Director of Consumer Affairs Victoria v Alpha Flight Services Pty Ltd

Counsel for the First Respondent: Mr C M Caleo QC with Ms P Neskovcin

Solicitor for the First Respondent: Lander & Rogers

Counsel for the Second Respondent: Mr N J Young QC with Mr N P De Young

Solicitor for the Second Respondent: Minter Ellison

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 35 of 2015

AND: ALPHA FLIGHT SERVICES PTY LTD (ACN 064 142 418)

JUDGES: BARKER, KATZMANN AND BEACH JJ DATE OF ORDER: 26 AUGUST 2015 WHERE MADE: MELBOURNE (delivered in Sydney)

1. The appeal be dismissed.
2. The appellant pay the respondents' costs of and incidental to the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 35 of 2015

AND: ALPHA FLIGHT SERVICES PTY LTD (ACN 064 142 418)

JUDGES: BARKER, KATZMANN AND BEACH JJ DATE: 26 AUGUST 2015 PLACE: MELBOURNE (Delivered in sydney)

THE COURT 1 The Director of Consumer Affairs Victoria (Director) has appealed against pecuniary penalties of $50,000 imposed on Alpha Flight Services Pty Ltd (Alpha) and $200,000 imposed on Qantas Airways Limited (Qantas) in respect of product safety contraventions of the Australian Consumer Law (set out in Schedule 2 of the Competition and Consumer Act 2010 (Cth) and also applied as a law of Victoria pursuant to s 8 of the Australian Consumer Law and Fair Trading Act 2012 (Vic)) (ACL). 2 For the reasons that follow, the appeal should be dismissed.

BACKGROUND 3 Alpha and Qantas admitted to various contraventions of s 118(1), (2) and (3) of the ACL. Those provisions provided: (1) A person must not, in trade or commerce, supply consumer goods of a particular kind if: (a) an interim ban on consumer goods of that kind is in force in the place where the supply occurs; or (b) a permanent ban on consumer goods of that kind is in force. Note: A pecuniary penalty may be imposed for a contravention of this subsection. (2) A person must not, in trade or commerce, offer for supply (other than for export) consumer goods the supply of which is prohibited by subsection (1). Note: A pecuniary penalty may be imposed for a contravention of this subsection. (3) A person must not, in or for the purposes of trade or commerce, manufacture, possess or have control of consumer goods the supply of which is prohibited by subsection (1). Note: A pecuniary penalty may be imposed for a contravention of this subsection. 4 A statement of agreed facts provided the factual foundation for the admissions and, together with other affidavits, constituted the basis upon which findings were made against the two companies and the penalties in question were imposed. The summary below is drawn from that statement. 5 The contraventions concerned the supply, offer for supply and possession or control between August and September 2013 of goods that were the subject of a permanent ban imposed by Consumer Protection Notice No 5 of 2012 issued under the Competition and Consumer Act 2010 (Cth). The goods were "Nano Magnetics Nanodots" (Nanodots) which were small, high-powered, separable and loose magnets sold in multiples of two or more and marketed as a toy or puzzle. If a child were to swallow more than one of these magnets, there was a risk that the magnets could stick together across the walls of the child's intestine or other digestive tissue and cause serious injury or death. 6 Qantas carried the Nanodots on various of its international flights departing from or entering Australia and sold them to passengers, either on such flights or online, as part of its duty free program. The Nanodots were supplied to Qantas by Alpha, an airline catering business. 7 The relationship between Alpha and Qantas was governed by a contract, the "Qantas Performance Based Service Agreement for In-Flight Retail Services", commencing 1 March 2005, pursuant to which Qantas outsourced to Alpha the management and administration of its duty free program. Schedule 2 of the agreement required Alpha to produce the Qantas and Alpha co-branded duty free catalogue which Qantas carried on its international flights and in its airport lounges. The Nanodots were advertised in the catalogue together with a warning that they were not suitable for children. Under clause 27 of the agreement, Alpha was to maintain the Qantas and Alpha co-branded duty free shopping website onto which Alpha uploaded content about the Nanodots. Qantas admitted that it allowed the catalogue and website to be used for the purposes of its duty free program. 8 Qantas cabin crew earned commissions from Alpha on the sale of the Nanodots. Alpha sourced the goods from the United Kingdom through its buyer and with the approval of its general manager for sales, marketing and duty free. Alpha relied on its suppliers to identify that the goods purchased complied with product safety laws. In turn, Qantas relied on Alpha to ensure product safety compliance. 9 At the time of the contraventions, neither Alpha nor Qantas had in place a relevant product safety compliance program or conducted relevant employee training on product safety compliance relating to the Qantas duty free program. Further, neither company knew that the Nanodots fell within the permanent ban. 10 Qantas only became aware of the prohibition on the sale of the Nanodots on 8 August 2013 when it was informed via telephone by a passenger on one of its international flights that the Nanodots being offered for sale in the in-flight catalogue were banned. On 14 August 2013, Qantas notified the passenger that his concerns had been directed to Alpha. Despite what the passenger was told, it later became clear that his concerns had not in fact been passed on to Alpha at that time. On 25 August 2013 the passenger noticed that the Nanodots were still being offered for sale on an international Qantas flight and, on 3 September and 12 September 2013, he again raised his concerns about the Nanodots with Qantas. It was not until 12 September 2013, after the third approach, that Qantas informed Alpha (by telephone) of the Nanodots ban. That same day, Alpha ceased supplying the Nanodots for sale and removed references to it on the co-branded website. The remaining Nanodots carried on Qantas aircraft ceased to be offered for sale on 14 September 2013. The primary judge in his reasons contrasted Alpha's prompt action with the failure of the systems within Qantas to respond without delay to product safety concerns. 11 On 20 September 2013, the Director wrote to Alpha and Qantas advising that the Nanodots did not comply with product safety provisions and requiring the supply of the product to cease and a recall to commence. On 26 September 2013, Alpha issued a recall notice in respect of the Nanodots to the Australian Competition and Consumer Commission. In October 2013, following requests from the Director, Alpha caused the recall notice to be published online and in leading Australian newspapers. 12 Part B of the statement of agreed facts dealt with other matters including: the nature and extent of the contravening conduct; the question of loss or damage; whether there had been a prior finding of similar conduct; the degree of deliberateness or carelessness involved; the size and financial position of the contravening companies; whether there had been any profit from the contravening conduct; the level of management involved in the conduct; the extent of cooperation with the Director's investigation and the approach to defending the proceeding. 13 In this regard, the statement covered matters required to be considered in determining penalty under s 224(2) of the ACL as well as other relevant factors sometimes referred to as the "French factors": NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285; 141 ALR 640; [1996] FCA 1134 (NW Frozen Foods). 14 Amongst other things, the statement noted that a total of 223 items of Nanodots were supplied to customers and 507 items were offered for supply or were in the possession or control of Alpha and Qantas during the period 1 August 2013 to 14 September 2013. The profit flowing from the sales was approximately $5,500 (before allocation between Alpha and Qantas). There was evidence that Alpha's operating profit after income tax for the year ended 31 December 2012 was $16,550,961 and that Qantas had expected an underlying profit before tax of $300 million to $350 million in the first six months of the 2015 financial year. 15 The statement referred to the involvement of senior managers of both Alpha and Qantas. But it noted that there was no evidence of loss or damage and that neither Alpha nor Qantas had previously been found by the Court to have engaged in similar conduct. It also recorded the extent to which each company had cooperated with the Director and acknowledged the savings in time and costs that had ensued. 16 In respect of the contraventions of the ACL disclosed by the respondents' conduct, the Director sought declaratory relief, adverse publication orders and orders for the destruction of the contravening products and for consumer refunds. These orders were not opposed by Alpha or Qantas and they formed part of his Honour's orders. 17 The Director also sought injunctive relief to restrain Alpha and Qantas from supplying goods covered by consumer safety laws. But this application was not pressed upon Alpha and Qantas implementing satisfactory product safety compliance programs, including employee training, on 14 November 2014 and 22 August 2014 respectively. 18 The remaining issue for determination by the primary judge concerned the amount of the pecuniary penalties that should be imposed on Alpha and Qantas and whether any penalty should be included in the public notice announcing the outcome of the proceedings.

Grounds of appeal 19 The Director appealed the determination of the penalties on the grounds that they were manifestly inadequate and that his Honour failed to have any, or any sufficient, regard to general deterrence, to the applicable maximum penalties and to the character and object of the provisions contravened, namely product safety provisions. 20 The penalty against Qantas was also originally separately appealed on the grounds (6 and 7) that his Honour failed to have any, or any sufficient, regard to the fact that Qantas had knowledge of the contraventions and had engaged in deliberate conduct. The Director no longer presses these grounds. Rather, it submits that Qantas' knowledge falls to be considered under ground 10 concerning the asserted manifest inadequacy of the penalty imposed on Qantas. 21 It is convenient to address each ground of appeal in turn. But where there are grounds common to the appeal against the pecuniary orders concerning both Alpha and Qantas, we will address those grounds together.

Grounds 1 and 5 - General deterrence 22 The Director alleged that the primary judge did not have any regard to the issue of general deterrence in determining and imposing a penalty on each of Alpha and Qantas. Alternatively, it is said that his Honour had "insufficient regard" to this issue. 23 During the course of argument the Director stepped back from the first proposition, conceding that his Honour did indeed consider general deterrence. The concession was properly made. So much is apparent from his Honour's references at [19] (to what was said in Australian Securities and Investments Commission v GE Capital Finance Australia [2014] FCA 701 at [71] to [78] per Jacobson J), at [21] (to what was said in NW Frozen Foods at 292), and at [28] picking up "all relevant factors". Further, the reference in [28] -- "(t)he amount should be significant to leave no room for any impression of weakness" -- also addresses general deterrence, albeit referring to fixing a penalty in respect of Alpha. The phraseology is taken from NW Frozen Foods at 294 and 295 where it is used in the context of general deterrence. Finally, as his Honour made clear in [37] of his reasons, he clearly considered general deterrence, albeit in the context of discussing the question of public notification. These references indicate that throughout his reasons the primary judge had general deterrence firmly in mind. 24 Moreover, there is little doubt that his Honour gave significance and weight to this question. 25 The alternative submission -- that the primary judge had "insufficient regard to the issue of general deterrence" -- raises a conceptual difficulty. 26 What was involved in the present case was an exercise of discretion. Accordingly, to demonstrate error, it was necessary to establish an error of the kind referred to in House v The King (1936) 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ. That is to say there must be a specific error, such as acting upon a wrong principle, allowing extraneous or irrelevant matters to guide or affect the exercise of discretion, mistaking the facts or not taking into account some material consideration (the "first category" of error) or, if the nature of the error is elusive, on the facts the result reached was "so unreasonable or plainly unjust [in this case, that the penalties imposed were "manifestly inadequate"] that the appellate court may infer that there has been a failure [by the primary judge] properly to exercise the discretion" (the "second category" of error). 27 The mere fact that an appellate court considers that a trial judge in the exercise of his or her discretion has given too little or too much weight to any particular consideration has not generally been treated as sufficient to vitiate the exercise of the discretion. Nevertheless, giving undue (or, for that matter, inadequate) weight to a particular factor may be causative of a second category error (Dinsdale v The Queen (2000) 202 CLR 321 at [3] to [6] per Gleeson CJ and Hayne J), and may cause or reveal a first category error in an unusual case. We would read references in House v The King to questions of weight in this light. Certainly, the preponderance of later authority has not treated either undue weight or inadequate weight as a separate category of error (see for example Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 (CFMEU v Cahill) at [29], Markarian v The Queen (2005) 228 CLR 357 (Markarian) at [25], Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission (2003) 127 FCR 170 (Schneider Electric) at [39] and J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission (2000) 172 ALR 532 at [154]). Indeed, in CFMEU v Cahill at [46] Middleton and Gordon JJ were quite emphatic about it: Complaints about too much weight or insufficient weight given to particular matters in the exercise of the sentencing discretion do not fall within any of the kinds of errors identified in House … They are not the kinds of errors that an appellate court is or should be concerned with in a sentencing appeal. A sentencing appeal is not a rehearing. 28 It is true that in Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission (2003) 131 FCR 529 (Universal Music) at [302], to which the Director referred, a Full Court held that the discretion of the primary judge had miscarried because of the weight he had given to certain matters. But Universal Music provides little support for the Director's position. 29 First, in Universal Music the Full Court held that in giving the weight he did to those matters, the primary judge misdirected himself. In the present case, the Director did not go so far as to submit that the weight the primary judge accorded to general deterrence had given rise to a misdirection. 30 Second, the Full Court in Universal Music went on to find that the penalties were in any event manifestly inadequate. 31 Treating errors about weight alone as a sufficient basis for setting aside a discretionary judgment may be conducive to an appellate court taking the impermissible approach of finding error merely because it would have weighted various factors differently from the primary judge and, as a consequence, come to a different result. As Dixon, Evatt and McTiernan JJ observed in House v The King itself and as seven judges of the High Court emphasised in their joint decision in Lowndes v The Queen (1999) 195 CLR 665 at [15], an appellate court may not substitute its own opinion for that of the primary judge merely because it would have exercised its discretion differently. 32 As Latham CJ explained in Lovell v Lovell (1950) 81 CLR 513 at 519, when an appellate court is considering weight, it is assessing whether the failure to give adequate weight to a relevant consideration "really amounts to a failure to exercise the discretion" actually entrusted to the court. That statement was cited with approval by Gibbs CJ in Mallet v Mallet (1984) 156 CLR 605 at 614. In Mallet at 622, Mason J (dissenting in part but not as to the relevant principle) acknowledged that in some cases, inadequate weight may vitiate the exercise of discretion but he said it was necessary for an appellate court "to view this ground of appeal with considerable caution". In that respect his Honour noted the remarks of Stephen J in Gronow v Gronow (1979) 144 CLR 513 at 519 and 520. Those remarks included the observation that: When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge's discretionary decision on grounds which only involve conflicting assessments of matters of weight. 33 Where questions of weight arise for consideration in an appeal from a discretionary judgment, the appellate court is undertaking a different exercise from the exercise in which the primary judge was engaged. It is not free to give its own weighting to a relevant factor for the purposes of then concluding that any less weight given to that factor by the primary judge bespeaks error. 34 It is appropriate to make one further point. When a sentencing judge is engaged in the exercise of a discretion, he or she must take into account and weight all the various factors which bear on the sentence of the offender (see Wong v The Queen (2001) 207 CLR 584 at [75] per Gaudron, Gummow and Hayne JJ). In that approach it may be an error to attribute particular weight to some factors whilst leaving the significance of all other factors unaltered. The task of the sentencing judge "is to take account of all of the relevant factors and to arrive at a single result which takes due account of them all": Wong at [75]. But in the present case, the primary judge followed the correct approach. 35 We are not satisfied that the primary judge had "insufficient regard" (whatever that means) to the issue of general deterrence. Nor are we satisfied that his Honour's treatment of this issue amounted to a misdirection or that the result is so unreasonable or plainly unjust that we should infer that there has been a failure properly to exercise the discretion. Perhaps if we had been in his Honour's position exercising the discretion for ourselves, we might have given general deterrence greater weight. But that is not to the point. 36 Accordingly, grounds 1 and 5 fail.

Grounds 2 and 8 - Maximum penalties 37 Section 224(1) authorised pecuniary penalties to be imposed "in respect of each act or omission by the person to which this section applies, as the court determines to be appropriate". The pecuniary penalty that could be imposed on a body corporate for a contravention was not to exceed $1.1 million. Section 224(4) provided that a person was not liable to more than one pecuniary penalty in respect of the same conduct that constituted a contravention of two or more provisions. The Director submitted that in characterising the offending conduct, the supply of the Nanodots in contravention of s 118(1) should be grouped separately from the offer for supply and possession or control of the Nanodots in contravention of s 118(2) and (3). Accordingly, the "aggregate" maximum penalty for each of Alpha and Qantas was $2.2 million. 38 It is said that the primary judge erred in determining and imposing penalties on each of Alpha and Qantas "without having any or with insufficient regard to the maximum penalties" applicable to the admitted contraventions. 39 In terms of the language "with insufficient regard to", we repeat what we said earlier. 40 As to whether there was a failure to have regard to the maximum penalties, in our view such an assertion is unsustainable. 41 It is appropriate to begin with his Honour's reasons. 42 First, at [7] his Honour stipulated the number of Nanodots supplied, offered for supply, possessed and controlled. Second, at [18] his Honour discussed the maximum penalty for each contravention. His Honour then also observed that one act or omission could give rise to more than one contravention and, further, that multiple offending acts could arise from "a common source of culpable conduct". Moreover, at [19] he discussed that in some cases, separate conduct giving rise to separate contraventions might require distinct penalties. Third, his Honour also observed that: "It is the substance of the offending conduct which the penalty should reflect and it is relevant to that end to bear in mind the number and nature of the contraventions and the number of acts constituting contraventions and the time over which the contraventions occurred." Fourth, at [20] his Honour made the point that some acts could give rise to more than one offence and that some acts were multiple and others occurred over a period of time. But his Honour then emphasised the point of focusing on conduct and the determination of a penalty to match the conduct, rather than merely making an arithmetical calculation multiplying the maximum penalty by the number of contraventions (see Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330 at [17], [18], [84] and [85] per Allsop CJ). At the same time, however, his Honour noted that the number of contraventions is to be taken into account and, in some cases, "may be determinative of the penalty". 43 It is incorrect to commence with the maximum penalty and engage in a ratcheting down exercise. The process to be applied in arriving at a particular penalty figure was considered in the context of criminal sentencing by the High Court in Markarian. This process provides, by analogy and with adjustment, guidance as to how the Court should approach the assessment of pecuniary penalties in the present context. In Markarian, Gleeson CJ, Gummow, Hayne and Callinan JJ held the following: (a) Assessment of the appropriate penalty is a discretionary judgment based on all relevant factors (at [27]); (b) It will rarely be appropriate to start with the maximum penalty and to proceed by making a proportional deduction from that maximum (at [31]); (c) The Court should not adopt a mathematical approach of increments or decrements from a predetermined range, or assign specific numerical or proportionate value to the various relevant factors (at [37] citing Wong v The Queen at 611 and 612 per Gaudron, Gummow and Hayne JJ); (d) It is not appropriate to determine an "objective" penalty and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities; and (e) The Court "may not add and subtract item by item from some apparently subliminally derived figure" to determine the penalty to be imposed (at [39]). 44 The Director's submission had the flavour of such an impermissible approach. Regardless, his Honour did not engage in such an impermissible approach. His Honour's reasons disclose that he had regard to the maximum penalties for the contraventions, but eschewed arithmetical calculations. 45 His Honour appropriately looked at the conduct and applied a "course of conduct" approach. 46 The "course of conduct" principle was explained in CFMEU v Cahill at [39], [41] and [42] by Middleton and Gordon JJ in the following terms: The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is "the same criminality" and that is necessarily a factually specific enquiry. … In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion: Johnson v R (2004) 205 ALR 346; [2004] HCA 15 at [3]-[4] and [34] and Attorney-General v Tichy (1982) 30 SASR 84 at 92-3 (Tichy). It is a tool of analysis (Tichy at 93) which a court is not compelled to utilise: Royer v Western Australia [2009] WASCA 139 at [21]-[34] and [153]-[156] (Royer). A court is not compelled to utilise the principle because, as Owen JA said in Royer at [28], "[d]iscretionary judgments require the weighing of elements, not the formulation of adjustable rules or benchmarks". The exercise of the sentencing discretion does not fall to be exercised in a vacuum. It is a matter of judgment to be exercised according to the facts of each case and having regard to conflicting sentencing objectives: see McHugh J in AB v R (1999) 198 CLR 111; 165 ALR 298; [1999] HCA 46 at [14]. For the same reasons, and contrary to the appellants' submissions, even if offences are properly characterised as arising from the one transaction or a single course of conduct, a judge is not obliged to apply concurrent terms if the resulting effective term fails to reflect the degree of criminality involved. Or, in the case of fines, a judge is not obliged to start from the premise that if there is a single course of conduct, the maximum fine is, in the present case, $110,000 for the CFMEU and $22,000 in the case of Mr Mates. 47 We cannot discern any error in his Honour's approach in looking at the course of conduct. Moreover, there is no separate ground of appeal asserting error in that respect. Nevertheless, some observations should be made about the Director's submissions on this subject. 48 First, much of the Director's argument appeared to confuse the distinction between looking at the "same conduct" for the purposes of s 224(4) and the discrete course of conduct principle. It was said that at [18] to [20] of his reasons his Honour appears to have regarded "supplying" as the same conduct as "offering for supply", "possessing" or "controlling" (see the Director's submissions in chief at [20] and in reply at [5]). His Honour did no such thing. As his reasons at [18] to [23] indicate, his Honour was considering the course of conduct question. 49 Second, the Director seemed to suggest that, because s 224 does not refer to the course of conduct approach, such an approach is impermissible. If that was indeed the submission we would reject it. 50 Third, even if one were to accept the Director's submission that there were, in substance, two contraventions with a maximum penalty of $2.2 million, that did not preclude his Honour from treating this as the one course of conduct. To do so does not deny that there may be more than one contravention. 51 Fourth, even if the course of conduct approach were not apposite, his Honour was nevertheless entitled to apply the totality principle in setting the penalty for Alpha (see his Honour's reasons at [28]) and for Qantas (at [38]). There is no ground of appeal challenging his Honour's application of the totality principle. 52 Finally, we do not accept the suggestion that his Honour somehow overlooked the 507 Nanodots that were offered for supply or in the relevant possession and control, but remained unsold. After all, he expressly referred to the fact at [7] and in our view it is embraced by the discussion at [18] to [23]. 53 In summary, grounds 2 and 8 are not made out.

Grounds 3 and 9 - Character of the contravention and object 54 The Director claimed that his Honour erred in determining and imposing the various penalties without having "any, or with insufficient, regard to the character of the contravention and the object of the provision of the ACL (Vic) that had been breached … as a central determinant". 55 Again, in terms of the language "with insufficient regard to", we repeat what we said earlier. 56 We reject the assertion that his Honour did not have regard to the character and seriousness of the relevant contraventions and the relevant object. That is because: At [1] his Honour identified the relevant provision as a product safety provision; At [15] he referred to the context of concerns about products which were banned for sale and which posed potential risks to children; At [29] he identified "non-compliance with its obligations at law and to a danger which its non-compliance posed to young children" and "concerns about compliance with product safety laws and the potential risks to children"; At [34] he referred to "product safety obligations". 57 Moreover, it is clear that the relevant risk under consideration by his Honour was serious risk to children. After all, the relevant "In Sky Shopping" brochure before his Honour contained the warning: "This product is not for children. Contains small magnets that can be dangerous if swallowed or inhaled". 58 Moreover, the public notice that was to be published as part of the relief sought and obtained was to have the statement: "HEALTH RISK: • Choking or suffocation risk for children. • If children swallow a number of magnets, the magnets can lock together through intestine walls and cause perforations and blockages or lead to serious infections". 59 The proposed notice was part of Annexure C to the Director's Fast Track Application and was the subject of his Honour's consideration in his reasons (see [37]) and his orders. Further, the statement of agreed facts at [63], which provided the factual foundation for his Honour's determination, referred to the serious risk to children including internal injuries and death. There is little doubt that his Honour was well aware of, and had regard to, the character of the relevant contraventions in posing such a risk. 60 As to the assertion that the object of the provision should have been a "central determinant" of his determination, in our opinion such a proposition is unsupported. It is not stipulated as such in s 224(2) of the ACL. 61 As to the assertion that the character of the contravention should be a central determinant, we would observe the following: (a) First, there is no statutory obligation to that effect. Certainly, it is not expressly required by s 224(2). Moreover, the Director did not claim that his Honour made an error in his construction or application of s 224(2). (b) Second, we accept that some authorities have referred to the "character of the offence" as being the "central determinant" (see for example Schneider Electric at [6] per Sackville J (citing D.I. Baker and B.A. Reeves, "The Paper Label Sentences: Critiques" (1977) 86 Yale LJ 619 at 622)). But it is not a rule. Further, and in any event, Sackville J coupled such a description with the expression "in the absence of ameliorating circumstances" (see also Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liq) (2007) 161 FCR 513 (Dataline) at 527). 62 We consider that the use of the language "central determinant" is unhelpful and distracts from the required statutory task. 63 What s 224(2) of the ACL requires is that the penalty be appropriate having regard to all relevant matters and that regard is paid to the following matters, in particular: The nature and extent of the act or omission. The nature and extent of any loss or damage suffered as a result of the act or omission. The circumstances in which the act or omission took place. Whether the person contravening has previously been found by a court in proceedings under Pt 5-2 to have engaged in any similar conduct. 64 As pointed out in NW Frozen Foods, at 292, those considerations do not necessarily exhaust "all relevant matters" and thus the so called French factors may be considered. 65 In this case, the primary judge had regard to the appropriate penalties, considered the particular factors identified by s 224(2) and took into account the so called French factors. 66 We can discern no error in his Honour's approach to the character of the contraventions and the object of the relevant provisions of the ACL.

Ground 4 - Manifest inadequacy (Alpha) 67 We propose to address ground 4 concerning Alpha before dealing separately with the analogous ground 10 concerning Qantas. 68 In order for the Director to make good this ground, the penalty must be so inadequate as to manifest error (see Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 (Singtel Optus) at [44] citing R v Tait (1979) 46 FLR 386 at 388). 69 The first of the Director's complaints was that the primary judge failed to explain his reasoning such that one could not ascertain what particular factors had been taken into account. There are a number of difficulties with this contention. 70 First, there was no separate ground of appeal asserting the inadequacy of reasons. 71 Second, read as a whole, we are not satisfied that the reasons were inadequate. Taking [23] to [28] of his Honour's reasons with the background of what was said at [5] to [17] concerning the evidentiary landscape and the statement of relevant principles at [18] to [21], there is an adequate explanation of the factors that were taken into account and the manner in which they were taken into account. 72 The Director's submissions in chief at [29] gave the example of financial resources not being appropriately analysed. But, as Alpha has contended, his Honour referred to financial resources at [24]. Further, at [28], he then referred to all the factors that he had previously referred to. 73 Third, this basis for asserting manifest inadequacy is flawed in any event. One does not observe manifest inadequacy by inadequate reasons per se. One observes manifest inadequacy by looking at the result and perceiving it to be so inadequate as to manifest error, where no specific error is identified or apparent. Perhaps inadequate reasons may correlate with a result that is outside the reasonable range, but the former, without more, does not establish the latter. An adequate penalty may be attended with inadequate reasons. By contrast, a penalty which is manifestly inadequate may be attended with copious reasons that do not disclose specific error. 74 The second complaint made by the Director was that there was a significant disparity between the penalty that his Honour imposed and pecuniary penalties imposed in other cases. We do not consider this complaint to have substance either. 75 First, there is no separate ground of appeal that his Honour made an error in failing to apply or inappropriately applying the parity principle. No such specific error has been raised. 76 Second, in any event, there is little to be gained by considering penalties imposed in other cases which turned upon their own facts and, indeed, where "agreed" penalties had been reached (see Dataline at [67], Singtel Optus at [60] and Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [215]). It is difficult to see what can be gained from reviewing or considering the quantum of "agreed penalties" in cases such as Australian Competition and Consumer Commission v Cotton On Kids Pty Ltd [2012] FCA 1428 and Australian Competition and Consumer Commission v Smash Enterprises Pty Ltd [2011] FCA 375. In any event, even if such other examples had potential relevance, there are cases where the orders of magnitude for the penalties imposed are similar to those imposed in the present case (for example Australian Competition and Consumer Commission v Sontax Australia (1988) Pty Ltd [2011] FCA 1202). 77 The third complaint made by the Director involved rolling up all of the other criticisms of his Honour's approach, including his approach to general deterrence, the seriousness of the contravention, his alleged failure to have regard to the maximum penalty and lack of parity with penalties imposed in other cases, for the purposes of making out this manifest inadequacy ground. As we have said, no first category House v The King error has been established. Moreover, we do not consider that the aggregation of these matters points to any second category House v The King error. 78 We are not persuaded that the penalty imposed on Alpha was manifestly inadequate. 79 Before addressing the position concerning Qantas, we would make two other observations concerning the penalty imposed against Alpha. 80 First, we were troubled by his Honour's statement at [28] that "the court should also substantially reward Alpha's exemplary and prompt behaviour". The notion of a "reward" is inapposite. But we consider that all that his Honour intended to convey was that Alpha was entitled to a discount, rather than that a reward should be given. In any event, the Director did not advance an appeal ground identifying this as a specific error. 81 Second, we were also troubled by the relative difference between the penalty imposed upon Alpha as compared with the penalty imposed upon Qantas: a one to four ratio. It might be said that this ratio, applying the parity principle, should have been narrower, given that it was Alpha's contractual responsibility in the first instance to have ensured that the product it obtained for supply complied with relevant product safety laws. Moreover, it seems to have had no relevant compliance program in place at the time. But the Director has not agitated this as a separate ground of appeal and we will put it to one side, particularly as we do not consider that the penalty imposed upon Alpha was manifestly inadequate. Indeed, if there had to be a re-alignment to achieve parity, adjusting for individual circumstances, this might have been done, not by increasing the penalty against Alpha, but by reducing the penalty against Qantas. We will say nothing more.

Ground 10 - Manifest inadequacy (Qantas) 82 The Director also asserted that the penalty imposed against Qantas was manifestly inadequate. We disagree. 83 The Director's arguments on this question were analogous to those advanced in relation to Alpha. As to these arguments, we would repeat what we have said above. Moreover, as we noted earlier concerning his Honour's consideration of the financial resources of Alpha (see [72] above), we also note that his Honour similarly considered the financial resources of Qantas in determining the penalty to be imposed against it. This is made plain at [32], [33] and [36] of his reasons. 84 The Director has separately argued against Qantas that there were additional aggravating factors concerning its knowledge and the "deliberateness" of its behaviour that justified a higher penalty and that manifest inadequacy in the penalty imposed was established, presumably because it is said that these aggravating factors were not properly considered. 85 There are a number of difficulties for the Director on this aspect. 86 First, the Director did not press grounds 6 and 7 of the notice of appeal. 87 Second, his Honour made detailed factual findings concerning the behaviour of Qantas and its knowledge (see [8] to [16], [23], [29], [33] and [34] of his reasons). In summary, his Honour found that on 8 August 2013 a passenger had contacted the Qantas customer care department advising that the Nanodots had been banned in Australia. This resulted in an online enquiry being created in the Qantas system. On 14 August 2013 this was processed by Ms Kim Thomas, an employee of Qantas in its customer care department. Ms Thomas mistakenly believed that she had directed the enquiry to Alpha for their investigation and action. On 3 September 2013 the passenger sent another email to the Qantas customer care department about the Nanodots. On 12 September 2013 the passenger then sent a further email. On 12 September 2013 Ms Thomas notified Alpha by telephone and the Nanodots were withdrawn from sale on the same day. 88 None of those factual findings was challenged. 89 The facts as found did not establish any deliberate unlawful behaviour on the part of Qantas. What they demonstrated at most was a systemic breakdown. 90 Moreover, if the knowledge and conduct of Qantas could be described as aggravating circumstances, his Honour took them into account at [29], [34] and [36]. These matters were also partially reflected in the relative difference between the penalty imposed on Qantas and the penalty imposed on Alpha. 91 In our view, there is nothing in this additional point raised by the Director. 92 Finally, as with Alpha, the Director sought to roll up all other criticisms concerning his Honour's approach, including his approach to general deterrence, the seriousness of the contravention, the alleged failure to have regard to the maximum penalty, lack of parity and Qantas' knowledge, for the purposes of demonstrating manifest inadequacy. As we have said, no first category House v The King error has been established. Moreover, we do not consider that the aggregation of these matters points to any second category House v The King error. We would also observe that the Director's approach has to some extent lacked balance in that it sought to diminish, if not ignore, other factors in favour of Qantas. We do not need to elaborate further. No manifest inadequacy has been established.

CONCLUSION 93 None of the Director's grounds of appeal has been established. The Director's appeal must be dismissed. I certify that the preceding ninety-three (93) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Barker, Katzmann and Beach.