09 Dec 2015

Negotiating agreed penalties with regulators is OK, says High Court

Regulators and the businesses they regulate can avoid lengthy court proceedings and negotiate an agreed set of facts and a proposed penalty, following a decision by the High Court this morning (Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46).

Going to court is expensive for all parties, so regulators have often, in appropriate cases, tried to limit the amount of court days by negotiating agreed sets of facts and penalties, including pecuniary penalties, with the business. These agreed facts and penalties were, until the case in the Federal Court last year presented to the court in joint submissions. The court does not accept these blindly; it considers them, but is free to reject them and set its own penalty.

In Barbaro, the High Court had previously held that in criminal proceedings prosecutors and the accused could not agree upon sentences to present to the court. Did this mean in civil proceedings regulators and companies couldn't agree upon suggested penalties? The Full Federal Court thought so, saying in May that agreed penalties limit the Court's discretion in applying the appropriate sentence.

This meant that both regulators and businesses lost a powerful incentive to negotiate and avoid a full trial on all the issues.

The High Court's decision today overturned the Full Federal Court, and reinstated the previous settlement process, saying that civil penalty proceedings and criminal proceedings have different goals. The regulator in a civil penalty case is trying to protect the public and therefore wants to achieve compliance, prevention and, possibly, compensation. In criminal cases, sentencing has those aims, but in addition it must deal with the accused's retribution and rehabilitation.

In this case, the Building and Construction Industry Improvement Act does not expressly rule out agreed penalties: in fact, "by providing for civil penalty proceedings, it implicitly assumes the application of the general practice and procedure regarding civil proceedings and eschews the application of criminal practice and procedure".

Agreeing facts and pecuniary penalties with regulators

Although the decision was based on the Building and Construction Industry Improvement Act 2005 (Cth), the decision affects various Commonwealth regulators (and possibly state regulators), such as the ACCC the Fair Work Ombudsman, ASIC, the ATO, ACMA, and APRA.

For businesses which want to avoid lengthy court hearings to establish facts, liability, and any penalty, this decision is good news. The basic settlement process is:

  • The regulator and the business will be able to negotiate and come to an agreed set of facts and suggested penalty.
  • The court will need to be persuaded that this agreement is accurate and that the penalty which the parties propose is an appropriate remedy in the circumstances. It does not have to be the penalty the court itself would have imposed, as long as it is not an inappropriate one, in the context of previous decisions.
  • If the court considers the agreed penalty is not appropriate, it can give the parties an opportunity to withdraw their consent or otherwise be heard.

Related Knowledge

Get in Touch

Get in touch information is loading


Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.