Penalty
22 Section 42Y of the TG Act empowers the Court to impose a pecuniary penalty on a person for contravention of a civil penalty provision. By s 42Y(3):
In determining the pecuniary penalty, the Court must have regard to all relevant matters, including:
(a) the nature and extent of the contravention; and
(b) the nature and extent of any loss or damage suffered as a result of the contravention; and
(c) the circumstances in which the contravention took place; and
(d) whether the person has previously been found by the Court in proceedings under this Act to have engaged in any similar conduct.
23 By s 42YA:
A subsection of this Act (or a section of this Act that is not divided into subsections) is a civil penalty provision if the words "civil penalty" and one or more amounts in penalty units are set out at the foot of the subsection (or section).
24 It follows that ss 42DLB and 42DMA are civil penalty provisions.
25 The maximum penalty for each contravention of either provision is $10,500,000. This is because the sections provide for a maximum penalty of 50,000 penalty units for a corporation, and s 4AA of the Crimes Act 1914 (Cth) relevantly provides that in a law of the Commonwealth or a Territory Ordinance, unless the contrary intention appears, "penalty unit" means the amount of $210.
26 Pecuniary penalties are payable to the Commonwealth: s 42YD(a).
27 I accept the submissions for the Secretary as follows.
28 The objects of the TG Act in s 4 are relevant. They include providing for "the establishment and maintenance of a national system of controls relating to the quality, safety, efficacy and timely availability of therapeutic goods that are used in Australia" and providing "a framework for the States and Territories to adopt a uniform approach to control the availability and accessibility, and ensure the safe handling, of poisons in Australia".
29 The object of the imposition of a civil penalty is deterrence, specific and general, so that the penalty imposed cannot be regarded as a mere cost of doing business: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113 (ABCC v CFMEU) at [98], Australian Competition and Consumer Commission v Woolworths Limited [2016] FCA 44 at [125], Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 at [62]-[63].
30 This said, the penalty should not be oppressive in the sense that it should be no higher than necessary to achieve the object of deterrence: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254; (2005) 215 ALR 281 at [9].
31 The maximum penalty, $10,500,000 for each contravention, must be considered because it shows the penalty for the worst possible case and enables comparison with the case at hand: Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 at [31].
32 The exercise, however, is not a mathematical one starting with the maximum penalty and adjusting by reference to mitigating and aggravating circumstances: ABCC v CFMEU at [166].
33 Regard needs to be had to the "course of conduct" principle which ensures that an offender is not punished multiple times for the same criminality: Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; (2010) 269 ALR 1 at [39]. Accordingly, as described in the submissions for the Secretary:
136. Thus, rather than imposing separate penalties for each contravention, the Court may seek to group them by reference to the principle of "single course of conduct" or "one transaction" if there is sufficient interrelationship between the legal and/or factual elements of those contraventions. This principle guards against the risk that the respondent is "doubly punished" in respect of the relevant acts or omissions that make up multiple contraventions. In effect, consideration is given to whether the contraventions arise out of the same course of conduct or the one transaction, in order to determine whether it is appropriate that a "concurrent" or single penalty should be imposed for the contraventions.
34 Regard needs to be had to the principle of totality. By this principle the total penalty imposed for multiple contraventions must not exceed that which is just and appropriate in the circumstances of the case: ABCC v CMFEU at [117].
35 The fact that Peptide Clinics is in liquidation and has ceased trading is relevant. For one thing, the object of specific deterrence is now moot. In Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) [2017] FCA 521 at [26] Bromwich J observed that:
(1) the purpose of a civil penalty, and thus of such proceedings, is primarily if not wholly protective in promoting the public interest in compliance, by putting a price on contravention that is sufficiently high to deter repetition by the contravener [not a factor in this case] and by others tempted to contravene: Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476 (the CFMEU civil penalty case) at 490 [55], quoting Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52,152;
(2) capacity to pay any penalties imposed was not a proper or relevant consideration: Australian Competition and Consumer Commission v Leahy (No. 2) [2005] FCA 254; (2005) 215 ALR 281 at 285 [11];
(3) even if a company is in liquidation, it may still be appropriate to order that it pay penalties as a measure of the Court's disapproval of the contraventions and as a measure of the seriousness in which they are regarded, including for the purposes of general deterrence: Australian Competition and Consumer Commission v SIP Australia Pty Limited [2003] FCA 336; (2003) ATPR 41-937 at 47,077-8 [59] - it was not suggested that this principle was diminished in a material way by such penalties not ultimately being recoverable by reason of the respondent being in liquidation;
(4) the ACCC [or in this case, the Secretary] as the body enforcing the civil penalty provisions in question has a real interest in seeking declaratory relief to vindicate a public right that … has been breached: Australian Competition and Consumer Commission v Goldy Motors Pty Ltd [2000] FCA 1885; (2001) ATPR 41-801 at 42,630 [30]; Australian Competition and Consumer Commission v Pacific Dunlop Limited [2001] FCA 740; (2001) ATPR 41-823 at 43,098-9 [63]-[69] - a point that may be seen to apply equally in respect of the other relief sought; and
(5) there is a significant public interest in declarations of contravening conduct and imposition of penalties being on the public record in aid of deterrence, which is not defeated by the fact that the company is in liquidation and unable to pay the penalties: Secretary, Department of Health and Ageing v Prime Nature Prize Pty Ltd (in liq) [2010] FCA 597 at [22]-[23].
36 As to the nature and extent of the contraventions:
(1) As the Secretary submitted, the contraventions involved numerous serious breaches of Pt 5-1 of the TG Act, which regulates the advertising of "therapeutic goods" and was introduced to promote the protection of public health.
(2) The contraventions formed part of a deliberate marketing strategy to promote the supply and use of the peptides sold by the business.
(3) The contraventions occurred over a 12 month period commencing when the operative provisions came into force and not ceasing until Peptide Clinics was placed into liquidation.
(4) In the Secretary's words, the modified business practices in response to the TGA's concerns was to involve doctors to give the business "the veneer of medical legitimacy" and compliance with the TG Act when, in substance, there was none. I accept that the conduct was "egregious because it gave consumers the false impression that the information contained in the advertisements was provided by a medical practitioner acting in their best interests to treat their individual needs".
(5) The contraventions had a wide reach with the company advertising that it had 50,000 satisfied patients.
(6) The conduct exposes a deliberate decision to pursue profits at the expense of public health and safety, and continued despite the TGA repeatedly raising concerns about the conduct.
37 As to the nature of any specific loss or damage caused by the contraventions, none can be proved. Nevertheless, based on the expert evidence, there was potential for harm to human health. As the Secretary submitted the expert evidence is clear - "it was dangerous for Peptide Clinics to promote the Schedule 4 Substances for the non-therapeutic purpose for which they were advertised, especially without proper supervision by a qualified healthcare professional". Further:
The products sold by Peptide Clinics were expensive. The evidence shows that products were being sold for amounts ranging from $99.95, to $209.95, $900 and $1,399.85. It can be inferred that for products that were at best, ineffective (and likely dangerous), consumers would have suffered significant financial loss in addition to risking their health and safety.
38 There is also evidence of online queries after treatment including:
(a) concerns about rashes and irritation after injecting the relevant substances; this query was not answered,
(b) issues raised concerning knee pain, the response to which did not directly address the question asked,
(c) heart palpitations to which the response was to "reduce the dose",
(d) gynecomastia, in response to which the Peptide Clinics representative prescribed a further medication without diagnosing the patient.
39 As to the circumstances in which the conduct took place, this has been described above, namely, the business model involved a deliberate strategy to pursue profit at the risk of public health and safety. I accept the Secretary's submission that "Peptide Clinics has deliberately and recklessly pursued its own financial self-interest at the expense of its legal obligations and the interests of public health".
40 Peptide Clinics has not previously been found by the Court to have engaged in any similar conduct.
41 I accept the submissions for the Secretary that:
165. The TGA gave Peptide Clinics every opportunity to address its concerns and correct its conduct; Peptide Clinics failed to do so. At all times between 23 July 2018 and 23 April 2019 Peptide Clinics was legally represented by Mills Oakley. There was substantial correspondence between the TGA and Peptide Clinics' solicitors regarding the concerns that the TGA had with the Website. However, Peptide Clinics refused to make the necessary changes to its Website to bring its Website into conformity with its obligations under the TG Act.
166. Peptide Clinics was obstructionist. It refused to provide the TGA with information when requested. For instance, it refused to identify to the TGA the names and registration numbers of the medical practitioners who were said to grant access to the Back End of the Website. It was later revealed that certain doctors that Peptide Clinics used to write prescriptions for its products had previously had limitations placed on their medical licences which prevented them from providing substances like peptides.
167. This Court would find that Peptide Clinics had no intention of complying with its obligations under the TG Act unless it was forced to do so.
168. Peptide Clinics did not co-operate with the Secretary in the course of this proceeding. This proceeding was commenced in November 2018. Peptide Clinics was not placed into liquidation until March 2019. During that time, it never filed a concise statement in response. While it did provide an undertaking, Peptides Clinics thereafter altered its business model in a way that still flouted the relevant provisions of the TG Act. Moreover, it never filed any admissions regarding its wrongdoing. Peptide Clinics intended to contest this proceeding until it was placed into liquidation.
169. It has shown no contrition for its conduct. It appears that there was a complete lack of compliance culture at the company. Peptide Clinics failed to act promptly and appropriately when the contraventions of the TG Act were brought to its attention.
42 As the business model of Peptide Clinics depended on contravening the statutory provisions, it should be inferred that all revenues derived from the contraventions. On the evidence, in the period from 1 July 2018 to 22 March 2019, Peptide Clinics received $2,150,740 in income and made a gross profit in the amount of $889,961. As at 22 March 2019, it had retained earnings of $856,478.
43 As to the number of contraventions, I accept the approach reflected in Appendix 2 to the effect that the different advertisements contravened the applicable provisions of the TG Act from day to day.
44 As to the course of conduct principle, I accept the approach in Appendix 3 that the conduct can sensibly be described as involving nine separate courses of conduct. I accept also that before applying the totality principle the range of penalties suggested by the Secretary for each contravening conduct is an appropriate range having regard to the maximum penalty, the circumstances considered above and the need for deterrence. With the object of deterrence in mind, I consider that penalties at the higher end of each range are called for as follows:
(1) Course of conduct 1 - $2.5 million
(2) Course of conduct 2 - $2 million
(3) Course of conduct 3 - $3 million
(4) Course of conduct 4 - $2 million
(5) Course of conduct 5 - $2.5 million
(6) Course of conduct 6 - $2 million
(7) Course of conduct 7 - $2.5 million
(8) Course of conduct 8 - $2 million
(9) Course of conduct 9 - $1.5 million
Total $20 million
45 Having regard to the totality principle I consider that a total penalty in the mid-range proposed by the Secretary should be imposed, in the sum of $10 million. As the Secretary submitted, although "it is no longer necessary to deter Peptide Clinics from re-contravening, a penalty of this size would secure the objective of general deterrence by making it clear message that companies will not be able to profit from their wrongdoing".
46 I also accept that the making of declarations is appropriate in the public interest given the seriousness of the contraventions and the associated risks to public health. I accept that "the declarations are desirable and appropriate because they would record the Court's disapproval of the conduct, vindicate the concerns of consumers, assist the Secretary to carry out the duties conferred on her by the TG Act, assist in clarifying the law, and make clear to other would-be contraveners that such conduct is unlawful".
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.