05 May 2015

Agreed pecuniary penalties with regulators no longer a done deal

Regulators' practice of agreeing pecuniary penalties with businesses has been dealt a serious blow by the Full Bench of the Federal Court (Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59).

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

Agreed pecuniary penalties – regulators' current practice

Going to court is expensive for all parties, so regulators will often, in appropriate cases, try to limit the amount of court days by negotiating agreed sets of facts and penalties, including pecuniary penalties, which are then presented to the court in joint submissions.

For example, the ACCC has described joint submissions as to penalty as, “critical to its capacity to conduct effective negotiations with the parties and to efficiently resolve enforcement proceedings”. It considers that if it could not make joint submissions “the majority of matters would be likely to proceed to a contested hearing, at least in relation to penalty, and in many cases, flowing over to a contest in relation to liability (in full or in part) and other relief”.

Pecuniary penalties are similar to criminal punishment

Although they are civil penalties, pecuniary penalties share many characteristics with criminal penalties, including their use as a way to punish, and to deter, using the coercive power of the State.

In 2014, the High Court held that agreed penalties in criminal cases should not be submitted to the court, because:

  • the expression of an identified range (as opposed to sentencing statistics and information concerning sentences imposed in other, more or less comparable cases) can never be more than an opinion;
  • a sentencing judge need not, and should not take such an opinion into account
  • notwithstanding any plea agreement (or “settlement”) it remains the prosecutor’s duty to decide upon the charge to be preferred;
  • it is for the accused alone to decide whether to plead guilty to a preferred charge, which decision will be made without knowledge of the sentence which will be imposed; and
  • it is for the judge, alone, to fix the sentence (Barbaro v The Queen [2014] HCA 2).

The Full Federal Court held that the same considerations apply to pecuniary penalties under the Building and Construction Industry Improvement Act. Anything else would limit the Court's discretion in applying the appropriate sentence, and the Act did not expressly allow that.

How regulators and businesses can make submissions on pecuniary penalties

While this is a decision under the Building and Construction Industry Improvement Act, it will affect other regulators who have a similar practice, such as the ACCC, ASIC, the ATO, and Fair Work Ombudsman.

As a result, they cannot submit a suggested range of pecuniary penalties to the court, or an agreed figure, other than to the extent that the agreement demonstrates a degree of remorse and/or co-operation on the part of each respondent.

They can, however, make submissions on:

  • the relative seriousness of the misconduct;
  • the relevant sentencing principles; and
  • any comparable decisions.

Ultimately, however, the court must make its own decision on the appropriate pecuniary penalty for each breach, and then consider, and, if necessary, adjust the overall amount.


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.