High Court Endorses Practice of Joint Submissions in Civil Penalty Matters

Client alert 10 DECEMBER 2015 Contact us Visit our website High Court Endorses Practice of Joint Submissions in Civil Penalty Matters The High Court of Australia has unanimously overturned the decision of the Full Court of the Federal Court in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union1 (CFMEU). The decision confirms that a court is not precluded from receiving and, if appropriate accepting, agreed submissions on penalty in civil enforcement matters, a practice that has developed over the course of more than 30 years of authorities. This decision will be welcomed by regulators and private parties alike, as it endorses the longestablished practice in civil penalty matters in which the parties were able to reach a negotiated settlement that encompassed admissions by the respondent (usually on the basis of a statement of agreed facts and admissions) and joint submissions to the Court on the appropriate penalty. Whilst the Court is not bound to accept an agreed penalty if it does not consider it to be appropriate, the ability to put an agreed penalty to the Court gives parties a degree of confidence as to the likely outcome of civil enforcement proceedings and as such can provide a strong incentive to settle these proceedings. Background and Full Federal Court decision The practice of parties settling civil enforcement proceedings, including those brought by the ACCC and ASIC, and approaching the Court with agreed submissions on penalty, is long-standing. Although the ultimate penalty order is a matter for the Court's discretion, weight has traditionally been given to the agreed position and the parties' submissions as to the appropriate penalty. The law and practice dates back to Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4)2 and has been confirmed on at least two occasions by the Full Court in NW Frozen Foods Pty Ltd v ACCC3 and Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd4 . In 2014, in Pasquale Barbaro v The Queen, Saverio Zirilli v The Queen5 (Barbaro), the High Court unanimously held in a criminal context, that the prosecution should not be permitted to make submissions on the appropriate sentence, as they amounted to no more than an expression of opinion and were therefore inadmissible. The Court also found that a refusal by the sentencing judge to hear submissions on the appropriate sentencing range from the prosecution, did not deny the defendants procedural fairness. 1 (2015) 229 FCR 331 2 (1981) 37 ALR 256 3 (1996) 71 FCR 285 4 (2004) ATPR 41-993 5 (2014) 253 CLR 58 Until the decision of the Full Federal Court in CFMEU, it was unclear whether the reasoning in Barbaro would apply to civil proceedings and in two decisions, Federal Court Judges at first instance held that it did not. However, the Full Court in CFMEU ruled that it was bound by Barbaro and held that it was not permissible for the Court to have regard to any agreed figure in fixing a civil penalty, other than to the extent that the agreement demonstrated a degree of remorse and/or cooperation. The effect of the Full Court's decision was to prohibit the established practice and prevent parties from making submissions, agreed or otherwise, on the appropriate penalty in civil enforcement matters. The Full Court's decision did not prohibit agreement between parties on the facts, identification of relevant comparable cases and submissions on the proper approach to fixing the penalty. It was feared that the Full Federal Court decision would have a "chilling" effect on negotiated settlements in civil penalty cases and would lead to significantly more contested hearings and increased costs, which would stretch the financial resources of regulators to investigate new complaints and bring proceedings. There were also concerns that the co-operation policies of the ACCC and ASIC would be rendered significantly less effective, as the regulators would no longer be in a position to offer incentives for co-operation that involved making recommendations to the Court to an agreed discounted penalty for the co-operating party. On 18 June 2015, special leave was granted to the Commonwealth to appeal the Full Court's decision to the High Court and the appeal was heard on 9 December 2015. High Court Decision In a unanimous decision, the High Court has rejected the Full Court's reasoning and held that, subject to the Court being sufficiently persuaded that the parties' agreement as to facts and consequences is accurate and that the penalty proposed is an appropriate remedy in the circumstances, it is consistent with principle and highly desirable in practice for the court to accept the proposal and impose the proposed penalty. In reaching its decision, the Court commented that:  There is an important public policy involved in promoting predictability of outcome in civil penalty proceedings and the practice of receiving and, if appropriate accepting, agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers.  This encourages corporations to acknowledge contraventions and in turn assists in avoiding lengthy and complex litigation, freeing courts and investigators to deal with other matters.  The Court is not bound by the figure suggested by the parties. The Court must satisfy itself that the submitted penalty is appropriate.  There are basic differences between criminal prosecutions and civil penalty proceedings that provide a principled basis for excluding the application of Barbaro, including that civil penalty proceedings: o are adversarial rather than accusatorial; o are calculated to avoid the notion of criminality; o are aimed at promoting the public interest in compliance rather than retribution or rehabilitation; and o provide considerable scope for the parties to agree on facts and consequences, to agree upon the appropriate remedy and for the Court to be persuaded as to the appropriate remedy. Accordingly settlements are commonplace and orders by consent are unremarkable.  It is the function of the relevant regulator to regulate the industry in order to achieve compliance and it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on that industry and the level of penalty necessary to achieve compliance. Follow us For more information Georgina Foster Partner georgina.foster @bakermckenzie.com Jo Daniels Partner jo.daniels @bakermckenzie.com Ross McLean Partner ross.mclean @bakermckenzie.com Rowan McMonnies Partner rowan.mcmonnies @bakermckenzie.com Alex Wolff Partner alex.wolff @bakermckenzie.com Helen Joyce Special Counsel helen.joyce @bakermckenzie.com Brisbane Level 8, 175 Eagle Street Brisbane QLD 4000 Australia Tel: +61 7 3069 6200 Melbourne Level 19, 181 William Street Melbourne VIC 3000 Australia Tel: +61 3 9617 4200 Sydney Level 27, AMP Centre, 50 Bridge Street Sydney NSW 2000 Australia Tel: +61 2 9225 0200 This email is sent by Baker & McKenzie (ABN 32 266 778 912), an Australian partnership and member of Baker & McKenzie International, a Swiss Verein. This communication has been prepared for the general information of clients and professional associates of Baker & McKenzie. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright. Personal information contained in communications with Baker & McKenzie is subject to our Privacy Policy and the obligations of the Privacy Act. Emails sent to Baker & McKenzie are subject to automated email filtering. Should you receive this email in error, please telephone us on +61 2 9225 0200 or email our Helpdesk. Before you send email to Baker & McKenzie, please be aware that your communications with us through this message will not create a lawyer-client relationship with us. Do not send us any information that you or anyone else considers to be confidential or secret unless we have first agreed to be your lawyers in that matter. Any information you send us before we agree to be your lawyers cannot be protected from disclosure. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. Thank you. UNSUBSCRIBE THIS COMMUNICATION UNSUBSCRIBE ALL