In a welcome decision for regulators, the High Court has overturned a decision of the Full Court of the Federal Court which held that the High Court decision in Barbaro v The Queen precludes a Court from receiving submissions as to an agreed civil penalty to be imposed under the Building and Construction Industry Improvement Act 2005 (Cth).
The Decision of the Full Court
In May 2013, the Director of the Fair Work Building Industry Inspectorate (Regulator) brought civil proceedings against two unions, the Construction, Forestry, Mining and Energy Union and Communications, Electronic, Energy, Information, Postal Plumbing and Allied Services Union (the Unions), in which it sought declarations and pecuniary penalties for contraventions of the Building and Construction Industry Improvement Act 2005 (Cth) (the Act). The Unions accepted liability for the alleged contraventions, and the parties filed agreed facts and submissions setting out the amount of civil penalty the parties had agreed should be imposed on the Unions (Agreed Facts).
During the course of the proceeding in the Federal Court the trial judge raised with the parties the possibility that the principles enunciated by the High Court in Barbaro v The Queen (Barbaro) might have application to the proceeding. In Barbaro, the High Court 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. Consequently, the question of what application Barbaro might have to the fixing of civil penalties was referred to a Full Court for consideration. Given all of the parties before the Full Court had submitted that the Court should make the orders proposed in the Agreed Facts, for the assistance of the Court the Full Court gave leave for separate counsel to appear as contradictors in the proceeding.
The Full Court delivered judgment on 1 May 2015. The reasons of the Full Court are discussed in detail in arecent update. In summary, the Full Court accepted the submissions of the contradictors and held that the reasoning in Barbaro applied to the proceedings. The Full Court stated that the Court should not have regard to the Agreed Facts when fixing the amounts of penalties to be imposed, other than to consider the extent to which the agreed amounts demonstrated a degree of remorse or cooperation by the Unions.
The High Court Decision
By a grant of special leave made on 18 June 2015, the Commonwealth appealed the decision of the Full Court, contending that the Full Court erred in ruling that Barbaro applies to civil penalty proceedings under the Act and seeking orders that the matter be remitted to the Federal Court to be determined on that basis. Counsel acting as contradictors before the Full Court were granted leave to appear as amici curiae before the High Court. In judgment delivered on 9 December 2015, the High Court allowed the Commonwealth’s appeal.
Criminal prosecution and civil proceedings compared
In their reasons, the plurality (of French CJ, Kiefel, Bell, Nettle and Gordon JJ) focused on the ‘basic differences between a criminal prosecution and civil penalty proceedings’, which they said ‘provide the ‘principled basis’ for excluding the application of Barbaro from civil penalty proceedings’. Unlike criminal prosecution, which is accusatorial, requires proof beyond reasonable doubt and adopts the rule that an accused cannot be required to assist in proof of the offence charged, civil proceedings are adversarial, framed and limited by the parties and assessed on the balance of probabilities, without the same levels of procedural fairness.
Importantly, unlike criminal prosecution, civil penalty proceedings do not result in criminal conviction and are ‘precisely calculated to avoid the notion of criminality’. It is, the plurality stated:
entirely consistent with the nature of civil proceedings for a court to make orders by consent and to approve a compromise of proceedings on terms appropriate by the parties, provided the court is persuaded that what is proposed is appropriate.
Punishment and deterrence
The plurality observed that criminal penalties ‘import notions of retribution and rehabilitation’, whereas the civil penalty is ‘primarily if not wholly protective in promoting the public interest in compliance’ and the principal object of civil penalties is ‘to put a price on contravention that is sufficiently high to deter repetition’ by the contravenor and others.
The benefits of agreed penalties
In the course of their reasons, the plurality focused also on the public policy benefits of agreed penalties, endorsing the position taken in earlier Federal Court decisions that the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for both regulators and contravenors. Agreed penalties, the Court noted, assist in ‘avoiding lengthy and complex litigation’ and free courts and investigating officers to deal with other matters.
The High Court reiterated a Court is not bound by a figure proposed by the parties but, adopting the position taken by the Full Federal Court in NW Frozen Foods and Mobil Oil, a Court must be itself satisfied that the amount of penalty is appropriate. The plurality was particularly scathing of the language used in the Full Court’s reasons:
Nor is it ‘pious’ to suppose that judges will do their duty, as they have sworn to do, and therefore reject any agreed penalty submission if not satisfied that what is proposed is appropriate. It would be a travesty of justice if that were not the case. It may be presumed that a judge will do his or her duty according to the oath of office. The public may have confidence that it will be so.
The specialist role of regulators
The plurality recognised the particular function performed by regulators in ‘choosing the enforcement mechanism or mechanisms which the regulator considers to be most conducive to securing compliance with the regulatory regime’, which ‘requires the regulator to balance the competing considerations of compensation, prevention and deterrence’. Accordingly, the plurality said ‘it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance’.
This view was supported in the separate, concurring, judgments of Gageler J and Keane J. Gageler J observed that ‘the position of the regulator cannot be equated with the position of a prosecutor’. Regulators are not required to be ‘dispassionate’ and may advocate for an outcome it considers to be in the public interest. Keane J noted that when a regulator agrees to an amount of penalty, it reflects a ‘considered estimation’, a ‘pragmatic assessment’ taking into account the ‘hazards and expense of litigation’.
The Unions’ appeal
By way of a separate notice of appeal, for which leave was granted on 6 August 2015, the Unions made two further submissions. First, in the absence of any amendment to the originating process, a court which declines to make orders for an agreed amount of penalty could not otherwise make orders for a higher amount than that sought in the originating process. The High Court declined to consider this point.
Second, the Unions submitted that the High Court should make the orders proposed by agreement of the parties. As the task had not yet been performed by a trial judge (having been referred before any hearing to the Full Court) the High Court rejected that submission.
Implications for regulators
The judgment of the High Court can give regulators confidence that the principles established by Barbaro have no application to civil penalty proceedings. This means that:
- regulators and contraveners will be able to agree on facts and quantum of civil penalties to be imposed
- consistent with the previous Full Court decisions of NW Frozen Foods and Mobil Oil, the court will need to be persuaded that the penalty which the parties propose is appropriate on the facts of the case
- if the court considers the amount of penalty proposed by the parties is not appropriate, it may give the parties an opportunity to withdraw their consent or otherwise be heard.