Coal Mining Industry (Long Service Leave Funding) Corporation v Payne

Between 1 January 2019 and 7 June 2021, on each day, by failing to provide to the Applicant an audit report for the 2018 financial year within 6 months after the end of the 2018 financial year, the Respondent contravened section 10(1) of the Coal Mining Industry (Long Service Leave) Payroll Levy Collection Act 1992 (Cth) (Collection Act).
Between 1 January 2020 and 26 August 2021, on each day, by failing to provide to the Applicant an audit report for the 2019 financial year within 6 months after the end of the 2019 financial year, the Respondent contravened section 10(1) of the Collection Act.
Between 1 January 2021 and 15 August 2023, on each day, by failing to provide to the Applicant an audit report for the 2020 financial year within 6 months after the end of the 2020 financial year, the Respondent contravened section 10(1) of the Collection Act.
Between 1 January 2022 and 8 August 2023, on each day, by failing to provide to the Applicant an audit report for the 2021 financial year within 6 months after the end of the 2021 financial year, the Respondent contravened section 10(1) of the Collection Act; and
Between 1 January 2023 and 8 August 2023, on each day, by failing to provide to the Applicant an audit report for 2022 financial year within 6 months after the end of the 2022 financial year, the Respondent contravened section 10(1) of the Collection Act. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

This leads to a theoretical maximum penalty in the current case of $150,785,000. 56. While the maximum available penalty operates as a 'yardstick', it is only 'one of a number of relevant factors' that must be taken into account: Pattinson at [54]. Where a large number of contraventions in a case leads to a statutory maximum that is 'many orders of magnitude more than the amount required to ensure specific or general deterrence', it remains relevant only to the extent that 'it reveals that the legislature did not regard contraventions [of that type] as trivial or inconsequential'. Factors to be taken into account 57. In determining the appropriate penalty, s 82(6) of the Regulatory Powers Act requires the court to take into account the following matters: (a) the nature and extent of the contravention; (b) the nature and extent of any loss or damage suffered because of the contravention; (c) the circumstances in which the contravention took place; and (d) whether the person has previously been found by a court (including a court in a foreign country) to have engaged in any similar conduct. 58. The mandatory considerations set out in s 82(6) of the Regulatory Powers Act of 'loss' and 'damage' ought not be given a narrow meaning and ought not be limited to financial harm. Rather, it is open to the court take a broad view of the concept of 'loss or damage suffered because of the contravention', which may be interpreted to include social harm. 59. In addition to the mandatory considerations set out in s 82(6) of the Regulatory Powers Act, s 13A(5) of the Collection Act requires the court, in determining the pecuniary penalty for a contravention by a body corporate of a civil penalty provision of the Collection Act, to take into account the following matters: (a) the level of the employees, officers or agents of the body corporate involved in the contravention; and (b) whether the body corporate exercised due diligence to avoid the contravention; and (c) whether the body corporate had a corporate culture conducive to compliance. 60. In addition, there are other factors which are long recognised as being typically relevant in arriving at a penalty amount of an appropriate deterrent value. Such additional relevant factors commonly include: (a) The size of the contravening company. (b) The degree of power held by the contravening company as evidenced by its market share and ease of entry into the market. (c) The deliberateness of the contravention and the period over which it extended. (d) Whether the contravention arose out of the conduct of senior management or at a lower level. (e) Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention. (f) Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the legislative regime relevant to the contravention. 61. The significance of each factor depends on the facts of the particular case. However, where such matters arise on the facts of a particular case, they must be considered by the court. [emphasis in original] 19 The parties additionally made reference to particular cases concerning penalty in respect of various types of statutory contraventions. Although I have considered that aspect of the joint submission, in the end result, I have not gained particular assistance from other cases concerning penalisation in different circumstances. I have, however, gained particular assistance from that part of the joint submission which sought to apply the general principles as to penalisation to Undamine's particular circumstances. The parties jointly submitted: (e) Application of principles to Undamine 69. Application of the above principles points to the imposition of a pecuniary penalty against Undamine. The parties submit that at least the following factors are relevant to the Court's determination of penalty. 70. First, considerations of general deterrence point to a need to impose an appropriate penalty. Coal LSL relies heavily on annual audit reports to gain assurance that the information provided to Coal LSL through the year in levy returns and reimbursement claims is supported by the relevant records of the employer and were correct. This is critical for Coal LSL to be able to verify employee records, to ensure the correct levies have been paid over the course of a financial year and that the reimbursements made by Coal LSL to the employer under Pt 7 of the Administration Act are correct. The audit review process will often result in amendments to Coal LSL's records, based on the findings set out by the auditor in the report. As a result, the timeliness and accuracy of audit reports directly affects Coal LSL's ability to fulfil its statutory functions, including to maintain proper records and ensure the adequacy of the Fund. 71. Accordingly, the penalty needs to be fixed at a level appropriate to prevent Undamine and other employers in the BCMI from viewing penalties for non- compliance with the Collection Act by failing to submit audit reports on time as an acceptable cost of doing business. 72. Second, while the breaches of the Collection Act could be considered administrative in nature, constituted by a failure to perform a reporting step, this does not render them trivial. Parliament has set its face against conduct of this kind through the imposition of a significant maximum penalty of 200 penalty units for a contravention of s 10(1) by a corporation. As noted above at paragraph 54, there is a theoretical total maximum penalty of $150,785,000. 73. Third, the audit reports for the 2020, 2021 and 2022 financial years show that Undamine has significantly overpaid its levy contributions in these periods. These audit reports were submitted after these proceedings were commenced. The parties agree that the audit reports indicate that the amount of the payroll levy Undamine has overpaid is $151,224.47. If further investigations confirm this figure, Coal LSL will therefore be required to pay this amount to Undamine under Pt 7 of the Administration Act. In the absence of the audit reports, Coal LSL would not have had information which allowed it to identify these overpayments. The amount of the overpayments suggest that Undamine's non-compliance have not caused harm to any specific employees. The parties do not submit that harm has flowed to any of Undamine's eligible employees as a result of Undamine's contraventions. It is possible however that errors in the calculation of eligible wages, as foreshadowed in these audit reports, may have contributed to overpayment of reimbursements to Undamine through this period. Further investigation on this issue is required. However, the inability to identify this issue in a timely way has the potential to impact the Fund. These potential impacts demonstrate the importance of a penalty capable of securing general deterrence, given the harm that late audit reporting visits upon the integrity of the LSL Scheme, insofar as it compromises Coal LSL's ability to maintain proper records and ensure that employers are contributing correct amounts. 74. Fourth, Undamine did not benefit from its contravening conduct and, in fact, may have made a significant overpayment to its detriment that, but for the contravening conduct, would have been identified earlier. 75. Fifth, there is some evidence that at least some of the delay relating to the contraventions arising from the late audit reports for the 2020 and 2021 financial years was the result of delay on the part of Undamine's auditors (as discussed at paragraphs 25 and 26 above). However, the obligation to provide audit reports under s 10(1) falls on Undamine, as the employer of eligible employees. Undamine accepts that it is not relieved of this obligation by the action or inaction of third parties. 76. Nevertheless, Coal LSL accepts that Undamine's contraventions did not arise from any intentional effort to circumvent the requirements of the LSL Scheme. Rather, Undamine's contraventions arose from a failure to prioritise its obligations in respect of the provision of audit reports, which was aggravated in the case of the audit reports for the 2020 and 2021 financial years by COVID-19 illness among staff and auditor delay. 77. Sixth, senior officers were aware of Undamine's noncompliance with s 10(1), and the consequences of this, from at least 29 April 2022. 78. Seventh, the contraventions occurred over a substantial period of time. In relation to three of the audit reports (for the 2020, 2021 and 2022 financial years), the contraventions did not cease until the present proceedings were commenced. 79. Eighth, Undamine has employed people in a high risk industry for over 13 years without being the subject of regulatory enforcement proceedings. However, Undamine has a long history of making late levy payments. Further, for over 6 years prior to the audit report contraventions the subject of this proceeding, Undamine repeatedly failed to submit its audit reports on time. When considered alongside the lengthy period of time for which the audit report contraventions continued, such circumstances indicate that Undamine does not have an adequate corporate culture of timely compliance with its obligations under the Collection Act, notwithstanding its record in relation to other regulatory regimes. 80. Ninth, Undamine's size by reference to its end of financial year 2023 revenue is $47,227,783. 81. Tenth, Undamine has shown a significant degree of cooperation with Coal LSL since these proceedings were commenced, including making the admissions in this Agreed Document. Cooperation with authorities in the course of investigations and subsequent proceedings can properly reduce the penalty that would otherwise be imposed. This reduction reflects the fact that such cooperation: increases the likelihood of cooperation in future cases in a way that furthers the object of the legislative scheme in question; frees up the regulator's resources, thereby increasing the likelihood that other contraveners will be detected and brought to justice; and facilitates the course of justice. In this case, the parties consider that a discount for cooperation is appropriate given Undamine's admission of the audit report contraventions and willingness to resolve the proceeding. 82. Eleventh, as discussed above at paragraph 51, it is appropriate for the Court to treat the 3,255 contraventions of the Collection Act as five distinct courses of conduct, relating to each of the 2018, 2019, 2020, 2021 and 2022 audit reports, and to take this account in assessing the appropriate penalty. 83. Twelfth, Undamine has not previously been found by a court to have been in contravention of the Collection Act or any of its other statutory obligations in relation to the operation of the Fund. 84. Having regard to all of the circumstances above, the parties submit that a total penalty of $40,000 is appropriate for all contraventions of s 10(1) admitted by Undamine. This amounts to a penalty of $8,000 for each of the five courses of conduct which, as outlined earlier in these submissions, are each in turn comprised of hundreds of contraventions. 85. In reaching this figure, an approximate discount of 20% has been applied in recognition of Undamine's cooperation. 86. The parties submit that a 'final check' by reference to the totality principle supports the conclusion that the penalty proposed by the parties is just and appropriate in all of the circumstances of this case. (f) Single civil penalty order 87. Section 85 of the Regulatory Powers Act provides that a court may make a single civil penalty order against a person for multiple contraventions of a civil penalty provision if the contraventions are founded on the same facts or form, or are part of, a series of contraventions of the same or a similar character. 88. In the present case, it is appropriate to make a single civil penalty order in relation to the audit report contraventions, given the that these contraventions have a substantially similar character. C. Declarations of contraventions 89. Undamine's contraventions of s 10(1) of the Collection Act are established by the facts and admissions set out in this Agreed Document. For the following reasons it is appropriate to make declarations as to those contraventions as set out in the Proposed Orders. 90. The Court has a wide discretionary power to make declarations under section 21 of the Federal Court Act. The preconditions for declaratory relief, as explained by the High Court, are established in this case: 90.1. There is a real and not a hypothetical question: There is a direct and important question as to whether Undamine contravened the provisions of the Collection Act in engaging in the Audit Report Contraventions. 90.2. The applicant has a real interest in raising it: Coal LSL has an obvious interest, as the statutory regulator discharging its functions in the public interest, in bringing the proceedings. 90.3. There is a proper contradictor and real consequences: Undamine, as the entity declared to have contravened the law, has an interest in opposing the relief. This remains so notwithstanding its admissions and agreement. 91. The utility of declarations which set out the particular liability found and the basis for penalties ordered is recognised by the High Court and Full Federal Court, and in the great majority of civil penalty cases at primary judge level. In this case the declarations are desirable and appropriate because they will record the Court's disapproval of the conduct, assist Coal LSL carrying out the duties conferred on it by statute, assist in clarifying the law, and make clear to other would-be contraveners that such conduct is unlawful. [emphasis in original] 20 As I put to the parties in the course of submissions, a subject which did concern me was a disparity between the statutory aggregate maximum penalty and that promoted by them. One answer to that was offered on behalf of the corporation by reference to Australian Competition and Consumer Commission v Samsung Electronics Australia Pty Ltd [2022] FCA 875, in which at [43] - [45], Murphy J made the following observations: 43 Careful attention to the maximum penalty will almost always be required because the legislature has legislated for it; and balanced with all of the other relevant factors, it provides a yardstick: Markarian v The Queen [2005] HCA 25; 228 CLR 357 at [31] (Gleeson CJ, Gummow, Hayne and Callinan JJ) cited with approval in Pattinson HCA at [52]-[54]. 44 Having noted that, where a representation is made in an advertisement, a separate representation is made - and thus a separate contravention arises - in respect of each person who reads the advertisement: Australian Securities and Investments Commission v La Trobe Financial Asset Management Ltd [2021] FCA 1417 at [91] (O'Bryan J) citing Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698 at [16]-[17] (Beach J). I accept the parties' submission that this is a case in which the number of contraventions is likely to be very large because of the manner in which the Galaxy phones were marketed, with the misleading representations made in various advertising and marketing material over a lengthy period. I also accept that the large number of contraventions in this case means that the total statutory maximum applicable to the wrongdoing is many orders of magnitude more than the amount required to ensure specific or general deterrence. 45 In other words, while the theoretical maximum remains relevant to the extent that it reveals that the legislature did not regard contraventions of the type that Samsung Australia has engaged in as trivial or inconsequential, the theoretical maximum penalty is so vast as to make precise calculation unnecessary and unhelpful, if it were even possible: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; 254 FCR 68 at [143]-[145] (Dowsett, Greenwood and Wigney JJ) citing Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; 327 ALR 540 at [82] (Allsop CJ); Reckitt at [139]-[145]. 21 Samsung is a case decided after Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 (Pattinson). Even so, and, with respect, I would prefer to reserve to a case where the facts made it pertinent detailed consideration of the relationship between an apparently large, even ruinous maximum penalty prescribed by Parliament and whether such a penalty should be visited in the circumstances on a particular contravener. I would merely observe that it is important that the judiciary not subvert, by idiosyncratic conceptions a statutory objective of deterrence by Parliament in making provision for apparently ruinous penalisation so as to ensure compliance with a particular statutory obligation. The appropriate approach, in my view, is one in conformity with the following observations made in the joint judgment in Pattinson, at [53] - [55]: 53 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, where their Honours, citing Markarian, said: "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. 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." (Citations omitted.) 54 Two aspects of the Full Court's reasoning in this passage from Reckitt Benckiser deserve particular emphasis here. The first is their Honours' recognition that the maximum penalty is "but one yardstick that ordinarily must be applied" and must be treated "as one of a number of relevant factors". As has already been seen, other factors relevant for the purposes of the civil penalty regime include those identified by French J in CSR. 55 The second point is that the maximum penalty does not constrain the exercise of the discretion under s 546 (or its analogues in other Commonwealth legislation), beyond requiring "some reasonable relationship between the theoretical maximum and the final penalty imposed". This relationship of "reasonableness" may be established by reference to the circumstances of the contravenor as well as by the circumstances of the conduct involved in the contravention. That is so because either set of circumstances may have a bearing upon the extent of the need for deterrence in the penalty to be imposed. And these categories of circumstances may overlap. [footnote references omitted] 22 Of particular importance here is the reference in the joint judgment in Pattinson, at [55], to some "reasonable relationship" between the theoretical maximum and the final penalty imposed with reasonableness being established by reference to the circumstances of the particular contravention. In this instance, the circumstances of the particular contravention necessarily include three factors, in my view: (a) that the corporation did engage auditors and to some extent, whilst it does not relieve the corporation of compliance liability, its compliance was affected by delays on the part of the auditors in completing audits; (b) there is at least the contingency that there was no loss to the fund administered by the corporation but rather an overpayment by Undamine; and (c) the ready admission of contraventions and also, it must be said, participation by Undamine in a jointly promoted penalty order and related orders. 23 The provision in the scheme for audits entails those companies participating in the scheme in part bearing a cost of external scrutiny whereby the corporation can have reasonable assurance of compliance. So the provision for audit and its cost to be borne in this way can be seen to be a way of relieving the corporation from a need to have a larger investigation and audit staff, which is not to say that the corporation has no capacity for that. The very existence of the present proceeding is eloquent proof of that. But there is in the sense described an element of self-administration borne by companies in the industry in the statutory scheme. 24 Satisfied as I am that the corporation is not operating under any misunderstanding as to the purpose of civil penalty regimes, and, respectful as I am of its value judgment as a regulator particularly and peculiarly constituted in its governance to have insight into the importance of the statutory scheme, I am prepared to act on the joint submission of the parties in the circumstances of this case as related above. I therefore make orders in terms of those promoted by the parties. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan.

At a glance

Court

Decision date

Before

Source

Judgment (3 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (8)