Federal Court delivers a blow to agreed outcomes in civil penalty proceedings

The recent decision of the Full Court of the Federal Court of Australia in FWBC v CFMEU has significant implications for regulators and respondents seeking to agree on a penalty in civil penalty proceedings. The decision is likely to alter the long-standing practice for negotiated outcomes with regulators including the Australian Competition and Consumer Commission (ACCC) which regulates product safety and related issues in Australia. 

Applying the 2014 decision of the High Court in Barbaro, which related to submissions as to penalty in criminal sentencing hearings, the Full Court found that it could not receive, or act on, submissions from parties on an agreed penalty or the range within which a penalty should fall in the case of civil penalty proceedings.

The Full Court was exercising its original (not appellate) jurisdiction, meaning its focus was the approach to be taken in the case before it, not to establish general rules as to the conduct of all such proceedings. Nonetheless we anticipate the decision will establish a precedent for similar proceedings.

It had become common in proceedings brought by regulators, including ACCC and the Australian Securities and Investments Commission (ASIC), to reach a resolution between the parties by way of negotiated settlement. This would be achieved by the regulator and the respondent approaching the court with an agreed statement of facts and an ‘agreed penalty’, requesting that the court convert that penalty into formal orders. While the decision on penalty remained a matter for the Court, the position agreed between the regulator and the respondent would be given significant weight by the Court. However, given the Full Court’s view that any agreement on the appropriate penalty figure is no more than an expression of a shared opinion, and thus inadmissible, this practice will unlikely be permitted in future Federal Court cases.

Regulators and respondents can still reach agreement as to factual matters, identification of relevant comparable cases and the proper approach to fixing the penalty for submission to the Federal Court. Parties are still entitled to make submissions as to the relative seriousness of the contraventions, explain the relevant principles, and refer to comparable decisions.

While the decision does not rule out the possibility of reaching a settlement with a regulator, the uncertainties in terms of ultimate outcome are materially greater. It is likely that in the negotiations there will be even greater focus on the content of agreed facts.

The Full Court’s decision may not be the final word on the matter. The prospect of the Commonwealth seeking special leave to appeal to the High Court is high. Given the serious implications of the decision, there is a real prospect of the High Court granting leave. Even if the High Court refuses special leave or grants special leave but affirms the decision on appeal, legislative reform is a real possibility to allow for agreed penalties.

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Authors

Andrew Eastwood
Andrew Eastwood
Partner, Sydney
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+61 2 9225 5442
Patrick Gay
Patrick Gay
Partner, Sydney
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+61 2 9322 4378
Luke Hastings
Luke Hastings
Partner, Sydney
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+61 2 9225 5903
Paul Hughes
Paul Hughes
Partner, Sydney
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+61 2 9225 5697
Chris Jose
Chris Jose
Partner, Melbourne
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+61 3 9288 1416

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