Case: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134 ; (1996) 71 FCR 285
Outcome: applied
In addressing the role that agreement between the parties may have when addressing penalties to be imposed under the Trade Practices Act in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134 ; (1996) 71 FCR 285 , Burchett and Kiefel JJ observed: The Act places on the shoulders of the Court the responsibility to determine the "appropriate" penalty in each particular case, having regard to "all relevant matters" including the matters specified in the section. But effects upon the functioning of markets, and other economic effects, will generally be among the most significant matters to be considered as relevant, so that the Court is likely to be assisted greatly by views put forward by the Australian Competition and Consumer Commission, or by economists called on behalf of the parties. Since the decision in Trade Practices Commission v Allied Mills Industries Pty Ltd [(1981) 60 FLR 38], it has been accepted that both the facts, and also views about their effect, may be presented to the Court in agreed statements, together with joint submissions by both the Commission and a respondent as to the appropriate level of penalty. Because the fixing of the quantum of a penalty cannot be an exact science, the Court, in such a case, does not ask whether it would without the aid of the parties have arrived at the precise figure they have proposed, but rather whether their proposal can be accepted as fixing an appropriate amount. There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case. It appears to us that the authorities in both Australia and New Zealand have provided unanimous support for the approach we have outlined... They approved the general acceptance of a "negotiated settlement", reserving for further consideration only the case where a compromise was based, not on considerations bearing on the quantum of the penalty, but on doubts or difficulties attending the proof of the contravention. In Simsmetal [Trade Practices Commission v Simsmetal Ltd [1996] ATPR 41 ,510], Lee J, in approving agreed penalties, said (at 41,512) that "the approach adopted by the parties in fixing (the figures put to the Court) is not dissimilar to the approach that would have been adopted by the Court had it been necessary for the Court to undertake the penalty fixing exercise itself", and that he agreed with the approach of Lockhart J in another case of refraining from "stating whether the penalties to which the parties have agreed are the size of [those] which the Court itself would have imposed". In Pioneer [Australian Competition and Consumer Commission v Pioneer Concrete (Qld) Pty Ltd [1996] ATPR 41 ,579] Lockhart J said (at 41,582): "I am of the view that the agreement that has been reached, subject to the Court's concurrence, is broadly in accord with what the Court would have done itself based upon the facts as I have read them from the affidavits, and I think the result is a sensible one. I propose to endorse it." In TNT [Trade Practices Commission v TNT Australia Pty Ltd [1995] HCA 4 ; [1995] ATPR 40 ,161] Burchett J said (at 40,165): "[I]t cannot be denied that the fixing of the quantum of a penalty is not an exact science. It is not done by the application of a formula, and, within a certain range, courts have always recognised that one precise figure cannot be incontestably said to be preferable to another." When the Court approaches the task of assessing a penalty under s 76, or of determining whether an agreed penalty is appropriate, there are certain principles which must be kept steadily in mind. The section itself lays down that the penalty is to be "appropriate having regard to all relevant matters", and then indicates certain matters which the legislature regarded as relevant... Reference may also be made to Australian Competition &amp; Consumer Commission v Econovite Pty Ltd [2003] FCA 964 at [11] where French J stated that the " Court has, over many years, accepted as a general principle that it should encourage fair and appropriate settlements to reduce the burdens of litigation on public and private resources ". See also: Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd [2004] FCA 693 at [15] [18], [2004] FCA 693 ; 207 ALR 329 at 332 3 per Lee J; Australian Competition &amp; Consumer Commission v FChem (Aust) Ltd [2008] FCA 344 at [22] [27] per Cowdroy J. These comments were obviously directed to the specific statutory provisions and objectives of the 1974 Act. 35 But, and as noted by the Full Court in Minister for Industry, Tourism &amp; Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [59] [79] by Branson, Sackville and Gyles JJ, there have been decisions which " have expressed reservations about the approach taken in NW Frozen Foods ". In Mobil Oil a pecuniary penalty was sought in respect to a contravention of s 10 of the Petroleum Retail Marketing Sites Act 1980 (Cth). The resolution of those reservations was there effected by a direction given by the Chief Justice pursuant to s 20(1A) of the Federal Court of Australia Act 1976 (Cth) that the jurisdiction of the Court should be exercised by a Full Court in respect to the following question: Where the parties propose an agreed amount to be imposed as a penalty pursuant to s 13 of the Petroleum Retail Marketing Sites Act 1980 (Cth), is the Court bound by the decision in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134 ; (1996) 71 FCR 285 to consider whether the proposed amount is within the permissible range in all of the circumstances and, if so, impose a penalty of that amount? 36 That question was answered: " No, but the reasons in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134 ; (1996) 71 FCR 285 disclose no error of principle ". The Full Court reviewed the authorities and observed: [51] The following propositions emerge from the reasoning in NW Frozen Foods: (i) It is the responsibility of the Court to determine the appropriate penalty to be imposed under s 76 of the TP Act in respect of a contravention of the TP Act. (ii) Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another. (iii) There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravenor have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed. (iv) The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise (such as the ACCC's views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more "subjective" matters. (v) In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so. (vi) Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court's view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range. Five further points were there made by their Honours, being: [53] First, the rationale for giving weight to a joint submission on penalty is said by the Court to be the savings in resources for the regulator and the Court, as well as the likelihood that a negotiated resolution will include measures designed to promote competition. As Jeremy Thorpe points out, a related advantage is that the savings in resources can be used by the regulator to increase the likelihood that other contraveners will be detected and brought before the courts. This has the effect of increasing deterrence which is one of the principal justifications, if not the only justification for imposing civil penalties under the TP Act or the Sites Act: J Thorpe, "Determining the Appropriate Role for Charge Bargaining in Pt IV of the Trade Practices Act" (1996) 4 Comp &amp; Cons LJ 69, at 72 74. ... [54] Secondly, the sixth proposition drawn from the reasoning in NW Frozen Foods does not mean, in our opinion, that the Court must commence its reasoning with the proposed penalty and limit itself to considering whether that penalty is within the permissible range. A Court may wish to take that approach. However, it is open to a Court, consistently with the reasoning in NW Frozen Foods, first to address the appropriate range of penalties independently of the parties' proposed figure and then, having made that judgment, determine whether the prepared penalty falls within the range. [55] Thirdly, as has been noted, the appellant in NW Frozen Foods admitted contravening the TP Act and had reached agreement with the ACCC upon the facts to be put before the Court. There was no suggestion that the admissions or statement had been tailored or modified to reflect the difficulties faced by the ACCC in proving its case. The Full Court therefore acted on the basis of clear admissions and a detailed statement of agreed facts setting out how the contraventions had occurred. ... [56] Fourthly, as the Full Court in Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [2002] ATPR 41-851 , has pointed out, the regulator should always explain to the Court the process of reasoning that justifies a discounted penalty. ... ... [58] Fifthly, there is nothing in NW Frozen Foods that is inconsistent with any of the following propositions: (i) The Court, if it considers that the evidence or information before it is inadequate to form a view as to whether the proposed penalty is appropriate, may request the parties to provide additional evidence or information or verify the information provided. If they do not provide the information or verification requested, the Court may well not be satisfied that the proposed penalty is within the range. (ii) If the absence of a contradictor inhibits the Court in the performance of its duties under s 76 of the TP Act, s 13 of the Sites Act, or similar legislation, it may seek the assistance of an amicus curiae or of an individual or body prepared to act as an intervenor under FCR, O 6 r 17. (iii) If the Court is disposed not to impose the penalty proposed by the parties, it may be appropriate, depending on the circumstances, for each of them to be given the opportunity to withdraw consent to the proposed orders and for the matter to proceed as a contested hearing. See: Australian Competition &amp; Consumer Commission v Admiral Mechanical Services Pty Ltd [2007] FCA 1085 at [13] [18] per Nicholson J. Most recently, it has been said that the " upshot of the authorities is that the Court should not depart lightly from a joint position put forward by the parties. The inquiry to be undertaken is not whether the Court would have arrived at the same figure as the parties, but whether the proposal fixes an appropriate amount 'within the permissible range' of penalties that might properly be imposed ": Australian Competition &amp; Consumer Commission v Oobi Baby Pty Ltd [2008] FCA 1488 at [9] per Finkelstein J. See also: Beaton-Wells C, 'Judicial Scrutiny of Penalty Agreements to Increase' (2005) 13 TPLJ 59. 37 In the present proceeding it is considered that the principles expressed in NW Frozen Foods and Mobil Oil are equally applicable to a proceeding in which a civil penalty is sought under the Therapeutic Goods Act and where an agreement has been reached as between the Regulator and those against whom the penalty is sought. 41 Part of the agreement in the present proceeding, which has avoided potential difficulties and complexities, is that the First and/or Second Respondent pay a penalty in the revised sum of $130,000. The question remains as to whether the Court considers that such a sum is " appropriate " within the meaning of s 42Y(2). As was recognised by Burchett and Kiefel JJ in NW Frozen Foods , " the quantum of a penalty cannot be an exact science ": [1996] FCA 1134 ; (1996) 71 FCR 285 at 290.