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AUSTRALIA BELGIUM CHINA FRANCE GERMANY HONG KONG SAR INDONESIA (ASSOCIATED OFFICE) ITALY JAPAN PAPUA NEW GUINEA
SAUDI ARABIA (ASSOCIATED OFFICE) SINGAPORE SPAIN SWEDEN UNITED ARAB EMIRATES UNITED KINGDOM UNITED STATES OF AMERICA
Australia
Regulatory Update
Civility is restored: High Court gives green light to agree
penalties
Commonwealth v Director, Fair Work Building Industry Inspectorate v CFMEU; CFMEU v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
10 December 2015
What you need to know
The High Court has unanimously held that, in determining a civil penalty in regulatory proceedings, courts are
entitled to have regard to the parties' submissions on an agreed penalty – overturning a recent Full Federal Court
decision to the contrary.
The High Court's decision allows a return to the common practice of regulators and respondents making joint
submissions asking the Court to order an agreed civil penalty or a penalty within an agreed range. The decision
also applies to private parties with standing to seek pecuniary civil penalties.
This practice will restore a degree of certainty for regulators and respondents who are able to reach a settlement of
civil penalty proceedings and may therefore encourage settlements leading to savings in the time and cost involved
in litigation.
In order to achieve these benefits, it is important that parties thoughtfully approach negotiations with regulators
and the presentation of agreed facts and submissions that will assist the court in determining that the agreed civil
penalty is appropriate.
This is to be contrasted with criminal proceedings, where there remains a restriction on prosecutors making
submissions to a court about the criminal penalty to be ordered.
You can agree on the suggested penalty
with regulators (again)
Civil penalties for contraventions of a statutory regime
(such as under the Competition and Consumer Act or
the Australian Securities and Investments Commission
Act) must be imposed by a court and not by the
regulator. Historically, regulators have encouraged
parties to resolve civil penalty proceedings by offering
an agreed joint submission on penalty to the court in
exchange for admissions of liability. In many cases,
courts have awarded penalties consistently with the
agreed proposed penalties. For example, since
1 January 2010, 59 of the 85 civil penalty cases
brought by the ACCC involved agreements with
respondents as to financial pecuniary penalties which
were recommended to the court.
The High Court has decided that a court is entitled to
have regard to submissions from the parties regarding
an agreed civil penalty, or the range within which such
a penalty should fall.
In doing so, the High Court reversed the Full Federal
Court's decision in Director, Fair Work Building
Industry Inspectorate v CFMEU [2015] FCAFC 59 to
the contrary (see our Dispute Resolution Update on
the Full Court decision here).
Prior to the Full Court's decision, it had been common
practice for regulators and respondents to make joint
submissions asking the Court to order an agreed
penalty or a penalty within an agreed range.
However, doubts about that practice began to emerge
in the wake of the High Court's decision in Barbaro v R
(2014) 253 CLR 58 (Barbaro). In that case, the High
Court held that it was neither the role nor the duty of
the prosecutor in a criminal prosecution to suggest an
appropriate length of sentence, or the range within
which the sentence should fall. The majority of the
High Court in Barbaro considered that such a
suggestion was an impermissible opinion, which was
neither evidence nor submission.
Ashurst Regulatory Update | 10 December 2015 Page 2
Background
In this proceeding, the Director of the Fair Work
Building Industry Inspectorate sought pecuniary
penalties and associated declaratory relief against two
unions, the CFMEU and CEPU, for contravening the
Building and Construction Industry Improvement Act
2005 (Cth) (the BCII Act). A settlement was reached
and the parties sought to make joint submissions that
the Court should impose agreed civil penalty amounts
on the two unions.
The Full Federal Court held that the principles in
Barbaro should be applied and that the Court should
therefore not have any regard to the parties'
submissions on the agreed civil penalty.
The decision created greater uncertainty for
settlements between regulators and respondents
because agreeing upon an appropriate civil penalty is
often a key element of a settlement. There were
concerns expressed by regulators and industry alike
about the decision having a possible chilling effect on
settlements.
The High Court's decision
The issue before the High Court was whether Barbaro
precludes a court from having regard to parties'
submissions regarding the appropriate amount for a
civil penalty.
The High Court (by separate judgments) unanimously
held that the decision in Barbaro does not apply to civil
penalty proceedings and a court is not precluded from
receiving and, if appropriate, accepting an agreed or
other civil penalty submission. The matter was
remitted to the trial judge for determination of an
appropriate penalty.
Important steps in the Court's reasoning were as
follows:
The common practice of submitting an agreed civil
penalty to the court does not and should not bind
the court to that outcome. The court's duty is to
reject any agreed penalty if the court is satisfied
that what has been proposed by the parties is not
appropriate.
There are fundamental differences between
criminal prosecutions and civil penalty proceedings,
which favour the exclusion of the principles in
Barbaro to civil penalty proceedings. For example,
unlike in a criminal prosecution, civil penalty
proceedings are not retributive and are more
focussed on promoting the public interest in
compliance. The regulator puts forward penalty
submissions with an overall view of achieving
certain objectives in the public interest, whilst
having other considerations beyond the case at
hand.
Settlements of civil penalty proceedings are
commonplace and agreed civil penalties (subject to
the penalty being appropriate in the court's
discretion) should be treated no differently to other
types of civil settlements.
The submissions of the regulator should be
considered on their merits in the same way as the
submissions of a respondent, so long as they are
supported by findings of fact based upon evidence,
agreement or concession.
The practice of the court receiving and, if
appropriate, accepting agreed civil penalty
submissions increases the predictability of outcome
for regulators and wrongdoers. This encourages
respondents to acknowledge contraventions, and
could assist in avoiding lengthy and complex
litigation.
Wider implications
The High Court's decision expressly applies to the
particular civil penalty regime within the BCII Act but
its reasoning will be followed in proceedings in relation
to other civil penalty regimes, and involving other
regulators such as the ACCC, ASIC and the Fair Work
Ombudsman. This is because the pecuniary penalty
regimes contained within the legislation empowering
those regulators are in materially the same terms as
s 49 of the BCII Act.
This decision will restore the previous long-standing
practice of parties making submissions (agreed or
otherwise) as to the civil penalty amount and the court
considering those submissions. It has never been the
case that the court will simply "rubber-stamp" an
amount agreed as a civil penalty between a regulator
and a respondent. However, the fact that parties are
entitled to present joint submissions to the court
regarding an agreed penalty provides a degree of
comfort to respondents about the likely outcomes of a
settlement with a regulator. Further, regulators may
be encouraged to agree on a proposed civil penalty in
exchange for cooperation during their investigations –
such cooperation is fundamental to the enforcement
programs of various regulators, for example, the
ACCC's leniency program. In turn, these practices are
likely to promote settlements and avoid time and cost
in regulatory disputes.
In order to achieve these benefits, it is important that
parties obtain considered legal advice to facilitate
negotiations with regulators and regarding the
presentation of agreed facts and submissions that will
assist the court in determining that the agreed civil
penalty is appropriate.
The decision of the High Court equally applies where a
private (non-governmental) party has standing to seek
a civil penalty for breach of a statute (for example, a
union or employee seeking a civil penalty against an
employer for a breach of the Fair Work Act). Such
private parties may make submissions to the court
about the civil penalty that the court should order.
The High Court's decision does not, of course, disturb
the principles in Barbaro that apply to criminal
prosecutions. These principles apply to criminal
prosecutions which may be commenced against
corporations, and the officers of them, under various
corporate, work health and safety and environmental
protection legislation. In such proceedings a
prosecutor is not permitted to make submissions to
the court about the criminal penalty or other sentence
which should be ordered.
Authors
Ashley Wharton Partner – Dispute Resolution Melbourne T: +61 3 9679 3374 E: [email protected]
James Clarke Senior Associate - Dispute Resolution Melbourne T: +61 3 9679 3093 E: [email protected]
Ben Wong Lawyer - Dispute Resolution Melbourne T: +61 3 9679 3782 E: [email protected]
This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers
should take legal advice before applying the information contained in this publication to specific issues or transactions. For more information please contact us
Ashurst Australia (ABN 75 304 286 095) is a general partnership constituted under the laws of the Australian Capital Territory and is part of the Ashurst
Group. Further details about Ashurst can be found at www.ashurst.com.
© Ashurst Australia 2015. No part of this publication may be reproduced by any process without prior written permission from Ashurst. Enquiries may be
emailed to [email protected]. Ref: 653638193.01 10 December 2015
www.ashurst.com
