Should the pecuniary penalties sought be ordered?
22 ACCC seeks orders that Safe Breast Imaging pay a pecuniary penalty of $550,000 and Ms Firth pay a pecuniary penalty of $110,000.
23 Under s 224 of ACL (or s 76E of the TP Act), the maximum penalty for a corporation is $1.1 million for each act or omission. The maximum penalty for an individual is $220,000 for each act or omission.
24 ACCC submits that for penalty purposes it is appropriate for the Court to consider the science representations and the medical practitioner representations as, respectively, separate and distinct courses of conduct engaged in by Safe Breast Imaging, each deserving of sanction.
25 ACCC accepts that the conduct engaged in by Safe Breast Imaging formed part of one continuous marketing campaign in respect of its use of the MEM device for breast imaging. It submits, however, that because of the different character of the science representations, on the one hand, and the medical practitioner representations, on the other, each class of representation amounts to a separate course of conduct for the purpose of assessing the appropriate penalty to be imposed.
26 ACCC says the science representations falsely stated there was an adequate scientific medical basis for using the MEM device for certain purposes, when there was no such basis. It says the medical practitioner representations falsely stated that trained doctors would interpret the images and prepare a medical report, giving the impression that medical doctors, registered to practise in Australia, would interpret the images and provide the reports, when that was not the case.
27 ACCC submits that treating each type of representation as a course of conduct is consistent with the approach taken to multiple contraventions in such cases as Singtel Optus Pty Ltd v Australia Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at [52]-[54] (Singtel Optus); Australian Competition and Consumer Commission v Apple Pty Ltd [2012] FCA 646 at [45]; and TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190; (2012) 210 FCR 277 at [151] (TPG Internet).
28 ACCC says it should also be noted that by making each of the representations, Safe Breast Imaging contravened two separate provisions of the TP Act and ACL, to which penalty provisions apply (being ss 53(c) and 55A of the TP Act and ss 29(1)(g) and 34 of the ACL).
29 ACCC notes that Ms Firth has been found to have been knowingly concerned in, or party to, each of those contraventions.
30 ACCC submits that, in these circumstances, based on two separate and distinct courses of conduct, rather than each advertising medium by which representations are conveyed itself amounting to a separate contravention, the maximum penalty for Safe Breast Imaging should be seen as being $2.2 million, and for Ms Firth as being $440,000.
31 In appropriate circumstances, it is no doubt open to a court to consider whether a number of contraventions should be treated as separate contraventions for penalty purposes, or falling within one or more courses of conduct. The purpose of approaching penalty on the one or the other basis, to put it simply, is to ensure the punishment fits the contravention and the penalty outcome is not artificially, and unjustly, inflated because of the sheer number of contraventions found.
32 In Singtel Optus, the Full Court (Keane CJ, Finn and Gilmour JJ) cited with approval what Middleton J had said in Australian Competition and Consumer Commission v Telstra Corporation Limited [2010] FCA 790; (2010) 188 FCR 238 (Telstra Corporation). Middleton J, at [250] of Telstra Corporation observed that, in that case, a number of different approaches could be taken to imposing a penalty. His Honour pointed out that the Court could look to each contravention, consider the appropriate penalty, taking into account the totality principle, and then apply any appropriate discount. Alternatively it could treat the admitted contraventions as all following from the same cause, with the maximum penalty being identified, and then consider the appropriate discount. His Honour added, at [251], that there was no scientific approach or arithmetic formula to be applied in determining the appropriate penalty and that the circumstances of each contravention needed to be looked at, taking into account all the circumstances pertaining to the contravention.
33 In Singtel Optus, the Full Court considered it was appropriate, in the circumstances of that case, to group Optus' offending conduct into 11 contraventions "in order to reflect the extent and variety of Optus' departure from the standards of commercial conduct required by the Act having regard to the magnitude of Optus' campaign and the deployment of different media and messages in the prosecution of Optus' campaign".
34 In my view, in the circumstances in this case, there was in reality one extended course of conduct that involved Safe Breast Imaging marketing to the public, in various ways, the breast imaging service that it offered, which carried with it the impugned representations, including those which have been called the medical practitioner representations. I do not consider that the medical practitioner representations are easily separated from the science representations. Rather, they added weight to the science representations and, in a sense, amplified them. But they were part of the one general course of conduct. As a result, I consider there is in substance only one course of conduct, not two. I consider to impose a punishment for each set of representations, as contended for by ACCC, would produce an artificial and unjust outcome.
35 In those circumstances, the starting approach to a pecuniary penalty assessment is that the company is liable to a maximum pecuniary penalty of $1.1 million and Ms Firth to a pecuniary penalty of $220,000 for the contraventions.
36 There remains to be considered, however, exactly what the pecuniary penalty should be taking into account all relevant factors.
37 In some statutory circumstances where a pecuniary penalty may be imposed under legislation, the Court necessarily has regard to a series of factors that are inferred on a proper understanding of the objects, purposes, intent and operation of the legislation in question. In this case, s 224(2) of the ACL and s 76E(2) of the TP Act provided at material times that in assessing penalty the Court must have regard to all relevant matters, but then specifically required three to be considered, namely:
(1) the nature and extent of the act or omission and any loss or damage suffered;
(2) the circumstances in which the act or omission took place; and
(3) whether the person has previously been found by a Court in proceedings under the relevant parts of the legislation to have engaged in similar conduct.
38 Relevant matters have in the course of many decisions of this Court been generally identified as including:
the nature and extent of the contravening conduct;
the amount of loss or damage caused;
the circumstances in which the conduct took place;
the size of the contravening company;
the degree of power it has, as evidenced by its market share and ease of entry into the market;
the deliberateness of the contravention and the period over which it extended;
whether the contravention arose out of the conduct of senior management or at a lower level;
whether the company has a corporate culture conducive to compliance with the TP Act or CCA as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention;
whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the legislation in relation to the contravention;
whether the respondent has engaged in similar conduct in the past;
the company's financial position; and
whether the conduct was systematic, deliberate or covert.
See Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 (CSR Ltd); NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (NW Frozen Foods).
39 It may be seen therefore that by considering all relevant matters the three matters to which the Court must have regard are also taken into account.
40 ACCC submits, and I accept, that with the exception of the relevant matter to do with the degree of power of a company, each of the matters identified above may be considered relevant to the assessment of a penalty under s 224 of the ACL and s 76E of the TP Act in this case. See Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) [2011] FCA 761 at [75].
41 It is well understood that consideration of the relevant matters is designed to assist the Court in determining what the appropriate penalty is, the primary objective of a penalty being to impose a penalty that recognises the seriousness of the contravention and which provides deterrence, both specific and general. See Singtel Optus at [62]; Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd [2011] FCA 372 at [31]-[32].
42 The authorities firmly indicate that the penalty imposed should be sufficiently high and substantial enough that the parties realise the seriousness of their conduct and are not inclined to repeat it. See CSR Ltd at 52,152; Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265; (2005) 215 ALR 301 at [39] (Goldberg J).
43 Nor should the penalty be so low as to constitute in the eyes of the contravener (and others) an acceptable cost of doing business. See Singtel Optus at [62].
44 At the same time it is also well understood that the penalty should not be "crushing" or, as stated in NW Frozen Foods at 293, so high as to be oppressive.
45 These principles were reflected in the recent decision of the High Court in Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 88 ALJR 176 at [65] where the plurality (French CJ, Crennan, Bell and Keane JJ) confirmed that general and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct.
46 There is, however, recognition that, all other things being equal, similar contraventions should incur similar penalties and so there is a parity principle at play when pecuniary penalties are imposed. See NW Frozen Foods at 295. But, it is equally well understood that the Court does not seek to identify a "tariff" or a "range" of penalties by reference to earlier decisions in order to select the penalty that appears to carry with it parity with earlier penalties, instead of identifying what the appropriate penalty is having regard to the seriousness of the contravention in question and the need for deterrence. See Singtel Optus at [60].
47 In that regard it is also appropriate to note the recent decision of the High Court in Barbaro v The Queen; Zirilli v The Queen [2014] HCA 2; (2014) 88 ALJR 372 (Barbaro). There, in the context of criminal sentencing, the plurality (French CJ, Hayne, Kiefel and Bell JJ) made statements that appeared to make impermissible the practice of prosecutors making submissions as to the 'available' range of sentences. I agree with what Middleton J recently said in Australian Competition and Consumer Commission v Energy Australia Pty Ltd [2014] FCA 336, that the dicta in Barbaro should not be taken to be relevant to the imposition of civil penalties. Rather, the High Court not having overruled NW Frozen Foods or Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41,993, the principles established in those cases remain applicable to the imposition of pecuniary penalties in this Court and indeed this Court is bound to follow those authorities.
48 In my view, as a matter of principle, in a civil penalty case such as this, submissions made on behalf of a body such as ACCC as to what pecuniary penalty and other outcomes might be considered appropriate having regard to the seriousness of a contravention can be of considerable assistance to the Court because they are likely to assist the Court to focus on what penalty is just and appropriate in the circumstances of the case. Reference to apparently like cases is also of assistance in regarding the parity principle. The Court is more likely to be assisted, rather than constrained or misled, at least in a civil contravention context, by such submissions. In no way is a particularised penalty submission on behalf of a body such as the ACCC in a proceeding such as the present likely to disable the Court from exercising its judicial discretion to impose a just and appropriate pecuniary penalty.
49 Finally, I should mention the totality principle. It is well understood that the totality principle operates as something of a "final check" to ensure that penalties imposed on a wrongdoer, when considered as a whole, are just and appropriate. See Kerkhoffs v Registrar of Aboriginal and Torres Strait Islander Corporations [2014] FCAFC 66.
50 In the result the process for determining penalty follows a fairly well-trodden path:
The Court's assessment of the appropriate penalty is a discretionary judgement based on all relevant factors involving an "instinctive synthesis" of those factors.
Careful attention must be paid to maximum penalties.
However, it will rarely be appropriate for a court to start with the maximum penalty and proceed by making a proportional deduction from it.
The Court should not adopt a mathematical approach of increments or decrements from a pre-determined range, or assign specific numerical or proportionate value to the various relevant factors.
It is not appropriate to determine an "objective" sentence and then adjust it by some mathematical value given to one or more factors such as pleas of guilty or assistance to authorities.
The Court "may not add and subtract item by item from some apparently subliminally derived figure" to determine the penalty.
Since the law strongly favours transparency, accessible reasoning is necessary and while there may be occasions where some indulgence in an arithmetical process will better serve the end, it does not apply where there are numerous and complex considerations to be weighed.
See Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 at [27]-[39].
51 In this case, in my view, the contravening conduct is serious, notwithstanding the submission made on behalf of the respondents that the case is related to a "long standing and still current political issue internationally".
52 It is plain that in this case Ms Firth, on behalf of each of the respondents, at material times has held strong views as to the efficacy of mammography and a preference for other means of advancing breast health for women.
53 That, however, is not the issue in this proceeding, as pointed out in the findings on contravention.
54 The fact is that representations of a scientific type were made which were false, misleading or deceptive; as were the allied medical practitioner representations.
55 I accept the submission of ACCC that each of the science representations were designed to inform consumers about the device used by Safe Breast Imaging and to encourage consumers to choose its service over more conventional breast imaging methods, such as mammography. In doing so, Safe Breast Imaging sought to take advantage of perceived negative characteristics of mammography and offered what it represented to be a viable alternative or substitute for mammography, when that was not the case. These representations, as I have said above, were fortified or amplified by the medical practitioner representations, which were also false. It is reasonable in these circumstances to see the representations as calculated to direct women or at least some women to take up the service offered by Safe Breast Imaging.
56 It is also reasonable to conclude that the respondents saw commercial advantage in the strategy, albeit the strategy was based on their strong beliefs in alternative strategies and technologies. The fact is Safe Breast Imaging offered its service as a business, and the means by which it promoted its activities were not without cost. Indeed, Ms Firth is at pains in her written submissions to emphasise the extent to which she travelled, met women and sought to advance the health service objectives of Safe Breast Imaging. This must have been a costly exercise and I infer that it was. So too was the apparent cost of using Google AdWords as a means of soliciting business. Notwithstanding that Ms Firth also submits that at material times the company and she did not make any or any large profits from the business, that commercial gain was an objective of the business cannot be gainsaid.
57 Ms Firth says in her written submissions that Safe Breast Imaging lodged tax returns which show that in 2010 its total profit was -$2,358, in 2011 it had a total profit of $517 and in 2012 it had no income. As to her personal tax returns, she says they show total income of $14,981 in 2010, $17,107 in 2011, and that in 2012 no tax return was required.
58 Notwithstanding these submissions I am unable to draw the conclusion, if the respondents mean to invite it, that the company was not intending to make a profit and indeed, as I have stated above, did not incur real business expenses in pursuing the business. The expenses, I infer, may well explain why, assuming their general accuracy, the company did not make a profit or made only a small profit in the relevant years. It should also be noted that the company employed three report writers at different times.
59 The fact is that Safe Breast Imaging attracted many customers across four States of Australia (Western Australia, Queensland, Victoria and New South Wales) in some 150 locations. At the penalty hearing, ACCC effectively accepted the estimate made by Ms Firth that the actual customers attracted to the business was closer to 1271. I proceed on that basis.
60 When one bears in mind that consumers to whom the service was directed would expect or be likely to expect that there was an adequate scientific basis to support the use of the MEM device for the purposes represented, when there was not, the seriousness of the conduct is underscored.
61 So too the medical practitioner representations that Australian registered doctors were involved in the evaluation of images or the writing of reports, when they were not, and any comfort that customers of the business may have drawn from that, was entirely misplaced.
62 As ACCC submits, women who are interested in breast imaging services ought to be able to make informed medical decisions based on accurate claims made by medical service suppliers. Their personal health and safety is potentially at risk if they are unable to do so.
63 So far as the circumstances in which the conduct took place are concerned, these tend to overlap with the matter just discussed. Even though there is no evidence of actual injury, illness or harm to any particular person to whom representations were made, this is a case where risk of serious harm to the health and safety of consumers is at play.
64 I accept the submission made on behalf of ACCC that the conduct of Safe Breast Imaging and Ms Firth had the potential to pose a grave risk of serious harm to the health of consumers, who were or were likely to be misled into believing the MEM device could be used for the purposes represented when there was no adequate scientific medical basis for those representations.
65 Indeed Ms Firth accepts that the contravening conduct had the potential to divert consumers from using medically recognised and more reliable means of breast imaging, such as mammography and ultrasound.
66 As to the amount of any loss or damage caused, there is no specific loss or damage identified by the evidence.
67 So far as the size of the contravening company is concerned, Safe Breast Imaging is, on the evidence, a small business set up by Ms Firth and owned and operated by her. While she employed three report writers at different times, that fact tends to emphasise the company was busy, rather than large.
68 So far as the deliberateness of the contravention is concerned, in finding contravention, I have already found that Ms Firth engaged in conduct knowing that the representations could not be supported.
69 The point may also be taken that, if the fact that there was an inadequate basis for the scientific representations, and that there were not in fact doctors engaged in the evaluative process, had been known, then there would have been limited, if any, consumer interest in the service offered.
70 It cannot be said, in the circumstances, that Ms Firth's engagement in the acts of the company was anything but deliberate and serious. Ms Firth, as her submissions on penalty emphasise, has a passionate commitment to the advancement of women's health and at material times she passionately believed that the service the company offered would assist women along a "journey of health and prevention".
71 The company being a small company, owned and operated by Ms Firth, the matter about the extent to which senior management or lower level management were involved in the contravention does not really arise for separate consideration. Ms Firth and the company were effectively the one and the same contravener.
72 In this case there is no suggestion that either the company or Ms Firth has been the subject of any prior legal proceedings by ACCC.
73 To Ms Firth's credit, she closed the business not long after the ACCC commenced an examination of its activities.
74 In relation to the principle of parity, ACCC refers in its submissions to cases where false and misleading contraventions have attracted penalties of between $30,000 and $3.61 million. Of these, the one case that provides some assistance is that of Australian Competition and Consumer Commission v Willesee Healthcare Pty Ltd (No 2) [2011] FCA 752, where the respondents cooperated with the ACCC and civil penalties were ordered by consent in the sum of $185,000 for representations that were considered false or misleading in relation to the diagnosis, treatment and cure of allergies. The corporate respondents consented to penalties of $125,000 and each individual to $30,000.
75 Dodds-Streeton J, in confirming the consent outcome, noted there were a number of factors in mitigation including the cooperation of the respondents with the ACCC, the acknowledgement of liability which avoided the need for lengthy litigation, and the expressions of regret and an undertaking not to repeat the contraventions. ACCC reasonably submits none of those mitigating factors are present in this case.
76 ACCC also notes that Dodds-Streeton J stated that the agreed penalties were towards the lower end of the range given the seriousness of the contraventions.
77 In this case, in the result, taking into account the various relevant matters and my discussion of them above, I consider that Safe Breast Imaging should be ordered to pay to the Commonwealth within 30 days of the making of the order by the Court a pecuniary penalty in the amount of $200,000 in respect of the conduct described in paras (1) to (4) of the order in the declarations.
78 I would further order that Ms Firth be ordered to pay to the Commonwealth within 30 days of the making of the order by the Court a pecuniary penalty in the amount of $50,000 in respect of the conduct described in para (5) of the order.
79 While the respondents may consider the pecuniary penalties imposed on them to be high or harsh, I consider them, with the other orders to be made, to be necessary to ensure others who might be inclined to engage in similar behaviour to the cost of consumers are deterred from doing so.
80 I consider that pecuniary penalties in these terms, combined with the declarations made and the injunctions issued provide a sufficient general and specific deterrent having regard to the contraventions involved, and that such pecuniary penalties, when considered with the other penalties imposed, and the disqualification of Ms Firth from being a company officer, which I will order (and deal with below), will not be "crushing" in any relevant sense.