Federal civil and administrative penalties

In January 2000, the federal Attorney-General asked the ALRC to review Commonwealth laws and arrangements relating to the imposition of administrative and civil penalties with a view to identifying clear and consistent principles, and ensuring there is a fair, effective and practical system of decision making and enforcement.

Within every government regulatory scheme is a system of penalties and other sanctions to foster compliance and punish non-compliance. The ALRC’s task was to consider the many disparate federal regulatory and penalties schemes that had developed over the last three decades or so to identify those areas where the injection of some structure could give them, both collectively and individually, greater clarity, transparency and consistency.

While the focus was on civil and administrative penalties, it was necessary to consider how they differ from, and are similar to, criminal sanctions.

It was clear from the outset that government regulation, and the penalties schemes used to reinforce it, cannot be generated from a single mould but must be adapted to meet the particular demands and communities which each scheme seeks to regulate. The ALRC does not therefore recommend rigid uniformity across the various penalty schemes. Instead, the ALRC has sought to introduce a greater degree of consistency across the various regulatory schemes in the form of a proposed Regulatory Contraventions Statute of general application. Although intended to provide a consistent basis of certain fundamental provisions relating to regulatory law, the demands of a particular regulatory or penalty scheme would entitle parliament to diverge from the default provisions contained in the Regulatory Contraventions Statute.

Key recommendations

As a fundamental principle, the ALRC considers that the distinction between criminal and non-criminal (civil) penalty law and procedure is significant and adds to the subtlety of regulatory law. This distinction should be maintained and, where necessary, reinforced. Parliament should exercise caution about extending the criminal law into regulatory areas unless the conduct being proscribed clearly merits the moral and social censure and stigma that attaches to conduct regarded as criminal.

The key recommendation is the enactment of a Regulatory Contraventions Statute of general application to cover various aspects of the law and procedure governing non-criminal contraventions of federal law. The Regulatory Contraventions Statute is not intended to be a comprehensive code but rather should be expressed:

1. to contain certain principles of responsibility that apply to any non-criminal breach of any law of the Commonwealth; and
2. to prevail over any inconsistent Commonwealth law to the extent of that inconsistency unless that other law expressly excludes or modifies the operation of the Regulatory Contraventions Statute by express reference to that statute (or the portion of it, the operation of which is to be excluded).

Other recommendations describe the principles to be set out in proposed Regulatory Contraventions Statute in the absence of any clear, express statutory statement to the contrary. These include:

• Contraventions for which a civil penalty may be imposed may contain fault elements as defined under the Criminal Code or as specified in a law that creates a particular contravention. If no fault element is specified, a contravention for which a civil penalty may be imposed does not contain a fault element. (ie, carries strict or absolute liability).
• Any legislation that deems an individual to be personally liable for the contravening conduct of a corporation should include a fault element that the individual knew that, or was reckless or negligent as to whether, the contravening conduct would occur.
• When the same physical elements can attract both a civil penalty and criminal liability, the physical and fault elements of both the contravention attracting a civil penalty and the criminal offence should be clearly distinguished in the legislation.
• In civil penalty schemes, an infringement notice scheme should apply only to minor contraventions in which no proof of a fault element or state of mind is required. Infringement notice schemes should follow the model to be set out in the proposed statute.
• All persons directly adversely affected by a regulator’s decision to impose a quasi-penalty (such as the revocation or qualification of a licence, or a social security penalty) must be afforded procedural fairness.
• The same protections for individuals afforded by the privilege against self-incrimination in criminal matters apply in relation to actions seeking a civil or administrative penalty.
• All penalty schemes should provide avenues of internal review, external merits review and judicial review, unless one or more of these is clearly inappropriate in the circumstances.
• A court may impose a non-monetary penalty in addition to, or in substitution for, a monetary penalty for an offence or contravention. The introduction of non-monetary penalties into regulatory schemes is encouraged.
• Guidance should be provided for courts setting civil penalties, particularly when considering non-mandatory penalties.

A number of other recommendations involve the development and publication by regulators themselves of a wide variety of informal guidelines. These are intended to give better structure to particular decision-making processes and to identify more clearly, for the regulator and regulated alike, the criteria on which discretions and decision-making processes will be based.

Implementation

There has been no formal response to ALRC Report 95 from the Australian Government. The report has, however, been influential in a number of developments.

In April 2004, the Attorney-General’s Department published on its website A Guide to Framing Commonwealth Offences, Civil Penalties and Enforcement Powers. The Guide is a resource to assist in the framing of proposed criminal offences, civil penalties and certain other enforcement provisions that are intended to become part of Commonwealth law. Many of the provisions in the Guide are based on principles discussed in ALRC 95, and in many circumstances it refers users directly to the ALRC report.

A number of features of the model infringement notice scheme set out in ALRC 95 were incorporated into the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) (also known as CLERP 9) in relation to its new notice scheme for contraventions of the continuous disclosure provisions under the Corporations Act 2001 (Cth). The Australian Government Treasury’s 2007 Review of Sanctions in Corporate Law, which reviewed criminal, civil and administrative sanctions in the Corporations Act and the Australian Securities and Investments Commission Act 2001 (Cth), drew heavily on the work in ALRC 95.

The report has also been referred to and its text accepted in a number of court and tribunal decisions dealing with civil and criminal penalties, including the High Court of Australia case of Rich v The Australian Securities and Investments Commission [2004] HCA 42 .