Chapter 3
The current landscape

What are pecuniary penalties?

3.1Pecuniary penalties are a comparatively new development. Primarily, they are used to punish and deter commercial wrongdoing. They were first introduced in New Zealand in the Commerce Act 1986 to deal with anti-competitive practices. The number of pecuniary penalty provisions has grown considerably in the last decade. They currently feature in 18 enacted pieces of legislation, which are set out in Appendix B of this Report.29 At the time of writing, one Bill before Parliament contains pecuniary penalties.30

3.2An example of a pecuniary penalty is in the Hazardous Substances and New Organisms Act 1996. Sections 124B and 124C provide:

124B  Pecuniary penalty order
(1) The enforcement agency may apply to the court for an order that a person pay to the Crown a pecuniary penalty under this Act.
(2) The court may make the order if it is satisfied that the person—
(a) developed, field tested, imported, or released a new organism in breach of this Act; or
(b) possessed or disposed of any new organism imported, developed, or released in breach of this Act; or
(c) failed to comply with any controls relating to a new organism—
(i) imposed by any approval granted under this Act; or
(ii) specified in regulations made under this Act.
124C  Amount of pecuniary penalty
(1) The court must not make an order for the payment of a pecuniary penalty that exceeds,—
(a) in the case of an individual, $500,000; or
(b) in the case of a body corporate, the greater of—
(i) $10,000,000; or
(ii) if it can be readily ascertained and if the Court is satisfied that the contravention occurred in the course of producing a commercial gain, 3 times the value of any commercial gain resulting from the contravention; or
(iii) if the commercial gain cannot be readily ascertained, 10% of the turnover of the body corporate and all of its interconnected bodies corporate (if any).

3.3Pecuniary penalties feature in:

3.4In some fields, pecuniary penalties provide a comprehensive response to a wide range of behaviour, but in others their adoption has been less broad. For example, they now feature heavily in the regulation of securities and securities markets.37 In contrast, while the participants in some major industries are regulated by way of pecuniary penalties, others are subject only to criminal offences.38 And, while they feature to an extent in environmental legislation, they are absent from a great deal of it too. For example, the Hazardous Substances and New Organisms Act 1996 was amended in 2003 in response to concern about genetically modified and other new organisms. Pecuniary penalties were introduced to the Act for certain breaches relating to these “new organisms”.39 However, the older part of the Act, which regulates the assessment, importation, storage and use of other “hazardous substances”,40 is enforced by way of criminal and infringement offences.

3.5Both individuals and corporate bodies may incur pecuniary penalties. The maximum penalty for the latter is generally substantially higher than for the former (for example, $100,000 for an individual under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 and $2 million for a body corporate).41

3.6In pecuniary penalty proceedings, the enforcement agency must prove that, on the balance of probabilities, the defendant carried out the contravention. Most regimes have no express requirement for the defendant to have had any degree of knowledge or intent. As such, most pecuniary penalty provisions appear to carry strict liability, and the enforcement agency does not have to prove anything regarding the defendant’s state of mind. However, the courts are often directed to take into account the defendant’s degree of intent, awareness or other subjective factors in determining penalty quantum.

3.7Enforcement bodies that can seek pecuniary penalties generally have information-gathering, and search and seizure powers that match the powers they have for investigating criminal offences. The enforcement agency often has access to pecuniary penalties as one of a range of enforcement measures, which is designed to give an enforcement body a range of responses to non-compliance.

3.8While some pecuniary penalties are directed at minor technical breaches of a regime, many are directed at the core behaviour that the legislation seeks to regulate. Pecuniary penalties may be the most serious enforcement mechanism within an Act (such as in the Unsolicited Electronic Messages Act 2007)42 or the Act may also contain criminal offences (such as in the Securities Act 1978).43 Also, pecuniary penalties sometimes form a parallel sanction to a criminal offence. In those cases, pecuniary penalties and criminal offences tend to be differentiated on the basis of the degree of knowledge or intent the defendant must be shown to have. So, for example, a contravention may be enforced by way of a criminal offence under the Hazardous Substances and New Organisms Act where it is performed with intent or recklessness, but by way of a pecuniary penalty where there is no proof of intent or recklessness.44
29There will be 16 Acts once the penalties in the Financial Markets Conduct Act 2013 come into effect, and the Securities Act 1978 and the Securities Markets Act 1988 are repealed.
30Therapeutic Products and Medicines Bill 2006 (103-1).
31Commerce Act 1986; Overseas Investment Act 2005 and Overseas Investment Regulations 2005; and Takeovers Act 1993.
32Financial Markets Conduct Act 2013 (pecuniary penalty provisions yet to come into force); Securities Act 1978; Securities Markets Act 1988; Securities Trustees and Statutory Supervisors Act 2011; Financial Advisers Act 2008; and Financial Service Providers (Registration and Dispute Resolution) Act 2008.
33Dairy Industry Restructuring Act 2001 and Dairy Industry Restructuring (Raw Milk) Regulations 2001; Telecommunications Act 2001 and Telecommunications (Civil Infringement Notice) Regulations 2007; Telecommunications (Interception Capability and Security) Act 2013; and Electricity Industry Act 2010.
34Biosecurity Act 1993; and Hazardous Substances and New Organisms Act 1996.
35Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
36Unsolicited Electronic Messages Act 2007.
37Under the Financial Markets Conduct Act 2013 which, once the relevant provisions are in force, will replace the relevant regulatory provisions in the Securities Act 1978 and Securities Markets Act 1988.
38Compare for example the use of pecuniary penalties in the Dairy Industry Restructuring Act 2001 with the use of criminal offences in the Railways Act 2005.
39These include genetically modified organisms, eradicated species, and species not present in New Zealand before July 1998: Hazardous Substances and New Organisms Act 1996, s 2A.
40“Hazardous substances” are defined in s 2(1) as:
any substance—
(a) with 1 or more of the following intrinsic properties:
(i) explosiveness:
(ii) flammability:
(iii) a capacity to oxidise:
(iv) corrosiveness:
(v) toxicity (including chronic toxicity):
(vi) ecotoxicity, with or without bioaccumulation; or
(b) which on contact with air or water (other than air or water where the temperature or pressure has been artificially increased or decreased) generates a substance with any 1 or more of the properties specified in paragraph (a) …
41Section 90(3).
42Part 3 of the Act contains the enforcement provisions and s 19 sets out the range of possible responses to a “civil liability event”. The Act creates no criminal offences.
43Sections 55A to 57A deal with civil liability, while ss 58 to 60 provide for criminal liability.
44Hazardous Substances and New Organisms Act 1996, ss 109 and 124B.