(b) Principles where parties agree on penalty
100 The relevant principles guiding a primary judge where the parties present an agreed position on the amount of a civil pecuniary penalty are helpfully provided in two decisions of the Full Court, namely NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 291 per Burchett and Kiefel JJ and Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Limited [2004] FCAFC 72; [2004] ATPR ¶41-993, per Branson, Sackville and Gyles JJ. Although neither of those decisions involved the OH&S Act, I consider that the stated principles are relevant to these proceedings.
101 The principles may be summarised as follows (relying on what was stated in Mobil Oil at [51]-[60]). First, the following principles may be derived from NW Frozen Foods:
(a) it is the responsibility of the Court to determine the appropriate penalty to be imposed in respect of a contravention of the relevant legislation;
(b) determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another;
(c) there is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravener have reached agreement, they may present to the Court a statement of facts and opinions as to the effects of those facts, together with joint submissions as to the appropriate penalty to be imposed;
(d) the view of the regulator, as a specialist body, is a relevant - but not determinative - consideration on the question of penalty;
(e) in determining whether a proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so; and
(f) where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court's view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It is appropriate if it is within the permissible range.
102 Secondly, the Full Court in Mobil Oil added the following further five considerations:
(a) the rationale for giving weight to a joint submission on penalty relates to the savings in resources for the regulator and the Court. The savings in resources can be used by the regulator to increase the likelihood that other contraveners will be detected and brought before the courts. This has the effect of increasing deterrence. The arguments in favour of negotiated settlements have to take account of the fact that it is the Court which bears the ultimate responsibility for determining the appropriate penalty;
(b) the sixth principle drawn from the reasoning in NW Frozen Foods set out in [101(f)] above does not mean that the Court must commence its reasoning with the proposed penalty and limit itself to considering whether that penalty is within the permissible range. A Court may wish to take that approach. However, it is open to a Court, consistently with the reasoning in NW Frozen Foods, first to address the appropriate range of penalties independently of the parties' proposed figure and then, having made that judgment, determine whether the proposed penalty falls within the range;
(c) the appellant in NW Frozen Foods admitted contravening the TP Act and had reached agreement with the regulator upon the facts to be put before the Court. There was no suggestion that the admissions or statement had been tailored or modified to reflect the difficulties faced by the regulator in proving its case. The Full Court therefore acted on the basis of clear admissions and a detailed statement of agreed facts setting out how the contraventions had occurred;
(d) as the Full Court indicated in Australian Competition & Consumer Commission v Ithaca Ice Works Pty Ltd [2001] FCA 1716; [2002] ATPR ¶41-851, the regulator should always explain to the Court the process of reasoning that justifies a discounted penalty; and
(e) there is nothing in NW Frozen Foods which is inconsistent with any of the following propositions:
(i) the Court, if it considers that the evidence or information before it is inadequate to form a view as to whether the proposed penalty is appropriate, may request the parties to provide additional evidence or information or verify the information provided. If they do not provide the information or verification requested, the Court may well not be satisfied that the proposed penalty is within the range;
(ii) if the absence of a contradictor inhibits the Court in performance of its duties it may seek the assistance of an amicus curiae or of an individual body prepared to act as an intervenor under the relevant Federal Court Rules; and
(iii) if the Court is disposed not to impose the penalty proposed by the parties, it may be appropriate, depending on the circumstances, for each of them to be given the opportunity to withdraw consent to the proposed orders and for the matters to proceed as a contested hearing.
103 Those guiding principles have been applied subsequently in cases in various statutory contexts, such as Australian Competition and Consumer Commission v Qantas Airways Ltd (2008) 253 ALR 89 at [25]-[27] per Lindgren J; Australian Competition & Consumer Commission v PRK Corporation Pty Ltd [2009] FCA 715; [2009] ATPR ¶42-295 at [20]-[27] per Jacobson J and in Australian Communications and Media Authority v Radio 2UE Sydney Pty Ltd (No 2) (2009) 178 FCR 199 at [48]-[54] per Rares J.
104 Having regard to the principles summarised above, I shall now set out the primary considerations which I have taken into account in forming the view that this matter warrants a civil pecuniary penalty within a very high range.
105 First, in my view, there was not only a foreseeable risk of serious injury or death arising from the use of the Boat in the Fast Boat Run, there was a very high foreseeable risk. Such a finding flows not only from the inherently dangerous use of a boat with unguarded propellers in such exercises, but from the fact that there had been no less than six similar incidents dating back to September 2004 which, in varying degrees, highlighted that risk.
106 Secondly, that risk was either known or ought to have been known by the Chief of the Defence Force having regard to both the factors referred to immediately above.
107 Thirdly, as is common ground, there was available a reasonably practicable step which would have protected OC Minchin (or at least reduced his exposure to the risk of being injured by coming into contact with the unguarded propeller). As the Commonwealth acknowledges, the reasonably practicable step was to only use the Boat for the relevant water-based exercises if adequate guarding was applied to the outboard motor propeller.
108 Fourth, the Commonwealth's failure to take appropriate steps to address that highly foreseeable risk involved a fundamental systemic failure on the part of the Commonwealth. This systemic failure relates to the clear absence, prior to the Incident, of any effective regime for ensuring that relevant information relating to the occupational health and safety of ADF personnel was exchanged or made available to all relevant sections of the ADF. This fundamental systemic failure is vividly illustrated by the fact that the ADFA was not even made aware of Comcare's reports into the First, Second or Third Incidents. In my view, it is not to the point that Comcare was content with the Army's response to its reports on each of those Incidents. The relevant point is that, because of the failure to provide the ADFA with relevant information concerning those incidents, the ADFA was denied information which may have caused it in respect of its own relevant activities to put in place at an earlier time a reasonably practicable step which would have protected people such as OC Minchin, by installing full propeller guards. The serious deficiencies in the ADF's internal communication system for OH&S matters is also demonstrated by the failure to advise the ADFA of matters such as the DMO Safety Case Study, the DMO Review and the Army's response thereto. If further demonstration is required, it is also telling that at no time leading up to the Incident were any steps taken by the Chief of the Defence Force to ensure that the Boat was maintained and serviced in accordance with the TRF of any of the three major ADF services.
109 Fifthly, independently of the absence of an effective information-sharing system within the ADF generally in respect of OH&S matters, it reflects poorly on the ADFA itself that appropriate steps were not taken by it and those who were responsible for its operations to address the highly foreseeable risk illustrated by the Fourth, Fifth and Sixth Incidents, all of which directly involved the ADFA and the use of the Boat (or similar vessels) in the same (if not similar) exercises to that in which OC Minchin was engaged on 14 February 2010. It is also significant to note in this context that those three earlier incidents all involved officer cadets participating in the YOFT programme at the outset of their careers in the ADF. Of course, the ADF owes duties to take all reasonably practicable steps to protect the health and safety of all its personnel, but that duty is particularly acute when young and inexperienced cadets are required to participate in inherently dangerous activities, such as those in which OC Minchin was involved on 14 February 2010.
110 Sixthly, I consider that considerations of both general and specific deterrence are highly relevant in the circumstances here. As to general deterrence, I consider that the amount of the pecuniary penalty should be set at a level which highlights to persons who are bound by the OH&S Act and other similar legislation the need to take a responsible and proactive approach in fulfilling their obligations to provide a safe workplace.
111 In my view, the case is also an appropriate one in which to bring to bear considerations of specific deterrence. The relevance of specific deterrence is highlighted by the fact that the Incident occurred notwithstanding the knowledge which was, or ought to have been, attained as a result of the previous six incidents. For the reasons set out above, the Commonwealth through the ADF failed to have in place an appropriate regime directed to ensuring that appropriate information relating to occupational health and safety matters affecting ADF personnel was shared within all parts of the ADF. Furthermore, while some steps were taken after the Incident to address that lacuna, for reasons which will be given below, I do not consider that those steps fully or adequately address the problem.
112 On the issue of specific deterrence, I am mindful of the observations of North J in Cadet Francis at [103], where his Honour commented on the "absurdity" of ordering the Commonwealth to pay to itself a civil pecuniary penalty. In my view, however, that does not mean that, in a case such as the present, specific deterrence is irrelevant. Even where the Commonwealth is the contravener, the imposition of an appropriate pecuniary penalty can serve as a specific deterrent because the imposition of such a penalty can have ramifications beyond purely financial considerations. As the Full Court recently observed in Post Logistics Australasia Pty Limited at [63]:
Acknowledgment at a level of general principle of the relevance of general and specific deterrence in determining civil pecuniary penalties under the OH&S Act should, however, be qualified in the following two respects. First, because of the individual nature of specific deterrence, there may be good reason why that concept has no or little relevance in the circumstances of a particular case. For example, at first blush it may be difficult to see any meaningful role for specific deterrence to play in a case where the Commonwealth is the party which has contravened the OH&S Act and any pecuniary penalty must be paid to the Commonwealth, presumably into the Consolidated Revenue Fund (see, for example, Cadet Francis at [102]). However, it may be important to appreciate that the individual officer or officers of the Commonwealth with general or particular responsibility for the conduct will ordinarily be publicly associated with the penalty imposed, he or she will have to allocate scarce public funds that were not appropriated to pay such a penalty, and thus cause a reduction in what the Commonwealth department, authority or agency involved can now provide. That is, the imposition of the penalty will have an impact on the department's, authority's or agency's capacity to perform its role, even if the sum is small in its overall budget. And, most importantly, the department, authority or agency will have to account to the Parliament and the public as to why it had had to pay a penalty and not use the money appropriated to it for the purposes that the Parliament intended. The impact of the penalty may vary depending on whether there is any evidence demonstrating the practical effect on internal budget allocations within the Commonwealth if the particular Commonwealth department, authority or agency is ordered to pay a civil pecuniary penalty.
113 Seventhly, I have taken into account the mitigating factors pointed to by both Comcare and the Commonwealth as outlined in [78]-[80] and [83(e)-(g)] and [84] above. I should add, however, that while various steps have been taken to address the systemic problem of not circulating relevant information within the ADF on OH&S matters, I do not believe that the protocol described in [84] above provides a full or adequate response. That is primarily because the obligation it creates upon the ADF to distribute information about OH&S matters is confined to circulating Comcare report findings. While that is a step in the right direction, it fails to address situations where Comcare has not become involved or has not generated a report. I agree with Comcare's submission that consideration needs to be given by the Chief of the Defence Force (or an appropriate delegate) to issuing a directive or policy instruction which ensures that there is effective communication and information-sharing systems in place across all sections of the ADF in respect of OH&S matters, not just matters in which Comcare happens to become involved. In my view, the Chief of the Defence Force should ensure that a proactive approach is taken to this issue.
114 Taking into account all of the above factors, I consider that the jointly proposed penalty of $190,000 falls short of the appropriate range and I reject it. In my view, taking into account all of the matters described above, I consider that the appropriate pecuniary penalty in this case is $210,000 (representing approximately 1910 penalty units).
115 Finally, as to the terms of the proposed declaration, I propose to make a declaration in terms which more accurately reflect the relevant requirements in clause 2 of Schedule 2 of the OH&S Act and appropriately describes the nature of the Commonwealth's contravention. There is no dispute that the Commonwealth must pay Comcare's costs.
116 I will make orders accordingly.
I certify that the preceding one hundred and sixteen (116) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.