By:
Matthew Peckham, Barrister
When an individual or corporation breaches a civil penalty provision, the responsible regulator may seek to have the court impose a civil penalty, for the purposes of deterring that person (and others) from future contravening conduct.
In recent years, the maximum available civil penalties have increased in a wide range of areas. Civil penalties are a powerful tool for regulators to encourage compliance, and businesses must confront the possibility that a court will impose a significant penalty for a breach.
But how should courts approach the task of assessing the amounts of civil penalties, and when will the maximum penalty be realistically available?
The High Court’s decision in Pattinson
In Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 (Pattinson), the High Court of Australia emphasised that the primary purpose of civil penalties was “deterrence” and largely dispensed with the criminal law notion of “proportionality” (ie, that the punishment must fit the crime). Notably, the High Court placed critical importance on the respondent's long history of contravening conduct.
While the decision in Pattinson has encouraged some regulators to seek higher (or maximum) penalties, particularly against large or persistent wrongdoers, its principles have since been applied with nuance by the Federal Court in a series of subsequent decisions.
The facts in Pattinson concerned contravening conduct by the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) on a construction site. Specifically, the CFMMEU had falsely advised two workers that they could not work on-site unless they were members of a union, contrary to s 349 of the Fair Work Act 2009 (Cth).
These false statements were consistent with the CFMMEU’s long-standing “no ticket, no start” policy, which had been unlawful in practice for over 20 years.[1]
In relation to this conduct, the trial judge imposed the maximum available penalty of $63,000, which was overturned on appeal to the Full Court and subsequently became the subject of an appeal to the High Court.
In reviewing the history of the matter, the High Court noted that the CFMMEU was notoriously a serial offender who had historically acted in disregard of the law and appeared to treat the imposition of civil penalties as “little more than the cost of its preferred business model”.[2]
While the Full Court held that the trial judge was wrong to assess the civil penalty amount based on the CFMMEU’s past offending (rather than the specifics of the contraventions in question), a majority of the High Court disagreed, and reinstated the maximum penalty. In doing so, the High Court held that a penalty does not need to be “proportionate” to the seriousness of the conduct in question, and that the primary consideration when assessing penalties was deterrence.
More specifically, the High Court held that the criminal law notion of “proportionality” (in the sense of retributive justice) had no place in the law of civil penalties. Accordingly, the High Court held that a maximum penalty is not reserved solely for the most serious contraventions; rather, there must be a reasonable relationship between the maximum penalty and the penalty imposed, which could be established if the maximum penalty was reasonably necessary to achieve the purpose of deterring future wrongdoing.[3]
The High Court conceded that a penalty must not be so high to be oppressive, in the sense that it was greater than necessary to achieve its purpose of deterrence.[4]
In this case, the CFMMEU’s continuing contraventions were a compelling indication to the court that the more moderate penalties imposed previously had not been sufficient to achieve deterrence[5] and that the maximum penalty was appropriate.
How have the courts applied the decision in Pattinson?
By expanding the circumstances in which the maximum penalty might be appropriate, the High Court in Pattinson created a potentially blunt instrument, not least for any future proceedings against the Construction, Forestry and Maritime Employees Union(CFMEU) – the CFMMEU’s successor.
However, in the two cases referred to below, the Full Federal Court has applied the principles in Pattinson with some nuance.
Case study: CFMEU v Fair Work Ombudsman [2024] FCAFC 55
In this case, the Full Federal Court imposed a penalty on the CFMEUfor (another) breach of industrial legislation involving the conduct of a union representative at a construction site.
The penalty imposed by the Full Court was $60,000, which was close to (but did not meet) the maximum available penalty for the contravention (being $66,600).
In imposing the penalty, the court held that the penalties were informed by an “extensive” and “defiant” history of contravening conduct[6] that was serious and deliberate[7] and so a penalty in an amount “approaching the maximum” was required for deterrence.[8]
While the Full Court cited and relied on the principles in Pattinson[9], it appeared to recognise that the nature and degree of repeat offending in this case, was such that the imposition of a near-maximum penalty (rather than the maximum penalty) was appropriate and sufficient to achieve the objective of deterrence.
Case study: J Hutchinson Pty Ltd v Australian Competition and Consumer Commission [2024] FCA 18
This decision concerned both the CFMEU and a construction company (J Hutchinson).
The trial judge imposed a penalty of $1.5 million on the CFMEU for its conduct as an accessory to an illegal boycott by J Hutchinson in breach of s 45E of the Competition and Consumer Act 2010 (Cth).
The $1.5 million penalty imposed on the CFMEU by the trial judge comprised:
- the maximum penalty of $750,000 for inducing J Hutchinson’s breach; and
- a further maximum penalty of $750,000 for having been knowingly concerned in that breach.
J Hutchinson and the CFMEU each appealed on both liability and penalty, and the appellate court set aside the contraventions. However, in setting aside those contraventions, Wigney J also considered the quantum of the penalties imposed by the trial judge and held that:
- the trial judge had placed “excessive and unjustifiable weight” on the CFMEU’s past contraventions of industrial legislation[10]; and
- in contrast to Pattinson, there had not been any previous or subsequent similar breaches (ie, of the competition legislation), let alone a policy of similar deliberate contraventions, or any involvement by the CFMEU’s senior management. It could not be said, in that context, that the maximum penalty was required for deterrence.[11]
Assessment of civil penalties after Pattinson
While the decision in Pattinson is a reminder that deterrence is the primary objective when assessing civil penalties, the courts must only impose penalties in amounts that are sufficient to achieve that objective.
In most cases, courts will consider the nature and extent of the wrongdoing in question, with more serious or repeated wrongdoing justifying a higher level of penalty to achieve the necessary deterrence. When dealing with serial offenders, the courts will look closely at the nature of their previous wrongdoing, and the deterrent effect of any previous penalties.
In cases such as Pattinson, where the circumstances suggest that only a high penalty (up to and including the maximum) will provide an effective deterrent, the issue of deterrence will override any other considerations, including the gravity of the present contravention in question.
Civil penalty proceedings content in Practical Guidance Dispute Resolution
LexisNexis® Practical Guidance Dispute Resolution features a dedicated civil penalty proceedings topic, which is designed to help practitioners keep up with developments and stay on top of practice in this unique area of civil procedure and which includes the following subtopics:
- Introduction to civil penalty proceedings, preliminary steps and investigations;
- The conduct of civil penalty proceedings; and
- Penalties, costs and other relief in civil penalty matters.
Contact your Relationship Manager for more information about Practical Guidance Dispute Resolution or visit our Practical Guidance website.
[1]Pattinson, [3].
[2] Pattinson, [21].
[3] Pattinson, [10].
[4] Pattinson, [40], [41].
[5] Pattinson, [43].
[6] CFMEU v Fair Work Ombudsman [2024] FCAFC 55, [36]-[38].
[7] CFMEU v Fair Work Ombudsman [2024] FCAFC 55, [8].
[8] CFMEU v Fair Work Ombudsman [2024] FCAFC 55, [6].
[9] CFMEU v Fair Work Ombudsman [2024] FCAFC 55, [7].
[10] J Hutchinson Pty Ltd v Australian Competition and Consumer Commission [2024] FCA 18, [92].
[11] J Hutchinson Pty Ltd v Australian Competition and Consumer Commission [2024] FCA 18. [90]-[92].