The Appropriate Penalties
71 At [67]-[72] of Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205, I summarised the general principles to be adopted when this Court comes to impose civil penalties in a regulatory context. At those paragraphs, I said:
67 The relevance of maximum penalties when consideration is being given by the Court to the imposition of a pecuniary penalty in a criminal case has been authoritatively determined by the High Court in Markarian v The Queen (2005) 228 CLR 357 (Markarian). At 372 [31] in Markarian, Gleeson CJ, Gummow, Hayne and Callinan JJ said:
It follows that careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick. That having been said, in our opinion, it will rarely be, and was not appropriate for Hulme J here to look first to a maximum penalty (The maximum selected by his Honour was not, as will appear, the maximum available in respect of the principal offence.), and to proceed by making a proportional deduction from it. That was to use a prescribed maximum erroneously, as neither a yardstick, nor as a basis for comparison of this case with the worst possible case. That he used the maximum penalty impermissibly appears from his Honour's particular deference to it in this passage ((2003) 137 A Crim R 497 at 506 [37]):
"Parliament cannot have intended that, other things being equal, the penalty for supplying more than 250 g should be less than for supplying that quantity."
The form of the statement is explained by the fact that his Honour did not start with the maximum penalty for an offence involving the quantity in question, but used another maximum penalty as his starting point, that is, the maximum for an offence in the category of seriousness immediately below that of the principal offence.
68 In this Court, these remarks by the High Court in Markarian have been held to apply to the imposition of civil penalties (see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 (Australian Ophthalmic Supplies) at 584 [108] (per Buchanan J); Minister for Sustainability, Environment, Water, Population and Communities v Woodley [2012] FCA 957 (Woodley) at [40]-[41] (per Foster J); Australian Communications and Media Authority v Bytecard Pty Ltd [2013] FCA 38 (Bytecard) at [38]-[39] (per Foster J); and Secretary, Department of Health and Ageing v Export Corp (Australia) Pty Ltd (2012) 288 ALR 702 at 714 [49]-[50] and at 718 [67] (per Perram J)).
69 It is plain that the legislature has given the clearest possible indication that contraventions of s 24B and s 154N of the REE Act are to be considered as serious matters when a court comes to determine an appropriate civil penalty.
70 The principal object of civil penalty provisions is to ensure deterrence. In Trade Practices Commission v CSR Limited (1991) ATPR 41-076, which was a case dealing with s 76 of the Trade Practices Act 1974 (Cth), French J (as he then was) said (at p 52,152):
The principal, and I think the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.
71 The dictum of French J in Trade Practices Commission v CSR Limited which I have extracted at [70] above has been applied not only in the trade practices context but in a wide variety of regulatory regimes. In particular, the need for a penalty to have a proper deterrent effect has been emphasised in the context of laws passed by the Parliament to protect the environment (eg Woodley [2012] FCA 957, esp at [53]-[67]).
72 In both Woodley and in Bytecard, I approached the determination of civil penalties by applying the process commonly called "instinctive synthesis". As I said in both of those cases, that process, as I understand it, has the following attributes:
(a) There must be a weighing of all relevant factors, rather than starting from a predetermined figure and making incremental additions or subtractions for each separate factor (Markarian, at 373-375 [36]-[39] (per Gleeson CJ, Gummow, Hayne and Callinan JJ) and at 385-387 [69]-[73] (per McHugh J); and
(b) It is critical that the reasoning process involved in synthesising the penalty be transparent (Markarian at 373-375 [36]-[39] (per the plurality) and at 390 [84] (per McHugh J).
72 In the same case, I considered the course of conduct principle which allows the Court to impose a sentence or punishment which fairly reflects the substance of the offending conduct, rather than a purely mathematical accumulation of sentences for each offence which may be able to be technically identified. In addition, I also discussed the totality principle. At [81]-[83], I said:
81 The totality principle operates as a "final check" to ensure that the penalties to be imposed on a wrongdoer, considered as a whole, are "just and appropriate" (Mill v The Queen (1988) 166 CLR 59 (Mill) at 62-63 and Johnson at 347-348 [3]-[5] (per Gleeson CJ) and at 354-358 [18]-[35] (per Gummow, Callinan and Heydon JJ). The totality principle has been adopted and applied in the civil penalty context (Mornington Inn at 386-387 [5]-[7] (per Gyles J) and at 396-398 [41]-[46] and 408 [90]-[92] (per Stone and Buchanan JJ)).
82 Consideration of the totality principle will not necessarily result in a reduction from the penalty considered appropriate prior to the application of that principle. However, in cases where the Court considers that the total penalties to be imposed are inappropriate, the Court should alter the final penalties to ensure that they are "just and appropriate". It is now recognised in the civil penalty context that the proper approach when applying the totality principle is to start by ascertaining the penalty which would be appropriate for each individual contravention and then to reduce the total of the amounts derived in this fashion for reasons of totality. It is undesirable to start with a single global total penalty and then to divide it among the individual contraventions in order to derive separate penalties.
83 Counsel for the regulator advocated that the Court should not apply the course of conduct principle but rather deal with any lack of proportionality in the penalties to be imposed in the present case through the application of the totality principle.
73 The Board submitted that, in this case, there was no occasion to apply the course of conduct principle since none of the contraventions pleaded arise from the same conduct but should rather be regarded as separate wrongful acts attracting separate penalties. I think that this submission is correct and I propose to consider the question of penalties upon the basis that each contravention is a separate wrongful act.
74 I do think, however, that I should apply the totality principle which I explained at [81]-[83] in Clean Energy Regulator v MT Solar Pty Ltd.
75 The statutory maximum penalty applicable to each contravention is as follows:
(a) Providing tax agent and BAS services contrary to subs 50-5(1) and (2): $27,500 for an individual and $137,500 for a body corporate.
(b) Advertising tax agent services contrary to subs 50-10(1): $8,500 for an individual and $42,500 for a body corporate.
76 The relevance of maximum penalties when consideration is being given by the Court to the imposition of a pecuniary penalty in a criminal case has been authoritatively determined by the High Court in Markarian v The Queen (2005) 228 CLR 357 (Markarian). I cited [31] in Markarian at [67] in Clean Energy Regulator v MT Solar Pty Ltd. I have extracted that paragraph at [71] above.
77 As I noted in Clean Energy Regulator v MT Solar Pty Ltd (at [68]), these remarks by the High Court in Markarian have been held to apply to the imposition of civil penalties.
78 In the present case, upon the assumption that each contravention should be treated as a separate matter requiring the imposition of a separate penalty, the maximum penalty that can be imposed upon HP Kolya for all of the contraventions which have been proven against it is $4,442,500 and the maximum penalty that can be imposed upon Mr Kolya for all of the contraventions proven against him is $237,500.
79 There are no criteria expressed in the TAS Act itself for the imposition of pecuniary penalties against persons who contravene the civil penalty provisions of that Act. Nonetheless, I propose to apply the principle articulated by French J (as he then was) in Trade Practices Commission v CSR Limited [1991] ATPR 41-076 where his Honour stated unequivocally that the main object of civil pecuniary penalties [in that case under the Trade Practices Act 1974 (Cth)] is to attempt to put a price on contraventions that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the relevant statute.
80 In the present case, there is an urgent and strong imperative to impose penalties which will, once and for all, bring home to Mr Kolya that he can no longer flout the regulatory requirements embodied in the TAS Act for his own commercial benefit. He is the principal perpetrator of the contravening conduct. He is the person who has caused HP Kolya to contravene the TAS Act. To date, he has been a recalcitrant contravenor who has repeatedly and persistently ignored the prohibition on providing tax agent services and BAS services and advertising the same on persons who are not registered tax agents or BAS agents. Not only has he shut his eyes to the obvious over a lengthy period, but he has taken steps of an artificial kind designed to prolong his opportunities for commercial gain while contesting the legitimate and valid concerns of the Board. He has actively engaged in conduct which is diametrically opposed to the object of the TAS Act. In so doing, he has caused significant harm to ordinary members of the public who were entitled to assume when dealing with him that he had the necessary qualifications and competence to perform the tasks which he undertook to perform for them. In addition, he has shown no contrition for his conduct and has failed to cooperate with the Board. He does not accept that he has done the wrong thing. He shows no remorse or contrition. Rather, he has persisted, even to the end of the case, in his argument that his registration as a migration agent is sufficient for him to justify his providing tax agent services and BAS services.
81 This case requires a strong response from the Court both in order to specifically deter Mr Kolya and also to make clear to others who may be minded to replicate his conduct that they should think very carefully before doing so because the penalties which will be imposed if caught will be significant.
82 In the present case, Counsel for the Board made very detailed written submissions and oral submissions directed to the relevant principles governing the imposition of pecuniary penalties in the present context. These submissions were also directed to persuading the Court to impose substantial penalties. After providing an appropriate analysis, the Board suggested that the penalties which should be imposed should be in the following range:
(a) For HP Kolya: $800,000-$900,000; and
(b) For Mr Kolya: $110,000-$125,000.
83 Those suggested ranges were arrived at after a substantial discount was allowed on account of the totality principle.
84 At the trial, I received both the written and oral submissions made by Counsel for the Board, including submissions directed to the imposition of civil penalties in the present case. Indeed, in addition, Mr Kolya was given an opportunity to address those matters. It must be remembered, of course, that this is not a case where the parties have agreed upon all of the material facts and also agreed upon the appropriate penalties. Although there was little real dispute as to the facts, Mr Kolya never admitted liability nor did he engage with the Board in relation to the appropriate penalties upon the assumption that liability was admitted.
85 On 1 May 2015, the Full Court delivered judgment in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59 (Inspectorate v CFMEU). In that judgment, the Court considered a number of issues relevant to the case before it arising out of the decision of the High Court in Barbaro v The Queen (2014) 305 ALR 323 (Barbaro).
86 In a subsequent written submission forwarded to me after the hearing, the Board addressed the question of whether Barbaro had any relevance to the present case. It submitted that Barbaro had no relevance to the present case for a number of reasons. Mr Kolya did not engage with the Board on the Barbaro questions.
87 I shall briefly refer to Barbaro and Inspectorate v CFMEU in the next section of these Reasons.
88 At the moment, all I need say is that, while I have received and considered both the written and oral submissions made by the Board in relation to the imposition of civil penalties in this case, I have made up my own mind as to the appropriate penalties to be imposed.