15 October 2017
Has the High Court paved the way for an increase in civil penalties for directors?
A recent and widely-reported decision by the High Court on criminal sentencing, in which an appeal against a ‘manifestly inadequate’ sentence for incest was allowed, may have broader ramifications. Directors and others who potentially face exposure to civil penalties at the suit of regulators should bear in mind that the decision in DPP v Dalgliesh  HCA 41 has the potential to lead to courts imposing heavier civil penalties despite lighter penalties having historically been imposed in similar cases. This may, in turn, further complicate the already difficult decision of whether to contest proceedings brought by a regulator or agree on the contravention and submit an agreed penalty proposal for the Court’s consideration.
The High Court’s decision in Dalgliesh
In Dalgliesh, the respondent was charged with and pleaded guilty to several criminal charges, including a charge of incest. The sentence imposed by the sentencing judge in the Supreme Court of Victoria for the incest offence was a term of imprisonment for three and a half years. The maximum sentence for that offence was 25 years’ imprisonment. On appeal, the Court of Appeal declined to disturb the sentence handed down by the trial judge as the sentence, while low, was within the range indicated by current sentencing practices. The Court of Appeal refused the appeal notwithstanding its expressed view that current sentencing practices for incest are ‘demonstrably inadequate’ to the point that they reveal error in principle. The Court of Appeal considered itself bound by the constraints of prior sentences imposed for similar offences, but for the existence of which the sentence the subject of the appeal would have been overturned on the basis that it was manifestly inadequate.
The High Court unanimously allowed the DPP’s appeal from the Court of Appeal’s judgment. The approach taken by the Court of Appeal was criticised as placing undue weight on the requirement of consistency in sentencing. Relevantly, the High Court observed that:
- A person who pleads guilty to a criminal offence is not entitled to expect that he or she will be sentenced consistently with current sentencing practices. The only expectation should be ‘the imposition of a just sentence according to law’.
- The existence of a range of past sentences does not establish that the range is the ‘correct’ range and past sentences should not operate to fix boundaries that, practically speaking, bind the court.
- The statutory obligation to have regard to current sentencing practices is just one of a number of matters to which regard is to be had, which factors are not to be applied mechanically or mathematically. Another important factor required to be taken into account in sentencing is the maximum penalty prescribed for the offence.
The matter has been remitted to the Court of Appeal for determination of the appeal against sentence.
What might this mean for directors facing civil penalty proceedings?
The maximum pecuniary penalty that can be imposed on an individual for various serious or materially prejudicial contraventions of ‘civil penalty provisions’ of the Corporations Act 2001 (Cth) is $200,000. Penalties imposed on directors and others who have contravened civil penalty provisions are typically much lower than the statutory maximum (which is reserved for the most serious cases). In imposing a civil penalty, or determining whether an agreed penalty falls within an appropriate range, courts have in the past understandably tended to place significant emphasis on the range of penalties previously imposed in analogous cases.
The High Court has in recent years noted the conceptual distinction between civil and criminal proceedings (see our update here), pointing to the desirability of parties to civil penalty proceedings reaching agreement on penalty and courts accepting those consensual proposals ‘where appropriate’. However, the judgments in the Dalgliesh case appear to invite the question of whether an agreed civil penalty proposal can be considered ‘appropriate’ if it affords too much deference to penalties that have been imposed in the past and does not place sufficient emphasis on the seriousness of the relevant conduct in the context of the maximum penalty set down by the legislature. Although Dalgliesh specifically concerns the criminal law sentencing process and the application of relevant provisions of the Sentencing Act 1991 (Vic), the High Court’s reasoning arguably extends well beyond the specific statutory wording considered in that case.
In our view it is possible that Dalgliesh will lead to a reconsideration of the role of past practice in setting the boundaries of an appropriate civil penalty. While penalties imposed in previous decisions will remain a relevant consideration, we may well observe a shift towards the quantum of penalty being determined more by reference to the objective seriousness of the impugned conduct having regard to the statutory maximum. To the extent that the courts may have considered themselves constrained from imposing a higher civil penalty, or rejecting an agreed civil penalty, by a ‘precedent’ of lighter past civil penalties, the clear indication from the High Court is that this now should no longer be the case.
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