The Director, Fair Work Building Industry Inspectorate (Applicant) alleged that the Construction, Forestry, Mining and Energy Union and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (Respondents) contravened the Building and Construction Industry Improvement Act 2005 (Cth) (BCII Act) and sought pecuniary penalties and declaratory relief.

The primary issue was whether or not the common practice of parties jointly submitting an agreed pecuniary penalty to the judge for approval is valid following the decision of the High Court in Barbaro v The Queen [2014] HCA 2 (Barbaro). This case was referred to in a recent update we prepared on pecuniary penalties in a case involving Snowy Hydro in the context of breaches of the national energy regime.

Background

This matter was seen as one of ‘sufficient importance’ for the Chief Justice to direct that the original jurisdiction of the court should be exercised by a Full Court.

The Full Court accepted that it had become common practice for the parties to jointly nominate an actual figure, or suggest a range of pecuniary penalty to be imposed, and to present this penalty to the court for approval.

In Barbaro, the High Court majority held that, in criminal sentencing proceedings, it was impermissible for the prosecutor to put forward either a specific sentencing result or a range within which the sentence should fall.

The Full Federal Court sought to determine whether or not the Barbaro reasoning should be applicable in pecuniary penalty cases such as this one.

The decision

Barbaro should apply in matters concerning pecuniary penalties.

We have concluded that the reasoning in Barbaro applies to these proceedings, and that we should therefore have no regard to the agreed figures in fixing the amounts of the penalties to be imposed, other than to the extent that the agreement demonstrates a degree of remorse and/or cooperation on the part of each respondent (at [3]).

NW Frozen Foods and Mobil establish that it is for the Court to fix the penalty. That proposition has been constantly repeated in subsequent cases. In these proceedings, no party has suggested otherwise… In Barbaro, the High Court held that statements as to ultimate outcome or range were merely expressions of opinion and therefore could not properly be advanced in submissions. There can be no justification for taking a different view in pecuniary penalty proceedings (at [242]).

Comparison with criminal penalties and Barbaro

There is some ambiguity as to where pecuniary penalties fit within the legal system. We have tended to group everything that is not criminal law into the category of civil law. However, civil law is the law as it concerns proceedings between citizens. Like criminal law, pecuniary penalties arise within the field of public law. Equally, a primary purpose of pecuniary penalties, like that of criminal sanctions, is deterrence. On the other hand, the standard of proof for pecuniary penalties is civil.

Previous cases, for example, ACCC v Jewellery Group Pty Ltd (No 2) [2013] FCA 14, have commented upon the similarity between criminal and civil sentencing. Therefore, ‘it would be surprising if the High Court’s views in Barbaro were not at least arguably relevant to the process of imposing pecuniary penalties’ (at [19]).

The Full Court concluded that ‘we consider that the sentencing process, and that in which a pecuniary penalty is imposed, are very similar in nature’. In particular, both address punishment by the State, and both require an assessment of a wide range of considerations which interact in complex ways. Hence each involves the instinctive synthesis to which we have referred. The impermissible expression of an opinion as to the amount of the penalty reflects a well established limitation upon the ambit of a party’s right to make submissions. Further, the difficulty in understanding the method by which any such opinion is formed is as real in pecuniary penalty cases as it is in criminal sentencing, as is the risk that such opinions may compromise the sentencing process and/or create a public perception of such compromise (at [239]).

Practice of agreed pecuniary penalties

The Commonwealth submitted that the practice of suggesting an agreed pecuniary penalty had been previously ‘encouraged’ by the court. This was accepted by the Court, and it considered that NW Frozen Foods Pty Ltd v ACCC [1996] FCA 1134 (NW Frozen Foods) had frequently been used to justify the practice. One reason that the practice had been encouraged was that of public policy. When contraventions are admitted and joint submissions are made, litigation is avoided, which frees up the courts and investigation officers of agencies such as the ACCC (NW Frozen Foods).

However, the Full Court rejected the NW Frozen Foods paradigm, stating that ‘when examined, the historical basis for that limitation is not grounded in principle’ (at [240]). The Full Court understood that the majority in Barbaro felt that expressing a suggestion of an appropriate sentence is opinion, and ‘the right to make submissions does not include the right to offer opinions as to an appropriate outcome (at [47, 89]).

The Full Court warned that ‘whilst the Court should adopt practices designed to achieve efficiency in the dispatch of its work, such practices must not derogate from the proper performance of its duties (at [62]). Not only should the court not exist merely to rubber-stamp penalties decided by the parties, but it should not be seen to be doing this.

They said ‘it is hard to see how such an approach [bringing agreed penalty amounts to court] can be reconciled with the often stated proposition that it is for the Court to identify the appropriate penalty(at [252]).

Other relevant decisions

There have been a number of decisions of single judges of the Federal Court that have considered the application of Barbaro to civil penalty matters before the Full Court in this matter.

In ACCC v Energy Australia [2014] FCA 336, Justice Middleton concluded that the High Court did not intend to overrule NW Frozen Foods when it made its decision in Barbaro. Middleton J stated that the predictability of outcomes for regulators and respondents makes it more likely that proceedings will be resolved by agreement in an appropriate way and under the supervision of the Court. He stated that ‘this in turn improves deterrence by encouraging implementation of corrective measures and freeing up the resources of the regulator [149]. Justice Middleton’s decision was followed by Justice Besanko in ACCC v Actrol Parts Pty Ltd [2015] FCA 312, Justice Mckerracher in ACCC v Mandurvit Pty Ltd [2014] FCA 464 and Justice Rangiah in ACCC v Titan Marketing Pty Ltd[2014] FCA 913.

However, in ACCC v Flight Centre Limited (No 3) [2014] FCA 292 (decided before the Energy Australia case), Justice Logan determined that Barbaro did apply to civil penalty proceedings and therefore he did not take into account the penalty ranges submitted by the ACCC.

It seems that the Full Court has now, at least for the time being, clarified the matter through this decision.

Implications for pecuniary penalties in the future

Parties will no longer be able to suggest either a penalty, or a penalty range. However, parties will still be permitted to make joint submissions concerning relevant facts or information pertaining to relevant considerations in sentencing.

The Full Court stated that the use of prior decisions of pecuniary penalties should play a valuable role in determining pecuniary penalties, as in the system of precedent in criminal sentencing.