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Federal Court judgments

Federal Court judgments

By Dan Star QC

Civil Procedure Courts Judgment Practice & Procedure 

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Consumer law and civil penalties

Appeal from primary judge rejecting agreed penalty and imposing substantially higher penalty

Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49 (9 April 2021) concerned the pecuniary penalty imposed on Volkswagen for its admitted contraventions of s29(1)(a) of the Australian Consumer Law (ACL) in relation to its deception of the Australian government and Australian consumers about the exhaust emissions of certain Volkswagen-branded motor vehicles which were imported into Australia for sale for about five years from January 2011 to October 2015. Volkswagen and the ACCC jointly submitted to the Court that a penalty of $75 million was an appropriate penalty for the contraventions. The primary judge found that the proposed penalty was manifestly inadequate and instead imposed a penalty of $125 million. The central issue raised by the appeal was whether the primary judge erred in rejecting the jointly proposed penalty and imposing instead the significantly higher penalty. 

The Full Court made observations about the nature of the primary judge’s decision (at [119]-[133]). Wigney, Beach and O’Bryan JJ rejected the ACCC’s submission that the primary judge’s decision was not discretionary and concluded (at [131]): 

“. . . The Court’s task in such cases is not limited to simply determining whether the jointly proposed penalty is within the permissible range, though that might be expected to be a highly relevant and perhaps determinative consideration. Nor is the Court necessarily compelled to accept and impose the proposed penalty if it is found to be within the acceptable range, though the public policy consideration of predictability of outcome would generally provide a compelling reason for the Court to accept the proposed penalty in those circumstances. The overriding statutory directive is for the Court to impose a penalty which is determined to be appropriate having regard to all relevant matters. The fact that the regulator and the contravener have agreed and jointly proposed a penalty is plainly a relevant and important matter which the Court must have regard to in determining an appropriate penalty. It does not follow, however, that the determination is not discretionary in nature”.

However, the Full Court rejected Volkswagen’s various appeal grounds which in the main were supported by the ACCC.

  • The Full Court accepted that the primary judge erred in adopting an overly narrow interpretation of s224(2)(c) of the ACL and in not considering whether the absence of prior contraventions on the part of Volkswagen was capable of constituting a mitigating circumstance (at [137]). However, in the circumstances of this case this could not have had any material effect on the ultimate penalty imposed (at [138]-[146]).
  • There was no error by the primary judge in finding that the agreed penalty of $75 million was not sufficient to achieve deterrence (at [147]-[167]). In determining this ground, the Full Court examined the circumstances where there may be a relationship between the penalty imposed and the profit derived from the contravening conduct (at [148]-[149]).
  • It did not follow that, in not accepting that the agreed penalty was an appropriate penalty and instead fixing a significantly higher penalty, the primary judge gave no or insufficient weight, to the agreement or settlement that had been reached between Volkswagen and the ACCC, or to the important public policy consideration concerning the promotion of the predictability of outcome in civil penalty proceedings (at [168]-[173]).
  • There was no error in the way that the primary judge dealt with the penalties imposed on Volkswagen in overseas jurisdictions (at [174]-[184]).
  • The findings that were made by the primary judge in relation to harm to consumers were findings based on inferences that were open to be drawn, irrespective of the joint submission of the parties (at [185]-[192]).
  • Nor was there error in relation to certain matters that Volkswagen contended that the primary judge had regard but were extraneous or irrelevant matters (at [193]-[201]).
  • The penalty of $125 million imposed by the primary judge was not manifestly excessive (at [202]-[213]).

Industrial law and practice and procedure

Challenge to a report of a referee regarding causation under s545 of the Fair Work Act 2009 

In Patrick Stevedores Holdings Pty Ltd v Construction, Forestry, Maritime, Mining and Energy Union (No 3) [2021] FCA 348 (1 April 2021) the Court rejected a report of a referee pursuant to s54A(3)(c) of the Federal Court of Australia Act 1976 (Cth) (FCA Act).

In a previous judgment the Court found the union contravened the Fair Work Act 2009 (Cth) (FW Act): [2019] FCA 451; (2019) 286 IR 52. The remaining issues in the litigation were (1) the identification and quantification of any entitlement to statutory compensation; and (2) whether the Court should impose any pecuniary penalty. The Court referred some aspects of the issues as to the entitlement to statutory compensation to a referee for inquiry and report: see (No 2) [2020] FCA 1093. The referee prepared a report and the parties were in dispute as to whether the report should be adopted or rejected.

The power of the Court to determine how to proceed with a referee report after it has been “provided to the Court” is in s54A of the FCA Act and rule 28.67 of the Federal Court Rules. Lee J relied on the principles in Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7] as setting out the considerations relevant to the Court’s discretion as to whether or not to adopt a referee report (at [15]).

Lee J held that the referee’s report should be rejected in whole. In summary, this was because the referee had gone beyond the questions and concepts that the Court asked him to address, being those related to factual causation. Further, the referee misunderstood the legal principles applicable to causation in the context of s546(2)(b) of the FW Act, the scope of the questions and, more specifically, blurred the line between factual and legal causation and that misunderstanding coloured the referee’s report on the evidence before him (at [9]). Rather than referring the matter back to the referee, the Court will in due course determine all remaining issues (at [53]).

Lee J observed at [47]: “For reasons I have already explained, the line was blurred between the task of the Court and the specific questions put to the Referee for resolution, in this case the line between factual and legal causation. I mean this with no disrespect to the Referee. I thought it was clear, given the nature of my Reference Judgment, but perhaps in future in matters such as this it may be useful for there to be a case management hearing where a non-subject matter referee is apprised directly by the Judge of the precise nature of the task the referee is being asked to undertake”.

Practice and procedure and legal practitioners

Application to restrain solicitor from acting against former client

In Sacca v El Saafin [2021] FCA 383 (20 April 2021) the Court dismissed an interlocutory application by the first defendant seeking an order restraining a solicitor from acting for the plaintiff in the proceeding. In doing so, Anastassiou J summarised the three potential basis that might justify the exercise of the Court’s jurisdiction to restrain a solicitor from acting against a former client, being:

  1. misuse of confidential information (at [26]-[27])
  2. the duty of loyalty owed by a solicitor to their former client even after the solicitor’s retainer has been terminated (at [28]-[29])
  3. the due administration of justice to protect the integrity of the judicial process (at [32]-[33]). ■

Dan Star QC is a Senior Counsel at the Victorian Bar, ph (03) 9225 8757 or email danstar@vicbar.com.au. The full version of these judgments can be found at www.austlii.edu.au. Numbers in square brackets refer to a paragraph number in the judgment.


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