In an apparent departure from some past cases, the Full Court decided that a single penalty cannot be imposed for multiple contraventions of a civil penalty provision on the basis of the "totality principle" or the "course of conduct" principle, unless specifically authorised by statute. Instead, a separate penalty must be imposed for each offence. Whether this ultimately leads to higher penalties, and whether this is the last view on the matter, remains to be seen.
The case is also interesting because the Court imposed larger penalties than those sought by the regulator and criticised the parties for jointly seeking a single penalty and failing to identify the number of contraventions that had occurred.
In a previous episode in this litigation, it briefly became harder to settle civil penalty proceedings in Australia when the Full Federal Court said it would ignore the figures agreed with a regulator, because submissions on agreed penalties were not allowed. Six months later, the High Court overturned this, saying this restriction on agreed settlements only applies in criminal cases, and unanimously holding that in determining a civil penalty in regulatory proceedings, courts can have regard to the parties' submissions on an agreed penalty.
Unlike criminal and other forms of civil litigation, civil penalties are a relatively new feature of the Australian legal landscape. This litigation illustrates the extent to which key principles applicable to civil penalties are still being worked out by the Courts.
The growing role of penalties
Three other recent penalties imposed by the Federal Court illustrate the increasing size and uncertainty surrounding the calculation of penalties. The approach to identifying and treating multiple contraventions based on related conduct is one of the key factors affecting this.
In August 2017 the Court imposed a $25 million fine on a Japanese shipping company for a criminal cartel with other shipping lines affecting cars transported to Australia. In that case a rolled up criminal charge and plea of guilty enabled the court to impose a single penalty for more than one criminal offence, calculated as a percentage of the company's annual turnover. This was Australia's first criminal cartel sentence and the second highest cartel penalty that has been imposed in Australia.
In March 2017 the Court imposed a record civil penalty of $45 million on Tabcorp for 108 contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 over a 5 year period.
In 2015 ASIC obtained record penalties totalling $18.975 million for breaches of the National Consumer Credit Protections Act 2009 and unconscionable conduct. In a sample of 281 credit contracts, 277 contravened the legislation, and it was likely that over 300,000 further contracts similarly contravened the legislation. The Court imposed penalties by reference to 5 classes of responsible lending contraventions.
These cases underscore a trend towards increasingly large civil penalties. Legislative change will also have an impact, as illustrated by the $200 million per contravention civil penalties proposed as part of the proposed Bank Executive Accountability Regime.
Fixing penalties for multiple contraventions
One of the areas where uncertainty about the applicable principles has given rise to particular problems is where there are multiple related contraventions. In some previous civil penalty cases, the "totality principle" and the "course of conduct principle" have been relied on to impose a single pecuniary penalty for multiple contraventions.
The course of conduct, or one-transaction, principle is derived from criminal law sentencing principles. According to this principle, care must be taken so that the offender is not punished twice for the same criminal conduct. In these cases, sentences of imprisonment may be served concurrently, but fines are also calculated with regard to this principle. In the civil penalty context, the courts have on occasion used the course of conduct principle to group together separate contraventions as part of a course of conduct and impose a single penalty for those contraventions.
The totality principle requires a Judge imposing a sentence to review the aggregate and consider whether it is a just and appropriate outcome for all the offences. The principle has likewise been applied in the context of civil pecuniary penalty proceedings to impose a single penalty for multiple contraventions.
The Full Court accepted that the course of conduct and totality principles should be applied in civil penalty proceedings. After reviewing relevant authorities, it determined that, absent a statutory provision to the contrary, neither the course of conduct principle nor the totality principle permits the court to impose a single penalty in respect of multiple contraventions. The Court pointed out that in the criminal context, these principles do not result in a single sentence, rather in concurrent sentences (in the case of imprisonment) and reduction of the fine imposed for each offence (rather than a single fine).
The Court here applied the course of conduct principles and totality principles to conclude the appropriate penalty for each of the CFMEU's 605 contraventions to be $1,000 (there being a course or courses of conduct involving encouraging industrial action at three sites). Having regard to the Commissioner's submissions (as a specialist regulator), the Full Court then applied the totality principle, reducing the penalty by 50% to $302,500 and rounding it down to $300,000. For the CEPU's contraventions, the appropriate penalty was $800 per contravention, which was reduced by 50% to $138,000 and rounded down to $130,000.
Is a single penalty ever appropriate?
The Court allowed for the possibility that in some limited cases a single penalty may be imposed for multiple contraventions where that course is agreed or accepted by the parties.
The Court said this may be possible where the pleadings and facts reveal that contraventions arose from a course of conduct and the precise number of contraventions cannot be ascertained, or is so large that the fixing of separate penalties is not feasible, or there is a large number of relatively minor related contraventions most sensibly considered compendiously.
An example of a case where a pecuniary penalty for multiple contraventions was imposed having regard to these principles is Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330. In that case, par-baked products were sold as "fresh" on an estimated 85 million occasions. The maximum penalty for each contravention was $1.1 million. The Court imposed a penalty of $2.5 million for four separate "courses of conduct".
In addition, particular legislation may allow for a single penalty. For example, s 557 of the Fair Work Act 2009 provides that two or more contraventions that arose out of a course of conduct by a person are to be taken to constitute a single contravention. The Corporations Act civil penalty provisions do not include any provision of this kind.
Significance of the case
The practical significance of the case may be limited and given the case represents an apparent departure from certain previous cases, it is possible that a differently constituted Full Court, or indeed the High Court, may take a different approach. It is clear, however, that where there are multiple contraventions, the Court should consider applying the course of conduct principle to reach penalties for each contravention, and then apply the totality principle to consider if the outcome in the aggregate is appropriate (and if, for example, it is disproportionate, reduce each penalty). It also highlights that the Court will bring its own assessment to bear, and that there are complications associated with working out penalties for multiple contraventions.
