Contents

Chapter 4
Nature of pecuniary penalties

Introduction

4.1The design of pecuniary penalties must be driven by an accurate statement of their nature and role. Importantly, that statement needs to be independent of the existing regimes where they are found. It is the nature and role of pecuniary penalties as a form of penalty and tool of enforcement that is important, rather than as a tool of enforcement of securities or environmental law, for example. In this review we have strived to conceive of pecuniary penalties outside the confines of the existing regimes. This approach has been important because, until now, the design of pecuniary penalties has, to a substantial extent, been driven by the perceived challenges of the particular regimes where they have been adopted. Also, because new regimes have relied on the design of pre-existing statutes, some aspects of current practice have become somewhat entrenched.

4.2The Law Commission is persuaded that the design of pecuniary penalties should be influenced primarily by principle, rather than those precedents. This is not to say that all existing pecuniary penalty provisions should be discarded. However, whether particular provisions are appropriate or not should depend fundamentally on an accurate and principled conceptualisation of pecuniary penalties, rather than on past practice. In this part of this Report, we set out our view of what is an accurate, principled conceptualisation of pecuniary penalties. Parts 3 and 4, which describe our conclusions on the optimal design of pecuniary penalty provisions, are fundamentally reliant on this view of pecuniary penalties.

4.3This approach accords with, and is reinforced by, the way fundamental procedural protections have been developed and applied in the criminal law. The context in which criminal offences are used is not determinative of the principled starting point. The same should be the case for pecuniary penalties. It is important to stress that this does not mean that the particular challenges faced in certain regimes, or with certain types of conduct, might not justify the modification of that principled starting point. In the criminal law, the concept of the strict liability offence provides the best example of where it has become accepted that certain fundamental rights can justifiably be removed where the particular context or the form of offending demands it. The same may be said of certain contexts in which pecuniary penalties are used. However, those exceptional cases should not dictate the principled starting point.

4.4In taking this approach, the Commission has been influenced by the growing number of pecuniary penalties in legislation. Regulatory policymakers appear to have an enthusiasm for them. New Zealand’s adoption of pecuniary penalties has also been strongly influenced by practice in Australia, where their use is expanding.

4.5Here, they have been a core aspect of two very recent law reform enterprises (the Financial Markets Conduct Act 2013 and the Biosecurity Law Reform Act 2012). They feature in the new Telecommunications (Interception Capability and Security) Act 2013. The Reserve Bank is consulting on their inclusion in legislative proposals for the prudential supervision of non-bank deposit takers,56 and the Commerce Commission would like consideration to be given to whether they should be included in the Fair Trading Act 1986.57

4.6We anticipate that they will continue to be introduced into New Zealand legislation as older Acts are reviewed, or as new areas of conduct come to be regulated. Pecuniary penalties, then, will feature increasingly heavily on our statute book, and will increasingly be the way that some breaches of the law will be punished. In assessing which safeguards should apply, it is important that their likely growth is acknowledged. In the Commission’s view, this makes it even more important to get the right level of protection.

56Reserve Bank of New Zealand Report for the Minister of Finance on the operation of the prudential regime for non-bank deposit takers 
(September 2013) at 62‒68.
57See Commerce Commission “Commerce Commission Submission on the Consumer Law Reform Bill (Bill no. 287-1)” at [48].