New Zealand – Global Investigations Review

General context, key principles and hot topics

1 Identify the highest-profile corporate investigation under way in your country, describing and commenting on its most noteworthy aspects.

CBL Insurance Limited (in liquidation) (CBLI) was put into liquidation on the application of the Reserve Bank of New Zealand (which is responsible for regulating the insurance sector) in November 2018. It applied to appoint liquidators following repeat failures by CBLI to meet solvency, direction and reporting conditions. The Reserve Bank subsequently commissioned a review of its own actions in overseeing CBLI to identify lessons for New Zealand’s insurance regulatory regime.

CBLI’s related entity, CBL Corporation Limited (in liquidation) (CBLC), was liquidated in May 2019. Following the liquidation of CBLI and CBLC, independent investigations were launched by New Zealand’s Financial Markets Authority (FMA) and Serious Fraud Office (SFO) into the conduct of the companies and their directors.

In December 2019, the FMA filed two sets of civil proceedings against CBLC, its six former directors and its former chief financial officer alleging breaches of the Financial Markets Conduct Act 2013. These proceedings are before the High Court of New Zealand.

Also in December 2019, the SFO filed criminal charges against some of CBLI’s former directors and its chief financial officer alleging theft by a person in a special relationship, obtaining by deception and false accounting. Trial at the High Court in Auckland is scheduled to commence in April 2023.

Following the SFO’s case, two class actions brought on behalf of eligible shareholders are set down to be heard alongside the FMA’s proceeding in a six-month trial due to commence in April 2024.

2 Outline the legal framework for corporate liability in your country.

New Zealand’s legal framework generally enables corporate liability for wrongdoing. Key statutes from a corporate liability perspective, including New Zealand’s Interpretation Act 1999 and Crimes Act 1961, broadly define ‘person’ to include companies and other bodies, incorporated or not. Applying this definition, corporations may be held directly or vicariously liable for the conduct of their employees or agents.

3 Which law enforcement authorities regulate corporations? How is jurisdiction between the authorities allocated? Do the authorities have policies or protocols relating to the prosecution of corporations?

New Zealand has no central decision-making agency responsible for prosecution decisions. Crime is prosecuted by the New Zealand Police, Crown solicitors and a number of specialist government agencies responsible for enforcement within a particular regulatory area. Corporate regulation is frequently the responsibility of these specialist agencies, the creation and jurisdiction of which is statutorily mandated. Jurisdiction is generally discrete, but where there is overlap, agencies work co-operatively.

Key agencies (and their responsibilities) include the following:

• Commerce Commission (regulation of competition and consumer protection);
• FMA (regulation of financial services and securities markets);
• Inland Revenue Department (enforcement of tax law);
• Takeovers Panel (enforcement of compliance with New Zealand’s Takeovers Code);
• Reserve Bank (regulation of banks, insurers and other deposit-takers);
• SFO (prosecution of serious or complex financial crime); and
• WorkSafe (regulation of workplace health and safety).

To unify these various bodies responsible for making prosecution decisions within New Zealand, the Solicitor-General promulgates Guidelines for Prosecutions that set standards to guide prosecution decisions. In addition, the various agencies frequently publish their own policies and procedures.

4 What grounds must the authorities have to initiate an investigation? Is a certain threshold of suspicion necessary to trigger an investigation?

Enforcement agencies within New Zealand are independent. They exercise a high level of discretion in making investigation and prosecution decisions within their regulatory area.

Agencies generally publish investigation and enforcement guidelines outlining the factors relevant to their decisions. Their ability to escalate a complaint is further constrained by any statutory limits on their use of powers, and by practical limits. Of course, agencies must also uphold the rights of individuals (for example, the right to be free from unreasonable search and seizure or unlawful detention), which are enshrined in the New Zealand Bill of Rights Act 1990.

5 How can the lawfulness or scope of a notice or subpoena from an authority be challenged in your country?

The actions of enforcement agents, including the issue of notices or subpoenas, can be challenged in New Zealand by way of judicial review. The challenging party applies to the High Court seeking review of the impugned decision. The grounds on which a review can be brought are limited: the challenging party must identify a defect in the decision-making process or demonstrate that the decision was otherwise unreasonable. The outcome of a successful review will be that the court refers the matter back to the original decision maker for a new decision.

6 Does your country make use of co-operative agreements giving immunity or leniency to individuals who assist or co-operate with authorities?

Co-operation with authorities is a mitigating factor relevant to enforcement outcomes or sentencing. Enforcement guidelines provide specifically for the consideration of co-operative behaviour within each regulatory field. Defendants are frequently granted a discount on sentence in recognition of their co-operation with an investigation, for example, for making voluntary disclosures, attending voluntary interviews or providing documents. Defendants may also be granted a discount on sentence if they have provided assistance with broader investigations against others.

Additionally, leniency schemes may be developed within particular regulatory frameworks. The most relevant example of this is the Commerce Commission’s Cartel Leniency and Immunity Policy.

The Solicitor-General’s Prosecution Guidelines provide that the Crown may grant a witness immunity from prosecution. Immunity is granted by way of a written undertaking from the Solicitor-General that any subsequently initiated prosecution will be stayed. Immunity will only be considered in respect of very serious offending and when the witness has relevant evidence that significantly strengthens the Crown’s case and was a minor participant in the offending only.

7 What are the top priorities for your country’s law enforcement authorities?

Each discrete regulatory area sets its own priorities and direction, though these generally bear synergies. Key shared priorities for New Zealand’s law enforcement agencies at present are the prevention of organised crime, bribery and corruption and the strengthening of partnerships between agencies and key community stakeholders.

8 To what extent do law enforcement authorities in your jurisdiction place importance on a corporation having an effective compliance programme? What guidance exists (in the form of official guidance, speeches or case law) on what makes an effective compliance programme?

New Zealand companies are not required to implement formal compliance programmes as such. However, online guidance is available to assist corporations to comply with their key money laundering, financial, company law and employment obligations through government websites.

Cyber-related issues

9 Does your country regulate cybersecurity? Describe the approach of local law enforcement authorities to cybersecurity-related failings.

Cybersecurity is a developing area of regulation in New Zealand in recognition of the growing threat posed by cybersecurity attacks. At present, New Zealand does not specifically regulate cybersecurity and corporations are not held liable for merely having weak or lax cybersecurity protection. However, corporations may become liable for the consequences of weak or lax cybersecurity where those consequences are regulated, for example, through New Zealand’s privacy and data protection regime.

10 Does your country regulate cybercrime? What is the approach of law enforcement authorities in your country to cybercrime?

New Zealand routinely prosecutes cybercrime at a domestic level. The Crimes Act 1961 criminalises an increasing range of cyber offences, including in relation to the unlawful access and use of computer systems, scams and harmful digital communications. Cyber offences attract a range of penalties. The maximum penalty for a cybercrime is 10 years’ imprisonment for a person who intentionally or recklessly destroys, damages or alters a computer system knowing (or where they ought to have known) that danger to life is likely to result (Crimes Act 1961, section 250).

In February 2021, the government announced that New Zealand is to join the Council of Europe Convention on Cybercrime (the Budapest Convention) following the recommendation of the Royal Commission of Inquiry into the Christchurch terror attack and consultation with the New Zealand public. However, amendments to New Zealand’s domestic legislation are required prior to formal accession.

Cross-border issues and foreign authorities

11 Does local criminal law have general extraterritorial effect? To the extent that extraterritorial effect is limited to specific offences, give details.

In general, criminal law in New Zealand does not have extraterritorial effect (see Crimes Act 1961, section 6). However, some specific offences are criminalised extraterritorially, including participation in organised crime, bribery and corruption, and money laundering.

12 Describe the principal challenges that arise in your country in cross-border investigations, and explain whether and how such challenges depend on the other countries involved.

In our experience, the following challenges are those that commonly arise in cross-border investigations and litigation, and are greatest when the jurisdictions involved have significant legal and cultural differences:

• dealing with different offices in different countries and differences in how they store their own data that an investigation may require;
• ensuring regulatory requirements in each country comply with the law of the country in which an investigation or proceeding is initiated;
• facilitating data transfer between jurisdictions and ensuring compliance with legal requirements in the home jurisdiction (in the case of New Zealand, most relevant is the Privacy Act 2020);
• anticipating and overcoming language and cultural barriers to ensure full and consistent understanding by all interested parties; and
• obtaining reliable translations of important documents.

13 Does double jeopardy, or a similar concept, apply to prevent a corporation from facing criminal exposure in your country after it resolves charges on the same core set of facts in another? Is there anything analogous in your jurisdiction to the ‘anti-piling on’ policy as exists in the United States (the Policy on Coordination of Corporate Resolution Penalties) to prevent multiple authorities seeking to penalise companies for the same conduct?

The law in New Zealand protects against double jeopardy within the New Zealand context. The Crimes Act 1961 provides that no one (including a corporation) is liable to be punished twice in relation to the same offence (section 10(4)). This is further mirrored in the New Zealand Bill of Rights Act 1990 (note that this is an ordinary statute, not a constitutional document of higher order) in which section 26(2) provides that a person cannot be tried or punished for an offence for which they have been finally acquitted, convicted or pardoned. However, a person or corporation can be charged with two separate offences arising from the same act or omission, provided the elements of each offence have discernible differences.

New Zealand does not have any equivalent to the ‘anti-piling on’ policy of the United States.

14 Are ‘global’ settlements common in your country? What are the practical considerations?

Global settlements are not common, probably because multinational corporations do not tend to have a base in New Zealand.

15 What bearing do the decisions of foreign authorities have on an investigation of the same matter in your country?

The decisions of foreign authorities are given weight in New Zealand, but will not preclude New Zealand authorities and institutions conducting their own assessment or investigation.

Economic sanctions enforcement

16 Describe your country’s sanctions programme and any recent sanctions imposed by your jurisdiction.

New Zealand is a Member State of the United Nations (UN) and, as such, is bound by the decisions of the United Nations Security Council. New Zealand individuals and companies must comply with locally enacted regulations relating to UN sanctions.

New Zealand does not have legislation in place to impose its own autonomous sanctions. Previous Bills seeking to establish this type of legislation have not succeeded, including the recent Autonomous Sanctions Bill, which was withdrawn in September 2021. However, in March 2022, New Zealand drafted and passed the Russia Sanctions Act 2022 under urgency. Section 9 of the new Act allows the Governor-General to make regulations to impose and enforce sanctions in response to military actions by, or on behalf of, Russia. Some regulations already enacted target the trade, services, assets and travel of designated individuals and entities who are listed on a public register. New Zealand’s approach to this legislation suggests that autonomous sanctions may be imposed on a targeted basis.

17 What is your country’s approach to sanctions enforcement? Has there been an increase in sanctions enforcement activity in recent years, for example?

The lack of an autonomous sanctions regime has historically limited New Zealand’s ability to take meaningful enforcement action against UN veto holders and their close political allies. However, the Russia Sanctions Act 2022 demonstrates a change in approach in cases where the UN Security Council’s sanctions do not reflect a broader inter­national consensus.

18 Do the authorities responsible for sanctions compliance and enforcement in your country co-operate with their counterparts in other countries for the purposes of enforcement?

New Zealand authorities actively co-operate with foreign authorities in relation to criminal matters, and there is no reason to think this not the case in the area of sanctions compliance and enforcement.

19 Has your country enacted any blocking legislation in relation to the sanctions measures of third countries? Describe how such legislation operates.

No.

20 To the extent that your country has enacted any sanctions blocking legislation, how is compliance enforced by local authorities in practice?

Not relevant.

Before an internal investigation

21 How do allegations of misconduct most often come to light in companies in your country?

Most allegations of misconduct come to light through the activities of whistleblowers. Whistleblowing is governed by the Protected Disclosures (Protection of Whistleblowers) Act 2022.

Prospective purchasers do not always conduct white-collar due diligence in the course of mergers and acquisitions, which makes this type of due diligence a less likely identifier of misconduct. Similarly, New Zealand’s use of suspicious activity reports is less intensive than in other jurisdictions, although the practice is steadily increasing (the New Zealand Police website provides monthly analyses of the number of reports filed).

Finally, one more common (if belated) route to unearthing corporate misconduct is the appointment of liquidators or interim liquidators by company creditors or regulators. The liquidators will then conduct an investigation into the company’s affairs.

Information gathering

22 Does your country have a data protection regime?

New Zealand’s data protection regime is governed by the Privacy Act 2020. Among other things, the Act gives the Privacy Commissioner powers to issue codes and practice, and compliance notices, and to prohibit the cross-border transfers of personal information.

Although the Act makes reference to guidelines of the Organisation for Economic Co-operation and Development (OECD) and to the EU General Data Protection Regulation (GDPR), it does not provide the same range of rights for data subjects as this latter directive. For example, there is no right to be forgotten.

One of the major introductions in the Act is an information privacy principle that deals with cross-border data transfers. An organisation covered by the Act may only send personal information outside New Zealand in a limited number of situations, as set out in the Act. The Privacy Commissioner also can prohibit cross-border transfers where the recipient country does not have legal safeguards comparable to those in the Act and the transfer would be likely to contravene basic principles set out in the OECD guidelines (albeit New Zealand currently has an adequacy decision from the European Commission). The Privacy Act also introduces compulsory notification requirements in the case of certain types of data breach.

23 To the extent not dealt with above at question 9, how is the data protection regime enforced?

The Privacy Commissioner enforces the Privacy Act 2020. Although the Act appears to signal a more interventionist role for the Commissioner, how it will exercise its new powers in practice remains to be seen.

24 Are there any data protection issues that cause particular concern in internal investigations in your country?

Cross-border transfers of personal information need special care in the course of an internal investigation under New Zealand law, and this issue is likely to attract greater attention under the Privacy Act 2020 than it did under its predecessor.

25 Does your country regulate or otherwise restrict the interception of employees’ communications? What are its features and how is the regime enforced?

Usually, an employee’s employment agreement will specify the rights an employer has to intercept employees’ communications. It is common for the employment agreement, or the employer’s policies, to allow employers to monitor or review employee work communications in specified circumstances.

If the communications are not on work devices, or use work email, then the provisions of the Privacy Act 2020 will determine the extent to which employers can collect this information. Information Privacy Principle One, for example, prohibits an organisation from collecting personal information other than for a lawful purpose or if collection is necessary for a function of that organisation.

Dawn raids and search warrants

26 Are search warrants or dawn raids on companies a feature of law enforcement in your country? Describe any legal limitations on authorities executing search warrants or dawn raids, and what redress a company has if those limits are exceeded.

Raids by the Serious Fraud Office (SFO) are not uncommon. The director of the SFO has the power, under the Serious Fraud Act 1990, to apply for a search warrant if there are reasonable grounds for believing that information provided through a compulsory section 9 interview is false or misleading in a material way, that a person has failed to comply with his or her section 9 obligations, that it is not practicable to serve a notice under section 9, if a person cannot be located, is missing or there is any other good cause, or where the service of a section 9 obligation might seriously prejudice the investigation. The court must also be satisfied that there are reasonable grounds for believing that relevant documents may be found at the specified location.

By contrast, the New Zealand Police’s Financial Crime Group uses traditional police investigation techniques, which rely on surveillance, the execution of search warrants and evidential interviews under caution.

Where a prosecuting agency may have exceeded its powers, the subject of these powers may challenge their exercise by judicial review or, if charges are laid, by seeking to exclude evidence obtained by these powers under section 30 of the Evidence Act 2006.

27 How can privileged material be lawfully protected from seizure during a dawn raid or in response to a search warrant in your country?

Section 102 of the Search and Surveillance Act 2012 prevents a search warrant from being issued for any communication covered by legal professional privilege. The exception to this bar is when an issuing officer is satisfied that there is a prima facie case that the communication or other thing sought was produced either for a dishonest purpose or for the purpose of planning to commit an offence.

28 Under what circumstances may an individual’s testimony be compelled in your country? What consequences flow from such compelled testimony? Are there any privileges that would prevent an individual or company from providing testimony?

Section 27 of the Serious Fraud Office Act 1990 removes the common law privilege against self-incrimination where a person is interviewed under section 9 of the Act. These powers are similar to those enjoyed by the United Kingdom’s Serious Fraud Office. However, a self-incriminating statement will only be admissible in a subsequent prosecution if a person gives evidence inconsistent with the earlier incriminating statement.

Where not explicitly excluded in this way, New Zealand law otherwise recognises a robust right against self-incrimination.

Whistleblowing and employee rights

29 Describe the whistleblowing framework in your country. What financial incentive schemes exist for whistleblowers? What legal protections are in place for whistleblowers?

The Protected Disclosures (Protection of Whistleblowers) Act 2022 (the Act), which came into force on 1 July 2022, now governs whistleblowing in New Zealand.

The Act promotes the disclosure and investigation of matters of serious wrongdoing, and the protection of employees who make disclosures. The Act defines ‘serious wrongdoing’ as including offences, a serious risk to health, safety or the environment, the corrupt or irregular use of public funds, and the discriminatory, oppressive or grossly negligent conduct by a person performing a public function. So, although the Act reflects a greater incursion into the private sector than its predecessor, its focus is still more on public wrongdoing.

The Act protects whistleblowers against retaliatory action and provides for confidentiality of identity, immunity from civil, criminal and disciplinary proceedings and remedies for victimisation under the Human Rights Act 1993 (see sections 17 to 23). Note that, like the equivalent UK legislation, the protection is one for employees to raise themselves, usually in the context of proceedings relating to their employment. The Act makes clear that an employee who faces retaliation will have a personal grievance against his or her employer under New Zealand’s Employment Relations Act 2000 (see section 21(2)).

Although the recipient of a protected disclosure must use ‘best endeavours’ to keep the identity of a whistleblower confidential, there are a number of exceptions to this principle. These exceptions include where the person who has acquired knowledge of the protected disclosure reasonably believes that disclosing the information is essential:

• to the effective investigation of the allegations in the protected disclosure;
• to prevent serious risk to public health or safety, or the environment;
• to comply with the principles of natural justice; or
• to an investigation by law enforcement.

There is no financial incentive scheme in New Zealand for whistleblowers.

Whistleblower policies are only mandatory for public sector organisations (see section 29 of the Act). However, section 31 of the Act gives the New Zealand Ombudsman (the public sector regulator) power to ask private organisations for details of their whistleblowing procedures and practices for the purposes of administering the law.

30 What rights does local employment law confer on employees whose conduct is within the scope of an investigation? Is there any distinction between officers and directors of the company for these purposes?

There is a significant employment aspect to all investigations. Many issues that arise in the course of an investigation into potential wrongdoing within an organisation will be framed as employment issues first, and issues of corporate liability second. Moreover, some of the highest-profile corporate investigations have examined issues relating to workplace culture and conditions (examples include investigations into allegations of sexual harassment at the law firm Russell McVeagh, and the media company Mediaworks).

Employee rights in the course of an investigation are governed by the test of justification in section 103A of the Employment Relations Act 2000. This test assesses whether any employer action was what a fair and reasonable employer could have done in all the circumstances at the time the action occurred. The test is objective.

In the event that an investigation leads to the dismissal of an employee, or some other adverse action, in assessing reasonableness, the specialist employment tribunals will look to the resources available to the employer and whether the employer sufficiently investigated the allegations against the employee. It will also be relevant whether the employer raised its concerns fairly with the employee and provided a reasonable opportunity for the employee to respond (Employment Relations Act 2000, section 103A(3)). So, an employee whose conduct may be impugned as a result of an investigation has significant protective procedural rights.

Company directors who are also employees have the same rights as non-director employees.

31 Do employees’ rights under local employment law differ if a person is deemed to have engaged in misconduct? Are there disciplinary or other steps that a company must take when an employee is implicated or suspected of misconduct, such as suspension or in relation to compensation?

Principles of natural justice apply to employees suspected of misconduct. Although an employer has the right to take disciplinary action if it believes an employee has engaged in misconduct, and this misconduct justifies a particular disciplinary action, the employer is required to treat all cases of suspected misconduct fairly.

A fair process involves the employer advising an employee of the details of the allegations, providing a reasonable opportunity to respond, and considering any explanations fully before concluding that disciplinary action is required.

Usually, this process will involve suspending the affected employee (presuming the employment agreement allows it or the employee agrees) if the employer cannot carry out a proper investigation with the employee still in the workplace.

New Zealand’s Employment Court has commented that it might not be inevitable that an employee is dismissed even when that employee is involved in a criminal proceeding. The question remains whether the employee’s conduct meets the criteria for dismissal in the relevant employment agreement (Hallwright v. Forsyth Barr Ltd [2013] NZEmpC 202 at [83]).

32 Can an employee be dismissed for refusing to participate in an internal investigation?

It is unlikely that, by itself, a refusal to participate in an internal investigation would justify an employee’s dismissal, unless there were circumstances that made the act of refusal ‘destructive of that basic confidence or trust that is an essential of the employment relationship’ (Northern Distribution Union v. BP Oil New Zealand Ltd [1992] 3 ERNZ 483 (CA) at 487).

Commencing an internal investigation

33 Is it common practice in your country to prepare a document setting out terms of reference or investigatory scope before commencing an internal investigation? What issues would it cover?

It is certainly best practice to prepare a terms of reference or scoping document before commencing an internal investigation. Ideally, it would cover at least the following:

• the matters to be investigated, including the limits of the investigation, and what is outside its scope;
• the purpose of the investigation, including (if applicable) whether it is for the purposes of providing legal advice to the organisation or if proceedings may be in contemplation;
• what the confidentiality expectations for the investigation are;
• the relevant internal rules, codes, policies and procedures that will govern the investigation;
• whether the investigation will include interviews and, if so, a general description of who might be interviewed;
• whether interviewees will be given copies of their interview transcripts;
• the predicted time frame for the investigation, with the caveat that it may be extended;
• that the role of the investigators is not the same as the role of the decision maker – that the investigators’ role is to determine the facts, not outcomes; and
• the type of report that will be produced at the end of the process, and to whom it will be disclosed (in draft or final form).

34 If an issue comes to light prior to the authorities in your country becoming aware or engaged, what internal steps should a company take? Are there internal steps that a company is legally or ethically required to take?

The key steps would include:

• to take legal advice, particularly around the issue of preserving privilege over subsequent communications made by the company;
• to ensure that company document preservation procedures are executed;
• to consider public disclosure obligations;
• to consider the extent to which employees who may be involved should be suspended;
• to make any necessary insurance notifications; and
• to determine what investigative steps are required.

Although there may be no specific legal or ethical internal obligations on the company, it is likely to be a personal duty of company directors to ensure that those charged with governance are aware of material issues (of which a company director should reasonably be aware).

35 What internal steps should a company in your country take if it receives a notice or subpoena from a law enforcement authority seeking the production or preservation of documents or data?

A company should co-operate with law enforcement and take the necessary steps to provide those documents captured by the wording of the notice, having reviewed documents for those protected by privilege. The company should review document preservation and destruction procedures to ensure that related material is preserved in the event that law enforcement make subsequent requests.

36 At what point must a company in your country publicly disclose the existence of an internal investigation or contact from a law enforcement authority?

The New Zealand Exchange Listing Rules (which apply to companies listed on the New Zealand Exchange (NZX)) require disclosure of ‘material information’ promptly and without delay (NZX Listing Rules (10 December 2020), Rule 3.1.1). The Rules also provide a number of exceptions, however, including where the information contains ‘matters of supposition or is insufficiently definite to warrant disclosure’, is generated for internal management purposes or is confidential (Rule 3.1.2). It will be a matter of judgement, therefore, at what point a company should make this disclosure. There are no similar disclosure rules for private companies.

37 How are internal investigations viewed by local enforcement bodies in your country?

Local enforcement bodies have no objection to internal investigations in principle, but may raise concerns if an internal investigation has the potential to interfere with their own investigation and evidence gathering. There are no particular statutory requirements as to how a company should conduct an internal investigation.

Attorney–client privilege

38 Can the attorney–client privilege be claimed over any aspects of internal investigations in your country? What steps should a company take in your country to protect the privilege or confidentiality of an internal investigation?

In general, the attorney–client privilege applies to all types of dealings between lawyers and clients and is codified in section 54 of the Evidence Act 2006. The associated duty of confidentiality owed by lawyers is enshrined in the Lawyers and Conveyancers Act 2006.

The attorney–client privilege can also be claimed in relation to parts of an investigation conducted by lawyers and involving legal advice, or an investigation conducted for the dominant purpose of preparing for contemplated legal proceedings. Whether privilege can be claimed depends on the circumstances and a company should seek legal advice before commencing an internal investigation. Where privilege does apply, companies should keep relevant communications or work confidential to preserve privilege.

However, there are some statutory exceptions and disclosure obligations that take precedence over the attorney–client privilege. These exceptions tend to arise in connection with potential criminal activity or dishonesty, including in relation to serious fraud, tax offending, customs and border security, anti-money laundering and counter-financing of terrorism.

39 Set out the key principles or elements of the attorney–client privilege in your country as it relates to corporations. Who is the holder of the privilege? Are there any differences when the client is an individual?

The Evidence Act 2006 codifies the law relating to privilege. The attorney–client privilege applies equally and in the same manner to individuals and corporations. The client is the holder of privilege.

Privilege attaches to communications between a person (which includes a corporation) and their legal adviser if:

• the communication was intended to be confidential; and
• it was made in the course of, and for the purpose of the person requesting or obtaining professional legal services from the legal adviser, or the legal adviser giving these services to the person.

Privilege may also attach, in defined circumstances, to communications or information where it is for the dominant purpose of preparing for a proceeding or an apprehended proceeding. This is known in New Zealand as litigation privilege. Communication with witnesses and expert reports are commonly covered by this type of privilege.

40 Does the attorney–client privilege apply equally to in-house and external counsel in your country?

The attorney–client privilege applies to in-house counsel, provided they hold a current practising certificate in New Zealand. It is important to note that meeting the relevant criteria to invoke privilege in part of a communication or document does not automatically attach privilege to the whole communication or document.

41 Does the attorney–client privilege apply equally to advice sought from foreign lawyers in relation to investigations in your country?

The scope of the attorney-client privilege is likely broad enough to cover these situations.

42 To what extent is waiver of the attorney–client privilege regarded as a co-operative step in your country? Are there any contexts where privilege waiver is mandatory or required?

There is no formal recognition for waiver as a co-operative step in law or policy. There is no situation in which a person under investigation is required to waive privilege to obtain co-operation credit.

43 Does the concept of limited waiver of privilege exist as a concept in your jurisdiction? What is its scope?

Limited waiver of privilege exists in New Zealand. In the leading case of B v. Auckland District Law Society ([2003] UKPC 38, [2004] NZLR 326 (PC)), the Privy Council noted at Paragraph 68:

It must often be in the interests of the administration of justice that a partial or limited waiver of privilege should be made by a party who would not contemplate anything which might cause privilege to be lost, and it would be most undesirable if the law could not accommodate it.

The scope of limited waiver appears to be wide. The Court of Appeal has held that there may be situations where privileged material may even be referred to in court and produced in evidence without a general loss of privilege. But it went on to say that a party who wishes to make only a limited waiver of privilege should make clear that the waiver is limited and take steps to ensure that the loss of confidentiality in the material is confined to what is necessary for the purposes of the limited waiver (in R v. Bain [2008] NZCA 585 at Paragraph 80).

44 If privilege has been waived on a limited basis in another country, can privilege be maintained in your own country?

There seems no reason, in principle, why not.

45 Do common interest privileges exist as concepts in your country? What are the requirements and scope?

Common interest privilege exists in New Zealand. It applies in respect of a document over which another class of privilege exists, and it protects the privilege holder against waiving the privilege by disclosing the document to another party who shares a common interest in the subject matter of the document or the relevant litigation. Common interest privilege only applies to the extent that a genuine common interest exists. If a disclosed document contains information in which the parties have no common interest, there is a risk that privilege has been waived in respect of that information. To avoid waiving the privilege, material must be kept confidential as between the parties with a common interest.

46 Can privilege be claimed over the assistance given by third parties to lawyers?

In general, privilege is unlikely to attach to assistance given by third parties to lawyers. In some circumstances, a third party could be considered an agent of the client and invoke privilege in that way. Otherwise, only litigation privilege could potentially apply.

Witness interviews

47 Does your country permit the interviewing of witnesses as part of an internal investigation?

Yes, witness interviews routinely form part of internal investigations. Interviews must be conducted in accordance with the rights of individuals, including employment rights. The corporation conducting the interview should be clear with the witness about the purpose of the interview and what the information will be used for. Generally, witnesses should not be anonymous or able to make off-the-record comments.

48 Can a company claim the attorney–client privilege over internal witness interviews or attorney reports?

New Zealand law recognises various categories of privilege, including legal professional privilege (or solicitor–client privilege) and litigation privilege, which may enable a privilege holder to withhold documents they would otherwise be obliged to disclose. How these privileges apply to witness interviews will be context-specific, but there are good arguments that legal professional privilege will attach.

49 When conducting a witness interview of an employee in your country, what legal or ethical requirements or guidance must be adhered to? Are there different requirements when interviewing third parties?

Employers have a duty to act in good faith towards existing employees. In conducting a witness interview, an employer must act in a way that is fair and reasonable. New Zealand’s Employment Relations Act 2000 imports additional duties in circumstances where an employer is meeting with an employee for a disciplinary purpose. Beyond these general duties, employers are not restrained in their approach to interviewing employees.

50 How is an internal interview typically conducted in your country? Are documents put to the witness? May or must employees in your country have their own legal representation at the interview?

There is no standardised procedure for the conduct of an internal interview in New Zealand. Employees are entitled to have in attendance a support person and a legal adviser, but neither is formally required. In general, an interview will be conducted by putting documents to the witness and asking open-ended questions. With the witness’s permission, the interviews will usually be recorded, either electronically or in writing.

Reporting to the authorities

51 Are there circumstances under which reporting misconduct to law enforcement authorities is mandatory in your country?

Mandatory reporting of misconduct is a feature of some regulatory frameworks within New Zealand; for example:

• qualifying financial institutions are presently required to report suspicious transactions to the Commissioner of Police under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (section 40), and failure by a company to report in breach of a reporting obligation under this Act (section 100) attracts a penalty fine of up to NZ$5 million; and
• the Financial Markets Supervisors Act 2011 creates a supervisory scheme over issuers of debt securities. Under the Financial Markets Conduct Act 2013 (sections 116 and 118), an issuer of debt securities is required to report certain issues to its supervisor, including any contravention (or possible contravention) of its issuer obligations and any serious financial problems.

52 In what circumstances might you advise a company to self-report to law enforcement even if it has no legal obligation to do so? In what circumstances would that advice to self-report extend to countries beyond your country?

The nature of an issue and the likely consequences of that issue (both with and without self-reporting) are the primary considerations relevant to a corporation’s management and response. Where an enforcement outcome is likely, co-operation (including voluntary disclosure) routinely attracts a significant discount in mitigation. However, it is unusual for self-reporting or co-operation to result in a complete avoidance or immunity from liability. A punitive outcome and the associated reputational risk is likely regardless.

Within particular regulatory frameworks, New Zealand has taken steps to strengthen the incentive to self-report. The most relevant example is the Commerce Commission’s Cartel Leniency and Immunity Policy (the Leniency Policy), which offers conditional immunity to the first participant in cartel conduct that reports to the Commission.

Where an incentive to self-report has cross-jurisdictional application, such as the Leniency Policy, that factor is relevant to a corporation’s assessment of whether or not to self-report internationally.

53 What are the practical steps needed to self-report to law enforcement in your country?

The practical steps required to self-report misconduct to law enforcement vary depending on the type of misconduct and the area of regulation. In all instances, it is advisable to obtain independent legal advice prior to taking any further steps.

There are few practical restraints on the process of self-reporting. Regulatory agencies provide contact details for general reporting of misconduct or suspected misconduct. If misconduct is being reported pursuant to a particular scheme, such as the Commerce Commission’s Leniency Policy, specific rules guiding the manner and nature of disclosure are publicly available.

Responding to the authorities

54 In practice, how does a company in your country respond to a notice or subpoena from a law enforcement authority? Is it possible to enter into dialogue with the authorities to address their concerns before or even after charges are brought? How?

Most companies will co-operate with law enforcement after having received a notice requiring the production of documents. Law enforcers are usually responsive to responsible dialogue with a company through the case officer or assigned prosecutor. Section 57 of the Evidence Act 2006 provides a privilege for plea discussions, although a company must be a ‘party to a criminal proceeding’ before this privilege engages.

55 Are ongoing authority investigations subject to challenge before the courts?

Once an agency lays charges, a defendant can apply for a stay of these proceedings on the basis they are an abuse of process. However, because New Zealand courts have taken the view that prosecutions are acts of the executive with which they should rarely interfere, stays are unusual. The decision to prosecute is generally subject to judicial review, although some statutes providing powers of investigation expressly prohibit those powers being challenged in court (e.g., Serious Fraud Office Act 1990, section 20).

56 In the event that authorities in your country and one or more other countries issue separate notices or subpoenas regarding the same facts or allegations, how should the company approach this?

This decision calls for an assessment by the company of the benefit in agreeing consistent disclosure packages across all jurisdictions, against the burden to the New Zealand subsidiary of complying with a wide-ranging notice when it is unlikely that data stored in New Zealand will be a focus for a multi-jurisdictional investigation.

The cross-border data protection provisions in the Privacy Act 2020 are unlikely to apply in the context of mutual legal assistance requests. But a New Zealand company should consider them carefully before voluntarily disclosing material to overseas authorities.

57 If a notice or subpoena from the authorities in your country seeks production of material relating to a particular matter that crosses borders, must the company search for and produce material in other countries to satisfy the request? What are the difficulties in that regard?

The issue that arose in R (KBR) v. SFO ([2021] UKSC 2) has not directly been tested in New Zealand courts, and its determination would likely turn on the wording of the empowering statute in question. However, we believe that New Zealand courts would look to the extent to which the target of the notice had custody or control over the documents requested, rather than the location of the documents sought (see, for example, Serious Fraud Office Act 1990, section 19).

58 Does law enforcement in your country routinely share information or investigative materials with law enforcement in other countries? What framework is in place in your country for co-operation with foreign authorities?

Yes. Mutual legal assistance requests are common. Requests for assistance in criminal investigations may be made to New Zealand by certain countries under the Mutual Assistance in Criminal Matters Act 1992 (the Act). Section 24 sets out which countries are eligible to make a request for assistance. Examples of types of assistance provided for by the Act include assistance in obtaining evidence in New Zealand (section 31), assistance in arranging for a person to give evidence or assistance (in relation to a criminal matter) in a foreign country (section 37), and assistance in obtaining articles by search and seizure (section 43). The Attorney General’s decisions providing or refusing mutual legal assistance are subject to judicial review.

59 Do law enforcement authorities in your country have any confidentiality obligations in relation to information received during an investigation or onward disclosure and use of that information by third parties?

Yes. Section 36 of the Serious Fraud Office Act 1990, for example, requires every member of the Serious Fraud Office to observe the ‘strictest secrecy’ in relation to information obtained in the course of an investigation, subject to some exceptions.

60 How would you advise a company that has received a request from a law enforcement authority in your country seeking documents from another country, where production would violate the laws of that other country?

Our advice would be to resist production, at least in the first instance, on the grounds that the documents are not within the company’s control, insofar as the request requires the company to breach the foreign law to produce them.

61 Does your country have secrecy or blocking statutes? What related issues arise from compliance with a notice or subpoena?

No.

62 What are the risks in voluntary production versus compelled production of material to authorities in your country? Is this material discoverable by third parties? Is there any confidentiality attached to productions to law enforcement in your country?

Risks lie in the form of breaches of the Privacy Act 2020, banking secrecy obligations, or other contractual obligations of confidence for voluntary disclosures of information where a company would have a defence if compelled to make the production by law.

A degree of confidentiality attaches to information provided to law enforcement. Section 36 of the Serious Fraud Office Act 1990, for example, requires every member of the Serious Fraud Office to observe the ‘strictest secrecy’ in relation to information obtained in the course of an investigation, subject to some exceptions.

Prosecution and penalties

63 What types of penalties may companies or their directors, officers or employees face for misconduct in your country?

Companies and their officers and employees can face both criminal and civil penalties, depending on the type and seriousness of the misconduct.

In practice, criminal prosecutions tend to be brought against directors and senior officers within an organisation. This could be because attribution of conduct to the company is challenging, or because the company itself is a victim of the wrongdoing.

There are specific criminal offences directed towards companies, including for non-compliance with statutory duties relating to corporate governance (Companies Act 1993, section 393) and disclosure (Commerce Act 1993, sections 86B and 87B), cartel behaviour and restrictive trade practices (Commerce Act 1986, part 6), breach of duties relating to health and safety in the workplace (Health and Safety at Work Act 2015, part 2), failure to comply with reporting obligations (Financial Reporting Act 2013, sections 36H and 36Q), fraud (Companies Act 1993, sections 380 and 383; Serious Fraud Office Act 1990, sections 45 to 47), misleading or deceptive conduct (Financial Markets Conduct Act 2013; Fair Trading Act 1986), and failure to comply with licensing rules on entities that carry on business borrowing, lending or provide financial services (Non-Bank Deposit Takers Act 2013, section 11; Financial Markets Supervisors Act 2011, section 43). All can result in criminal conviction and penalty, and some can alternatively incur civil penalties.

64 Where there is a risk of a corporate’s suspension, debarment or other restrictions on continuing business in your country, what options or restrictions apply to a corporate wanting to settle in another country?

A company can have its registration suspended or cancelled by the Companies Office as a punishment for serious breaches of the law. The effect is that the company can no longer carry on business in New Zealand.

65 What do the authorities in your country take into account when fixing penalties?

When considering the appropriate penalty to impose, authorities will generally take into account the seriousness of any offending, the level of intent behind the offending and any efforts to rectify the wrongdoing or make amends.

Criminal sentencing is governed by the Sentencing Act 2002, which sets out mandatory and discretionary factors a court should take into account when imposing a criminal sentence.

Civil penalties are imposed in a similar way, and by reference to statutory requirements and comparable cases for the particular misconduct.

Resolution and settlements short of trial

66 Are non-prosecution agreements or deferred prosecution agreements available in your jurisdiction for corporations?

New Zealand does not have non-prosecution or deferred prosecution agreements per se. However, ‘enforceable undertakings’ can be entered into with particular enforcement agencies in lieu of prosecution, such as WorkSafe (which monitors health and safety compliance), the Department of Internal Affairs, the Commerce Commission and the Financial Markets Authority. Some agencies have formal policies, while others may consider enforceable undertakings on a discretionary basis.

67 Does your jurisdiction provide for reporting restrictions or anonymity for corporates that have entered into non-prosecution agreements or deferred prosecution agreements until the conclusion of criminal proceedings in relation to connected individuals to ensure fairness in those proceedings?

A company may apply to a court for suppression in connection with a criminal proceeding under the Criminal Procedure Act 2011, or to an enforcement agency where that agency has power to make non-publication orders (such as the Financial Markets Authority (Financial Markets Authority Act 2011, section 44) and the Commerce Commission (Commerce Act 1986, section 100)).

68 Prior to any settlement with a law enforcement authority in your country, what considerations should companies be aware of?

Settlement does not preclude a public court judgment or a finding of liability. Settlement in the New Zealand context is unlikely to involve paying money to avoid prosecution. Even where a defendant company and the prosecuting agency support the imposition of an agreed penalty, a court will need to give public judgment for that penalty to have effect. The courts can also disagree with and disregard an agreement reached by the parties if it comes to a different conclusion about the appropriate penalty.

69 To what extent do law enforcement authorities in your country use external corporate compliance monitors as an enforcement tool?

New Zealand does not typically use external corporate compliance monitors.

70 Are parallel private actions allowed? May private plaintiffs gain access to the authorities’ files?

Private actions can run in parallel to regulatory prosecutions. Any member of the public may be entitled to and can apply for access to certain ‘official information’ held by government departments, pursuant to the Official Information Act 1982, although there are a number of carve-outs for sensitive investigatory material.

Publicity and reputational issues

71 Outline the law in your country surrounding publicity of criminal cases at the investigatory stage and once a case is before a court.

In general, there is no rule preventing the media from reporting that an investigation is under way; however, publicity is managed carefully at the investigatory stage of a potential case. Participants in an investigation are unlikely to comment publicly while an investigation is under way.

Once a matter is before the courts, the media have significant rights to access court and report on proceedings.

Proceedings are generally heard in open court. However, public access may be restricted where required in the interests of justice, for example, in sensitive cases or when a witness protection issue arises (Criminal Procedure Act 2011, section 197). In such cases, members of the media may be granted access to closed court proceedings in recognition of their role as the eyes and ears of the public (Criminal Procedure Act, section 198).

The publication of certain details of a criminal case are automatically suppressed under criminal procedure legislation (e.g., Criminal Procedure Act 2011, sections 199A, 203 and 204). In addition, the court can order that further details of a case be suppressed temporarily or permanently (e.g., under Criminal Procedure Act 2011, sections 199C, 200 and 202).

72 What steps do you take to manage corporate communications in your country? Is it common for companies to use a public relations firm to manage a corporate crisis in your country?

There is no uniform approach to the management of corporate communications – corporations make their own determinations about the management of publicity and public relations. Public relations firms exist and it is not unusual for a firm to be engaged to advise on the management of any publicity, including in relation to corporate crises.

73 How is publicity managed when there are ongoing related proceedings?

The management of publicity is a matter for the corporation, usually in reliance on legal and public relations advice. Most often, corporations will decline to comment while an investigation or proceeding is under way or will limit any comment to simply confirming the existence of the investigation or proceeding. Once an outcome has been determined, corporations may release a prepared statement to the media for publication.

Duty to the market

74 Is disclosure to the market in circumstances where a settlement has been agreed but not yet made public mandatory?

The New Zealand Exchange (NZX) listing rules provide the general rule that a listed issuer must disclose material information to the market. However, there are exceptions to this rule, including where the information contains an incomplete proposal or negotiation, or the information is confidential and its confidentiality is reasonably maintained (NZX Guidance Note on Continuous Disclosure (10 December 2020)).

Environmental, social and corporate governance (ESG)

75 Does your country regulate ESG matters?

ESG governance and regulation is a relatively new frontier in New Zealand.

The New Zealand Exchange (NZX) promotes disclosure of ESG matters but does not yet regulate it. The most recent NZX Corporate Governance Code, released in 2017, framed one of its recommendations (Recommendation 4.3) to issuers on disclosure of ESG:

Financial reporting should be balanced, clear and objective. An issuer should provide non-financial disclosure at least annually, including considering environmental, economic and social sustainability factors and practices. It should explain how operational or non-financial targets are measured. Non-financial targets should be informative and include forward looking assessment and align with key strategies and metrics monitored by the Board.

The NZX has also published an ESG Guidance Note to encourage ESG reporting.

76 Do you expect to see any key regulatory or legislative changes emerge in the next year or so designed to address ESG matters?

The government has recently enacted a mandatory climate-related disclosures regime, with first disclosures to be made in 2023. The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 will require large financial sector organisations and high-value listed companies to make climate-related disclosures in the areas of governance, strategy, risk management and metrics and targets. The External Reporting Board (XRB) has a mandate to issue climate standards and, following the conclusion of a public consultation, was expected to publish the full climate-related disclosures framework in December 2022.

77 Has there been an increase in ESG-related litigation, investigations or enforcement activity in recent years in your country?

To date, there has not been any ESG-related litigation, and enforcement action has been limited to issuing guidance. However, litigation and stronger enforcement are expected once mandatory climate-related disclosures come into force. The Ministry of Business, Innovation and Employment suggests that consideration of ESG factors may even be within the remit of fiduciary duties owed by company directors, and a private member’s bill to that end is currently going through Parliament.

Anticipated developments

78 Do you expect to see any key regulatory or legislative changes emerge in the next year or so designed to address corporate misconduct?

On 30 June 2022, the Ministry of Justice completed a review of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009. It is likely that the Ministry will recommend a new Act, or significant amendments to the existing one.

---

Footnotes