Australia: High Court allows agreed civil penalty submissions with regulators

On 9 December 2015, the High Court of Australia delivered its decision in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate; CFMEU v Director, Fair Work Building Industry Inspectorate (CFMEU)1 (see judgment here).

The High Court unanimously set aside the Full Court decision and reinstates in excess of twenty years of authorities relating to the ability of parties, such as the ACCC, ASIC and the ATO, and those that are the subject of civil prosecutions to make joint submissions to the Court about the appropriate pecuniary penalty or range of penalties that should be imposed.

FULL COURT DECISION

The Full Bench of the Federal Court concluded that:

"the public interest in the imposition of pecuniary penalties... leads to the conclusion that the fixing of the amount of such a penalty is a matter for the Court, and that the parties cannot, by agreement, bind it" 2.

In doing so, the Full Court applied the recent High Court decision Pasquale Barbaro v The Queen, Saverio Zirilli v The Queen3 (Barbaro) that related to penalty recommendations in criminal matters.

For further detail about the Full Court decision please see our previous Corrs in Brief article "Where to now for agreed civil penalty outcomes following the CFMEU and Barbaro decisions?" that can be accessed here.

HIGH COURT DECISION

Barbaro not to be applied and penalty submissions allowed in civil proceedings

In setting aside the Full Court's decision and the application of Barbaro in civil proceedings, the High Court identifies that "there are basic differences between a criminal prosecution and civil penalty proceedings and it is they that provide the "principled basis" for excluding the application of Barbaro from civil penalty proceedings".4

Therefore, the High Court held that Barbaro applies only to criminal proceedings and, consequently, the established practice of agreed penalty submissions in civil penalty proceedings can continue. Accordingly, the High Court states that Middleton J in ACCC v Energy Australia Pty Ltd5 and McKerracher J in ACCC v Mandurvit Pty Ltd6 (which were both decided after Barbaro but before the Full Court decision), appropriately distinguished, instead of applied Barbaro.7

Additionally, the High Court explicitly states that regulators can actively make civil penalty submissions:

"...In contradistinction to the role of the Crown in criminal proceedings, it is consistent with the purposes of civil penalty regimes...and therefore with the public interest, that the regulator take an active role in attempting to achieve the penalty which the regulator considers to be appropriate and thus that the regulator's submissions as to the terms and quantum of a civil penalty be treated as a relevant consideration."8

The High Court also explains that a regulator's penalty submissions must also be "supported by findings of fact based upon evidence, agreement or concession".9

Benefits of civil penalty submissions

Consistent with the submissions that were made during the Full Court hearing by Commonwealth regulators, the High Court also recognised that "there is an important public policy involved in promoting predictability of outcome in civil penalty proceedings" because "such predictability of outcome encourages corporations to acknowledge contraventions, which, in turn, assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention".10

Court must be satisfied that the penalty is appropriate

The High Court also emphasised that the Court is not bound by any agreed or suggested penalty or range of penalties. Instead, the Court has to satisfy itself that the submitted penalty is appropriate.11

WHERE TO NOW?

After the Full Court decision, there was considerable uncertainty for regulators and potential respondents, especially about:

  • ACCC – the operation of the leniency/cooperation component of the ACCC's Immunity and Cooperation Policy for Cartel Conduct.12 In the time between the Full Court decision and the High Court decision, the level of comfort or certainty about the likely quantum of penalty in proceedings by the ACCC against a party prepared to cooperate and obtain leniency for cartel conduct13 or other conduct that may contravene the Competition and Consumer Act 2010 (Cth)14 was significantly diminished.
  • ASIC – the benefit of ASIC's published approach concerning cooperation and its impact in resolving civil penalty proceedings.15 Commercially speaking, parties being investigated are generally interested in a final resolution of the matter – both on facts, findings of liability and quantum. The impact of the Full Court decision left quantum in the air, and hence the attractiveness of admitting liability, without comfort about penalty.

This judgment restores certainty for potential respondents in deciding whether to cooperate with regulators, even where they are not the 'first-in' immunity applicant. The incentive for 'second-in' applicants to cooperate with regulators also has significant benefits for regulators. For example, the ACCC has pointed in a number of instances to the efficacy of its investigations being assisted not only by the immunity applicant but also those that are 'second-in' seeking to cooperate with the ACCC.

This decision also restores the preparedness of regulators and respondent parties to seek to resolve, rather than to contest, matters, which will result in the timely and efficient resolution of issues.

Footnotes

1 [2015] HCA 46.

2 [2015] FCAFC 59 at [66]

3 [2014] HCA 2

4 [2015] HCA 46 at [51].

5 [2014] FCA 336.

6 [2014] FCA 464.

7 [2015] HCA 46 at [50].

8 [2015] HCA 46 at [64].

9 [2015] HCA 46 at [61].

10 [2015] HCA 46 at [46].

11 [2015] HCA 46 at [48].

12 Dated 10 September 2014 can be accessed here: http://www.accc.gov.au/publications/accc-immunity-cooperation-policy-for-cartel-conduct.

13 As opposed to those that are "first in" and hence able to seek immunity under the Immunity and Cooperation Policy in the context of cartel conduct.

14 Including for contraventions of the Australian Consumer Law.

15 As set out in ASIC's Information Sheet 172 Cooperating with ASIC ( INFO 172)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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