Not necessarily for fare evasion. Byelaw 18 offences are also included.Or in other words an out-of-court settlement for fare evasion so paying it implies you have accepted you did something illegal and in taking your payment Northern agree not to prosecute you for breaking the law.
As you say, the passenger is under no obligation to participate. If they believe there is no case to answer they can call Northern's bluff, so to speak.
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