Federal Court Changes the Playing Field on ‘Agreed’ Civil Penalties in Regulatory Proceedings

by DLA Piper
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The very recent decision of the Full Court of the Federal Court (handed down on 1 May 2015) in Director, Fair Work Building Industry Inspectorate v CFMEU [2015] FCAFC 59 has changed the law in relation to the Court’s approach to ‘agreed’ penalties in civil penalty proceedings. This decision is likely to be highly relevant to any party considering a ‘settlement’ with regulators (including the ACCC). Please click here to read the decision.

In short, the Court has ruled that it must have complete discretion to fix an appropriate penalty in civil penalty cases, and any agreement as to penalty between a regulator and a respondent is no more than an expression of a shared opinion, and therefore inadmissible. This is a significant departure from the long established previous position, whereby the Federal Court in civil penalty proceedings would encourage regulators and respondents to make agreed submissions as to what penalty amount would be appropriate (with a degree of comfort for the parties that the Court would adopt or have substantial regard to the agreed position).

The Court declined to approve pecuniary penalties of $105,000 and $45,000 (respectively) against 2 unions, the CFMEU and the CEPU, in terms that had been agreed with the Director and submitted to the Court in an Agreed Statement of Facts. The respondents had consented to these penalties and related declarations that they had both contravened Building and Construction Industry Improvement Act 2005 (Cth) by engaging in unlawful industrial action. The Court directed the parties to consider its reasons and reconsider their respective positions before a further hearing (stating pointedly that ‘the Court might reasonably expect a little more discernment in identifying the relevant decisions and a little more detail in the submissions concerning them‘).

The position adopted by the Court is now in line with the position that applies in criminal proceedings (as confirmed by the High Court in Barbaro v The Queen (2014) 305 ALR 323, which is the subject of extensive analysis in the CFMEU decision). Some of the key points made by the Federal Court in its judgment which may be of particular interest to insurers and insureds contemplating ‘deals’ with regulators in pecuniary penalty cases are as follows:

  • The Court should have no regard to agreed figures in fixing the amounts of penalties to be imposed, other than to the extent that the agreement demonstrates a degree of remorse and/or co-operation on the part of each respondent. A respondent’s acceptance of liability and willingness to submit to the imposition of a substantial pecuniary penalty are relevant considerations in fixing a penalty, but not as to the actual amount.
  • The responsibility for fixing penalties rests with the Court.  The regulator may choose the remedies which it seeks, but the Court must, in the exercise of its discretion, decide whether to grant such relief.  In particular, it must fix the amount of any pecuniary penalty to be imposed.
  • Whilst the parties may submit statements as to agreed facts and joint submissions, this does not include the right to offer opinions as to an appropriate outcome.  An opinion or view as to penalty is neither evidence nor submission. The Court may not take advice from the regulator as to the exercise of its discretion.
  • The development of a consistent approach to the fixing of pecuniary penalties necessitates reference to prior decisions (as with the criminal sentencing process).

This decision is likely to create much uncertainty for parties and their insurers in relation to current and future negotiations with regulators over appropriate penalties to be imposed in civil penalty proceedings. It will be interesting to see how the parties adapt to this changed playing field, whether settlements of proceedings decline and if (ultimately) there is a legislative response.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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