Crime Prevention Unit

Organised Crime

Office of the Minister of Justice
Cabinet Business Committee

LAW COMMISSION REPORT SEARCH AND SURVEILLANCE POWERS

Paper 8: Examination powers

Proposal

1. This paper is part of a suite of eight papers concerned with the implementation of the Law Commission’s report on Search and Surveillance Powers. It proposes the introduction of a judicially sanctioned examination power to require employees, directors, trustees and officers of a business structure or enterprise and certain persons providing professional services and advice to answer questions where they have information relevant to the investigation of suspected offending. An application for judicial authority to exercise the power would require the approval of the Commissioner of Police or another senior member of the Police to whom the power to approve had been delegated.

2. It is also proposed that persons whose knowledge of suspected offending has arisen in a non-business context may also be subject to an examination power where a Judge is satisfied that the person’s knowledge relates to serious organised crime or serious and complex fraud. In such cases, due to the potentially more serious impacts of the examination power than in the business context, the approval of both the Commissioner of Police and the Secretary for Justice personally would be required before an application for authority to exercise the power could be made.

3. In both situations, the examination power would be subject to certain limits, including that the voluntary cooperation of the proposed examinee has been sought and the person declined to cooperate before an application for an examination order is made, and that compulsory questioning of the person is reasonable in the circumstances.

Background

4. Examination powers – the authority to require a person to answer questions – have never been generally available to law enforcement officers in New Zealand. In gathering information in the course of investigating crime, the police and other law enforcement officers rely on co-operation of citizens, rather than the use of coercive powers. However, whilst citizens have a moral or social obligation to assist in such circumstances, there is no legal duty to do so. They have the right to decline to answer any questions asked by an investigating officer, whatever their reason for doing so and even though they may have information that is material to the investigation. This presumption against the enactment of examination powers underpins the criminal law in all common law jurisdictions at present.

5. In its report on Search and Surveillance Powers, the Law Commission recommended the enhancement of search powers and a legislative regime governing the use of surveillance devices by law enforcement officers. Included in the search powers were proposals for a production and monitoring power for all enforcement agencies. The Commission did not make recommendations as to the use of examination powers by law enforcement officers as they were beyond its terms of reference.

6. Since the publication of the Law Commission’s report, Cabinet has decided to establish the Organised Crime Agency (OCA). The functions of the proposed agency include the investigation and prosecution of serious financial crime currently undertaken by the Serious Fraud Office (SFO). The SFO is to be disestablished: [CAB Min (07) 32/5].

7. This paper considers the need for a law enforcement power of examination in light of that decision.

Why examination powers have not been generally available to law enforcement officers

8. Three broad considerations underpin the reluctance to give enforcement officers coercive examination powers:

• When consideration is given to what statutory questioning powers law enforcement officers should have, the starting point for legislation is that citizens should be encouraged to co-operate with the Police and other law enforcement officers rather than being required to do so through the use of the State’s coercive powers. In this way the community is empowered to help law enforcement officers through a sense of obligation rather than through coercion. That is in the overall public interest;

• Where witnesses or suspects refuse to co-operate, questioning powers do not necessarily provide a panacea: they afford no guarantee that people who are questioned will respond, or that any answers they give will be truthful, and sanctions - or at least acceptable sanctions - for not answering or telling the truth are often unlikely to secure their co-operation;

• As the privilege against self-incrimination extends to a person who is required to answer a law enforcement officer’s questions, an examination power, so far as it relates to suspects, is of limited value as any self-incriminating statements cannot, except in rare circumstances, be used in evidence.

9. Where examination powers are enacted, they are generally not open-ended. Both the officer and the person being questioned need to know the precise nature and extent of the power. For this reason the power is generally limited to a specific purpose, narrowly drawn and accompanied by procedural requirements. This is also necessary to avoid the boundaries of the power being inadvertently exceeded with undesirable consequences for the personal privacy of the subject, and to avoid claims that officers use the power to conduct “fishing expeditions”.

Existing exceptions to the general rule

10. Exceptions to the presumption against vesting enforcement officers with examination powers are confined to three areas of state activity: as part of regulatory regimes; where identification particulars are sought in certain classes of minor offending; and in the investigation of some serious financial crimes.

Regulatory regimes

11. A statutory requirement to provide information to officers exercising regulatory inspection powers is relatively common. These powers apply only in a particular setting and are justified by reference to the environment in which the regulated activity is occurring and the fact that engaging in a regulated activity is a matter of personal choice.

12. They facilitate verification of compliance with the regulatory regime, and often questioning powers are needed to supplement other features of the regime such as a reporting requirement. Where a breach of the regime is a criminal offence, only rarely does it give rise to a penalty of imprisonment. The power of a fishery officer under the Fisheries Act 1996 to require a person to provide information for the purpose of enforcing that Act and the powers of the Commerce Commission to require a person to provide written information for the purpose of carrying out its functions under the Fair Trading Act 1986 and the Commerce Act 1986 are examples of powers that are justified on this basis.

Obtaining personal details of person suspected of offending

13. In some circumstances the Police have the power to require people to provide their personal particulars (in respect of a possible breach of the Sale of Liquor Act 1989, for example), or specific information within their knowledge about the identity of others (such as the requirement under the Land Transport Act 1998 to identify the driver of a vehicle they own). Other officers such as rangers (under the Wildlife Act 1953 and Reserves Act 1977) are empowered to require persons whom they find offending under those Acts to disclose their name and address. These powers are, however, confined to the investigation of minor offences, where, without the power to demand the information, enforcement of the law in question would be significantly undermined, or the costs of investigation would be disproportionately high.

Examination powers under the Serious Fraud Office Act

14. Where an investigation is conducted under the Serious Fraud Office Act 1990, the Director of the SFO has a statutory power to require a person to answer questions relevant to the investigation, or provide an explanation of the history, subject-matter and contents of a document produced by that person. The power can only be used in investigations of suspected serious or complex fraud (a term which is undefined), and it is accompanied by provisions restricting the use in evidence of any self-incriminating statement derived from the questioning unless the person concerned gives evidence inconsistent with that statement or is prosecuted for making a false or misleading statement. The examination power was part of a suite of powers enacted in conjunction with the establishment of the SFO to combat commercial fraud. Those powers will be repealed when the SFO is disestablished.

Need for an examination power

15. There are two different contexts in which the use of compulsory questioning needs to be considered:

Persons whose knowledge has arisen in a business context

16. The first situation relates to people who have knowledge of matters that relate to suspected offending that has arisen in a business context (such as professional advisers, employees, and auditors). Many such persons may be subject to incentives not to comply with the usual expectations of cooperation with law enforcement investigations. Professional or fiduciary obligations or concerns about the impact on business all provide disincentives to cooperation. In the absence of these professional or fiduciary disincentives and constraints on cooperation (whether real or perceived), most people in this category would be happy to cooperate with enforcement officers and there will be no broader or ongoing consequences arising from cooperation.

17. These circumstances may justify overriding the general presumption of reliance on cooperation with investigations.

Persons whose knowledge has arisen in a non-business context

18. The circumstances of those whose knowledge has arisen in a business context is in contrast to other cases such as those whose knowledge arises through their personal relationship with a suspect (parent, child, partner, neighbours, caregiver or friends). There may be many reasons why such persons are reluctant to cooperate and there may be ongoing consequences given the enduring nature of many of these types of relationships (in contrast to many types of business relationship).

19. While there is a strong public interest in protecting these kinds of relationships, or at least avoiding damage to them through the exercise of coercive powers, there is a need to strike an appropriate balance between the exercise of State power and the freedom of individual citizens and maintenance of public confidence in the criminal justice system. Accordingly, the maintenance of “social relationships” is not an overwhelming public interest and may give way in circumstances where it is outweighed by other competing interests.

20. Such a competing interest is in the detection and prosecution of serious organised crime and serious and complex fraud. These types of offending tend to be pervasive, are sometimes difficult to detect, and often involve sophisticated and complex transactions that are not always readily understandable without the assistance of persons involved in those transactions.

21. Accordingly examination of persons whose knowledge of the suspected offending has arisen in a non-business context (as opposed to through involvement in business activities and relationships) may be justified where an investigation concerns serious organised crime and serious and complex fraud.

22. However, where the proposed examinee’s knowledge has arisen in a non-business context, additional safeguards around the exercise of such an intrusive power are appropriate in view of the potentially more serious impact of the examination for such a person.

Limits and safeguards

23. Although an examination power is warranted in these contexts, an unlimited or wide ranging power of examination is highly undesirable and cannot be justified. Questioning powers are intrusive and compulsory examinations can create considerable anxiety for innocent citizens who may be put to the unnecessary expense of instructing a lawyer when confronted by an unnecessary requirement to attend an examination. Perhaps more importantly, if implemented in a widespread and open-ended manner, they would fundamentally and detrimentally alter the balance between State power and the freedom of individual citizens, and adversely affect public perceptions of the Police.

Prior judicial authorisation

24. I consider that the exercise of the examination power should be sanctioned by an independent officer acting judicially. This principle was regarded by the Law Commission as one of the core values that should underpin all law enforcement search and surveillance powers, unless there is a compelling reason to the contrary.

25. I have proposed in Paper 6: Clarification and Codification that ordinary search warrants should be able to be issued by judges and specialist officers who have received appropriate training. However, in Paper 2: Interception and Surveillance I have proposed that only District Court and High Court judges be able to issue a surveillance device warrant.

26. As an examination power is an exception to the general rule against the use of coercive powers in law enforcement investigations and is a new power in the police context, I consider that for reasons of public perception and confidence the use of the examination power also should only be able to be authorised by a District Court or High Court judge.

Matters of which the judge needs to be satisfied prior to issuing an order

27. In all cases (whether the knowledge of the proposed examinee has arisen in a business or a non-business context), a Judge must be satisfied of the following matters before issuing an examination order:

• The cooperation of the proposed examinee has been sought and the person declined to cooperate before the application for an examination order is made;

• There are reasonable grounds to believe that an imprisonable offence has been committed;

• There are reasonable grounds to believe that the proposed examinee has information relevant to the offending (this is consistent with the standard threshold for the exercise of search powers recommended in Paper One: Overview);

• The examination must be reasonable in all the circumstances, having regard to the nature and seriousness of the suspected offending, the nature of the information being sought, the relationship between the proposed examinee and the suspect, and any alternative ways of obtaining the information.

28. In addition to the above matters, where the proposed examinee’s knowledge has arisen in a non-business context, the Judge should be satisfied that the information being sought from the person is relevant to serious organised crime or serious and complex fraud.

Approval process

29. There should also be restrictions around who may make or approve the making of an application for judicial authorisation to use the examination power. An example of such a limitation already in statute is contained in the Crimes Act 1961 which provides that an application for an interception warrant may only be made by a commissioned police officer.

30. There is a problem with prescribing the particular person who may make an application. In particular, as the making of an application requires the giving of evidence, the person who makes an application for authorisation to use an investigatory power should be a person who is familiar with the detail of the investigation. To provide otherwise, would be to require the person who is empowered to make the application to give hearsay evidence as to the grounds on which the application is being made. Accordingly, the better alternative might be to prescribe who may approve the making of an application.

31. A requirement for a particular person to approve the making of an application for an examination order would ensure there is a independent judgment about whether the exercise of the power is warranted in the circumstances of the investigation. This would ensure some check on the judgments being made by those closely involved in the investigation. It would not, however, involve the application of the legal criteria (which is the role of the judicial officer).

32. There are two possible ways of implementing this model. The first is via an internal approval process such as the Commissioner of Police (or a member of the Police to whom the Commissioner has delegated the power to approve an application). The alternative is to require the approval of an external party as well as the internal approval - for example, the approval of both the Commissioner of Police and the Secretary for Justice.

33. I consider that, where the proposed examinee’s knowledge has arisen in a business context, it is sufficient that the Commissioner or his or her delegate approve an application to examine the person.

34. However, where the proposed examinee’s knowledge arises in a non-business context, an additional safeguard is appropriate given the potentially more serious impact of the examination for such a person. Therefore, I propose that the approval of both the Commissioner and the Secretary for Justice personally would be required in such a situation. The additional requirement for the involvement of the Secretary for Justice provides an independent check on the appropriateness of the Commissioner’s decision to approve the making of an application for authorization to use the examination power. The inability to delegate the power to approve the making of an application here highlights the exceptional nature of the examination power in this setting.

Self-incrimination and confidentiality

35. The specific nature of the examination power proposed reduces the likelihood that any person will be compelled to give an answer that is self-incriminating. To avoid doubt, however, I propose that the general privilege against self-incrimination should be available to a person who is questioned pursuant to the proposed power. In the circumstances there does not seem to be any justification for ousting the privilege. Furthermore, it is not clear the extent to which there would be any particular advantage to investigators from doing so. Accordingly, I propose that the general privilege against self-incrimination should be available to a person who is questioned pursuant to the proposed power.

36. One of the purposes of the examination power is to override any obligation of confidence or other obligation the person who is to be questioned may owe to a client or an employer in respect of the document. The requirement to respond to the law enforcement officer’s questions even where the answer may breach a duty of confidence is essential to the effective operation of the examination power. Accordingly, I propose that provision be made to ensure there is no doubt that the obligation to answer questions overrides any other duty or obligation that the person may have and that answering questions does not expose the professional person or employee to liability for breach of any obligation they may have in relation to the document.

The proposed examination power in relation to persons who have knowledge
that has arisen in a business context

37. Accordingly, I propose a power to examine persons whose knowledge of suspected offending has arisen in a business context with the following features:

• The exercise of any examination power must be authorised by a District Court or High Court Judge;

• Persons whose knowledge has arisen in a business context for the purposes of making an application for an examination order are:

• Applications for an examination order must be approved by the Commissioner or Police or a member of the Police to whom the power to approve an application has been delegated;

• Before issuing an examination order the Judge must be satisfied that:

• The questions that may be asked can relate only to “evidential material” as defined in Paper 1: Overview, including matters relevant to the investigation of the suspected offending;

• The general privilege against self-incrimination should be available to a person who is questioned pursuant to the proposed power.

The proposed examination power in relation to persons who have knowledge that has arisen in a non-business context

38. I also propose a power to examine persons who have knowledge acquired in a non-business context. That power should have the following features:

• The exercise of the examination power must be authorised by a District Court or High Court Judge;

• Applications for an examination order must be approved personally by both the Commissioner of Police and the Secretary for Justice;

• Before issuing an examination order the Judge must be satisfied that:

• The questions that may be asked can relate only to “evidential material” as defined in Paper 1: Overview, including matters relevant to the investigation of the suspected offending;

• The general privilege against self-incrimination should be available to a person who is questioned pursuant to the proposed power.

39. The factors that will need to be taken into account by the Judge in determining whether the case involves serious organised crime or serious and complex fraud will be developed as part of the drafting process and will addressed in the submission to the Cabinet Legislation Committee.

Compliance with the power

40. I also propose that an offence, punishable by a maximum penalty of 3 months imprisonment for a person to fail, without reasonable excuse, to comply with an examination order. That penalty would be consistent with that proposed in Paper 5 for failure to comply with a production order.

Reporting and Review

41. I have recommended in Paper 1: Overview that there be a requirement for law enforcement agencies to include in their annual reports to Parliament details of the number of occasions on which the power had been exercised during the year together with details of who had been responsible for approving the application for an order authorising the use of the power.

42. I have also proposed in Paper 1: Overview that there be a mandatory review of the operation of the legislation after five years. That review will cover all aspects of the legislation, but it will need to pay close attention to the examination power proposed in this Paper to ensure that it is meeting the proper needs of law enforcement in serious cases and also protecting the rights of citizens.

Implementation

43. The examination powers proposed above will be exercised in the same way as other law enforcement search, surveillance, production and monitoring powers. Accordingly, I propose the power be included in the legislation giving effect to the recommendations made by the Law Commission in its report on Search and Surveillance Powers.

Consultation

44. The State Services Commission, the New Zealand Police and the Serious Fraud Office have been consulted about this paper, which has been prepared by the Law Commission and the Ministry of Justice. The Department of Prime Minister and Cabinet has been informed.

Recommendations

45. I recommend that the Cabinet Business Committee:

1. Note that statutory examination powers authorising enforcement officers to require a person to answer questions are not generally available to law enforcement agencies;

2. Note that limited exceptions to the presumption against statutory examination powers presently exist, including powers in the Serious Fraud Office Act 1990 which apply to the investigation of complex or serious fraud;

3. Note that with the disestablishment of the Serious Fraud Office, the powers of examination in the Serious Fraud Office Act 1990 will be repealed;

4. Agree that a limited examination power is required for criminal investigations;

5. Agree that a limited examination power is required to enable law enforcement officers to examine persons whose knowledge of suspected offending has arisen in a business context and that such a power should have the following features:

• The exercise of any examination power must be authorised by a District Court or High Court Judge;

• Persons whose knowledge has arisen in a business context for the purposes of making an application for an examination order are:

• Applications for an examination order must be approved by the Commissioner or Police or a member of the Police to whom the power to approve an application has been delegated;

• Before issuing an examination order the Judge must be satisfied that:

• The questions that may be asked can relate only to “evidential material” as defined in Paper 1: Overview, including matters relevant to the investigation of the suspected offending;

• The general privilege against self-incrimination should be available to a person who is questioned pursuant to the proposed power;

6. Agree that a more limited examination power is required to enable law enforcement officers to examine persons whose knowledge of suspected offending has arisen in a non-business context and that that power should have the following features:

• The exercise of the examination power must be authorised by a District Court or High Court Judge;

• Applications for an examination order must be approved personally by both the Commissioner of Police and the Secretary for Justice;

• Before issuing an examination order the Judge must be satisfied that:

• The questions that may be asked can relate only to “evidential material” as defined in Paper 1: Overview, including matters relevant to the investigation of the suspected offending;

• The general privilege against self-incrimination should be available to a person who is questioned pursuant to the proposed power;

7. Agree that an offence of failing, without reasonable excuse, to comply with an examination order should be created with a penalty consistent with that proposed in for failure to comply with a production order, namely a maximum of three months imprisonment;

8. Agree that the limited examination power be included in legislation implementing the recommendations made by the Law Commission in its report on Search and Surveillance Powers.

Hon Annette King
Minister of Justice
Date signed: