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On 11 July 2023, Justice lee of the Federal Court handed down his decision in Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Crown Melbourne Limited [2023] FCA 782.
The case essentially involved the imposition – as agreed to by the parties – of a $300 million dollar fine on Crown Melbourne and a $150 million fine on Crown Perth, arising from contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
The fines were ordered to be payable over a two year period.
Apart from the size of the fine, the timeframe for payment of the same is an issue of note in the decision.
As to the penalty, mandatory considerations and loss and damage, Lee J said:
F.2 General principles
89 In Australian Securities and Investments Commission v GetSwift Limited (Penalty Hearing) [2023] FCA 100, I summarised the foundational principles with respect to the imposition of pecuniary penalties, as distilled by the High Court in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 96 ALJR 426. As I noted then (at [36]), although the High Court’s decision concerned s 546 of the Fair Work Act 2009 (Cth), the observations of the plurality have since been applied to analogous civil penalty regimes.
90 The relevant principles may be summarised as follows.
91 First, subject to the relevant statutory scheme, the primary (if not sole) purpose of a civil penalty is the promotion of the public interest in compliance with the provisions of the Act in question by the deterrence of further contraventions of that Act: ABCC v Pattinson (at 431 [9] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). Retribution, denunciation and rehabilitation have no part to play in the imposition of a civil penalty.
92 Secondly, the use of the word “may” in s 175(1) of the Act confers a discretion upon the Court: Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1 (at 165 [748] per Giles JA). Accordingly, as with any discretionary power conferred by statute, the discretion is to be exercised judicially, having regard to the subject matter, scope and purpose of the legislation: ABCC v Pattinson (at 437 [40] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ).
93 Thirdly, the process of fixing the quantum of a penalty is one of “instinctive synthesis”: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 (at 37–38 [44] per Jagot, Yates and Bromwich JJ). The Court is not unanchored, however, as there must be some reasonable relationship between the theoretical maximum and the final penalty imposed: ACCC v Reckitt Benckiser (at 63 [156] per Jagot, Yates and Bromwich JJ)). The following factors have emerged as possible relevant considerations, but not a “rigid catalogue” (Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560 (at 580 [91] per Buchanan J); ABCC v Pattinson (at 433 [18] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ)), and were summarised by French J in Trade Practices Commission v CSR Limited (1991) ATPR ¶41-076 (at 52,152–53) as follows:
- The nature and extent of the contravening conduct.
- The amount of loss or damage caused.
- The circumstances in which the conduct took place.
- The size of the contravening company.
- The degree of power it has, as evidenced by its market share and ease of entry into the market.
- The deliberateness of the contraventions and the period over which it extended.
- Whether the contravention arose out of the conduct of senior management or at a lower level.
- Whether the company has a corporate culture conducive to compliance with the [Act in question], as evidenced by educational program[me]s or other corrective measures in response to an acknowledged contravention.
- Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the [Act in question] in relation to the contravention.
94 As I said in GetSwift (at [40]), the need to avoid adopting a checklist approach has been brought into even sharper focus following ABCC v Pattinson. The overriding need to focus on what is necessary for specific and general deterrence is the key, and the above matters are important insofar as they inform the remedial response necessary to secure the objects of deterrence.
95 Fourthly, and importantly in the context of this case, the Court must arrive at a figure with a view to ensuring the penalty is not such as to be regarded as “an acceptable cost of doing business”: ABCC v Pattinson (at 433 [17] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ); Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 (at 659 [66] per French CJ, Crennan, Bell and Keane JJ), citing Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 (at 265 [63] per Keane CJ, Finn and Gilmour JJ). Persons engaged in trade and commerce must be deterred from the “cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention”: Singtel Optus v ACCC (at 265 [63] per Keane CJ, Finn and Gilmour JJ).
96 Fifthly, careful attention to the maximum penalty may be required because, balanced with all other relevant factors, it provides a yardstick: ABCC v Pattinson (at 440 [52]–[54] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ).
97 Sixthly, three principles commonly utilised in criminal sentencing can also inform the Court’s arrival at a penalty figure.
98 The first is the so-called “course of conduct” or “one transaction” principle. That is, where conduct engaged in by an offender may technically comprise a number of separate offences, but that conduct can fairly be characterised as a single act or course of conduct, the sentences imposed should be attuned to reflect that fact and avoid double punishment: Australian Competition and Consumer Commission v Yazaki [2018] FCAFC 73; (2018) 262 FCR 243 (at 294–295 [227]–[229] per Allsop CJ, Middleton and Robertson JJ).
99 The second is the “totality” principle, which requires the Court to look at the entirety of the offending and determine the most appropriate sentence for all the offences taken together: Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd [2019] FCA 786; (2019) 370 ALR 637 (at 691 [240]–[241] per Perram J).
100 The third is that parity and equal justice are relevant factors in determining the appropriate penalty: Australian Securities and Investments Commission v Macdonald (No 12) [2009] NSWSC 714; (2009) 259 ALR 116 (at 173 [319]–[322] per Gzell J); Australian Securities and Investments Commission v Flugge (No 2) [2017] VSC 117; (2017) 342 ALR 478 (at 491 [69]–[72] per Robson J). Ultimately, however, each case turns on its facts, so a review of penalties imposed in past cases is of limited utility.
101 There are, of course, limits to the “transplantation” of principles governing criminal sentencing to civil penalty regimes. The focus must be on the promotion of the public interest in compliance with the relevant statutory norms by specific and general deterrence. The only “proportionality” which falls for consideration is the need to strike a “reasonable balance between deterrence and oppressive severity”: ABCC v Pattinson (at 437–438 [41] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ).
F.3 Mandatory considerations
102 As noted above, in addition to the requirement that the Court have regard to “all relevant matters” in determining whether a penalty is within the appropriate range, s 175(3) of the Act sets out a non-exhaustive list of matters to which the Court must have regard.
103 Two immediate observations may be made about s 175(3).
104 First, although the section directs the Court to “have regard to” the matters to which it refers, the weight, if any, to be given to those matters in the circumstances of the particular case is left to the discretion of the Court, informed by the general principles outlined above. In TAB Limited (No 3) (at [9]–[10]),Perram J considered that these matters include (or may include depending on the circumstances) the “French factors” (see above at [93]), which broadly overlap with the matters to which the Court must have regard under s 175(3) of the Act.
105 Secondly, the matters in s 175(3) are properly understood as matters that may inform the ultimate object of deterrence in imposing a civil penalty. The primary object of deterrence in this context as affirmed by the High Court has been applied by other judges of this Court at first instance, and by the Full Court, in circumstances where the statute in question was substantively similar to the terms of s 175(3): see, for example, viagogo AG v Australian Competition and Consumer Commission [2022] FCAFC 87; Australian Securities and Investments Commission v Squirrel Superannuation Services Pty Ltd [2022] FCA 702.
106 Before turning to considering the proposed penalty, it is necessary to say something about two matters of particular relevance to this case.
F.4 Loss or damage suffered as a result of the contravention and indicia of profit
107 Section 175(3)(b) requires the Court to assess the nature and extent of any loss suffered as a result of the contravention. That formulation is significant in the present case because on the evidence before me, it is very difficult to estimate, let alone determine, the loss or damage caused, or the profit obtained by Crown, by reason of the contravening conduct.
108 This is said to be for three reasons.
109 First, the key harm arising from a failure to manage the risk of ML/TF is the creation of the opportunity for such risks to be realised and go undetected. The extent to which risks that Crown failed to manage appropriately were in fact realised cannot be determined because those failures undermined the capacity for the risks to be detected in the first place. Secondly, and relatedly, it is difficult to quantify the revenue or profits obtained by Crown by reason of the contravening conduct because it would involve making retrospective assumptions about how Crown would have managed the risk of ML/TF at various points in time. Thirdly, ML/TF, by its very nature, exposes the Australian community and financial system to loss or damage that extends beyond the amount of money laundered or used to finance terrorism.
110 At first glance, it might be thought that the Court faces some difficulties in discharging its statutory function in fixing a penalty that is within the appropriate range in circumstances where it is in the dark about first,the extent of the loss caused by the wrongful conduct; and secondly, what are the profits obtained by reason of the wrongful conduct. Related to this second point is an added complication: the Court’s focus in fixing a penalty must be upon specific and general deterrence: ABCC v Pattinson (at 431 [9] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). But how does the Court fasten upon a view as to deterrence in circumstances where the profits obtained by Crown as a result of the wrongful conduct are, at least on the present evidence, unknown?
111 While there is no direct authority, there are decisions of this Court which have addressed the issue in the context of an analogous penalty regime under the Australian Consumer Law (as contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth)) (ACL).
112 In Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330; (2015) 327 ALR 540, Allsop CJ dealt with an application for the imposition of a penalty under s 224 of the ACL, which, relevantly, requires the Court to have regard to all relevant matters including, among other things, the “nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission” (cf s 175(3)(b) of the Act). In that case, the nature of the contravening conduct engaged in by Coles was such that it was not possible to quantify the loss suffered by consumers.
113 There, the Chief Justice referred to the reasoning of Perram J in Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2011] FCA 382; (2011) 279 ALR 609. In that decision, his Honour noted (at 627 [77]–[79]) that as a matter of “commonsense”, in circumstances where it is easy to imagine detriment to consumers, in the absence of any evidence, the respondent is entitled to be sentenced on the basis that the contravening conduct did not cause harm. The Chief Justice distinguished MSY Technology on the basis that (at 554 [57]):
The “commonsense” nature of his Honour’s suggestion is, with respect, far more apposite to a case such as the one before his Honour than it is in the present. It would be simple enough to adduce evidence of consumers who paid for additional warranties or who incurred expenses in the belief that they were not entitled to a warranty. The circumstances of that case were such that the misleading or deceptive conduct could clearly have a quantifiable and ascertainable pecuniary consequence for consumers. Here, the ACCC did not contend that the quality of the par-baked products was of any lower standard than goods baked from scratch. The primary source of any loss or damage to consumers was of a non-pecuniary nature. The fact that they had lost the opportunity to make a different purchasing choice that they may have made had they been provided with accurate information about the goods they were purchasing. In light of the period of time over which the conduct took place, I am not prepared to sentence on the basis that no one was in fact misled by Coles’ conduct.
(Emphasis added)
114 Recently, in Australian Competition and Consumer Commission v Booktopia Pty Ltd [2023] FCA 194, Burley J considered an application under s 224 of the ACL for the imposition of a penalty in circumstances where a retailer, Booktopia Pty Ltd (Booktopia), had made false or misleading representations relating to notification requirements, returns and refunds. His Honour noted that notwithstanding that the loss suffered by consumers, or the profit gained by Booktopia, could not be determined, it was possible to infer that the wrongful conduct may have caused harm. As his Honour noted (at [41]):
… The confidential evidence tendered indicates that millions of consumers purchased products from Booktopia during that period and tens of thousands of people visited the Terms of Business on the website. However, the parties agree that the value of any benefit obtained by Booktopia – or the loss suffered by consumers – that could reasonably be attributed to the contraventions cannot be determined. The latter is because it is not possible to identify how many consumers may have been dissuaded from pursuing their consumer guarantee rights under the ACL after viewing the Terms of Business. Nonetheless, I infer that the contravening conduct may have caused widespread consumer harm.
(Emphasis added)
115 Although analogues can only be taken so far, there is no reason in principle why the present position should be different. In this case, as in ACCC v Coles, the nature of the loss or damage caused by conduct in contravention of the Act is non-pecuniary. The failure to implement an appropriate programme for managing the risk of ML/TF hinders the ability of law enforcement to investigate and prosecute serious crimes: see AUSTRAC v Westpac (at 274–275 [172]–[179] per Beach J).
116 The contravening conduct engaged in by Crown occurred over a period of approximately six years. For reasons I explain below, I infer that the contravening conduct engaged in by Crown caused not insignificant loss or damage to the Australian community and financial system.
117 As to the profit or benefit obtained by Crown, it has been suggested that the requirements of specific deterrence demand that there be some relationship between the penalty imposed and the profit obtained by reason of the contravening conduct: see, for example, Singtel Optus v ACCC (at 265 [62]–[63] per Keane CJ, Finn and Gilmour JJ); ACCC v Coles (at 562 [100] per Allsop CJ). As the Full Court observed in Volkswagen v ACCC (at 431 [149] per Wigney, Beach and O’Bryan JJ), however, those cases should not be construed as laying down an “immutable principle” that in fixing a penalty that is within the range of penalties that will secure the object of deterrence, the Court must necessarily have regard to the amount of profits derived from the contravention or contraventions. Indeed, in AUSTRAC v Westpac and TAB Limited (No 3), the Court fixed a penalty without quantifying the benefit enjoyed by the contravener by reason of the contraventions.
118 To the extent it matters, notwithstanding its attendant difficulties, I am not persuaded it is impossible to quantify in some meaningful way the profits obtained by Crown by reason of the contravening conduct. It may be accepted that this would involve looking back over the relevant period and making assumptions about what risk management decisions Crown may or may not have made. But what is clear is that a material source of Crown’s revenue was sourced from junkets which were known vehicles for ML/TF. This accords with common sense. As I explain below, the turnover and revenue generated by junkets has been estimated, and provides some (although I suspect quite rubbery) indicative figures of profit which is relevant to determining whether the proposed penalty is within the appropriate range.
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When assessing the timeframe for payment of the fines, Lee J, considered the appointment of a ‘contradictor, amicus curiae or referee’ in order to assess Crown’s evidence as to reasons for the deferred terms of payment. His Honour said:
H PAYMENT OF THE PENALTY
229 As noted above, an important component of the proposed penalty is its proposed deferment, which, when one has regard to the NPV of the notional judgment sum, lessens its value.
230 As I have indicated above, Mr McGregor gave evidence that because of the current and forecast financial position of Crown Resorts Group, Crown does not have the financial capacity to pay the proposed penalty in a lump sum within 28 days of the Court making orders “without significant financial hardship” or recourse to negotiations with debt and equity providers: McGregor Affidavit (at [6]). In the light of the deteriorating financial position of Crown, the parties submit that payment of the penalty in three instalments over two years will not undermine the specific and general deterrent effects of the penalty.
231 I have already noted (at [15]–[16]) that aspects of this evidence are unsatisfactory and presents real challenges to the Court in the light of the matters to which the Court is to have regard in fixing a penalty that is within the appropriate range. This is a matter of particular concern here, given the lineball adequacy of the proposed penalty as being sufficient to achieve specific and general deterrence.
232 Earlier today, being the second day of the hearing, I invited oral submissions from the parties as to whether it may be appropriate to adopt a course taken in other cases (see Volkswagen Aktiengesellschaft (at 27 [5] per Wigney, Beach and O’Bryan JJ)) to appoint a contradictor or amicus curiae to assist the Court in testing the evidence (such as it is) before the Court or appointing a referee to inquire into and report upon Crown’s capacity to pay.
233 Those submissions may be summarised as follows.
234 First, Mr Crutchfield KC, counsel for Crown, in his characteristically engaging style, submitted that it is not incumbent upon the parties to persuade the Court that a payment plan is necessary because without it, Crown would face significant financial hardship. Crown referred to the decision of Burley J in Booktopia, where his Honour was satisfied, having regard to a confidential accountant’s report, that a payment plan was “appropriate having regard to the particular financial circumstances of Booktopia” (at [58]). It was said that while it may be accepted that a penalty with a NPV of $405 million is at the lower end of the range of permissible penalties, the Court should be satisfied on the evidence, without having recourse to a contradictor or a similar process, that the penalty proposed will achieve the twin objectives of specific and general deterrence in the light of Crown’s deteriorating financial position and inability to secure debt or equity financing.
235 Secondly, it was said that further that public policy considerations are at play in this respect because if the Court were to appoint a contradictor, it would delay final resolution and hinder the ability of the regulator to move on to the investigation of other matters (a somewhat ironic submission, given the delay in progressing the matter by the parties and the promptitude with which I have heard the case and delivered judgment). Mr Crutchfield referred to the High Court’s reasoning in Commonwealth v Director (at 507 [57] per French CJ, Kiefel, Bell, Nettle and Gordon JJ) where it was noted there is generally very considerable scope for parties in regulatory proceedings to agree facts and upon an appropriate remedy. This, in turn, can assist in avoiding lengthy and complex litigation, and hence diminish demand on the public resources constituted by both the Court and the regulator: see also ASIC v CBA (at [7] per Lee J).
236 I am somewhat sceptical as to these submissions, as I do not consider it unreasonable that the deferred terms of payment of penalty, based on submissions as to the financial position of a company, should accompanied by cogent evidence and be the subject of appropriate testing. AUSTRAC would not perform that testing by cross-examination as it was supporting the bargain it had struck.
237 On balance, however, I do not propose to delay the final resolution of the matter by appointing a contradictor, amicus curiae or referee, as it will likely lead to the same outcome and because some of my concerns can be addressed by the form of order permitting payment by instalments now proposed by the parties.
238 But it is worth recording that people should not swear affidavits on the expectation that representations made in their written evidence in chief will not be subject to close scrutiny, even if a joint proposal for resolution of penalty proceedings is agreed. Without being critical of the present witness or impugning his integrity, it is represents a moral hazard for deponents to think that what they say on oath will not be questioned.
239 In any event, at the conclusion of the second day of the hearing, my concerns as to a lack of testing and the state of the evidence generally were somewhat allayed by the proposed inclusion of an order which, in effect, grants liberty to AUSTRAC to make an application to seek a variation of the orders on the basis that there is a change in the financial position of Crown. Given that the debt arising from an order for the imposition of a penalty under s 175 of the Act is taken to be a judgment debt: s 175(7), the parties were in agreement that there was express power under the FCA Act to make such an order (or an implied power existed to allow the Court to control the discharge of obligations arising pursuant to orders of the Court).
(Underlining added)
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A link to the case can be found here.
