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University of Otago Law Theses and Dissertations |
Last Updated: 13 April 2024
The Imperious Fraud Office:
An Assessment of the Serious Fraud Office’s Investigatory Powers
Stewart Komie
A dissertation submitted in partial fulfilment of the degree of Bachelor of Laws (Honours) at the University of Otago.
October 2023
Acknowledgements
To Shelley Griffiths, thank you for taking me on over and above the usual number of students you supervise, your considerable patience, your willingness to indulge my choice of topic and your sage advice. I could not have asked for a better supervisor.To Mum & Dad, thank you for doing absolutely everything you could to give me the best possible start in life.
To Fredrick & Margret Pond, thanks for giving me a place to stay all these years. I suppose I had better finally move out now this is all over.
And to Virginia, thank you for listening to my rantings about this dissertation long into the wee small hours, your proofreading and your ongoing feedback.
Table of Contents
Chapter 1: Introduction
The rule of law, the right to a fair trial, the presumption of innocence and the privilege against self-incrimination are fundamental pillars of our criminal justice system. All of these principles are unjustifiably infringed by the Serious Fraud Office Act 1990 (SFOA).The Serious Fraud Office (SFO) has been afforded extraordinary powers of compulsion which are subject to insufficient oversight and constraint. The SFOA arms the SFO with the power to command suspects or persons of interest to attend a meeting with the Office’s Director,1 in which they must supply information or documents demanded by the Director and answer the Director’s questions.2 The Act not only strips the privilege against self-incrimination from suspects and the innocent alike,3 but allows these powers to be used following the suspect’s arrest and charge.4 Such powers may even be used where it is discovered no serious fraud was perpetrated.5
The Act’s infringement of the privilege against self-incrimination is problematic in three ways. Firstly, the protection afforded by the Act insufficiently mitigates the infringement of suspects’ rights. Secondly, the Director enjoys excessive discretion and inadequate supervision in the exercise of their powers. The threshold tests guarding the use of these powers employ vague language such that the Director’s discretion is functionally unfettered.6 However, even the most stringent test would be of little use to a suspect, as the Act also provides the Director with immunity from judicial scrutiny in relation to his decision to investigate. 7 Thirdly, the infringement of the privilege is unjustified in the context of serious fraud.
These powers continue to be available to the Director once a suspect has been arrested or charged.8 This raises additional considerations, not only due to the infringement of additional rights contained in the New Zealand Bill of Rights Act 1990 (NZBORA) relating to the privilege, but also due to the threat it poses to the principles which underlie criminal procedure and the right to a fair trial.9
The Act is therefore in need of reform. Most immediately, the Director’s powers ought to be curtailed once a suspect’s trial has commenced, as well as where it is clear no serious fraud is at issue. Further, the Director must be reined in, either through tighter definition of serious fraud or the imposition of greater oversight. As reasonable minds will differ as to the degree to which the infringement of the privilege is acceptable, a spectrum of options will also be detailed which would better protect the privilege and the principles it serves.
1 Serious Fraud Office Act 1990, ss (9)(1) (a)-(c).
2 ss 9 (1) (d) - (f).
3 s 27.
4 s 50(b).
5 R v H (No. 2) [1995] DCR 772.
6 Serious Fraud Office Act 1990, s 7.
7 s 20.
8 s 50(b).
9 New Zealand Bill of Rights Act 1990, ss 23(4), 25(a) and (d). See also Criminal Disclosure Act 2008, ss 21 and 23.
I. The Rule of Law
Chapter 2: Fundamental Principles
The rule of law invokes a myriad of complex ideas essential to the fair and proper operation of a justice system. However, for present purposes, it may be reduced to its shallowest and most incontrovertible understanding: the governing of society by ‘rules which are fixed, knowable and certain.’10 This curtails arbitrary rule, enhances the liberty of a jurisdiction’s subjects and is a necessary condition for the exercise of individual autonomy - another fundamental principle of the law - as citizens must be able to know the law before it is just to convict them for breaking it.11While the principle of non-retrospectivity which flows from the rule of law is widely known, the lesser-known principle of maximum certainty is also its product.12 This principle demands criminal offences be drafted in a manner which provides as much certainty as possible as to the conduct which constitutes an offence. Essentially, the law must provide a ‘fair warning’.13 The ability of a citizen to learn of an offence and its substance without undue struggle reflects the criminal law’s fundamental acknowledgement of a citizen’s rationality and autonomy. The principle does not call for absolute certainty. Such a demand would be impracticable, if not impossible, to satisfy. Against this principle it has been said that those who dare to ‘skate on thin ice’ can hardly expect a sign denoting the precise spot where they will fall in.14 However, such a position encourages the courts to expand the law, rather Parliament who bears the constitutional mandate to legislate.15 It would also undermine autonomy.16
II. The Right to a Fair Trial
As will be seen below, the sanctity of this right cannot be overstated. Under s 25(a) of the New Zealand Bill of Rights, everyone charged with an offence has the right to a fair and public hearing. 17 That subsection is considered the foundational right, on which the other rights contained in the section rest and serve.18 These consequential rights include the presumption of innocence, the right not to be compelled to be a witness, the right to examine the witnesses under the same conditions as the prosecution and the right to be tried without undue delay.This fundamental right has been described as ‘essential for the preservation of an effective system of justice’,19 as well as ‘the ultimate right from which all procedural rights may be deduced.’20 The sacrality of the right is underscored by judicial reverence paid to it. The Court of Appeal has said ‘there is no right more inviolable... Not only is it the fundamental right of
10 Andrew Ashworth Principles of Criminal Law (5th ed, Oxford University Press, Oxford, 2006), at 68.
11 Ashworth, at 68.
12 Ashworth, at 68-73 and 74.
13 Ashworth, at 74 and 75.
14 C v DPP [1995] UKHL 15; [1996] AC 1, at 28.
15 Ashworth, at 73.
16 Ashworth, at 74.
17 New Zealand Bill of Rights Act 1990, s 25 (a).
18 Paul Rishworth, Grant Huscroft, Scott Optican and Richard Mahoney The New Zealand Bill of Rights (Oxford University Press, Oxford, 2003), at 664
19 Gisborne Herald Co Ltd v Solicitor General [1995] 3 NZLR 563, at 12.
20 Rishworth, Huscroft, Optican and Mahoney, above n 18, at 664.
the individual, it permeates the very fabric of a free and democratic society.’21 The idea that one may face trial and endure punishment in the absence of this right being assured is ‘repugnant’.22As far as one may be, the right to a fair trial is absolute.23 Functionally, this means it cannot be weighed against other interests and infringed by compromise as ‘there is no room in a civilised society to conclude that “on balance” an accused should be compelled to face an unfair trial.’24 The High Court has even claimed it ‘cannot be subject to reasonable limits under s 5 of NZBORA.’25 Accordingly, the right has been found to outweigh the hallowed right to freedom expression when the two come into conflict,26 as well as the principle of open justice should circumstance require it.27
III. The Presumption of Innocence
Viscount Sankey’s description of the presumption of innocence as the ‘golden thread’ within the web of common law has been recited ad infinitum, such that the point has become axiomatic.28 The presumption’s importance cannot be overstated: it goes to the very heart of our justice system’s legitimacy and the liberty of a nation’s citizens. It is a core value of New Zealand’s justice system,29 hence its enshrinement in NZBORA.30 While the presumption is being dealt with separately, it is inextricably intertwined with the right to a fair trial - the former being an aspect of the latter.31 It is also closely linked to the privilege against self-incrimination. In Sorby v The Commonwealth it was said ‘the protection which [the presumption] affords to the liberty of the individual will be weakened if power exists to compel a suspected person to compel his guilt.’32The presumption has been buttressed through the prosecution’s burden of proving guilt in criminal cases and its infringement is deeply disapproved of by all common law judiciaries. Viscount Sankey declared in Woolmington v DPP ‘no attempt to whittle it down may be entertained.’33 In Australia, it was described as the ‘cardinal principle of our justice system’.34
21 R v Burns [2002] 1 NZLR 387; (2000) 6 HRNZ 506, at [10].
22 R v Burns, above n 21, at [10].
23 Condon v R [2006] NZSC 62, [2007] 1 NZLR 300, at [38]; R v Parore [2021] NZHC 3405, at [48]; R v Burns
above n 21, at [10]; Brown v Stott [2000] UKPC D3; [2003] 1 A.C. 681, 2001 2 W.L.R 817; and Morrison v Financial Markets Authority [2023] NZHC 1654, at [143]. See also: R v Lord Chancellor, Ex parte Witham [1997] EWHC Admin 237; [1998] QB 575, at 585. 24 R v Burns, above n 21, at [11].
25 Morrison v Financial Markets Authority, above n 23, at [143].
26 Gisborne Herald Co Ltd v Solicitor General above n 19; R v Burns above n 23, at [10]; and R v Liddel [1995] 1 NZLR 538.
27 R v Liddell [1995] 1 NZLR 538.
28 Woolmington v Director of Public Prosecutions [1935] AC 462 (HL), at 481-482.
29 Hansen v R [2007] NZSC 7, [2007] 1 NZLR 607, at [193].
30 New Zealand Bill of Rights Act, s 25 (c).
31 Hansen v R, above n 29, at [47]; Rishworth, Huscroft, Optican and Mahoney, above n 18, at 674.
32 Sorby v The Commonwealth [1983] HCA 10, (1983) 152 CLR 281, at 294.
33 Woolmington v Director of Public Prosecutions, above n 18, at 182.
34 Sorby v The Commonwealth, above n 32, at 294.
IV. The Privilege Against Self-Incrimination
The privilege against self-incrimination differs from the above principles in three important ways, requiring its examination in comparatively greater depth. Firstly, its proper origins (and thus the principles and values it protects) are subject to controversy. Secondly, it is explicitly infringed by the Serious Fraud Office Act.35 Finally, the privilege’s validity has been the subject of ongoing academic dispute. As such, in-depth examination is warranted: one can hardly complain about a principle’s infringement if it itself is illegitimate, nor can its justifications be understood and assessed if its origin is uncertain.
The real genesis of the privilege remains disputed, with two understandings of the privilege against self-incrimination’s origins having developed in modern scholarship.36 This debate is significant, as each account of the privilege implicates different conceptual underpinnings.
Championed most famously by Leonard Levy, the traditional view believes the privilege’s roots lie in the English tradition of resistance to the ex officio oath, which was first used by the Church and later by the state.37 This resistance would culminate in 1641, with the abolition of the Star Chamber and the High Council, on the basis their inquisitorial procedure violated Magna Carta’s 29th article, 38 which guaranteed Englishmen the right to be tried in accordance with England’s accusatorial system.39The oath was a procedure in which the accused was made to swear an oath to answer all questions at the very start of the proceeding, in ignorance of the charges faced or evidence held against them.40 Failure to do so would see the subject found guilty. They were also liable to punishment for perjury should their inquisitors possess evidence to the contrary, this perjury being further evidence of his guilt.41
Levy follows the oath’s genesis back throughout English history, all the way to its introduction to cannon law following the Fourth Lateran Council in 1215 and the subsequent pattern of resistance upon its introduction to England in 1236.42 Levy traces England’s ongoing resistance to the oath’s imposition: from the initial parliamentary attacks in the 1330s upon its introduction to England’s cannon law,43 to the widespread popularisation of its illegitimacy during the Marian Inquisition through Foxe’s Book of Martyrs.44 Under Elizabeth I, resistance to the oath continued with the introduction of
35 Serious Fraud Office Act 1990, s 27.
36 Law Commission, The Privilege Against Self-Incrimination, (NZLC PP 25 1996), at [14]. R.H. Helmholz, Charles M. Gray, John H. Langbein, Eben Molgen, Henry E. Smith, Albert W. Alschuler The Privilege Against Self-Incrimination: Its Origins and Development (The University of Chicago Press, Chicago, 1997), at 82. Paul Roberts and Adrian Zuckerman Criminal Evidence, (2nd ed, Oxford University Press, Oxford, 2010), at 538.
37 Leonard W. Levy Origins of the Fifth Amendment: The right against self-incrimination (Ivan R Dee, Chicago,
1968), at 331.
38 The Act for the Abolition of the Court of Star Chamber 1641, July 5, 1641. Statutes of the Realm, v. 110. 17 Car. I. cap. 10, (I).
39 Magna Carta 1297, Article 29.
40 Levy, above n 37, at 23.
41 Levy, above n 37, at 23 and 24.
42 Levy, above n 37, at 46-47.
43 Levy, above n 37, at 47.
44 Levy, above n 37, at 77, 79-80
the canonical maxim ‘nemo tenetur seipsum podre’ to the common law following Thomas Leigh’s trial in 1568.45 Under the Stuarts, particularly Charles I, the Star Chamber and the High Commission would become an instrument of tyranny. It was used by Charles to silence the critics of his Court, the church and, in one instance, punish libelers of his friends and ministers.46 When Charles dissolved Parliament, he would enact his will through the Star Chamber.47 Simultaneously, the Commission’s repugnant treatment of Prynne, Leighton, Bastwick, Burton and Lilburne would enrage the people of England. Popular opposition to the Chamber and its oath rapidly grew into outrage based on the belief that compelled self-incrimination violated the common law rights and procedures to which all Englishmen were entitled.48In the 1640s, this pressure boiled over. George Peard, speaking in the House of Commons, demanded that no accusation stand “but under the mouth of two or three witnesses” and he condemned the oath as unjust where used to examine a man on that which was beyond what was testified to, deriding it as that which “upon every occasion watches the conscience”. 49 By February of 1641, Parliament bombarded the High Commission with a series of hostile questions about the oath and the basis of the Commission’s powers.50 In April, a Bill was introduced to curtail the High Council’s abuses, but fervor had reached such heights that nought but ‘root and branch destruction’ would sate the oath’s opponents.51 Such an Act would be given royal assent on July 5th 1641, thereby abolishing the Courts of High Commission and the Star Chamber.52 Its first provision immediately makes reference to Magna Carta’s 29th Article and its subsequent affirmations which called for common law procedure and protections to be used in matters pertaining to life, liberty and property.53 The Act also described the Chamber as a means through which ‘intolerable burdens’ and ‘arbitrary power and government’ were inflicted on the King’s subjects.54
As such, the traditionalists understand the privilege as the product of a great political struggle for constitutional limitations on arbitrary rule. Its role in transforming Magna Carta from a baronial relic into the foundation of the rule of law and constraint on executive power closely associates the privilege with these principles.55 Moreover, it is strongly associated with freedom of speech, freedom of religion and, above all, freedom from wanton political oppression. This conception also incorporates more modern developments. Levy acknowledges that while the right was initially claimed by those guilty of religious and political crimes, it was also a protector of the innocent.56 Later, it would become one of many tools used to ensure the fairness of the criminal
45 Levy, above n 37, at 96-97.
46 Harry Potter, Law, Liberty and the Constitution: a brief history of the common law, (online ed, The Boydell Press, Suffolk, 2015), at 107.
47 Potter, above n 46, at 133.
48 Levy, above n 37, at 280.
49 Levy, above n 37, at 281.
50 Levy, above n 37, at 281.
51 Levy, above n 37, at 281.
52 The Act for the Abolition of the Court of Star Chamber 1641, July 5, 1641. Statutes of the Realm, v. 110. 17 Car. I. cap. 10
53 The Act for the Abolition of the Court of Star Chamber, I. 54 The Act for the Abolition of the Court of Star Chamber, I. 55 Levy, above n 37, at 331.
56 At 332.
process and was made to work in concert with the presumption of innocence and the prosecution’s burden of proof.57 Now, it is merely one of many ways in which the fairness of a trial’s determination is secured – it implies a humane and ethical standard of judgement reflecting society’s belief in justice.58
The second view focuses on the principle’s emergence in substantive law during the rise of the adversarial system and defence counsel in 18th century England. 59 It undermines the traditional view with a very simple assertion: there cannot have been a privilege against self-incrimination as claimed by the traditionalists, because prior to the emergence of the adversarial criminal trial in the 18th century, the defendant had no choice but to respond to his accusers; and for nearly all of the 19th century, when defence counsel had become available for defendants, they were barred from speaking entirely. This view does not claim the judicial maxim did not exist or influence contemporary thinking, but rather contends that in the substantive procedural context, it is quite impossible to speak of any privilege against self-incrimination in the sense of it being a privilege of any actual value. Accordingly, such a view implies that the privilege is merely a relic of the adversarialization of our legal system, divorcing it from the highly political undercurrents it is associated with under the traditional view.Prior to the adoption of an adversarial trial procedure, criminal procedure made the accused’s silence all but a guarantee of conviction. From the 15th until nearly the 20th century, the central purpose of a criminal trial was to allow the defendant to respond to the accusations he faced in person.60 During a typical English trial of the period, a defendant would directly confront his accusers and their witnesses, responding to prosecutorial evidence and assertion as it arose in direct ‘altercation’.61 The accused’s retorts were made unsworn, despite the fact his accusers were afforded this credibility.62 Certainly there was no requirement to challenge evidence, but to failure to do so was suicidal.63 The accused had no right to counsel, with the judge serving as such but only in relation to points of law.64 In practice, where the judge did not actively undermine the defendant, the counsel they offered felons was pathetic.65 In effect, should the accused have remained silent, where there existed no possibility of another defending him, the accusations against him would go unchallenged and he would undoubtedly be condemned to death.
However, the rise of the adversarial system and lawyer’s infiltration of the justice system during the 18th and 19th centuries would change this. Defence counsel was
57 At 332.
58 At 332.
59 Law Commission, above n 36, at [16].
60 Helmholz, Gray, Langbein, Molgen, Smith and Alschuler, above n 36, at 82.
61 Thomas Smith De Republica Anglorum, (Cambridge University Press, London, 1906), at 98, noted by Helmholz et al, above n 36, at 84.
62 John H. Langbein, The Origins of the Adversary Criminal Trial (online ed, Oxford University Press, Oxford, 2005), at 13.
63 Helmholz, Gray, Langbein, Molgen, Smith and Alschuler, above n 36, at 87.
64 At 85.
65 At 84-85.
introduced to criminal trials under the Treason Act of 1696.66 This reform was the result of legislative acceptance of the reality that judges appointed by the King were unlikely to make any effort to defend a traitor. 67 The frequent appearance of prosecutorial counsel and resulting notion of unfairness was also influential.68 While initially this reform was only limited to treason trials, the floodgates had been opened. In the 1730s, the judiciary allowed defence counsel to act in felony trials in response to the increasing presence of prosecutorial counsel, though defendant’s up-take of this new-found assistance remained infrequent until the 1780s.69 Thus, only in the late eighteenth- century did the English criminal justice system become truly adversarial, this transformation bringing with it the privilege against self-incrimination. In coming years, lawyers would assume from their clients the right to question witnesses, argue the law and address the factfinder,70 leading to a peculiar situation where the defendant, barred under the common law from giving sworn evidence, had conferred all remaining responsibilities to their lawyer. In 1820, contemporary accounts joked that the role of a defendant was such that his ‘hat stuck on a pole might without inconvenience be his substitute’ at trial.71 It was only in 1898 that the defendant was provided the ability to give any sworn testimony of his own,72 this being essential in ensuring the privilege was of actual consequence.On this basis, those who posit the revisionist view do not claim there was no such privilege. Rather, they simply believe structure of the criminal process ‘made it impossible to implement’.73 It simply was not a viable course of action for those who wished to escape the noose.
It seems the revisionists who see the privilege as a relic of criminal procedure’s adversarialization may be said to be correct, but only if one takes the view that the principle can only be evaluated by how it came to exist in positive law. I do not believe this is so. Certainly, it must be acknowledged that the privilege’s genesis in positive law is rooted in the aforementioned procedural history. However, that does not preclude it from acting as a channel for sentiments espoused by the traditionalists, nor does it nullify these sentiments as a justification for the privilege’s existence or render the tyrannical historical context irrelevant. Such a view was taken by the High Court of Australia in Environment Protection Authority v Caltex Refining Co Pty Ltd, which found that the privilege ‘represents, at all events so far as the criminal law is concerned, an unequivocal rejection of an inquisitorial approach’.74 However, the privilege does not serve a single policy goal or purpose, but rather an interrelated collection of them.
66 Treason Act 1695 (7 &8 Will 3 C 3), in preamble. Stephen Sedley LJ, ‘Wringing out the fault: self- incrimination in the twenty-first century, (2022) NILQ 57, at 62.
67 Helmholz, Gray, Langbein, Molgen, Smith and Alschuler, above n 36, at 97.
68 At 97.
69 At 97.
70 Sedley, above n 66, at 63.
71 M. Cottu, De l’Administration de la Justice Criminelle en Angleterre (Islington, E. Hunt, 1820), quoted in Sedley above n 66, at 63.
72 Sedley, above n 66, at 57.
73 Helmholz, Gray, Langbein, Molgen, Smith and Alschuler, above n 36, at 108.
74 Environment Protect Authority v Caltex Refining Co Pty Ltd [1993] HCA 74; (1993) 178 CLR 477, at 526, and
527.
This was recognised by Deane, Dawson and Gaudron JJ, who stated that while its generally recognized that the privilege emerged as was described in the traditional account, the principle now equally rests upon the principle that the prosecution bears the burden of proof and ‘the deep-seated belief that those who allege the commission of a crime should prove it themselves.’75Thus, the privilege may be understood to stand with one foot in each camp, it being all the stronger for it. It is justified not only by concerns roused by the politics and treason trials of the 13th-17th century, but also the values which underlie our adversarial system. The consequent importance of the privilege is reflected in the reverence it is paid throughout the common law, as well as its enshrinement in NZBORA along with all other fundamental human rights.
The New Zealand Bill of Rights Act contains multiple provisions which protect the privilege against self-incrimination.Under s 23 (4) of the Act, everyone who is arrested or detained under any enactment for an offence or suspected offence shall have the right to refrain from making any statement and to be informed of this right.76 Further, under s 25(d), anyone who is charged with an offence has the right, in relation to the determination of the charge, ‘not to be compelled to be a witness or to confess guilt.’77
S 25(d) was recently considered by the High Court in Parore v Attorney-General in relation to financial crime.78 Following a bankruptcy and on-going tension with the Inland Revenue Department (IRD), an audit into Parore’s tax affairs was launched. A day after the IRD signed a prosecution memorandum indicating an intention to prosecute him, they issued a default GST assessment against Mr Parore, which he duly disputed via a Notice of Proposed Adjustment (NOPA).79 A NOPA requires a taxpayer to disclose the facts which support the reassessment they seek. This includes any facts the IRD may not know, an explanation as to why they believe their proposed change is correct with reference to the law the taxpayer intends to rely on in support of the proposed change, as well as how they believe the law applies to their situation. This is mandatory should one wish to dispute IRD’s default assessment. Subsequently, the IRD began criminal proceedings against Mr Parore. The Court found that ‘by subsequently laying charges, the Commissioner had made Mr Parore a witness against himself in breach of his right.’80 It was determined this was a breach of s 25(d) of NZBORA. Consequently, it is clear s 25(d) is applicable to financial crime, even in instances of compelled disclosure required by statute.
However, in the face of unambiguous legislation enacted to the contrary, as is the case with the SFOA, the rights contained within NZBORA are simply nullified. Under s 4,
75 Environment Protect Authority v Caltex Refining Co Pty Ltd, above n 74, at 526, 527 and 53.
76 New Zealand Bill of Rights Act 1990, s 23 (4).
77 s 25 (d).
78 Parore v Attorney-General [2023] NZHC 1010.
79 Parore v Attorney-General, at [15]-[16].
80 Parore v Attorney-General, at [70].
no court may hold any provision of any enactment to be impliedly repealed/revoked or in any way made ineffective, or decline to apply any provision, by reason only that the provision is inconsistent with any of NZBORA’s provisions.81 While the Bill of Rights requires courts to adopt the meaning which is most consistent with the rights and freedoms contained within it where such an interpretation can be taken,82, there is no interpretation of the SFOA that could possibly be adopted which would see the privilege survive in any functional state - Parliament undoubtedly intended to extinguish it. However, while Parliament undoubtedly supreme, the privilege’s infringement nevertheless ought to be minimised and decisively justified where infringement is unavoidable.
In the courtroom, the privilege is protected under s 60 of the Evidence Act 2006. The section makes clear that where a person is required to provide specific information and that information would be likely to incriminate the person under an offence punishable by a fine or imprisonment, the person has a privilege in respect of the information and cannot be required to provide it.83 Further, the person cannot be prosecuted or penalised for refusing or failing to provide the information, whether or not the person claimed the privilege when they refused or failed to provide it.84However, the privilege does not operate where an enactment removes it expressly or by necessary implication.85 In that case, the scope of the privilege only runs to the extent not infringed upon.86 The privilege is also not open to defendants when giving evidence relating to the matter for which they are being tried.87 Further, it may be waived, either expressly or impliedly, by a person or authorised agent who voluntarily discloses, produces or consents to the production/disclosure of any significant part of the privileged information/opinion/document in circumstances which are inconsistent with a claim of confidentiality.88
The privilege only protects against compelled incrimination, rather than self- incrimination in general, meaning it cannot be invoked where the subject willingly or voluntarily incriminates themselves.89
The privilege’s aforementioned existence in NZBORA and the Evidence Act is merely a reflection of a long-standing common law tradition, which still remains in force.In Taylor v New Zealand Poultry Board, Cooke J held the starting point for exploring the privilege is that in the absence of legislation to the contrary, every citizen may refuse to answer questions from anyone, including officials.90 He further notes that s 4 of the
81 New Zealand Bill of Rights Act, s 4.
82 New Zealand Bill of Rights Act, s 6.
83 Evidence Act 2006, ss 60 (1) and (2) (a).
84 s 60 (2) (b).
85 Evidence Act, s 60 (3) (a).
86 s 60 (3) (b).
87 S 60 (4) (a) and (b).
88 Evidence Act s 65 (1) and (2).
89 Law Commission, above n 36, at [28].
90 Taylor v New Zealand Poultry Board [1984] 1 NZLR 394, at 7.
Evidence Act 1908 (s 60 of the current Act) reflects the common law privilege that prevents witnesses being compelled to answer questions where that would incriminate them.91 Having summarised authorities from Australia and the United Kingdom, Cooke J concluded that the privilege ‘is capable of applying outside court proceedings’ as ‘the common law favours the liberty of the citizen’.92 Where a court is ‘not satisfied a statutory power of questioning was meant to exclude the privilege, it is in accordance with the spirit of the common law to allow the privilege.’93New Zealand has also curiously extended the privilege to corporations.94 The Court of Appeal found this to be so as there ‘seems [to be] no policy reason why a corporation should not avail itself of the rule’ and:95
‘It would be unrealistic to deny the directors and other officers of those companies the right to plead incrimination just because they have changed the legal status of the business for considerations which are irrelevant to the issue of self-incriminating admissions.’
While international authorities are far from unanimous, the reasoning underlying the United States’ refusal to bestow such protections to corporations is comparatively forceful. The Supreme Court held that as a corporation is a creature of the state created to advance the public good, it would be absurd to say it’s privileges and rights could not be limited by its sovereign creator – especially when it is pleading its own criminality.96 Additionally, considerations like privacy and oppression are less relevant to corporate entities.
While the validity of the privilege has been subject to doubt in modern times, it continues to be a profoundly important legal right.97Speaking in relation to the 5th amendment, the dean of Harvard Law School described it as ‘one of the great landmarks in man’s struggle to make himself civilized’ and ‘...one of the fundamental decencies in the relation we have developed between government and man’.98 In its justification, he also points towards society’s increased appreciation of the ‘dignity and intrinsic importance of the individual man.’99 It would be easy to dismiss such an account as stirring but ultimately vacuous. As noted by the Law Commission:100
There is no shortage of eloquent testimonials to the hallowed place of the right to remain silent in the pantheon of Anglo-American liberties. But defenders of the privilege have yet to substantiate the misty rhetoric that cloaks the privilege in a haze of noble words.
91 At 8.
92 At 17.
93 At 17.
94 New Zealand Apple & Pear Marketing Board v Master & Sons Ltd [1986] 1 NZLR 191, at 196.
95 At 196.
96 Hale v Henkel [1906] USSC 54; 201 US 43 (1906), 74-75.
97 Roberts and Zuckerman, above n 36, at 579.
98 Erwin Griswold, The Fifth Amendment Today, (Harvard University Press, Cambridge MA, 1955), at 7-8. 99 Erwin Griswold, The Fifth Amendment Today, (Harvard University Press, Cambridge MA, 1955), at 7-8. 100 Law Commission, above n 36, at [52].
However, Griswold’s description concisely captures various overlapping sentiments and justifications which underlie the privilege’s operation. The privilege’s long and complex history has shown it serves political principles, such as the rejection of authoritarian methods of investigation, as well as ensuring the proper function of the adversarial system and its associated values.101 In the modern era, it also serves to protect privacy, a fair state- individual balance and addresses concerns about the reliability of coerced confessions.102 This was recognised by Lord Mustill in R v Director of Serious Fraud Office, Ex Parte Smith, where he stated ‘one person should so far as possible be entitled to tell another person to mind his own business’, with such an assertion of ‘personal liberty and privacy’ being recognised by ‘all civilised states’.103Ever since its publication in 1827, Bentham’s criticism in The Rationale of Judicial Evidence has been repeatedly quoted by the privilege’s detractors. The ‘cruel trilemma’ evokes little sympathy from Bentham, who states ‘whatever hardship there is in a man’s being punished, that, and no more, is there in his thus being made to criminate himself.’104 Further, Bentham sees that the trilemma only exists where the suspect is in fact guilty, meaning only the guilty would have to bear this trifling discomfort: ‘...innocence claims the right of speaking as guilt invokes the privilege of silence.’105 This view as to the trilemma was also shared by the Law Commission.106 However, Bentham has failed to account for a myriad of circumstances wherein one innocent of the crime in question nevertheless wishes to remain silent. One can quite readily foresee a circumstance where an innocent suspect has information which would clear them of suspicion, but it is of an extremely private nature. As such, if it could be guaranteed that suspects subject to inquisitorial powers were guilty, the cruel trilemma would not justify the privilege. We do not live in such a world. Bentham later turns to the sentiment of unfairness which may underlie the privilege, with his arguments enjoying reverence to this day.107 He derides the sentiment as the ‘fox-hunter’s reason’, comparing the privilege to the head start given to a hunted fox. Certainly, as far as the privilege is based on a sense of sport, it is unjustified. The purpose of criminal law is the deliverance of justice. But this is merely a mischaracterization of legitimate concerns about excessive government power.108
Against the privilege, it may also be said that there are many statutes which infringe it, this being a necessary compromise to enable a liveable society. Mandatory breath tests for drink driving are one such example where the privilege is infringed in the face of societal need. However, nothing may be revealed by a breath test beyond the presence of alcohol. In such an application, the privilege’s justifications are negated such that the benefit provided to society unquestionably outweighs considerations against its use. The same clearly cannot be said for unbridled powers of inquisition.
101 Murphy v Waterfront Commission [1964] USSC 136; 378 US 52, at 55.
102 Law Commission, above n 36, at [53]-[97]. Murphy v Waterfront Commission, above n 101, at 55.
103 R v Director of Serious Fraud Office, Ex Parte Smith [1993] AC 1, at 31.
104 Jeremy Bentham Rationale of Judicial Evidence (Simpkin, Marshall & Co., London, 1843).
105 M Durmont and Ettienne Durmont A Treatise on Judicial Evidence: Extracted from the Manuscripts of Jeremy Bentham (William S Hein & Co, London, 1825), at 241.
106 Law Commission, above n 36, at [97].
107 Roberts and Zuckerman, above n 36, at 553.
108 Law Commission, above n 36, at [71]-[76].
Thus, while the privilege may frustrate the immediate prosecution of guilty, this is the unavoidable cost it imposes in its protection of fundamental human rights. It continues to be a valid legal principle, protecting individual freedoms and the principles underlying our adversarial legal system. It is a hallmark of our society’s civility.
Chapter 3: The Serious Fraud Office Act 1990
I. Origins and Purpose of the SFO
The history of the Act provides an insight into why the Serious Fraud Office and its considerable investigatory powers were considered necessary by Parliament.In the mid-1980s, the New Zealand economy witnessed a marked increase in financial, commercial and investment activity following its liberalisation.109 However, October 1987 saw one of the largest global falls in share values ever recorded.110 New Zealand was one of the countries most affected, with a drop of 36% seen that month.111 While other markets soon recovered, New Zealand’s prices continued to drop. Many New Zealand financial institutions would collapse in the following months, taking with them New Zealander’s life savings. By mid-January 1988, prices had fallen 57%. 112 While economists did not necessarily believe this increased effect was caused by New Zealand’s lax regulatory regime, such a theory was propagated by the media and became popularly held. 113 Accordingly, there was acute concern in the public mind about the increasing incidence of actual or suspected corporate fraud.114 The impact of this collapse on the public psyche was reflected in the Bill’s heavy-handed approach.
The Bill which would become the SFOA was introduced in late 1989 as part of a package of law reforms aimed at restoring the credibility of the New Zealand investment market.115 The Bill was heavily influenced by the United Kingdom’s creation of a Serious Fraud Office a few years prior and would closely mirror the Criminal Justice Act 1987 (UK). The introductory speech for the New Zealand Bill illuminates the rationale underlying Parliament’s decision to confer these extraordinary powers. The Minister of Justice explained that:116
“Fraud is not a simple offence. In its more serious or complex form its perpetrators are persons of some sophistication and guile. Fraud can lurk behind apparently normal complex commercial transactions. It is committed and carefully hidden with stealth and deceit. Investigators need special powers to be able to unravel the complex transactions and documentation that accompany such offences.”
These powers and their infringement of the privilege against self-incrimination were said to ‘reflect the Government’s concern about dealing effectively with serious and complex fraud’.117 Prime Minister Geoffrey Pamler, much to the same effect, said:118
109 Dennis Pain and John Billington “The Serious Fraud Office” (paper presented to a New Zealand Law Society Seminar, November 1990), at 1.
110 Brent Wheeler and Murray Nash, An Examination of the Sharemarket Crash and its Aftermath in New Zealand, (Economic Development Commission, Wellington, 1989), at 1.
111 Wheeler and Nash, above n 110, at 1.
112 Wheeler and Nash, above n 110, at 1.
113 Wheeler and Nash, above n 110, at 2 and 8.
114 Pain and Billington, above n 109, at 1.
115 (5 December 1989), 503 NZPD 14022.
116 (5 December 1989) 503 NZPD 14022.
117 (5 December 1989) 503 NZPD 14023.
118 ‘History’, Serious Fraud Office, <https://sfo.govt.nz/about-us/who-we-are/history/>.
“[fraud] is a very deceitful and nefarious activity that is often conducted by people with respectable reputations in the community. It is very hard to discover and it is very difficult to prosecute successfully. Indeed, many people think that a lot of the behaviour that goes on is aided by modern technology – especially computers.”
The last sentence in Palmer’s statement is illustrative of a zeitgeist formed by a swirling mix of uncertainties surrounding the digital revolution of the 1990s and its potential implications for financial crime. It must be kept in mind that in 1989 and 1990, New Zealand’s population and government were significantly less familiar with computers than in the present day. While such historical fears may understandable, in the present day they are no longer relevant. It should also be noted that at this time, New Zealand’s financial markets regulation was relatively crude – for instance, no prohibitions on insider trading were in place prior to the collapse. Thus, even if it is accepted the regulatory system was the cause of the collapse, enforcement and detection may not have been the issue.This sentiment of necessity (perhaps unsurprisingly) is shared by the SFO, which claims it would ‘not be able to carry out its functions without the powers contained within the SFO Act as the nature of the offences which they are tasked with investigating are ‘extremely difficult to detect and prosecute’.119 Whether this explanation holds up in light of the SFO’s record of investigation - as well of its ability to use these powers in its routine enforcement of the Electoral Act 1993 (which would seemingly import vastly different considerations)
- may render this statement questionable. The Opposition made little complaint about the Bill’s abrogation the privilege against self-incrimination, with the most repeated complaint being simply that the Bill had come too late.
One also must question whether the impending 1990 election was influential in the Bill’s removal of the privilege. It was only 15 months prior to the Bill’s introduction that the Government had declared the National Party’s calls for a similar Bill - one actually more restrained in its elimination of rights - to be a ‘constitutional outrage’.120 In light of this, it may be surmised that this moral U-turn by the Government was a calculated effort to mitigate the damage the market crash did to its credibility, rather than a legitimate and even- handed attempt to address crime.
Thus, an examination of the Act’s origins reveals a government in desperate need of restoring its economic credibility before a looming election, a sense of uncertainty surrounding the implications of the digital revolution and financial markets regulations which were significantly underdeveloped. This perfect storm combined into a perceived need to crack down on commercial fraud, or at the very least appear to be doing so. Unfortunately, this is rarely a recipe for cogent and considered law making, meaning the Act’s origins may explain why it took the form it did, but no longer provide a convincing justification for its measures.
Since its inception, the SFO’s scope of operations has expanded far beyond merely policing fraudulent conduct. The SFO describes its purpose as ‘protecting New Zealanders’ financial
119 ‘History’, Serious Fraud Office, <https://sfo.govt.nz/about-us/who-we-are/history/>.
120 (5 December 1989) 503 NZPD 14024. (28 June 1990) 508 NZPD 2532.
and economic wellbeing.’ 121 It considers itself the ‘lead law enforcement agency for preventing, investigating, and prosecuting serious financial crime, including bribery and corruption.’122The SFO receives an average of 1052 complaints per year.123 These result in around 26 enquiries per year, with an average of 14 full-fledged investigations following. The organisation will typically have between 30-40 investigations and prosecutions open at a time, choosing to focus on cases which they believe have a high impact on the economy and the finances of New Zealanders. Priority is given to cases in which there are multiple victims; where the accused is in an important position of trust; where the transactions have significant legal or financial complexity beyond the resources of most other law enforcement agencies and where there are allegations of bribery and corruption – particularly involving public officials; or which may undermine the public’s confidence in the administration of the law.124
II. Inquisitorial Powers under the Act
Part 1 of the Act relates the detection of serious or complex fraud, providing the Director with powers to compel the production of documents and obtain search warrants.125 The powers conferred under this part are available to the Director where they have ‘reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud’.126
The production of documents is governed by s 5 of the Act. The section states the Director may, via written notice, require any person to produce any documents specified in the notice for inspection where the Director has reason to believe they may be relevant to any suspected case of serious fraud, or to answer questions pertaining to the existence or location of any further documents which may be relevant to the investigation.127 However, notices issued under s 5 cannot require their recipient to supply any other type of information or answer any other questions from the Director or SFO.128 Anything asked of a recipient in a notice must be performed ‘forthwith’ unless otherwise specified.129 Requirements must be performed at the time and place specified in the notice.130
121 ‘Statement of Strategic Intentions 2020-2024’, Serious Fraud Office, <https://sfo.govt.nz/about-us/strategy- and-purpose/>.
122 ‘What We Do’, Serious Fraud Office, < https://sfo.govt.nz/fraud-and-corruption/what-we-do/>.
123 ‘Annual Report 2022’, Serious Fraud Office, < https://sfo.govt.nz/assets/Uploads/Annual-Report-2022- Web.pdf>.
124 ‘FAQs – What does the SFO investigate’, Serious Fraud Office, < https://sfo.govt.nz/fraud-and- corruption/what-we-do/faqs/>.
125 Serious Fraud Office Act 1990, ss 4 and 5.
126 Serious Fraud Office Act 1990, s 4.
127 s 5 (1).
128 s 5 (3).
129 s 18 (3).
130 s 18 (1).
Any document produced by a recipient may have copies taken of it.131 Further, anyone who produces a document under this section may be required to reproduce, or assist in the reproduction of, the information recorded in a document in a useable form.132 This is likely to target digital files which have been encrypted, so that recipients cannot claim to have ‘complied’ with this section while obfuscating the document’s contents from the investigators.The notice issued by the Director must follow the form described in s 18 of the Act.133 The Director must inform the recipient of the fact that they may be accompanied by a barrister or solicitor at their meeting, the relevant circumstances in which the Director may apply for a search warrant and relevant offences under s 45 and 46 of the Act for non-compliance.134
It is clear the Director may make extremely broad and general requests for information, such that they may be little more than a shot in the dark. Under s 18 (2), any request for information or documents is sufficiently specified in a notice even if it is described in a general, rather than specific way, or solely by reference to its ‘class, nature, content, or effect.’135 These deliberately wide limits allow the Director to create a very wide net of catchment via a section 5 notice.
Where a notice under s 5 reveals unsatisfactory information/documentation or the Director feels the recipients of a notice have not been sufficiently forthcoming, they may turn to their power to obtain a search warrant. The Director may make an application on oath for a warrant to search any place.136 Such a warrant may be issued by any judge who is satisfied that there are reasonable grounds to believe:137a) A person has failed to produce all of the documents specified in a notice issued under s 5; or
b) A person has failed to answer any question asked pursuant to s 5 or that any answer given to such a question was false or misleading in a material particular or is incomplete; or
c) It is not practicable to serve a notice under s 5 as the person cannot be located, is absent from New Zealand or some other good cause.
A warrant may also be issued where a judge is satisfied there may be documents or ‘other things’ which may be relevant to an investigation or be evidence of an offence involving serious or complex fraud at a location specified in a notice.138 Under s 12(1), any warrant under issued under the Act will authorise the person who executes it to enter and search a specified location, to use assistance and such force as is reasonable in the circumstances, to search and remove any documents which may be relevant to the investigation, take copies or extracts from them and require any person to reproduce,
131 s 5 (2) (a).
132 s 5 (2).
133 s 18 (1).
134 ss 18 (4) and (5).
135 s 18 (2).
136 s 6 (1).
137 s 6 (2) (a).
138 s 6 (2) (b).
or assist in reproducing, any information recorded or stored in such documents in a usable form where necessary.139
Part 2 of the Act details the powers of the Director in relation to the investigation of suspected instances of serious fraud.
Under s 7, the powers contained within this part are available to the Director where they ‘have reasonable grounds to believe that an offence involving serious or complex fraud may have been committed’.140 The Act does not limit the matters to which the Director may have regard when formulating such a belief.141 However, the Act does state the Director may have regard to: 142a) the suspected nature and consequences of the fraud;
b) the suspected scale of the fraud;
c) the legal, factual and evidential complexity of the matter; and
d) any relevant public interest considerations.
In order for the s 7 test to be met, the District Court found in R v H:143
The director had to have grounds, as far as his belief was concerned based on what he knew or ought to have known – that belief being tested objectively from the standard of a person of reasonable competence in the director’s position – before he could have had reasonable grounds to believe that an offence of serious or complex fraud may have been committed...
The fact this was formulated through reference to Re a Solicitor (which considered a lawyer’s professional conduct) and Vinyl Processors New Zealand v Cant (which focused on reckless trading under the Companies Act 1955) perhaps explains such a confused test.144 Further, it seems strange the Director may form a reasonable belief on anything but their actual knowledge given the importance of the rights they may breach once s 7 is satisfied. Ultimately, information about the crimes being received from both employees and public complaints following the collapse of the relevant company’s share price was found clearly sufficient to satisfy the test in this case.145
Should the Director conclude the test is met, s 10 provides him the power to obtain a warrant near identical to those previously mentioned, differing only in that they pertain to failures to comply with notices issued under s 9.146The most concerning power afforded to the Director is that under s 9 of the Act. This section allows the Director to issue what is known as a ‘section 9 notice.’ Such a notice may be issued to any person who is being investigated or any person who the Director
139 s 12 (1).
140 Serious Fraud Office Act 1990, s 7.
141 s 8.
142 s 8.
143 R v H [1995] DCR 338, at 343.
144 At 342-343.
has reason to believe may possess information or documents relevant to an investigation.147 The notice may require its recipient to attend a meeting with the Director.148 The notice may (and almost certainly will) require the recipient to answer questions, to supply any information specified by the Director within the notice and to produce any specified documents for inspection.149Despite NZBORA being passed in the very same Parliamentary session as the Act, s 27 makes clear that this right provides no protection against the Director’s inquisition.
Under s 27, the Act states:150
‘No person shall be excused from answering any question, supplying any information, producing any document, or providing any explanation pursuant to section 5 or section 9 on the ground that to do so would or might incriminate or tend to incriminate that person.’
The records of Parliamentary debate make clear this reflected a sentiment common to both sides of the House. The Rt. Hon. Paul East of the National Party repeatedly commented during the Bill’s debate that the right to silence in its entirety ought to be reassessed, rather than merely in the context of white collar crime, particularly in the context of gang-based crime. 151 Thus, it seems the only opposition raised to the infringement of a fundamental principle of justice was that the Government did not go far enough.Shockingly, information unearthed via a s 9 notice may well be used to prosecute the suspect for unrelated offences, even where no serious or complex fraud is unearthed, so long as the s 7 threshold test was met when the Director initially assessed its satisfaction.152 In the District Court judgement which found this to be so, Judge Kerr held that the use of such information was not a breach of the right against unreasonable search and seizure in s 21 of the New Zealand Bill of Rights, as the Director’s ability to do so is based on a ‘reasonable belief’.153
Consequently, defendants’ and suspects’ rights in relation to crimes which are potentially completely unrelated to those Parliament envisaged the SFO would combat are liable to become subject to the Director’s powers. There seems to be no legitimate justification for such sweeping powers of investigation in these circumstances and in this regard the law is in sore need of reform.
However, as concerning as all of the above is, the most pressing issue presented by s 9 powers is the Director’s ongoing ability to exercise them following the commencement of proceedings against a defendant. Under s 50(b), ‘the Director may exercise any power conferred by this Act notwithstanding... that any criminal or other proceedings have been commenced in respect of any matter related to the investigation.’154 This means the Director may continue to question defendants and witnesses in order to
147 ss 9 (1) (a) and (b).
148 s 9 (c).
149 ss 9 (1)(d), (e) and (f).
150 Serious Fraud Office Act, s 27.
151 (22 May 1990) 507 NZPD 1678. (28 June 1990) 508 NZPD 2554.
152 R v H, above n 143, at 346.
extract information they otherwise would not be able to under the rules of disclosure or evidence. It also is in direct conflict with the right of those arrested to refrain from making any statement and the right not to be compelled to be a witness or confess guilt contained in the New Zealand Bill of Rights Act.155 Again, this may occur even where it is clear that the crime in question is not serious fraud, so long as the s 7 threshold test was initially satisfied.156
The Act creates three offences for those who fail to comply with the SFO.
The first offence created by the Act relates to the obstruction of SFO investigations. Under s 45, anyone who fails to comply with a section 5 or section 9 notice, or who resists, obstructs or delays any member of the SFO in the exercise of any power conferred by s 9 without lawful justification or excuse, commits an offence.157 Further, anyone who answers a question, produces a document or provides an explanation that they know is false or misleading in a material particular, or is reckless as to whether it is so, also commits an offence.158 If brought against a natural person, the charge is punishable by imprisonment of a term not exceeding one year or a fine of up to$15,000.159 A corporation’s maximum fine may be as much as $40,000.160
The second offence relates to the destruction, alteration, and concealment of records. Under s 46, it is an offence for anyone to destroy, alter, conceal or send out of New Zealand any book, document or record, where this is done with the intent to defeat any investigation being carried out or likely to be carried out by the SFO or with the intent to prevent the SFO from exercising any power they have under the Act.161 Where the actus reus of this offence is proved in any prosecution for this offence, the onus of proving the accused did not contravene the section lies on the defence.162 This offence is punishable by a term of up to two years imprisonment or a fine not exceeding
$50,000.163
Finally, under s 47, it is an offence to intentionally resist, obstruct or delay any person executing or assisting in the execution of a warrant issued under the Act.164 This is punishable by three months’ imprisonment or a fine of $5000.
155 New Zealand Bill of Rights Act, ss 23 (4) and 25 (d).
156 R v H (No. 2) above n 5, at 778.
157 ss 45 (c) and (d).
158 s 45 (a).
159 s 46 (1) (a).
160 s 46 (1) (b).
161 s 46 (1).
162 s 46 (2).
163 s 46 (1).
164 s 47.
Chapter 4: Issues with the Infringement of the Privilege Against Self- Incrimination
The SFOA’s infringement of the privilege is problematic for the following reasons. While the Act affords some protections for suspects, their ineffectuality becomes readily apparent upon close examination. Further, the Act provides both excessive discretion and inadequate supervision over the Director’s exercise of statutory powers. The Act’s infringement of the privilege is also unjustified in the context of serious fraud.
I. Illusory Protections
The Act states that suspects required to attend a meeting with the SFO under s 9 must be given a reasonable opportunity to arrange a barrister or solicitor to accompany them.165 However, this right is only operative when one is required to attend a meeting with the Director.166 Further, this protection is notably absent for those asked for information under s 5. This is problematic as an examinee may well become the focus of suspicion during an interview, which would result in the concerns such protections normally address becoming live.167It must also be remembered that a lawyer will be of little use to a defendant who is subject to a s 9 interview, as the law provides a defendant with scant refuge from the Director’s scrutiny. In an interview with the Director, counsel’s role may well be limited to confirming to an incredulous interviewee that their interrogator was not joking when they said an answer was mandatory.
Thus, while the right to counsel is an important protection, in practice it serves as little more than a veil for the serious lack of protection afforded to the suspect.
The Act provides some limited restrictions over the use information unearthed in the course of an investigation, slightly tempering the otherwise extensive powers of compulsion afforded to the Office. However, upon examination, it quickly becomes apparent that these too are ineffective.Under s 26, no evidence obtained under ss 5, 6 9 and 10 is inadmissible solely by reason of the fact it was obtained through those provisions.168 However, this is subject to s 28, which allows self-incriminating statements made to the SFO, regardless of form, to be used in evidence against the person charged with an offence only when they give evidence that is inconsistent with that statement.169 The provisions ineffectuality was recognised before the Bill was even passed, being described a ‘distinction without a distinction’ during the Bill’s introduction.170
165 Serious Fraud Office Act, s 9 (5).
166 s 9 (5).
167 Law Commission, above n 36, at [343].
168 Serious Fraud Office Act, s 26.
169 s 28 (1).
170 (5 December 1989) 503 NZPD 14023.
The immunity in s 28 only applies to oral statements and does not apply to documents or non-verbal assertions.171 More concerningly, the protection s 28 affords is merely a ‘use’ immunity, not a ‘fruits’ immunity. Use immunities prevent information or statements given by the defendant from being produced at trial. They do not protect the fruits of this information from being presented, i.e., information that is consequently discovered. Such a protection will be worthless in the face of even the most modestly competent investigator: they will not seek confessions of guilt. Rather, they will ask the suspect where to find the evidence necessary to prove them guilty. While the suspect’s statement disclosing the information’s location is inadmissible, evidence consequently discovered may be freely introduced at trial. The High Court of Australia has found the use of such derivative information may afford the prosecution an unfair forensic advantage, even where direct use immunities are in place.172Writing on such immunities, Sir Stephen Sedley saw that two views on the use of compelled information could be taken: either it is legitimate to use such techniques to compel answers in order to ensure the truth is found; or it must be found unacceptable in order to protect the innocent and unsophisticated. 173 He criticised laws which take a position half-way between these two (allowing questions to be asked but prohibiting the answers given from being used), as this introduces the vices of both positions while providing the benefits of neither.174
Unfortunately, it seems that New Zealand law has adopted such an approach, with s 28 acting as little more than a speedbump against the SFO’s inquisition.
II. Excessive Directorial Discretion
All of these extremely coercive powers beg a question which has yet to be answered: just what is ‘serious or complex fraud’?Parliament did not see fit to provide a definition of any real use. Only a non-exhaustive and circular description of what the SFO has been charged with eradicating has been included in the Act. Section 2 simply states that serious or complex fraud ‘includes a series of connected incidents of fraud which, if taken together, amount to serious or complex fraud.’175 This is far from a revelation. While the use of a wide definition is understandable in light of the wide range of crime the SFO is charged with policing, Parliament has failed to provide any concrete barriers to contain the exercise of the Director’s powers. An examination of the Bill’s introduction will reveal this is no accident. Hon. W. P. Jefferies, the then Minister of Justice, explicitly noted the absence of such a definition in the Bill’s introductory speech, preferring to only provide ‘guidelines’ as ‘any legislative prescription of serious or complex fraud would be arbitrary and provide only the basis for technical argument by those who want to avoid the investigatory powers in the Bill.’ This comment seems to erroneously suggest that only the guilty would ever wish to prevent themselves
171 Law Commission, above n 36, at [333]. Pain and Billington, above n 109, at 8.
172 X7 v Australian Crime Commission [2013] HCA 29, (2013) 248 CLR 92, at [53].
173 Sedley, above n 66, at 60.
174 Sedley, above n 66, at 60.
175 Serious Fraud Office Act, s 2.
from being subject to unbridled inquisition and that Parliament is somehow incapable of drafting legislation which would reasonably contain the ambit of inquisition while providing workable flexibility. The falsity of the latter implication is underscored by the Fraud Act 2006 (UK), which defines three categories of fraud all within the confines of only 13 provisions.176 Further, the Australian Crime Commissions Act 2002, which sets up an organisation akin to SFO, manages to define ‘serious and organised crime’ by reference to a minimum number of perpetrators, the suspected crime’s complexity, a minimum of 3 years imprisonment and, most importantly, has listed discrete criminal offences which they may target. 177 Despite these requirements, there appears to be no issue of flexibility.Searching for clarification by reference to the Crimes Act 1961 will also be futile. Certainly, it contains many offences which undoubtedly would be found beneath fraud in a thesaurus: obtaining by deception, forgery, counterfeiting, money laundering and match fixing all feature.178 However, there is no specific offence of fraud. The words fraud and fraudulent are used throughout the Act, for instance in the offence of obtaining by deception, deception is defined to mean a ‘fraudulent device, trick or stratagem’, but ‘fraudulent’ remains undefined.179 The Crimes Act 1908 contained a section devoted to fraud, comprised of the offences of false accounting and statement by an official, falsification of accounts by a clerk, false statements by public officers, conspiracy to defraud, cheating at play, concealing deeds and encumbrances and even pretending to practice witchcraft.180 The word fraud or fraudulent is also used throughout the 1908 Act in various offences similar to those in the 1961 Act, but again, no definition was included. Thus, while it is apparent that ‘fraud’ relates to offences involving elements of dishonesty, in legislation the term remains vague and provides little clarity as to when the SFO ought to make use of its powers.
As such, it is only by reference to the SFO’s cases that one may begin to understand what ‘serious or complex fraud’ may mean. However, even then, all that is revealed is what serious fraud is not. In R v H, the accused was one of six employees involved in acts of dishonesty.181 While $180,000 was stolen in total, H was charged with 3 offences of using a document capable of being used to obtain a pecuniary advantage with the intent to defraud, the sum of the amounts involved being about $10,000.182 While the question of whether the crimes amounted to serious fraud was not directly at issue nor contentious, Judge Kerr nevertheless stated ‘the sum involved is not large and the fraud alleged is not sophisticated’, finding it undoubtedly to be less than serious or complex fraud.183 Positively defining serious fraud using case law will be difficult due to the broad range of charges the SFO brings. The value of cases prosecuted is equally unhelpful, as the SFO has taken cases that range from millions of dollars to as little as two thousand.184
As it stands, the SFO’s extraordinary powers of compulsion are only limited by its Director’s ability to reasonably believe or, requiring even less conviction, suspect the
176 Fraud Act 2016 (UK).
177 Australian Crime Commissions Act 2002 (Cth), s 4.
178 Crimes Act 1961, ss 240, 240A, 241, 243, 256 and 257.
179 s 240 (2) (c).
180 Crimes Act 1908, ss 256-262.
181 R v H, above n 143, at 340.
182 R v H, above n 143, at 339 and 340.
183 R v H, above n 143, at 340.
184 Law Commission, above n 36, at [346].
perpetration of an act without definition. In other words, the scope in which the Director may exercise their powers is limited only by their imagination. This is a significant breach of the principle of maximum certainty and the rule of law from which it flows.
In light of these extensive powers and the ill-defined scope of their use, one would expect the SFO to be subject to serious external scrutiny to ensure their powers are not abused. One would be disappointed.Under s 20, the SFO Director is largely shielded from any judicial scrutiny when assessing whether threshold tests are met. The section provides that any decision by the Director to investigate any case which they believe may involve serious or complex fraud may not be challenged, reviewed, quashed or called into question in any court.185 This provision was considered by the district court in R v H, with the Court finding the plain meaning of this to simply be that ‘there can be no challenge to a decision by the Director to investigate serious or complex fraud.’186 This becomes of particular importance when one considers the poorly outlined boundaries of the test under s 7.
This protection resulted in a complaint being made to the Public Service Commissioner Peter Huges by Mike Heron KC, who said the protection conferred on the Act protected the Director from any other form of scrutiny and that the Public Service Commissioner’s intervention was ‘the only means by which the propriety of the Director’s actions can be tested and the Director, if necessary, held to account.’187 Heron was likely referring to the Commissioner’s role in appointing Chief Executives of public services and reviewing the way in which they carry out their responsibilities, as is conferred by the Public Service Act 2020.188 Because his complaint was made in relation to an on-going investigation, it was deemed inappropriate to act upon, though Heron was allowed to make further representations once the proceeding had come to an end.189 However, it is apparent that remedying misdeeds ex post facto will be too late to be of real benefit to those wronged.
Further, should any proceedings be brought in relation to any other duties or powers conferred under the Act, the Director may continue as if no proceedings had commenced until a final decision is issued in relation to those proceedings.190 ‘Final decision’ is defined so as not to include any interim orders issued under s 15 of the Judicial Review Procedure Act 2016, which would otherwise allow the court to issue an interim order where it believes it is necessary to preserve the position of an applicant.191 It also makes clear that the bringing of proceedings will not excuse anyone from fulfilling an obligation imposed by the Act.192 The above overrides any provision of any Act or rule of law or equity.193
185 Serious Fraud Act, s 20(a).
186 R v H, above n 143, at [344].
187 Tim Murphy, “Is the SFO too powerful for its own good?”, Newsroom, (online ed, New Zealand, 23 September 2022).
188 Public Service Act 2020, s 44 (d).
189 Tim Murphy, above n 187.
190 s 21 (1).
191 Judicial Review Procedure Act 2016, s 15 (1).
192 s 21 (1).
193 s 21 (2).
III. Infringement of the Privilege is Unjustified in Context
While the aforementioned justifications of the privilege are relevant to the context of serious fraud, this particular application invites additional considerations. These are discussed below.
The purported sophistication of perpetrators of serious fraud is used as a justification for the abrogation of the privilege. The SFO itself advised the government during the forming of the Act that the right to remain silent had ‘no relevance to serious and complex fraud offences given the sophistication of the persons involved and the legal and financial advice available to those persons.194 However, it is questionable whether such sophistication exists in reality.The SFO’s cases regularly involve large sums of money, but few, if any, appear to be of such overwhelming complexity that an investigator armed with normal powers of investigation would not be able to unravel the accused’s schemes. Even if it is accepted that serious fraud is exclusively committed by criminal masterminds, this explanation of the privilege’s abrogation falls apart when one remembers ‘serious fraud’ is without any concrete definition under the Act and the Director is able to exercise these powers even when it becomes apparent the conduct in question is plainly not serious fraud. Consequently, there can be no guarantee that the inquisitive powers of the Director are solely concentrated on those, in the words of the then Minster for Justice, of ‘sophistication and guile’. Rather, as the law stands, there is every possibility the all-seeing eye of the SFO will be used to coerce the illiterate, the vulnerable and the innocent who merely wish to be left alone.
The protection of the innocent and unsophisticated therefore continues to be a relevant justification of the privilege against self-incrimination in the context of serious fraud.
The difficulty of prosecuting fraud given the potential complexity and lack of external evidence has also been touted as a justification for the SFO’s unusual ability to infringe fundamental rights.195 The parliamentary speeches during the Bill’s introduction which allude to the sophistication would seem to suggest such a rationale underlay the Serious Fraud Office Act.Certainly, rights are not absolute. The NZBORA white paper makes express acknowledgement of this fact, noting they ‘must be balanced against other rights and freedoms and the general welfare of the community’ and ss 4-6 of NZBORA were drafted to ensure this principle was put into practice.196
However, this is simply the rationale which underlay the ex officio oath’s introduction during the Inquisition, thinly veiled under modern clothes. Pope Innocent III introduced inquisito because the cannon law’s system of proofs required two eyewitnesses to convict those accused of capital offences, hamstringing the Church’s ability to prosecute heretics.197
194 Murphy, above n 187.
195 (5 December 1989), 503 NZPD 14022. Law Commission, above n 36, at [337].
196 Hon. Jeffery Palmer, A Bill of Rights for New Zealand: A White Paper, (Ministry of Justice, 1985), at 6.
197 Levy, above n 37, at 22, 23, 29.
Equally, the oath was used by the High Council under Queen Mary in its notoriously brutal oppression of Protestants, with the letters patent which created the Council making the oath’s use mandatory in its procedure so as to ensure the expedient and efficient trying of heretics.198 If society, devout as it was in the 1600’s, saw that the immorality of compelled self-incrimination outweighed the need to stamp out treason against the Almighty himself, one would face a considerable challenge claiming that the import of serious fraud required the resurrection of such powers.Further, unlike heresy, serious fraud cannot be committed without a trace. In the age of immutable digital bank records and stringent AML/KYC requirements,199 one would think serious fraud has never been easier to detect and prove. Admittedly, these regulations were not in place when the Act was passed, but that does not excuse the Act’s short comings in the present day.
This claim is also undermined by the fact that in the United States, where Federal Trade Commission reports found fraud cost American citizens $8.8 Billion USD in 2022,200 the Fifth Amendment renders the privilege inviolable. 201 The US has not abrogated the privilege for natural persons, even in the context of serious financial crime. For example, natural persons subpoenaed by the Securities and Exchange Commission may still resist the Commission’s powers on the basis of their constitutional privilege against self- incrimination. 202 Given that the New Zealand’s financial markets are infinitesimal in comparison to those of the United States and large fraudulent operations in 2021 totalled less $30m NZD;203 it seems absurd to suggest there is a desperate need to infringe the privilege here. This was recognised by the Law Commission soon after the SFOA was passed, which noted that ‘there is no evidence that large numbers of serious fraudsters are escaping detection by claiming the privilege in the serious fraud context.’204
Accordingly, while such powers are certainly an evil, they cannot be said to be necessary. There must be something more to justify the infringement of the privilege beyond mere convenience of prosecution: as a society we have rejected an approach which seeks conviction at all costs. Attaining convictions by any means necessary is not justice.
While on its face the context of serious fraud does not invite such a justification, reference to the privilege’s history suggests caution must still be taken to protect fundamental rights.The history detailed by Levy’s work has made clear that the privilege’s popular conception as a protection against tyranny was a direct response to the corruption of the Star Chamber. It was initially conceived for good and given exceptional powers to pursue its aims.205
198 Levy, above n 37, at 76 and 77.
199 For example, see The Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
200 Sarah O’Brien, “Fraud cost consumers $8.8 Billion last year, Federal Trade Commission Says, CNBC (online ed, United States, 21 March 2023).
201 United States Constitution, amend V.
202 Seymour Glanzer, Howard Schiffman and Mark Packman, “The Use of the Fifth Amendment in SEC Investigations (1984) 41 Wash. & Lee L. Rev. 895, at 897.
203 Mike Lowe ‘Fraud Barometer: a snapshot of fraud in New Zealand’ (September 202)
<https://assets.kpmg.com/content/dam/kpmg/nz/pdf/2021/10/kpmg-fraud-barometer-2021.pdf>.
204 Law Commission, above n 36, at [344].
205 Potter, above n 46, at 103 and 107.
However, it would ultimately be corrupted and used as an instrument of political and religious oppression. 206 The past seems to be rhyming with the present. Certainly, parallels to the Inquisition should not be overstated: the SFO’s suspects face no threat of torture, nor will they be burnt in the fires of Smithfield. At worst, they face a relatively short jail sentence. This also is not to suggest the SFO’s powers are being used as a political tool: the Director acts independently from the Attorney-General,207 who is the responsible Minister for the Office.208 However, the entrustment of unbridled inquisitorial powers to a quasi- independent body, albeit one with a noble cause, should be examined with considerable scrutiny, given their historically proven potential for abuse. The oppressive use of their powers may not be a likelihood, but due to the poor drafting of the Act, it remains a possibility. The SFO’s Director perhaps inadvertently said as much when giving advice to the Government during the Bill’s passing, noting that ‘the threat of torture has receded...’209- receded and non-existent being two very different things.
The NZBORA white paper also directly addressed the danger of eroding these protections. It correctly recognises the fact New Zealand is not on the precipice of tyranny, nor is it likely to be in the near future.210 However, this is not the matter at issue. Rather, the danger lies in the executive making small but continued erosions of rights, using plausible excuses such as expediency and necessity, thereby putting the privilege to death by 1000 cuts with each stroke providing precedent for the next.211 Accordingly, where such infringements are made, the justifications thereof must be subject to the utmost examination. This is especially so in the context of the Serious Fraud Office Act, where the Director’s exercise of powers is extremely discretionary and shielded from scrutiny.
Protections against governmental overreach will often seem of little value or an unnecessary inconvenience when they are operating as intended. In the words of the Supreme Court of the United States, ‘to treat [the privilege] as a historical relic, at most merely to be tolerated—is to ignore its development and purpose.’212 As such, in the context of the SFO Act as it currently stands, this continues to be a valid justification of the privilege’s preservation.
206 Potter, above n 46, at 103.
207 Serious Fraud Office Act, s 30.
208 Serious Fraud Office Act, s 29.
209 Law Commission, above n 36, at [340].
210 Palmer, above n 196. at 27.
211 Palmer, above n 196, at 27.
212 Quinn v United States [1955] USSC 56; 349 U.S. 155, at 162.
Chapter 5: Issues with Criminal Procedure and the Right to a Fair Trial
I. Outlining the Issue
This chapter will focus on the SFO’s ability to exercise their powers against a defendant following both their charge and the commencement of proceedings. As will be examined below, these powers give the SFO the ability to extract significantly more information than they otherwise could under normal disclosure requirements. Naturally, this undermines disclosure law’s underlying principles, which include the presumption of innocence, the privilege against self-incrimination and the burden of proof being borne by the prosecution. 213 More concerningly, there is a line of Australian cases which suggests this may also infringe the defendant’s right to a fair trial.
II. Standard Rules of Criminal Disclosure
Under NZBORA, anyone who is arrested or detained for an offence has a right to refrain from making any statement and to be informed of this right.214 Generally, criminal defendants are not obliged to disclose anything to their prosecutor. However, under the Criminal Disclosure Act 2008 (CDA), there are two exceptions.The first of these are alibis which are intended to be relied upon at trial.215 The defendant must give notice of their intention along with the name and address of any witness or, failing that, any information that may be of material assistance in locating them.216 The underlying rationale is that the nature of such a defence necessitates particular preparation by the police, i.e., examining the account and credibility of witnesses supporting the claimed alibi.217 This also prevents needless adjournments and inconvenience which would otherwise follow.218
The other exception where the defendant proposes to call an expert witness.219 In this case, the defendant must disclose any brief of evidence to be given or report provided by that witness, or failing that, they must provide a summary of the evidence to be given and the conclusion of any report to be provided.220 Should only a summary or conclusion be provided, the full brief or report must be disclosed as soon as it is available.221 This is because such evidence, by its very nature, requires considered assessment prior to trial.222 This also avoids delays in trial where adjournments would otherwise be necessary.223
Thus, while a defendant is not able to completely stone-wall their prosecution, it is clear the rationale underlying these exceptions is that expert witnesses and alibis require specific
213 Law Commission, Criminal Procedure: Part One Disclosure and Committal (NZLC R14, 1990), at [103]. Jeremy Finn and Don Mathias, A-Z of NZ Law, (online ed, Thompson Routers), at [20.I.10.2.2].
214 New Zealand Bill of Rights Act, s 23 (4).
215 Criminal Disclosure Act 2008, s 22 (1).
216 s 22 3 (a).
217 Finn and Mathias, above n 213, at [20.I.10.2.2]. 218 Finn and Mathias, above n 213, at [20.I.10.2.2]. 219 S 23 (1).
220 S 23 (1) (a) and (b).
221 S 23 (2).
222 Law Commission, above n 213, at [109].
223 Law Commission, above n 213, at [109].
preparation which would otherwise necessitate unnecessary adjournments. No such justification can be offered in relation to the SFO’s evasion of the general rule.
III. Ability of the SFO to Compel Defendants Following Charge
The ability of the SFO to exercise their powers following the charge has been established both in New Zealand through legislation and in the United Kingdom by a decision of the House of Lords. No compelling rationale can be found for either jurisdiction’s position.
In New Zealand’ the SFO’s ability is the product of legislation. The SFOA expressly permits the Director to exercise their powers ‘notwithstanding that any criminal or other proceedings have been commenced in respect of any investigation’.224 In R v H (No. 2), Judge Kerr found that this section applied even where serious/complex fraud was clearly not at issue.225
In the United Kingdom, the Act empowering the Serious Fraud office does not explicitly permit powers to be used during the course of proceedings, leaving the existence of such an ability to be considered by the courts. The position on this matter was decided in R v Director of Serious Fraud Office, Ex Parte Smith, though the decision failed to produce a satisfying justification for this position.In order to contextualise the ruling, it is worth canvassing the decisions to which it referred. Previously, the English courts had found that compulsive investigatory powers bestowed by an Act which was silent as to matters following charge could not be exercised in relation to parties who had been arrested, summoned and cautioned.226 This decision was reached as to infringe these ‘rights which are enshrined in the common law and emphasised by the Judge’s Rules’ would ‘would make a mockery of the caution and the concept of the right to silence after a charge has been preferred.’ 227
However a very different approach was taken in R v Director of Serious Fraud Office, Ex Parte Saunders, which considered whether the SFO’s powers of investigation ceased in relation to third parties once the suspect was charged, with the defendant arguing ‘investigations’ must be said to have ended at such a point.228 The SFO was seeking documents from Guiness PLC in relation to its director, who at the time of proceedings was facing 30 offences connected to those documents. The court found that charging a suspect did not end the Office’s investigatory powers in relation to third parties.229 This would prove very influential in Smith.
In Smith, the applicant advanced two arguments, aiming to curtail the SFO’s continued interrogation after his charge. The first argument advanced was that by its natural meaning ‘investigation’, used in ss (2)(2) and (2)(3) of the Criminal Justice Act 1987, must cease
224 Serious Fraud Office Act 1990, s 50 (b).
225 R v H (No. 2), above n 5, at 778.
226 A v H.M. Treasury [1979] 1 WLR 1056.
227 A v HM Treasury, above n 226, at 1060.
228 R v Director of Serious Fraud Office, Ex Parte Saunders [1988] Crim L.R. 837.
229 At 838.
once the suspect was charged with an offence. 230 This interpretation was found to be ‘unreal’.231 The court found that while investigation into a suspect may terminate at the moment of charge, this is not always the case: ‘nobody could expect the police to simply cease work on the case and rely at the trial only on the material revealed up to the moment of charging.’232 Further, the practical consequence of such an interpretation was found to clearly demonstrate it as wrong: if the investigation ceased in relation to the Director’s ability to examine the suspect, then it also must cease in relation to its ability to question third parties, which has no logical connection to the status of the suspect.233 While the poor construction of the statute indeed makes this so, imprecise statutory drafting is not a legitimate rationale for extinguishing essential legal rights.The second argument made was that the words of the Act must be interpreted as containing an implied protection of those charged.234 The court rejected this, finding that there ‘was no reason to force onto section 2 an unspoken qualification.’235 Right before he ruled against this argument, Lord Mustill commented that:236
‘Counsel conjured up for us the picture of the accused person, after a gruelling day in court, returning to the cells to be met with the sight of an official of the Serious Fraud Office, armed with a further batch of questions, which he would be forced to answer on pain of being prosecuted for another offence...
...the picture painted is unreal. I find it impossible to believe that the Director would contemplate sending an official to interview a defendant during his trial, even if there were anything to be gain from such a course, which is hard to see, given that his answers would not be admissible.’
Three points may be made in about this statement. Firstly, the mere fact that it is unlikely that the Director would do so does not mean that they will not. If the Director has no intention of questioning a suspect charged with an offence, what is the purpose of leaving the option open to them and why have they fought the case all the way to the House of Lords to ensure they may continue to do so? Secondly, Lord Mustill fails to account for the fact that while the answers given by the suspects themselves will not be admissible, it is very unlikely that these will be the target of any such inquiry. As discussed above, the real value lies in information derived in consequence. Thirdly, Lord Mustill is not necessarily correct in his assertion that there is nothing to be gained by conducting such an interview. It is not difficult to imagine a situation in which the SFO, having heard the defendant or witnesses testify, conducts such an interview, either in order to lock the defendant into certain details given he will no longer be able to provide evidence contrary to his statements, or to extract further information from the defendant about matters relating to newly heard testimony/evidence which they otherwise would not be able to in Court. The benefits of such tactics have been explicitly acknowledged by the New Zealand Director.237
230 R v Director of Serious Fraud Office, Ex Parte Smith, above n 103, at 39.
231 At 39.
232 At 39.
233 At 40.
234 At 40.
235 At 43.
236 At 43.
237 Law Commission, above n 36, at [340].
Thus, while Smith shows a rationale that, in the absence of an explicit legislative allowance, would see the SFO able to exercise their powers post charge, it fails to offer a convincing one: it was largely decided by statutory construction rather than any substantive policy considerations. Its conclusion notably contrasts with that of Treasury, given that Treasury was decided by reference to substantive policy considerations rather than statutory construction. Lord Mustill made tacit acknowledgement of the criticisms which could be levied at such a position but concluded that these were ultimately criticisms of the Act’s underlying policy and thus could not be entertained by the courts.238 Thus, while the House of Lords might was constrained to enact Parliament’s will, Smith advances no substantive policy arguments in support of such a position.
IV. Infringement of Rights
The ability of the SFO to exercise its powers post-charge raises the same concerns as have been discussed generally in relation to the privilege against self-incrimination, which under its common law existence extends prior to arrest/charge. However, it is worth noting the stakes are naturally higher once the matter has gone to trial and, unlike questioning which occurs before arrest and charge, ss 23(c) and 25(d) of NZBORA are triggered and clearly infringed.239
The ability of the SFO to conduct inquisitions during a trial also threatens the absolute privilege of the right to a fair trial.While there are no New Zealand cases directly relevant to the SFO’s ability to side-step standard disclosure requirements, it is clear that abuse of disclosure obligations can lead to a breach of the right to a fair trial. Morrison v Financial Markets Authority followed R v Bublitz. At the conclusion of the Crown’s case in Bublitz, it was discovered that over 14,500 documents had been improperly withheld by the FMA, in breach of the CDA. In Morrison, the Court found that this resulted in the defendants having inadequate time to prepare their defence and meant they were unable to examine witnesses under the same conditions as the prosecution.240 Finding that Crown could not prove the trial was substantively fair, the Court held the defendants had suffered a breach of their right to a fair trial,241 for which the two applicants were awarded damages, as well as a declaration that the Attorney-General breached their rights.242
The facts of Morrison are not directly analogous to the Crown making use of information compelled during trial: failing to make proper disclosure is a direct breach of prosecutorial obligations under the CDA, whereas the SFO’s powers allow it to access information it otherwise would not be entitled to. Nevertheless, these powers breach substantive rights within s 25. Undoubtedly, this is a breach of s 25(d). Further, at the very least it is arguable that allowing on-going inquisitions during the trial puts the prosecution in a better position than the defence in relation to examining witnesses, in breach of s 25(f). In sum, all of this
238 R v Director of Serious Fraud Office, Ex Parte Smith, above n at 103, at 44.
239 New Zealand Bill of Rights Act, ss 23(c) and 25(d).
240 Morrison v Financial Markets Authority [2023] NZHC 1654, at [184].
241 At [184].
242 At [211].
tends to point to a breach of the general right to a fair trial, as it is hard to see how the Crown could legitimately argue a trial is substantively fair when it has such a significant advantage over the defence – particularly when this advantage undermines what is termed the minimum standards of criminal procedure.In cases which more directly touch on compelled disclosure, the Australian High Court has found that such disclosure on questions relating to charges being faced encroached on the right to a fair trial.
In Hammond v The Commonwealth, Hammond was required to appear before a Royal Commission where, subject to a two-year penalty, witnesses could not refuse to answer any inquiry put to them.243 Hammond had protested in light of his concurrent criminal charges. The Commission agreed to proceed in confidence, but he nevertheless continued to object, leading to the case being brought. Gibbs CJ found that once the defendant was bound to answer questions designed to establish their guilt, it inescapably followed that in the circumstances there would be a real risk that the administration of justice would be interfered with and the defendant’s defence would be prejudiced, even if the questioning occurred in private and answers were not produced at trial.244
In X7 v Australian Crime Commission, the High Court considered the right to a fair trial in the context of an Australian Crimes Commission (ACC) investigation.245 The ACC is an organisation created under the Australian Crime Commissions Act 2002 (ACCA), with the purpose of collecting criminal information and intelligence and investigating activity in relation to serious and organised crime.246 The ACC was seeking to interrogate a man facing trial about matters directly relating to his guilt. The case revolved around the drafting of the empowering provision, as it was unclear whether those facing trial could be examined.247 Ultimately, the court concluded that in the absence of express permission, Parliament would not have intended to alter the fundamentally adversarial system of law and thus the Act did not empower the ACC to examine such suspects.248
In a statement which is perfectly applicable to the SFO/SFOA, French CJ and Crennan J held:249
... administrative or executive inquiries into offences under some statutory schemes are capable of prejudicing the fair trial of an accused person. Compulsory examination by a member of the executive after a charge has been laid might prejudice the fair trial of the person examined where the prosecution is, as a result, afforded an unfair forensic advantage, being an advantage, which would not otherwise be obtainable under ordinary rules of criminal procedure. A direct use immunity is a protection in that respect. However, a use immunity alone does not place an accused person in as good a position as he or she would be if able to rely on the privilege against self-incrimination, because material establishing that a person is guilty of an offence “may place [a person] in real and appreciable danger of conviction, notwithstanding that the answers themselves may not be given in evidence”. An unfair forensic advantage may therefore take the
243 Royal Commissions Act 1902, s 6.
244 Hammond v The Commonwealth [1982] HCA 42, 152 CLR 188, at 198.
245 X7 v Australian Crime Commission [2013] HCA 29, (2013) 248 CLR 92.
246 Australian Crime Commissions Act 2002 (Cth), s 7 (a) and (c).
247 X7 v Australian Crime Commission, above n 245, at [83].
248 At [66] and [156].
249 X7 v Australian Crime Commission, above n 245, at [53].
form of the prosecution making use of derivative evidence to obtain a conviction. The clearest example is when the prosecution tenders derivative evidence which could not have been obtained, or the significance of which could not have been appreciated, but for the compulsorily obtained evidence.
The Court concluded that given the burden of proof lies with the prosecution and the non- compellability of an accused, it was not possible to reconcile a fair trial with prosecutorial reliance on evidence derived from compulsorily obtained material establishing guilt or defences. 250The ACCA requires the ACC’s CEO to prohibit the disclosure of discovered evidence where this would be reasonably expected to prejudice the examinee’s right to a fair trial.251 This prompted French CJ and Crennan J to find that these ‘safeguards were capable of ensuring a compulsory examination’ did not create an ‘unfair burden on the examine’.252 However, no such obligation is owed by the SFO Director, meaning the threat to suspect’s right to a fair trial remains a live concern in New Zealand in relation to SFO examinations. In fact, it is hard to imagine the SFO’s powers provide anything but an ‘unfair forensic advantage’ to the Office. This creates the inescapable conclusion that the SFOA’s ability to interrogate the accused threatens the right to a fair trial.
Regardless of what one believes about the issues outlined in previous chapters, compelled interrogation of the accused during a trial is beyond the pale. Parliament has failed to provide any justification as to why this crucial right, incapable of being subjected to reasonable limits in a free and democratic society, is infringed. 253 Nor has the British examination of such a policy produced an explanation beyond this being a mere (potentially inadvertent) product of statutory construction. This unacceptable state of affairs needs immediate remediation.
250 At [54].
251 Australian Crimes Commission Act, s 25A (9A) (b).
252 At [57].
253 Morrison v Financial Markets Authority, above n 23, at [143].
Chapter 6: Reforming the Act
At this point, it is clear the Serious Fraud Office Act is in desperate need of reform. This paper has identified that the SFO’s ability to interrogate defendants during trial is unjustifiable, that the protections afforded to examinees are insufficient and that the Director has excessive power which is subject to insufficient oversight. The first section, urgent reform, addresses the most egregious issues – issues which even the most dogmatic proponent of the SFO’s cause would fail to justify. Subsequently, the remaining issues, on which reasonable minds may differ, are addressed in the second section, which provides a range of feasible options for remediating them.
I. Urgent Reform
S 50(b) ought to be redrafted so as to exclude defendants facing charges from questioning relating to matters before the courts. This will preserve suspect’s right to a fair trial, as well as their right to refrain from giving a statement under NZBORA.It is also beyond principled argument that the SFO’s powers must be curtailed once it becomes apparent that serious or complex fraud is not at issue. In such circumstances, there is simply no arguable reason to deprive a suspect of their fundamental legal rights. Any notions of hardened criminals of ‘sophistication and guile’ - the supposed basis of the Director’s powers
- are necessarily inapplicable.
II. Further Reform
Ideally, s 27 and 28 ought to be repealed. As demonstrated above, the privilege against self- incrimination continues to be a legitimate protection, both generally and in the context of serious fraud. Accordingly, its complete restoration is preferrable.Failing this, a ‘fruits’ immunity should be provided, except in cases involving breaches of ss 45-47 of the SFOA. Such protection has been extended to those compelled to testify in Canada.254 This immunity excludes ‘derivative evidence which could not be obtained but for the testimony of a witness’ in recognition of the fact that ‘while the evidence is not technically self-incriminatory itself, it is nevertheless self-incriminatory because it otherwise could not have become part of the Crown’s case’.255 The ‘but for’ test is applied through the judge’s discretion in a flexible and practical manner.256 This is all to say that such an approach is clearly a workable and readily implementable solution.
Neither of these propositions are particularly radical: as early as 1996, the Law Commission recognised the issues underlying these recommendations and made proposals to that effect.257
However, if I am wrong and compelled interrogation is absolutely necessary and morally legitimate, it ought to be limited to use against corporations. As found by the United States Supreme Court, many of the considerations which underlie the privilege are largely
254 United States of America v Ross (1995) 41 CR (4th) (Quebec CA), at [30]. Andrew L-T Choo ‘The Privilege Against Self-Incrimination and Criminal Justice’ (Hart Publishing, Oxford, 2013), at 36.
255 R v S (RJ) [1995] 1 SCR 451, at [191].
256 Phillips v Nova Scotia (Commission of Inquiry into the Westray Mine Tragedy) [1995] 2 SCR 97, at [93].
257 Law Commisison, above n 36, at 104.
inapplicable to a company.258 Corporations are convenient fictions, the privileges and rights of which ought to be dictated by the common good.259 They are also a likely vehicle for complex/serious fraud. Arguably, this may justify the abrogation of their privilege. Such an approach would sate those thirsty for compelled disclosure, while also protecting individuals’ fundamental rights.
To properly limit the arbitrary exercise of the Director’s powers, an unambiguous definition of ‘serious and complex fraud’ must be implemented or the Director’s decision to investigate serious fraud must be made subject to judicial scrutiny. However, the best option may be adopting an approach similar to the ACCA.If one believes the Director’s right-infringing powers of examination are a necessary evil in the face of master-mind fraudsters, then one cannot complain that their use is restricted to such cases. Accordingly, a concrete definition of what constitutes serious fraud must be provided. The exact ambit of where the borderline falls is admittedly ultimately arbitrary, but a borderline must nevertheless be provided. While this does limit flexibility, this option has the advantage of reducing the infringement of the principle of maximum certainty and thus the rule of law.
Alternatively, oversight over the Director’s discretion to investigate serious fraud must be restored by repealing s 20(a). This is preferrable to enacting rigid definitions as this provides flexibility for the SFO whilst also ensuring suspects’ and defendants’ rights are able to be protected by the judiciary. The judiciary are preferable supervisors of such matters given their predisposition to protect the common law and legislative rights threatened by the Director’s powers. It would also aid the Office’s legitimacy should the judiciary find in their favour where their decisions are challenged. As such, this is a preferable, albeit less efficient, alternative to more concretely limiting the crimes which the SFO may become involved in. However, if the government wishes to infringe these principles where it believes such a course to be the lesser of two evils, it ought to be prepared to pay the cost of ensuring injustice does not result.
Following the ACCA’s approach (which combines aspects of the above) is also an option. It provides concrete definitions, details as to complexity and sophistication, a minimum period of punishment and a discrete list of crimes for the ACC to investigate.260 Such an approach would provide flexibility, but also certainty in relation to circumstances which are clearly inappropriate for the SFO to investigate. If this was adopted, the law also ought to allow suspects to seek judicial review. This will enable cases where the SFO’s powers are either clearly applicable or inapplicable to be quickly dispatched, while borderline cases will receive proper judicial consideration. As this combines aspects of the previous two options, this is likely the preferrable solution.
258 Hale v Henkel, above n 96, 74-75.
259 Hale v Henkel, above n 96, 74-75.
260 Australian Crime Commissions Act 2002 (Cth), s 4.
Chapter 7: Conclusion
The Serious Fraud Office Act unjustly infringes fundamental legal rights which go to the very heart of the justice system’s legitimacy.The Act was passed by a government shouldering the blame for an epoch-making financial disaster and staring down the barrel of an imminent election. It was also passed during the advent of the digital age, a time where the bounds of computing technology remained unknown. While these fears and uncertainties may explain how the Act and the SFO’s extraordinary ability to compel incriminatory testimony came to be, they are no longer defensible legislative foundations.
The privilege against self-incrimination continues to be a foundational legal prinicple, standing as a reflection of our society’s reverence for individual freedom, the presumption of innocence, the ‘right of an individual to a private enclave’ and ‘private life’,261 as well as our rejection of inquisitorial justice. Its infringement by the SFOA is neither justified in the abstract nor in context. The few protections Parliament did think necessary to afford suspects are ineffective or easily circumvented. Further, this infringement is insufficiently minimised as the Act provides an inadequate definition of serious fraud, while also failing to impose the supervision necessitated by the Director’s consequent unfettered discretion, thereby also infringing the rule of law.
The ability of the Director to continue questioning following charge undermines the adversarial nature of the legal system and the associated legal principles reflected in the CDA. More pressingly, it also threatens the right to a fair trial, a right of such importance it is said to be absolute.
However, the Act is not beyond repair. Prohibiting the Director’s powers being used against a defendant who has been charged, along with the addition of a provision prohibiting the Office’s powers being used in cases involving anything short of serious fraud, would remedy the Act’s most egregious issues. Beyond this, it is clear that the Director’s discretion must be fettered, either through the imposition of more precise definitions, additional judicial oversight, or a combination thereof. Finally, if the privilege is not restored in its entirety, the Act’s infringement of the privilege against self-incrimination ought to be greatly mitigated.
None of this is to say that the SFO’s purpose and members are anything short of noble. Without doubt, there will be cases of financial crime which are beyond the means of ordinary police investigators. However, the SFO’s goals and purpose do not necessitate the excessive costs imposed by the Act on New Zealander’s fundamental legal rights and the consequent delegitimization of our justice system.
261 Grunewald v. United States [1957] USSC 59; 353 U.S. 391 (1957), at 581-582.
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Parore v Attorney-General [2023] NZHC 1010.
R v Burns [2002] 1 NZLR 387, (2002) 6 HRNZ 506.
R v H [1995] DCR 338.
R v H (No. 2) [1995] DCR 772.
R v Lidell [1995] 1 NZLR 538, (1994) 12 CRNZ 458.
R v Zhang [2022] NZHC 3168.
Taylor v New Zealand Poultry Board [1984] 1 NZLR 394.
Environment Protection Authority v Caltex Refining Co Pty Ltd [1993] HCA 74, (1993) 178 CLR 477.
Hammond v The Commonwealth [1982] HCA 42, 152 CLR 188.
Sorby v The Commonwealth [1983] HCA 10, (1983) 152 CLR 281.
X7 v Australian Crime Commission [2013] HCA 29, (2013) 248 CLR 92.
Phillips v Nova Scotia (Commission of Inquiry into the Westray Mine Tragedy) [1995] 2 SCR 97.
R v S (RJ) [1995] 1 SCR 451.
United States of America v Ross (1995) 41 CR (4th).
A v H.M. Treasury [1979] 1 WLR 1056.
Brown v Stott [2000] UKPC D3; [2003] 1 A.C. 681, 2001 2 W.L.R 817.
C v DPP [1995] UKHL 15; [1996] AC 1.
R v Director of Serious Fraud Office, Ex Parte Saunders [1988] Crim L.R. 837.
R v Director of Serious Fraud Office, Ex Parte Smith [1993] AC 1.
R v Lord Chancellor, Ex parte Witham [1997] EWHC Admin 237; [1998] QB 575.
Woolmington v DPP [1935] AC 462.
Grunewald v. United States [1957] USSC 59; 353 U.S. 391 (1957).
Hale v Henkel 202 US 43 (1906).
Murphy v Waterfront Commission [1964] USSC 136; 378 US 52 (1964).
Quinn v United States [1955] USSC 56; 349 U.S. 155 (1955).
II. Legislation
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009. Crimes Act 1908.
Crimes Act 1961.
Criminal Disclosure Act 2008. Criminal Procedure Act 2011. Evidence Act 2011.
Judicial Review Procedure Act 2016. New Zealand Bill of Rights Act 1990. Public Service Act 2020.
Serious Fraud Office Act 1990.
Australian Crime Commission Act 2002. Royal Commissions Act 1902.
Fraud Act 2006.
Magna Carta 1297.
The Act for the Abolition of the Court of Star Chamber 1641 (v. 110. 17 Car. I. cap. 10.).
Treason Act 1695 (7 & 8 Will 3 C 3.).
United States Constitution, amend V.
III. Books
Francis A. Allen The Crimes of Politics: Political Dimensions of Criminal Justice (Harvard University Press, Cambridge, MA, 1977).
Andrew Ashworth Principles of Criminal Law (5th ed, Oxford University Press, Oxford, 2006).
Andrew Ashworth and Jeremy Horder Principles of Criminal Law (7th ed, Oxford University Press, Oxford, 2013).
Jeremy Bentham The Rationale of Judicial Evidence (Simpkin, Marshall & Co., London, 1843).
M. Cottu De l’Administration de la Justice Criminelle en Angleterre (Islington, E. Hunt, 1820).
Robert LT Choo The Privilege Against Self-Incrimination and Criminal Justice (Hart Publishing, Oxford, 2013).
Richard Crompton Star-chamber cases shewing what cases properly belong to the cognizance of that court (I.O., London, 1641).
Mathew Downs (ed) Adams on Criminal Law - Rights and Powers (online ed, Thomson Reuters).
M Durmont and Ettienne Durmont A Treatise on Judicial Evidence: Extracted from the Manuscripts of Jeremy Bentham (William S Hein & Co, London, 1825),
Jeremy Finn and Don Mathias A-Z of New Zealand Law (online ed, Thompson Reuters).
Erwin Griswold The Fifth Amendment Today (Harvard University Press, Cambridge MA, 1955.
R. H. Helmholz, Charles M. Gray, John H. Langbien, Eben Moglen, Henry E. Smith, Albert W. Alschuler The Privilege against Self-Incrimination: Its Origins and Development (University of Chicago Press, Chicago, 1997).
L. H. Leigh The Control of Commercial Fraud (Hienemann, London, 1982).
John H. Langbein The Origins of the Adversary Criminal Trial (online ed, Oxford University Press, Oxford, 2005).
Leonard W. Levy Origins of the Fifth Amendment: The right against self-incrimination (Ivan R Dee, Chicago, 1968).
Suzanne B. McNicol A Non-Curial Privilege Against Self-Incrimination (Faculty of Law Monash University, Melbourne, 1984).
Denis Pain and John Billington New Zealand Law Society Seminar: The Serious Fraud Office
(New Zealand Law Society, Wellington, 1990).
Harry Potter Law Liberty and the Constitution: A Brief History of the Common Law (Boydell & Brewer, Suffolk, 2015).
Ed Ratushny Self-Incrimination in the Canadian Criminal Process (The Carswell Company Ltd, Toronto, 1979).
Paul Rishworth, Grant Huscroft, Scott Optican and Richard Mahoney The New Zealand Bill of Rights (Oxford University Press, Oxford, 2003).
Paul Roberts and Adrian Zuckerman Criminal Evidence (2nd ed, Oxford University Press, Oxford, 2010).
A P Simester, J R Spencer, F Stark, G R Sullivan and G J Virgo Simester and Sullivan's Criminal Law: Theory and Doctrine (6th ed, Hart Publishing, Oxford, 2016).
Thomas Smith De Republica Anglorum (Cambridge University Press, London, 1906).
Brent Wheeler and Murray Nash An Examination of the Sharemarket Crash and its Aftermath in New Zealand (Economic Development Commission, Wellington, 1989).
IV. Journal Articles
Seymour Glanzer, Howard Schiffman and Mark Packman, “The Use of the Fifth Amendment in SEC Investigations, Washington and Lee Law Review (Summer 1984) 41 Wash. & Lee L. Rev. 895Ross Ramsay, "Corporations and the Privilege Against Self-Incrimination", (1992) UNSW Law Journal 297.
V. Reports
‘Annual Report 2022’, Serious Fraud Office, < https://sfo.govt.nz/assets/Uploads/Annual- Report-2022-Web.pdf>.
Hon. Jeffery Palmer A Bill of Rights for New Zealand: A White Paper, (Ministry of Justice, 1985).
Law Commission, The Privilege Against Self-Incrimination, (NZLC PP 25 1996).Law Commission, Criminal Procedure: Part One Disclosure and Committal (NZLC R14, 1990). Mike Lowe ‘Fraud Barometer: a snapshot of fraud in New Zealand’ (September 202)
<https://assets.kpmg.com/content/dam/kpmg/nz/pdf/2021/10/kpmg-fraud-barometer-
2021.pdf>.
‘Statement of Strategic Intentions 2020-2024’, Serious Fraud Office,
<https://sfo.govt.nz/about-us/strategy-and-purpose/>.
VI. Hansard
(6 December 1989) 503 NZPD 14022.(22 May 1990) 507 NZPD
(28 June 1990) 508 NZPD
VII. Newspaper Articles
Sarah O’Brien, “Fraud cost consumers $8.8 Billion last year, Federal Trade Commission Says”
Consumer News and Business Channel (CNBC) (online ed, United States, 21 March 2023).
Tim Murphy, “Is the SFO too powerful for its own good?” Newsroom (online ed, New Zealand, 23 September 2022).
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