In a decision that will have far reaching implications on all civil penalty prosecution matters, the Full Court of the Federal Court has determined that it is not required to receive or act upon submissions from parties as to an agreed penalty.  

In Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59 (“CFMEU”), the CFMEU and the Communications Electrical & Plumbing Union pleaded guilty to unlawful industrial action in contravention of the Building and Construction Industry Improvement Act 2005. The Fair Work Inspectorate and the Unions agreed to a statement of facts for the purposes of disposing with a full hearing. The parties also negotiated and agreed to the penalties that should apply to the admitted contraventions and provided it to the Court for its approval.  

In a rare show of unity, the Unions, the Inspectorate and the Commonwealth argued that the Full Court should take into consideration any agreed submissions on penalty. The Commonwealth led evidence showing that its statutory regulators (e.g. ASIC, Australian Tax Office, Fair Work Ombudsman and the ACCC) regularly resolved litigation on the basis that the parties could agree on the penalty to be imposed.  

However, accepting the argument of a court appointed “Contradictor” in this matter, the Court determined that the imposition of a civil penalty was analogous to the imposition of a criminal penalty. Accordingly it was bound to follow the relevant High Court authority (Barbaro v The Queen [2014] HCA 2) which mandates that the Court is not required to accept or act upon parties’ submissions as to the appropriate penalty to be applied. Rather it is for the Court alone to consider and determine what civil penalty should apply to the party in contravention.  

It has been common practice for parties conducting civil litigation before the Federal Court to confer and agree upon the penalties that should apply to such contraventions. The most apparent benefit of this approach was the certainty it provided to both parties: a respondent may feel more willing to settle or accept guilt when they have some security in the final outcome, while an applicant would have a reasonable expectation as to the penalty that will be applied. Agreeing on penalties, or a range of penalties, to be applied provides an inducement to co-operate and settle litigation, together with the corresponding cost savings that ensues from such an approach.  

However the Full Court did not accept submissions that there would be “dire consequences” if parties were not allowed to submit agreed penalties to the Court. It instead noted that there was no suggestion that the decision in Barbaro had resulted in criminal defendants being less likely to plead guilty:  

“…we are not aware of any suggestion that under the earlier regime, pleas of guilty were discouraged by the absence of any likelihood that the prosecution would make submissions as to sentence.”   

The decision in CFMEU has implications for all litigation for which a civil penalty could apply. A reduced certainty as to the penalty to be applied by the Court will likely result in parties being less willing to resolve litigation in the early stages, instead taking a “roll of the dice” approach to the outcome and penalty.  

This matter however is not settled, with the Commonwealth and Unions being granted special leave to appeal the decision by the High Court on 18 June 2015.