Australia: Agreeing on civil penalties

The High Court has removed any concerns over the ability of regulators to make submissions to courts on the appropriate response to a breach of civil penalty provisions.

In Commonwealth v Director, Fair Work Building Inspectorate, the High Court considered the role of regulators in bringing civil penalty proceedings and concluded that, like any party to a civil proceeding, regulators are able to make submissions or reach agreements on what they consider the appropriate penalty to be.

Background

The Director of the Fair Work Building Industry Inspectorate brought civil penalty proceedings in the Federal Court against two unions involved in unlawful industrial action and in breach of a civil penalty provision under the Building and Construction Industry Improvement Act 2005 (Cth). The unions and the Director had filed an agreed statement of facts and submissions on the civil penalty amount that the parties were seeking from the Court. The agreed facts said that, "subject to the discretion of the Court to fix an appropriate penalty, [those penalty amounts are] satisfactory, appropriate and within the permissible range in all the circumstances".

The primary judge referred the matter to the Full Federal Court due to a concern that the decision in Barbaro v The Queen (2014) 253 CLR 58, in which the High Court held it was not appropriate for the prosecution to nominate an available range of sentences, also applied to civil penalty provisions. The Full Federal Court held that the importance of civil penalties being fixed by an independent court meant that the appropriate penalty could not be, in effect, determined by agreement between the parties.

The High Court's decision

The High Court, however, held the reasoning in Barbaro did not apply to civil penalty provisions. The various judgments of the High Court emphasised that Barbaro was concerned with the prosecution suggesting sentences that a court of criminal appeal would be persuaded was either "so manifestly excessive or inadequate as to be affected by error of principle". The prosecution would therefore be involved in anticipating the "indeterminate boundaries of the available range of sentences" and, as Gageler J noted, put at risk the "sharp distinction which must exist within the criminal justice system between the roles of the prosecution and the court in exercising the coercive power of the state in the punishment of criminal guilt".

Civil penalty proceedings, however, can be distinguished from criminal proceedings. As the plurality of French CJ, Kiefel, Bell, Nettle and Gordon JJ suggested, where the parties have agreed to an appropriate penalty, the role of the court is to determine whether that proposal is appropriate. A court is not bound by the parties' agreement, but may only depart from any agreed penalty where it considers it to be inappropriate not just different from what the court, in the absence of submissions from the parties, might have considered an appropriate penalty. The High Court therefore accepted civil penalty provisions as a form of civil proceeding in which the "issues and scope of possible relief are largely framed as the parties may choose".

Benefits of allowing agreed penalties

There are numerous public benefits in enabling agreed penalties, including avoiding complex litigation and making efficient use of the court's and the regulator's resources. As a party to civil proceedings, the regulator is in the same position as any other party in making submissions, which will be considered in the Court's decision. The regulator can also "offer informed submissions as to the effects of contravention on the industry being regulated and the level of penalty necessary to achieve compliance".

Distinguishing between civil and criminal penalties

The plurality judgment emphasised the clear legislative intention in distinguishing between civil and criminal penalties. The history of the Act, the range of orders available upon a breach of a civil penalty provision and the range of eligible persons—including the Director, who can bring an action—clearly implies the application of civil procedures. As Keane J suggested, the distinction between civil and criminal provisions are not always clear but here the label of civil penalty and the purpose of deterrence allowed a more active role for the regulator, subject always to the court ensuring any civil penalty is both just and not simply an acceptable cost of doing business.

Matter returned to the Federal Court

The High Court remitted the matter back to the Federal Court for the appropriate penalty to be considered. The question of whether the Court could reject an agreed penalty and impose a greater penalty was not decided, although the Court commented that in those circumstances it may be appropriate to give the parties an opportunity to withdraw their consent or otherwise be heard.

The High Court's decision recognises the prejudicial impact civil penalties can have in pursuit of regulatory objectives while, by encouraging agreement on appropriate penalties, also emphasising the important role of regulators in using those penalties in the public interest.

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