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Client Update: Significant High Court decision on settlement of regulatory proceedings

9 December 2015

In brief: The High Court today held that parties and regulators are permitted to put before the court an agreed position as to the value of a penalty reached as part of a settlement agreement. Our Regulatory team reports.

Summary

The High Court's important judgment, which held that parties and regulators are permitted to put before the court an agreed position as to the value of a penalty reached as part of a settlement agreement, will have significant implications for the settlement of proceedings involving a regulator. It will remain a matter for the court, in its discretion, to determine whether the agreed penalty is appropriate. The decision is consistent with historical practice and will facilitate the resolution of regulatory proceedings by providing greater certainty that penalties agreed between the parties will likely come to be reflected in the court's orders.

Doing deals with regulators: the court's role

Over the past two decades, a practice has developed, whereby companies who wish to settle proceedings brought by a regulator such as the ACCC, ATO and ASIC  agree with the regulator a joint statement of facts and a penalty.

If this agreed penalty fell within an appropriate range, the court would typically endorse the negotiated settlement and make corresponding orders. While the court would usually endorse the negotiated penalty, it retained a discretion to reject the submissions on penalty and impose a different penalty if it considered that the agreed penalty was not appropriate in all the circumstances.

This well established practice was halted by a decision of the Full Federal Court earlier this year in Director, Fair Work Building Industry Inspectorate v CFMEU (2015) 229 FCR 331 (see our article Unravelled: Full Federal Court rules against agreed civil penalties), which held that a court cannot receive submissions on the quantum of the appropriate penalty. In the CFMEU case, the Federal Court applied a criminal law case (Barbaro v The Queen (2014) 253 CLR 58), which held that criminal prosecutors are not permitted to make a submission to a sentencing judge setting out a range of available sentences.

The Commonwealth and others appealed the judgment in the CFMEU case to the High Court.

The High Court's decision

The High Court  unanimously held that the principles from Barbaro had no application in relation to civil penalty proceedings. The High Court emphasised that, in considering the submissions of the parties as to the agreed penalty, the court's task is to determine whether the agreed penalty is appropriate in all the circumstances. Critically, the High Court reiterated that a court that has received submissions on penalties retains a discretion to reject the agreed penalty if the court does not consider it appropriate. This discretion ensures that the submission of agreed penalties does not usurp the court's role.

In reaching its decision, the High Court noted the public interest in promoting predictability in the settlement of civil penalty proceedings, including the public interest in avoiding lengthy and complex trials.

 

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