penalty - applicable principles
23 The power to impose a pecuniary penalty is governed by s 224 of the ACL. Under ss 224(1)(a)(i), (ii), (iv) of the ACL, the Court may order a person who has contravened ss 21, 29, 79 and 86 of the ACL to pay such pecuniary penalty, in respect of each act or omission by the person, as the Court determines to be appropriate. Strictly, each communication of a false representation, each failure to adhere to the unsolicited consumer agreement provisions of the ACL and each act of unconscionability involves a separate contravening act for the purposes of s 224(1).
24 Section 224(2) of the ACL provides that in determining the appropriate pecuniary penalty the Court must have regard to all relevant matters including:
(a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;
(b) the circumstances in which the act or omission took place; and
(c) whether the person has previously been found by a Court in proceedings under Chapter 4 or Part 5-2 of the ACL to have engaged in any similar conduct.
25 Section 224(3) provides that the maximum penalty for a body corporate for each act or omission to which s 224 applies that relates to:
(a) section 21 (unconscionable conduct) and s 29 (false representations) of the ACL is not to exceed $1.1 million; and
(b) sections 79 and 86 (the unsolicited consumer agreement provisions) of the ACL is not to exceed $50,000.
26 Section 224(3) provides that the maximum penalty for a person who is not a body corporate for each act or omission to which s 224 applies that relates to:
(a) sections 21 and 29 of the ACL is not to exceed $220,000; and
(b) sections 79 and 86 of the ACL is not to exceed $10,000.
27 Section 224(4)(b) provides that if conduct constitutes a breach of two or more of the provisions of the ACL for which a pecuniary penalty may be imposed, a person is not liable to more than one pecuniary penalty in respect of the same conduct.
28 Deterrence (both specific and general) is the primary objective of imposing penalties under the Competition and Consumer Act 2010 (Cth) (CCA), including the ACL.
29 As noted above, s 224(2) sets out three mandatory factors to be considered in determining the appropriate penalty. The following overlapping or additional considerations are also relevant to the assessment of a pecuniary penalty:
(a) the nature and extent of the contravening conduct;
(b) the amount of loss or damage caused;
(c) the circumstances in which the conduct took place;
(d) the size of the contravening company;
(e) the degree of market power that the contravening company has, as evidenced by its market share and ease of entry into the market;
(f) the deliberateness of the contravention and the period over which it extended;
(g) whether the contravention arose out of the conduct of senior management or at a lower level;
(h) whether the company has a corporate culture conducive to compliance with the CCA including the ACL as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; and
(i) whether the company has shown a disposition to cooperate with the ACCC.
30 Such considerations may be expanded to include:
(a) whether the company has engaged in similar conduct in the past;
(b) the company's financial position; and
(c) whether the conduct was systematic or covert.
31 In relation to the relevant principles, I refer to and incorporate my observations in Australian Securities and Investments Commission v Superannuation Warehouse Australia Pty Ltd (2015) 109 ACSR 199; [2015] FCA 1167 at [53], [55] to [59], [61] and [63], Australian Competition and Consumer Commission v OmniBlend Australia Pty Ltd [2015] ATPR 42-492; [2015] FCA 871 at [83] to [87], [89], [92], [115] and [119] and Australian Energy Regulator v Snowy Hydro Ltd (No 2) [2015] FCA 58 at [109] to [116], [118], [121] and [124] on the questions and application of:
(a) general and specific deterrence;
(b) the methodology to be applied in arriving at a particular penalty figure;
(c) the "course of conduct" principle, on which I will further elaborate;
(d) the parity principle; and
(e) the totality principle.
32 The ACCC has emphasised that it is important to have regard to the maximum penalty imposed by the ACL in a case such as the present where false representations have been made to a large number of consumers. I agree. Now it may be accepted that the maximum penalty for the s 29 contraventions is some considerable multiple of $1.1 million. But it is an arid exercise to engage in a mere arithmetical calculation multiplying the maximum penalty by the number of contraventions even if one could theoretically quantify that latter number (see Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540; [2015] FCA 330 at [17], [18], [84] and [85]). But of course some estimate of the number of contraventions is to be taken into account. In the present case, in relation to the number of s 29 contraventions, one is theoretically considering orders of magnitude well above a single contravention. But it is not productive to quantify this further. Moreover, it is not appropriate to quantify a theoretical maximum for the purpose of then ratcheting down, an impermissible exercise.
33 For present purposes it is sufficient to say that I have taken into account that the theoretical maximum penalty is at least two orders of magnitude above $1.1 million in relation to the s 29 contraventions. Let me elaborate on some principles relevant to dealing with multiple contraventions.
34 In determining the appropriate penalty for multiple contraventions, there are two related principles to consider: the "totality" principle, which may be applied at the end of the process, and the "course of conduct" principle, which may be applied as an intermediate step.
35 The totality principle requires that the total penalty for related offences not exceed what is proper for the entire contravening conduct taking into account all factors. The principle operates to ensure that the penalties to be imposed, considered as a whole, are just and appropriate.
36 Contrastingly, the "course of conduct" principle gives consideration to whether the contraventions arise out of the same course of conduct to determine whether it is appropriate that a single overall penalty should be imposed that is appropriate for the course of conduct. It has a narrower focus. The principle was explained in Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1; [2010] FCAFC 39 at [39]:
It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is "the same criminality" and that is necessarily a factually specific enquiry. Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions. (emphasis in original)
37 But even if the contraventions are properly characterised as arising from a single course of conduct, I am not obliged to apply the principle if the resulting penalty fails to reflect the seriousness of the contraventions. The principle does not restrict my discretion as to the amount of the penalty to be imposed for contraventions that may be grouped as a course of conduct. Further and as a corollary, the maximum penalty for the course of conduct is not restricted to the prescribed statutory maximum penalty for any one contravening act or omission.
38 More generally, the "course of conduct" principle does not have paramountcy in the process of assessing an appropriate penalty. It cannot of itself operate as a de facto limit on the penalty to be imposed for contraventions of the ACL. Its application and utility must be tailored to the circumstances. In some cases, the contravening conduct may involve many acts of contravention that affect a very large number of consumers and a large monetary value of commerce, but the conduct might be characterised as involving a single course of conduct. Contrastingly, in other cases, there may be a small number of contraventions, affecting few consumers and having small commercial significance, but the conduct might be characterised as involving several separate courses of conduct. It would be anomalous to apply the concept to the former scenario, yet be precluded from applying it to the latter scenario. The "course of conduct" principle cannot unduly fetter the proper application of s 224.
39 Putting to one side the "course of conduct" principle for the moment, in my view for the purposes of applying ss 224(1) and (3) to the present case, a separate act by GQA in contravention of the ACL occurred on each of the following occasions:
(a) First, with regard to s 29(1) of the ACL, a separate contravening act occurred with each communication of the 100% money back guarantee representation, the skills review representation, the eligibility representation and the refund ineligibility representation to an individual consumer.
(b) Second, with regard to s 21 of the ACL, a separate contravening act occurred when:
(i) GQA's unconscionable conduct came to bear upon or affected each of the four individual consumers referred to in ACCC v Get Qualified Australia (No 2); and
(ii) GQA's system of unconscionable conduct came to bear upon or affected any individual consumer. I agree with the ACCC that it may fairly be inferred that at least hundreds of consumers were affected by such a system, given the thousands of consumers who enrolled, the thousands of consumers who did not receive qualifications, and the at least 670 who requested a refund.
(c) Third, with regard to s 79 of the ACL, a separate contravening act occurred each time GQA entered into an agreement with a customer who it had contacted using contact information obtained via its online skills review tool and failed to disclose information prescribed by s 79 of the ACL; that is to say on numerous occasions given that 95% of consumers came through the website.
(d) Fourth, with regard to s 86 of the ACL, a separate contravening act occurred each time GQA required or accepted payment from customers within 10 business days of entering into an agreement with a customer who it had contacted using contact information obtained via its online skills review tool; that is to say, on numerous occasions.
40 As to website representations, in Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698, I said at [12] that:
A representation is made when there is a communication of some form. The act of placing information on a website that is yet to be accessed by downloading does not involve the making of a representation. An uncommunicated statement is relevantly no representation. In reality, the representation is made when the website is viewed by a person through downloading the relevant page.
41 The issue was also considered by Edelman J in Australian Competition and Consumer Commission v Valve Corporation (No 3) (2016) 337 ALR 647; [2016] FCA 196 in the context of considering territorial reach. The website representations were made on a website based in Washington State, USA and accessed in Australia. His Honour observed at [181]:
Considered by themselves, they are general representations to the world at large. They are not representations to any person or to any Australian consumer. Until the representations were accessed, the representations were meaningless and could not be the subject of any alleged contravening conduct. But, by the time a consumer had purchased a game or downloaded Steam Client the consumer had a relationship with Valve and representations were made in Australia.
42 Further, in relation to the unsolicited consumer agreement provisions of the ACL, s 79 is contravened when a "supplier" fails to ensure that an unsolicited consumer agreement complies with prescribed requirements. So, each time a "supplier" enters an agreement that fails to comply with these requirements, it is theoretically liable to a separate penalty. Similarly, s 86 is contravened when a "supplier" accepts payments within the relevant cooling off period. Each time a supplier accepts payment within the cooling off period, it is theoretically liable to a separate penalty.
43 Let me now address s 21. Discerning when a contravening act or omission has occurred for the purposes of determining when a separate penalty should be imposed is more difficult when a contravention is constituted by conduct. Moreover, difficulty arises when the contravention is dependent on "all the circumstances", as is the case with s 21 contraventions.
44 In my view, it is appropriate to characterise each of the four individual unconscionable conduct instances (consumers WJ, GF, JA and AV) as involving a separate contravention of s 21 and attracting a separate penalty. The maximum penalty that could be imposed for all of them is $4.4 million.
45 But in this case, GQA has also been found to have engaged in a system of conduct or pattern of behaviour engaged in over a period of about two years in contravention of s 21 of the ACL. What maximum penalty is theoretically available for such systematic conduct?
46 Section 21(4)(b) of the ACL was introduced on 1 January 2012 and sets out the legislative intention that s 21 is capable of applying to a system of conduct or pattern of behaviour, irrespective of whether a particular individual is identified as having been disadvantaged by the conduct or behaviour. The purpose of the amendment was to clarify rather than alter the effect of the statutory prohibition on unconscionable conduct (Explanatory Memorandum to the Competition and Consumer Legislation Amendment Bill 2011 (Cth) at [2.19]). In this context, section 21(4)(b) of the ACL was introduced to make the following clear (at [2.21] of the explanatory memorandum):
Paragraph 21(4)(b) of the ACL provides that it is the intention of the Parliament that the section is capable of applying to a system of conduct or a pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour. The unconscionable conduct provisions of the ACL are not limited to individual transactions. Rather, the focus of the provisions is on conduct that may be said to offend against good conscience; it is not specifically on the characteristics of any possible 'victim' of the conduct (though these may be relevant to the assessment of the conduct). (emphasis in the original)
47 On this basis, strictly there is nothing arising from the interaction between s 21(4)(b) and s 224(1) which limits the Court's discretion to impose a penalty of more than $1.1 million in relation to a system that has involved multiple contravening acts or omissions by GQA directed at a very large number of consumers. Section 224(1) provides that a person can be ordered to pay a pecuniary penalty "in respect of each act or omission by the person to which [the] section applies". It would be a strange result if the maximum penalty that could be imposed in respect of a system that has affected at least hundreds of consumers could not exceed the maximum penalty that could be imposed for one of the four individual instances of unconscionable conduct that I have found to have been established.
48 There is little authority on the question of multiple penalties in the context of systemic unconscionable conduct. In Australian Securities and Investments Commission v Kobelt [2017] FCA 387, ASIC claimed that the respondent had engaged in a system of unconscionable conduct in relation to the supply of financial services to at least 117 customers but contended that that part of its case did not turn on any identified individual consumer. ASIC also claimed that the respondent had engaged in unconscionable conduct in dealings with five identified consumers. ASIC did not ultimately press its allegations in relation to the five individual instances of unconscionable conduct but succeeded in its claim that the respondent had engaged in a system of unconscionable conduct. On the question of penalty ASIC contended that the systemic conduct had involved 59 separate contravening acts. The trial judge rejected this submission and held that the "system" amounted to a single contravention. His Honour said at [33] and [34]:
In the present case, ASIC pursued its "system" case on the basis that it could succeed without proving the circumstances of any particular individual. Having so succeeded, it would be inappropriate now for penalties to be imposed on the basis that ASIC had, instead, pursued a case that Mr Kobelt's conduct was, in respect of 59 customers, unconscionable.
ASIC's contention would give rise to a further difficulty. Given that the identity of the particular 59 customers (out of the total of the 117) in respect of whom ASIC seeks the imposition of a penalty is not known, the Court is not in a position to make any assessment of the extent of the unconscionability in their individual cases, or of the impact which the unconscionable conduct had on them.
49 In my view, the present case can be distinguished from ASIC v Kobelt. First, the ACCC did not abandon its claims that GQA engaged in individual instances of unconscionable conduct. Second, the ACCC put its systems case on the basis that it was supported not just by GQA's records of its business system but by evidence relating to the experiences of thirteen of GQA's customers. This material included material relating to the particularised consumers (WJ, GF, AV and JA), affidavits from five more affected consumers (MA, DH, GD, MK and JR), and records of correspondence between four more consumers and GQA's representatives, the recordings of their telephone discussions with GQA representatives and transcripts of these calls (AS, LM, PP and VM). Accordingly, in the present case, unlike ASIC v Kobelt, it is possible to make an assessment of the extent of the unconscionability in each affected consumer's individual case, and of the impact which the unconscionable conduct had on them. More generally, it may be inferred that at least hundreds of consumers were affected, given the thousands of consumers who enrolled, the thousands of consumers who did not receive qualifications, and the at least 670 who requested a refund. In my case, I do not consider the ASIC v Kobelt limitation to be appropriate.
50 More generally, and as I have earlier indicated, in a case such as the present where false representations were made to a large number of consumers, the requirements of the unsolicited consumer agreement provisions in the ACL were routinely breached and a system of unconscionable conduct has been shown to have impacted a large number of consumers, it may not be possible or helpful to calculate the maximum possible penalty.
51 In the present case, the determination of the appropriate penalty involves an assessment of the overall extent and seriousness of the contravening conduct, taking account of the number of contraventions and the maximum penalty. Given the consistency between the exemplified cases, it is possible to draw inferences about unconscionability in the case of each of the other consumers who enrolled with GQA but did not receive a qualification, and of the impact of that unconscionable conduct. It is open for me to infer that at least some hundreds of consumers were affected by GQA's unconscionable conduct. Accordingly, it is open to me to impose penalties in relation to GQA's system of unconscionable conduct that exceed $1.1 million.
52 Before turning to the specific penalties that I propose to impose, it is appropriate to say something on the question of parity.
53 The ACCC contends that assessments of penalties in analogous cases may provide guidance. But as observed in Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618; [2002] FCA 192 at [34], "while pecuniary penalties imposed in one case provide a guide, that guide will seldom, if ever, be able to be used mechanically". Moreover, the Full Court observed in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295 that "other things are rarely equal where contraventions of the Trade Practices Act are concerned" and in Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249; [2012] FCAFC 20 it was said at [60] that:
… the court is not assisted by … citations of penalties imposed in other cases, where the combination of circumstances were different from the present, as if that citation is apt to establish a 'range' of penalties appropriate in this case.
54 To such statements may be added what the Full Court observed in Director of Consumer Affairs Victoria v Alpha Flight Services Pty Ltd [2015] FCAFC 118 at [76], that "there is little to be gained by considering penalties imposed in other cases which turned upon their own facts and, indeed, where "agreed" penalties had been reached".
55 But I accept that some albeit limited guidance may be taken from the penalties imposed in Australian Competition and Consumer Commission v Acquire Learning and Careers Pty Ltd [2017] FCA 602. That case also involved a range of conduct which breached the prohibitions on false, misleading or deceptive conduct and involved contraventions of the unsolicited consumer agreement provisions in the ACL. It also involved a business established for the purposes of profiting from the Australian Government scheme that provides loans to eligible fee paying students to finance their enrolment and participation in courses offered by RTOs. Murphy J imposed penalties totalling $4.5 million in respect of conduct towards eight consumers. I would observe that the penalties proposed by the ACCC in the present case in relation to the four individual instances of unconscionable conduct are within an analogous range.
56 But two distinguishing matters should be noted. First, in ACCC v Acquire Learning, the parties reached an agreed position on liability and relief and the Court took such cooperation and also contrition into account in determining an appropriate penalty. But GQA and Mr Wadi have shown no contrition and have failed to cooperate with the ACCC. Second, that case concerned conduct which was characterised as involving eight courses of conduct directed towards eight particularised consumers. But in the present case, in addition to findings in respect of four particularised instances, findings have been made of a system of unconscionable conduct which came to bear on a very large number of consumers, widespread contraventions of the unsolicited consumer agreement provisions and multiple false representations which were communicated to a very wide audience, including online and through the use of social media advertising. The extent of the contravening conduct in the case before me is much broader than the conduct that was the subject of ACCC v Acquire Learning.