Thursday, 17 December 2015

A civil penalty is not a criminal sentence by any other name

Regulators' speaking roles in civil penalty determinations restored by the High Court

Last week, the High Court delivered an important judgment for regulators in civil penalty proceedings.  In Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate; CFMEU and Director, Fair Work Building Industry Inspectorate, the High Court unanimously held that Courts are not precluded from considering and, if appropriate, imposing civil penalties that are agreed between the parties. 

What's new about that?  Isn't that the way it always works?

Not exactly.  In May this year, the Full Court of the Federal Court significantly constrained the ability of Courts (and potentially Tribunals) to consider and give effect to agreements between regulators and other parties about the suitable penalty for a regulatory breach.  

As many of our State clients would know (and as the High Court has now said is sound practice) in a multitude of regulatory proceedings - from breaches of employment awards to director’s duties – regulators as diverse as the Fair Work Ombudsman to ASIC had often reached agreement with an accused on a form of civil penalty.  That agreement was then proposed to the courts who, if it was considered appropriate, imposed the agreed penalty.  Trial times were shortened and, among other things, the regulators’ resources could be put to other uses, such as monitoring compliance. 

With the Full Court’s decision, however, this longstanding practice was held to be unlawful.  For the Full Court, the task of ordering a civil penalty was very much like imposing a criminal sentence.  As a result, it applied the principle in Barbaro, which prohibits a criminal prosecutor from making submissions as to the appropriate sentencing range or ultimate sentencing outcome, to the civil penalty context.  At the heart of the Court's concern was the idea that by agreeing on a penalty, parties may 'bind the Court' to make their preferred order and undermine its role in determining an appropriate penalty. 

Since May, then, real questions have existed in many jurisdictions about the lawfulness of regulators’ speaking roles in any civil penalty determination.  Were regulators to be like prosecutors – silent and dispassionate? Or, alternatively -  invested, knowledgeable, agencies with a range of unlawful conduct expertly in their sights?  

High Court Decision

On appeal, the High Court determined unanimously that, in civil penalty proceedings, courts are not precluded from considering and, if appropriate, imposing penalties that are agreed between the parties.   While the High Court noted that there was some similarity between the task of imposing civil and criminal penalties – the tasks are, it said, fundamentally of a different character.  The Court rejected any attempt to apply Barbaro to civil penalty proceedings.  Moreover, the Court held that a court is not bound by the penalty suggested by the parties, reiterating that it must ask 'whether their proposal can be accepted as fixing an appropriate amount'.  The judgments also spend considerable time endorsing the traditional model of regulator agreement and regulators' speaking role when proposing the terms and quantum of a penalty, stating:

  • there is important public policy involved in promoting predictability of outcome in civil proceedings;
  • the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcomes for regulators and wrongdoers; and
  • it must be accepted that judges will do their duty, as they have been sworn to do, and reject any agreed penalty submission if not satisfied that what is proposed is appropriate.
For advice on regulatory proceedings and civil penalties, now the silence has been lifted, contact:

Managing Principal Solicitor
8684 0414

Managing Principal Solicitor
8684 0450

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