Case: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134 ; (1996) 71 FCR 285
Outcome: followed
And the Court notes the agreement of the parties that orders 12, 12B, 12C, 13 and 13A will be made by the Court but will not be entered and sealed under Federal Court Rules Order 36 unless there is default on the part of the First or Second Respondents. Proposed Orders the Court's approach 7 The parties concede that it is for the Court to determine whether a pecuniary penalty should be ordered, as well as the quantum of such penalty. This position is clarified by s 570(1) of the Act which provides: (1) If the Federal Court is satisfied that a person has contravened a civil penalty provision, the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each contravention, as the Court determines to be appropriate. 8 Notwithstanding the discretion vested in the Court by s 570(1) it is also clear that the Court should be aided by any negotiated agreement reached by the parties, and should not depart from an agreed penalty merely because it might have determined another amount to be appropriate, except in a clear case. This principle was explained by the Full Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134 ; (1996) 71 FCR 285 at 290, 298, and confirmed by the Full Court in Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) FCAFC 72. In Mobil Oil the Full Court reiterated that: &#8226; judges can, in appropriate circumstances, make an order departing from an agreed penalty (for example Australian Competition and Consumer Commission v FFE Building Services [2003] FCA 1542) (at [70]); &#8226; in applying the principles in NW Frozen Foods the Court is not acting as a "rubber stamp" the Court must form its own view about the appropriate range of penalties, on the basis of the agreed facts or evidence (at [71]); &#8226; the Court should be satisfied that it is being given accurate, reliable and complete information on critical questions (at [79]); &#8226; in making a joint submission, it is appropriate for parties to nominate a precise figure as a pecuniary penalty rather than limiting themselves to a range of pecuniary penalties (at [79]). 9 In this case the respondents were not legally represented. The applicant has however made submissions on penalty and other orders. The submissions of the applicant in relation to these issues are well-researched and helpful, and I understand from the directions hearing at which the parties last appeared that, while the respondents were not a party to the applicant's submissions, they did not demur from them. Pecuniary Penalties Relevant factors to take into consideration 10 Section 570(2) of the Act provides that, in determining a 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. 11 The Act prescribes a cap on pecuniary penalties, namely: &#8226; in relation to a body corporate; o in the case of a contravention of subs 68(1) or (2) or 101(1) or (2) $10 million for each contravention; o in any other case $250,000 for each contravention (s 570(3)); &#8226; in relation to a person other than a body corporate not more than $50,000 for each contravention (s 570 (4)). 12 In addition to the factors prescribed by s 570(2), factors the Courts have taken into account in imposing pecuniary penalties include: &#8226; the deliberateness of the contravention and the period over which it extended; &#8226; whether the contravention arose out of the conduct of senior management or at a lower level; &#8226; whether the company has a corporate culture conducive to compliance with the Act; &#8226; whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention; &#8226; the financial position of the contravenor and the capacity to pay; &#8226; the penalty imposed must be substantial enough that the relevant party realises the seriousness of its conduct and is not inclined to repeat it; &#8226; although the penalty should achieve the object of general deterrence, it must not be so high as to be oppressive. ( Australian Communications and Media Authority v Clarity1 Pty Ltd [2006] FCA 1399 ; (2006) 155 FCR 377 , NW Frozen Food [1996] FCA 1134 ; (1996) 71 FCR 285 , Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254 ; (2005) 215 ALR 281 , Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265 ; (2005) 215 ALR 301.) Pecuniary Penalties application of principles 13 Considering the facts of this case in light of factors which should be taken into consideration, I make the following observations: &#8226; The conduct of the first respondent as described earlier in this judgment represents multiple breaches of the service provider rules under the Act, including improper imposition of fees, failures to comply with the TIO scheme, and failures to comply with specified directions of the applicant. It is not in dispute that the second respondent, in his role as sole director, shareholder and Chief Executive Officer of the first respondent, was knowingly concerned in or party to the conduct of the first respondent and aided, abetted, counselled or procured the contravening conduct of the first respondent. This conduct of both respondents represented deliberate contravention of the Act over several years. &#8226; The applicant makes no claim that any substantive loss or damage was suffered as a result of the relevant contraventions, or that monetary amounts to which the relevant conduct related were substantial. However I consider that the matter is significant because of the four separate types of conduct pleaded, and that it is appropriate to order relief to ensure that the particular conduct does not recur. &#8226; It is not in dispute that the respondents have not previously been found by the Court in proceedings under the Act to have engaged in similar conduct. &#8226; The contravention of the legislation by the first respondent arose from conduct of the second respondent, who was clearly in a senior management role in the first respondent. &#8226; It is common ground that the first respondent does not presently operate as an internet service provider, with the result that the issue whether its corporate culture is conducive to compliance with the Act is of minimal relevance. Of more relevance in this context is the fact that the proposed injunctions are framed to apply should the first respondent resume operations as an internet service provider within a two year period. &#8226; Both respondents have co-operated with the applicant in seeking resolution of these proceedings. &#8226; Material before the Court indicates that the first respondent has no or very limited assets (Notice of Defence filed 22 July 2008 para 5, TS 24 June 2008 p 2 ll 40-41, TS 12 August 2008 p 2 ll 13-18) and that the second respondent is similarly financially disadvantaged (Notice of Defence filed 22 July 2008 para 4). The applicant accepted in its written submissions that the respondents had limited financial capacity. In my view: o it is appropriate that the proposed orders contemplate payment of the proposed amounts (both penalties and costs) by instalments over a defined period; o while well below the maximum penalty, the penalties are appropriate, and not oppressive, in light of the small business operations of the respondents and the nature of the contraventions; o in the circumstances of this case the penalties are sufficiently substantial that the respondents would not be inclined to repeat the contraventions. 14 Accordingly I consider that the penalties and other orders jointly proposed by the applicant and the respondents are appropriate and should be made by the Court. In doing so I note however the agreement of the parties that orders 12, 12B, 12C, 13 and 13A will be made by the Court but will not be entered and sealed under Order 36 Federal Court Rules unless there is default on the part of the First or Second Respondents. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. Associate: Dated: 15 October 2008 Counsel for the Applicant: Ms M Brennan Solicitor for the Applicant: Australian Government Solicitor Counsel for the First Respondent: The First Respondent was not represented Counsel for the Second Respondent: The Second Respondent appeared in person Date of Hearing: 7 October 2008 Date of Judgment: 15 October 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/1530.html