Contents

Chapter 18
Limitation periods

Current approaches to limitation periods

18.9We have identified five distinct approaches in pecuniary penalty statutes currently in force:

No express limitation period

18.10Some pecuniary penalty statutes are silent on the question of limitation periods and are therefore subject to the Limitation Acts 2010 and 1950.480 “Civil penalties” are included as “money claims” under the 2010 Act,481 with the result that the structure of the limitation period includes:

18.11The interaction of these various periods means that a limitation period can be between three and six years from the acquisition of knowledge of the contravention or reasonable discoverability of that knowledge. This is because the six-year primary period applies regardless of the point at which the contravention is discovered. This means that the acquisition of knowledge or reasonable discoverability occurring within the first half of the primary period is subject to the full length of the remaining primary period, whereas a contravention discovered near the end of the primary period is subject to a three-year late knowledge period.

18.12By contrast, the Limitation Act 1950485 provided a two-year limitation period (from the date on which the cause of action accrued)486 for actions to recover a penalty487 that could be extended where the cause of action has been concealed by fraud.488 The 1950 Act also has a longstop period of 15 years, introduced by the Limitation Act 2010.
18.13The decision to include pecuniary penalties as “money claims” for purposes of the Limitation Act 2010, and therefore make penalties subject to a six-year primary period, was a simplification decision by the Commission reference group convened in 2007–2008, in response to submissions that the draft Limitation Bill was overly complex in categorising different claims.489

Limitation periods based on the Limitation Act 2010Top

18.14Section 72 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 expressly adopts the six-year limitation period (from the date the conduct occurs) but does not specify any additional late notice period.490 It would be a matter of statutory interpretation whether section 72 provides a finite limitation period, or whether it is extendable through the Limitation Act’s late knowledge provision.491 Another interpretation issue is whether the Limitation Act’s fraud exception applies to potentially lengthen the limitation period.

18.15In contrast, section 508 of the Financial Markets Conduct Act 2013 generically applies all aspects of the money claim defence from the Limitation Act:

(1) The Limitation Act 2010 prescribes a defence to a money claim that is a claim for monetary relief under this subpart (for example, a pecuniary penalty order or a compensatory order).

18.16The provision also expressly applies the Limitation Act periods to non-monetary orders as if they were “money claims” within the Limitation Act definition:

(2) Subsections (3) to (5) apply to a claim for relief (other than any form of monetary relief or declaratory relief) under this subpart.
(3) It is a defence to the claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based.
(4) The claim has both a late knowledge period and a longstop period, and sections 11(3)(a) and (b) and 14 of the Limitation Act 2010 apply to it—
(a) as if it were a money claim; and
(b) as if the period in subsection (3) were its primary period.

Shorter finite primary limitation periodTop

18.17Some pecuniary penalty statutes use shorter finite primary limitation periods. For example:492

18.18This formulation does not indicate whether the late knowledge period, longstop period and fraud exceptions from the Limitation Act are intended to apply, in addition to the primary limitation period expressed in the pecuniary penalty statute.

Primary limitation period based on reasonable discoverabilityTop

18.19Other pecuniary penalty statutes use a primary limitation period based on reasonable discoverability of the contravention. For example:493

18.20On its face, it may appear shorter than the six-year primary period in the Limitation Act, but because it may start at a later point in time (from reasonable discoverability of the contravention, rather than from the date of the contravention itself), the period may not in fact be shorter than a standard limitation period. If the contravention is immediately or fairly quickly discoverable, however, the limitation period will be shorter than under the Limitation Act.

18.21The model used in these statutes raises similar interpretation issues as to whether the Limitation Act would fill any gaps, as there is no indication whether any longstop period or fraud exception applies.496 Use of the reasonable discoverability model also gives rise to consideration of the state of knowledge required for discoverability to be achieved.497

18.22We note the formulation used in section 52 of the Electricity Industry Act 2010, in particular subsection (2), which negates the operation of the limitation provision:

(1) The [Electricity] Authority may not exercise its powers in relation to a breach or possible breach of the Code if the breach—
(a) was discovered, or ought reasonably to have been discovered, more than 3 years before the exercise of the power; or
(b) occurred more than 10 years before the exercise of the power.
(2) However, once the [Electricity] Authority has exercised a power in relation to the breach or possible breach, the limitations in subsection (1) do not apply.

18.23The intent, presumably, is that once the Electricity Authority has exercised any power in relation to a breach, it is not precluded from then exercising a different power with respect to same breach, in cases where an escalated regulatory response may be required. The Commission’s view, however, is that any pecuniary penalty proceedings should be initiated within the specified limitation period, and we are not persuaded that the exception in subsection (2) is desirable. We do not recommend its wider adoption.

Dual approachTop

18.24The Commerce Act 1986 has adopted two different limitation models depending on the type of contravention.498 First, a primary period of three years from the date of contravention is used for proceedings for contraventions relating to business acquisitions,499 information disclosure requirements500 and price quality requirements.501 This matches the limitation period applying to damages actions for breach of business acquisition restrictions.502 It is not specified whether the three-year primary period is potentially extendable by virtue of the Limitation Act late knowledge period.
18.25Secondly, a primary period of three years from the date of reasonable discoverability applies to proceedings for contraventions relating to cease and desist orders,503 restrictive trade practices504 and the indemnification prohibition,505 with a 10-year longstop from the date of contravention. This matches the limitation period applying to damages actions for restrictive trade practices.506 However, there is no express provision for a fraud exception to the longstop period, as would apply under the Limitation Act.
480Biosecurity Act 1993; Hazardous Substances and New Organisms Act; Overseas Investment Act 2005; and Securities Trustees and Statutory Supervisors Act 2011.
481Limitation Act 2010, s 12. “Civil penalty” is defined in s 4 as:
[A] sum that is recoverable under an enactment and is, or is by way of, a forfeiture or a penalty, but does not include the following to which a person is liable on conviction for an offence:
(a) a fine:
(b) an amount of compensation, reparation, or restitution.
482The late knowledge date is defined in s 14: “the date (after the close of the start date of the claim’s primary period) on which the claimant gained knowledge” (or earlier if the claimant ought reasonably to have gained knowledge) of particular facts. To utilise the late knowledge extension, the claimant must prove that at the start of the six year primary period, the claimant had no knowledge of the contravention (s 14(2)).
483Limitation Act 2010, s 11.
484Limitation Act 2010, s 48.
485This provision applies to acts or omissions before 1 January 2011, and, as more than two years has passed since that date, will not generally apply to pecuniary penalty proceedings any longer, except that the postponement for fraud provision may still apply in particular circumstances (Limitation Act 1950, s 23B).
486Most of the Australian jurisdictions adopt a two-year limitation period for penalty proceedings, although the Limitation Act 2005 (WA) adopts a six-year general limitation period.
487Limitation Act 1950, s 4(5).
488Limitation Act 1950, s 28. In that case, the limitation period does not start to run until the fraud or mistake that concealed the cause of action was discovered or was reasonably discoverable.
489The reference group was established to progress reform of the Limitation Act 1950 following two Law Commission Reports: Limitation Defences in Civil Proceedings (NZLC R6, 1988) and Tidying the Limitation Act (NZLC R61, 2000), and a report by barrister Chris Corry Limitation Defences in Civil Claims: Update Report for the Law Commission (2007). A note of a meeting of the reference group records that it was agreed to treat claims in relation to civil penalties the same as other monetary claims, noting that overriding statutes can impose different limits: Minutes of meeting of Law Commission Limitation Reference Group (25 August 2008).
490See also Therapeutic Products and Medicines Bill 2006 (103-1), cl 251.
491See Limitation Act 2010, s 40. Other enactments may displace or affect defences.
492See also Commerce Act 1986, below at [18.24].
493Although not involving pecuniary penalties, s 43A of the Fair Trading Act 1986 also uses this approach to limitation periods. See also Commerce Act 1986, below at [18.25].
494Electricity Industry Act 2010, s 52; Securities Act 1978, s 57E; Securities Markets Act 1988, s 42ZJ; Telecommunications Act 2001, s156L(5); and Telecommunications (Interception Capability and Security) Act 2013, s 97(3).
495Takeovers Act 1993, s 43C; and Unsolicited Electronic Messages Act 2007, s 50.
496A longstop period of 10 years is specified in s 52 of the Electricity Industry Act 2010.
497See s 14 of the Limitation Act 2010.
498See also the 12 month time limit for applying for a penalty for breach of an undertaking in s 85A(7) of the Commerce Act 1986.
499Section 83.
500Section 86.
501Section 87.
502Section 84A.
503Section 74D(5).
504Section 80(5).
505Section 80B(5).
506Section 82(2).