Since the High Court’s decision in Barbaro v The Queen1, the Federal Court has increasingly scrutinised regulators and respondents attempting to resolve civil penalty proceedings by providing the Court with an agreed statement of facts that contains an agreed penalty figure or penalty range.2
The recent decision by the Full Federal Court in Director, Fair Work Building Industry Inspectorate v CFMEU and another3 (Director v CFMEU) may end this common practice, as the Court held that it cannot receive, or act on, an agreement as to penalty figures or receive submissions from a regulator as to the appropriate penalty range.
The case has particular significance for the resolution of enforcement proceedings brought by the Australian Competition and Consumer Commission (ACCC), and represents a significant departure from a well-established practice that has developed in which the parties to agree to resolve enforcement matters on the basis of agreed submissions on penalty, including stipulation of a proposed penalty to the Court. Under Director v CFMEU, this process will no longer be available and the difficulty for parties to reach a cooperative resolution with the ACCC prior to trial is likely to increase significantly.
Director v CFMEU
In Director v CFMEU, the primary issue concerned the Court’s practice of accepting submissions from the parties to a matter, often jointly, which nominate the actual pecuniary penalty figure to be adopted by the Court, or the range within which it should fall.
The regulator and the respondents in Director v CFMEU had agreed upon the penalties which they considered should be imposed by the Court for the respondents’ breaches of the Building and Construction Industry Home Improvement Act, and subsequently filed a statement of agreed facts that contained an agreed pecuniary penalty figure.
The question before the Full Court was whether the High Court’s decision in Barbaro v The Queenapplied to civil penalty proceedings. The majority in Barbaro v The Queen held that in criminal sentencing proceedings, the prosecution should not nominate the specific sentencing result or the range within which it should fall.4 It further held that submissions from a prosecutor on the appropriate penalty or range would be mere opinion evidence, and therefore inadmissible. The High Court ruled that it is ‘neither the role nor the duty of the prosecution to proffer some statement of the bounds within which a sentence may be imposed’.5
However, up until now it has been unclear whether the High Court’s judgment only applied to criminal proceedings, and it has been common practice for the ACCC to agree a penalty amount with a respondent seeking a cooperative resolution to proceedings, which the parties would propose to the Court by way of joint submission to the Court .
Although Barbaro v The Queen concerned criminal proceedings, the Full Court in Director v CFMEUrejected the submission that the decision should not be applied in the context of civil proceedings as ‘the cases do not support such a sharp distinction’ between civil and criminal proceedings.6
The Full Court found that:
- It is the Court’s responsibility to determine the appropriate penalty. The Court does not discharge its responsibility by considering whether an agreed penalty figure falls within an appropriate range.
- Although there is a public interest in promoting the settlement of litigation, it does not justify the presentation to the Court of agreed penalties, submissions as to range or submissions as to the specific penalty figure to be imposed.
- The views of a regulator to proceedings should be considered in accordance with the law of evidence; the Court cannot take advice from the regulator as to the appropriate penalty figure.
Implications for regulators, companies and individuals
Civil penalty proceedings can no longer be resolved by approaching the Court with an agreed penalty or an agreed penalty range. The Court’s decision was based on the Building and Construction Industry Home Improvement Act 2005 (Cth), but the decision will affect several Commonwealth statutory regulators, including the ACCC, Australian Taxation Office, Australian Securities and Investments Commission and the Fair Work Ombudsman.
Submissions to the Court from the parties to a matter regarding penalties will now be limited to the seriousness of the conduct, relevant sentencing principles and penalties imposed in comparable decisions. The Full Court acknowledged that its application of Barbaro v The Queen to civil penalty cases will cause inconvenience to regulators and respondents in cases where agreed penalties or a penalty range have already been identified, and that it would perhaps cause increased expense to regulators. However, it did not accept that the additional costs for regulators would be significant.
Evidence led by the Commonwealth of Australia, as an intervener in the case, demonstrates the ACCC’s heavy reliance on pecuniary penalty agreements, with 59 of the 85 cases brought by the ACCC involving agreements with respondents as to relief, including pecuniary penalties which were “recommended to the Court”. The ACCC also noted that regardless of whether it has reached an agreement with the respondent, it still proposes penalty amounts and/or ranges to the Court that may be appropriate.
Proceedings before the Court will now be initiated by regulators without any clear indication to respondents about the potential penalty figure or appropriate penalty range.
For companies and individuals that are currently a party to a civil penalty proceeding brought by a regulator, the Full Court’s decision will diminish the level of certainty they were previously afforded in relation to the likely outcome of the proceedings. The decision will also effect individuals and companies that are currently being investigated by a Commonwealth statutory regulator. It is possible that regulators may respond by only instituting proceedings in matters where the conduct is particularly serious, and therefore worth the increased expenditure of running a matter to trial, and instead regulators’ reliance on lighter sanctions such as enforceable undertakings may increase. Alternatively, more cases may not be capable of a cooperative resolution prior to trial.