By: N/A
The recently released Law Commission report on pecuniary penalties accepts that pecuniary penalties are a legitimate tool.  However, the Law Commission has made nine recommendations that will mean future legislation invoking penalty regimes will be more principled and uniform.  Unfortunately, little has been done about overhauling the pecuniary regimes that are already in place.

Pecuniary penalty regimes have become increasingly prevalent, but are drafted on a somewhat ad hoc basis.  That created a legislative environment that can appear unclear and unprincipled, a climate that prompted the Law Commission review. 

A pecuniary penalty is, to use a less legal phrase, essentially a fine.  A fuller description is provided by the Law Commission which says that a pecuniary penalty is a potentially substantial monetary penalty paid to the Crown (rather than the victim) which is imposed by a Court following a civil trial.  They are designed to punish and deter unlawful behaviour, rather than compensate those actually affected by that behaviour.

Accordingly, pecuniary penalties sit in a 'grey area' between the traditional boundary of criminal and civil law.  A punitive measure is something that is generally considered to be within the realm of criminal law, subject to a higher burden of proof and stricter evidentiary standards.  However, pecuniary penalty regimes exist in a range of legislation, including commonly used legislation such as the Commerce Act, the Unsolicited Electronic Messages Act, the Securities Act and the Financial Markets Conduct Act (not yet in force). 

Currently, individuals and/or businesses which face potential liability under these quasi-criminal regimes must deal with the fact that the penalty regimes differ across statutes.  For example, differences can include:
  • the standard of proof required;
  • whether the principle of double jeopardy applies (ie the principle that a person should not be punished twice for the same deed);
  • limitation periods; and
  • the factors to be taken into account by the Court when setting a penalty (for example, the level of intent or recklessness in the behaviour of the defendant).
At the outset of its review, the Law Commission had a clear concern that pecuniary penalties were an unprincipled measure designed to side-step criminal procedural protections, thus making it easier for enforcement agencies to impose substantial penalties.  At the conclusion of its review the Law Commission did suggest there was some truth to that concern.  However, it also accepted that there was a role for pecuniary penalties, so long as there were adequate procedural protections in place.

That 'middle ground' has prompted the Law Commission to suggest that Parliament adopt the following recommendations in the future:
  • The Ministry of Justice should be consulted on all proposals for pecuniary penalties at the policy development stage in the same manner as it would be for criminal offences.
  • The Legislation Advisory Committee (LAC) should draft a 'best legislative practice' guideline for pecuniary penalties regimes (developing the Guidelines suggested in the Law Commission report).
  • The Parliamentary Counsel Office should draft model provision for common pecuniary penalty provisions.
  • Where existing pecuniary penalty statutes come up for review, those provisions should be re-evaluated in light of the guidelines in the Law Commission report.
  • The Evidence Act should be amended to allow for a privilege against self-exposure to a pecuniary penalty.
  • The Government should instigate a review of how maximum penalties should be set in legislation.
  • Cabinet should add to the Cabinet Office Circular to require analysis of the impact on the liability of the Crown of legislative proposals to introduce penalty regimes.
  • Enforcement agencies with the power to commence penalty proceedings should develop and publish enforcement policies.
There appears to be an increasing desire by lawmakers to utilise pecuniary penalty regimes to deter unlawful behaviour.  In some respects, any legal argument against the use of penalties would come too late – the horse has well and truly bolted.  With that in mind, it is hard to criticise the Law Commission for adopting a relatively pragmatic approach by suggesting recommendations that will assist with adding clarity and principle to future penalty regimes.  Hopefully, the recommendation to review existing regimes will be acted upon.

Assuming the recommendations are adopted, it is encouraging that law makers will at least turn their minds to the very real impact these regimes do have.  For example, the Law Commission pointed out that under the Commerce Act, over $50 million dollars in pecuniary penalties have been imposed since 2010.  Any legislation that can impose penalties of that magnitude should, at the very least, carefully consider whether that penalty regime is described and applied on a principled basis.

The Law Commission also suggested the following general principles should apply to penalty regimes, which presumably it hopes that the LAC will include in its guidelines:
  • The civil standard of proof should apply, that is, the balance of probabilities and civil rules of court procedure and evidence should apply.
  • The burden of proof should fall on the enforcement agency.
  • Generally, pecuniary penalty regimes should prohibit a person being punished by the imposition of both a pecuniary penalty and a criminal penalty.
  • A pecuniary penalty regime should clearly state whether intent or recklessness is an element of the offence or whether the penalty is applied on a strict liability basis.
  • Pecuniary penalties should be imposed by a Court, not an enforcement agency.
  • Careful consideration should be given to the attribution of individual and corporate liability for pecuniary penalties.  Further, ancillary liability (for example those who assist a contravention of the law, those who organise others to contravene the law or those who attempt but fail to contravene the law) should be clearly stated.
  • Regimes should expressly deal with the question of insurance and indemnification from pecuniary penalties.
  • The maximum penalty should reflect the worst class of case.  Further, guidance should be provided to the Courts in terms of 'sentencing guidelines'.
Unfortunately, the Law Commission did not recommend that existing statutes should be amended to reflect those principles. Hopefully, whenever those statutes are reviewed, that will occur.  If all pecuniary penalty regimes considered and answered those guidelines, then concerns about unprincipled and un-uniform regimes would be lessened significantly. 

Download this article in PDF format
Share this page on social media:

Enter security code:
 Security code


Wynn Williams Client Toolkit

This page is best viewed in an up-to-date web browser with stylesheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so. The latest version of Firefox, Safari or Google Chrome will work best if you're after a new browser.