Amended Hignett v Health Promotions International Pty Ltd [2003] QDC 54

Mr A. Rafter for the appellant in 3849/02, 3853/02 and the respondent in 3850/02

Mr S. Stanton for the respondent in 3849/02, 3853/02 and the appellant in 3850/02

Commonwealth DPP for the appellant in 3849/02, 3853/02 and the respondent in 3850/02

Aitken McLachlan & Thorpe, Sydney for the respondent in 3849/02, 3853/02 and the appellant in 3850/02

[1] There are before the court three sentence appeals arising out of a single course of offending by the abovenamed company in which Mr Gardiner was the sole or principal shareholder and the dominant director (the other being his wife). The 24th day of July 2002 was expected to be the first day of a five day trial of 10 charges against the company and 10 related charges against Mr Gardiner. Those were refined to two charges against each of them, the duplication being attributable to a change in the legislation, the Therapeutic Goods Act 1989 (Commonwealth) ("the Act") by changes occurring about May 2000. The period of offending was nominated as between 18 January 1999 and 28 May 2001, subject to the qualification that for one of the two therapeutic products, Bovine Max Liquid the unlawful supply commenced only in September 1999; the other product was Lacto-Max Pro Capsules.

[2] The prosecutor's submission before the magistrate was that there had been "abundant flagrant disregard here" of the requirements to register products under the Act. Mr Gardiner, correctly described as "the controlling mind" of the company, understood what the requirements were, having caused the company to comply with them in relation to other products. The prosecution's financial analyst identified a gross profit from the unlawful supply of $639,260.73, a claim the defence said they did not accept; the prosecution accepted the calculation of the defendants' accountant, Mr Stapleton, identifying the net profit as $236,799, against a gross profit of $623,155.93. The prosecution theory was that Mr Gardiner was simply unprepared "to put out the money to have the products registered." The supply period was well in excess of two years. It seems that pursuant to a gazetted notice on 3 May 2000, the listing of "Bovine Cartilege" as listed goods would have simplified and reduced the costs of obtaining registration. But still registration was not arranged.

[3] From the 20th of May, 1999, Mr Gardiner knew, from a conversation with Mr Mackintosh of the Therapeutic Goods Administration ("TGA") (who was acting on a complaint about Lacto-Max Pro Capsules) that the administration (which administers the Act) were concerned. A particular concern was that the capsules were being promoted as useful in the treatment of cancer. No issue was taken with the prosector's informing the magistrate that on 20 May 1999 Mr Gardiner informed the TGA "that he would remove the flyer and ... speak with the consultant about having the product - capsules registered." In February 2000, there was another complaint and, contacted again by the TGA, Mr Gardiner "gave assurances that certain advertising material concerning Lacto Max would be withdrawn."

[4] At pp 15-17 of the transcript, there seems to have been some confusion about printouts of material displayed on the company's website. The magistrate was told that a search on 9 February 2000 contained the following statement:-

"Lacto Max has the ability to get in there and beat the hell out of cancer blood vessel networks",

and there was tendered as Exhibit 2 "a copy of the actual website advertisement." A check was made on 18 May 2000 to see whether any changes had been made to the website, which revealed that no change had been made. Exhibit 2 appears to be a result of that check search. In the two page document "cancer" appears 15 times, "tumour" three times. The potential usefulness of Lacto Max Pro capsules to prostate cancer sufferers is emphasized.

[5] The defence denied ever receiving a formal written letter from the TGA Surveillance Unit dated 13 June 2000 (Exhibit 3). On 23 August 2000, a website page for Bovine Max, a product made available in liquid form in a bottle, was located, which proclaimed that Bovine Max was "the only Australian product produced to strict TGA standards." The prosecution's assertion to that effect went undisputed, but no evidence was tendered to support it. No doubt any reader of the website would have been surprised to learn that the product was not registered, nor even the subject of an application to register.

[6] On 31 May 2001, the TGA searched the company's premises, which appear to have been relocated from Brookvale in New South Wales, the address indicated in published material, to Nerang in Queensland. Invoices located on search confirmed that supply of both products had occurred on a regular basis to various distributors, health shops, chemists and so on. Mr Dolan's affidavit details hundreds of such invoices.

[7] Neither the company nor Mr Gardiner has any criminal history. He has reached the end of the fifth decade of his life with an unblemished record, attested to by reference material from people in a similar line of business.

[8] Summarising the submissions put on the defendant's behalf before the magistrate, there was little challenge to the version of the facts placed before the magistrate by the prosecution. It was submitted that the defendants had not entirely "flouted" TGA requirements, that action had been taken to recall flyers, for example, and that Exhibit 3 had not been received; some effort was gone to to distance the defendants from a similar communication of 25 February 2000 which was returned to the TGA after having been marked by someone "Return to Sender". (This was something of red herring, as the prosecution had in no way sought to rely on that letter.) It was asserted that the process of obtaining registration was particularly complicated until May 2000 and, perhaps inconsistently, that Mr Gardiner thought he was entitled to keep supplying the products "as food provided therapeutic claims weren't made, and that's the basis on which he went forward ... in hindsight, should have I suppose recognised that they were therapeutic goods." Relevant contact with the TGA was admitted to have occurred on 20 May 1999, with Mr Mackintosh's "visit".

[9] The suggestion in the prosecution's submissions that an adverse factor was the preying on desperate cancer sufferers in promotions of the products whose efficacy was not established was met by defence submissions that most of the promotion was to retailers, rather than to the public, that material, such as that on the website, was of an educational nature, and to a large extent in the public domain already, for example in books which were quoted from, incorporating testimonials. It was submitted that the website publications were accessible only by a process which exposed people to a disclaimer that no medical or therapeutic advice was being given, that it should be sought from an appropriate quarter, and so on. It was submitted that others in the business (suggested to have been responsible for the complaints) engaged in similar conduct (a submission which the magistrate rightly belittled). It was submitted that sentencing schedules made available to the magistrate indicated that "supply" offences were visited with more modest penalties than offences by way of importing or manufacturing similar products. Evidence as to the loss the company had already suffered by reason of the prosecution and surrounding events (including seizure of the product) and prejudice suffered in the market was drawn to the magistrate's attention. There was no suggestion that the products were dangerous or harmful.

[10] The maximum penalty under s 20(1) of the Act for intentionally supplying therapeutic goods in Australia for use in humans unless the goods come within paragraphs (e) to (h) is 240 penalty units. Section 4B(3) of the Crimes Act 1914 (Commonwealth) provides that where a body corporate is convicted, the court may impose a pecuniary penalty up to five times that constituting the maximum if a natural person is convicted of the offence. It was common ground that the company was liable to a maximum fine of $132,000, Mr Gardiner to a maximum fine of $26,400. Before the magistrate, the prosecutor suggested the company be fined around $120,000, having regard in particular to what the company gained from its unlawful conduct: "otherwise a fine isn't a deterrent." The submission in respect of Mr Gardiner was for an outcome securing that "if he was to put one step wrong ever again and not comply with the requirements of the Therapeutic Goods Authority (sic, p24), that he is brought back before the court ... a good behaviour recognizance in a period up to a maximum of five years pursuant to s20 sub-s(1)(a) of the Crimes Act." For the company, it was submitted it ought to receive a "small fine" acknowledging a 25-40% discount for an early plea. The prosecution's suggestion of a bond or recognizance was taken up, the magistrate being asked to proceed under s 19B of the Act.

[11] The appeal most easily disposed of is the company's against the $60,000 fine it suffered. There should be taken into account in its favour the factors relied on in the Magistrates Court, and by Mr Stanton in the appeal, of the company's good record, guilty plea (which Mr Rafter conceded entitled it to some credit), and other matters. Against those factors are the blatant and persistent nature of the offending, which was wilfully persisted in for years, together with the amount of the gain, and the importance for the community of the integrity of the system of controlling "therapeutic goods", and the highly susceptible target market (or section of the market) presently relevant, namely cancer sufferers. I am not in the least impressed by assertions that the fine was excessive. The company might be counted fortunate that it faced, effectively, a single charge, rather than multiple ones, by reference to distinct periods of time, or distinct products. A sentence having a deterrent effect was called for; that is not supplied, in my opinion, if every company, for a first offence of the present kind, receives no more than the proverbial "slap on the wrist".

[12] An appropriate penalty is one that would inflict real pain on the company. By no stretch of the imagination could that fixed by the magistrate be deemed excessive. The community is becoming used to an expects significant penalties where commercial entities commit trade practices or environmental offences, or as here, offences against laws for consumer protection, particularly relative to safety/health matters, food and "therapeutic goods", and the like.

[13] Is the $60,000 fine inadequate? Counsel in the appeal agreed that an appellant prosecutor seeking an increased sentence must satisfy the requirements established in cases such as R v Melano, ex parte Attorney-General [1994] QCA 523; (1995) 2 Qd R 186. However, Mr Rafter submitted that the task might not be of the same order where the appellant seeks not imprisonment, or increased imprisonment, but rather, a steeper financial penalty. Except that I would agree that imprisonment gives rise to some special considerations, for example, where an offender has been returned to the community, I have some difficulty in agreeing with Mr Rafter. I regard his task as being to show the magistrate's sentence was manifestly inadequate, or outside the range of a sound sentencing discretion.

[14] The magistrate's reasons demonstrate awareness that the defendants "received verbal advice from the Therapeutics Goods Association Investigators (sic)... as early as February 2000; and subsequently" I do not think it makes a significant difference that such verbal advice seems to have been received as early as May 1999. The magistrate recorded that the defendants' knowledge of the industry should have made it "obvious to them that their procedures were illegal." The magistrate said he had "noted the objects or purposes of the Act" in section 4 and the maximum penalties provided and also "the need for penalties to deter such illegal procedures"; he noted the duration of the offences "for two and a quarter years and one and a half years in relation to the separate therapeutic products", and that the defendants "enjoyed a net profit from such illegal procedures at almost a quarter of a million dollars." His Worship said:

"I also accept that such offences were allowed by the defendants to blatantly continue for a considerable period after it had been made apparent to them verbally that the procedures they were following were, in effect, unacceptable, and, in any event, there is little doubt that they would have been aware of the need for prior approval and registration before sale and provision of the products to the public."

[15] The only aggravating circumstance that the magistrate failed to note in his reasons was the somewhat emotive one that, at least in the earlier stages, the promotion of the products as potentially useful to cancer sufferers was inappropriate. A reading of the whole of the transcript makes it clear that his Worship was well aware from submissions and exhibits of that feature of the case, whose relevance to offences under s 20 is perhaps arguable. It was open to the magistrate, having regard to the defendants' good character and/or record to, "see fit, because of those circumstances, to discount what I believe is an appropriate deterrent penalty".

[16] While I have some sympathy for the view that a larger fine should have been imposed, the magistrate's reasons reveal no error of principle, no disregarding of any significant feature pointing to a harsher penalty, and no resort to inappropriate considerations. Even where no error can be demonstrated in the exercise of a sentencing discretion, there remains the possibility of an appeal seeking a higher sentence succeeding because of "the manifest inadequacy of the sentence as demonstrating that an error of principle must have occurred" - per Holmes J, dissenting in R v Thompson; Ex parte A-G (Qld) [2003] QCA 200, 16 May 2003. I am not prepared to characterise the magistrate's fine as manifestly inadequate. Accepting that one can always postulate "worse" cases, speaking generally, the maximum sentence ought to be reserved for the most serious case. I do not think that was encountered here. Mr Rafter could not point to any indication in the Act or in the Crimes Act (in s16A, where one might expect to locate it) that sentences for offences ought to ensure that the defendant does not profit from unlawful activity. In other contexts, one is used to that, in the form of provisions permitting confiscation of profits from criminal activity; there are forfeiture provisions, which may be of expensive items such as motor vehicles or vessels used in offences. Circumstances of aggravation justifying increased penalties often stipulate a benchmark of gain to the offender expressed in dollar terms. Here the authorities chose not to avail themselves of opportunities which are provided in the Act to effect the forfeiture of seized products. Mr Hignett's appeal against the sentence imposed on the company is rejected. Mr Rafter's suggestion of a financial penalty of $100,000 as appropriate did not persuade me. In my opinion this court should not engage in "tinkering" in the form of some quite modest increase in the $60,000 penalty.

[17] Next for consideration is the prosecution appeal against the s 19B recognizance upon which Mr Gardiner was released; he was required to bind himself in the sum of $10,000 to be of good behaviour for three years.

[18] Section 19B commences:

"Discharge of offenders without proceeding to conviction

(a) a person is charged before a court with an offence against the law of the Commonwealth; and

(b) the court is satisfied, in respect of that charge or more than one of those charges, that the charge is proved, but is of the opinion, having regard to:

(i) the character, antecedents, cultural background, age, health or mental condition of the person;

(ii) the extent (if any) to which the offence is of a trivial nature; or

(iii) the extent (if any) to which the offence was committed under extenuating circumstances;

that it is inexpedient to inflict any punishment, or to inflict any punishment other than a nominal punishment, or that it is expedient to release the offender on probation;

(c) dismiss the charge or charges in respect of which the court is so satisfied; or

(d) discharge the person, without proceeding to conviction in respect of any charge referred to in paragraph (c), upon his giving security, with or without sureties, by recognizance or otherwise, to the satisfaction of the court, that he will comply with the following conditions:

(i) that he will be of good behaviour for such period, not exceeding 3 years, as the court specifies in the order;"

Section 20, which the prosecution had urged was appropriate in the case of Mr Gardiner, commences:

"Conditional release of offenders after conviction

(1) Where a person is convicted of a federal offence or federal offences, the court before which he is convicted may, if it thinks fit:

(a) by order, release the person, without passing sentence on him, upon his giving security, with or without sureties, by recognizance or otherwise, to the satisfaction of the court, that he will comply with the following conditions:

(i) that he will be of good behaviour for such period, not exceeding 5 years, as the court specifies in the order;"

It is plain that before the magistrate, as on the appeal, the difference between the parties lay in whether or not the court ought to proceed to conviction, or, in local parlance, record a conviction. Doing so would have two consequences, namely increasing from 3 to 5 years the recognizance period over which the court might exercise control over Mr Gardiner and visiting upon him whatever disadvantages or disabilities a conviction might bring.

[19] There is a useful passage in the judgment of Windeyer J in Cobiac v Liddy [1969] HCA 26; (1969) 119 CLR 257, at 275-76:

"The question is not whether any of us in this Court, or any of their Honours in the Supreme Court, would himself have taken the course that the magistrate took. The question is not what we would do, but what could he lawfully do. The discretion was his. He could exercise it as he thought expedient, provided that in the circumstances it was open to him to exercise it at all. The statutory conditions for its exercise were that he should be `of opinion that, having regard to the character, antecedents, age, health, or mental condition of the person charged ... it is expedient to exercise' the power. That means, I think, that the magistrate must be of opinion that the exercise of the power is expedient because of the presence and effect of one or more of the stated conditions, namely character, antecedents, age, health or mental condition. One of these by itself, or several of them taken together, must provide a sufficient ground for a reasonable man to hold that it would be expedient to extend the leniency which the statute permits. The Act speaks of the court exercising the power it confers `having regard to' the matters it states. I read that as meaning more than merely noticing that one or more of them exists. Its, or their, existence must, it seems to me, reasonably support the exercise of the discretion the statute gives. They are not mere pegs on which to hang leniency dictated by some extraneous and idiosyncratic consideration. But they are wide words. None of the matters they connote is necessarily to be regarded in isolation from the others, or apart from the whole of the circumstances of the offender and the offence. In the instant case the magistrate's decision, according to his notes, was that:

"... in view of the defendant's age, his previous good character (apart from his driving record) the circumstances of his aged sister being dependent on him - the provisions of s. 4 should and in the exercise of my discretion, will be applied'.

I see nothing in that which shews that the magistrate took into consideration any matters that he ought not to have done."

His Honour emphasises that it is not for the appeal court to substitute its view of the way in which the discretion in s 19B, or its equivalent in other jurisdictions (for example s 657A of the Queensland Criminal Code (now repealed)) should be exercised; the appeal court may interfere, however, if the discretion does not truly arise, or if the circumstances are such that it could not be exercised by a sentencing court acting "reasonably".

[20] In the analogous context of the discretion a sentencing court has to record or not record a conviction pursuant to s 12 of the Queensland Penalties and Sentences Act 1992, it was accepted (without argument on the point) by the Court of Appeal that appeals by the Attorney against non-recording of a conviction, and nothing else, were permissible in R v Brown [1993] QCA 271; (1994) 2 Qd R 182. There is no shortage of instances of Attorney's appeals succeeding solely on the issue of recording a conviction. See, for example R v Briese [1997] QCA 10; (1998) 1 Qd R 487, R v Gallagher (1999) 1 Qd R 200; R v Hoch [2001] QCA 63; R v Reid [2001] QCA 301; R v Jackson (CA 276 of 1994, 2 February 1995); R v Thomas (CA 239 of 1997, 4 September 1997) and R v DK Doyle (CA 247 of 1997, 8 August 1997). Typically, the cases involved offenders who had not been previously convicted, although in some, at least, more than one offence was dealt with on the sentencing occasion. Briese was 19; Doyle was a 17 year old.

[21] In respect of s 19B, examples may be found of appeal courts allowing prosecution appeals against a sentencing court's decision not to proceed to conviction. A common context is failure to lodge income tax returns. See for example Federal Commissioner of Taxation v Wormald International Australia Pty Limited (1985) 85 ATC 4844 (Supreme Court of New South Wales); O'Brien v Norton-Smith (Mr) Pty Ltd [1995] TASSC 78; (1995) 83 A Crim R 41 (Supreme Court of Tasmania); Commonwealth Director of Prosecutions v Kent (County Court of Victoria) 11 May 2001. Exceptional cases are still admitted, as in Talisco Pty Ltd v Sarney (1987) 87 ATC 4343, in which the sentencing magistrate erred in not invoking s 19B. The reason for the lateness of the return (which was lodged immediately upon the initiating of the relevant complaint, and which established that no tax was actually payable) was the amazing coincidence of three senior members of the tax agent unexpectedly dying within six months and one younger accountant resigning, so that the tax agent firm was unable to meet its lodgment program agreed with the Tax Office, the taxpayer itself was in ignorance of most of the foregoing. A blameless character otherwise has not served to protect offenders from intervention by the appellate court to require conviction. The possibility of dire consequences of conviction has not deterred such intervention. Judge Kent, for example, was a County Court judge at the time when the conviction was entered on appeal.

[22] The dictum of Windeyer J confirms that if they were to be relied on as a basis for proceeding under s19B, favourable conditions as referred to in s 19B(1)(b)(i) had to be present. As Judge Hoath said in Kent, the statement "has equal application to sub-paragraph (ii) dealing with whether the offence is of a trivial nature or sub-paragraph (iii) dealing with whether the offence was committed under extenuating circumstances;" in neither respect, Mr Stanton's submissions notwithstanding, is there anything to be said in Mr Gardiner's favour. Triviality is to be judged in terms of the offence committed by the offender, rather than the offence in the abstract: Walden v Hensler (1987) 163 CLR 558, at 577 and 595, applied in Heffernan v Harris [1992] QCA 412. The present offences were not trivial. There are no extenuating circumstances.

[23] There is a judgment of the New South Wales Court of Criminal Appeal, R v On Clinic Australia Pty Ltd, File No. 60360/96, 6 November 1996, in which the Crown appealed against sentences imposed on the respondent company on 34 charges under s 20(1)(a) of the Act of knowingly importing therapeutic goods which were not registered in relation to it. The primary judge ordered the company to serve six months' probation (sic) and that therapeutic goods valued at some $200,000 be forfeited. Hunt CJ at CL said:

"Nevertheless, the result which this Court is upholding in the present case should not be regarded as a precedent. I would myself have preferred the imposition of a notional fine. I agree with the Director's submissions that the importance of the obligations imposed by the Therapeutic Goods Act 1989 are such that even an innocent failure as occurred in the represent case requires a fine. But the Criminal Appeal Act 1912 does not exist for the purposes of imposing nominal fines except where the most extraordinary error has been made at the first instance level, because of the element of double jeopardy involved. This is not such a case. For myself, I would place no weight upon the cultural background of Dr Vaisman. The extenuating circumstances were, however, very significant. Even with all that, I would nevertheless have upheld the appeal in order to impose a nominal fine had it not been for the substantial value of the goods forfeited."

Imposition of a fine was dependant on the court proceeding to conviction. Smart J, with whom McInerney J agreed, said at p 15 of his reasons:

"The Therapeutic Good Act provides important safeguards for the public on a matter of major public importance, namely the safety and welfare of humans whether in Australia or in countries to which the goods are exported. To ensure that these goals are achieved the system of controls must be adhered to fully. Those operating in this field must ensure that they make full enquiries and obtain full advice as to compliance with the Act and Regulations. The high penalties emphasise that breaches must be avoided. Those guilty of breaches of the Act must expect that convictions will be recorded and that substantial fines will be imposed. Bonds and the use of a 19B of the Commonwealth Crimes Act will seldom be correct. These propositions are self evident given the importance of the subject matter, the terms and purposes of the legislation, the severity of the maximum penalties and the public interest to be served. Section 16A(1) provides that a court must impose a sentence or make an order that is of a severity appropriate to all the circumstances of the case."

[24] I think I should be guided by what the court said, rather than by what it did, in a case clearly identified as exceptional, which the one before me most certainly is not. I thought initially that there was merit in Mr Stanton's submission that any blanket condemnation of recourse to s 19B in On Clinic ought to be limited to corporate offenders. He told the court that in his considerable experience at the Bar he had never seen a corporate defendant given the benefit of discharge under s 19B until he encountered the decision on On Clinic. He submitted there are obvious reasons for distinguishing personal defendants, whose privilege against self-incrimination, for example, ought to be regarded more seriously. There are many aspects, to do with applications for passports and visas, and qualifications for offices and employment which would be seen as rendering s 19B more appropriate for flesh and blood offenders, and possibly inappropriate to the situation of a corporate offender. I agree with the submission that, in circumstances such as the present, there are no "parity" considerations pointing to Mr Gardiner's being convicted because that happened to the company. In a practical sense, here, Mr Gardiner and the company may be assimilated. If the company suffers disadvantage from having been convicted, this is likely to impact on Mr Gardiner. The company's having to pay the fine of $60,000 will impact on Mr Gardiner, as will other reverses the company has suffered in this whole episode, such as damage in the relevant market. I am not suggesting that any of this is other than a consequence of their own unlawful actions.

[25] At Mr Stanton's urging, I am prepared to treat with some circumspection the general principle stated by Smart J, it seems incontrovertible that corporations can be accorded the benefit of s 19B in relation to tax returns, as in Talisco Pty Ltd.

[26] An interesting example of the same leniency extended to a natural person is Commissioner of Taxation v Baffsky [2001] NSWCCA 332; (2001) 192 ALR 92, decided after Kent, and a much less serious case. Mr Baffsky, a barrister, pleaded guilty to two charges of failing to furnish an income tax return. He was convicted and fined a single amount of $800 in the Local Court, then appealed to the District Court, which dismissed the charges under s 19B. There was no further appeal, as in Cobiac v Liddy. Rather, the District Court judge stated a case for the Court of Criminal Appeal. Its view was sought as to the correctness of her Honour's taking into consideration various matters such as the amount of tax payable pursuant to the returns (which were furnished on the eve of the Local Court hearing), Mr Baffsky's having been involved in a motor accident, which had the effect of aggravating an existing back ailment and also reduced his motivation, his having been bankrupted by the Commissioner in the interim, his regular work commitments interstate, his maintaining a relationship with his son following a marital breakdown, his volunteer work and his expression of "contrition and remorse for the offences." The Court of Criminal Appeal was asked to answer a dozen different questions. It declined to answer two. The unusual procedure adopted meant that useful answers were provided in respect of the relevance of particular factors. Neither under the heading "Failure to take into account relevant considerations", as I read what Spigelman CJ said, nor elsewhere, was doubt cast on the views expressed by the judges of various Supreme Courts in the matters listed in paragraph [21] above. The Commissioner of Taxation turned out to have made a tactical error in asking the Court of Criminal Appeal to rule that "s19B is not available with respect to prosecutions under revenue legislation unless exceptional circumstances are found to exist" (see [70]), that formulation "differing" from what judges had said in reported cases. His Honour said at 105:

"[77] This general policy served by s 19B is as pertinent to revenue offences as it is to other offences. The statute formulates a test of whether punishment is `inexpedient'. I do not see any warrant for replacing the statutory formulation with terminology as broad as `exceptional circumstances' in a particular sphere of regulation. This conclusion does not, however, cast any doubt on the importance of giving consideration to issues of seriousness, prevalence, difficulties of detection etc to which I will refer under the heading of `General Deterrence' below.

[78] The stated case before the court consists of a summary of the facts, the judgment and a statement of matters taken into account. The evidence before Backhouse DCJ included a number of documents, including character references, which contained information about the respondent's health and conduct. Such matters require qualitative assessment before it can be determined whether they provided a proper basis for the conclusion reached by her Honour. The documents on which her Honour relied are not before this court. The evidence before her Honour was not annexed to the stated case.

[79] This court cannot, on the basis of a summary statement of facts, infer from the result itself that some error of principle must have occurred. A stated case is not an appropriate procedure to determine the general issue raised by the commissioner. The three specific matters identified can, however, be determined."

[27] At 108, under the heading "General deterrence", a topic not mentioned in the District Court judge's reasons, but accepted as relevant by the Court of Criminal Appeal, notwithstanding the lack of reference to it in s16A(2) of the Crimes Act, Spigelman CJ said:

[98] ... This court is reluctant to infer that a sentencing judge has failed take into account a relevant consideration, only because express reference to it does not appear in the reasons. The judgment must be considered as a whole in order to draw any such inference.

[99] Two factors indicate that this court should not draw the inference in this case. First, her Honour referred on two occasions to the fact that s 19B is not generally seen to be appropriate with respect to revenue offences and, in that context, expressly referred to the line of authorities on which the commissioner relied in this court, as before her Honour. Secondly, her Honour expressly found that the offence was not a `trivial' one.

[100] I have not found this issue easy to resolve. It would have been desirable that these important considerations were articulated more fully. On balance I am not prepared to conclude that her Honour failed to take the matter into account. I am also unable to conclude, without access to the whole of the materials that were before her Honour, that the result itself showed that her Honour failed to give these considerations appropriate weight."

"The application of s 19B

Did I err in law in categorising the circumstances before me as satisfying recourse to the provisions of s 19B Crimes Act 1914?

[103] The jurisdiction of this court on a stated case under s 5B of the Criminal Appeal Act 1912 (NSW) is limited to a `question of law'. The question of law which appears to be raised under this particular question is whether only one finding was, in all the circumstances, open. (*See for example Attorney-General (NSW) v X [2000] NSWCA 199; (2000) 49 NSWLR 653 at [56]- [63].)

[104] For the reasons outlined above, the summary statement of facts contained in the stated case does not permit the court to answer a question of this kind. The whole of the evidence before the first instance court would have to be annexed to the stated case. During the course of argument, counsel for the commissioner accepted this proposition and did not press for an answer to this question."

I do not read Baffsky as a determination that the District Court judge was right and that the Local Court was wrong.

[28] In my opinion, general deterrence is of high importance in a matter such as the present. Further, I think it is salutary that the courts make it clear that natural persons who are responsible for corporations' breaking the law be given clear warning that, where the legislation permits it, they face condign punishment along with the corporation. The present case does not qualify, but there will be circumstances in which it may be unjust that the corporation suffer the major penalty (having regard to interests involved), or where punishment of the company is a matter of indifference to it (for reasons that might range from the maximum penalty's being miniscule when compared with gains from the offending to lack of resources to meet a financial penalty).

[29] Here, the magistrate, in a paragraph of his reasons which expressly mentions both defendants, refers to "an appropriate deterrent penalty". It is clear that personal deterrence was in his mind from his warning to Mr Gardiner that further offending within the three year recognizance period would lead to forfeiture of $10,000. It is less clear that considerations of general deterrence were adverted to, but it seems to me they were inherent in the acknowledgement of judicial statements in the cases indicating "the need for penalties to deter such illegal procedures." The magistrate expressly stated he was acting under s19B "without proceeding to a conviction in accordance with that section", having warned that Mr Gardiner could "reasonably expect a conviction to be recorded" if he offended again.

[30] Where it seems to me things went awry is that his Worship did not appreciate that the prosecutor was submitting for conviction. The prosecutor did not mention the word "conviction", but the express reference to s 20 of the Crimes Act necessarily carries that meaning. The prosecutor at p 25 of the transcript referred to "s19B of the Crimes Act which is effectively, a discharge altogether ... well and truly not applicable in the circumstances that are before the court today." He then referred to On Clinic and the magistrate said: "I won't consider anything other than what you're submitting at this point until I hear the other submissions from Mr Goldsworthy." At p 28 Mr Wagner referred to another authority, which I take to be Czarniak v The Queen (1995) 118 FLR 36 as indicating the offences "could not be viewed as of a trivial nature to justify s 19B, complete discharge. ... I rely on that case ... to show that s 19B ... shouldn't be considered by the Court." (At 43 of Czarniak, the importance of general deterrence was acknowledged: "It is very much in the public interest that those who market therapeutic goods comply strictly with the provisions of the Act. Unless this is done the consequences for members of the public can be serious indeed.")

[31] The magistrate (at the foot of page 28 of the transcript) appeared somewhat reluctant to read On Clinic ("obviously quite a thick report") which Mr Goldsworthy indicated "upheld" s 19B. After an adjournment, Mr Wagner handed up a copy of On Clinic and referred specifically to page 11 in the judgment of Smart J. Mr Goldsworthy then said (p. 31):

"I respectfully accept what the Crown says in relation to a bond or recognizance in relation to Mr Gardiner personally, except that the defence says that should be under 19B without conviction for the reason which I'll develop in due course but I'm indebted to my friend for his concession that a bond is the appropriate penalty for Mr Gardiner personally."

[32] It is unfortunate that, in light of the magistrate's frank statement at p 24 of the transcript that (like most judicial officers, including myself) he professed a lack of current familiarity with the intricacies of the Crimes Act sentencing provisions, the prosecutor before him did not explicitly state that conviction of Mr Gardiner was pressed for. The point of the court's not acting under s 19B was never expressly stated. I think it is possible to read the magistrate's reasons as indicative of misgivings felt by him that no conviction was being recorded against Mr Gardiner on the day.

[33] There may have been a similar lack of communication in Thompson, where the Chief Justice said:

"[10] ... The Prosecutor submitted that the respondent ought to be imprisoned for a period `in the order of six years,' saying that if there was a range, that would `sit within it.' The Prosecutor agreed that the penalty could be moderated to reflect the respondent's loss of his professional career and his pleas of guilty.

[11] On the other hand, defence counsel submitted for five years imprisonment suspended after six to 12 months. When the Judge indicated that he was intending to sentence the respondent to five years suspended after 18 months, in the course of defence counsel's submissions, the Crown Prosecutor did not then or subsequently demur. But acknowledging the way the sentencing process proceeds, that should not now assume any particular significance to the disposition of the appeal. I should add that the Judge did not invite any further submission from the Prosecutor (not to suggest His Honour should have), so that the Prosecutor's failure to submit further is unremarkable.

[12] Of course the position taken by the Prosecutor before the sentencing Judge carries significance, but it should not for reasons expressed on other occasions be regarded as controlling this court's approach if the court is otherwise convinced of clear error."

"[37]...It was submitted by counsel for the respondent that the Crown should be bound by its conduct on sentencing. The learned Crown prosecutor had raised no objection when the sentencing judge indicated that he had in mind a sentence such as was imposed. I should say firstly, that the prosecutor's submission as to a sentence of six years imprisonment being within an appropriate range appears to me entirely correct; and, as will be apparent from my reasons, I similarly view the sentence in fact imposed as within an appropriate sentencing range. But had that not been the case, I would not regard the Crown prosecutor's conduct as disentitling the appellant from advancing the submission that the sentence of five years' imprisonment, suspended after 18 months, was inadequate, in circumstances where the prosecutor had already contended for six years as the appropriate sentence, and had pointed out that the option of suspension would thus be excluded. It does not seem to me that it was incumbent on him to advance the submission once more when the learned judge indicated that he was persuaded otherwise. It might have been different if the prospect of a lesser sentence and suspension had been raised for the first time in his Honour's remarks; but the prosecutor had already addressed that question, and nothing was to be gained by repetition."

[34] For reasons for which it would be inappropriate to blame the magistrate, he appears not to have given his attention to whether he should proceed to conviction, which is not only what the prosecution, by use of the coded reference to s 20, was asking for, but what clearly ought to have been done. The adverse factors the magistrate identified in relation to the company were equally applicable to Mr Gardiner. I am afraid the magistrate was misled into thinking that the only issues were amount and duration of the recognizance.

[35] The issues in the appeal came to be expanded in two ways. The first concerned Mr Stanton's application to present new evidence in the form of an affidavit by Mr Gardiner which, essentially, outlined developments after 24 July 2002 - so that it was not material which could or ought to have been placed before the magistrate. Mr Gardiner complains of months of delay in the company's getting the relevant products appropriately registered and in securing return of seized product which the TGA determined not to forfeit. As to the latter aspect of the complaint, which asserts that the remaining shelf life of the products until their "use by" date is reached has made them pretty well unsaleable, Mr Gardiner complains that the company has lost market share, which it will find difficult to retrieve. I think his affidavit implies that within the TGA, a deliberate tactic has been adopted to damage the company. My inclination was to allow the material to be used, but only to the extent that it indicated for the benefit of this court in its appellate role that the company had effectively been penalised in additional ways which arguably could be taken into account. It seemed to me that any impropriety in the TGA, as such, if it had happened, was irrelevant.

[36] Mr Rafter was ready with three affidavits in response, whose effect was to challenge imputations of impropriety. Thus, it was said that registration could not occur until the company got its paperwork in order, which took some months, and that there were innocent explanations for the delay in returning the product, such as the need for testing or sampling of the product to be released (some being withheld because of discrepancies in the concentration of ingredients) and unavailability of particular officers who had to be involved. There were issues about the precise terms or implications of conversations deposed to by Mr Gardiner. He provided a response affidavit.

[37] In the end, counsel elected not to pursue the (probably) extraneous issues raised. By their agreement, there was no cross-examination, no claims of impropriety against the TGA were persisted in, and it was left on the basis that this court had information of adverse developments in the company's financial position which the court might (or might not) regard as relevant to the exercise of its function. I would confirm that I have accepted the broad proposition of collateral commercial disadvantage as one of the many factors telling against intervening to increase the financial penalty imposed on 24 July 2002.

[38] The matters for this court's consideration were expanded, too, by my inquiry whether there were particular disadvantages that might flow if Mr Gardiner were convicted. Mr Stanton advised that s 38 of the Act was in the course of being amended. His understanding was that a person convicted or a company controlled by such a person will "be regulated in terms of their right to apply for a licence or be suitable for a licence or to be considered as a licensee." This legislative activity, which it can be assumed will move to finality, has occurred since the sentence under appeal. Both parties have provided supplementary written submissions.

[39] Section 38 has no relevance to the present activities of Mr Gardiner or the company, since it relates to a person applying "to carry out steps in the manufacture of therapeutic goods at a particular manufacturing premises". It may stand in the way of the requisite licence being granted if the applicant "has been convicted of an offence against this Act or a law of a State or Territory relating to therapeutic goods" or is controlled by another person (whether directly, indirectly, etc) who has been so convicted. By s 38(2) the licence may granted nevertheless, if "special circumstances make it appropriate to do so." The expected amendments will identify problematic applicants in a different way, namely:

"(g) the applicant is not a fit and proper person to hold a licence; or

(h) a person who is participating in, or is likely to participate in, managing the applicant's affairs is not a fit and proper person to participate in the management of the affairs of a holder of a licence; or

(i) a person who has, or is likely to have, effective control over the applicant is not a fit and proper person to have effective control over a holder of a licence."

Thus far, the fact of a conviction arising under the Act is subsumed in a broader "fit and proper person" test. The new subsection (1A) specifically makes relevant any Australian conviction:

"(1A) Without limiting the matters to which the Secretary may have regard in considering whether the applicant or person is not a fit and proper person for the purposes of paragraph (1)(g), (h) or (i), the Secretary must have regard to:

(a) any suspension or revocation of a manufacturing licence granted to:

(ii) another person who controls the applicant or person (whether directly, or indirectly through one or more interposed entities); or

(iii) another person whom the applicant or person controlled (whether directly, or indirectly through one or more interposed entities) at the time of the suspension or revocation; or

(b) any conviction, for an offence against a law of the Commonwealth or a law of a State or Territory, against:

(ii) another person who controls the applicant or person (whether directly, or indirectly through one or more interposed entities); or

(iii) another person whom the applicant or person controlled (whether directly, or indirectly through one or more interposed entities) at the time the offence was committed or the time of the conviction; or

(c) any failure to comply with a condition of a manufacturing licence by:

(ii) another person who controls the applicant or person (whether directly, or indirectly through one or more interposed entities); or

(iii) another person whom the applicant or person controlled (whether directly, or indirectly through one or more interposed entities) at the time of the failure."

Subsection (2) will continue to offer prospects of a licence in "special circumstances". I think the court may properly consider the legislation in its current and future forms, the amendments having been passed by both Houses of Parliament, but still awaiting assent. The changes do not, in my opinion, make much difference. A conviction of Mr Gardiner might lead to his or a company controlled by him's being put to extra trouble to obtain a manufacturing licence, or to failure to obtain such a licence. The difficulty will arise only if Mr Gardiner or his entities should determine to expand accustomed activities into manufacturing. This is no more than a theoretical possibility. A conviction is not necessarily fatal.

[40] Mr Rafter's supplementary submission relies on two passages from R v Beissel (CA 424, 425/1996) which were referred to in an instructive passage in Briese at 492:

" "it is not the position that a conviction should never be recorded if it will have an adverse impact upon an applicant because of the consequences attached to a conviction by other legislation" (R v Hagan (CA 442, 443/1996; Court of Appeal, 15 November 1996, unreported). The court in that case added:

"That section exists to protect the public, and it is not appropriate that this Court should routinely fashion a special order with the object of defeating the operation of such a section."

In R v Beissel (CA 424, 425/1996; Court of Appeal, 12 November 1996, unreported), McPherson JA observed:

"In my opinion it really misapprehends the purpose and function of provisions like s12 (of the Penalties and Sentences Act) to suppose that the provisions they confer are designed to enable the fact that criminal convictions have been sustained to be concealed from bodies or authorities whose duty it is to determine whether or not an applicant is a fit and proper person to be licensed under a particular statute."

"The applications against recording of a conviction also seem to me to give an unwarranted benefit to the applicants which will have the effect of seeking to hide from the liquor licensing authority and the Department of Consumer Affairs which administers the Auctioneers and Agents Act conduct which really ought to be taken into account by them when considering the issue of any such licences."

Those observations should not be taken as laying down a rule that the court must not grant an offender the benefit of non-recording of a conviction whenever it is likely that the offender might come before such a board; it is a stricture to look at the matter carefully and to bear in mind the potential public harm that may result from the court's authorising concealment of the truth."

[41] In Beissel, in relation to the amount of fines, which the primary judge had fixed by reference to an estimate of the profit made from the penalised activities, the offenders did not respond to the court's invitation to give an estimate, leaving the Court of Appeal to regard them as "not really in a position to challenge this rough assessment made by the judge because they themselves made no effort to calculate or disclose the sums received, whether directly, or indirectly from their activities." The Court of Appeal thought the offences were committed, in a calculated way, in the expectation of profit. Also, "they expected to be punished".

[42] (Among the difficulties about the court's having regard to post-sentence events is that, as revealed by an exhibit to Mr Gardiner's first affidavit, the Lacto-max Pro capsules came from Pan Pharmaceuticals Limited. This may have kept that product off the market in any event and/or led to the company's being obliged to repurchase shipments already sold. Apart from documents such as the manufacturer's "product specification" and Pan Laboratories Pty Ltd's "formulation certificate", there is no evidence about these matters. There is considerable uncertainty about the extent to which courts may notice current events, which in some instances they are entitled to do: Monarch Steamship Co Ltd v A/B Karlshamns Oljefabriker (1949) AC 196, 234 per Lord Du Parcq, noted by Lee J in Ward v WA [1998] FCA 1478; (1998) 159 ALR 483, 498 referring to "taking judicial notice of the facts of history, or the past, or contemporaneous". It would be artificial for me to pretend to ignorance that Pan's manufacturing licence has been suspended in recent times and that a large number of lines manufactured by it have been recalled.)

[43] The parties have spared the court the task of deciding what costs orders ought to be paid by agreeing, in relation to all three appeals, that, whatever their outcomes, there ought to be no costs orders. (They further agreed that if the appeal resulted in the company's suffering a reduced or unchanged fine, the 12 months the magistrate allowed for payment should stand, and that if the fine were increased payment should be required at a rate of $6000 per month.)

[44] The appeals by and against the company will be dismissed. The appeal involving Mr Gardiner will be allowed, and the order made in lieu of the one made by his Worship will be in terms similar to that one, save that Mr Gardiner will be convicted and the order will be one pursuant to s 20 of the Act. I have noted that the magistrate imposed the maximum penalty available under s 19B, in terms of duration, and considered whether a longer period ought to be fixed, but decided against it. I detect no error of principle in three years being selected, rather than a longer period, as the prosecution has sought. The magistrate said nothing about the period. This court should emphasise that the only respect in which there was an error, an error I think attributable to lack of a more complete statement by the prosecutor of what he sought, was to do with the court's proceeding to conviction.

[45] After preparation of the foregoing, on my associate's making inquiries of Mr Stanton's instructing solicitors on 27 May 2003 to ascertain a convenient means of forwarding these reasons, he was advised that further submissions were to be made. Those came in by fax at 9:09am the next day. They make the point, of which I am acutely conscious, that an appellate tribunal should be reluctant to interfere with a sentencing discretion, and refer to two matters in which appeals against resort to s19B failed: Lanham v Brambles-Ruys Pty Ltd (1984) 55 ALR 138, in which the beneficiary was a corporation, and DPP (Cth) v Li (2000) 34 ACSR 457; [2000] VSCA 76, decided by the Court of Appeal in Victoria. The primary judge was alleged by the DPP to have placed too much weight on s229 of the Corporations Law, which might stand in the way of a person "convicted" participating in the management of corporations. The section was the subject of comments in the case of Hagan, mentioned in the extract from Briese in paragraph [40] above. Li's situation was very different from Mr Gardiner's. As a clerk working for a company participating in a fraudulent scheme to avoid paying sales tax (which he had no part in devising), he came to the realisation "that it was wrong for him to sign some of the documents although it seems that he had no knowledge as to why this might be so" ([11]). The offending happened in 1994-95; he came to Australia only in June 1990, with very little English; he was "anxious not to lose his job" which was "on the lowest rung of the organisational ladder" ([10]). He was paid $3000 for "additional work", the alternative being to lose his job. He left in 1995 after less than a year with that employer and set up his own company in 1996 which had an exemplary record in meeting its liabilities, including sales tax; its turnover rose from $300,000 to $13.5m by 1998, and it employed 8. Li was arrested and charged in August 1998 and pleaded guilty on arraignment a year later. The sentencing judge indicated a 6 month actual custodial sentence would have been ordered but for cooperation under s21E of the . This matter seems to me very different from Li's.

[46] As to Beissel, Mr Stanton makes the point that there need be no concern the absence of a conviction will leave the TGA in ignorance of matters it ought to know. This is true, insofar as the TGA was the de facto prosecutor. I do not think that the considerations pointing to conviction so that the public are appropriately informed are satisfied because a particular regulatory agency is informed.