Water Efficiency Labelling and Standards Regulator v Renaissance Traditional Bathrooms Pty Ltd - [2022] FCA 1456 - FCA 2022 case summary — Zoe

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Water Efficiency Labelling and Standards Regulator v Renaissance Traditional Bathrooms Pty Ltd

[2022] FCA 1456

Federal Court of Australia|2022-12-09|Before: Commission J, Cheeseman J

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Court

Federal Court of Australia

Decision date

2022-12-09

Before

Commission J, Cheeseman J

Source

Original judgment source is linked above.

Judgment (63 paragraphs)

[1]

Introduction 1 This is the first civil penalty proceeding under the Water Efficiency Labelling and Standards Act 2005 (Cth) (WELS Act). The WELS Act forms part of a co-operative scheme between the Commonwealth and the States and Territories to provide for national water efficiency labelling and standards: s 8 of the WELS Act. The objects of the WELS Act are to conserve water supplies by reducing water consumption; provide information for consumers of water-use and water-saving products; and promote the adoption of efficient and effective water-use and water-saving technologies: s 3 of the WELS Act. Part 3 of the WELS Act establishes a national WELS scheme pursuant to which designated WELS products, relevantly in the present proceedings, tap products, shower products, and lavatory products, are required to be registered and labelled before being supplied for sale. 2 The role of the Water Efficiency Labelling and Standards Regulator is established by s 21 of the WELS Act. The Regulator's functions relevantly include to administer, and monitor and enforce compliance with, the WELS scheme: s 22(a) and (d) of the WELS Act. The Regulator is the applicant in these proceedings and seeks relief in respect of alleged contraventions of the WELS Act against five related respondents. 3 The first to fourth respondents are, respectively, Renaissance Traditional Bathrooms Pty Ltd ACN 091 105 574 (Renaissance Bathrooms); Traditional Taps.com.au Pty Ltd ACN 142 098 575; Castironbaths.com Pty Ltd ACN 142 098 548; and Belfast Sinks.com.au Pty Ltd ACN 142 098 548 (together, the Respondent Companies). The fifth respondent, Andrew Shaw, is the sole director and ultimate shareholder of each of the Respondent Companies. 4 The Regulator alleges that each of the Respondent Companies contravened s 33 of the WELS Act by advertising and selling unregistered WELS products - which products were required to be registered - and s 34, by advertising registered WELS products which were not labelled, but which were required to labelled or carry designated text advice. The Regulator further alleges that Mr Shaw contravened s 33 and s 34 of the WELS Act by aiding, abetting, counselling, procuring, or being knowingly concerned in, the contraventions by the Respondent Companies: s 44M of the WELS Act. 5 Although the proceedings were initially contested, Renaissance Bathrooms, Belfast Sinks and Mr Shaw (together, the Solvent Respondents) ultimately admitted some of the alleged contraventions in their amended defence. The Regulator does not press the allegations in the amended statement of claim in respect of the balance of the contraventions. 6 The remaining two respondents, Traditional Taps and Castironbaths, are in liquidation (together, the Insolvent Respondents). The Regulator was granted leave to proceed against them: see Water Efficiency Labelling and Standards Regulator v Renaissance Traditional Bathrooms Pty Ltd [2020] FCA 1757 (WELS (No 1)). The Insolvent Respondents have not taken an active part in these proceedings since leave was granted. 7 As part of the agreement between the Regulator and Mr Shaw, the Regulator does not press the accessorial contraventions alleged against Mr Shaw arising from the conduct of the Insolvent Respondents, and, accordingly, does not seek any further penalties against Mr Shaw in respect of ancillary liability for the Insolvent Respondents' alleged contraventions. 8 The Regulator and the Solvent Respondents jointly submit to the Court that the following orders are appropriate to resolve the proceeding between them: (1) declarations in relation to each of the admitted contraventions; (2) injunctions restraining the supply of WELS products in breach of ss 33 and 34 of the WELS Act; (3) pecuniary penalties in the following amounts: (a) $150,000 against Renaissance Bathrooms; (b) $25,000 against Belfast Sinks; and (c) $200,000 against Mr Shaw; and (4) that the Solvent Respondents will together pay a contribution of $75,000 toward the Regulator's costs of the proceedings. 9 The Regulator submits that the following orders ought be made against the Insolvent Respondents: (1) declarations in respect of the contraventions; (2) pecuniary penalties in the following amounts: (a) $750,000 against Traditional Taps; and (b) $1,070,000 against Castironbaths; and (3) that the Insolvent Respondents pay the Regulator's costs. 10 Notwithstanding that the Insolvent Respondents are in liquidation, the Regulator presses the claim for relief against them "for reasons of general deterrence". In doing so, the Regulator acknowledges that it must obtain leave of the Court to enforce against the Insolvent Respondents.

[3]

THE STATUTORY FRAMEWORK 12 The relevant statutory framework is comprised of the WELS Act, the Water Efficiency Labelling and Standards Determination 2013 (No. 2) (Cth) (the WELS Determination) and the 'Australian Standard AS/NZS 6400:2016 Water efficient products - Rating and labelling' (version published 6 April 2016) (the WEPRL Standard). 13 The relevant period during which the contraventions occurred is from 5 June 2015 to at least 20 November 2018. 14 References to the WELS Act in these reasons are to the consolidated version of the WELS Act registered on 27 July 2016. For the purpose of these proceedings, there is no material difference in the relevant provisions between the version of the WELS Act in force as at 5 June 2015 (being the date of the three contraventions which predate the consolidated version of the WELS Act registered on 27 July 2016) and the consolidated version registered on 27 July 2016. 15 References to the WELS Determination are to the version registered 23 August 2016. There is no material difference in the relevant definitions and standards provided in the version of the WELS Determination that was in force at 5 June 2015. 16 References to the WEPRL Standard are to the Australian Standard AS/NZS 6400:2016 Water efficient products - Rating and labelling, which was approved on behalf of the Council of Standards Australia on 23 December 2015, and was published on 6 April 2016. 17 The present proceedings concern contravention of: (1) the requirement in s 33 of the WELS Act that certain WELS products be registered in order to be supplied as new products; and (2) the requirement in s 34 of the WELS Act that certain registered WELS products must be WELS labelled or carry text advice in lieu of a WELS label in order to be supplied as new products. The present proceedings do not concern allegations of contravention based on the content of the labels on the WELS products the subject of the contraventions. For this reason, it is not necessary to descend into the further reaches of what is a complicated statutory framework. The following outline of the statutory framework focusses only on the critical provisions relevant to the present proceeding.

[16]

Civil penalty orders 41 An application by the Regulator for a civil penalty order must be made within four years of the alleged contravention: s 44A(2) of the WELS Act. The present proceedings were commenced within that time. If the court is satisfied that the person has contravened the civil penalty provision, the court may order the person to pay to the Commonwealth such pecuniary penalty for the contravention as the court determines to be appropriate: s 44A(3) of the WELS Act. 42 In determining the pecuniary penalty, the Court may take into account all relevant matters, including the nature and extent of the contravention, the nature and extent of any loss or damage suffered by reason of the contravention, the circumstances in which the contravention took place, and whether the person has previously been found by a court to have engaged in similar conduct: s 44A(6) of the WELS Act. 43 The relevant penalty for both ss 33 and 34 is 60 penalty units in the case of an individual: ss 33(3) and 34(2) respectively. If the contravenor is a corporation, the pecuniary penalty must not exceed five times the pecuniary penalty specified in the civil penalty provision: s 44A(5). At the time of the 2018 and 2019 contraventions, the value of a penalty unit was $210. The maximum penalty for each contravention by an individual was $12,600 and by a body corporate was $63,000. At the time of the three contraventions alleged against Castironbaths in 2015, the value of a penalty unit was $170 and the maximum penalty for each contravention by a body corporate was $51,000. 44 If conduct contravenes two or more civil penalty provisions, the Regulator may commence proceedings in relation to the contravention of any one or more of those provisions. However, the person cannot be liable to more than one civil penalty provision in relation to the same conduct: s 44C of the WELS Act. 45 Where a person has engaged in multiple contraventions, the Court may make a single civil penalty order against a person for multiple contraventions of a civil penalty provision if proceedings for the contraventions are founded on the same facts, or if the contraventions form, or are part of, a series of contraventions of the same or a similar character: s 44D of the WELS Act. A penalty in respect of multiple contraventions must not exceed the sum of the maximum penalties that could be ordered if a separate penalty was ordered for each contravention: s 44D(2) of the WELS Act. 46 The rules of evidence and procedure for civil matters apply in proceedings for a civil penalty order: s 44F of the WELS Act.

[24]

Findings on liability 60 The Regulator bears the onus to prove the case advanced to the requisite civil standard having regard to the gravity of the matters alleged: s 140 of the Evidence Act 1995 (Cth). 61 In the present proceedings, the Insolvent Respondents were served with the amended statement of claim and leave to proceed against them in liquidation was granted, over their opposition. They have not filed a defence in the proceedings as they were required to do by orders entered on 30 January 2020 and pursuant to r 16.32 of the Federal Court Rules 2011 (Cth). 62 Rule 16.07(2) provides that "[a]llegations that are not specifically denied are taken to be admitted". By reason of r 16.07(2), the Insolvent Respondents are taken to have admitted all of the allegations in amended statement of claim. Notwithstanding that these are civil penalty proceedings, as corporations, the Insolvent Respondents do not have the benefit of privilege against exposure to a penalty: s 187 of the Evidence Act. It follows that pursuant to r 16.07 of the Rules, the Insolvent Respondents are taken to have admitted all matters pleaded in the amended statement of claim: Michell, in the matter of Aizome1 Pty Ltd (in liq) v Millar [2019] FCA 2169 at [19]. It is therefore open to the Regulator to rely on deemed admissions of all the facts pleaded in the amended statement of claim: Thunder Studios Inc (California) v Kazal (No 9) [2020] FCA 846 at [32]. 63 On that basis, Traditional Taps is deemed to have admitted to contravening s 33 of the WELS Act in respect of 46 products (see TT1 to TT46 of Annexure B). These products were required to be registered for supply as a new product, but were not registered. Castironbaths is further deemed to have admitted to contravening s 33 of the WELS Act in respect of 13 products advertised on the Castironbaths website (see CB1 to CB 13 in Annexure C, and 55 products advertised on the Farmhouse Sinks website (see FS1 to FS55 in Annexure D). 64 Further, Traditional Taps is deemed to have admitted to contravening s 34 of the WELS Act in respect of 26 products (see TT47 to TT72 of Annexure B). These products were required to be WELS labelled, or bear the alternative text advice, but did not. 65 Castironbaths is deemed to have admitted to contravening s 34 of the WELS Act in respect of 26 products advertised on the Castironbaths website (see CB14 to CB 39 in Annexure C) which were not labelled as required, and 25 products advertised on the Farmhouse Sinks website which were similarly not labelled as required (see FS56 to FS80 in Annexure D). 66 Notwithstanding that the Insolvent Respondents are deemed to have admitted the contraventions, the Regulator supplemented the deemed admissions with a body of evidence that reinforces the Regulator's right and entitlement to relief of the kind claimed. Even though the Insolvent Respondents did not attempt to discharge their burden in respect of registration under s 33(5) of the WELS Act, the Regulator led evidence to establish that the relevant products were not registered. Evidence was led from two WELS inspectors who had undertaken examinations of the websites operated by the Insolvent Respondents on multiple occasions. The WELS inspectors combed the websites to identify specific model names and model codes associated with WELS products offered for sale by the Insolvent Respondents, and then verified that the products the subject of the s 33 contraventions were registered in the WELS register. This evidence demonstrates that the Insolvent Respondents contravened s 33 in the manner alleged by the Regulator. 67 The Regulator also led evidence as to the detailed steps taken by the WELS inspectors to demonstrate that the WELS products in issue did not have the requisite WELS labelling or other alternative text advice. A collection of screenshot images taken from the relevant websites operated by the Insolvent Respondents is in evidence. This evidence further demonstrates that the Insolvent Respondents contravened s 34 in the manner alleged. Eight of the Traditional Taps website advertisements were available for the period between February or March 2017 to 20 November 2019 (about 2.5 years), and the remaining 64 were available for the period between December 2017 or January 2018 to 20 November 2019 (about 2 years). 68 I am satisfied on the basis of the deemed admissions of the Insolvent Respondents, which is supplemented by the evidence before me, that each of the alleged contraventions against each of the Insolvent Respondents is established on the civil standard.

[25]

Principles relevant to orders by agreement and the assessment of penalty 69 Penalties and other relief are agreed by the Solvent Respondents. The principles relevant to making orders and declarations by consent are well-settled. These principles are not confined to agreed submissions on pecuniary penalties - they apply to agreed declarations, injunctions and the like in civil regulatory proceedings: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [70] to [74]; Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc [1999] FCA 18; 161 ALR 79 at [1], [20], [21] and [29]; Australian Competition and Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326 at [24]; Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [2]; Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2006] FCA 1730 at [4]. In Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 at 519 at [57] French CJ, Kiefel, Bell, Nettle, and Gordon JJ (with whom Keane J agreed) observed "that it is entirely consistent with the nature of civil proceedings for a court to make orders by consent to approve a compromise of proceedings on terms proposed by the parties provided the court is persuaded that what is proposed is appropriate." At [58], their Honours said (footnotes omitted): …There is, however, no reason in principle or practice why civil penalty proceedings should be treated as an exception. Subject to the court being sufficiently persuaded of the accuracy of the parties' agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and, for the reasons identified in Allied Mills, highly desirable in practice for the court to accept the parties' proposal and therefore impose the proposed penalty… and at [59]: … Once it is understood that civil penalties are not retributive, but like most other civil remedies essentially deterrent or compensatory and therefore protective, there is nothing odd or exceptionable about a court approving an agreed settlement of a civil proceeding which involves the public interest; provided of course that the court is persuaded that the settlement is appropriate. 70 A further reason given by the plurality for courts acting upon submissions as to agreed penalty is that they are advanced by a specialist regulator able to offer "informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance": see [60] to [61]. 71 The principles to be applied in considering an agreed penalty were recently summarised by Burley J in Australian Securities and Investments Commission v Squirrel Superannuation Services Pty Ltd [2022] FCA 702 at [58] to [59] as follows: 58 First, there is a well-recognised public interest in the settlement of cases such as the present. Secondly, the orders proposed by agreement must not be contrary to the public interest and at least consistent with it. Thirdly, when deciding whether to make orders that are consented to, the Court must be satisfied that it has to power to make the orders proposed and that they are appropriate. Fourthly, once the Court is satisfied these requirements are met, the Court should exercise a degree of restraint when scrutinising the proposed settlement terms, particularly where both parties are legally represented and able to understand and evaluate the desirability of the settlement. Finally, in deciding whether agreed orders conform with legal principle, the Court is entitled to treat the consent of the respondent as an admission of all facts necessary or appropriate to the granting of the relief sought against it: see Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [70]-[73] (Gordon J) and the authorities cited there. 59 Furthermore, where declarations are sought by consent, the Court will exercise its discretion under s 21 of the Federal Court of Australia Act, but provided that; (a) the issue in respect of which the declaration is sought is not hypothetical or theoretical; (b) the applicant has a real interest in raising it; and (c) there is a proper contradictor; the Court will be slow to refuse to give effect to the terms of a settlement reached by consent; Coles Supermarkets at [75]-[76]. 72 The task of the Court where parties have agreed an appropriate penalty includes two steps: first, the Court forming a view as to whether it is sufficiently persuaded of the accuracy of the parties' agreement as to the relevant facts and consequences; and secondly, the Court determining whether the penalty the parties propose is an appropriate remedy in all the circumstances: Australian Competition and Consumer Commission v Apple Pty Ltd (No 4) [2018] FCA 953 at [7]; Australian Competition and Consumer Commission v Google LLC (No 4) [2022] FCA 942 at [19]. 73 The emphasis on whether the agreed penalty is an appropriate penalty is important. There is no single appropriate penalty - the enquiry is whether the agreed penalty falls within a range which is appropriate having regard to all relevant circumstances: Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited (No 3) [2020] FCA 1421 at [78].

[26]

Assessment of the appropriate penalty value 74 The matters relevant to the assessment of penalty of appropriate deterrent value comprise both statutory considerations and discretionary factors. The discretionary factors were described by the majority in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; 399 ALR 599 at [18]: The assessment of penalty of appropriate deterrent value will have regard to a number of factors… [including] the following: 1. The nature and extent of the contravening conduct; 2. The amount of loss or damage caused; 3. The circumstances in which the conduct took place; 4. The size of the contravening company; 5. The degree of power it has, as evidenced by its market share and ease of entry into the market; 6. The deliberateness of the contravention and the period over which it extended; 7. Whether the contravention arose out of the conduct of senior management or at a lower level; 8. Whether the company has a corporate culture conducive to compliance, as evidenced by educational programs or other corrective measures in response to an acknowledged contravention; and 9. Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to contravention. 75 These factors are not to be considered as a rigid list of factors to be ticked off (Pattinson at [19]), but rather are to inform a multifactorial investigation that leads to a result arrived at by a process of "instinctive synthesis" addressing the relevant considerations: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 at [44]; viagogo AG v Australian Competition and Consumer Commission [2022] FCAFC 87 at [149] and [167]. 76 In the present context, the statutory considerations derive from s 44A(6) of the WELS Act, which provides that, in determining the pecuniary penalty, the court may take into account all relevant matters, including: (a) the nature and extent of the contravention; and (b) the nature and extent of any loss or damage suffered because of the contravention; and (c) the circumstances in which the contravention took place; and (d) whether the person has previously been found by a court to have engaged in any similar conduct.

[31]

General deterrence considerations in this case 85 General deterrence is a central consideration in assessing the appropriate penalty against each of the respondents. I accept the Regulator's submission that penalties with a robust general deterrent effect are called for in this case, having regard to the objectives promoted by the national WELS scheme and the circumstances of the contravening conduct. 86 The WELS scheme is directed to reducing urban water consumption. It is important to Australia's water security. Critical to the success of the WELS scheme is ensuring clear and consistent water-efficiency information is made available to consumers. The requirement for, and use of, a standardised and readily recognisable water-efficiency rating label serves to drive consumer behaviour and in turn promote the development of more water-efficient technologies. The WELS scheme aims to encourage favourable consumer perceptions and behaviour by providing consumers with water-efficiency information at the point of display and sale. The consistent application and enforcement of the registration and labelling requirements at the point of display or sale underpins industry and consumer confidence in the WELS scheme. 87 Water and energy costs are reduced when consumers choose products which are more water efficient. Over time, savings increase as more efficient products replace less efficient products in use across the community. The registration and labelling requirements of the WELS scheme are key to realising these benefits. In order to be effective in achieving the desired objective, water-efficiency information available to consumers at the point of sale must be accurate, credible and prominent. The objectives of accuracy and credibility are supported by the requirement that accredited laboratories conduct standardised tests for the purpose of determining a rating for WELS products. The WELS labelling requirements ensure that information is both intelligible and prominent to enable consumers to make an informed choice. These requirements includes the well-recognised "star rating" label, which allows consumers to compare products at a glance. 88 Evidence led by the Regulator demonstrates that the WELS scheme has significantly contributed to reductions in water consumption across Australia. That water efficiency is the highest or second highest consideration for consumers of WELS products is supported by market research. Consumer interest in water efficiency is reflected in a general shift towards greater availability and sales of more water-efficient products with higher "star ratings", which have grown substantially since 2007, whereas sales of less efficient, lower "star rated" products have decreased. The Regulator led evidence in respect of estimated water consumption savings, which demonstrate a continuing reduction in water consumption. In 2017 to 2018, the estimated savings were around 112GL/year. This is equivalent to 21% of the water supplied for all purposes in Greater Sydney in that year, or approximately 25% of the total volume of Sydney Harbour, with a corresponding about $1.05 billion dollars in annual utility bill savings for households and businesses. These figures are projected to increase to around 185 GL/year in 2026 and 231 GL/year in 2036. The broader benefits of these savings include deferral of investment in water supply infrastructure, re-tasking of water supply, reductions in wastewater treated and discharged, and significant saving of greenhouse gas emission through reduced energy use in supply and heating. 89 Non-compliant supply, including by advertisement, of WELS products that are not registered as required or not labelled as required has the potential to erode confidence in the integrity of the WELS scheme. That is particularly so if it creates a perception that the WELS requirements are not enforced, or that compliance is not adequately enforced. In turn, that has the potential to lead to lower compliance rates from industry, and a decrease in favourable consumer sentiment, with the consequence that less consumers use accurate water-efficiency information to inform their purchasing decisions. The projected water savings associated with the WELS scheme would be put in peril. 90 The civil penalties in this case must be informed by a recognition of the nexus between compliance with the registration and labelling requirements and the effective functioning of the WELS scheme and the objectives served by it. The imposition of an appropriate civil penalty for contraventions of the type committed by the Respondents will enhance industry and consumer confidence in the WELS scheme. 91 Another feature of the present case that is relevant to general deterrence is the need to deter smaller businesses - who utilise direct internet sourcing - from side-stepping the requirements of the WELS scheme. The Regulator has identified as a current and emerging risk changes to the traditional supply chain caused, in part, by direct internet purchasing. In the past, the importation of WELS products rested with a relatively small number of large importers and wholesalers who were responsible for ensuring that imported products complied with all Australian regulations before supplying them to smaller retailers for on-sale to consumers. As the present case demonstrates, the internet makes it easier for small to medium businesses to directly source WELS products from overseas manufacturers. Direct internet sourcing diversifies the supply chain and increases the number of businesses responsible for the first point of supply, whether by advertising, or physical supply, of new WELS products in Australia. The result is that the responsibility for having a new imported product appropriately tested, WaterMark certified, WELS registered and WELS labelled prior to the first supply as a new product now rests with a broader spectrum of businesses of different sizes and sophistication, and, importantly, with varying levels of familiarity with the WELS scheme. 92 Due to the large volume of material on the internet and the number of suppliers, it is not possible for WELS inspectors to detect every new sales website, or monitor every webpage or update to existing websites. Conducting test purchases is the way in which WELS inspectors actively monitor the labelling at the point of the supply of the physical product, especially for online or telephone purchases. That it is difficult to detect contravening conduct factors into how businesses approach the risk/benefit calculus. Higher levels of deterrence are required to offset the difficulty in detecting contraventions as a means of, in effect, recalibrating the risk/benefit calculus in such cases: Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49 at [152]. 93 Relatedly, penalties imposed should be sufficient to send a positive signal to compliant businesses. This is the other side of the risk/benefit calculus: Reckitt at [152]. Effective self-monitoring by compliant businesses involves a cost, as do WELS registration fees, which are set to reflect an 80% industry contribution to the costs of the WELS Scheme. Robust deterrent penalties serve to validate compliant behaviour and support and encourage voluntary compliance with the law. Similarly, robust penalties serve to deter rogue businesses who would otherwise prioritise the commercial advantage derived from the lower operating costs in being non-compliant, above being put to the expense of compliance. 94 Another factor that is relevant is the real world harm that is caused to consumers who are supplied with products that are not registered. Suppliers are required to provide the Regulator with WaterMark certification and laboratory testing certification as part of the registration process. When an unregistered product is supplied to a consumer, the Regulator cannot know whether that product meets relevant Australian standards for safety and fitness for purpose, or whether water-efficiency information, if any, is accurate. State and Territory regulations require WaterMark certification for plumbing-related WELS products. Consumers may find that they cannot have such products installed. Plumbers cannot lawfully install products if they do not have a current WaterMark. Further, if the water-efficiency information is not accurate, and the product is less efficient than indicated, consumers who purchase and install the product will use more water and pay more in utility bills than they would if the product performed as represented. 95 In assessing an appropriate penalty to achieve deterrence, it is relevant to have regard to the fact that the conduct in this case was persistent. It continued in the face of repeated warnings by the Regulator. The conduct continued after the commencement of these proceedings. The more determined the wrongdoer, the greater the requirement for deterrence: Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; 356 ALR 389 at [71]. 96 Mr Shaw personally - and through him each of the Respondent companies of whom he is the sole director and ultimate shareholder - was warned verbally and in writing on many occasions, was aware of infringement notices issued to Traditional Taps in 2017 which were not paid, and was aware of the commencement of these proceedings. Mr Shaw was on notice of the obligations owed by the Respondent Companies under the WELS scheme since 2013. That Mr Shaw and the Respondent Companies persisted in their contravening business model in the face of escalating regulatory action implies that to their perception the risk/benefit calculus involved in advertising and selling WELS products did not favour compliance. As a matter of general deterrence, the penalties imposed should be sufficient to reset the risk/benefit calculus for other wrongdoers who might otherwise be minded to engage in contravening conduct. 97 It is necessary to say something specific about the general deterrence in relation to the penalty to be imposed upon Mr Shaw. Directors of companies akin to the Respondent Companies would be expected to be sensitive to the potential for personal liability. The imposition of a penalty on an individual director can operate as a powerful deterrent. In cases where a company's contraventions largely result from the conduct of its executive officers, a significant penalty imposed on a director personally may be warranted. Conversely, the imposition of inadequate penalties may encourage directors and others to believe that the risks of non-compliance will be borne primarily by the company itself. In the case of smaller companies, such as in the present case, imposing penalties on the company and not the individual involved may encourage a business model in which companies are effectively abandoned to deregistration or liquidation. The liquidation of Traditional Taps and Castironbaths after the commencement of the present proceedings illustrates this risk. 98 I now turn to consider specific deterrence, which is relevant in the case of the Solvent Respondents. Traditional Taps and Castironbaths are in liquidation, with the only remaining step being deregistration. Accordingly, specific deterrence is not relevant to the assessment of penalty in respect of their contraventions. The Regulator seeks penalties against them on the basis of general deterrence alone. 99 Many of the considerations relevant to general deterrence discussed above are also relevant to specific deterrence. As mentioned above, the contraventions by Mr Shaw and the Respondent Companies were determined and persistent, and demonstrated disregard for the warnings issued, and actions taken, by the Regulator. I accept the Regulator's submission that the Solvent Respondents are contraveners who demonstrated a preparedness to court the risk of being penalised in the pursuit of commercial gain. 100 The fact that the Solvent Respondents belatedly admitted some of the contraventions alleged against them and agreed orders and penalties with the Regulator does not, in my view, significantly reduce the need for specific deterrence. Those actions were taken late in the proceedings, after the Regulator had served all of her evidence on liability and penalty and after the matter had been listed for hearing. Neither Mr Shaw nor the Respondent Companies have led evidence on which the Court could be satisfied that they are unlikely to contravene in the future. In some cases, the need for specific deterrence is shown to be reduced in a variety of ways, for example, where a business has accepted the wrongdoing, made frank and full admissions, taken action to remediate its conduct, established compliance processes to prevent a recurrence and apologised: see Volkswagen at [153]; Australian Competition and Consumer Commission v Telstra [2021] FCA 502 at [63] to [68]. On the contrary, Renaissance Bathrooms, Belfast Sinks and Mr Shaw adopted an adversarial approach in these proceedings from the outset. While those respondents were entitled to defend the proceeding in that way, that approach does not bespeak an acceptance of their wrongdoing. There is no evidence of any steps taken or systems implemented by Mr Shaw or his companies to increase compliance.

[34]

The approach to be taken to multiple contraventions 103 I am satisfied it is appropriate to group the continuing daily contraventions in respect of each of the 254 website advertisements into 254 courses of conduct, one for each contravening product advertisement, for the following reasons. 104 The prohibitions in the WELS Act attach to each separate product that is unregistered or unlabelled. Penalties should reflect this regulatory framework by applying to each of the different contravening product advertisements. This approach permits the overall course of conduct for each product to be assessed by reference to the total period during which the website advertisement was available to the public. Although the presentation of the website advertisement of each product was specific to that product, the presentation of each product remained largely unchanged throughout the contravening period, and it is appropriate to reflect this commonality and continuity of the contraventions in respect of each product advertisement. That some contraventions persisted for longer than others and, for that reason, are more serious makes some allowance appropriate in this case. 105 The parties' agreed assessment of penalties is on a course of conduct basis in respect of the contraventions involving website advertisements. I am satisfied that the approach agreed between the parties results in an appropriate penalty. The approach does not reduce the many separate contraventions into a smaller number of contraventions, nor does it constrain the available maximum penalty in a way that is not appropriate having regard to the actual, substantive wrongdoing of each of the Solvent Respondents. 106 The contraventions concerning the six instances of physical supply, three by each of Castironbaths and Belfast Sinks, concern different WELS products and are appropriately dealt with as separate contraventions and not as a course of conduct. 107 Due to the similarities between the website advertising courses of conduct, and the cumulative effect of the many penalties that would otherwise result, a significant totality reduction is appropriate.

[37]

Nature and extent of the contraventions 109 Mr Shaw's contraventions of ss 33 and 34 of the WELS Act arise from his knowing involvement and procurement of the Renaissance Bathrooms website advertisement contraventions (63 website advertisements in respect of 63 different WELS products: 51 relating to contraventions of s 33 and 12 concerning contraventions of s 34) and Belfast Sinks' sale contraventions (three contraventions). The website advertising contraventions took place in the period from May 2018 to November 2019 (about 1.5 years) and the sale contraventions arose from internet, telephone and in-person purchases of two taps and a fixed shower in November 2018 by WELS investigators. 110 Mr Shaw was closely involved and responsible for the deliberate contravening conduct of Renaissance Bathrooms and Belfast Sinks. Mr Shaw's personal responsibility for the contraventions is underscored by a number of matters. 111 First, Mr Shaw was the sole director, ultimate sole shareholder and controlling mind of the Solvent Companies at all relevant times. The contravening conduct of the Solvent Companies was undertaken either by Mr Shaw personally or by employees or agents of Renaissance Bathrooms or Belfast Sinks, respectively, acting under Mr Shaw's direction or with Mr Shaw's consent or authority. 112 Secondly, Mr Shaw was well aware of the registration and labelling requirements imposed by ss 33 and 34 of the WELS Act, prior to and during, the contraventions by Renaissance Bathrooms and Belfast Sinks. He personally received multiple warnings that explained those requirements and detailed the Regulator's concerns that advertisements for WELS products on the relevant websites did not comply with the WELS Act. Mr Shaw received his first formal warnings in October and November 2013, and was warned again in February 2016 and February and May 2017. Mr Shaw personally received, and interacted with, WELS Inspectors in respect of those warnings. 113 Thirdly, Mr Shaw was personally involved in the registration of the WELS products which were registered by Renaissance Bathrooms. He was named as the contact on each of the applications by Renaissance Bathrooms for the registration of WELS products. As a consequence, I infer that Mr Shaw was aware of which products being advertised and/or sold by the Solvent Respondents were registered, and which were not. 114 Fourthly, Mr Shaw is personally named as the registrant's contact for the Renaissance Bathrooms' website.

[39]

Circumstances in which the contravention took place 118 As mentioned above, Mr Shaw knowingly persisted in a business model which involved ongoing supply of unregistered WELS products, or registered WELS products that were not WELS labelled, in the face of escalating regulatory action. 119 Moreover, the contravening conduct occurred under the cloak of false representations as to compliance - Renaissance Bathrooms falsely represented on its website that its products complied with the WELS Scheme. In June 2018, the 'Approval' page on the RB website stated: Approvals As of 1st July 2006 it became law that all shower systems, taps and shower roses joined the Wells [sic] scheme. As part of this scheme it became a prerequisit [sic] of being able to supply products in Australia that all relevant items be labelled with a Wells [sic] compliance sticker. Stickers must now appear on both physical product and marketing literature. If a product does not carry the Wells [sic] emblem it is illegal for a wholesaler to supply this product after 30th June 2006. All Renaissance products that are required to comply with this scheme do so, and as such are legal to be supplied throughout Australia, giving you peace of mind that whatever Renaissance product you specify the necessary legislative requirements have been met. For more information about Wells [sic] legislation please contact our sales team or visit www.waterrating.gov.au. 120 Renaissance Bathrooms and Belfast Sinks engaged in commercially motivated advertising and sales activities while avoiding compliance costs. As the sole director and ultimate sole shareholder of Renaissance Bathrooms and Belfast Sinks, Mr Shaw stood to gain personally from any financial benefits to those companies by reason of their non-compliance. 121 In the period of the contraventions, the annual cost to register between 51 and 75 products was $5,600: Sch 1, Water Efficiency Labelling and Standards (Registration Fees) Amendment Determination 2015 (No. 1). In May 2018, the indicative costs of obtaining a 5-year WaterMark licence for a WELS product were approximately $22,950-$33,500. However, a single licence may cover a set of similar products, so it is difficult to estimate the total indicative costs saved by Renaissance Bathrooms and Belfast Sinks in respect of their supply of unregistered products. It is unclear whether a WaterMark licence could be obtained for the unregistered products. 122 It was open to Mr Shaw, Renaissance Bathrooms and Belfast Sinks at all times after receiving the warnings and other action by the Regulator, and during the contravening period, to simply cease engaging in the advertising and sales conduct. The multiple warnings referenced above invited the respondents to correct their non-compliance, and offered advice and assistance to Mr Shaw. The Regulator has led evidence to the effect that, in the ordinary course, voluntary corrective action, whether by registering products or taking down particular advertisements, or amending the labelling presentation of already registered products, would have resolved the issue without the need for further action. That the Solvent Respondents chose instead to persist in their conduct is significant. Mr Shaw, and through him Renaissance Bathrooms and Belfast Sinks, were prepared to take the odds as an acceptable business risk: Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 193; 131 FCR 529 at [308] to [310]. As explained in Reckitt at [151], the resulting penalties must be such as to firmly disabuse them, and any like-minded would-be contraveners, of taking such a punt. 123 For completeness, I note the evidence led from Mr Shaw as to his personal and familial circumstances, including that he was at the relevant times, and continues to be, affected by adverse health issues which may have impacted his ability to oversee the Respondent Companies' compliance with the WELS scheme. I further note that Mr Shaw sought legal advice and representation. I accept the submission made on behalf of Mr Shaw that these matters are of some relevance in assessing the amount of penalty: s 44A(6)(c) of the WELS Act. Also relevant in this regard is the very belated expression of contrition and regret by Mr Shaw.

[41]

Penalties against both the companies and the sole director and shareholder 125 As the sole director and ultimate sole shareholder of Renaissance Bathrooms and Belfast Sinks, Mr Shaw is likely to feel the financial effect of the penalties imposed on the companies. Where respondents are very closely related, such that the cumulative burden for the penalties on each effectively falls upon one individual or entity, it can be appropriate, but is not mandatory, to reduce the amount of penalties payable by one of the respondents. However, the mere fact that two contravenors are closely related does not mean that only one penalty is appropriate or that a purely nominal penalty should be imposed on one of them: Minister for Sustainability, Environment, Water, Population and Communities v Woodley [2012] FCA 957 at [66]. 126 The approach taken in the penalties proposed in respect of the Solvent Respondents reflects that more culpability and responsibility for the conduct rests with Mr Shaw, such that a higher penalty (relative to the respective maximum) is required to deter him as an individual than may be the case for the Solvent Companies: Australian Competition and Consumer Commission v Geowash Pty Ltd (Subject to a Deed of Co Arrangement) (No 4) [2020] FCA 23 at [143]. The proposed penalties for Renaissance Bathrooms and Belfast Sinks are significantly reduced to take into account that Mr Shaw bears the weight of those penalties - as sole director and ultimate shareholder - and who, himself, is personally subject to penalties. If penalties were not sought in respect of Mr Shaw, the Regulator submits that she would have sought significantly higher penalties against the Solvent Companies. However, in view of Mr Shaw's agreement that significant penalties totalling $200,000 are appropriately to be imposed upon him, and recognising the additional burdens that will be felt through the penalties agreed by Renaissance Bathrooms and Belfast Sinks, the Regulator accepts that lower penalties can be imposed on those companies than would in other circumstances have been called for. 127 The same considerations do not arise in relation to Traditional Taps and Castironbaths, which are both in liquidation. They have not agreed to penalties and the effect of such penalties as will be imposed on those companies will not be felt by Mr Shaw. Accordingly, appropriate penalties against the Insolvent Respondents should not be reduced in the ways and for the reasons applicable to Solvent Companies.

Parties

Applicant/Plaintiff:

Water Efficiency Labelling and Standards Regulator

Respondent/Defendant:

Renaissance Traditional Bathrooms Pty Ltd

Legislation Cited (4)

Evidence Act 1995(Cth)ss 140, 187

Federal Court of Australia Act 1976(Cth)s 26

Federal Court Rules 2011(Cth)r 16.07

Water Efficiency Labelling and Standards Act 2005(Cth)ss 33, 34, 44, 44A, 44C, 44D, 44F, 44M, 44Q

Cases Cited (34)

tralian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 Australian Competition and Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326 Australian Competition and Consumer Commission v Telstra [2021] FCA 502 Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; 262 FCR 243 Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited (No 3) [2020] FCA 1421 Australian Securities and Investments Commission v Axis International Management Pty Ltd [2009] FCA 852 Australian Securities and Investments Commission v Squirrel Superannuation Services Pty Ltd [2022] FCA 702 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) (2018) 356 ALR 389 Forster v Jododex Australia Pty Ltd [1972] HCA 61; 127 CLR 421 Michell, in the matter of Aizome1 Pty Ltd (in liq) v Millar [2019] FCA 2169 Minister for Sustainability, Environment, Water, Population and Communities v Woodley [2012] FCA 957 Thunder Studios Inc (California) v Kazal (No 9) [2020] FCA 846 Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 193; 131 FCR 529 viagogo AG v Australian Competition and Consumer Commission [2022] FCAFC 87 Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49 Water Efficiency Labelling and Standards Regulator v Renaissance Traditional Bathrooms Pty Ltd [2020] FCA 1757

[1972] HCA 61

(1997) 145 ALR 36

(2018) 356 ALR 389