Pecuniary penalty
28 ASIC seeks the imposition of a pecuniary penalty only in relation to the s 12DB(1) contraventions.
29 The balance of the contraventions either are not (and never were) civil penalty provisions (s 12DA(1) of the ASIC Act and s 912A(1)(c) of the Corporations Act), or were not civil penalty provisions during the Penalty Period (s 912A(1)(a) of the Corporations Act). Noting that s 912A(1)(a) did become a civil penalty provision on and from 13 March 2019, it only operates where the conduct constituting the contravention of the provision occurred "wholly on or after" 13 March 2019. Accordingly, ASIC does not seek a civil penalty under s 912A(1)(a) in respect of IAL's conduct. However, ASIC submitted the conduct constituting the contravention of s 912A(1)(a) is a serious contravention of the Corporations Act, and remains relevant to the consideration of penalty for the contraventions of s 12DB(1) of the ASIC Act.
30 The purpose of a civil penalty is primarily protective, in promoting the public interest in compliance by deterring further contravening conduct: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 399 ALR 599 at [15]-[16], [43] and [45] (Pattinson). A penalty of appropriate deterrent effect "must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business": Pattinson at [17] citing Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at [62].
31 Section 12GBA(2) of the ASIC Act, which was replaced by 12GBB(5) following amendments taking effect in March 2019, provides that, in determining the appropriate pecuniary penalty, the Court must have regard to all relevant matters. Those matters include: the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; the circumstances in which the act or omission took place; and whether the person has previously been found by the court in proceedings under subdivision G (in which 12GBA is located), to have engaged in any similar conduct. The Court is to decide what penalty is "appropriate" in all the circumstances.
32 In addition, there are a number of factors identified in the authorities, relevant to this task. For example, the assessment of penalty of appropriate deterrent value will have regard to: (1) the nature and extent of the contravening conduct; (2) the amount of loss or damage caused; (3) the circumstances in which the conduct took place; (4) the size of the contravening company; (5) the degree of power it has, as evidenced by its market share and ease of entry into the market; (6) the deliberateness of the contravention and the period over which it extended; (7) whether the contravention arose out of the conduct of senior management or at a lower level; (8) whether the company has a corporate culture conducive to compliance, as evidenced by educational programs or other corrective measures in response to an acknowledged contravention; and (9) whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to contravention: Pattinson at [18]. These are not to be considered to be a rigid list of factors to be ticked off: Pattinson at [19]. Rather, they are to inform a multifactorial investigation that leads to a result arrived at by a process of "instinctive synthesis" addressing the relevant considerations: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 (Reckitt Benckiser) at [44].
33 ASIC submitted that conduct that occurred before the penalty period can reflect that there was a failure to take steps before the penalty period commenced, which continued throughout the penalty period. However, it also recognised that where an offending entity has remediated for the entire time period this may have a mitigating effect, showing that the offending entity did not confine its remediation to the penalty period. This is to be considered in the context of the entity's obligations under s 912B of the Corporations Act to have compensation arrangements in place to compensate persons for loss or damage arising from breaches of obligations under Chapter 7 of the Corporations Act.
34 The maximum penalty is also one of the relevant factors. In this regard, in Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357, the majority observed at [31]:
…careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick.
35 In a civil penalty context, the relevance of a prescribed maximum penalty as a yardstick was explained by the Full Court of the Federal Court in Reckitt Benckiser at [155]-[156] as follows:
The reasoning in Markarian about the need to have regard to the maximum penalty when considering the quantum of a penalty has been accepted to apply to civil penalties in numerous decisions of this Court both at first instance and on appeal (Director of Consumer Affairs, Victoria v Alpha Flight Services Pty Ltd [2015] FCAFC 118 at [43]; Australian, Competition and Consumer Commission v BAJV Pty Ltd [2014] FCAFC 52; (2014) ATPR 42-470 at [50]-[52]; Setka v Gregor (No 2) [2011] FCAFC 90; (2011) 195 FCR 203 at [46]; McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29; (2011) 202 IR 467 at [28]-[29]). As Markarian makes clear, the maximum penalty, while important, is but one yardstick that ordinarily must be applied.
Care must be taken to ensure that the maximum penalty is not applied mechanically, instead of it being treated as one of a number of relevant factors, albeit an important one. Put another way, a contravention that is objectively in the mid-range of objective seriousness may not, for that reason alone, transpose into a penalty range somewhere in the middle between zero and the maximum penalty. Similarly, just because a contravention is towards either end of the spectrum of contraventions of its kind does not mean that the penalty must be towards the bottom or top of the range respectively. However, ordinarily there must be some reasonable relationship between the theoretical maximum and the final penalty imposed.
36 This passage was more recently cited with approval in Pattinson at [53].
37 ASIC relies on the ASIC Act before 13 March 2019. At that time, the Court's power to order payment of a pecuniary penalty was located in s 12GBA of the ASIC Act. Pursuant to s 12GBA(1), if the Court is satisfied that a person has contravened a provision of Subdivision D (including s 12DB(1)(g) and (i)) of the ASIC Act), the Court has power to order a person pay a pecuniary penalty in respect of each act or omission by the person to which s 12GBA applies, as the Court determines to be appropriate. The value of a penalty unit, as fixed under s 4AA(1) of the Crimes Act 1914 (Cth), and subject to indexation under s 4AA(3), was: $180 for the period 31 July 2015 to 30 June 2017; and $210 for the period 1 July 2017 to 30 June 2020.
38 A contravention of s 12DB(1) occurs each time the relevant false or misleading representation is made to a person: Australian Securities and Investments Commission v Commonwealth Securities Limited [2022] FCA 1253 at [29].
39 Under 12GBA(3), the maximum pecuniary penalty payable for a contravention by a body corporate was 10,000 penalty units. Depending on when the contravention occurred during the Penalty Period, the maximum value of each contravention is $1.8m to $2.1m. I note that IAL admitted that it contravened s 12DB(1)(g) and (i) around 1,098,000 times: SAFA [61].
40 Where the theoretical maximum penalty is in the billions or trillions of dollars, the overall maximum penalty will not be a meaningful factor in the court's assessment. In these circumstances, the appropriate range is best assessed by reference to factors other than where the conduct falls in the range of seriousness of offending in relation to the maximum penalty: Reckitt Benckiser at [157].
41 Ordinarily separate contraventions arising from separate acts should attract separate penalties. However, where separate acts give rise to separate contraventions which are inextricably interrelated, they may be regarded as a "course of conduct" for penalty purposes: Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; (2018) 262 FCR 243 at [234]. This avoids double-punishment for those parts of the legally distinct contraventions that involve overlap in wrongdoing: see for example, Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; (2010) 269 ALR 1 at [39] and [41]. However, "[i]t is not appropriate or permissible to treat multiple contraventions as just one contravention for the purposes of determining the maximum limit dictated by the relevant legislation": Yazaki at [227]. "It cannot in itself operate as a de facto limit on the penalty to be imposed for contraventions": Reckitt Benckiser at [141] quoting Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd (t/as Bet365) (No 2) [2016] FCA 698 at [24] - [25].
42 The principle of totality requires the Court to make a "final check" of the penalties to be imposed on a wrongdoer, considered as a whole, to ensure that the total penalty does not exceed what is proper for the entire contravening conduct: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [1997] FCA 450; (1997) 145 ALR 36 at 53, citing Mill v The Queen [1988] HCA 70; (1988) 166 CLR 59.
43 An appropriate penalty is therefore one that is fashioned by reference to the facts of the particular case before the Court, in order to arrive at a penalty that is sufficient to deter the conduct in question, without being overly oppressive: Pattinson at [46].
44 The principles to be applied in considering a jointly proposed penalty were considered in Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (DFWBII), where the majority observed at [46]:
[T]here is an important public policy involved in promoting predictability of outcome in civil penalty proceedings and that the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers. As was recognised in Allied Mills and authoritatively determined in NW Frozen Foods, such predictability of outcome encourages corporations to acknowledge contraventions, which, in turn, assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention.
45 Further, their Honours said at [58]:
... Subject to the court being sufficiently persuaded of the accuracy of the parties' agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and ... highly desirable in practice for the court to accept the parties' proposal and therefore impose the proposed penalty.
(emphasis added)
46 Those observations about the desirability of acting upon agreed penalty submissions were made in the context of a broader recognition that as a civil litigant in civil proceedings, civil penalties are but one of numerous forms of relief which regulators can pursue, and it is entirely orthodox for regulators to make submissions as to that relief: see DFWBII at [24], [57]-[59], [63], [103], [107]. Those principles to be applied in considering a jointly proposed penalty were recently considered in Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49; (2021) 284 FCR 24 (Volkswagen) at [124]-[131], referring to DFWBII, NW Frozen Foods Pty Ltd v Australian Competition Commission [1996] FCA 1134; (1996) 71 FCR 285 and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993. A number of points were highlighted, including: first, the Court must be satisfied that the penalty proposed by the parties is appropriate: at [125]; second, if persuaded of the accuracy of the parties' agreement as to facts and that the proposed penalty is an appropriate remedy, it is highly desirable for the Court to accept the proposal: at [126]; third, in considering whether the proposed penalty is appropriate, it is necessary to bear in mind that there is no single appropriate penalty, but rather a permissible range. The proposed penalty may be "an" appropriate penalty if it falls within that range: at [127]; fourth, the Court should generally recognise that the proposed penalty was most likely a result of compromise and pragmatism on the part of the regulator, and while the regulator must estimate the penalty necessary to achieve deterrence, the Court must assess the proposed penalty on its merits, being wary of the possibility that the regulator may have been too pragmatic: at [129]; fifth, the Court's task is not limited to simply determining whether the jointly proposed penalty is within the permissible range, though that might be expected to be a highly relevant and perhaps determinative consideration. The overriding statutory directive is for the Court to impose a penalty that is determined to be appropriate having regard to all relevant matters: at [131].