Role of pecuniary penalties
Why is there a place for pecuniary penalties?
5.4The Commission accepts that, provided the appropriate procedural protections are in place, there is scope for a broader range of legislative tools for achieving compliance with legislation, and appropriately and effectively deterring law-breaking. This is because an increasingly broad range of conduct is regulated today. The public has greater expectations about public safety, standards of service and professional behaviour than in the past. Breaches of those standards may be undesirable but they may not be so grave as to demand the full measure of the criminal law. Developments such as the growth of pecuniary penalties (and in the past, infringement and regulatory or “public welfare” offences) are a valid response to the demands of an increasingly complex society. They are examples of how our justice system has been adapted to meet changing needs. Being open to such adaptations is necessary if we are to retain an efficient, proportional and flexible legal system.
5.5It is also clear that infringement offences – the other main alternative penalty to criminal prosecution – are not equipped to deal with all forms of offending that, while undesirable, should not be criminalised. Infringement offences are appropriate for offences of strict liability that are committed in large numbers, involve misconduct that is generally regarded as being of comparatively minor concern by the general public, and involve acts or omissions that are easy to establish involving straightforward issues of fact. They give rise to comparatively low, fixed penalties that cannot be adjusted to take account of individual circumstances. Given the wide range of conduct regulated today, it is not surprising that some conduct that might not warrant a criminal penalty is also not suited to the infringement regime.
5.6Also, in the past strict liability criminal offences have been the key tool in encouraging compliance with technical, statutory standards and duties. In many cases where strict liability criminal offences might have been used in the past, pecuniary penalties now provide the incentive to comply. There is an argument that in some circumstances pecuniary penalties, notwithstanding their potentially severe penalty, are to be preferred since they avoid the imposition of a criminal conviction.
5.7Taking account of the demands of regulating the broad range of conduct in modern society, we consider that pecuniary penalties can play a valid role in any statute where they are the appropriate form of penalty, taking into account the type of conduct and the persons involved.
Consideration alongside other forms of State penalty
5.8Implicit in the points made above and in the previous chapter is that pecuniary penalties cannot be considered without reference to the other main forms of penalty available to lawmakers. Punishment for breaches of a statute can be inflicted by criminal offences, pecuniary penalties and infringement offences. Each form of penalty has unique features that make it more or less appropriate for different types of breaches of the law.
5.9Pecuniary penalties need to be considered alongside these other forms of penalty. For this reason, we recommend that the Legislation Advisory Committee Guidelines on Process and Content of Legislation (LAC Guidelines) should address the subject of “penalties” broadly, and should provide guidance on the circumstances when each type should be used.
5.10We suggest that the factors relevant to the choice of penalty are:
- effectiveness and efficiency;
- practical considerations; and
- the harm caused or the nature of the conduct.
5.11The third of these is the most challenging and possibly controversial. In our view, it has not been adequately or overtly addressed in policy material relating to proposed pecuniary penalties. In fact, it is one of the most important factors to consider when a form of penalty is being proposed.
5.12Below, we describe the types of breaches of the law that pecuniary penalties are most effective for, set out practical considerations for their inclusion in regimes, and provide a framework to assist policymakers in assessing whether pecuniary penalties are appropriate, given the type of harm and conduct being targeted. Answering these three questions in relation to criminal offences and infringement offences is not strictly within the remit of this project. However, we make observations about them, founded largely on the current LAC Guidelines.
Inadequacy of the term “regulation”Top
5.13First, however, we wish to state strongly that labelling a legislative regime as “regulatory” is an inadequate basis on which to justify the inclusion of pecuniary penalties. As the Productivity Commission noted recently, there are numerous definitions of regulation, each displaying varying degrees of specificity and breadth. Some examples are:
- the promulgation of rules by government, accompanied by mechanisms for monitoring and enforcement, usually assumed to be performed through a specialist public agency;
- any form of direct State intervention in the economy, whatever form that intervention might take; and
- all mechanisms of social control or influence affecting all aspects of behaviour from whatever source, whether they are intentional or not.
5.14In legal terms, then, “regulation” can encompass a range of different statutes: from one that sets standards, monitoring processes and enforcement mechanisms for a narrow range of readily identifiable actors who voluntarily enter a closely regulated activity; to one that sets down broad rules for the conduct of the general population. This range is reflected in the existing statutes where pecuniary penalties are found. For example, the anti-competitive rules within the Commerce Act 1986 apply to any person resident or carrying on business in New Zealand that affects a market in New Zealand. In contrast, the Telecommunications Act 2001, in that it regulates the supply of telecommunication services, clearly applies only to those supplying telecommunications services. Grouping these two statutes under the “regulatory” banner does not, of itself, explain why pecuniary penalties should be included in them.
5.15The “regulatory” label is likely attached to pecuniary penalty regimes because of its use in relation to strict liability offences. Where an offence is silent as to mens rea, the courts have developed a number of factors to help them determine whether it can be categorised as a “public welfare regulatory” offence carrying strict liability. These factors are reflected in the LAC Guidelines, as follows:
An offence may properly be categorised as a strict liability offence (where there is no need for the prosecution to prove mens rea, but there is a defence if the defendant proves total absence of fault) if—
(a) the offence involves the protection of the public from those undertaking risk-creating activities. These offences (commonly described as public welfare regulatory offences) usually involve the regulation of occupations or trades or activities in which citizens have a choice as to whether they involve themselves; and
(b) the threat of criminal liability supplies a motive for persons in those risk-generating activities to adopt precautions, which might otherwise not be taken, in order to ensure that mishaps and errors are eliminated; and
(c) the defendant is best placed to establish absence of fault because of matters peculiarly or primarily within the defendant’s knowledge.
5.16Because strict liability offences shift the onus of exculpation on the defendant, they are considered to involve an inherent encroachment on the presumption of innocence. However, because they operate within the apparently limited “public welfare regulatory” sphere, strict liability offences are regarded, under section 5 of the New Zealand Bill of Rights Act 1990, as a justified limit on the presumption of innocence.
5.17Policy material will frequently justify the inclusion of a strict liability offence on the grounds that the offending is of a “regulatory” nature.
5.18A justification for a form of penalty is not the same as a positive reason for using it. We prefer the approach that pecuniary penalties should be accompanied by adequate safeguards, and used in the circumstances where they are appropriate, taking into account questions of effectiveness and efficiency, practical concerns and the nature of the harm and conduct at hand.
5.19We are quite clear in the following chapters that our proposed procedural protections are the starting point for pecuniary penalties. There may be circumstances where their relaxation or modification may be justified, as with the strict liability form of criminal offences.