Australian Competition and Consumer Commission v Chubb Security Australia Pty Limited

Contraventions of the same provision 145 Chubb acknowledges that the contraventions of s 58(b) cannot be grouped with contraventions of s 75AZL of the Act.

Same or substantially similar nature 146 Chubb submits that the contraventions are of the same or of a substantially similar nature. I accept that the conduct which was in contravention of the Act was the entering into of security agreements when there were reasonable grounds for believing that the services in the agreement would not be able to be supplied. While the contraventions occurred in respect of different runs in different locations and in different States, the gravamen of each charge was the same (as in Trade Practices Commission v Cue Design Pty Ltd (1996) ATPR 41-475 at 41,831 ('Cue')). In Cue, as here, so much is apparent from the standard form of the charges, where matters such the dates and identity of the client differed but the substantive details of Chubb's conduct remained the same.

At or about the same time 147 As to whether the offences occurred at or about the same time, Smithers J observed in Ducret v Colourshot Pty Ltd (1981) 35 ALR 503 ('Ducret') at 508: 'Whether in the ordinary affairs of mankind it may be said that an event occurred at about the same time as another event, depends largely on the context.' His Honour also commented that, according to the words 'at or about the same time'their ordinary meaning, s 79(2) of the Act would seem to reflect the principle that a man shall not be punished twice for the same offence. He favoured a practical, rather than strict, application in determining whether the coincidence in time of the offences was so close as to impart unity to them. 148 On that basis, Smithers J was of the view that the span of time contemplated must reflect an 'emphasis on the notion of contemporaneity of the contraventions rather than the notion of the collection into a fictional unity of contraventions separated by a distinct, measurable and substantial period of time' (at 508). The offences must be so close together 'that there is a basis in reality for attributing to them a unity in the commission of the actus reus of each offence': (Trade Practices Commission v Advance Bank Australia Limited (1993) ATPR 41-229 ('Advance Bank') at 41,164 per Gummow J applying Ducret). 149 Smithers J concluded in Ducret that separate contraventions committed at an interval of two months could not reasonably be regarded as having occurred at about the same time but that offences committed within four days of each other could be said to occur at about the same time (at 508). Gummow J did not accept in Advance Bank that advertisements appearing over a period of three weeks appeared at or about the same time. In Trade Practices Commission v Sun Alliance Australia Ltd (1994) ATPR 41-286, Einfeld J adopted the views of Gummow J in Advance Bank on the application of s 79(2) of the Act and found, at 41, 851, that 'the placing of the advertisements over a three-week period precludes any conclusion that the offences were so close together in time that there was a basis in reality for attributing to them a unity in the commission of them'. 150 In Farrow at 65, the prosecutor conceded and von Doussa J accepted that groups of offences, one group occurring over a period of 23 days, occurred at or about the same time. In that case, representations were made to a series of investors to invite them to engage in a business activity. Similarly in Thompson v Magnamail (No 1) (1977) ATPR 40-032 it was submitted by counsel for the defendant, the prosecution did not argue to the contrary and St John J accepted that s 79(2) applied to three offences resulting from two advertisements nearly six months apart. In neither case were reasons given for the acceptance. 151 In Hartwich Spender J found that groups of offences, two of which were committed 6 weeks and 5 days apart occurred at or about the same time. Those dates represented the time frame in which representations were made by named persons to specified persons to invite them to engage in a specific business activity. His Honour did not elaborate on the reason for the application; it would seem to have been inherent in the nature of the offences themselves. 152 In Australian Competition and Consumer Commission v The Vales Wine Co Pty Ltd (1996) ATPR 41-528 at 42,776 - 42,777 O'Loughlin J made an 'assessment' that s 79(2) applied to three offences that occurred over a period of 47 days, which were said to be 'sufficiently close in point of time' but not to an additional offence which occurred eight or nine months later. His Honour made no reference to Ducret and did not give detailed reasons for his conclusion, made without the benefit of counsel's submissions. 153 In Australian Competition and Consumer Commission v Nissan Motor Co (Aust) Pty Ltd (1998) ATPR 41-660, offences on 21 September 1996 and 10 October 1996 were held not to have occurred at or about the same time. In Crossan v Commons (1985) ATPR 40-542, nine advertisements published between 5 January 1983 and 16 February 1983 were held not to have occurred at or the same time; however, invitations to engage in business which were made between 1 January 1983 and 5 January 1983 were held to constitute one offence. 154 Chubb submits that s 79(2) applies because all of the offences came about due to one course of conduct and systemic failure rather than planned and separate incidents. This, it is submitted, makes it permissible to group all charges under one provision. It would follow that a single penalty should be imposed in respect of those charges and assessed on the basis that the maximum penalty is the maximum for one of those charges under that provision. 155 The ACCC submits that s 79(2) is not applicable because the contraventions did not occur at or about the same time. They occurred over a seventeen month period and, with limited exceptions, each offence was separated by periods of a week or more. 156 The ACCC submits that the only offences which occurred within days of each other and which could 'conceivably be regarded as having occurred at or about the same time' were charges 5 and 6 (both on 17 September 2001), charges 8 and 9 (12 and 16 November 2001) and charges 11 and 12 (20 and 21 December 2001). However, the submission was that even these do not qualify for grouping under s 79(2). 157 Mr Fagan says, constrained by authority (Cue), that a difference in place and identity of personnel who take the action that constitutes the offending conduct does not prevent the application of s 79(2). Time is the relevant factor but it is necessary, he submits, to consider the interaction between the nature of the offences and the time over which they were committed to determine whether the section applies. 158 Mr Fagan draws attention to the fact that the offences have been committed with respect to different customers and on different runs. He submits that, while offences committed with respect to the same run and within days of each other may arguably be considered to be at or about the same time for the purposes of s 79(2), it is the ACCC's contention that the more appropriately applicable section is s 4K of the Crimes Act, which gives the Court some flexibility in fixing an appropriate penalty. 159 There is a tension in Mr Fagan's submissions. On one hand he submits that the Court should consider 26 separate offences individually and not regard them as a single offence. On the other hand, he submits that Chubb cannot properly suggest that the problem arose because of the delegation to franchisees, as Chubb's function was the monitoring of the performance of the franchisees and it was Chubb that entered into the contracts and made the commitment to provide the mobile security services. In referring to the 'representational character' of the offences, Mr Fagan emphasises that they took place in the context of a 'systemic breach of the provisions'. This tends to characterise Chubb's responsibility in terms of a single, if continuing, breakdown. 160 The same tension arises in Mr Bathurst's submissions. He relies upon the systemic failure but draws attention to the actions of the individual service providers. Mr Bathurst's primary submission is that the offences arose out of one matter and, although the actions the subject of these charges occurred over a lengthy period of time, there exists a unity in the commission of the actus reus for the purpose of s 79(2). 161 The offence is one committed by Chubb not by the sub-contractors, licensees or franchisees. The elements of Chubb's offences are relevantly, for the purposes of s 58(b) of the Act, at the time of acceptance of payment for the services there were reasonable grounds, of which Chubb was aware or ought reasonably to have been aware, for believing that it would not be able to supply the services. 162 For s 75AZL(3) of the Act, the elements are the same, except that at the time of acceptance there must be reasonable grounds for believing that Chubb will not be able to supply the services. There is no requirement in s 75AZL(3) of the Act of actual or constructive knowledge on the part of Chubb. It is in this sense that this provision can be said to create a strict liability offence. Chubb admits for the purpose of s 58(b) of the Act, that it was aware or ought reasonably to have been aware of the grounds for the believe that it was unable to supply the promised services. 163 The approach of Mr Fagan concentrates on the element of the time of acceptance as separating the offences. 164 Mr Bathurst's approach, on the other hand, emphasises that the existence of the reasonable grounds for believing that Chubb would not be able to supply the services arose from what he described as the systemic failure of Chubb's systems. 165 To my mind, the grounds for believing that Chubb would not be able to supply the services was not Chubb's awareness of the failures within the runs but the state of the runs themselves. Those failures were not constant over time or between runs. The failures did not exist in all runs for which consideration was accepted by Chubb nor were all persons within the runs the subject of some failure deprived of the services for which they had contracted. At the time of acceptance of payment, Chubb may well have been able to supply services to a particular client. 166 The systemic failure meant that Chubb was not monitoring service delivery in the various runs. In each case, the new client was added to an existing run. Before that occurred, Chubb should have satisfied itself that the operator of the run could provide that service. In each case Chubb failed to do so. 167 This means, in my view, that the there was not a single offence comprising the systemic failure. The audits carried out by Chubb have shown which runs were not providing contracted services and the reasons for that failure. Chubb's failure meant that, at the time of the acceptance of consideration from each client the subject of each charge, Chubb was not aware whether or not the service provider would be able to supply the services to that client in that run. 168 Section 79(2) of the Act links the nature of the contravention and the time. Smithers J in Ducret referred to the context of the contravention in deciding whether they occurred in or about the same time. 169 The reference in s 79(2) is to the contraventions being 'of the same nature or a substantially similar nature and to have occurred at or about the same time' (emphasis added). Chubb's submissions rely on a single systemic failure on the part of Chubb. That takes care of the first of these requirements, as effectively conceded by the ACCC. To my mind, s 79(2) does not apply to a single systemic failure without regard to the time of the offences committed as a result of that failure or the context of that failure or the actions that were part of Chubb's 'systems' during that time. 170 Chubb's procedures which were, as discussed above, in theoretical operation during the Charge Period, should have resulted in monthly reviews by State General Managers that should have alerted them to deficiencies in operations. 171 The contraventions of s 58(b) occurred over a time period of over six months. The contraventions of s 75AZL occurred over nearly eleven months. The promised provision of services was to a number of different clients in different States in respect of different runs operated by different licensees or franchisees. While these latter factors do not of themselves preclude the application of s 79(2), they are matters that assist in determining the context of the time period. 172 In my opinion, it cannot be said that all of the contraventions of s 58(b) or all of the contraventions of s 75AZL occurred at or about the same time. 173 That is not, however, the end of the matter. It is submitted that there were some charges that relate to dates of acceptance of the consideration for services to be provided that were on or about the same time and should be grouped by reason of the application of s 79(2) of the Act.

Charges laid under section 58(b) of the Trade Practices Act 1974 Summons 3 June 2004 Charge No Date Run No/State 1 5 June 2001 1 - ACT 2 22 June 2001 4 - ACT 3 3 July 2001 4 - ACT 4 24 July 2001 73 - NSW 5 17 September 2001 4 - ACT 6 17 September 2001 83 - NSW 7 26 October 2001 71 - NSW 8 12 November 2001 72 - NSW 9 16 November 2001 83 - NSW 10 13 December 2001 4 - ACT

Summons 24 June 2004 Charge No Date Run No/State 1 20 December 2001 48 - ACT 2 21 December 2001 48 - ACT

Charges laid under section 75AZL(3) of the Trade Practices Act 1974 Charge No Date Run No/State 1 24 December 2001 81 - NSW 2 17 January 2002 3 - ACT 3 20 February 2002 12 - TAS 4 1 March 2002 4 - ACT 5 20 March 2002 11 - TAS 6 3 April 2002 407 - NSW 7 13 May 2002 10, 11, 12 - TAS 8 25 June 2002 81 - NSW 9 27 June 2002 81 - NSW 10 16 July 2002 11 - TAS 11 23 July 2002 407 - NSW 12 7 August 2002 81 - NSW 13 4 October 2002 407 - NSW 14 4 November 2002 407 - NSW

174 Mr Fagan acknowledges that, where the contravention occurred in respect of the same run and on or close to the same date, it was arguable that they could be grouped for the purposes of s 79(2). This could apply, he submitted, to charges 2 and 3 under s 58(b) of the Act of the summons of 3 June 2004, to charges 1 and 2 of the summons of 24 June 2004 under s 58(b) of the Act and to charges 8 and 9 of the charges laid under s 75AZL(3). 175 He concedes that where it is a single run which is affected by the one body of knowledge concerning capacity to provide service, the state of knowledge could be said to be the same over a short period of time, such as eleven days. He submits that there must be some unifying feature to justify treating the different offences as one. 176 Mr Bathurst seeks to extend the groupings. His proposition is that offences relating to a run or runs operated by the same franchisee in respect of which, in effect, identical complaints are made, can be grouped together. He submits that adjoining runs may be grouped. For example, runs 71, 72 and 73 are adjoining runs in Sydney so there is, he submits, "in a practical sense the necessary unity". Similarly, runs 1 and 4 are in the same areas of the ACT. Runs 81 and 82 are operated by the same franchisee. 177 Mr Bathurst submitted that the groupings could be made on a number of different bases. He submitted that groupings could occur for contraventions in respect of:

• Contracts that were made out of the same Chubb branch office
• Runs that were grouped by Chubb for the purposes of addressing issues raised by the ACCC
• Runs that were grouped by Chubb and serviced by the same service provider
• Runs that were in the same or similar broad geographic location, for example, all runs located in the ACT 178 In order to be eligible for grouping for the purposes of s 79(2), the contraventions have to comply with both criteria of the subsection. I am prepared to accept that each run would have had similar factors affecting the delivery of services to the properties within that run and that each run should have been monitored for compliance. On that basis, on the assumption that these factors of which Chubb ought to have been aware remained constant over a short time, I am of the view that some grouping should be applied. That does not mean, however, that the requirement of "at or about the same time" can be waived or extended beyond a reasonable assessment. I am not satisfied that the environment was static. Further, it is reasonable to conclude that Chubb, were it properly monitoring each run, would do so by monthly review. In a practical sense, the 'necessary unity' of the charges would cover a particular run over the period between monthly compliance checks by Chubb, giving Chubb the grounds for believing that, in that time period, services could or could not be supplied. 179 The agreed statement of facts says that Chubb's operating procedure manuals and instructions: '…purported to provide for the defendant's respective State General Managers to review, monthly, missed call reports and client complaints registers. These procedures further purported to require the State General Managers to review selected runs and clients on a monthly basis and to ensure that all documentation relating to the provision of patrol services was being correctly completed.' It seems to me to be logically incorrect, therefore, to join those charges which occurred substantially more than one month apart, where the State General Managers had failed to comply with this duty to monitor the runs on a monthly basis. Such a check would have established the state of the delivery of the services on each run. 180 The groupings that apply, in my opinion, are: Charges laid under s 58(b) under summons 3 June 2004: · Charges 2 and 3 which are 11 days apart involving run 4 in the ACT. Charges laid under s 58(b) under summons 24 June 2004: · Charges 1 and 2 which are 1 day apart involving run 48 in the ACT. Charges laid under s 75AZL(3): · Charges 8 and 9 which are two days apart involving run 81 in NSW. · Charges 13 and 14 which are one month apart involving run 407 in NSW.

Section 4K of the Crimes Act 181 Subsections 4K(3) and (4) of the Crimes Act which, it is accepted by Mr Fagan, apply to the summonses provide: '(3) Charges against the same person for any number of offences against the same provision of a law of the Commonwealth may be joined in the same information, complaint or summons if those charges are founded on the same facts, or form, or are part of, a series of offences of the same or a similar character. (4) If a person is convicted of 2 or more offences referred to in subsection (3), the court may impose one penalty in respect of both or all of those offences, but that penalty shall not exceed the sum of the maximum penalties that could be imposed if a separate penalty were imposed in respect of each offence.' 182 Mr Fagan submits and Mr Bathurst agrees that the Court could, by applying s 4K(4) of the Crimes Act, adjust the overall sentence if it were of the view that the total penalty imposed as a result of aggregating individual fines otherwise appropriate to each offence were excessive, having regard to the totality principle. The circumstances in which s 4K(3) and (4) of the Crimes Act may apply are not, it is submitted, identical with the circumstances of application of s 79(2) of the Act. There is no requirement in s 4K(3) and (4) of the Crimes Act that the offences occurred at or about the same time. 183 Mr Fagan submits that the reliance by Chubb upon systemic or structural problems is an attempt to minimise the seriousness of the matter and demonstrates a failure on the part of the company to appreciate that 'the whole essence of this service business was doing what was contracted to be performed and it makes no difference that the company was using franchisees to actually send the servicemen around to the premises and examine them'. He submits that the Chubb submissions appear to attempt to disown knowledge of the failures in the delivery of services. 184 While Mr Fagan concedes that the offences form part of a series of offences of the same character, he submits that they cannot properly be regarded for sentencing purposes as one instance of conduct. There is, he contends, a fresh offence each time there is a new contract with a client which involves the acceptance of consideration for the provision of a service where Chubb knew or ought to have known that the services could not be provided. He points out that there has been a breach of the section in different locations and spread over a substantial time period. This is not, he contends the same as, for example, misrepresentations made in a number of stores by a number of personnel pursuant to a the adoption of a single policy or marketing strategy (Cue). In the present case, he contends, Chubb denies a cohesion of policy. 185 Mr Bathurst submits that Chubb could not have had a more serious response. He points out that Chubb has not been charged with actual knowledge or an intention not to supply services. 186 It does not seem to me that since the Charge Period Chubb has failed to appreciate its role in the fundamental failure to provide the services. The evidence and submissions based on the systemic problems are by way of explanation of how the system was not working and how agreements came to be entered into without consideration of the ability to deliver services. Chubb should have known whether in fact the services were being provided, whether by Chubb directly or by its licensees, franchisees or sub-contractors. It should have had effective systems to monitor the service delivery. Chubb acknowledges that the systems in place during the Charge Period were inadequate and has dismissed a number of senior personnel who should have ensured that Chubb did have such knowledge. Chubb acknowledges that it was aware of facts from which there were reasonable grounds for believing that new clients could not be supplied with the services. 187 Chubb points out: (a) That there was no intention on its part not to provide services (b) There were compliance processes that had been put in place and had been reported to the ACCC pursuant to the civil undertakings (c) While the shortfalls in each run were as alleged, this meant that the runs were, in the worst case 56% but generally around 86-88% serviceable (d) It was the shortfalls that were not being 'picked up' 188 Mr Fagan submits that the offences are 'in the mid range of seriousness', acknowledging that there would be more serious and less serious contraventions. He submits that the appropriate range is between 25 and 75 per cent of the penalty for each charge.

Conclusions on penalty 189 Giving effect to the grouping of charges, there are now three offences which each attract a maximum penalty of $200,000 each; seven offences which each attract a maximum penalty of $220,000 and 12 offences which each attract a maximum penalty of $1,100,000. 190 Taking into account all of the matters in s 16A(2) of the Crimes Act each offence, on its own should, in my view, attract a penalty of 20% of the maximum. In coming to that figure I have determined that what might be called the negative aspects of the offence, such as the seriousness of the conduct and the necessary deterrence, including the fact that Chubb had previously been made aware of its shortcomings in delivering promised services in the civil proceedings, attract a penalty of 40% of the maximum. I have discounted that to take account of what might be described as the positive aspects of Chubb's response, such as lack of intention, the plea of guilty, co-operation and rehabilitation as described. I also take account of the moneys and effort that Chubb has expended in effecting a comprehensive change to its procedures and compliance programs and the commitment that comprehends to effecting future compliance. 191 This would mean a penalty for the s 58(b) offences of $428,500 ($384,000 for the summons of 3 June 2004 and $44,000 for the summons of 24 June 2004) and, for the s 75AZL(3) offences, $2,640,000. This would result in a total penalty of $3,068, 500. 192 In applying s 4K(4) of the Crimes Act to each summons and giving effect to the totality principle and the parity principle, I am of the view that it is appropriate to reduce that penalty. The offences, both as to number and as to time, arose out of a failure in Chubb's procedures and systems. This was a failure to comply with the very systems that were in place to prevent the behaviour that occurred. This systemic failure does not avoid the fact that there were a large number of offences but it is a factor to be taken into consideration in reducing the penalty to be applied in respect of that total number. 193 It is also the case that the financial benefit to Chubb, the consideration for each contract, was not large and that there was no deliberate intent on the part of Chubb to fail in the delivery of security services. This is not a case where a corporation has weighed the commercial benefit of the offences against the risk of prosecution. 194 I am of the opinion that the appropriate penalties are: for the s 58(b) offences set out in the summons of 3 June 2004, $190,000; for the s 58(b) offences set out in the summons of 24 June 2004, $20,000; for the s 75AZL(3) offences, $1,300,000. This results in a total penalty of $1.51 million. 195 I have been asked to reserve the question of costs and I do so. 196 I direct the parties to forward to my associate draft orders to give effect to these reasons. I certify that the preceding one hundred and ninety-six (196) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett.

Associate: Dated: 30 December 2004 Counsel for the Prosecutor: D J Fagan SC with M A Wigney

Solicitor for the Prosecutor: Commonwealth Director of Public Prosecutions

Counsel for the Defendant: T F Bathurst QC with L McCallum

Solicitor for the Defendant: Mallesons Stephen Jaques