Agreed penalties - Commonwealth v Director, FWBII
92 In Commonwealth v Director, FWBII, despite previous indications that the distinction between criminal and civil proceedings was, at best, unstable or involved an imprecise dichotomy (cf. Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 at 173-173 [29]-[30], 180-181 [62]-[63]; Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at 141 [22], 145 [32]), the High Court pointed out a number of important differences between criminal proceedings and civil proceedings. Those differences were such that, whatever may be the position in criminal proceedings (cf. Barbaro v The Queen (2014) 253 CLR 58), in civil penalty proceedings the Court can and should receive submissions by the parties in relation to the appropriate pecuniary penalty. That includes the scenario where a regulator and a contravenor have settled the proceeding and, in pursuance of that settlement, have jointly proposed an agreed penalty or penalties. In so deciding, the Court espoused a number of important principles concerning the approach that the Court should take to proposed agreed penalties.
93 First, the High Court confirmed, as had previously been authoritatively determined, that the Court is not bound by the figure suggested by the parties.
94 Second, the plurality (French CJ, Kiefel, Bell, Nettle and Gordon JJ) likened the Court's task, when faced with agreed penalty submissions, to approving a compromise in civil proceedings like an infant's compromise, a custody or property compromise, a group proceeding settlement or a scheme of arrangement (at 491 [58]). Their Honours said (at 491 [57]) that it is "entirely consistent with the nature of civil proceedings for a court to make orders by consent and to approve a compromise of proceedings on terms proposed by the parties, provided the court is persuaded that what is proposed is appropriate" and (at 491 [58]) that there is "no reason in principle or practice why civil penalty proceedings should be treated as an exception" to that general rule.
95 Third, and largely following from the second point, when the parties jointly propose an agreed penalty, the Court's task, in the view of the plurality, is essentially to consider whether the settlement, including the proposed agreed penalty, is appropriate. And, it would seem, if the Court is satisfied that the agreed penalty is appropriate, the Court should ordinarily accept that penalty, or at least it would be highly desirable for it to do so. In the words of the plurality, if the Court is persuaded of "the accuracy of the parties' agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed" (emphasis in original) it would be "highly desirable in practice for the Court to accept the parties' proposal and therefore impose the proposed penalty" (at 491 [58]).
96 The emphasis on "an" in that passage appears to be important. It suggests, consistently with what was said by the Full Court of this Court in NW Frozen Foods at 290-291 and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993 at 48-626 [51] (see also 48-625 [47]), that there is no single appropriate penalty: rather, there is a range within which no particular figure can be said to be more appropriate than another. An agreed penalty may be "an" appropriate penalty if it falls within that range.
97 Fourth, the desirability of the Court accepting a proposed agreed penalty which it is persuaded is an appropriate penalty appears to derive primarily from a public policy consideration. That public policy consideration is the promotion of predictability of outcome in civil penalty proceedings. According to the plurality in Commonwealth v Director, FWBII (at 489 [46]), "the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers" and "such predictability of outcome 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 and to free investigating officers to turn to other areas of investigation that await their attention". In short, since it is desirable to encourage the settlement of complex pecuniary penalty proceedings, it is desirable to accept and make agreed penalty orders, so long as the agreed amount is considered to be an appropriate penalty.
98 Fifth, Keane J explicitly recognised that the willingness of a regulator to accept an agreed penalty is likely to be the product of a compromise which reflects "a considered estimation that, given the hazards and expense of litigation, satisfaction of the [regulator's] claim against the defendant on such terms is apt to advance the public interest in the enforcement of the regulatory regime more effectively and efficiently than the continued prosecution of the claim" (at 503 [109]). In agreeing to the proposed penalty, it might be expected that the regulator had weighed up, amongst other things, the likely cost of the proceeding and the risk of failure if a compromise was not reached and the matter proceeded to hearing. The regulator's "stance can be expected to reflect a pragmatic assessment by the authority charged by the legislature with the effective enforcement of the regulatory regime that the public interest is best served by bringing the proceeding to a conclusion on agreed terms as to penalty" (at 503-504 [109]). In that sense at least, the regulator is not bound to be dispassionate and may advocate for any litigious outcome which it considers to be in the public interest: see also Gageler J at 496 [78]; Keane J at 502 [105].
99 The explicit recognition that an agreed penalty is likely to reflect compromise and pragmatism is important. It appears to implicitly recognise that the agreed penalty may well be less than the penalty that the regulator might otherwise have sought or advocated. In short, the regulator might well have been prepared to accept a penalty which has been discounted to reflect the risk and cost of the proceeding if not compromised: much like a plaintiff settling a civil damages claim might apply a discount to the damages sought to reflect the compromise and the avoidance of cost and risk.
100 Each of the parties in these proceedings accepted that the agreed penalties were the product of compromises and the assessment of risks and costs. It was expressly put that the Commission had started "high" and ANZ had started "low" and that the parties had met somewhere in between. It was expressly and candidly acknowledged by the Commission that it would have preferred a higher penalty.
101 The fact that the agreed penalty is likely to be the produce of compromise and pragmatism also informs the Court's role when faced with a proposed agreed penalty. According to Keane J, it is because a regulator may, on occasion, be "too pragmatic in taking such a stance that the court must exercise its function to ensure that the penalty imposed is just, bearing in mind competing considerations of principle, including that of equality before the law and the need to maintain an effective deterrence to other potential contravenors" (Commonwealth v Director, FWBII at 504 [110]). In other words, compromise and pragmatism are to be expected, but if the regulator goes too far, the penalty may cease to be an appropriate penalty because it would cease to achieve the objective of deterrence.
102 Sixth, Keane J noted another feature of civil proceedings which suggested perhaps another reason why the Court would perhaps be slow not to accept an agreed civil penalty That reason is that an agreed penalty is not merely the opinion of the parties concerning what penalty would be just. Rather, it goes more fundamentally to the basis up which the controversy between them may be quelled. His Honour said (at 502 [103]):
In proceedings under s 49 of the BCII Act, as indeed in any civil proceedings, it is the right and duty of the plaintiff to mark out the extent of its claim against the defendant. The plaintiff's claim establishes the scope of the controversy to be resolved by the judgment of the court. When a plaintiff asserts a claim to the grant of a particular remedy, it is not proffering an opinion on a matter of fact or law; it is stating the basis on which a controversy between it and the defendant may be quelled by the exercise of judicial power. When a defendant agrees to a civil penalty in a particular amount, it is assenting to the grant of relief to that extent. And an agreement of the parties as to the basis on which they seek to resolve the controversy between them is not merely an opinion proffered by either or both of them as to how the proceedings should justly be resolved: it is a resolution of the controversy between them insofar as the quelling of that controversy is in their power.
103 Overall, the decision in Commonwealth v Director, FWBII suggests that the Court's primary task, when faced with civil penalty proceedings that have settled on the basis of agreed facts and joint submissions advocating an agreed penalty, is to consider whether the agreed penalty is an appropriate penalty having regard to all relevant matters. The relevant matters include, where the contravention is a contravention of the Competition and Consumer Act and the penalty is to be imposed under s 76 of that Act, the matters expressly referred to in that section. They also include the factors and principles discussed earlier, including the factors that bear on the nature and seriousness of the contravention, the factors that relate to the particular circumstances of the contravenor, and the overall objective of deterrence. If, upon consideration of those factors and principles, the Court is persuaded that the penalty is an appropriate penalty, it should ordinarily be accepted and imposed, mainly for public policy reasons relating to the promotion of predictability of outcome and the encouragement of settlements.
104 In considering whether the proposed agreed penalty is an appropriate penalty, the Court should also generally recognise that there is no single appropriate penalty and that an agreed penalty may be an appropriate penalty if it falls within a range within which any of the figures could be considered to be appropriate having regard to all relevant circumstances. The Court should also recognise that the agreed penalty is most likely the result of compromise and pragmatism on the part of the Commission, and to reflect, amongst other things, the Commission's considered estimation of the risks and expense of the litigation had it not been settled. While the High Court did not say so in terms, it seems to be implicit in what was said (at least by Keane J), that because the agreed penalty might be the result of compromise, pragmatism and an assessment of risk and expense, it might also reasonably be expected that the agreed penalty is likely to be lower than what the Commission might otherwise have contended was an appropriate penalty. That, in any event, would appear to be a practical and realistic assessment of the likely outcome of a compromise involving an agreed penalty. The question is whether the Commission had been "too pragmatic".