Casenote PDF

The Corporate Fail casenote is available to download here: Cth v Director FWBII casenote.  The case is available online: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46.

Why is it important?

This case:

  1. Clarifies Barbaro;
  2. Affirms NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission and Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd, particularly their approach to penalty submissions;
  3. Confirms that parties to civil pecuniary penalty proceedings (including the state, when the state is a party) have a right to make submissions about appropriate penalties, including, should they wish, joint submissions;
  4. Confirms that, where the plaintiff is a regulator, its views about the proposed penalty are relevant considerations;
  5. Affirms that Barbaro concerns the unique position of a prosecutor and judge in criminal proceedings and therefore has no application to civil proceedings; and
  6. Affirms the civil character of civil pecuniary penalty proceedings brought by the state.

There is also quite a lot of dicta on the distinction between civil and criminal litigation.

Comments

Choosing between civil penalty and criminal enforcement

What I find especially interesting about this case, in conjunction with Barbaro, is the potential implications it has for Ayers and Braithwaite’s regulatory pyramid.  Imagine you are a regulator – let’s say you’re the ACCC – and you are considering whether to take civil or criminal enforcement action against companies who engaged in cartel conduct.  Your legislation prohibits cartel conduct in civil and criminal law.  The maximum civil pecuniary penalty for cartel conduct is the same as the maximum sentence for cartel conduct.  But if you take civil action, additional orders may be sought, including injunctions, disqualifying orders, and community service orders.  In these circumstances, only the availability of a conviction attends the criminal proceeding to mark its distinction as more serious than civil penalty proceedings.  But the price is swapping a civil standard of proof, and civil procedure, for a criminal standard and procedure.  There is an extraordinarily wide gulf between them.

Barbaro and Cth v Director FWBII appear to prohibit you from making submissions regarding the quantum of an appropriate criminal fine,1 but warmly encourage you to make submissions regarding the quantum of an appropriate civil penalty.   Perhaps you fear, particularly if you have not had any experience with the court’s attitude to sentencing these types of matters, that the court will not calculate an appropriate penalty if it cannot hear your views about what size fine will provide sufficient general deterrence to the industry.  After all, the very same court that will sentence the offender has previously advised that it finds the regulator’s views on what is required for deterrence very helpful in civil penalty cases.  Or perhaps you fear that, if the offender is cooperative through the investigation and litigation process, the court will undervalue that cooperation and impose what you consider to be an overly punitive sentence, tending to discourage other corporations from cooperating with your criminal investigations.  Or perhaps you simply find that criminal investigations become much more difficult and resource-intensive than civil investigations, because unlike civil investigations, which may result in agreed submissions on penalty, the investigated company is unwilling to cooperate, knowing that you the regulator cannot agree to propose a particular fine to the court.

So, although criminal prosecution has traditionally been reserved as the “big stick” in the regulatory toolbox, considered the most serious step a regulator can take in reaction to corporate malfeasance (apart, perhaps, from licence cancellation), one can imagine how criminal law might not be used in the most serious and important cases: there are practical reasons why these cases might be litigated as civil penalty matters instead.  In the new millennium, the proper role of prosecution as a tool for regulating corporations is increasingly unclear.

Perhaps what we may see – and to some extent, Cth v Director FWBII points to this – is that Barbaro will be confined to submissions regarding imprisonment.  Perhaps in corporate criminal prosecutions, the prosecutor will be permitted to argue that “a fine of at least $X is necessary to achieve appropriate specific deterrence” or “a fine of between $X and $Y would, in our opinion, achieve sufficient general deterrence within the licensed industry”.   This would require some overlooking of the court’s comments about “the sharp distinction between the role of the judge and the role of the prosecutor in the criminal trial process.” If not, there will need to be more development of the principles of sentencing as they apply to corporations and the calculation of corporate fines, to give both parties to criminal proceedings a better idea of what punishment may be ordered if a conviction is secured.  We shall see.

The civil/criminal distinction

The plurality did a fine job of finding a principled basis for distinguishing the civil and criminal jurisdictions.  But, as a practitioner, I find myself preferring the additional comments made by Keane J, which seem to accord better with the reality I see in courtrooms.

Keane J readily admits: “[t]he distinction between criminal and civil cases does not hold for all purposes.” [89]  But as he explains,

“distinctions are regularly drawn for particular purposes between criminal proceedings and civil proceedings; and these distinctions have proved to be sufficiently stable to serve the purposes for which they have been drawn.” [90]

Whereas the plurality assert that the criminal sentence and pecuniary penalty can be distinguished on principle, one being rehabilitative and/or retributive, the other ‘protective’, Keane J demonstrates that the distinction is not so clear, noting

“the availability or the exercise of the power to award exemplary damages in proceedings for tort for the purpose of punishing the tortfeasor rather than compensating the victim [does not alter] the civil character of the proceedings.” [90] per Keane J.

And to this observation I would add my own: that it is unexceptional for a sentencing Magistrate or Judge to determine that in a particular case neither retribution nor rehabilitation are called for, and to proceed to craft a sentence that is designed only to deter the offender.2   This means that a criminal sentence is not necessarily, or essentially, retributive (or rehabilitative) and to characterise it in this way lays a deficient premise on which to distinguish criminal sentences from civil pecuniary penalty orders.

There is also an air of unreality around the plurality comments that, unlike in criminal proceedings, there is “generally very considerable scope for the parties to agree on the facts and upon consequences” in civil proceedings.  In truth, most criminal proceedings resolve as guilty pleas,3 and most plea hearings are uncontested: that is, the facts are agreed between the parties and recorded in an Agreed Prosecution Summary.4  Of course it remains for the sentencing court to satisfy itself of those agreed facts, but the same is true of the civil judge determining penalty: she must be “sufficiently persuaded of the accuracy of the parties’ agreement as to facts and consequences.” (Cth v Director FWBII [58])

I think it is a shame that these and other comments made by the plurality, in an effort to neatly distinguish the two jurisdictions, tend to create a false image of the criminal jurisdiction.

Barbaro clarification

The plurality (French CJ, Kiefel, Bell, Nettle and Gordon JJ) took the opportunity to clarify the plurality reasoning in Barbaro v The Queen (2014) 253 CLR 58; [2014] HCA 2, saying it was “principally informed by three considerations.” [35]

  • First, “it is impossible to define the precise limits of the “available range” of terms of imprisonment that may be imposed on a criminal offender.” [35]  So, here we see the High Court confining Barbaro to submissions on imprisonment, something it certainly did not do in the text of Barbaro, but this must have been prompted by the Matthews comments, and, one guesses, Nettle J’s involvement.
  • Second, “a statement as to the available range of sentences can never be more than an expression of opinion; and, in a criminal proceeding, the Crown’s opinion is irrelevant.” [36] Here, we see the High Court expressly limit Barbaro to opinions of the Crown, something it did not do explicitly in Barbaro.
  • Third, allowing the Crown to give a range “could lead to erroneous views about the importance of such a statement in the sentencing process, with consequent blurring of what should be, and be perceived to be, the sharp distinction between the role of the judge and the role of the prosecutor in the criminal trial process.” [37]

In his concurring judgment, Gageler J offered an alternative conceptualisation of the Barbaro plurality judgment:

“The reasoning of the plurality in Barbaro is therefore best understood as having gone no further than to recognise a qualification to the common law duty of a prosecutor to assist a criminal court to avoid appealable error, founded on a consideration of legal policy. The qualification is that the prosecutor cannot state that a custodial sentence of a specified numerical length or of a length within a particular numerical range is appropriate. The policy reason is that for the prosecutor to speak of numbers would give rise to what was assessed to be an unacceptable risk of breaking down the sharp distinction which must exist within the criminal justice system between the roles of the prosecution and the court in exercising the coercive power of the state in the punishment of criminal guilt.”  Commonwealth of Australia v Director, Fair Work Building Inspectorate [2015] HCA 46 at [77] per Gageler J.

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  1. Barbaro was interpreted in this way by the Supreme Court of Western Australia in The House of Relocators Pty Ltd v Ginbey [2014] WASCA 94.  I say “appear” because the High Court didn’t address the issue directly, and there is so much dicta that you can see an opening for courts to run either way – especially given the fact that the plurality in Cth v Director FWBII seem to limit Barbaro to imprisonment submissions.  Then again, if Barbaro were truly limited to imprisonment submissions, surely Cth v Director FWBII would have been much shorter.
  2. Indeed, sometimes a sentencing court may consider that even deterrence is unnecessary, and discharge an offender without so much as a conviction.
  3. For example, approximately 70% of Victorian County Court criminal cases are resolved by guilty pleas. (See: County Court of Victoria Annual Report 2012-2013, p6)
  4. Often enough, in lower courts, evidence of the offender’s circumstances is given from the bar table without objection.