Chapter 5
Role of pecuniary penalties

Harm caused or nature of conduct

5.46In a number of regimes, pecuniary penalties have been adopted as the sole form of penalty. For example, criminal offences are entirely absent from the Unsolicited Electronic Messages Act 2007. This is not to say that criminal offences targeting related or similar conduct do not already exist under other legislation: section 250 of the Crimes Act 1961 provides for the offence of damaging or interfering with a computer system.96 Conduct that breaches the Unsolicited Electronic Messages Act could also fall foul of this offence. However, pecuniary penalties have been considered adequate for breaches of the scheme established by the Unsolicited Electronic Messages Act itself. It is at least implied that specific criminal offences were not considered to be warranted.

5.47In other regimes a distinction has been drawn between forms of conduct or harm that do warrant criminalisation and forms that do not. Under the Anti-Money Laundering and Countering the Financing of Terrorism Act 2009, pecuniary penalties are available for any breach of the legislation, with criminal offences becoming available where the breach is knowing or reckless. The implication is that, under that regime, criminal offences should be reserved for the most morally culpable breaches of the law, and in like manner, those guilty of non-intentional breach should not be subjected to a criminal conviction.

5.48The Financial Markets Conduct Act 2013 takes a similar approach. The explanatory note to the Bill preceding the Act acknowledged the spectrum of penalties noted above:97

The Bill introduces an infringement notice regime, which will provide an effective remedy for minor compliance-type contraventions. The Bill places an increased emphasis on civil liability for contraventions of the regime, including the ability of the Financial Markets Authority to take civil pecuniary penalty proceedings in a wide variety of circumstances. Serious criminal offences that include the possibility of imprisonment are targeted at egregious violations of the law, such as where the conduct in question involved knowledge or recklessness.

5.49We have reached the view that this approach can be entirely appropriate. That is, we consider that some law-breaking activity requires a punitive response but: (a) is undeserving of a criminal conviction; and (b) cannot be effectively deterred and penalised by infringement offences. An alternative view could be posited that all breaches of the law must, on point of principle, be categorised as criminal offences.98 That is, a person who is proved to have breached the law should be subject to a criminal conviction. We do not agree with this proposition and consider that pecuniary penalties can appropriately fill a gap. A number of arguments support this view.

5.50First, it is inevitable that, over time, our ideas of what amounts to “criminal” behaviour changes. The characteristics of a particular form of behaviour that lead us to outlaw it today may not be the same as those that led us to criminalise conduct in the past. The Unsolicited Electronic Messages Act is an example of a statute that targets a relatively new form of conduct which has unwanted consequences. We agree that while there are good reasons for deterring commercial electronic spam, many people would not think it warrants the imposition of a criminal penalty. And, given that commercial spam can take place on a variety of levels and can result in substantial financial gain, infringement offences are not always going to be an effective response.

5.51Secondly, the existence of the infringement notice procedure itself, and of minor offences in the past, illustrate that society has long been willing to accept that there is a difference between minor and grave breaches of the law. Dealing with certain breaches of the law outside the criminal courts is not a new proposition.

5.52Thirdly, we have sympathy for the argument that the criminal law should remain the last resort.99 The distinction needs to be maintained to “prevent the dilution of the criminal law’s blaming function and maintain criminal punishment as an effective and powerful mechanism of social control”.100 On one hand, this argument has been used to defend the criminal law against hybrid actions such as pecuniary penalties. On the other hand, it could also be argued that alternative ways of punishing breaches and obtaining compliance are desirable so that the criminal law can be retained for what society considers to be the most morally culpable breaches of the law.

For what types of harm or conduct might pecuniary penalties be appropriate?

Submitters’ views

5.53Submitters were generally agreed that pecuniary penalties are inappropriate for “traditional” criminal offending. What is meant by traditional criminal offending is, to an extent, indicated by submitters’ main objections to the expansion of pecuniary penalties into this area. First, it was suggested that pecuniary penalties might not achieve the intended aims of outlawing such conduct: pecuniary penalties might not be as effective a deterrent for traditional offending, and (impliedly) the people who carry it out, as criminal offences. That is, a burglar or shoplifter is more likely to be deterred by the threat of arrest, conviction or imprisonment, than by a mere monetary penalty.

5.54Secondly, it was observed that pecuniary penalties are inappropriate for dealing with conduct that warrants the stigma of criminal conviction (such as conduct involving physical violence, sexual offending, serious fraud, bribery and corruption).

5.55Thirdly, there was concern that although pecuniary penalties might be more appropriate than criminal offences for certain kinds of conduct, the inherent removal of criminal procedural protections might raise an issue. In other words, the concern centred around the ability of people allegedly involved in more traditional forms of law-breaking to be adequately protected from the power inequalities involved, without the extra protection of criminal procedures.

5.56We agree with the first two concerns above. In relation to the third, where there was general public agreement that a form of conduct should not result in a criminal conviction, we think it would be perverse for a criminal offence to be introduced onto the statute book rather than a pecuniary penalty, merely for the purpose of making the usual criminal procedural protections available. It is preferable that the individual should avoid the risk of a conviction, and that a lesser form of penalty be used. However, what the concern does highlight is that it is imperative to get the procedural design of pecuniary penalties right.

Our views
5.57Decisions as to whether a form of conduct should be penalised by a criminal offence, a pecuniary penalty, or an infringement offence, based on the nature of the harm and conduct, will rarely be clear cut. This point is made in the current LAC Guidelines, where it is stated:101

… it must be acknowledged that the proper scope of the criminal law is a matter involving political and ethical judgments, and there is room for opposing views on the question …

5.58We have considered what more useful advice can be provided on this question. To an extent it is difficult to identify guidance that does not result in a degree of circularity. For example, one observation in the LAC Guidelines is that “criminal offences … must reflect current societal values about the type of conduct which is sufficiently serious to warrant the punishment of the criminal law”.102 As a means of distinguishing criminal conduct and harm from pecuniary penalty conduct and harm, this will not be of much help, since it merely leads to a further statement that “use of pecuniary penalties … must reflect current societal values about the type of conduct which is not sufficiently serious to warrant the punishment of the criminal law; but is sufficiently serious to warrant a pecuniary penalty.”

5.59Notwithstanding this difficulty, we have tried to identify questions that policymakers should ask themselves when assessing whether a pecuniary penalty is appropriate based on the nature of the harm and conduct.

5.60In terms of harm, we suggest that pecuniary penalties will rarely if ever be appropriate where there has been:

5.61We suggest that the following forms of conduct may be so morally reprehensible that pecuniary penalties will rarely, if ever, be appropriate:

5.62Ultimately, the question requires members of Parliament to exercise their judgment in a manner one would expect will reflect the majority view of the rest of the population.

96Section 250 provides:
(1) Every one is liable to imprisonment for a term not exceeding 10 years who intentionally or recklessly destroys, damages, or alters any computer system if he or she knows or ought to know that danger to life is likely to result.
(2) Every one is liable to imprisonment for a term not exceeding 7 years who intentionally or recklessly, and without authorisation, knowing that he or she is not authorised, or being reckless as to whether or not he or she is authorised,—
(a) damages, deletes, modifies, or otherwise interferes with or impairs any data or software in any computer system; or
(b) causes any data or software in any computer system to be damaged, deleted, modified, or otherwise interfered with or impaired; or
(c) causes any computer system to—

(i) fail; or

(ii) deny service to any authorised users.

97Financial Markets Conduct Bill 2011 (342-1) (explanatory note) at 6.
98Although under our present system, this already excludes those that are so numerous and technical that sufficient administrative efficiencies may be achieved by treating them as infringement offences.
99See for example D Husak “The Criminal Law as Last Resort” (2004) 24 OJLS 207; and Dr Marina Nehme “Birth of a New Securities Law Regulator: The Financial Markets Authority and the Powers at its Disposal” [2011] NZ L Rev 475 at 490.
100I Rosen-Zvi and T Fisher “Overcoming procedural boundaries” (2008) 94 VA L Rev 79 at 108. See also J Coffee “Paradigms Lost: The Blurring of the Criminal and Civil Law Models – And What Can Be Done About It” (1992) 101 Yale LJ 1875 at 1877; and F Sayre “The Present Significance of Mens Rea in the Criminal Law” in R Pound (ed) Harvard Legal Essays (Harvard University Press, Cambridge (Mass), 1934) 399 at 409.
101Legislation Advisory Committee Guidelines on Process and Content of Legislation, above n 75, at [12.1.2].
102At [12.1.2].