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CDR Insight

December 2008

The Rise of Civil Penalty Regimes

Businesses should be aware of a recent trend among Federal and State authorities to increasingly impose civil penalties to enforce compliance with their statutory schemes. The number and type of legislation under which these regimes operate are expanding and the level of fines also dramatically increasing.

Types of regimes

In the Federal sphere alone there are in excess of 60 pieces of legislation which impose civil penalty provisions, and similarly substantial numbers of State Acts. The type of legislation which impose civil penalty provisions generally fall within the following groups:

• consumer protection, such as the Trade Practices Act, various credit and home building legislation. Some consumer protection legislation also impose criminal sanctions for breach of certain provisions, such as the Fair Trading Act and the Property Stock and Business Agents Act;
• industry regulation, with legislation such as the Therapeutic Goods Act, the Broadcast Services Act, the Telecommunications Act, the SPAM Act and various insurance Acts;
• employment regulation, such as workers compensation and occupational health and safety legislation;
• corporate governance, such as the Corporations Act 2001; and
• environmental protection, such as the Water Act 2007.

These areas are generally supervised by a government regulatory authority, the most significant being:

• the Australia Prudential Regulation Authority (APRA) in relation to insurance legislation;
• the Australian Securities and Investments Commission (ASIC) in relation to corporate legislation;
• the various state Fair Trading departments in relation to homebuilding and consumer protection; and
• the Australian Competition and Consumer Commission (ACCC) in relation to trade practices.

These agencies are increasingly utilising the civil, rather than criminal, penalty regimes available under the legislation they administer as it offers them an efficient and effective enforcement tool. This is because:

• litigation concerning civil penalty provisions generally are determined in civil courts subject to civil standards of proof, rather than the higher criminal onus of beyond reasonable doubt;
• litigation is based on civil procedure principles and accordingly the regulatory agency can seek payment of its costs if successful, unlike traditional criminal prosecutions; and
• the fines imposed are often substantial so as to justify not pursuing a separate criminal prosecution.