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Submissions on penalty in regulatory proceedings like ASIC and disciplinary prosecutions

June 8th, 2015 · No Comments

The Federal Court has given a landmark decision about regulatory prosecutions.  In federal jurisdictions and state jurisdictions which follow the new decision, professional disciplinarians like ASIC and Legal Services Commissioners will no longer be able to enter into plea bargains in the expectation that the court or tribunal hearing them will rubber stamp the agreed outcomes so long as they are ‘within the permissible range’ of penalties.  But nor will disciplinary prosecutors be able to submit what the appropriate penalty ought to be.  Rather, they will be limited to making submissions about the appropriate sentencing principles, and about similar outcomes in similar cases.

The powerful judgment is at odds with a paragraph of dicta in a recent decision of the Victorian Court of Appeal in that it applies the High Court’s decision in Barbaro, a criminal case, to the quasi-criminal realm.  How the case plays out in Victoria remains to be worked out, but if this case goes to the High Court (and both sides have filed special leave applications), all that may change. Certainly the settlement of proceedings by regulators just got more complicated.

There seems to be a discrepancy about fundamental norms of government between the dicta of our Court of Appeal and the ratio of the Federal Court’s decision.  Once that gets resolved, however, each piece of legislation setting up the regulatory regime must be construed against the backdrop of those fundamental norms, and might give rise to different outcomes.  The Federal Court approached the task of working out how Barbaro applies in regulatory prosecutions in an orthodox fashion, i.e. by a process of statutory construction based on a close textual analysis of the legislative scheme as a whole.

The Chief Justice of the Federal Court allocated three judges to hear a preliminary question in the regulatory prosecution at first instance, in which the parties had already agreed on a proposed outcome, the result of a settlement (or, if you will, a plea bargain).  The proceeding was brought against the CFMEU and the judgment’s aim was apparently to sort out once and for all if, and how, the High Court’s decision in Barbaro is to apply in proceedings for a penalty.  The mouthful of a case is reported as Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59, but seems set to be called ‘the CFMEU Case’.

It’s quite a judgment: indignant, keen to cut cant, and argued from first principles in relation to the place of the courts in civil society.  It is a further step in the demolition of the nonsense about disciplinary proceedings being sui generis, fundamentally distinct from criminal prosecutions, and (oh, spare me!) protective and not punitive in a way which means the protection of those against whom punishment is sought need not be extended.  The   punishment of citizens is, and must be seen to be, a job for the courts (except where parliament has expressly provided otherwise); where the State is seeking to punish citizens the label applied to the proceedings is a distraction; and in such cases, the Courts having been tasked with ascertaining the appropriate penalty, they must do so conscientiously themselves, however convenient it might be for them, for regulators, and for the regulated, to cede that task to a regulator which is part of the machinery of the executive arm of government, and to pay lip service to the inquiry conducted by the Court into the appropriateness of a deal done behind closed doors.  So said the Court.

The indignation extends to the many judges and other decision makers who have convinced themselves post-Barbaro that the decision does not apply  to them, often on the basis that criminal proceedings are special and proceedings for a penalty are civil proceedings and nothing like criminal prosecutions.  Distinguishing Barbaro away has been de jour.

The High Court decided, in Barbaro v The Queen (2014) 305 ALR 323, according to the Full Federal Court’s paraphrase, that ‘in criminal sentencing proceedings, the prosecution should not nominate the specific sentencing result or the range within which it should fall’.  What the parties should do, the High Court said, is make submissions about the facts, identify the legal principles applicable to the determination of sentence, and, if so minded, give evidence about sentences for other more or less similar offences. The appeal in Barbaro was on the grounds of the trial judge’s refusal to allow the prosecution to propose a ‘sentencing range’.  The appeal failed because the High Court said that the judge should have refused that invitation.

In the case determined on 1 May 2015 by the Full Federal Court exercising original jurisdiction, a building regulator had settled a proceeding for pecuniary penalties against the CFMEU and the parties proposed to proceed on the basis of a statement of agreed facts and a joint submission as to the appropriate penalty.  The case is Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59.

The Court, constituted by Dowsett, Greenwood and Wigney JJ, held that in proceedings for pecuniary penalties:

1.  Just because they are not ‘criminal proceedings’ it does not follow that they are ‘civil proceedings’  in the sense that they ought to be conducted according to the rules for cases between private parties, or that Barbaro should not apply: the differences between the two are just insufficient to give that result (c.f. Legal Profession Complaints Committee v Love [2014] WASC 389 at [75] – [78] per a four-judge bench, which the Full Federal Court did not affirm);

2. Criminal sentencing principles are influential in pecuniary penalty cases, such that — this was expressed as a preliminary view — a separate sentence should be imposed for each offence, followed where appropriate (e.g. in a continuing course of conduct) by a separately reasoned moderation of the total penalty to bring the penalty into accord with the ‘overall criminality’ (or its pecuniary penalty equivalent) (see [38] – [46] and note, to similar effect but not referred to by the Full Federal Court, Legal Services Commissioner v Stirling [2013] VSCA 374, at [72] – [75]);

3. ‘the public interest in the imposition of pecuniary penalties also leads to the conclusion that the fixing of the amount of such a penalty is a matter for the Court, and that the parties cannot, by agreement, bind it.  We would add that although in criminal sentencing, the prosecution has a duty to draw to the attention of a sentencing judge any perceived inadequacy in a proposed sentence, we do not understand that duty to extend to making submissions as to ultimate outcome, range or an agreed figure.  It is not necessary that we consider whether a regulator bears any duty similar to that mentioned above.’  (see [145]) (The reference to the duty mentioned above appears to have been intended to refer to a duty identified by the High Court, post-Barbaro, in a criminal prosecutor to submit that a penalty being mused-over by a Court would be manifestly inadequate.)

There now appears to be some tension between the majority’s decision in Matthews v R [2014] VSCA 291 and the position which will prevail in federal courts, so it should not be assumed necessarily that this landmark decision in relation to civil penalties will apply in jurisdictions bound by the Victorian Court of Appeal.  (See [99] to [106])

It seems likely enough that the Full Federal Court’s decision will go on appeal to the High Court where Nettle J, one of the majority in Matthews, may sit.

VCAT’s Legal Practice List has declined to apply Barbaro in the disciplinary prosecutions of solicitors, by reference to dicta in Matthews that it does not have application outside the sentencing of convicts to terms of imprisonment (most recently in, Legal Services Commissioner v Zervas [2015] VCAT 356).  By contrast, the Tribunal declined, pre-Matthews, to hear submissions as to disposition in Legal Services Commissioner v Horak [2014] VCAT 539, and, once again pre-Matthews, it held in Legal Services Commissioner v Nomikos [2014] VCAT 305 that though the Tribunal need no longer consider itself ‘bound’ by a joint submission as to penalty on a plea even if it was within the ‘permissible range’, nothing prevented the Commissioner stating his views in relation to the appropriate penalty.

The Court endorsed the following paragraph of a a law reform commission report to the effect that proceedings for a pecuniary penalty are not ‘civil’ proceedings:

‘Pecuniary penalties are sought by the State against its citizens, acting in and on behalf of the public interest (rather than as a litigant in its own interests). In investigating conduct that can result in a pecuniary penalty, State enforcement bodies are armed with intrusive investigative powers to identify and establish breach.  For the enforcement bodies in question, those powers are the same as, or may in some ways be more profound than, the powers they use in criminal investigations.

… this feature of pecuniary penalties means that describing them as “civil” is inapt.  Adoption of that term has been driven by the fact that the New Zealand court system exhibits a fundamental dichotomy between civil and criminal proceedings.  Any matter that is not pursued in criminal proceedings is liable to be branded, by process of elimination, as “civil” within that dichotomy.  In reality, the term “civil” relates to matters concerning citizens, and “civil law” is the branch of law that deals with the resolution of legal issues between private parties.  Pecuniary penalties do not arise in this context: like criminal offences, they arise within the field of public law, which concerns the relationship between the State and its citizens. Therefore, application of the term “civil” is liable to mislead. In its submission, Bell Gully expressed concern that the use of that label risks encouraging the unthinking application of civil rules, and a perception that pecuniary penalties are an easy way to punish and deter, while neatly sidestepping the rules and protections of the criminal law.  We agree that is a risk.’

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Tags: Criminal liability · Discipline · Legal Services Commissioner · Legal writing · Out of court settlements · procedure · Professional regulation · prosecutors' duties · regulators' duties · Rule of law