38Our research and consultation did not indicate that the courts are encountering particular difficulties or raising particular objections when applying civil procedural rules to pecuniary penalties. Those rules were not designed with a State-sought and State-imposed penalty in mind. Therefore, pecuniary penalties differ from the forms of proceeding for which the rules are most apt. However, rule 1.4(4) of the High Court Rules, which allows the court to determine any questions about the application of the rules and give any directions it thinks just, arguably provides judges with sufficient scope to depart from particular rules where, given the nature of the proceedings, they will lead to unfairness. On balance, then, we propose that the civil rules of evidence and procedure should continue to apply. However, we note the need for policymakers, when devising new “civilly-imposed” orders, to consider the practicalities of whether aspects of the standard civil court process will be inappropriate or unnecessary.
39Although penalties imposed by regulators can create certainty and cost savings, penalties imposed by the courts – the primary model in New Zealand – means there is a transparent, independent assessment of the appropriate penalty and protection against abuse, or the appearance of abuse, of regulators’ powers. Therefore, we propose in Chapter 13 that variable monetary penalties should generally only be imposed by a court. It follows that enforcement agencies and defendants should not be able to “settle” penalties outside the court, except where there is a legislative requirement to publicise details of the circumstances and the nature of the breach and the quantum of the payment. This increases transparency and certainty. Enforcement bodies with such a power should make public their policy for approaching settlement negotiations with parties suspected of breach.
40Based on our research and consultation, the apportionment of penalties between corporations and individuals does not seem to be causing difficulties for the courts and guidance on these matters does not seem necessary. However, we understand that policymakers would find it useful to have guidance about the various means of attributing liability between a body corporate and its officers, including the need for certainty within the statute as to who is liable and how. We set out this guidance in Chapter 14.
41The issue of whether insurance and indemnification should be available to a defendant to meet the costs of defending pecuniary penalty proceedings raises both policy and legislative design questions. The position is uncertain at present as there are no express provisions, and pecuniary penalty regimes should pre-empt argument on these matters by expressly authorising or confirming the extent to which such measures are available. The availability of indemnification and insurance may have a disciplinary effect that contributes to the deterrence objectives of pecuniary penalty regimes. However, there may also be arguments to place a bar on indemnification and insurance under the statute and to reinforce the impact of a pecuniary penalty by expressly penalising indemnification against statutory liability.
42The setting of maximum penalties in statute raises a range of issues. In Chapter 16 we set out some principles to guide policymakers when doing so, but there is a clear case for a thorough inter-disciplinary review of how this is done. We found significant inconsistencies across the regimes that may not be justified, and we note that maximum penalties have been set unsystematically in the criminal sphere as well. We therefore recommend a review of how maximum criminal and pecuniary penalties are set in legislation.
43Most statutes provide a set of factors that a court should take into account when determining what penalty to impose. While these will be highly context-dependent, we set out in Chapter 16 a set of “core” factors, and “additional” factors that policymakers should consider including within a penalty regime as statutory factors that the court must consider.
44In Chapter 17 we conclude that the general right of appeal in section 66 of the Judicature Act 1908 should apply to pecuniary penalties imposed by the High Court. It is important for the Court of Appeal to have appellate jurisdiction over procedural matters and quantum, given pecuniary penalties’ novelty and their high amounts. For the same reason, penalties imposed by the District Court should be subject to the general appeal rights contained in sections 72, 75 and 76 of the District Courts Act 1947.
45Existing pecuniary penalty statutes have five distinct approaches towards limitation periods, including not dealing with them expressly. In the interests of consistency and certainty, we propose in Chapter 18 that each pecuniary penalty regime deals explicitly with the limitation question, and we propose an approach that is tailored to the hybrid features of pecuniary penalties.
46The tailored model is based on a limitation period of three years following reasonable discoverability, with a 10-year longstop period. Discoverability is used in a number of New Zealand statutes as the basis for limitation periods. The advantages of using a discoverability period (it is more flexible and provides a greater incentive to enforcement agencies) outweigh the disadvantages (including lack of certainty), which can be addressed in other ways, such as through the inclusion of a 10-year longstop period.
47We conclude that applying the Limitation Act 2010 model in its entirety to pecuniary penalties could result in overly long limitation periods that do not fit with the regulatory function of pecuniary penalties. However, a regime should be able to specify that the Limitation Act applies in full where there is specific policy justification for that.
48All the current pecuniary penalty statutes purport to bind the Crown. However, variation in drafting means there is uncertainty as to whether the Crown would in fact be liable for a pecuniary penalty under current provisions.
49Given the reach of the activities of contemporary government, certainty on this issue is desirable. We have recommended that as each existing pecuniary penalty statute is reviewed or amended it should be assessed against the Guidelines proposed in the Report, and in Chapter 19 we suggest that the assessment should include whether there is sufficient certainty and clarity about the liability of the Crown or State sector defendants.
50For a similar reason, increased guidance for policymakers is also desirable. Therefore, in Chapter 19 we set out a number of considerations for policymakers when they are considering pecuniary penalties, relating to the liability of the Crown and the State sector. These include: identifying whether the Crown or parts of the State sector should be potentially liable in the event of contraventions; legislative drafting that makes the matter clear; considerations as to the form of penalty that should apply, or any alternatives; and potential substantive and procedural issues when imposing pecuniary penalties on the Crown and State sector.
51Finally, given the potential for pecuniary penalties to impose quasi-criminal liability on public sector defendants, we recommend that the Cabinet circular procedure be supplemented by a requirement to disclose, to Cabinet, the impact of any new Bills concerning the liability of the Crown for pecuniary penalties.
52In Chapter 20 we observe that public and industry confidence in enforcement agencies will be maximised if they use their powers transparently, consistently and responsibly. We therefore recommend that enforcement agencies devise and publish enforcement guidelines and policies, specific to the statutory regime they oversee, which set out the factors governing their enforcement decisions, including whether or not to commence court proceedings; whether these should be civil or criminal; when it is appropriate to enter negotiations for settlement; and the settlement process that will be followed.