(ii) ACM
53 ACM submitted that pecuniary penalties should be in a lower amount than the range of $1.54 to $1.65 million sought by the ACCC. ACM submitted that a penalty in the order of $350,000 to $400,000 is appropriate. ACM agreed with the ACCC that, by reason of s 224(4) of the ACL, only one penalty should be imposed on ACM in respect of each consumer.
54 ACM submitted that it was relevant to take into account the effects on it of both these proceedings and the ACM 2012 judgment. First, it said that it had undertaken a significant restructuring of its business operations to ensure consistency and compliance with industry and regulatory guidelines. It implemented significant changes to improve its culture, business systems, training processes, compliance and the way in which it dealt with whom it now calls "customers". It submitted that these steps demonstrated that it viewed the ACM 2012 decision very seriously and took steps to avoid any repetition of the conduct that gave rise to that proceeding.
55 Secondly, ACM submitted that both proceedings had had a significantly negative impact on its business, revenue and profitability. It submitted that its debt book had been in steady decline since 2012: as at 30 June 2018 it had about 62 percent fewer customer accounts than it did in 2012. It said that it had not purchased a bank debt book since January 2013 and had purchased only one Telco debt book since May 2015. ACM drew attention to the contrast between the financial losses it had incurred since 30 June 2015, as opposed to the significant profits it earned between 2011 and 2013.
56 ACM submitted that the changes it made following ACM 2012 were time consuming, costly and required significant work. It said that some of the improvements took time to develop and implement, such as the automated sensitive word report audit system which only went live in May 2016.
57 ACM drew attention to the fact that in around October 2015, it engaged Kildonan Uniting Care to assist in the review and rewriting of all customer letters. Well before the hearing of the present proceeding, ACM had stopped using the pro forma of letters of demand which were the subject of these proceedings and had, instead, implemented revised letters which had been drafted with the assistance of Kildonan Uniting Care.
58 Reliance was also placed on the Anteris Report dated September 2016. ACM said that it had implemented many of the recommendations in that Report, including updating many of its policies. It should be noted that the Anteris Report was admitted into evidence as evidence of statements made by Anteris in the Report but not as to the truth of those statements.
59 Another reform emphasised by ACM was the appointment in March 2018 of Mr Maxim Alves as Head of Compliance. He is assisted by 15 employees who comprise the Compliance and Ethics team which is responsible for ensuring that ACM and its employees meet all relevant regulatory obligations and consumer expectations.
60 ACM acknowledged that not all the reforms implemented by it after ACM 2012 were finalised in sufficient time to prevent the inappropriate and unlawful conduct which gave rise to the Court's findings with respect to CT and JR. ACM said that it "accepts unreservedly" the findings made in the Primary Judgment. Although ACM said that it regretted the delay, it emphasised that it had undertaken substantial work since 2012 with a view to preventing conduct such as that which occurred with CT and JR and that it did not sanction, condone or desire such conduct.
61 ACM acknowledged that the Court was entitled to take into account the similarity of the contravening conduct as found by Perram J in ACM 2012. It emphasised, however, that there were two aspects which distinguished the conduct which gave rise to the contraventions in ACM 2012 from the conduct here. First, the earlier conduct was found by Perram J to be consistent with ACM's policies at that time, whereas the conduct here was found to be inconsistent with the relevant policies. Secondly, it submitted that almost two-thirds of the calls which gave rise to contraventions as found in ACM 2012 were calls which were made prior to ACM's acquisition of the relevant business in July 2009.
62 As to the conduct relating to CT, which took place between 2011 and 12 June 2015, ACM submitted that part of the conduct occurred prior to delivery of the judgment in ACM 2012 and that the remaining conduct occurred at a time when ACM was in the process of implementing its reforms, including changing its Debt Smart system to automatically prevent excessive contact with a customer. This was done by inserting key word searches to flag and refer accounts to the Compliance Team, where sensitive words such as "hospital", "nursing home", "care facility" and "stroke" are identified. This system only went live in May 2016 which was too late for CT but ACM submitted that it demonstrated that it was taking steps to prevent the conduct which occurred with CT in respect of both red-flagging calls and changing the form of letters.
63 ACM submitted that the contact or attempted contact of CT resulted from:
(a) low level telephone operators failing properly to review the CT notes; and
(b) a failure of ACM's systems at the time to automatically flag CT's file for higher management review. It acknowledged that its policies required ACM to cease contact with someone like CT and to process him as a candidate for hardship.
64 ACM submitted that, having regard to the contents of the CT Notes and the brevity of the contact it established with CT on six occasions, this demonstrated that ACM's activities towards CT did not involve any deliberate, systematic or covert attempt to harass or act unconscionably towards him, or that it had any awareness of the conduct. ACM submitted that "contact was made at discrete times by different low level operators based in the Philippines who were apparently ignorant of what previous operators had experienced and who were merely seeking to confirm CT's identity and open a discussion". ACM added that the letters which were sent to CT were system-generated and sent automatically, as opposed to being ordered by someone who was fully appraised of CT's circumstances. ACM submitted that it did not deliberately attempt or design to harass or act unconscionably towards CT.
65 ACM submitted that, putting to one side CT's particular personal circumstances, the frequency and timing of its contact with CT was "significantly less than the level of contact recommended by the Guidelines".
66 For all these reasons, ACM submitted that its conduct towards CT could not appropriately be characterised as "among the worst kind of contravention" and should not attract the maximum penalty of $1.1m.
67 As to JR, ACM emphasised that the contravening conduct took place on a single occasion on one day in September 2014 and involved a lower level employee who acted contrary to ACM's policies and training. ACM emphasised, however, that Mr Francisco had not previously been identified as a problematic employee. He had attended all required training sessions and passed all relevant examinations. ACM emphasised that the additional compliance, training and audit/monitoring regimes it had implemented should substantially reduce the risk of an individual employee engaging in such conduct in the future.
68 ACM said that it accepted the Court's findings that Mr Francisco acted inappropriately, but it submitted that his conduct was isolated and limited to one call centre operator who was a low level employee. It also mentioned that Mr Francisco had resigned from ACM Philippines in January 2018, before the Primary Judgment was published.
69 ACM emphasised that Mr Francisco's branch manager, Mr Clarke (whose evidence the Court accepted and preferred) did not authorise or direct him to act as he did.
70 ACM also asked the Court to take into account that Mr Brabazon was no longer employed by it, having resigned in January 2018.
71 In all these circumstances, ACM submitted that its conduct concerning JR did not require "a substantial penalty" as sought by the ACCC.
72 ACM submitted that it was common ground that neither CT nor JR had suffered any financial loss or damage, nor was there any evidence that ACM had profited from its employees' conduct.
73 ACM submitted that a penalty in the range of $270,000 to $300,000 should be imposed with respect to its conduct towards CT, and a penalty in the range of $80,000 to $100,000 should be imposed with respect to JR. This would give a total penalty of about $350,000 to $400,000. It emphasised that a penalty in that range would constitute about 23 percent of its cash available as at 30 June 2018 and that the Court should also take into account the likelihood that ACM would have to pay an even larger amount in respect of the ACCC's costs of the proceeding. This would leave ACM with limited resources to fund its continued operations, compliance regime, wages and other expenses.
74 Additional matters which ACM asked the Court to take into account in assessing the level of pecuniary penalties may be summarised as follows.
75 ACM has a large call centre operated by a related entity in the Philippines which (as at September 2014) had in the order of 200 staff. It also has an office in Sydney where most of its management is based, including the joint CEOs and the Head of Compliance and Risk.
76 ACM made losses for each of the financial years ended 30 June 2016, 2017 and 2018. The audited financial statements for the year ended 30 June 2018 were only recently completed on 31 October 2018. The accounts paint a bleak picture with a net loss for the year of $145,000 and net assets of $32.348 million of which $31.133 million comprises the value of ACM's debt book (which cannot immediately be realised, if ever). In other words, ACM's total net assets other than the debt book are $1.215 million. ACM's debt book has been in steady decline and ACM has had difficulty purchasing any new debts. As at 30 June 2018, ACM's total cash and cash equivalents was $1.743 million, but its current liabilities were reported at $1.674 million.
77 Taking into account all of these matters, ACM submitted that the pecuniary penalty of $1.54 to $1.65 million sought by the ACCC (plus costs) may result in ACM's insolvency. Whilst that alone may not be a reason for the Court to decline to order a large penalty if the question of deterrence otherwise warrants it, ACM added that is not appropriate in the circumstances of this case for reasons which include the following. First, ACM was already in the process of reform at the time the CT and JR conduct occurred. The significant improvements it was implementing would likely have prevented any such conduct recurring. These proceedings did not cause ACM to implement those reforms; it was already doing that. In short, ACM learnt its lesson from ACM 2012 and was making significant changes and improvements although not all of the changes had been implemented by the time of the conduct relating to CT and JR. In those circumstances, the deterrent value of a significant penalty is low. The Court should be hesitant to impose significant penalties on a company that was already in the process of reforming and improving, but was then subjected to further proceedings by the regulator before the reform processes had been able to be completed. In oral address, ACM also emphasised that its conduct which underpinned the findings of contravention in the Primary Judgment was conduct which was directed at only two consumers and that its position was different from companies who engage in contravening conduct which affects a wide class of consumers, as sometimes occurs with advertising and marketing campaigns. Moreover, it emphasised that, without detracting from the seriousness of its conduct towards CT and JR, that conduct was relatively isolated and confined, taking into account that in 2012 it had approximately 460,000 debtor accounts and, in 2015, approximately half that number.
78 Secondly, ACM said that it is now operating as a model debt collection business with comprehensive policies and processes, regular and detailed training for staff and a large internal compliance team, headed by an experienced Head of Compliance, Mr Alves, who oversees the regular review and improvement of ACM's policies and procedures. ACM has also retained experienced external consultants to review and critique its processes and conduct. It has recently received independent certification from BSI Group Australia that it operates a quality management system which complies with the requirements of ISO 9001. The ACCC does not suggest that there are any deficiencies or failings in ACM's policies. Even during the trial, the ACCC sought to establish contravening conduct by, inter alia, highlighting ACM's policies and seeking to establish non-compliance with those policies.
79 Thirdly, ACM submitted that the imposition of a penalty in an amount that may result in its insolvency or the cessation of its operations will likely have a negative impact on debtors and the collections industry as a whole, by removing a significant debt collector who is operating compliantly, is customer focused and has invested significantly in training and compliance. The objects of the ACL are best served by framing relief in such a way that it allows and encourages reformed companies such as ACM (who have learned from previous failings) to continue to operate as a model debt collector and set an example, rather than removing such reformed and improved companies from the market.
80 Fourthly, ACM did not act deliberately in contravening the ACL in respect of its dealings with CT and JR.
81 Fifthly, ACM's improvements were extensive and could not be completed immediately. They involved the use of external reviews, advice and recommendations. It is unsurprising that the process took some time given the extensive work undertaken. The ACCC appears to concede the appropriateness of ACM's policies and procedures. If there can be any criticism, it would be that the reforms should somehow have been implemented more quickly, but there is no evidence to demonstrate that all of the reforms could have been completed in a materially shorter time period. There is no useful deterrence value in penalising a reformer who strives to be a compliant model player on the basis that its own reforms were not completed more rapidly.
82 Sixthly, the CT and JR issues which arose during the reform process represent less than 0.0005 percent of the debtors ACM were dealing with at the time. They were isolated incidents and did not involve systemic, planned or widespread conduct.
83 Seventhly, ACM did seek to co-operate with the ACCC in a number of respects. Although ACM did not concede liability, that question was arguable. The email and attachment from Mr Vieira referred to by the ACCC is not an admission that ACM defended these proceedings believing the defence would fail. The statement refers to the continuing improvements ACM had been making since ACM 2012. The entire paragraph from ACM's document reads: "Well before the judgment was handed down last month, we knew that we needed to do better, and for the last four years, we have been undergoing a dramatic transformation of the business". The document speaks to the lengthy reform process that had been underway since 2012 and should be read in its entirety, so submitted ACM.