Australian Communications and Media Authority v Clarity1 Pty Ltd - [2006] FCA 1399 - FCA 2006 case summary — Zoe

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Australian Communications and Media Authority v Clarity1 Pty Ltd

[2006] FCA 1399

Federal Court of Australia|2006-10-27|Before: Nicholson J

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Source facts

Court

Federal Court of Australia

Decision date

2006-10-27

Before

Nicholson J

Source

Original judgment source is linked above.

Judgment (34 paragraphs)

[1]

Declaratory Relief:

A declaration that the first respondent by sending during the period from 10 April 2004 to 13 April 2006: 1.1 at least 213 443 382 commercial electronic messages (CEMs) (of which 41 796 754 were successfully sent) to 5 664 939 unique electronic addresses; 1.2 at least 56 862 092 CEMs (of which 33 199 806 were successfully sent) to 2 291 518 unique electronic addresses; and by offering to supply/or promoting and/or advertising goods or services without obtaining the prior consent of the recipients thereby sent CEMs with an Australian link in contravention of section 16(1) of the Spam Act 2003 (Cth) (the Spam Act).
A declaration that the second respondent by authorising the sending of the CEMs described in order 1 on behalf of himself and the first respondent aided and abetted, counselled and procured and was directly or indirectly knowingly concerned in or party to the contravention of section 16(1) of the Spam Act by the first respondent in contravention of section 16(9) of the Spam Act.
A declaration that the first respondent, by sending the CEMs described in order 1 to electronic addresses that had been obtained prior to the commencement of section 22 of the Spam Act by: 3.1 using address-harvesting software; and 3.2 obtaining harvested-address lists from external parties, used harvested-address lists and thereby contravened section 22(1)(a) of the Spam Act.
A declaration that the second respondent, by authorising the sending of the CEMs described in order 1 on behalf of himself and the first respondent to electronic addresses that had been obtained, prior to the commencement of section 22 of the Spam Act, by: 4.1 using address-harvesting software; and 4.2 obtaining harvested-address lists from external parties, aided and abetted, counselled or procured and was directly or indirectly knowingly concerned in or party to the use of address-harvesting software in contravention of section 22(1)(a) of the Spam Act by the first respondent in contravention of section 22(3) of the Spam Act.

[3]

Restraining injunction 7. An injunction restraining the first respondent, whether by its directors, servants, agents or otherwise, from sending, or causing to be sent, CEMs as defined by section 6 of the Spam Act with an Australian link to any electronic address except in respect of the electronic addresses for which the first respondent has obtained the prior consent of the accountholder in accordance with the Spam Act or which is otherwise permitted by that Act. 8. An injunction restraining the second respondent, from sending, or causing to be sent, or authorising the sending of CEMs as defined by section 6 of the Spam Act, with an Australian link to any electronic address except in respect of the electronic addresses for which the first respondent has obtained the prior consent of the accountholder in accordance with the Spam Act or which is otherwise permitted by that Act. 9. An injunction restraining the first respondent, whether by its directors, servants, agents or otherwise, from sending, or causing to be sent, CEMs as defined by section 6 of the Spam Act with an Australian link to any electronic address that had been obtained at any time by: 9.1 using address-harvesting software; or 9.2 obtaining harvested-address lists from external parties, except in respect of the electronic addresses for which the first respondent has obtained the prior consent of the accountholder in accordance with the Spam Act or which is otherwise permitted by that Act. 10. An injunction restraining the second respondent, from sending, or causing to be sent, or authorising the sending of CEMs as defined by section 6 of the Spam Act, with an Australian link to any electronic address that had been obtained at any time by 10.1 using address-harvesting software; or 10.2 obtaining harvested-address lists from external parties, except in respect of the electronic addresses for which the first respondent has obtained the prior consent of the accountholder in accordance with the Spam Act or which is otherwise permitted by that Act.

[9]

relevant legislative provisions on penalty 4 The provisions of the Spam Act have been examined and described in my reasons identified in the opening paragraph of these reasons to which reference may be made. 5 Section 24 is the primary provision addressing pecuniary penalties for contravention of civil penalty provisions under the Spam Act. It reads: '24 (1) If the Federal Court is satisfied that a person has contravened a civil penalty provision, the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each contravention, as the Court determines to be appropriate. (2) In determining the pecuniary penalty, the Court must have regard to all relevant matters, including: (a) the nature and extent of the contravention; and (b) the nature and extent of any loss or damage suffered as a result of the contravention; and (c) the circumstances in which the contravention took place; and (d) whether the person has previously been found by the Court in proceedings under this Act to have engaged in any similar conduct; and (e) if the Court considers that it is appropriate to do so - whether the person has previously been found by a court in a foreign country to have engaged in any similar conduct.' 6 The issue of maximum penalties is addressed in s 25. Section 25(1) sets the general approach in the following terms: '25 (1) The maximum penalty payable under subsection 24(1) by a person in respect of a contravention of a civil penalty provision depends on: (a) whether the person has a prior record in relation to the civil penalty provision (see subsection (2)); and (b) whether the person is a body corporate; and (c) whether the civil penalty provision is subsection 16(1), (6) or (9).' 7 No issue of prior record arises here so that it is not necessary to examine s 25(2). 8 The provision for a maximum penalty in respect of a body corporate is described in the following terms by s 25(3): '(3) If a body corporate does not have a prior record in relation to a particular civil penalty provision: (a) the penalty payable under subsection 24(1) by the body corporate in respect of a contravention of the civil penalty provision must not exceed: (i) if the civil penalty provision is subsection 16(1), (6) or (9) - 100 penalty units; or (ii) in any other case - 50 penalty units; (b) if the Federal Court finds that the body corporate has, on a particular day, committed 2 or more contraventions of the civil penalty provision - the total of the penalties payable under subsection 24(1) by the body corporate in respect of those contraventions must not exceed: (i) if the civil penalty provision is subsection 16(1), (6) or (9) - 2,000 penalty units; or (ii) in any other case - 1,000 units.' 9 The maximum penalty payable by a person other than a body corporate where there is no prior record is described as follows in s 25(4): '(4) If a person other than a body corporate does not have a prior record in relation to a particular civil penalty provision: (a) the penalty payable under subsection 24(1) by the person in respect of a contravention of the civil penalty provision must not exceed: (i) if the civil penalty provision is subsection 16(1), (6) or (9) - 20 penalty units; or (ii) in any other case - 10 penalty units; and (b) if the Federal Court finds that the person has, on a particular day, committed 2 or more contraventions of the civil penalty provision - the total of the penalties payable under subsection 24(1) by the person in respect of those contraventions must not exceed: (i) if the civil penalty provision is subsection 16(1), (6) or (9) - 400 penalty units; or (ii) in any other case - 200 penalty units.' 10 The provisions in s 25(5) and s 25(6) do not require consideration because they address the position of a body corporate and a person other than a body corporate each with a prior record, that not being the case here. 11 To understand the reference to 'penalty unit' in these provisions it is necessary to have regard to other portions of the Spam Act. Section 4 defines penalty unit, subject to the appearance to any contrary intention (of which there is none), as having the meaning given by s 4AA of the Crimes Act 1914 (Cth). Relevantly a penalty unit means, where the reference is in a law of the Commonwealth and unless the contrary intention appears, the sum of $110. 12 The applicant submits when determining the pecuniary penalty the Court may also have regard to the system of infringements set up in Sch 3 to the Spam Act. It is appropriate to have such regard as part of the context in which the penalty provisions appear. Whether the infringement notice system carries any weight in that respect is a matter additionally to be determined. 13 Section 30 of the Spam Act provides that Sch 3 has effect. Clause 1 of Sch 3 states that the object of the Schedule is to set up a system of infringement notices for contraventions of civil penalty provisions as an alternative to the institution of proceedings in the Federal Court. Clause 3 empowers an authorised person (being the Chairman of the applicant or a member of staff appointed under cl 9 of Sch 3) to issue an infringement notice requiring a person as an alternative to action in the Federal Court to pay a penalty specified in the notice: cl 4(1). The amount of the penalty is provided for in cl 5. Subclause 5(1) provides that the penalty to be specified in an infringement notice given to a body corporate must be a pecuniary penalty equal to the number of penalty units worked out using the Table which (relevantly) reads as follows: ' Number of penalty units Item in this case… the number of penalty units is… 1 … … 2 … … 3 the notice relates to 50 or more alleged contraventions of subsection 16(1), (6) or (9) 1,000

[12]

' 15 The applicant submits the point of having regard to these Schedules in respect of the infringement notice is to demonstrate that pecuniary penalties imposed by such notices are themselves substantial. It is submitted that in that context regard must be had to the penalties applicable as a consequence of an action in the Federal Court. If infringement notices were issued to the respondents for their contravening conduct (based on them committing over 50 contraventions occurring on 300 days) the maximum penalties would be: in the case of Clarity1, for contravening: · s 16(1) of the Spam Act: 300 x 1000 = 300 000 ($33 000 000); and · s 22(1) of the Spam Act: 300 x 500 = 150 000 ($16 500 000); and in the case of Mr Mansfield, for contravening: · s 16(1) of the Spam Act: 300 x 200 = 60 000 ($6 600 000); and · s 22(1) of the Spam Act: 300 x 100 = 30 000 ($3 300 000). I accept that submission as supportive of the effect of the penalty provisions subject to consideration of the particular circumstances of the matter. It demonstrates that the quantum of pecuniary penalty sought by the respondents is manifestly inadequate in the context of the legislative provisions for penalty. 16 Nevertheless the respondents submit these provisions should not be understood as requiring application so as to produce an unrealistically large penalty payable for multiple contraventions. Reliance is placed upon the statement at 67 of the 'Explanatory Memorandum to the Spam Bill 2003', circulated by authority of the Minister for Communications, Information Technology and the Arts, Senator the Honourable Richard Alston, where it is stated: 'A daily ceiling for penalties has been set that may be charged for all contraventions against a particular provision that have occurred in one day. This has been included to ensure that a meaningful penalty may be charged for a single contravention without causing an unrealistically large penalty payable for multiple contraventions. For example, there are reported cases of dedicated spammers sending millions of unsolicited commercial electronic messages each day. Without a ceiling amount for daily contraventions, such a spammer could potentially be liable for a million contraventions.' [emphasis added] 17 The respondents submit that even in cases of very serious criminal offences, such as those, for example, prosecuted under the Crimes (Confiscation of Profits) Act 1986 (Cth), the subject of a pecuniary penalty order is usually the value of the benefit derived by a person from the commission of the offence of which he or she is convicted. They therefore submit a more appropriate method of fixing a pecuniary penalty for both Clarity1 and for Mr Mansfield would be to base the penalty on the value of the benefits received by both respondents. It is argued that such a measure of the pecuniary penalty would be more in line with the precedents in more serious criminal matters where confiscation of assets and restitution play a large part in the penalties applied to wrongdoers. However, there is no basis in the Spam Act for the application of an alternative method to that prescribed by the provisions of the Spam Act itself. It is the provisions of the Spam Act to which regard must be had, not other legislation enacted for another purpose. 18 I therefore turn to the matters enumerated in s 24(2) of the Spam Act noting, however, that those matters are not exclusive and that the Court must have regard 'to all relevant matters'.

[13]

Nature and extent of the contraventions 19 The Court has found that during the period from 10 April 2004 to 13 April 2006, Clarity1 sent:

213 443 382 CEMs (of which 41 796 754 were successfully sent) based on an analysis of the 'Direct2' database; and
56 862 092 CEMs (of which 33 199 806 were successfully sent) based on an analysis of the 'success' and 'failed' text files contained in System#11. These figures were drawn from the expert report of Mr Thompson and were based on his analysis of data for the period 10 April 2004 to 7 April 2005. As the Court found at [64] of the previous published reasons, the respondents admitted to have continued to dispatch CEMs at the same rate until 24 October 2005. This was supported also by the evidence of Mr Duffy. At [65] of the previous reasons, the Court noted that the term 'send' as applicable to CEMs in s 16(1) of the Spam Act included attempt to send (s 4) so that it was not material whether or not the respondents had 'successfully' sent the CEMs. 20 In making these findings the Court also found that the CEMs were sent to a number of electronic addresses kept by Clarity1. The Court has found that there were 5 664 939 unique electronic addresses contained in the 'Direct2' database (see [58] and [66] of the previous reasons) and 2 291 518 unique electronic addresses contained in the 'success' and 'failed' text files (see [61] read with [66] of the previous reasons). 21 At [97] the Court found that, except in relation to 182 electronic addresses belonging to persons who purchased goods or services from Clarity1, the applicant's claim that Clarity1 contravened s 16(1) of the Spam Act was made out: see [112] of the previous reasons. Accordingly, each time Clarity1 sent a CEM during the period from 10 April 2004 to 24 October 2005 it committed a contravention of s 16(1) of the Spam Act. 22 In relation to the contravention of s 22(1) by Clarity1, the Court found that the majority of the unique electronic addresses kept by Clarity1 were obtained by using address-harvesting software or by obtaining harvested-address lists from external parties prior to the relevant commencement of the Spam Act: at [114] of the previous reasons. It was held at [115] that in the majority of instances of contravention of s 16(1), Clarity1 used a harvested-address list in contravention of s 22(1) on each occasion. 23 In [121] of the previous reasons it was held that Mr Mansfield had aided, abetted, counselled and procured and was knowingly concerned in or a party to the above contraventions of s 16(1) and s 22(1) committed by Clarity1. Accordingly, on each occasion that Clarity1 contravened those sections, he contravened s 16(9) and s 22(3) of the Spam Act respectively. 24 Therefore the applicant submits that is clear from the findings that Clarity1 was a prolific sender of CEMs regularly sending thousands of CEMs a day until at least 24 October 2005, each time in contravention of s 16(1) of the Spam Act. In the majority of these instances Clarity1 also contravened s 22(1) as the electronic addresses that Clarity1 used were harvested-address lists. Mr Mansfield was closely involved in those contraventions, that giving rise to the contraventions which were found in respect of him. All of the contraventions of s 22 of the Spam Act occurred when Clarity1 used a harvested-address list to send CEMs in contravention of s 16. 25 The applicant contends that there is evidence that the respondents are continuing to engage in the proscribed conduct. It relies on the affidavit of Mr Duffy, sworn 19 May 2006. In that affidavit, Mr Duffy refers to complaints from the public received in respect of Clarity1 in relation to contraventions of the Spam Act. He refers to evidence from which the applicant contends the respondents did not stop sending CEMs after the making of interim injunctions on 20 July 2005 and interlocutory injunctions on 4 August 2005 as well as after the delivery of the reasons of the Court on 13 April 2006. Mr Mansfield has lodged an affidavit, sworn on 16 June 2006, denying that the case is as Mr Duffy has stated. He also tenders certain evidence and suggests that others than Clarity1 or himself may have sent the allegedly offending messages in the name of Clarity1. This issue arises after the reasons of the Court were delivered on 13 April 2006 and the affidavits have not had the benefit of cross-examination. In those circumstances I do not consider it is appropriate to take into account the allegations of continuing conduct in fixing the penalty in respect of the findings made on that date. 26 The applicant submits that with respect to the nature of the contraventions that the methods used by the respondents to send the CEMs contained elements of deception, namely:
used the software program 'Stealth Mail Master' which has the functionality to randomise email header information, to use open proxies and to 'provide anonymity' and to hide the IP address: see [81] of the previous reasons;
utilised the process of rotating IPs, which was described in evidence as a method engaged by someone trying to 'hide their tracks and not wanting to be pro-actively blocked from sending messages': see evidence of Mr Villa;
used different 'yahoo.com' and 'yahoo.com.au' electronic addresses: see for example Exhibit A1, [21] and VRR-1 annexed to Exhibit M; and
used overseas servers in the United States of America, Korea, China and elsewhere: see [81] of the previous reasons. 27 The applicant further submits as to the nature of the contravention that they were flagrant and unapologetic. It is submitted that the respondents have refused to accept that their conduct may contravene the Spam Act and have continued to deny any contravention stating in their written submissions that the applicant's claims are without foundation. 28 Therefore the applicant submits that the nature of the contraventions as well as the extent of them support a significant and substantial pecuniary penalty.

[14]

nature of loss or damage resulting from contraventions 29 I accept it is impossible to precisely and specifically quantify the amount of loss or damage caused by the contravening conduct of each of the respondents. In the case of the Trade Practices Act 1974 (Cth) (Trade Practices Act), where the provisions in relation to loss or damage bear similarity, it has been established that an absence of loss or damage is not a mitigating factor in the imposition of penalty even though a statute expressly requires the nature and extent of such loss or damage to be taken into account: Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115 at 119 per Olney J. I agree with the applicant that there is no reason to depart from that approach in the context of the Spam Act. 30 Consequently the presence of loss or damage is to be considered as a possible aggravating factor. 31 The contraventions are distinguished by the huge volume of CEMs sent by the respondents. There was evidence before the Court that witnesses have described them as annoying, time consuming and frustrating. Witnesses have in response to the CEMs implemented filtering and blocking software. The threat to functionality of the internet thus represented is supported by statements in the Regulation Impact Statement contained in the Explanatory Memorandum to the Spam Act. The Explanatory Memorandum at 6 notes that studies have indicated financial costs in the form of loss of productivity and increased download times. I therefore accept that it can be reasonably inferred that the respondents' conduct is likely to have resulted in real loss or damage to the recipients of the CEM in the form of direct financial costs associated with purchasing blocking and filtering software; other financial costs in the form of lost time and productivity; and non-financial costs in the form of annoyance and frustration at having received unsolicited CEMs. Such loss or damage is therefore an aggravating factor to be taken into account.

[20]

Financial position and capacity to pay of respondents 39 The applicant submits there is very limited financial information available to it regarding the respondents. I agree with this submission. 40 The respondents have provided an unaudited statement of assets and liabilities of Mr Mansfield with no supporting documentation dated 5 May 2006 and unsigned company tax returns for Clarity1 for the financial years 2004 and 2005. This financial information purports to demonstrate that Clarity1's business had a total gross income in the financial year 2003/2004 of $530 627 and in the financial year 2004/2005 of $895 739. The information also suggests that the company recorded an overall loss in both years. The applicant says that the Court should conclude therefore that the respondents' business was 'a substantial small business'. On the evidence before the Court, I must so find. 41 The applicant submits that the apparent limited capacity of the respondents to pay cannot mitigate against the need for an appropriate pecuniary penalty to be applied. This is supported by reference to Australian Competition and Consumer Commission v High Adventure Pty Limited (2006) ATPR 42-091. That was a case in which the Full Court heard an appeal against a pecuniary penalty on the grounds that such penalty was manifestly inadequate and had failed to give due consideration to proper deterrence. The offence of resale price maintenance had given rise to the pecuniary penalty so that the penalty arose under the Trade Practices Act. The Full Court (Heerey, Finkelstein and Allsop JJ) said at 44,564: '11 … by focusing on the detriment to the respondents the judge ignored both the seriousness of the contravention as well as the need to fix upon an appropriate penalty by reference to the need to deter future contraventions. As the cases to which the judge was referred show, the principal, if not the sole, purpose for the imposition of penalties for a contravention of the antitrust provisions in Part IV is deterrence, both specific and general. This rule is so well entrenched that citation of authority is unnecessary. Moreover, as deterrence (especially general deterrence) is the primary purpose lying behind the penalty regime, there inevitably will be cases where the penalty that must be imposed will be higher, perhaps even considerably higher, than the penalty that would otherwise be imposed on a particular offender if one were to have regard only to the circumstances of that offender. In some cases the penalty may be so high that the offender will become insolvent. That possibility must not prevent the Court from doing its duty for otherwise the important object of general deterrence will be undermined.' In Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltd (Administrators Appointed) (2004) ATPR 41-983, Heerey J was required to consider the imposition of a pecuniary penalty in respect of contraventions of s 46 and s 47 of the Trade Practices Act. He addressed the insolvency and likely winding up of the offending respondent in the following terms at 48,522: '23 It may be that where what would otherwise be an appropriate penalty may have the effect of putting a corporation out of business. The potential effect of such a result on innocent parties such as employees and creditors, and indeed of the lessening of competition, might provide grounds for some reduction: Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission (2003) ATPR 41-957 at 47,511; [2003] 196 ALR 611 at [8]. However different considerations apply when it seems that when the practical reality is that the corporation is going out of business anyway.' He referred to Australian Competition and Consumer Commission v The Vales Wine Company Pty Ltd (1996) ATPR 41-528 at 42,776, Australian Competition and Consumer Commission v SIP Australia Pty Ltd (2003) ATPR 41-937 at [59] and Australian Competition and Consumer Commission v GIO Pty Ltd [2002] FCA 1298. I see no reason in the content of the Spam Act not to follow the principles enunciated in these decisions in the context of the Trade Practices Act. 42 There is no evidence that Clarity1 is likely to go out of business apart from any effect which a pecuniary penalty may have on it. 43 Also I accept that the issue of capacity to pay is, although a relevant factor, of less relevance when balanced against the necessity of imposing a penalty that satisfies the objective of general deterrence: Australian Competition and Consumer Commission v Leahy Petroleum (No 2) (2005) 215 ALR 281 at 284-285, at [9] and [11] (ACCC v Leahy). 44 The information concerning Mr Mansfield states that he does not own any land or buildings or motor vehicle. He owns household effects to the value of $30 000. His investments are valued at $28 510. He values his one share in Clarity1 at nil. 45 In a further affidavit of 8 June 2006, Mr Duffy states that on 5 June 2006 whilst reviewing the Spam matters reporting database he identified two nearly identical emails which he believed were sent by Clarity1 and which stated that Mr Mansfield earns a multi-million dollar income. The emails are analysed in the affidavit. Mr Mansfield has responded in an affidavit sworn on 16 June 2006. He denies that he earns a multi-million dollar income. He refers to advertising being based on hyperbole, that not all his claims 'are literally true' and to his customers knowing that much of his advertising is 'mere puff', including the statements about a 'multi-million dollar income'. Mr Mansfield therefore does not deny the emails referred to in Mr Duffy's second affidavit but does deny the truth of the comments in relation to his income. In the absence of any trial of the issue, I cannot place reliance on it. Viewed in the light of the present evidence it seems to me to be in the character of 'puff'.

[24]

consideration against the maximum penalty 51 The applicant submits that having regard to the high volume of CEMs sent and the aggravating circumstances set out in its submissions, the respondents should be seen as liable to pay close to the maximum penalty amount set out in cl 25 of Sch 3 to the Spam Act for each day that the respondents committed a contravention. 52 The applicant estimates, based on the evidence referred to in its submissions, that Clarity1 sent considerably in excess of two CEMs in contravention of the Spam Act on at least 300 days during the period between 10 April 2004 and 13 April 2006. This would give rise to a potential maximum penalty of: · against Clarity1 for contravening: section 16(1): 300 x 2000 = 600 000 ($66 000 000); and section 22(3): 300 x 1000 = 300 000 ($33 000 000); and · against Mr Mansfield for contravening: section 16(9): 300 x 400 = 120 000 ($13 200 000); and section 22(3): 300 x 200 = 60 000 ($6 600 000). 53 The applicant further submits this estimate is a conservative one in view of a number of factors. First, the sending process adopted by the respondents involved sending many thousands of CEMs in 'campaigns' on a particular day. Second, as the evidence in the expert report discloses, between the period of 10 April 2004 and 7 April 2005 Clarity1 sent considerably in excess of two CEMs (usually thousands) on 252 separate days. It has admitted, by not responding to the notice to admit facts, that it continued to send CEMs at the same rate until at least 24 October 2005. Third, in order to achieve the high volume of total CEMs sent it would be necessary to send CEMs in bulk quantities over the course of many days. Fourth, on almost every occasion Clarity1 sent a CEM it contravened s 16(1) and s 22(1) of the Spam Act and Mr Mansfield contravened s 16(9) and s 22(3). 54 Therefore the applicant submits that there is circumstances disclosing systematic, flagrant, deliberate and blatant conduct which warrants a very substantial penalty. In my view this fails to weigh the conduct in the context of the novelty of the legislation and the other circumstances referred to under 'reasoning on pecuniary penalties'.

[26]

reasoning on pecuniary penalties 56 One difficulty which emerges in the application of the pecuniary penalty provisions in the new Act is that the maximum penalties are so high as to give rise to 'an unrealistically large penalty'. The unrealistic character derives principally from the quantum of penalty viewed in relation to the capacity of either respondent to pay and the need for general as well as specific deterrence. It is not just the total quantum of a pecuniary penalty which can provide the element of general deterrence. That quality derives from a consideration of the penalty in relation to the conduct giving rise to it and the financial capacity of the offenders. Where the financial capacity is not great, a lessor pecuniary penalty in value will derive its quality of general deterrence from its magnitude in relation to that capacity. 57 With respect to Clarity1, the position is that a pecuniary penalty of $9.9 million is sought, being 10 per cent of the potential penalties of $66 million and $33 million. I agree these offences involve overlapping conduct so that the former is the relevant potential maximum. A penalty in the amount of $9.9 million is clearly one beyond the capacity of Clarity1 to pay and so likely to lead to its liquidation. It is quite disproportionate to the commercial realities of Clarity1. Even as proposed it is in the particular circumstances 'an unrealistically large penalty' (see the Explanatory Memorandum). It is overly weighted in favour of general deterrence. Importantly, it does not appear to be constructed on any allowance of the new character of the legislation and the entitlement of the respondents to test their view of the effect of the legislation. 58 The same may be said of the pecuniary penalty proposed by the applicant with respect to Mr Mansfield. There a pecuniary penalty of $1.98 million is sought against potential maximums of $13.2 million and $6.6 million. The proposed penalty is one which would bankrupt Mr Mansfield. It is disproportionate to his financial realities and is also overweighted to general deterrence. It is in the character of 'an unrealistically large penalty'. It also is not constructed with any apparent regard to the new character of the legislation. 59 In my view the Parliamentary intention of imposing penalties of marked general deterrence, the nature and extent of the contraventions, the nature of loss or damage resulting from the contraventions, the totality principle, the specific deterrence of the respondents, and the commercial realism of the particular circumstances of the matter would be met by pecuniary penalties in the following amounts, particularly given the innovative character of the legislation, the boundaries of which the respondents were at liberty to contest on its first application: Clarity1 $4.5 million Mr Mansfield $1 million