Agreed civil penalties back on the table

The High Court in CFMEU v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 has unanimously overturned a decision of the Full Court of the Federal Court, which had controversially held that courts are precluded from receiving submissions from parties on the appropriate penalties in proceedings for the imposition of civil penalties. The High Court has restored the previous position and confirmed that courts may receive and, where appropriate, accept agreed penalty submissions in civil penalty proceedings.

Prior to the CFMEU Full Federal Court decision, there was a long-standing and generally accepted¹ practice of regulatory authorities agreeing with defendants the appropriate quantum of civil penalties to be imposed for the defendants’ alleged contraventions of legislative civil penalty provisions. Submissions as to penalty (including joint submissions) were able to be received by courts and, provided the judges exercised independent judgment in forming the view that an agreed penalty quantum fell within an acceptable range, would generally impose the agreed penalties.

The clear benefits of this practice included the relative certainty of outcome for defendants to civil penalty proceedings in deciding whether to admit wrongdoing and enter into a consensual process, usually involving the filing of a statement of agreed facts and a joint submission as to penalty, instead of engaging in risky, time-consuming and expensive contested litigation with regulators. Similarly, the practice benefited regulators through the resolution of more matters by agreement, the freeing up of resources and increasing predictability of outcomes.

The Full Federal Court’s decision proceeded on the basis that the High Court’s plurality reasons in a 2014 decision, Barbaro v The Queen, where it was held that prosecutors in criminal proceedings are not permitted to nominate a range of available sentences for the courts’ consideration, should also be taken to apply in respect of proceedings for civil penalties (in this case, civil penalties under the Building and Construction Industry Improvement Act 2005 (Cth)).

The High Court in CFMEU disagreed, pointing to the different juridical foundations of civil proceedings (including civil penalty proceedings) and criminal proceedings, and observing that there is ‘considerable scope’ for parties to civil proceedings ‘to agree on the facts and upon consequences … and upon the appropriate remedy’ and that it is ‘highly desirable’ for courts to accept parties’ consensual proposals, where appropriate. The Court also observed that the predictability of outcomes that flows from the acceptance by courts of agreed penalties ‘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’.

The High Court’s decision is a sensible and welcome one, which will lead to renewed certainty for litigants seeking to agree outcomes in the civil penalty arena.

¹But compare the Victorian Court of Appeal’s contrary approach in ASIC v Ingleby (2013) VR 554, which now cannot be considered good law.