Nature, extent and circumstances of the contraventions
85 The nature, extent and circumstances of the contravening conduct is a mandatory statutory consideration in the assessment of penalty and is a primary consideration in the assessment of an appropriate penalty. In that context, the parties' submissions with respect to the nature and circumstances of the contravening conduct were surprisingly brief. I consider that the following matters are significant.
86 First, the contravening conduct concerned the supply of a financial service comprising an investment product. The investment product was open to the public. There was a minimum investment amount for an investment in the 48 Hour Account or the 90 Day Account. The minimum investment amount for the 48 Hour Account was $1,000 in the period to about 1 November 2017 and thereafter was $10. Since about 26 June 2019, the minimum investment amount for the 90 Day Account has been $10. Thus, those investment options were available to a wide cross-section of the community and, inevitably, with varying levels of financial sophistication. As at 31 December 2020, the Fund had 49,510 registered investors (45.7% of which La Trobe classified as "retail" investors) and approximately $5.345 billion in funds under management.
87 Second, the misleading conduct was serious and had very considerable potential to mislead the public about the characteristics of the investment options named the 48 Hour Account or the 90 Day Account. La Trobe admits that its marketing of those investment options conveyed a representation that the investor would be entitled to withdraw from the investment option within, respectively, 48 hours or 90 days of providing a withdrawal notice. That representation was incorrect. The true position was that under the Fund's Constitution, while the Fund was liquid, La Trobe had up to 12 months to satisfy a withdrawal notice and, had the Fund become not liquid, an investor would have been entitled to withdraw only in accordance with any withdrawal offer made by La Trobe. Thus the true position was vastly different to the impression conveyed by La Trobe's marketing material. It should be acknowledged that La Trobe's marketing material in respect of the 48 Hour Account or the 90 Day Account included disclaimers which sought to qualify the representations. However, La Trobe has admitted that the disclaimers did not dispel the misrepresentations otherwise conveyed by the marketing material. While the disclaimers are to be taken into account in the assessment of the nature and circumstances of the contravening conduct, the deployment of ineffective disclaimers does not carry much weight in the overall assessment of penalty.
88 The capital stable representation had similar potential to mislead the public about the characteristics of La Trobe's investment options. As admitted by La Trobe, the capital stable representation conveyed that any capital invested in the Fund would be "stable" in the sense of there being no risk of substantial loss of that capital. That representation was incorrect. The true position was that an investor could substantially lose the capital invested. Again, it should be acknowledged that La Trobe's marketing material in connection with the capital stable representation included disclaimers which sought to qualify the representation. However, La Trobe has admitted that the disclaimers did not dispel the misrepresentation and, for that reason, the disclaimers do not carry much weight in the overall assessment of penalty.
89 Third, in relation to the extent of the contravening conduct, the misrepresentations were made:
(a) on various pages of La Trobe's website, over the period between 1 April 2017 and 21 August 2020; and
(b) in advertisements published in several newspapers, and in Money magazine, over the period between 1 April 2017 to 1 January 2020.
90 Where a representation is made on a website, a separate representation is made - and thus a separate contravention of s 12DB(1) arises - each time a person accesses the relevant page of the website: see Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698 (Bet365) at [12]-[13]; Australian Competition and Consumer Commission v Gallop International Group Pty Ltd [2019] FCA 1514; 138 ACSR 395 at [288] per Charlesworth J. The parties submitted that it is not known precisely how many times the relevant pages of La Trobe's website were accessed during the periods when those pages conveyed the representations giving rise to the admitted contraventions of s 12DB(1). However, each of the relevant pages was accessible by members of the public through the whole of the period when those representations were conveyed:
(a) in the case of the 48 Hour Account representation, the relevant period was 1 April 2017 to 14 August 2020 - a period of more than three years;
(b) in the case of the 90 Day Account representation, the relevant period was 24 June 2019 to 21 August 2020 - a period of about 14 months; and
(c) in the case of the capital stable representation, the relevant period was 16 May 2019 to 19 May 2020 - a period of about one year.
91 Similarly, where a representation is made in a newspaper or magazine advertisement, a separate representation is made - and thus a separate contravention of s 12DB(1) arises - in respect of each person who reads the advertisement: Bet365 at [16]-[17]. The parties submitted that it is not known precisely how many copies of the relevant advertisements were distributed. However, the advertisements appeared in many different publications (several with national circulations) on multiple occasions throughout the following periods:
(a) in the case of the 48 Hour Account representation, the relevant period was 1 April 2017 to 25 January 2020 - a period of about two years and nine months;
(b) in the case of the 90 Day Account representation, the relevant period was 21 July 2019 to 25 January 2020 - a period of about six months; and
(c) in the case of the capital stable representation, the advertisement appeared on 1 December 2019.
92 In those circumstances, it is not possible to identify the number of contraventions of s 12DB(1) that occurred. The parties submitted that it is appropriate for the Court to proceed on the basis that La Trobe engaged in three distinct categories of contravention:
(a) making the 48 Hour Account representation on its website and in newspaper advertisements;
(b) making the 90 Day Account representation on its website and in newspaper advertisements; and
(c) making the capital stable representation on its website and in Money magazine.
93 The parties further submitted that each of the above categories of contraventions could be characterised as a separate course of conduct for the purposes of assessing an appropriate penalty. I accept that submission having regard to the facts that:
(a) each of the categories of representations is distinct from each other category of representations; and
(b) within each category of representations, the relevant conduct was substantially the same as between the website and the print advertisements and was substantially the same across the whole of the period for which the representations were made.
94 However, as noted earlier, the maximum penalty for each course of conduct is not restricted to the prescribed statutory maximum penalty for each contravening act or omission.
95 The fourth matter to be noted, that also bears upon the extent of the contravening conduct, is the quantum of funds invested in the Fund, and in the 48 Hour Account and the 90 Day Account investment options, during the contravening period. The quantum of funds invested gives an indication of the extent of commerce potentially affected by the contravening conduct.
96 It was an agreed fact that, in the period from 1 January 2017 to 30 August 2020, 21,313 persons invested in the Fund comprising total new investments of approximately $6.932 billion. That fact is not directly relevant to the contravening conduct. In so far as investments in the Fund may have been caused, to some extent, by the capital stable representation, the agreed period of contravention in respect of that representation was 16 May 2019 to 19 May 2020. More relevantly, in the period from 1 January 2017 to 30 August 2020, approximately 8,331 persons invested funds in the 48 Hour Account and the total amount of new investments by those persons was approximately $2.978 billion. In the period from 24 June 2019 to 30 August 2020, approximately 1,517 persons invested funds in the 90 Day Account, and the total amount of new investments by those persons was approximately $322 million.
97 The parties submitted, and I accept, that it is not known how many of the persons who invested in the Fund during the relevant period did so having accessed the relevant pages of La Trobe's website or having read the relevant print advertisements. However, because the representations were made on La Trobe's website, and in widely available print publications, the parties accepted, and I infer, that they are likely to have come to the attention of retail investors. The parties referred to the possibility that the misrepresentations may not have been operative at the "point of sale" as investors may have examined the Constitution and discovered the true position before making an investment in the Fund. I accept that that is a possibility, but I place little weight on that prospect in the absence of detailed evidence concerning the means by which investments are made in the Fund and the likelihood of a document, such as the Fund's Constitution, being read by a potential investor in the Fund. Further, even if the misrepresentations were not operative at the "point of sale", the contravening conduct nevertheless had considerable potential to cause harm by drawing consumers into La Trobe's "marketing web": see ACCC v TPG at [50].