Contents

Summary

Part 1: About this review

Chapter 1: Introduction

1This Report examines the use and design of pecuniary penalties. It considers their benefits, their role as a tool of enforcement, and whether they are imposed in a way that is fair and proportional.

2The Law Commission has defined pecuniary penalties for the purpose of this Report as monetary penalties that are imposed:

3The Report concludes that pecuniary penalties are punitive measures. They are not intended or designed to compensate people affected by a breach, but to punish the contravention and deter future contraventions. However, they are imposed on a lower standard of proof than criminal offences, and in civil proceedings that lack many of the procedural protections offered by the criminal law. There has been concern that pecuniary penalties illegitimately challenge the traditional distinction between the criminal and civil law. This is one of the factors that prompted the Commission’s review.

4Pecuniary penalties are also a relatively novel form of penalty. They have been adopted into statutes in an ad hoc manner, especially since 2000. Apparent inconsistencies among existing pecuniary penalty provisions suggest a lack of clear principles guiding their use. These were other factors driving the Law Commission’s review.

5In undertaking this review, the Commission has been guided by three principles:

6We have reached the view that pecuniary penalties can be a valid tool of enforcement and may be desirable in some circumstances. In this Report we identify what those circumstances are. We have concluded that, for the most part, the rules of evidence and procedure that accompany pecuniary penalties are appropriate. However, we have identified one area where the current design of pecuniary penalties does not appropriately balance the principles of fairness and effective and efficient regulation. We make one recommendation for legislative change to adequately reflect their punitive nature.

7The Report contains eight other recommendations for action by the Government and public agencies.

8The remainder of the proposals in the Report are in the form of Guidelines for policymakers about the appropriate design of pecuniary penalty statutes. These Guidelines should be used when consideration is given to creating new pecuniary penalty statutes, or when existing statutes are amended.

Chapter 2: Guidance for future pecuniary penalty regimesTop

9In Chapter 2 we consider the need for guidance for policymakers who are considering when and how to use pecuniary penalties in the future. Effective guidance will help in the creation of principled and, so far as desirable, consistent pecuniary penalty provisions. Existing pecuniary penalty regimes are inconsistent in their approach to a range of matters, including procedural safeguards. Not all of these inconsistencies are justified. A common approach should be taken to those aspects.

10Chapter 2 considers a range of options for giving guidance to policymakers creating pecuniary penalties. It makes four recommendations:

11On balance we are not persuaded that sufficiently strong arguments exist for enacting a generic statute that provides for the core default features of pecuniary penalties. However, we suggest that this option be revisited in three to five years’ time.

Chapter 3: The current landscapeTop

12In Chapter 3 we set out the current statutory landscape of pecuniary penalties. At present, 18 statutes contain pecuniary penalties. Both individuals and corporate bodies may incur pecuniary penalties.

13We note that pecuniary penalties are a comparatively new development and that they are primarily used to punish and deter commercial wrongdoing, although their use has expanded. They were first introduced in New Zealand in the Commerce Act 1986 and the vast majority of pecuniary penalty orders have been sought and imposed under that Act. They now feature heavily in the regulation of securities and securities markets and will form a key part of that enforcement regime.

14However, their use across the statute book is patchy. While some major industries are regulated by way of pecuniary penalties, others are subject instead to criminal offences. Penalties feature in some environmental legislation but are absent from a great deal of it too.

15Similarly, we note that the purpose pecuniary penalties serve within a regime also varies. While some are directed at minor technical breaches of a regime, many others are directed at the core behaviour that the legislation seeks to regulate. Pecuniary penalties may be the most serious enforcement mechanism within an Act, or that role may be fulfilled by criminal offences. In some regimes a contravention will be enforced by way of a criminal offence where it is performed with intent or recklessness, but by way of a pecuniary penalty where there is no proof of intent or recklessness.