The great uncertainty resulting from the decision in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union
In 2014, the majority of the High Court in Barbaro v The Queen (2014) 305 ALR 323 (Barbaro) held that the practice of prosecutors making submissions to a sentencing judge in criminal proceedings as to the available range of sentences was improper because it represented an opinion rather than evidence.
Earlier this month in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union FCAFC 59 (CFMEU), the Full Court of the Federal Court applied the reasoning in Barbaro to civil penalty proceedings. Accordingly, while regulators such as the ACCC, ASIC and ATO can adduce evidence in support of penalty considerations in civil penalty proceedings, they can no longer propose an agreed penalty for the court to consider as appropriate in all the circumstances.
The decision in CFMEU accordingly brings to an end the long-established practice of negotiating and submitting to the court “agreed penalties”.
What the decision means for you?
The decision has significant ramifications for the manner in which regulators such as the ACCC and respondents seek to settle penalty proceedings.
The prospect of negotiating and submitting an agreed penalty to the court had been a cornerstone of the ACCC’s enforcement policy for over 20 years and parties were able to settle matters quickly on the bases that:
- there was some certainty that the court would generally consider and adopt the agreed penalty submitted by the regulator;
- negotiations on an agreed penalty with the regulator gave each side a sense of what might otherwise happen if the matter proceeded to a full trial; and
- companies were reluctant to have cartel claims against them publically aired and to incur substantial legal costs.
The CFMEU decision however will result in considerable uncertainty and cost for respondents in civil penalty proceedings. In particular:
- Parties are likely to more vigorously defend civil penalty proceedings (liability and penalty) as directors fear the quantum of penalty that a court may order. This will naturally result in increased cost and time for respondents which now have far less incentive to enter settlement negotiations.
- There is considerable uncertainty for respondents as to the quantum of the ultimate penalty as they will no longer be able to negotiate an agreed penalty with the regulator during the early stages of litigation.
- Prior penalty decisions that were uncontested (i.e. agreed to between the parties and effectively endorsed by the court) are unlikely to provide a reliable guide in advising on future penalties.
- Respondents may be deterred from cooperating with a regulator as there is no certainty how much weight a court will place on the respondent’s cooperation in determining a discount off the penalty. This in turn may place more onerous obligations on “first in” immunity applicants to assist regulators such as the ACCC. Indeed, the ACCC’s Immunity and Cooperation Policy may need to be amended on the basis that it can no longer propose to the court the level of “discount” for cooperation by a respondent.
Ironically, given that civil penalty proceedings may take longer and result in increased costs, regulators may ultimately take on fewer cases each year as their resources are tied up with ongoing matters (which would otherwise be resolved more expeditiously by agreed penalties).
In CFMEU, the court made it clear that regulators can still adduce evidence and make submissions about penalty factors and comparable decisions but they cannot submit an agreed penalty unless they are doing so as an expert.
The previous practice of “agreed penalties”
Prior to the CFMEU decision, a prosecuting regulator and a respondent could, in civil penalty proceedings, submit to the court an agreed statement of facts including a joint submission on the appropriate level of penalty. In such cases, the Federal Court did not ask whether it would have arrived at the same figure without the parties’ submission but rather whether the parties’ proposal could be accepted as one within the permissible range of penalties considering all of the circumstances of the case.1
If the agreed penalty was appropriate (i.e. within the permissible range of penalties available to be ordered by the court under the relevant legislation), the practice of the Federal Court was to base its determination on and endorse that figure.
This practice of agreed penalties had been justified on the following grounds:
- determining a penalty was not an exact science and a particular figure within a permissible range of penalties was not necessarily more appropriate than another;
- the views of the regulator and/or experts on particular penalty factors were seen to be helpful and carried weight; and
- agreed penalties avoided lengthy and complex litigation by encouraging negotiated resolutions and the early disposal of proceedings.
In our view, these reasons from the judiciary at that time are not surprising given that many were former trade practices counsel who understood the cost efficiency and benefits of certainty arising from agreed penalties.
Growing concerns over the practice of “agreed penalties”
The Federal Court’s agreed penalty practice has not been without critics – even within its own ranks. In 2001, Justice Finkelstein identified “very real problems” of the settlement practice and warned that “a hasty disposal of a case, though it does free up the court’s time, may sometimes be at the expense of justice”.2
A decade ago, Justice Weinberg, as a member of the Federal Court, found “dangers associated with this approach” as the court may be seen to act as a “rubber stamp” when simply approving a decision taken at an executive level of the regulator who is prosecuting the case.3 His Honour took the view that the agreed penalty approach is “misconceived and contrary to principle”.4
More recently, Justice Weinberg, as a member of the Supreme Court of Victoria (and with whom the other judges agreed), considered that courts must independently exercise their discretion when imposing civil penalties.5 His Honour however endorsed the practice of submitting an appropriate range of penalties (either by joint submission or individually), rather than a single figure penalty.
The turning point – the High Court in Barbaro
In Barbaro v The Queen (2014) 305 ALR 323, the majority of the High Court held that the practice in Victoria of criminal prosecutors making submissions to a sentencing judge as to the available range of sentences should cease on the basis that it was wrong in principle. The majority reasoned that it was for the judge alone to determine the sentence and that the prosecutor’s role was to submit the relevant facts and the legal principles that applied to these facts. That is, a prosecutor’s submissions must address evidence and the law and any suggestion as to the appropriate length of a sentence was an ‘opinion’ and could not properly be advanced in submissions.
The High Court was concerned that a statement by the prosecution as to an appropriate sentence or range of sentences may:
- not be dispassionate and may give undue weight to particular sentencing factors (for example, the respondent’s cooperation);
- blur what should be a sharp distinction between the role of the judge and the role of the prosecution;
- unduly sway a judge or give the appearance that the judge has been unduly swayed; and
- ultimately increase the number of appeals because in many cases, an appeal will be inevitable if the judge deviates from the proposed penalty or fixes a sentence outside the suggested range.6
The CFMEU decision
In CFMEU, the Federal Court considered that7
- the sentencing process in criminal proceedings and the process of imposing a penalty in civil proceedings were “very similar in nature” and as such the concerns identified in Barbaro were relevant to the civil penalty process;
- it was the court’s responsibility to determine the appropriate penalty and it must not discharge that responsibility by considering whether an agreed figure falls within a permissible range that is a matter of mere opinion and not evidence;
- the court must not, in the interest of efficiency or convenience or even the broader public interest of promoting settlement of litigation, allow the exercise of its discretion to be fettered by submissions containing the parties’ opinions about the appropriate penalty. To the extent a regulator or expert was able to assist the court in determining the appropriate penalty, he or she must do so in accordance with the law of evidence; and
- an agreed penalty will reflect the particular interests of the regulator and respondent in question, leading to the real possibility (if not probability) that the opinion was not based on a dispassionate view of all the circumstances.