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ABCC v Pattinson: High Court Dispenses with the Notion of ‘Just Deserts’ in Civil Penalty Cases.

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Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 (13 April 2022) (Pattinson)

In a landmark judgment, the High Court has clarified that maximum civil penalties are not just reserved for the most serious breaches of the law. In reaching this view, the High Court emphasised that the primary, if not sole, purpose of civil penalties is deterrence from further breaches of the relevant legislation. Thus, the High Court said, the retributive notion of proportionality used in criminal sentencing has no role to play in determining the appropriate civil penalty. Rather, the contravenor’s circumstances, including prior recidivist conduct, can be taken into account to set a higher penalty. This is particularly so where previous civil penalties have failed in their objective and have not deterred the conduct in question.

Implications

The High Court decision in Pattinson resolves longstanding uncertainty about the application of statutory maximum civil penalties and the use of criminal sentencing tools in determining the appropriate civil penalty. The case confirms that a court can, in appropriate circumstances, impose a higher civil penalty, including the maximum available, even where the misconduct in question is not, in itself, of the most serious kind. A regulator investigating an alleged contravention by a recidivist contravenor will usually have a suite of civil remedies, including civil penalties, to choose from. In these circumstances, even where the alleged contravention is at the less serious end of the scale, the regulator may decide to file civil penalty proceedings because it will be open to the court to impose a higher penalty to achieve deterrence.

Key takeaways

  • A civil penalty must reflect deterrence, not punishment.
  • A maximum penalty can be imposed for less serious contraventions if it is necessary to deter further contraventions by the contravenor or by other members of the industry.
  • Regulators may consider civil penalties are a more appropriate and more useful response to less serious contraventions by repeat offenders, as further contraventions of the same provision will justify the regulator seeking penalties of increasing severity. 
  • When negotiating to settle a civil penalty matter with a recidivist contravenor, a regulator can seek to put an agreed penalty to the Court that is at the higher end of the range.

Background

In 2018, Mr Pattinson was a CFMMEU (the Union) delegate at a building site in Frankston, Victoria. He conducted an induction session which was attended by two employees of a solar contractor at the site. During the induction, he told them that they could not work on the site unless they became members of an industrial association, consistent with the Union’s unlawful ‘no ticket, no start’ policy (the misrepresentations). As a result the two workers did not work on the day of the induction.

The ABCC commenced proceedings for a breach of s 349(1)(a) of the Fair Work Act 2009 (Cth) (FW Act). Mr Pattinson and the Union admitted that the misrepresentations contravened s 349(1)(a).


The Federal Court

Justice Snaden, at first instance, considered the appropriate level of penalties to be imposed under s 546 of the FW Act. His Honour decided that the maximum penalty available for a single contravention would be appropriate. The Union was large and well-resourced. It had a history of contravening the FW Act to further its ‘no ticket, no start’ policy. Indeed, by 2019, it had been found to have contravened civil penalty provisions on more than 150 occasions. In effect, the Union regarded the penalties previously imposed on it as ‘an acceptable cost of the way that it conducts its affairs’.

His Honour held that a penalty at or near the statutory maximum could be imposed if necessary to achieve deterrence, saying that if such a penalty was ‘the only way to deter even the most objectively inoffensive conduct… then imposition of anything less would necessarily result in a failure to achieve the only object to which the imposition of penalties is directed.’1 Mr Pattinson was ordered to pay $6000 and the Union was ordered to pay $63,000, the statutory maximum penalties.


The Full Federal Court

The full Federal Court upheld the Union’s appeal, finding that the maximum penalty should be reserved for the most serious examples of misconduct.

The Full Court analysed the criminal sentencing ‘principle of proportionality’, which prevents a court from imposing a sentence greater than the offender deserves by way of retribution. It held that the statutory maximum operated as a statutory ‘yardstick’ against which the misrepresentations needed to be assessed. It found that there is a ‘notion of proportionality’ within the task of determining an appropriate penalty under s 546 of the FW Act. This ‘notion’ required that the penalty imposed be ‘proportionate’ to the nature, gravity and seriousness of the actual conduct that contravened the FW Act in the current case and not to any recidivism. The Full Court reduced Mr Pattinson’s penalty to $4,500 and the Union’s penalty to $40,000.

The High Court considered that the penalties imposed by Justice Snaden… represented a reasonable assessment of what was necessary to deter the Union from continuing to implement its ‘no ticket, no work’ policy by making it too expensive to maintain.

The High Court

The ABCC appealed to the High Court, arguing that: 

  1. The discretion to determine a penalty under s 546 of the FW Act is not constrained by a ‘notion of proportionality’; and
  2. The maximum statutory civil penalty should not be regarded as a ‘yardstick’ for imposing the maximum penalty only in cases involving the worst misconduct.

The High Court accepted the ABCC’s arguments and allowed the appeal. It observed that:

It has long been recognised that, unlike criminal sentences, civil penalties are imposed primarily, if not solely, for the purpose of deterrence

The High Court considered that the penalties imposed by Justice Snaden, taking into account more than 150 similar contraventions by the Union, represented a reasonable assessment of what was necessary to deter the Union from continuing to implement its ‘no ticket, no work’ policy by making it too expensive to maintain.


Proportionality

The High Court considered that the criminal law concern that a sentence must be proportionate to the seriousness of the offence for which the offender is being sentenced does not apply to compliance actions involving civil penalties. This is because the purpose of a criminal sentence is retribution and, therefore, the punishment needs to fit the crime and be what the offender deserves. 

In civil penalty cases, the court’s task is to impose a penalty that is ‘appropriate’. This must be done fairly and reasonably, having regard to the subject matter, scope and purpose of the legislation. An ‘appropriate’ penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of a particular case. 

The High Court found that the Union’s steadfast resistance to previous attempts to enforce compliance by civil penalties fixed at less than the maximum is ‘a compelling indication’ that the penalties previously imposed had not been taken seriously. They did not outweigh the benefits of the Union’s unlawful ‘no ticket, no start’ policy. Indeed, the Union’s continued defiance demonstrated that it regarded previous penalties as an ‘acceptable cost of doing business.’

The High Court distinguished other concepts used in criminal sentencing from proportionality. It found that totality2, parity3 and course of conduct4 concepts are analytical tools that can be used in determining the appropriate civil penalty. ‘Proportionality’ by contrast is so closely tied to punishment that it is incompatible with a civil penalty regime focussed on deterrence.


Not ‘the Worst Case’

The High Court considered that the Full Court was misled by the view that the maximum penalty is reserved for the most serious conduct and that this would prevent it from imposing the maximum penalty even though the maximum might be necessary to deter similar conduct. 

The Full Court’s use of the statutory maximum penalty as a ‘yardstick’ against which to assess the gravity of the contravention in question was an attempt to transplant the concept of retributive justice into a civil penalty regime in which retribution has no role to play.

This “yardstick” understanding of the maximum penalty, with its focus on the objective seriousness or gravity of a contravention, is reminiscent of retributive notions of “just deserts” and the adage that the punishment should fit the crime.

Rather, the High Court held, the maximum penalty is “but one yardstick that ordinarily must be applied”. It must be treated as one of a number of relevant penalty factors. It acts as a constraint on the court’s discretion in that it requires “some reasonable relationship between the theoretical maximum and the final penalty imposed”. This relationship of “reasonableness” may be established by reference to the circumstances of the contravenor as well as by the contravention.


Contravention vs contravenor

The High Court held that both the circumstances of the contravenor and the circumstances of the contravention may be relevant to the assessment of whether the maximum level of deterrence is called for. Where there has been a persistent strategy of non-compliance by the contravenor, the need for deterrence may warrant the imposition of the maximum penalty even though the conduct in question is not the worst example of non-compliance. Indeed, the High Court said, in some cases, the circumstances of the contravenor may be more significant in terms of the extent of the necessity for deterrence than the circumstances of the contravention.


The High Court’s conclusions

The court’s function is to give effect to the intention of the Act. In this regard, the court must do what it can to deter non-compliance with the Act. Its role is to fix a penalty which it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions of the Act. As such, it was open to Justice Snaden to conclude that the maximum penalty was necessary to deter the Union from further contraventions.

About the author

Melissa has more than 20 years practising law in the public and private sectors. She is a strategic legal adviser with significant expertise in energy, administrative, commercial, regulatory, consumer and competition law in the public and private sectors.

Melissa has extensive experience in initiating, developing and implementing frameworks for statutory decision- making and legislative and policy development. She also has significant  compliance, civil penalty investigations, and litigation experience.

Melissa is known for being future focused, collaborative and inclusive. She is an innovative legal strategist with the ability to deliver excellent results for clients while maintaining strong working relationships.

Outside work, Melissa enjoys skiing, reading and spending time with family and friends.


References

  1. Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654 at [72].
  2.  The totality principle requires the court to review the aggregate penalty for multiple contraventions to determine whether it is appropriate.
  3.  The parity principle requires that similar penalties be imposed on similar contravenors for similar contraventions committed in similar circumstances.
  4.  The course of conduct groups together separate contraventions to impose a single penalty.
  5.   Pearce v The Queen (1998) 194 CLR 610 at 623 [40].

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