FINANCIAL MARKETS AUTHORITY v MEDICAL ASSURANCE SOCIETY NEW ZEALAND LIMITED [2023] NZHC 3312

FINANCIAL MARKETS AUTHORITY v MEDICAL ASSURANCE SOCIETY NEW ZEALAND LIMITED[2023] NZHC 3312 [22 November 2023]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2023-485-251[2023] NZHC 3312UNDER the Financial Markets Conduct Act 2013BETWEEN FINANCIAL MARKETS AUTHORITYPlaintiffAND MEDICAL ASSURANCE SOCIETY NEWZEALAND LIMITEDDefendantHearing: 21 November 2023Appearances: B H Dickey and Y Fu for PlaintiffE J Rushbrook and M C Kavanagh for DefendantJudgment: 22 November 2023JUDGMENT OF CHURCHMAN JIntroduction[1] The Medical Assurance Society New Zealand Ltd (MAS) is a mutual societythat provides membership-based insurance, investment and financial advice services.MAS's wholly owned subsidiaries, Medical Life Assurance Society Ltd (MLA) andMedical Insurance Society (MIS), are the licenced insurers in the group. The groupoffers, promotes and underwrites a large range of insurance products, and enterscontracts of insurance with customers. MLA and MIS administer and manage theinsurance policies.[2] MAS provides MLA and MIS the staff and resources necessary for theiroperation, receives distributions of surplus from its subsidiaries and retains capital inorder to sustain the MAS group.1 It also owns the brand and logo under which theMAS group operates. MAS is governed by a board (the directors of which also serveas directors for most of MAS's subsidiary companies), but it is a mutual societywherein customers of its subsidiaries become members of the MAS Members' Trust,which holds 99.99 per cent of the shares in MAS.[3] The parties to this claim are jointly seeking the imposition of an agreedpecuniary penalty on MAS for four discrete contraventions of ss 22(d), (f), (g) and/or(h) of the Financial Markets Conduct Act 2013 (the FMCA). The Financial MarketsAuthority (the FMA) and MAS have agreed to recommend that this Court:(a) adopts a starting point of $3,000,000;(b) applies a 30 per cent discount for all mitigating factors; and(c) imposes a pecuniary penalty of $2,100,000.[4] The FMA further seeks:(a) declarations of breach under s 486 of the FMCA; and(b) an order under s 493 of the FMCA that the pecuniary penalty must beapplied first to pay the FMA's actual costs in bringing this proceeding.The FMA seeks no further order as to costs.The FMCA breaches[5] By notice of admissions dated 26 September 2023, MAS has admitted tomaking false and/or misleading representations to its customers (or customers of itswholly owned subsidiaries), constituting four classes of affected customers and fourdistinct breaches of the FMCA. These four breaches are discussed below in furtherdetail.1 Under s 536 of the Financial Markets Conduct Act 2013 [FMCA], the impugned conduct engagedin by MIS and MLA (for example in issuing incorrect invoices or remittance letters) is consideredto be conduct engaged in on behalf of MAS, and so is treated as the conduct of MAS in turn.[6] MAS self-reported the issues to the FMA and admitted its breaches of theFMCA. The cause of the breaches was related to flaws in MAS's systems andprocesses. The relevant systems relied heavily on manual accuracy with there beingno proper checking or auditing systems. MAS also failed to take prompt action whensome of these issues first came to light.The multi-policy discount issue[7] The first issue relating to a breach of s 22 involves MAS's multi-policydiscount (MPD). Since 2014, customers have been eligible to receive an MPD incertain circumstances. However, from about April 2014, MAS did not apply the MPDor incorrectly applied it at a lower rate (the MPD issue). Customers affected by thisissue received invoices that recorded incorrect premium amounts (the affected MPDinvoices).[8] From at least March 2014, MAS's General Insurance Product Manager wasaware that some MPDs were being misapplied. The issues were wrongly consideredto be isolated at the time, and so they persisted until a large-scale investigationcommenced in November 2015. The investigation found that 20,200 policies had beenaffected with customers both overcharged and undercharged, and that approximately$588,132 in refunds were due to customers. In August 2016, MAS's General Managerof Risk and Compliance recommended that the MPD issue only be fixed at eachcustomer's next renewal date with no remediation to be paid to customers who hadbeen overcharged. In December 2016, the matter was closed with no remediation forcustomers, no further investigation, and no further reporting or confirmation that theissue had been resolved at a systems level (which it had not).[9] The MPD issue was identified again in February 2019, investigated by MASbetween March 2019 and July 2021, and reported to the FMA in August 2021.Between April 2014 and November 2021, the MPD issue affected 8,864 customers(16.12 per cent of all customers eligible to receive an MPD). Of the $71,563,988.98in premiums charged during this period, $3,318,997.75 was overcharged.Inflation adjustment issue[10] The second issue relates to incorrect inflation adjustments to customers'premiums. From April 2009, MAS has offered an inflation-adjusted cover optionwhich provided customers with the option to increase cover with an equivalent upliftto the premium to adjust for inflation each year. From 2009 until 31 July 2017, MAS'ssystem automatically applied an inflation adjustment of 3 per cent instead of theadjustment specified in customers' policies (the inflation adjustment issue).2[11] The affected customers were issued invoices that recorded incorrect premiumamounts not in fact owed by them (the affected adjustment documents). For some ofthese customers, these invoices also contained a further statement falsely representingthat an inflation adjustment had been applied to their premiums (the inflationwording), when in fact a different rate unrelated to inflation had been applied. Theissue arose because of an incorrect input into MAS's computer policy administrationprogramme, which went uncorrected between 2012–2017.[12] MAS employees first identified the existence of some affected customers in2012. In 2017, it identified the systems error. Steps were taken to correct theadjustment rate applied but no broader investigation was carried out until the issuewas re-identified and escalated to senior employees in March 2019, after which aninvestigation began into all policies potentially affected by the issue.[13] MAS first reported the error to the FMA (regarding one of its products) inMay 2019 and then, more broadly, again in August 2021. Between April 2014 andJune 2022, the inflation adjustment issue affected 6,267 customers. Of the$118,120,727 charged in premiums, $1,714,067 was overcharged. 325 customersmade claims on their policies and received $419,605 in benefit payments above whatthey would otherwise have received had the error not occurred.2 For some customers, the policy terms included an "Index of Wage Rates". This term was notinternally defined, nor is it an index that is tracked by Statistics New Zealand.Benefit payment issue[14] The third issue arises from errors by MAS in calculating benefit payments inrelation to life and disability insurance products (the benefit payment issue). Thecalculation errors were made by claims staff, who manually calculated the benefitspayment and then used a basic Microsoft Excel worksheet to calculate paymentperiods. Customers affected by the benefit payment issue were issued with remittanceletters that referred to the incorrect benefit payment amount owed to them (the affectedremittance letters).[15] MLA identified the first instance of a benefit payment error in August 2019.Between August 2019 and 2021, it investigated and identified further errors. Thebenefit payment issue was reported to the FMA in August 2021. Between 1 April 2014and 1 June 2022, the benefit payment issue affected 104 customers and resulted in atotal of $1,047,059.60 in underpayments.No claims bonus issue[16] The fourth issue relates to the misapplication of a no claims bonus (NCB) incircumstances where customers were entitled to a higher grade of NCB but did notreceive it, instead receiving a lower grade and paying a higher premium accordingly(the NCB issue). This misapplication occurred where a customer's NCB grade wasdowngraded as a result of:(a) a failure by MAS staff to reverse a selection on one of the customer'slines of cover; and(b) customers' policies being incorrectly flagged as having an open claimat their renewal date.[17] These customers were issued invoices that recorded incorrect premiumamounts that were in fact not owed by them (the affected NCB invoices). MASemployees became aware of the issue regarding lines of cover in May 2014, but nosystemic fix was implemented. The issue was re-identified in June 2019 and MASinvestigated the issue between November 2019 and April 2022. The second issueregarding open claims was identified in June 2022. The NCB issue was reported tothe FMA in November 2021 (regarding the lines of cover issue) and July 2022(regarding open claims).[18] Between April 2014 and July 2022, the affected NCB invoices were issued to1,235 customers who were entitled to a higher grade of NCB but did not receive it.This was approximately three per cent of eligible NCB customers. Of the$14,800,926.55 charged in premiums, $572,061 was overcharged.Civil liability under the FMCA[19] The FMCA was enacted as part of reforms made in response to the globalfinancial crisis. Its purposes are as follows:3 Main purposesThe main purposes of this Act are to—(a) promote the confident and informed participation of businesses,investors, and consumers in the financial markets; and(b) promote and facilitate the development of fair, efficient, andtransparent financial markets.4 Additional purposesThis Act has the following additional purposes:(a) to provide for timely, accurate, and understandable informationto be provided to persons to assist those persons to makedecisions relating to financial products or the provision offinancial services:(b) to ensure that appropriate governance arrangements apply tofinancial products and certain financial services that allow foreffective monitoring and reduce governance risks:(c) to avoid unnecessary compliance costs:(d) to promote innovation and flexibility in the financial markets.[20] Part 2 of the FMCA introduced a range of "fair dealing" provisions, one ofwhich being s 22, which provides:22 False or misleading representationsA person must not, in trade, in connection with any dealing in financialproducts, the supply or possible supply of financial services, or thepromotion by any means of the supply or use of financial services, makea false or misleading representation—(a) that the products or services are of a particular kind, standard,quality, grade, quantity, composition, or value, or have had aparticular history; or(b) that the products or services are offered, issued, transferred, orsupplied by a particular person, by a person of a particular trade,qualification, or skill, or by a person who has other particularcharacteristics; or(c) that a particular person has agreed to acquire the products orservices; or(d) that the products or services have any sponsorship, approval,endorsement, performance characteristics, accessories, uses, orbenefits; or(e) that a person has any sponsorship, approval, endorsement, oraffiliation; or(f) with respect to the price of the products or services; or(g) concerning the need for the products or services; or(h) concerning the existence, exclusion, or effect of any condition,warranty, guarantee, right, or remedy, including (to avoid doubt)in relation to any guarantee, right, or remedy available under theConsumer Guarantees Act 1993; or(i) concerning the place of origin of the products or services.[21] MAS accepts that it has breached ss 22(d), (f), (g) and/or (h) as follows:(a) sections 22(f) and/or (g) by issuing the affected MPD invoices, affectedadjustment documents and affected NCB invoices;(b) sections 22(d) and/or (h) by issuing the affected remittance letters; and(c) sections 22(d) and/or (g) by issuing the affected adjustment documentscontaining the inflation wording.[22] Section 38 of the FMCA provides that a contravention of s 22 may give rise tocivil liability under subpt 3 of pt 8, which includes a pecuniary penalty. Section 38(3)provides that a contravention of s 22 must not result in a pecuniary penalty whichexceeds the greater of:(a) the consideration given for the relevant transaction;(b) three times the amount of the gain made or the loss avoided; or(c) $1 million in the case of an individual or $5 million in any other case.[23] Subpart 3 of pt 8 of the FMCA provides further detail as to pecuniary penalties.Section 489 allows the FMA to apply for a pecuniary penalty order where a person hasbreached a civil liability provision, such as s 22. Under s 489(2), where the FMAapplies for a pecuniary penalty order, the court:(a) must determine whether the person has contravened, or been involvedin a contravention of, a civil liability provision; and(b) must make a declaration of contravention if it is satisfied that theperson has contravened, or been involved in a contravention of, a civilliability provision; and(c) may order the person to pay to the Crown a pecuniary penalty that thecourt considers appropriate if it is satisfied that the person hascontravened, or been involved in a contravention of, a civil liabilityprovision.[24] Section 490 mirrors the provisions in s 38 regarding the maximum amount ableto be imposed as a penalty. Section 492 then sets out a non-exhaustive list of relevantfactors to which the court must have regard in setting the appropriate penalty:492 Considerations for court in determining pecuniary penaltyIn determining an appropriate pecuniary penalty, the court must haveregard to all relevant matters, including—(a) the purposes stated in sections 3 and 4 and any other purposestated in this Act that applies to the civil liability provision;and(b) the nature and extent of the contravention or involvement inthe contravention; and(c) the nature and extent of any loss or damage suffered by anyperson, or gains made or losses avoided by the person incontravention or who was involved in the contravention,because of the contravention or involvement in thecontravention; and(d) whether or not a person has paid an amount of compensation,reparation, or restitution, or taken other steps to avoid ormitigate any actual or potential adverse effects of thecontravention; and(e) the circumstances in which the contravention, or involvementin the contravention, took place; and(f) whether or not the person in contravention, or who wasinvolved in the contravention, has previously been found bythe court in proceedings under this Act, or any otherenactment, to have engaged in any similar conduct; and(g) in the case of section 534 (directors treated as havingcontravened), the circumstances connected with the director'sappointment (for example, whether the director is a non-executive or an independent director); and(h) the relationship of the parties to the transaction constitutingthe contravention.[25] If a court orders a person pay a pecuniary penalty, s 493 requires the court toorder that the penalty must be applied first to pay the FMA's actual costs in bringingthe proceedings.The Court's role in recommended penalties[26] The quantum of any pecuniary penalty to be imposed is a matter for the court.However, in the case of recommended or agreed penalties, the general approach takenby the courts has been to consider whether the proposed penalty is in range rather thanembarking on its own inquiry of what would be appropriate. The courts have longrecognised the significant public interest in bringing about the prompt and efficientresolution of penalty proceedings and the need to ensure that defendants are notdeterred from a negotiated resolution by fears that a settlement will be rejected oninsubstantial grounds.3[27] Nevertheless, the Court must still be satisfied that the proposed penaltysatisfies the objectives of the FMCA and reflects the particular circumstances of the3 Commerce Commission v Alstom Holdings SA [2009] NZCCLR 22 (HC) at [18], cited withapproval in Financial Markets Authority v AIA New Zealand Ltd [2022] NZHC 2444 at [49].case before it. The Court need not accept each step of the methodology proposed bythe parties as long as it is satisfied that the final amount of the recommended penaltyis in the appropriate range.4Setting the penalty[28] Alongside the requirements in s 489 above, the courts have adopted a three-stage framework as guidance in setting a pecuniary penalty:5(a) first, the court must determine the maximum penalty in accordance withss 38(2) and 490 of the FMCA;(b) second, the court should set a starting point, having regard to therelevant statutory criteria in s 492; and(c) third, the court should adjust that starting point by applying an uplift ordiscount on the basis of circumstances personal to the individualdefendant.The maximum penalty[29] Under ss 38(2) and 490 of the FMCA, the maximum penalty will be the greaterof the consideration for the relevant transaction, three times the amount of the gainmade, or loss avoided, by the contravention, or $5 million.[30] The consideration for the relevant transactions here is the total premiumscharged on the affected policies (with respect to the inflation adjustment, MPD andNCB issues) and the full benefit entitlements (with respect to the benefit paymentsissue). The FMA submits that it is appropriate to assess the maximum penalty for eachindividual breach, the sum of which should form the notional maximum penalty in thiscase, with a global penalty being set for all contravening conduct.4 Financial Markets Authority v ANZ Bank New Zealand Ltd [2021] NZHC 399 at [32].5 Financial Markets Authority v Cigna Life Insurance New Zealand Ltd [2022] NZHC 3610 at [22].[31] In short, the FMA submits that the consideration for the MPD issue, theinflation adjustment issue, and the NCB issue is $71.5 million, $118.1 million and$14.8 million respectively. The FMA does not have the relevant information availableto it in relation to the full benefit entitlements for the purposes of assessing theconsideration for the benefit payments issue. In these circumstances, the FMA submitsthe Court should adopt an appropriate notional maximum for this breach of $5 million.Accordingly, the FMA submits that the maximum penalty is more than $209 million.The starting point[32] The agreed starting point is $3,000,000. As noted above, the starting pointmust be set having regard to "all relevant matters", including each of the factors in thenon-exhaustive list of factors set out in s 492 of the FMCA. The considerations in thiscase are accordingly as follows:6(a) Purposes of the FMCA:7The making of false and misleading representations, and any associatedovercharging, undermines the purposes of the FMCA in promotingconfident participation of consumers and facilitating the developmentof transparent financial markets. Customers are entitled to trust in theaccuracy of their insurance provider's communications in its systemsbut cannot do so where they must double check pricing and invoices(particularly where, as is the case here, customers could not verifywhether amounts charged or benefits paid were correct). That beingsaid, MAS's conduct constituted breaches of the FMCA no more or lessthan most breaches of s 22 and so this is not a particularly aggravatingfeature of the conduct in this instance.6 FMCA, s 492(g), relating to the circumstances connected with a director's appointment, wheredirectors are treated as having contravened, is not relevant in this case.7 Section 492(a), in reference to the purposes set out at ss 3(a), 3(b) and 4(a).(b) Nature and extent of the contravention:8While MAS submits that its conduct across the four contraventions wasall of the same or very similar kind, the nature and the extent of thecontraventions is a significant aggravating factor:(i) The root cause of MAS's contraventions was in large partbecause of systems failures, being overly reliant on manualprocesses without proper checking or auditing. MAS acceptsthat the largely manual processes in place should have beencoupled with appropriate controls to ensure failings werepromptly identified and dealt with, and ought to have had inplace a robust incident management system.(ii) When the MPD issue was identified and escalated, noremediation occurred, and no care was taken to ensure a fix wasput in place.(iii) MAS's conduct took place over a lengthy period, mostly from2014 to 2021/2022. MAS submits, however, that it hasproactively managed the various process and systemenhancements, investigations and remediations since 2019 in away that was timely.(iv) A total of 16,470 customers were affected over all four issues.9(v) In regard to the inflation adjustment issue, the fact that the issuesubsisted from 2009 and remained undetected until 2017 showshow significant the system failures were.(vi) A failure to escalate the inflation adjustment issue for almost adecade is a separate aggravating feature.8 Section 492(b).9 By way of reference, MAS had a customer base of 46,313 in the 2023 financial year.(vii) The proportion of eligible customers affected by the issues alsoaggravates the conduct, in that 16.12 per cent of all eligibleMPD customers were affected by the MPD issue, and all 6,267customers who elected to have inflation adjustment wereaffected by the inflation adjustment issue).(viii) Although the NCB issue only affected three per cent of thoseeligible, the number of customers affected is still significant andthe issue should have been identified if MAS had undertakenthe appropriate checks.10(ix) The high number of affected customers suggests that it is highlylikely a number of the problems would have been identifiedearlier had MAS had checks and balances on its systems.(c) Nature and extent of any loss, damage or gains:11The total harm to customers has been in the region of $6.6 million andMAS's net gain across all four issues was approximately $6.2 million,or perhaps slightly less due to costs incurred. The average overchargeper customer was approximately $378. Although only a relativelysmall number of customers were affected by the benefits payment issue,and the customers did receive certain amounts, the underpaymentscame at a time of real need or vulnerability, and on average, eachcustomer was underpaid by $10,067.88, which resulted in directfinancial, and, the FMA submits, possibly emotional, harm.(d) Compensation:12MAS has taken a comprehensive approach to compensation and repaid$6,115,271.54 to customers. Its costs in doing so are even higher. Ithas acted properly and repaid customers the amounts it should not have10 In contrast to the ANZ case, above n 4.11 FMCA, s 492(c).12 Section 492(d).taken or withheld from them. MAS also now has systems and processesin place to ensure that remediation occurs in the case of any futureFMCA breaches. This is a significant mitigating factor.(e) Circumstances in which the contravention occurred:13The conduct is aggravated by the multiplicity of breaches, whichappears to have occurred due to a wide-ranging failure to invest incompliance systems and what the FMA submits is a highly troublingcompliance culture. The FMA also submits that the circumstances ofthe identification and escalation of some of the issues is troubling, andpermitted the contravening conduct to persist, resulting in significantlygreater customer harm. MAS's inaction in escalating or fixing theissues led to continued contravening conduct and further breaches.Although the FMA accepts the circumstances of the conduct here werenot brazen, MAS fell well short of the standards expected of it.Although MAS is a relatively small insurer in comparison to othermarket participants, the harm to each customer is no less.MAS challenges the characterisation of its conduct under this head. Itsays while it is regrettable that the MPD issue was not fixed at eachcustomer's next renewal date and closed following confirmation oftechnology and process change, that was not as a result of a decisionof, or within the knowledge of, senior managers or the board. MASsubmits that its actions in respect of the investigation and self-reportingof the issues once they were re-identified in 2019 must be viewed in thecontext of the complexity, scale and challenging nature of the issues,and the fact that it engaged external consultants to assist it.13 Section 492(e).(f) Previous similar conduct:14MAS has not previously been the subject of proceedings under theFMCA.(g) Relationship of the parties to the transaction:15The contraventions, occurring in the context of an insurer–customerrelationship, occurred in the context of a special relationship of trust.The relationship between MAS and its members ought to be one inwhich customers can trust the accuracy of information provided tothem, which MAS accepts. MAS also owed obligations to its membersnot only as customers, but also in their capacity as members of the MASMembers' Trust, another distinct relationship of trust.(h) Deterrence:In the context of pecuniary penalties, deterrence is always a relevantconsideration.16 Any penalty must create a strong incentive forfinancial institutions to maintain adequate systems and processes.17The penalty should deter other market participants from riskingsimilarly deficient processes or systems.18 The FMA submits that theprevalence and duration of the issues indicates that MAS was notproperly incentivised to check its own systems and processes.Indeed, the FMA submits that due to the number of distinct breaches,the very significant number of customers affected, and the "highlytroubling" decisions not to remediate customers or ensure thatprocesses were in place to investigate or implement a fix (in relation tothe MPD issue), the contravening conduct in this case is the mostserious to come before the Court in any proceedings brought by the14 Section 492(f).15 Section 492(h).16 ANZ, above n 4, at [45].17 At [45].18 AIA, above n 3, at [90].FMA under Part 2 of the FMCA to date. The FMA submits a penaltythat "stings" is warranted.On the other hand, specific deterrence is not a particular concern in thiscase, and the existence of this High Court proceeding and associatedcosts and court order is itself a part of the penalty being imposed. It isalso important that the penalty is not set at a level that acts to deter othersmall financial services providers from seeking out and remediatingissues proactively and constructively.(i) Purpose, structure, size and scale:Although it is generally appropriate for penalties to be set "substantiallyhigher" than the net gain and at a level where they are "not seen merelyas a cost of doing business", in this case the FMA accepts thatdeterrence will be met by a starting point less than the commercial gainon the basis that MAS is a much smaller insurer and market participantthan others in the insurance market. To achieve deterrent aims, thestarting point must be of an appropriate size and scale in relation to theparticular defendant on which the penalty is being imposed, and a lowerpenalty than would otherwise be imposed on a larger and moreprofitable market participant is sufficient to meet the objectives ofdeterrence in this case. The fact that MAS is a mutual insurer which isowned by its members is not something relevant to the issue ofdeterrence. All participants in the insurance industry are bound tocomply with the FMCA irrespective of their ownership structure.(j) Undercharges:In this case, MAS undercharged customers approximately $5–5.5 million as a result of errors associated with the MPD issue. Whilethe amount that MAS undercharged its customers does not go to its netgain, it is relevant to the level of the starting point necessary fordeterrence, which is accordingly lower than it otherwise might havebeen.[33] In determining an appropriate starting point for the penalty, I have found thedecisions in Financial Markets Authority v Cigna Life Insurance New Zealand Ltd andFinancial Markets Authority v Vero Insurance New Zealand Ltd to be helpfulcomparators.19 The starting points adopted in each were $5.5 million and $6 millionrespectively. The Cigna case involved deliberate decisions leading to breaches, but itsconduct was mitigated by other factors, including taking its position after legal adviceexpressly authorising it. Both cases involved more affected policies, but the harm percustomer was greater in this case. It is also a specific feature of this case, that was notpresent in these cases mentioned, that the harm caused by the benefit payment issueaffected customers at vulnerable times of their lives. This aggravates the conduct.MAS's net gain was also higher than Cigna's, but lower than Vero's.[34] MAS submits that the decision in Financial Markets Authority v AIA NewZealand Ltd, in which the court adopted a starting point of $1 million, is also a helpfulcomparator.20 However, I do not see this case as an apt comparison. The wrongfulconduct involved in this case is significantly more serious and involved much greaterharm and wide-spread and lengthy systems failures than in that case.[35] Overall, having regard to these comparator cases and the factors mentionedabove, I am satisfied that a starting point of $3 million is within the appropriate rangein this case. The misconduct in this case is serious, and a starting point pitched at thatlevel is appropriate to meet the principles of deterrence in this case, while havingregard to MAS's size, and to ensure such pecuniary penalties are not simply seen as a"cost of doing business".Adjustments[36] The FMA acknowledges there are no aggravating factors specific to MAS.19 Cigna, above n 5; and Financial Markets Authority v Vero Insurance New Zealand Ltd [2023]NZHC 2837.20 AIA, above n 3.[37] The FMA accepts MAS is entitled to discounts to reflect the timing of its self-report, its admissions, and the extent of its cooperation. The FMA and MAS haveagreed that a total discount of 30 per cent is available, comprised of a 25 per centdiscount for MAS's cooperation with the FMA's investigation, its remediation and itsearly admissions, and a five per cent discount for its self-report and this being its firstcontravention of the FMCA.[38] MAS says it self-reported the issues in a prompt way to the FMA once theywere re-identified, and it did all that could reasonably be asked of it from 2019. MASsays it has accepted liability for the breaches and cooperated with the FMA throughoutits investigation. It says it also acknowledged and accepted at the earliest possiblestage that it had contravened the FMCA and has agreed to settle the proceeding onterms acceptable to the FMA.[39] The FMA accepts that since MAS's self-reporting it has been fully cooperative.The FMA says MAS's cooperation was important and is to be encouraged, but it didnot go beyond the usual level. It submits that any larger discount should be reservedfor cases where a defendant provides a significantly enhanced degree of cooperation,and highlights this Court's observation in the Cigna case that "absent special or usualfeatures, discounts should not be so large as to remove the deterrence object ofpecuniary penalties".21[40] The FMA also accepts that MAS is entitled to a discount for its remediationefforts, including its efforts to significantly invest to remediate issues in its systems,as well as the fact that the present contraventions are MAS's first contraventions ofthe FMCA.[41] While I accept the submission that, from 2019, MAS co-operated appropriatelywith FMA, I cannot overlook its behaviour between 2014 and 2019 which means thatit is not able to claim the benefit of full co-operation from the earliest discovery of thebreaches.2221 Cigna, above n 5, at [70].22 As the defendant was able to in Cigna, above n 5, at [69].[42] For these reasons I am satisfied that a total discount of 30 per cent is within therange appropriate as a discount.Final total penalty[43] This results in a final total penalty of $2.1 million. I am satisfied this is apenalty which is set at a level which denounces the conduct in which MAS wasinvolved, and acts as a sufficient deterrent. It is also a penalty which recognises thesignificant public benefit of the parties having reached an agreed figure and havethereby avoided time-consuming and costly litigation.[44] The final penalty is an amount which MAS says is a significant amount for itand its members but one that MAS has agreed is appropriate in all the circumstances,including in order to bring a swift and efficient resolution to this matter.Result[45] Accordingly, I make the following declarations, namely that MAScontravened:(a) sections 22(f) and/or (h) of the FMCA by issuing the affected MPDinvoices, affected adjustment documents, and affected NCB invoices;(b) sections 22(d) and/or (h) of the FMCA by issuing the affectedremittance letters; and(c) sections 22(d) and/or (g) of the FMCA by issuing the affectedadjustment documents containing the inflation wording.[46] I impose a pecuniary penalty of $2.1 million on MAS, as recommended by theparties.[47] I also make an order under s 493 of the FMCA that the penalty be applied firstto the FMA's actual costs in bringing the proceedings.Churchman JSolicitors:MC, Auckland for PlaintiffsRussell McVeagh, Wellington for Defendant