The common and long-standing approach of courts and regulators to the imposition of civil penalties has been turned on its head following a recent decision of the Full Federal Court.

Until recently, parties employed a widespread practice in civil penalty prosecutions to make submissions about agreed or appropriate penalties.

The High Court’s decision in the criminal case of Barbaro v The Queen [1] (Barbaro) threw this practice into doubt. In that case, the High Court concluded that such submissions are inadmissible opinion that a sentencing judge cannot property take into account.

However, it was not clear whether the Barbaro principles applied to civil penalty proceedings.

CFMEU: changing the landscape

The Full Court in
CFMEU [2] ruled that the Barbaro principles did apply to civil penalty proceedings – making it impermissible for the Court to hear submissions about an agreed penalty or range of penalties.

What does this important decision mean for the regulated and the regulators?  It fundamentally alters the approach taken prior to that case and removes all certainty, because:

  • regulators are not able to inform the Court of any agreement reached as to an appropriate penalty or range; and
  • in all likelihood, regulators are not able to influence the Court to achieve the desired outcome of the parties.

Regulators, through the Commonwealth, submitted evidence to the Full Court in CFMEU that:

  • between 20% and 25% of civil penalty cases brought by ASIC and the ATO involved agreed penalties; and
  • nearly 70% of civil penalty cases brought by the ACCC and decided since 1 January 2010 involved agreed penalties.

The Full Court recognised the concerns of regulators that respondents would be less willing to agree to resolve matters in the absence of agreed penalties, but felt these concerns were overstated.  The Court observed:

“...we see no reason to conclude that the exclusion of submissions as to range, agreed penalty or a specific outcome would necessarily discourage joint submissions as to the facts of the case, identification of relevant comparable cases and the proper approach to fixing the penalty.  The regulator may have to provide carefully prepared evidence, and counsel may have to make considered submissions.  The Court expects such assistance.”

Not all is lost though. The Full Court did make it clear that parties can make submissions about factors relevant to the assessment of civil penalties, the relevant principles and proper approach to such an assessment, and comparable decisions.  It is also open to parties to file expert evidence which has the aim of informing the Court of relevant considerations concerning penalties.

Where to from here?

How the
CFMEU decision will be applied remains to be seen.  A number of recent cases suggest that it is still permissible for regulators to make submissions relating to penalties imposed in previous decisions.  It is not yet known what effect there will be on the number of civil penalty cases being commenced in the first place, and the number of cases settled.  Perhaps we will see regulators increasing their use of alternative enforcement powers following CFMEU.

At the time of writing this article, both the CFMEU and the Commonwealth have sought special leave to appeal the CFMEU decision to the High Court.

The decisions in Barbaro and CFMEU have revealed a tension between the executive and the judiciary.  The Full Court made it clear in CFMEU that the Court’s role in determining a civil penalty must involve it deciding the appropriate penalty to be imposed on the respondent, and that this responsibility may not be transferred to the parties.  It also stated that it is the Court’s role, not the regulator’s role, to protect the public interest.

In our view, both the Court and Commonwealth regulators have a role to play in protecting the public interest by the imposition of civil penalties for breaches of Australian law. 

We consider it is likely that the tension between the judiciary and the executive will shortly be resolved, either by the High Court clarifying on appeal the extent to which it intended the Barbaro principles to apply to civil penalty proceedings, or, if the CFMEU decision stands following the High Court appeal, by Parliament possibly legislating to ensure that regulators can make submissions as to agreed penalties in civil penalty cases.

It will be interesting to see whether more civil penalty cases brought by regulators proceed to lengthy trials in lieu of agreed outcomes between the parties.  In the absence of regulators being able to give offenders some certainty as to the likely outcome of proceedings for the imposition of a civil penalty, it would logically follow that it may be more difficult for regulators to negotiate agreed outcomes with respondents.

Authors:
  Alana Giles and Alex Dold

Notes:

[1] (2014) 253 CLR 58.

[2] Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59 (CFMEU).


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