A recent Federal Court decision affirmed the Court’s responsibility to have the final say in the face of negotiated settlements. But the finding may mean uncertainty for business. Francis Wilkins reports
The full bench of the Federal Court last week supported the Court’s ability to exercise judicial discretion rather than its having to accept penalties agreed upon by regulators and businesses. The 30 March decision clarifies a 1996 finding of the Federal Court that “the Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case. . .” It does, however, potentially raise serious concern within business because companies may now feel they have even less certainty that courts will accept negotiated penalties.
Such agreements between regulators and alleged contraveners are becoming increasingly common as a way to settle court actions and avoid lengthy and expensive litigation.
The decision stems from a case in which the resources minister was seeking a penalty from Mobil Oil Australia for contravention of the Petroleum Retail Marketing Sites Act 1980. The Act is designed to limit the number of retail outlets that major petroleum companies can operate. Mobil admitted the contravention, and with the minister submitted a statement of agreed facts, which the Court accepted. The parties also submitted that the Court should impose a negotiated penalty of $844,500.
The trial judge, however, recommended the Full Court should first examine whether the Court is bound by the 1996 decision “to consider whether the proposed amount is within the permissible range in all of the circumstances and, if so, impose a penalty of that amount”.
In that 1996 case, NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission, the Federal Court found that because “the fixing of the quantum of a penalty cannot be an exact science, the Court, in such a case, does not ask whether it would without the aid of the parties have arrived at the precise figure they have proposed, but rather whether their proposal can be accepted as fixing an appropriate amount…When corporations acknowledge contraventions, very complex and lengthy litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the [regulatory authority] to turn to other areas of the economy that await their attention … These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks.”
The ACCC, which intervened in the Mobil case and concluded the Court should not be bound by the NW Frozen Foods decision, nevertheless argued that negotiated settlements represent an efficient mechanism for concluding investigations. Benefits include encouraging alleged contraveners to make admissions, saving the time and resources both of the Court and the regulator, and enabling more effective enforcement of the Trade Practices Act 1974, the Commission said.
In NW Frozen Foods, the trial judge rejected an agreed penalty of $900,000, substituting a penalty of $1,200,000. But while the full bench in the Mobil case found the judge had erred, it was not because he had rejected the parties’ proposed penalty; rather, he had “erroneously placed weight on certain considerations, thus vitiating the exercise of his discretion”.
The reasoning behind NW Frozen Foods indicated that while determining a penalty was not an “exact science”, it was the Court’s responsibility to determine an appropriate amount. In considering a proposed penalty, the Court examines “all the circumstances of the case”, and although the view of the regulator, as a specialist body, is a relevant consideration it is not a determinative one.
The Court also found the NW Frozen Foods decision did not inhibit judicial discretion in three key areas: if the Court considers insufficient evidence has been submitted to allow it to make a decision on whether a proposed penalty is appropriate, it may request additional information (and may conclude the penalty is not appropriate if the parties do not provide that information); if the absence of a contradictor inhibits the Court, it may seek the assistance of an amicus curiae; and if the Court chooses not to accept the proposed penalty, it may be appropriate for the parties to withdraw consent to the proposed orders and for the case to continue as a contested hearing.
Courts in both civil and criminal cases are not relieved from exercising their discretion in determining appropriate penalties, the full bench concluded. Courts should also be satisfied they have received accurate, reliable and complete information.
Being bound by NW Frozen Foods “may imply that a trial Judge is obliged to take the proposed penalty as the starting point for analysis and to limit himself or herself to inquiring whether that particular penalty is within the appropriate range,” the judgement said. “[It] may also imply that the trial judge is bound to consider the proposed penalty simply on the basis of information provided by the parties.”