The Correct Approach
147 The principles applicable to the determination by the Court of an appropriate civil pecuniary penalty in a case such as the present are well settled. The seminal cases are: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (NW Frozen Foods) and Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd (2004) ATPR ¶41-993 (Mobil).
148 In NW Frozen Foods, at first instance, the primary judge had rejected the agreed civil pecuniary penalty put forward by the parties (in the amount of $900,000) and substituted for that amount a higher penalty ($1.2 million). NW Frozen Foods concerned price fixing agreements said to have been made in contravention of s 45 and s 45A of the Trade Practices Act 1974 (Cth) (TPA).
149 At trial, relevant contraventions were admitted by NW Frozen Foods and the Court was asked to fix the appropriate penalty upon the basis of facts which had been agreed between that company and the ACCC. This practice had been followed in the Court in numerous cases since the decision of Sheppard J in 1981 in Trade Practices Commission v Allied Mills Industries Pty Ltd (No 5) (1981) 60 FLR 38 (Allied Mills).
150 In Allied Mills, the parties had handed up consent orders after the trial judge had published a judgment in which his Honour had found that each respondent had a case to answer on allegations of price fixing arrangements contrary to s 45 of the TPA. One of the respondents withdrew its defence to the allegations. The consent orders provided for a pecuniary penalty of $50,000 to be imposed. Justice Sheppard made orders in accordance with the consent orders. His Honour briefly referred to the circumstances of the case and then held that he was satisfied, having taken all relevant circumstances into account, that a penalty of $50,000 was both proper and appropriate. At 41, after recording his satisfaction with the agreed penalty, his Honour continued:
It is, of course, true that the penalty has been suggested to me by the agreement of the parties. Uninformed of their agreement, I may have selected a different figure, but I am satisfied that it would not have been very different from theirs. There is from time to time, amongst members of the profession and amongst the public, discussion concerning plea bargaining. Sometimes it is suggested that it involves disreputable conduct. It is my opinion that that is so if it at all implicates the court in private discussions as to what the court's attitude will or would be likely to be if a particular course is taken. In this case nothing of that kind has occurred. The parties have made their own agreement and put it to the court for approval, not knowing what its attitude was likely to be. That was the course adopted, perhaps in a less positive way, in a customs prosecution heard in the original jurisdiction of the High Court: Chipp (Minister for Customs) v. Campbell Beaumont Trading Pty. Ltd. [(1969) 44 A.L.J.R. 72 (note)]. The court there accepted the parties' view of the matter. This, of course, is not a criminal case; the liability is civil only. But, even in the most serious criminal cases, it is not unusual for the prosecution to accept a plea to a lesser charge, subject always to the approval of the court. I have said what I have only to explain that the course which the parties have adopted is both proper and not uncommon, even though perhaps novel in the comparatively new field of trade practices.
151 It is quite clear that Sheppard J did not regard himself as bound by the parties' agreement as to the appropriate pecuniary penalty to be imposed in the circumstances before him in Allied Mills.
152 In NW Frozen Foods, the appellant appealed the trial judge's decision but did not challenge his power to impose a pecuniary penalty which differed from the agreed pecuniary penalty submitted to the Court.
153 At 290E-291B, after referring to the circumstances confronting the Court in NW Frozen Foods and to the relevant legislative provisions, Burchett and Kiefel JJ said:
The contrast between ss 78 and 79 of the Act make it quite clear that a penalty imposed under s 76 is a civil penalty, and that a contravention falling within the section is not to be regarded as a criminal offence. At the same time, the seriousness with which the law views the contraventions in question in this case is underlined by the very large sums which the Court is authorised to levy against a contravener. A consequence of the civil nature of a penalty under s 76 is that the onus of proof of the contravention is the civil onus - in contradistinction to the onus of proof beyond reasonable doubt generally borne by the prosecution in a proceeding brought to punish crime.
The Act places on the shoulders of the Court the responsibility to determine the "appropriate" penalty in each particular case, having regard to "all relevant matters" including the matters specified in the section. But effects upon the functioning of markets, and other economic effects, will generally be among the most significant matters to be considered as relevant, so that the Court is likely to be assisted greatly by views put forward by the Australian Competition and Consumer Commission, or by economists called on behalf of the parties. Since the decision in Trade Practices Commission v Allied Mills Industries Pty Ltd, it has been accepted that both the facts, and also views about their effect, may be presented to the Court in agreed statements, together with joint submissions by both the Commission and a respondent as to the appropriate level of penalty. Because the fixing of the quantum of a penalty cannot be an exact science, the Court, in such a case, does not ask whether it would without the aid of the parties have arrived at the precise figure they have proposed, but rather whether their proposal can be accepted as fixing an appropriate amount.
There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.
154 Justices Burchett and Kiefel then referred to a number of authorities which, in their view, provided unanimous support for the approach which they outlined at 290E-291B. Their Honours then moved to consider the approach which should be adopted when the Court undertakes the task of assessing a pecuniary penalty under a provision such as s 76 of the TPA. At 291G-292F, their Honours said:
… When the Court approaches the task of assessing a penalty under s 76, or of determining whether an agreed penalty is appropriate, there are certain principles which must be kept steadily in mind. The section itself lays down that the penalty is to be "appropriate having regard to all relevant matters", and then indicates certain matters which the legislature regarded as relevant, being:
"• the nature and extent of the act or omission.
• the nature and extent ... of any loss or damage suffered as a result of the act or omission.
• the circumstances in which the act or omission took place.
• whether the person [contravening] has previously been found by the Court in proceedings under [Part VI of the Act] to have engaged in any similar conduct."
The specified considerations do not necessarily exhaust "all relevant matters", but they do indicate considerations to which the Parliament turned its attention. In Trade Practices Commission v CSR Ltd [1991] ATPR 52,135 at 52,152-52,153, French J set out a checklist of matters to which judges have since frequently made reference. He added to those expressly mentioned in s 76 the following further points, which may be regarded as elaborations of the statutory requirement to consider "the circumstances in which the act or omission took place":
"• The size of the contravening company.
• The degree of power it has, as evidenced by its market share and ease of entry into the market.
• The deliberateness of the contravention and the period over which it extended.
• Whether the contravention arose out of the conduct of senior management or at a lower level.
• Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.
• Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention."
In CSR Ltd, French J said (at 52,152):
"The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act."
155 The factors identified by French J in Trade Practices Commission v CSR Limited (1991) ATPR ¶41-076 (TPC v CSR) at 52,152-52,153 and referred to with approval by Burchett and Kiefel JJ in the passages I have extracted at [154] above have become known as "the French factors" and have generally been described as such in later authorities (as to which, see Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540 (ACCC v Coles) at 544 [8] and [9] and the cases referred to in those paragraphs per Allsop CJ).
156 Justices Burchett and Kiefel then referred to a number of authorities in which the Court has held that deterrence of unlawful conduct is the main purpose of the imposition of penalties under provisions such as s 76 of the TPA.
157 Their Honours then considered a number of factors which might be regarded as mitigating factors. At the conclusion of that consideration, at 294G-295A, their Honours said:
… The Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay, and detection lead merely to a compliance program for the future.
158 In NW Frozen Foods, Burchett and Kiefel JJ found that the fixing of a penalty in that case by the trial judge was vitiated by error and that it was necessary for the Full Court to give consideration to the appropriate penalty. They then fixed a pecuniary penalty in the agreed sum of $900,000, not because it was the agreed amount, but because it was an appropriate penalty. At 298D-299A, their Honours said:
… As we have already made clear, there is no doubt that, when the Court considers this question [referring to the fixing of an appropriate penalty], the view of the specialist Commission is a relevant matter. The appellant's submission appeared to go further, suggesting that the Commission would have knowledge about the particular case and the markets involved not available to the Court, which should make the Court reluctant to interfere with its conclusions. Courts have learned to be suspicious of claims of secret knowledge; and justice should be done in the light, with the relevant facts exposed to view. It is the Court which bears the responsibility. (Compare the position in the United States, where under the Clayton Act the Federal Trade Commission has "a special competence in formulating remedies to deal with problems in the general sphere of competitive practices": Federal Trade Commission v Ruberoid Co (1952) 343 US 470 at 473, but even so, as Frankfurter J pointed out in his dissenting judgment in Federal Trade Commission v Motion Picture Advertising Service Co Inc (1953) 344 US 392 at 406: "[H]e is no friend of administrative law who thinks that the Commission should be left at large.") However, in discharging its responsibility, the Court gratefully accepts all proper help, and the views of the specialist body set up to protect the public interest in the maintenance of economically healthy competition are plainly relevant, for example, to the question whether a proposed penalty will be sufficient to deter anti-competitive behaviour in a particular market. On that issue, those views are likely to be persuasive; while "subjective" matters, calling perhaps for a degree of mercy, may fall less within the specialist sphere, and more within those broad concepts of justice to which the Court must always have regard.
The cases we have discussed earlier in these reasons unite in affirming the public interest in the promotion of settlements, especially in this area where litigation is likely to be very lengthy. We agree with the statement made in several of the cases cited that it is not actually useful to investigate whether, unaided by the agreement of the parties, we would have arrived at the very figure they propose. The question is not that; it is simply whether, in the performance of the Court's duty under s 76, this particular penalty, proposed with the consent of the corporation involved and of the Commission, is one that the Court should determine to be appropriate. In our opinion, it is appropriate.
Accordingly, the appeal should be allowed; the order appealed against should be set aside; and in lieu of the order appealed against, it should be ordered that a penalty be imposed in the sum of $900,000. In all the circumstances, there should be no order as to the costs of the appeal.
159 Subject to differing on one point which is not presently relevant, Carr J agreed with Burchett and Kiefel JJ.
160 In Mobil, a question arising in the proceedings before the trial judge was referred to the Full Court pursuant to s 20(1A) of the Federal Court of Australia Act 1976 (Cth). That question was whether the decision in NW Frozen Foods required the Court to consider whether a pecuniary penalty proposed by the parties was within the permissible range in all of the circumstances and, if so, was it required to impose a penalty in that amount. In that case, Mobil Oil Australia Pty Ltd had conceded its contravention of the Petroleum Retail Marketing Sites Act 1980 (Cth). The parties made joint submissions that a pecuniary penalty of $844,500 was the appropriate penalty to be imposed upon Mobil for the admitted contraventions.
161 After referring to the observations made by Burchett and Kiefel JJ at 290-291 and 298-299 in NW Frozen Foods, at 48,626-48,628 [50]-[58], the Full Court said:
In reaching the conclusion that the proposed penalty was appropriate, the Court took into account the circumstances of the case as set out in the agreed statement of facts. That statement included clear admissions by the appellant that it had contravened the TP Act. (As to the Court acting on admissions, see FCR, O 18 r 4; Evidence Act 1995 (Cth), Part 3.4.) Their Honours characterised the contraventions as deliberate and serious (at 289). However, they also took into account that the contravenors had assisted the ACCC in its investigations and had agreed to establish trade practices compliance programs.
The following propositions emerge from the reasoning in NW Frozen Foods:
(i) It is the responsibility of the Court to determine the appropriate penalty to be imposed under s 76 of the TP Act in respect of a contravention of the TP Act.
(ii) Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another.
(iii) There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravenor have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed.
(iv) The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise (such as the ACCC's views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more "subjective" matters.
(v) In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so.
(vi) Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court's view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range.
Five further points should be made.
First, the rationale for giving weight to a joint submission on penalty is said by the Court to be the savings in resources for the regulator and the Court, as well as the likelihood that a negotiated resolution will include measures designed to promote competition. As Jeremy Thorpe points out, a related advantage is that the savings in resources can be used by the regulator to increase the likelihood that other contraveners will be detected and brought before the courts. This has the effect of increasing deterrence which is one of the principal justifications, if not the only justification for imposing civil penalties under the TP Act or the Sites Act: J Thorpe, "Determining the Appropriate Role for Charge Bargaining in Part IV of the Trade Practices Act" (1996) 4 Comp & Cons LJ 69, at 72-74. Of course the arguments in favour of negotiated settlements have to take account of the fact that it is the Court that bears the ultimate responsibility for determining the appropriate penalty.
Secondly, the sixth proposition drawn from the reasoning in NW Frozen Foods does not mean, in our opinion, that the Court must commence its reasoning with the proposed penalty and limit itself to considering whether that penalty is within the permissible range. A Court may wish to take that approach. However, it is open to a Court, consistently with the reasoning in NW Frozen Foods, first to address the appropriate range of penalties independently of the parties' proposed figure and then, having made that judgment, determine whether the prepared penalty falls within the range.
Thirdly, as has been noted, the appellant in NW Frozen Foods admitted contravening the TP Act and had reached agreement with the ACCC upon the facts to be put before the Court. There was no suggestion that the admissions or statement had been tailored or modified to reflect the difficulties faced by the ACCC in proving its case. The Full Court therefore acted on the basis of clear admissions and a detailed statement of agreed facts setting out how the contraventions had occurred. Accordingly, the decision is consistent with the views expressed by the New Zealand High Court in Milk Corporation. Those views are, with respect, correct in principle.
Fourthly, as the Full Court in Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [2002] ATPR ¶41-851, has pointed out, the regulator should always explain to the Court the process of reasoning that justifies a discounted penalty. In that case, the ACCC and two contravenors produced an agreed statement of facts, supplemented by affidavit evidence, but they disagreed as to the appropriate penalty. The trial Judge had previously imposed agreed penalties on other offenders, which the Full Court apparently thought were somewhat low (at 44,543 [51]), and had taken these penalties into account in determining the appropriate penalties to be imposed on the two remaining contravenors. The Full Court made the following observations (at 44,549 [56]):
"[w]here the Commission proposes to the Court an agreed penalty which is calculated taking into account a substantial discount from what would otherwise be considered the appropriate penalty so as to reflect a degree of co-operation, it would be desirable that the Commission disclose the process by which the discounted penalty has been arrived at. In particular, it would be of assistance to the Court, particularly where there are other proceedings pending, to hear submissions on the range of appropriate penalties and the discount which it is proposed should be allowed to take into account the level of co-operation afforded by the offender. Had that been done in the present case, the learned primary judge would have been able to form a view as to the appropriate range of penalty absent co-operation and have then been in the position to calculate an appropriate discount to take into account the exceptional level of co-operation afforded by QIS [one of the offenders]. It is only in this way that a comparison could properly be made between the penalty payable where the offender had offered a high level of co-operation and the penalty payable where the level of co-operation was of a lesser magnitude."
These observations are consistent with the approach in NW Frozen Foods. The Full Court in Ithaca Ice was plainly aware of the reasoning in NW Frozen Foods, since it considered the factors discussed in that case as relevant to the quantum of penalty. It follows that a court considering an "agreed" penalty is entitled to expect the regulator to explain the basis on which a discount from the otherwise appropriate penalty has been calculated having regard to the contravenor's co-operation and, for that matter, other relevant factors. (For endorsement of this approach, see Australian Law Reform Commission, Principled Regulation: Federal Civil and Administrative Remedies in Australia (ALRC 95, 2002), pars 30.81 ff.)
Fifthly, there is nothing in NW Frozen Foods that is inconsistent with any of the following propositions:
(i) The Court, if it considers that the evidence or information before it is inadequate to form a view as to whether the proposed penalty is appropriate, may request the parties to provide additional evidence or information or verify the information provided. If they do not provide the information or verification requested, the Court may well not be satisfied that the proposed penalty is within the range.
(ii) If the absence of a contradictor inhibits the Court in the performance of its duties under s 76 of the TP Act, s 13 of the Sites Act, or similar legislation, it may seek the assistance of an amicus curiae or of an individual or body prepared to act as an intervenor under FCR, O 6 r 17.
(iii) If the Court is disposed not to impose the penalty proposed by the parties, it may be appropriate, depending on the circumstances, for each of them to be given the opportunity to withdraw consent to the proposed orders and for the matter to proceed as a contested hearing.
162 The Full Court then considered criticisms made by individual judges of the Court of the reasoning in NW Frozen Foods and ultimately rejected those criticisms. At 48,632 [79], the Full Court said:
For these reasons, we do not think that the criticisms made of NW Frozen Foods warrant departing from the principles stated in that case, even if it were open to this Court to do so. Nor do we think that they warrant taking measures of the kind proposed in PIAC's submissions. The Court has adequate powers to ensure that it discharges its statutory responsibilities appropriately.
163 The following pertinent propositions are supported by the above authorities.
164 First, it is the responsibility of the Court, and the Court alone, to determine the appropriate pecuniary penalty under s 224 of the ACL once the Court is satisfied that the person upon whom it proposes to impose that penalty has contravened one or more relevant provisions of the ACL. In order to discharge that responsibility, the Court must examine all of the circumstances of the case. Where the parties have put forward a statement of agreed facts, the Court may act upon that statement if it considers that it is appropriate to do so. The Court may also act upon such other evidence as may be admitted for the purpose of its determination of an appropriate pecuniary penalty.
165 Second, where, as here, a specialist regulator and the contravener reach an agreement as to the amount of the pecuniary penalty which they suggest the Court should impose, the Court is not bound to give effect to that agreement and impose the agreed penalty. The responsibility to fix "… such pecuniary penalty … as the court determines to be appropriate" (s 224(1)) remains with the Court at all times. The Court must not act as a mere "rubber stamp". As Wilcox J said in Australian Competition and Consumer Commission v FFE Building Services Limited (2003) ATPR ¶41-969 (FFE) at 47,805 [34]-[36]:
There is a danger in judges of this Court being overly influenced by the view as to penalty taken by the ACCC. In Australian Competition and Consumer Commission v Colgate Palmolive Pty Ltd (2002) ATPR ¶41-880; [2002] FCA 619, Weinberg J was confronted with a case where the ACCC and the respondent had agreed upon a particular penalty figure. Although he eventually decided to adopt the agreed figure, his Honour made it clear at [29] that he thought it too low. His Honour went on to make some comments that apply equally to a situation where the Court is presented with an agreed narrow range of penalties. His Honour said, at [34]:
"There are dangers associated with this approach. The Court may be seen, perhaps not altogether incorrectly, to act as a 'rubber stamp' in simply approving a decision taken at an executive level by a body charged with investigating and prosecuting contraventions of the Act, but having no role in actually imposing particular sanctions for those contraventions. Negotiated settlements are an important vehicle for resolving complex matters such as those involved in the present case. It must be borne in mind, however, that there is a public interest in ensuring that corporations that engage in behaviour of the kind that occurred in this case are dealt with appropriately, and that proper recognition is given to the need for specific and general deterrence. There are important parallels between the fixing of a pecuniary penalty under s 76, and the ordinary sentencing process which is quintessentially a matter for the courts."
Weinberg J noted the tendency of the Court simply to adopt the agreed figure. He said at [32]:
"I acknowledge that both the ACCC and Colgate have accepted that the figure proposed is in no way binding upon the Court. However, when pressed to point to a single instance when the Court has not, in the past, endorsed such a figure, counsel found it difficult to do so."
This seems to me a most unsatisfactory position. It involves an abrogation of responsibility by the Court. My concern is exacerbated by the level of penalties often accepted by ACCC. In 1992, Parliament made a dramatic revision of the scale of penalties available for breaches of Part IV of the Act. The maximum penalty for a corporate respondent was increased from $250,000 to $10,000,000. Parliament obviously intended to achieve a quantum leap in the size of penalties imposed for breaches of Part IV. Yet, as the cases cited to me demonstrate, ACCC has continued to negotiate penalties that are but a small fraction of the new maximum.
In FFE, his Honour more than doubled the agreed penalty submitted to the Court by the parties. I agree with these observations made by Wilcox J and propose to keep them in mind when determining the appropriate pecuniary penalty in the present case.
166 Third, in any given case, there is no one amount which will satisfy the statutory requirement. Within a permissible range, it cannot necessarily be said that one particular figure is the appropriate figure. There will usually be a range of figures from which the particular penalty may justifiably be chosen. When parties propound an agreement as to the pecuniary penalty, if the agreed figure is in the range which the Court considers appropriate, the Court may give effect to the parties' agreement and impose the agreed figure. In particular, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure.
167 Fourth, there is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy.
168 Fifth, the view of a specialist regulator will be given more weight if the quantum of the agreed penalty significantly reflects particular views of the regulator within its expertise. For example, in a case involving anti-competitive conduct, the view of the ACCC as to the likely deterrent effect of the agreed penalty in the relevant market may well be significant. On the other hand, in a case such as the present, the views of the ACCC as to the quantum of the penalty may be accorded less weight.
169 Sixth, where, as here, the Court considers that the agreed pecuniary penalty propounded by the parties is not within the permissible range, the Court is not obliged to give the parties an opportunity to withdraw their consent to the proposed orders and send the matter to trial on a contested basis. In the present case, during the course of oral submissions, Senior Counsel for the ACCC submitted that, were I not disposed to impose the agreed pecuniary penalty of $75 million, I was obliged to send the matter to trial on a contested basis. I challenged the correctness of that submission. Subsequently, Senior Counsel recanted and accepted that the Court was not obliged to send the matter to trial in the event that it did not accept and impose the agreed pecuniary penalty. I think that the ACCC's initial submission on this point is incorrect and was actuated by a misunderstanding of the observations made by the Full Court at 48,628, subpar (iii) of [58] in Mobil. There, the Court stated that, in some cases, it may be appropriate to allow the parties to withdraw their consent and send the matter to trial. However, the Full Court did not say that the Court should adopt that approach in every case.
170 VWAG did not embrace the ACCC's initial submissions to which I have referred at [169] above. VWAG submitted that the present case was not an appropriate case for the application of the principle stated by the Full Court at 48,628, subpar (iii) of [58] in Mobil and that, in any event, it did not support an approach which might engage that principle. VWAG expressly accepted that, in the event that I imposed a pecuniary penalty in an amount greater than the agreed pecuniary penalty, its only recourse would be to appeal my judgment. Ultimately, the ACCC agreed with this.
171 Seventh, the Court is not obliged to approach the task by commencing its reasoning process with the agreed penalty and limiting itself to considering whether that penalty is within the permissible range. Such an approach is acceptable but not obligatory. The reverse approach is also acceptable. That is, the Court might first determine the appropriate range of penalties independently of the parties' agreed figure and then, having made that judgment, determine whether the proposed penalty falls within the range.
172 In 2014, the High Court decided Barbaro v The Queen (2014) 253 CLR 58 (Barbaro). Barbaro was a criminal case. In that case, the appellants, Messrs Barbaro and Zirilli, pleaded guilty to serious drug offences in the Supreme Court of Victoria. Before they pleaded guilty, there were discussions between the lawyers on both sides of the record as to the range of sentences to which the offenders might be sentenced. The offenders were then sentenced. At the sentencing hearing, the trial judge refused to accept any submission from the prosecution or the defence as to the range of sentences that could be imposed upon the appellants. The Victorian Court of Appeal refused leave to appeal to Mr Barbaro and dismissed Mr Zirilli's appeal. In the High Court, the appellants argued that the sentencing hearing before the trial judge was procedurally unfair because she had failed to take into account a relevant consideration, namely, the views of the parties as to the appropriate sentence.
173 In the High Court, the plurality (French CJ, Hayne, Kiefel and Bell JJ) held that the appellants' arguments depended upon two flawed premises. The first was that the prosecution is permitted (or required) to submit to the sentencing judge its view of what are the bounds of the range of sentences which may be imposed on an offender. The second was that that premise is a submission of law. At 66 [7], the plurality held that the prosecution is not required, and should not be permitted, to make a statement of bounds to a sentencing judge. At 75 [42], the plurality held that such a submission is an expression of opinion not a matter of law. At 69-70 [20]-[23], the plurality justices explained that, as a result of the decision in R v MacNeil-Brown (2008) 20 VR 677, a practice had developed in criminal matters in Victoria of a sentencing judge asking Counsel for the prosecution to make a submission as to the "available range" of sentences. The plurality considered this practice to be wrong in principle. They held that the practice should cease.
174 Justice Gageler joined in the orders which the plurality held should be made. However, his Honour took a different view as to the status of a submission proffered by the prosecution in relation to sentence. His Honour held that such a submission is a submission of law and not merely a statement of opinion. His Honour went on to hold that the prosecution had a duty to assist the Court to avoid appealable error by making a submission as to the range of appropriate sentences if the sentencing Court requests such assistance or if the prosecution thinks that there is a significant risk that the Court will impose an appealable sentence in the absence of such a submission. His Honour also held that the Court is not obliged to accept the submission and is required to give effect to its own conclusion as to the appropriate sentence.
175 Prior to the High Court's decision in Barbaro, this Court had taken up some of the ideas and principles as to sentencing expounded by the High Court in another criminal case (Markarian v The Queen (2005) 228 CLR 357 (Markarian)) and applied them in civil penalty cases in this Court. In light of that circumstance, on 1 May 2015, a Full Court of this Court in Director, Fair Work Building Industry Inspectorate, v Construction, Forestry, Mining and Energy Union (2015) 229 FCR 331 (Inspectorate v CFMEU) decided that the reasoning in Barbaro applies to proceedings for the imposition of a civil pecuniary penalty in this Court where the parties have agreed upon the penalties and, pursuant to that agreement, where the parties make joint submissions to the Court as to the appropriate penalties or range of possible penalties. In addition, the Full Court also said that the reasoning of the majority of the High Court in Barbaro inevitably leads to the conclusion that it is not permissible for the regulatory authority in civil pecuniary penalty cases to make a submission to the Court identifying a range of penalties, nominating specific penalties or urging the adoption of agreed penalties (see, in particular, 404-405 [239]-[243] per Dowsett, Greenwood and Wigney JJ).
176 The High Court granted special leave in Inspectorate v CFMEU and gave judgment later in 2015 (Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 (the FBII case)).
177 The central question in the FBII case was whether the reasoning in Barbaro should be applied to civil pecuniary penalty proceedings in this Court. The High Court unanimously held that it should not and expressly approved the principles which had been previously articulated in NW Frozen Foods and Mobil. In the course of their judgments, the Justices of the High Court made a number of observations which are of general application.
178 The plurality (French CJ, Kiefel, Bell, Nettle and Gordon JJ) commenced their discussion of civil penalty regimes at 492-493 [16]. At 493 [18], the plurality held that s 76 of the TPA maintained a clear distinction between civil penalties and criminal penalties provided for elsewhere in that Act.
179 After referring to a number of particular civil penalty regimes, at 494-495 [23], the plurality observed that the form of civil penalty provisions that are found in a number of Commonwealth statutes is essentially similar. At 495 [24], the plurality said:
In essence, civil penalty provisions are included as part of a statutory regime involving a specialist industry or activity regulator or a department or Minister of State of the Commonwealth (the regulator) with the statutory function of securing compliance with provisions of the regime that have the statutory purpose of protecting or advancing particular aspects of the public interest. Typically, the legislation provides for a range of enforcement mechanisms, including injunctions, compensation orders, dis-qualification orders and civil penalties, with or, as in the BCII Act, without criminal offences. That necessitates the regulator choosing the enforcement mechanism or mechanisms which the regulator considers to be most conducive to securing compliance with the regulatory regime. In turn, that requires the regulator to balance the competing considerations of compensation, prevention and deterrence. And, finally, it requires the regulator, having made those choices, to pursue the chosen option or options as a civil litigant in civil proceedings.
180 At 495-500 [25]-[33], the plurality discussed (inter alia) Allied Mills, NW Frozen Foods, Mobil and FFE. In particular, they referred to FFE with apparent approval.
181 At 497-498 [31], the plurality emphasised that, as evidenced by the judgment of Wilcox J in FFE and the relevant statements of principle in NW Frozen Foods, the Court is required to form its own view about the appropriate range of penalties. At the end of that paragraph, the plurality said:
… there would be little advantage in limiting parties to an agreed range as opposed to an agreed figure. A better way of reinforcing the court's responsibility to determine an appropriate penalty was for the court to scrutinise the material presented to it carefully and satisfy itself that it was sufficient to determine whether the agreed penalty was appropriate.
182 The ratio of the plurality judgment begins at 503-504 [46]. After expressly rejecting the Full Court's reasoning in Inspectorate v CFMEU, the plurality said:
… there is an important public policy involved in promoting predictability of outcome in civil penalty proceedings and that the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers. As was recognised in Allied Mills and authoritatively determined in NW Frozen Foods, 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.
183 The plurality continued (at 504-506 [48]-[56]) as follows (footnotes omitted):
NW Frozen Foods and Mobil Oil do not suggest that the task of a judge faced with an agreed civil penalty submission is to determine whether the submitted penalty is "wholly outside" the "range of penalties reasonably available" or that the court is "bound to impose [an agreed] penalty irrespective of whether it is considered appropriate". To the contrary, as was emphasised in Mobil Oil, those cases make plain that the court is not bound by the figure suggested by the parties. The court asks "whether their proposal can be accepted as fixing an appropriate amount" and for that purpose the court must satisfy itself that the submitted penalty is appropriate.
Nor is it "pious" to suppose that judges will do their duty, as they have sworn to do, and therefore reject any agreed penalty submission if not satisfied that what is proposed is appropriate. It would be a travesty of justice if that were not the case. It may be presumed that a judge will do his or her duty according to the oath of office. The public may have confidence that it will be so.
Middleton J and McKerracher J were also correct in their view that what was said in Barbaro applies only to criminal proceedings and, consequently, that nothing said in Barbaro is antithetical to continuing the practice of agreed penalty submissions in civil penalty proceedings.
Contrary to the Full Court's reasoning, there are basic differences between a criminal prosecution and civil penalty proceedings and it is they that provide the "principled basis" for excluding the application of Barbaro from civil penalty proceedings.
A criminal prosecution is an accusatorial proceeding which is governed by the fundamental principle that the burden lies in all things upon the Crown to establish the guilt of the accused beyond reasonable doubt and by the companion rule that the accused cannot be required to assist in proof of the offence charged.
Civil penalty proceedings are civil proceedings and therefore an adversarial contest in which the issues and scope of possible relief are largely framed and limited as the parties may choose, the standard of proof is upon the balance of probabilities and the respondent is denied most of the procedural protections of an accused in criminal proceedings.
Granted, both kinds of proceeding are or may be instituted by an agent of the state in order to establish a contravention of the general law and in order to obtain the imposition of an appropriate penalty. But a criminal prosecution is aimed at securing, and may result in, a criminal conviction. By contrast, a civil penalty proceeding is precisely calculated to avoid the notion of criminality as such.
No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
"Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. ... The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act."
Moreover, in criminal proceedings the imposition of punishment is a uniquely judicial exercise of intuitive or instinctive synthesis of the sentencing facts as found by the sentencing judge (consistently with the jury's verdict) and the judge's relative weighting and application of relevant sentencing considerations in accordance with established sentencing principle. There is no room in an exercise of that nature for the judge to take account of the Crown's opinion as to an appropriate length of sentence. …
184 At 507-508 [57]-[61], the plurality said (footnotes omitted):
In contrast, in civil proceedings there is generally very considerable scope for the parties to agree on the facts and upon consequences. There is also very considerable scope for them to agree upon the appropriate remedy and for the court to be persuaded that it is an appropriate remedy. Accordingly, settlements of civil proceedings are commonplace and orders by consent for the payment of damages and other relief are unremarkable. So are court-approved compromises of proceedings on behalf of infants and persons otherwise lacking capacity, court-approved custody and property settlements, court-approved compromises in group proceedings and court-approved schemes of arrangement. More generally, 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.
Possibly, there are exceptions to the general rule. There is, however, no reason in principle or practice why civil penalty proceedings should be treated as an exception. Subject to the court being sufficiently 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, it is consistent with principle and, for the reasons identified in Allied Mills, highly desirable in practice for the court to accept the parties' proposal and therefore impose the proposed penalty. To do so is no different in principle or practice from approving an infant's compromise, a custody or property compromise, a group proceeding settlement or a scheme of arrangement.
It is true that there is a public interest in the imposition of civil penalties as opposed to the purely private interests which are in issue in many civil proceedings. But civil penalty proceedings are by no means the only civil proceedings in which the public interest is involved. Custody disputes involve the public interest. So do group proceedings and schemes of arrangement. So also do taxation, customs and social security appeals, and detention orders; and examples can be multiplied. Yet in each of those cases, it is wholly unexceptionable for a court to accept an agreed submission as to the nature and quantum of relief, provided the court is persuaded that it is an appropriate remedy. Once it is understood that civil penalties are not retributive, but like most other civil remedies essentially deterrent or compensatory and therefore protective, there is nothing odd or exceptionable about a court approving an agreed settlement of a civil proceeding which involves the public interest; provided of course that the court is persuaded that the settlement is appropriate.
It is also true, as the Full Court observed, that the regulator in a civil penalty proceeding is not disinterested. As has been seen, under the BCII Act, the Director's statutory functions include monitoring and promoting appropriate standards of conduct by building industry participants generally. It is, therefore, naturally to be assumed that the Director will fashion penalty submissions with an overall view to achieving that objective and thus perhaps, if not probably, with one eye to considerations beyond the case in hand. That consideration, however, supports, rather than detracts from, the propriety of a court receiving joint (or separate) submissions as to facts and penalty and imposing the proposed penalty if persuaded that it is appropriate. As was emphasised in NW Frozen Foods, it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance.
That being said, the submissions of a regulator will be considered on their merits in the same way as the submissions of a respondent and subject to being supported by findings of fact based upon evidence, agreement or concession. As was also said in NW Frozen Foods: "Courts have learned to be suspicious of claims of secret knowledge; and justice should be done in the light, with the relevant facts exposed to view. It is the Court which bears the responsibility." But, subject to that imperative, there is no indication in the purpose or text of the BCII Act that the court should be less willing to receive a submission as to the terms and quantum of penalty in a civil penalty proceeding than to receive a submission as to the terms and quantum of relief put up for approval by the court in any other kind of civil proceeding.
185 At 510 [65], the plurality approved the remarks made by the Full Court in Mobil at 48,628, subpar (iii) of [58], but the plurality did not suggest that, in the event that the Court is not disposed to impose an agreed penalty, in every case, the matter must then be sent to trial on a contested basis. Nor did the plurality decide whether a court which rejects an agreed penalty nonetheless may not impose a penalty greater than that sought in the initiating process. That submission made on behalf of the CFMEU was expressly put to one side and the question left undecided.
186 At 511 [68], Gageler J agreed that the reasoning of the plurality in Barbaro has no application to a civil penalty proceeding and that the principles applicable to agreed penalty submissions in a civil penalty proceeding are those articulated in NW Frozen Foods and Mobil.
187 Justice Keane also agreed with the plurality but added a number of additional observations.
188 At 520 [100], Keane J said that the concept of a "penalty" has long been recognised as describing a sanction for a wrong done to the public interest that was neither entirely criminal nor entirely civil. At 520-521 [102], his Honour observed that it is well settled that proceedings for the recovery of a civil penalty are civil proceedings even though "the purposes of those proceedings include the purposes of deterrence, and the consequences can be large and punishing" (referring to Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 at 198-199 [114] per Hayne J).
189 At 521-522 [103]-[104], his Honour continued (footnotes omitted):
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.
In addition, as the Full Court rightly appreciated, a defendant's agreement to meet a plaintiff's claim for a penalty is relevant as an indication of the defendant's acceptance of responsibility, in a way which is meaningful to the fixing of a proper penalty, for its departure from legal norms which gave rise to the claim. It has significance, of such weight as the court considers appropriate, as an assurance that the defendant may be relied upon not to transgress in that way again. It is relevant to the court's assessment of what is required by way of specific deterrence to prevent departures by the defendant from those standards in the future. To accept that this is so, as the Full Court did, is to acknowledge a point of difference between this case and Barbaro. To acknowledge this difference is to acknowledge an indication that the considerations of principle which underpin the reasons in Barbaro do not apply to proceedings under s 49 of the BCII Act. That indication should have been heeded.
190 Justice Keane concluded his judgment (at 523-524 [109]-[110]) with a note of caution expressed in the following terms (footnotes omitted):
In proceedings under s 49 of the BCII Act for the recovery of a civil penalty by the Commissioner, the willingness of the Commissioner to accept a particular sum by way of civil penalty in discharge of the Commissioner's claim against the defendant can be expected to reflect a considered estimation that, given the hazards and expense of litigation, satisfaction of the Commissioner'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. Those considerations may include the cost of proceeding to a judgment against a defendant who is willing to acknowledge its contravention upon terms, and the risk of failure involved in pursuing the case to a successful conclusion if a compromise cannot be reached. Modest successes may be regarded by the Commissioner as of greater value to the public interest in general deterrence of wrongdoing than the exhaustion of its resources upon an egregious but isolated example of wrongdoing. The Commissioner's stance can be expected to reflect a pragmatic assessment by the authority charged by the legislature with the effective investigation and enforcement of the regulatory regime that the public interest is best served by bringing the proceedings to a conclusion on agreed terms as to penalty. That course may be informed by a perceived need to conserve resources for the pursuit of other wrongdoing and wrongdoers, and to avoid the risks and uncertainties usually associated with litigation.
It is because the Commissioner 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 effective deterrence to other potential contraveners. In this latter regard, in Australian Competition and Consumer Commission v TPG Internet Pty Ltd, French CJ, Crennan, Bell and Keane JJ approved the statement by the Full Court of the Federal Court in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission that a civil penalty for a contravention of the law:
"must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business".
191 In the FBII case, the plurality recognised that there is an important public policy in promoting predictability of outcome in civil penalty proceedings and that the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for both regulators and wrongdoers. For this reason, the Court should always give careful consideration to and pay due respect to such submissions. Nonetheless, the Court held that the sentencing Court is not bound to impose the agreed penalty and must satisfy itself that the agreed penalty is appropriate. The Court would normally accept the agreed penalty if it is sufficiently 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. I take it that the expression "an appropriate remedy in the circumstances thus revealed" is another way of expressing the notion that the agreed penalty must be within the permissible range as determined by the Court. There is nothing odd about a Court approving a settlement of a civil proceeding which involves the public interest provided, of course, that the Court is persuaded that the settlement is appropriate.
192 Notwithstanding the observations which I have made at [191] above, the submissions of a regulator (whether as part of a joint submission made by all parties or on its own account alone) will be considered on their merits in the same way as the submissions of all other relevant parties will be considered.
193 As Keane J stated (at 520-521 [102]), a plaintiff regulator in a regulatory proceeding is not a prosecutor but a plaintiff.
194 Just as Wilcox J had done in FFE, Keane J warned against the Court being too ready to accept submissions and penalties agreed to by a regulator who was being overly pragmatic. The overriding obligation on the part of the Court is to fix a penalty which is appropriate.
195 In Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Ltd (2016) 118 ACSR 124 at 142-143 [83]-[88], Wigney J said:
In short, the primary purpose of imposing a pecuniary penalty is to protect and deter by punishment. Lest this be thought to be somehow inconsistent with what was said by French J in TPC v CSR (at 52-152), in a passage that was referred to with apparent approval by the plurality in Commonwealth v Director, FWBII at [55], it should be noted that punishment imposed primarily, if not solely, for the purpose of deterrence does not amount to retribution "within the sense of the Old and New Testament moralities that imbue much of our criminal law"; it is not vengeance or the infliction of pain or suffering purely in requital for a wrong. It is the imposition of a penalty for a statutory wrong for protective purposes. It has a primarily economic content, rather than a moral content.
The fixing of a pecuniary penalty pursuant to s 76 of the Competition and Consumer Act involves the identification and balancing of all the factors relevant to the contravention and the circumstances of the contravenor, and making a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty. While there may be differences between the criminal sentencing process and the process of fixing a pecuniary penalty (cf. Commonwealth v Director, FWBII at [56]-[57]), the fixing of a pecuniary penalty may to an extent be likened to the "instinctive synthesis" involved in criminal sentencing: TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at 294; [2012] FCAFC 190. Instinctive synthesis is the "method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case": Markarian v R (2005) 228 CLR 357; 215 ALR 213; [2005] HCA 25 (Markarian) at [51] (per McHugh J). Or, as the plurality put it in Markarian (at [37], per Gleeson CJ, Gummow, Hayne and Callinan JJ) "the sentencer is called on to reach a single sentence which … balances many different and conflicting features".
In fixing the amount of a civil penalty, reference is frequently made to the lists of factors or considerations identified by Santow J in Australian Securities and Investments Commission v Adler (No 5) (2002) 42 ACSR 80; [2002] NSWSC 483 at [126] and French J in Chemeq at [99]. Those lists of relevant considerations, which have been approved and elaborated on by many subsequent decisions of this Court, were not, and plainly were not intended to be, exhaustive. Nor was it suggested that each of the factors referred to in the respective lists was necessarily relevant or important in every case. These lists of factors (and similar lists given in other cases) should not be treated as a rigid catalogue or checklist of matters to be applied in each case: the overriding principle is that the Court should weigh all relevant circumstances: Australian Securities and Investments Commission v GE Capital Finance Australia [2014] FCA 701 at [72].
In general terms, the factors that may be relevant when fixing a pecuniary penalty may conveniently be categorised according to whether they relate to the objective nature and serious of the offending conduct, or concern the particular circumstances of the contravenor in question (what sentencing judges commonly refer to as the offender's "subjectives" or the "subjective circumstances").
The factors relating to the objective seriousness of the contravention include: the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the contravenor is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention.
The factors that concern the particular circumstances of the contravenor (where the contravenor is a corporation) generally include: the size and financial position of the contravening company; whether the company has been found to have engaged in similar conduct in the past; whether the company has improved or modified its compliance systems since the contravention; whether the company (through its senior officers) has demonstrated contrition and remorse; whether the company had disgorged any profit or benefit received as a result of the contravention, or made reparation; whether the company has cooperated with and assisted the relevant regulatory authority in the investigation and prosecution of the contravention; and whether the company has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law.
196 Putting to one side for the present the controversial issue as to whether the imposition of a civil pecuniary penalty ever involves "punishment", I agree with the observations made by his Honour in those paragraphs. They provide a convenient summary of the relevant principles.