Australian Competition and Consumer Commission v BlueScope Steel Limited (No 6)
[2023] FCA 1029
•29 August 2023
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v BlueScope Steel Limited (No 6) [2023] FCA 1029
File number(s): VID 932 of 2019 Judgment of: O'BRYAN J Date of judgment: 29 August 2023 Catchwords: COMPETITION – application for the imposition of pecuniary penalties and other relief under Pt VI of the Competition and Consumer Act 2010 (Cth) for conduct constituting an attempt to induce an understanding containing cartel provisions – relevant penalty considerations in the case of an attempt to induce a contravention – relevance of the potential for the attempt to have caused loss and damage – relevance of the potential for the corporate respondent to have obtained financial gain – maximum penalty for corporate respondent – whether corporate respondent obtained a benefit from the conduct that was subject to penalty – whether the Court is empowered by s 86E or s 80 to disqualify an individual respondent from managing corporations in the case of an attempt to induce a contravention – whether the Court is empowered to make a personal payment or non-indemnification order under s 76
STATUTORY INTERPRETATION – meaning of the phrase “the benefits that have been obtained” in s 76(1A) of the Competition and Consumer Act 2010 (Cth) – proper construction of the limitation period in s 77(2) and its application where part of the conduct that was subject to penalty occurred outside the limitation period
Legislation: Acts Interpretation Act 1901 (Cth), s 15AA
Australian Securities and Investments Commission Act 1989 (Cth), ss 12DA(1), 12GD, 12GM
Competition and Consumer Act 2010 (Cth), Pt IV, ss 44ZZRB, 44ZZRJ, Pt V, Pt VI, ss 75B, 76, 77, 77A, 80, 81, 82, 86C, 86D, 87
Corporations Act 2001 (Cth), ss 182, 183, 199A, 199B, 206C
Fair Work Act 2009 (Cth), s 546
Federal Court of Australia Act 1976 (Cth), s 21
Statute Law (Miscellaneous Provisions) Act (No 1) 1983 (Cth)
Trade Practices Legislation Amendment Act (No 1) 2006 (Cth)
Cases cited: Australian Building and Construction Commission v Construction, Forestry, Maritime, Mining and Energy Union (No 4) (2021) 173 ALD 112
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27
Australian Building and Construction Commission v Construction, Forestry, Maritime, Mining and Energy Union
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450
Australian Competition and Consumer Commission v Cement Australia Pty Ltd (2017) 258 FCR 312
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36
Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5) [2022] FCA 1475
Australian Competition and Consumer Commission v BlueScope Steel Limited (No 2) [2020] FCA 625
Australian Competition and Consumer Commission v Coles Supermarkets [2014] FCA 1405
Australian Competition and Consumer Commission v CryositeLtd [2019] FCA 116; 135 ACSR 231
Australian Competition and Consumer Commission v Danoz Direct Pty Ltd [2003] FCA 881; 60 IPR 296
Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513
Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247; ATPR 42-091
Australian Competition and Consumer Commission v IPM Operation & Maintenance Loy Yang Pty Ltd (No 2) [2007] FCA 11
Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265; 215 ALR 301
Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25
Australian Competition and Consumer Commission v Renegade Gas Pty Ltd (trading as SupagasNSW) [2014] FCA 1135
Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238
Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640
Australian Competition and Consumer Commission v Z-Tek ComputerPty Ltd (1997) 78 FCR 197
Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd [2019] FCA 786; 370 ALR 637
Australian Securities and Investments Commission v Adler (No 5) [2002] NSWSC 483; (2002) 42 ACSR 80
Australian Securities and Investments Commission v Kobelt [2017] FCA 387
Australian Securities and Investments Commission v Wooldridge [2019] FCAFC 172
Balog v Independent Commission Against Corruption (1990) 169 CLR 625
Bradford Old Bank v Sutcliffe [1918] 2 KB 833
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1
Consumer Commission v Yazaki Corporation (2018) 262 FCR 243
Director of the Fair Work Building Industry Inspectorate v Stephenson (2014) 146 ALD 75
Foster v Australian Competition and Consumer Commission (2006) 149 FCR 135
ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248
J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission [2000] FCA 365; 172 ALR 532
Markarian v The Queen (2005) 228 CLR 357
Medibank Private Ltd v Cassidy (2002) 124 FCR 40
Mills v Meeking (1990) 169 CLR 214
Minister for Immigration and Multicultural Affairs v Nystrom (2006) 228 CLR 566
New South Wales Aboriginal Land Council v Minister Administering the Crown Land Act (2016) 260 CLR 232
NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285
OD Transport Pty Ltd v WA Government Railways Commission (1987) 13 FCR 500
R v Wallis; Ex parte Employers Association of Wool Selling Brokers (1949) 78 CLR 529
Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53
Schneider Electric (Australia) Pty Ltd v ACCC (2003) 127 FCR 170
Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249
SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362
Trade Practices Commission v Carlton & United BreweriesLtd (1990) 24 FCR 532
Trade Practices Commission v CSR Limited [1991] ATPR 41-076
Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd [1978] ATPR 40-091
Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375
Williams v Milotin (1957) 97 CLR 465
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Economic Regulator, Competition and Access Number of paragraphs: 181 Date of hearing: 12 April 2023 Date of last submissions: 27 April 2023 Counsel for the Applicant: Mr M Hodge QC with Mr J Clark, Dr S Chordia and Ms S Andrews Solicitor for the Applicant:
Australian Government Solicitor
Counsel for the First Respondent: Mr C A Moore SC with Mr P J Strickland and Mr R Pietriche Solicitor for the First Respondent:
Gilbert + Tobin
Counsel for the Second Respondent:
Dr R Higgins SC with Mr C Bannan
Solicitor for the Second Respondent:
Norton Rose Fulbright
ORDERS
VID 932 of 2019 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: BLUESCOPE STEEL LIMITED (ACN 000 011 058)
First Respondent
JASON THOMAS ELLIS
Second Respondent
ORDER MADE BY:
O'BRYAN J
DATE OF ORDER:
29 AUGUST 2023
THE COURT DECLARES THAT:
1.In these declarations and orders:
(a)Apex Steel means Apex Steel Pty Ltd;
(b)BlueScope means the First Respondent;
(c)BlueScope Distribution means BlueScope Distribution Pty Ltd, a wholly owned subsidiary of BlueScope which conducted business as a distributor of flat steel products in Australia;
(d)CCA means the Competition and Consumer Act 2010 (Cth);
(e)CIPA means BlueScope’s Coated Industrial Products Australia division which was the division of BlueScope responsible for the manufacture and sale of flat steel products in Australia;
(f)CIPA’s Distribution Market price lists means the list prices published by CIPA with respect to the sale of flat steel products to distributors in Australia;
(g)Citic means Citic Australia Commodity Trading Pty Ltd;
(h)CMC Steel means CMC Steel Distribution Pty Ltd;
(i)Ellis means the second respondent;
(j)NZSA means New Zealand Steel (Australia) Pty Ltd, a wholly owned subsidiary of BlueScope which conducted business as a steel trader for flat steel products in Australia supplying distributors and occasionally steel users;
(k)OneSteel means OneSteel Trading Pty Ltd;
(l)Selection Steel means Selection Steel Trading Pty Ltd;
(m)Selwood Steel means Celhurst Pty Ltd trading as Selwood Steel;
(n)Southern Steel means Southern Steel Group Pty Limited;
(o)Vulcan Steel means Vulcan Steel Pty Ltd;
(p)Wright Steel means Wright Steel (Sales) Pty Ltd;
(q)Yieh Phui means Yieh Phui Enterprise Co. Ltd.
2.BlueScope attempted to induce:
(a)Selection Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Selection Steel would use CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the Act by conduct engaged in between 6 September 2013 and 8 January 2014;
(b)Apex Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Apex Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 2 June 2014;
(c)Southern Steel to contravene s 44ZZRJ of the CCA, by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Southern Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 2 September 2013 and 30 May 2014;
(d)Vulcan Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Vulcan Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 5 June 2014;
(e)Selwood Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Selwood Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the CCA by conduct engaged in on 30 October 2013;
(f)CMC Steel to contravene s 44ZZRJ of the CCA, by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)CMC Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 9 September 2013 and 11 June 2014;
(g)OneSteel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 10 September 2014 and 2 June 2014;
(h)one or both of Wright Steel and Citic to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)one or both of Wright Steel and Citic would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists; and
(ii)BlueScope and NZSA would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in on 12 September 2013; and
(i)Yieh Phui to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Yieh Phui would sell flat steel products to import traders at a higher price than it was doing at the time of the meeting between BlueScope and Yieh Phui on 26 February 2014 by reference to CIPA’s Distribution Market price lists, within the meaning of s 76(1)(d) of the CCA.
3.Ellis attempted to induce:
(a)Selection Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Selection Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 8 January 2014;
(b)Apex Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Apex Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 2 June 2014;
(c)Southern Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Southern Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 2 September 2013 and 30 May 2014;
(d)Vulcan Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Vulcan Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 5 June 2014;
(e)Selwood Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Selwood Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the CCA by conduct engaged in on 30 October 2013;
(f)CMC Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)CMC Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 9 September 2013 and 11 June 2014;
(g)OneSteel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 10 September 2014 and 2 June 2014;
(h)one or both of Wright Steel and Citic to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)one or both of Wright Steel and Citic would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists; and
(ii)BlueScope and NZSA would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the CCA by conduct engaged in on 12 September 2013; and
(i)Yieh Phui to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Yieh Phui would sell flat steel products to import traders at a higher price than it was doing at the time of the meeting between BlueScope and Yieh Phui on 26 February 2014 by reference to CIPA’s Distribution Market price lists, within the meaning of s 76(1)(d) of the CCA.
THE COURT ORDERS THAT:
4.BlueScope pay to the Commonwealth of Australia pecuniary penalties totalling $57,500,000 in respect of the attempts to induce contraventions of s 44ZZRJ of the CCA referred to in order 2 above being:
(a)in respect of the attempt involving Selwood Steel referred to in order 2(e) above, $2.5 million;
(b)in respect of the attempt involving Wright Steel referred to in order 2(h) above, $4 million;
(c)in respect of the attempt involving Yieh Phui referred to in order 2(i) above, $6 million; and
(d)in respect of each of the attempts involving Selection Steel, Apex Steel, Southern Steel, Vulcan Steel, CMC Steel and OneSteel referred to in orders 2(a), (b), (c), (d), (f) and (g) above, $7.5 million.
5.Ellis pay to the Commonwealth of Australia pecuniary penalties totalling $575,000 in respect of the attempts to induce contraventions of s 44ZZRJ of the CCA referred to in order 3 above being:
(a)in respect of the attempt involving Selwood Steel referred to in order 3(e) above, $25,000;
(b)in respect of the attempt involving Wright Steel referred to in order 3(h) above, $40,000;
(c)in respect of the attempt involving Yieh Phui referred to in order 3(i) above, $60,000; and
(d)in respect of each of the attempts involving Selection Steel, Apex Steel, Southern Steel, Vulcan Steel, CMC Steel and OneSteel referred to in orders 3(a), (b), (c), (d), (f) and (g) above, $75,000.
6.Ellis is not to pursue any claim or accept any indemnity under any directors and officers insurance policy to which BlueScope or Ellis is a party or an insured for payment or reimbursement of any part of the pecuniary penalty the subject of order 5.
7.BlueScope and Ellis pay the Applicant’s costs of, and incidental to, this proceeding to be assessed on a lump sum basis if not agreed (either as to the overall quantum of costs or the proportion of costs to be borne by each of the Respondents).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
O’BRYAN J:
INTRODUCTION
On 9 December 2022, the Court delivered judgment in Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5) [2022] FCA 1475 (Liability Judgment or LJ), finding that each of the respondents, BlueScope Steel Limited (BlueScope) and Jason Ellis (Mr Ellis), had attempted to induce nine competing suppliers of flat steel products in Australia to contravene s 44ZZRJ of the Competition and Consumer Act 2010 (Cth) (Act) by arriving at an understanding that contained a cartel provision. These reasons assume familiarity with the Liability Judgment and adopt the defined terms used in the Liability Judgment.
The ultimate findings of the Court in the Liability Judgment were that (at [1552]):
Each of BlueScope and Mr Ellis attempted to induce:
(a)Selection Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Selection Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the Act;
(b)Apex Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Apex Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the Act;
(c)Southern Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Southern Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the Act;
(d)Vulcan Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)Vulcan Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the Act;
(e)Selwood Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Selwood Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the Act;
(f)CMC Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)CMC Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and
(ii)BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the Act;
(g)OneSteel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the Act;
(h)one or both of Wright Steel and Citic to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:
(i)one or both of Wright Steel and Citic would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists; and
(ii)BlueScope and NZSA would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists,
within the meaning of s 76(1)(d) of the Act; and
(i)Yieh Phui to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Yieh Phui would sell flat steel products to import traders at a higher price than it was doing at the time of the Yieh Phui meeting by reference to CIPA’s Distribution Market price lists, within the meaning of s 76(1)(d) of the Act.
In these reasons, I will refer to the above conduct as the “offending conduct”. The offending conduct was undertaken by and on behalf of BlueScope and Mr Ellis pursuant to deliberate and planned commercial strategies that were described in the Liability Judgment as the benchmarking strategy and the overseas mill strategy, and which continued from the beginning of September 2013 until, in some cases, June 2014.
In its amended originating application, the ACCC sought by way of relief declaratory orders, the imposition of pecuniary penalties and a disqualification order against Mr Ellis.
The ACCC’s application for relief was heard on 12 April 2023.
In support of its application, the ACCC filed written submissions dated 10 March 2023 and tendered a number of documents, including (as against the first respondent) a statement of agreed facts dated 7 March 2023 agreed between the ACCC and the first respondent. On the application, the ACCC submitted that it would be appropriate for the Court to make the following orders:
(a)declarations largely in the form of the Court’s ultimate findings, as set out above;
(b)that BlueScope pay an aggregate pecuniary penalty of $83 million (if the applicable maximum penalty for each attempt is $10 million) or $120 million (if the applicable maximum penalty for six of the attempts is 10% of BlueScope’s turnover);
(c)that Mr Ellis pay an aggregate pecuniary penalty between $600,000 and $800,000;
(d)that Mr Ellis be disqualified from managing corporations for a period of 7 years (the disqualification order); and
(e)that Mr Ellis be prevented from making any claim in respect of, seeking to rely upon, or accepting any indemnity under, any applicable insurance policy for payment or reimbursement of any part of the pecuniary penalty imposed by the Court (the non‑indemnification order).
While the ACCC’s amended originating application included the proposed disqualification order, it did not include the proposed non-indemnification order. The ACCC submitted that it is not necessary to seek an express order for a personal payment or non-indemnification order because such an order is necessarily, if impliedly, sought in any claim for a civil pecuniary penalty and so not a matter requiring specific pleading (relying upon Australian Building and Construction Commission v Construction, Forestry, Maritime, Mining and Energy Union (No 4) (2021) 173 ALD 112 at [23]-[24] per Rares J). Mr Ellis did not contend that the ACCC was prevented from seeking the non-indemnification order by reason that the proposed order had not been included in the amended originating application. However, as discussed below, Mr Ellis contends that the Court does not have power under the Act to make the type of non‑indemnification order sought by the ACCC.
On the application for relief, BlueScope filed written submissions dated 29 March 2023 and read the following affidavits:
(a)an affidavit dated 24 March 2023 of Peter Armitage, a partner of Ashurst who was retained to provide legal services for BlueScope between approximately April 2016 and January 2018 with respect to the ACCC's investigation of BlueScope's conduct which became the subject of these proceedings;
(b)an affidavit dated 28 March 2023 of Debra Joy Counsell, the Chief Legal Officer of BlueScope;
(c)an affidavit dated 28 March 2023 of Nathan John Harle, the Reporting, Governance & Risk Manager at BlueScope;
(d)an affidavit dated 29 March 2023 of Darren John Mackenzie, the General Counsel of BlueScope’s Australian Steel Products division; and
(e)an affidavit dated 29 March 2023 of Liana Janet Witt, a partner of Gilbert + Tobin, the solicitors for BlueScope in these proceedings.
None of the above deponents were required for cross-examination. The ACCC objected to a small number of statements contained within the affidavits, largely on the basis that they were expressions of opinion or were conclusory in form. I considered that the objections related more to the weight to be given to the statements rather than their admissibility. I have taken the objections into account in assessing those statements.
BlueScope did not contest (other than in minor respects) the form of declaratory relief sought by the ACCC. In respect of pecuniary penalty, BlueScope submitted that an aggregate penalty in the range of $30-40 million was appropriate in all the circumstances.
On the application for relief, Mr Ellis filed written submissions dated 29 March 2023 and read an affidavit sworn by him on 27 February 2023 concerning his current financial position. Mr Ellis was cross-examined by the ACCC on that topic.
Mr Ellis did not contest the form of declaratory relief sought by the ACCC. In respect of pecuniary penalty, Mr Ellis submitted that an aggregate penalty in the range of $100,000 to $125,000 was appropriate in all the circumstances. In respect of both the disqualification order and the non-indemnification order, Mr Ellis submitted that the Court is not empowered to make the orders as sought by the ACCC. Mr Ellis further submitted that, even if the Court is empowered to make those orders, they were not appropriate in the circumstances of this case.
During the hearing of the application for relief, I invited further evidence or submissions with respect to two issues. The first concerned Mr Ellis’s salary and other remuneration from BlueScope during the period of the attempts to induce cartel conduct. The second concerned the loss or damage that could potentially have been suffered by purchasers of flat steel products in Australia if the attempts to induce the cartel conduct had been successful. In response to that invitation:
(a)the ACCC tendered (as against Mr Ellis) a second statement of agreed facts dated 18 April 2023 agreed between the ACCC and Mr Ellis in relation to Mr Ellis’s salary and other remuneration from BlueScope during the period of the attempts;
(b)on 19 April 2023, the ACCC filed a further submission on the question of potential loss or damage to purchasers of flat steel products in Australia;
(c)on 26 April 2023, BlueScope filed a further submission on the question of potential loss or damage to purchasers of flat steel products in Australia; and
(d)on 27 April 2023, Mr Ellis notified the Court that he adopted the further submission filed by BlueScope.
For the reasons that follow, I consider it appropriate to grant declaratory relief largely in the form proposed by the ACCC and to order that:
(a)BlueScope pay an aggregate pecuniary penalty of $57,500,000; and
(b)Mr Ellis pay an aggregate pecuniary penalty of $575,000,
in respect of their respective attempts to induce understandings with competitors that contained cartel provisions. I will not make the disqualification order sought by the ACCC. I consider that the Court is not empowered to make that order and, even if the Court has power, I would decline to make the order as a matter of discretion. I will, though, make the non-indemnification order. I consider that the Court has power to make such orders and the order is appropriate in the circumstances of this case.
DECLARATORY RELIEF
The application for declaratory relief can be addressed relatively briefly. This Court has a broad discretionary power to make declarations of right under s 21 of the Federal Court of Australia Act 1976 (Cth).
As observed by the Full Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 (ABCC v CFMEU) at [90], the fact that the parties have agreed that a declaration of contravention should be made does not relieve the Court of the obligation to satisfy itself that the making of the declaration is appropriate. However, the Full Court also stated (at [93]):
Declarations relating to contraventions of legislative provisions are likely to be appropriate where they serve to record the Court’s disapproval of the contravening conduct, vindicate the regulator’s claim that the respondent contravened the provisions, assist the regulator to carry out its duties, and deter other persons from contravening the provisions: Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] ATPR 42-140 at [6], and the cases there cited; Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [95].
I am satisfied that the ACCC has a real interest in seeking declaratory relief in this proceeding. Declaratory relief serves to record the Court’s disapproval of the relevant conduct and to vindicate the ACCC’s claim that BlueScope and Mr Ellis attempted to induce nine competing suppliers of flat steel products in Australia to contravene s 44ZZRJ of the Act by arriving at an understanding that contained a cartel provision.
The Court is not bound by the form of the declarations proposed by the parties and must determine for itself whether the form is appropriate. As stated by the High Court in Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [89], a declaration that a person has contravened a statutory prohibition should indicate the gist of the findings that identify the contravention. The declaration should accurately reflect the contravening conduct in a concise way: Australian Competition and Consumer Commission v Danoz Direct Pty Ltd [2003] FCA 881; 60 IPR 296 per Dowsett J at [260].
As noted earlier, the form of declaratory relief sought by the ACCC largely reflects the ultimate findings made by the Court in the Liability Judgment. I consider that that form of declarations is appropriate.
PECUNIARY PENALTY TO BE IMPOSED ON BLUESCOPE
The statutory power to impose a pecuniary penalty
During the relevant period, s 76(1)(d) of the Act provided that if the Court is satisfied that a person has attempted to induce another person to contravene a provision of Pt IV (including relevantly s 44ZZRJ):
… the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.
The principles that guide the exercise of the Court’s discretion in the imposition of a pecuniary penalty under s 76(1) are well established. Save in two respects, the applicable principles were not in dispute between the parties. The first matter of dispute concerned the maximum penalty that may be imposed by the Court in the circumstances of this case. The second matter of dispute concerned the application of the statutory limitation period in s 77(2) to the conduct involving OneSteel. I will turn to those issues after briefly stating the uncontroversial principles.
Accepted principles
The following matters are uncontroversial.
First, the penalty to be imposed under s 76(1) is a penalty that the Court determines to be appropriate.
Second, the Court is empowered to impose a penalty on a person in respect of each act or omission by the person to which s 76(1) applies. In the present case, the parties were agreed that the relevant “acts” to which s 76(1) applied were each of the attempts to induce the nine suppliers of flat steel products to contravene s 44ZZRJ. The ACCC did not advance a contention that it was open to the Court to impose a penalty in respect of the separate acts undertaken by BlueScope that formed part of each attempt to induce the cartel conduct. I therefore proceed on the agreed basis that there were nine “acts” in total. As already noted, a question arises with respect to the application of the statutory limitation period in s 77(2) to the attempt involving OneSteel.
Third, the principal object of imposing a pecuniary penalty is deterrence; both the need to deter repetition of the contravening conduct by the contravener (specific deterrence) and to deter others who might be tempted to engage in similar contraventions (general deterrence): Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 (TPG) at [65] per French CJ, Crennan, Bell and Keane JJ; Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ and [110] per Keane J. The Court must seek to “put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene” the relevant statute: Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 (Pattinson) at [15] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ, citing Trade Practices Commission v CSR Limited [1991] ATPR 41-076 (TPC v CSR) at [50] per French J (as his Honour then was). The penalty imposed should not be regarded by the contravenor or others as an acceptable cost of doing business: TPG at [66] per French CJ, Crennan, Bell and Keane JJ) citing Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249 at [62]-[63]. A penalty should nonetheless be proportionate in the sense of striking “a reasonable balance between deterrence and oppressive severity” (Pattinson at [41], [46]-[47]). The question, therefore, is what is required to achieve deterrence in the specific circumstances of the case.
Fourth, the level of penalty required to achieve the objective of deterrence in a given case depends upon the facts and circumstances of the case. Section 76(1) requires the Court to take into account four specific considerations and all other relevant matters. The four specific considerations are:
(a)the nature and extent of the act or omission;
(b)any loss or damage suffered as a result of the act or omission;
(c)the circumstances in which the act or omission took place; and
(d)whether the person has previously been found by a court in proceedings under (relevantly) Pt IV to have engaged in any similar conduct.
In TPC v CSR (at 52,152-52,153), French J (as his Honour then was) listed a number of matters potentially relevant to the assessment of penalty under s 76 of the Act, some of which overlap with the mandatory considerations enumerated in s 76(1). Those factors have been referred to on many occasions in the assessment of penalties and have become known as the “French factors”. They are:
(a)the nature and extent of the contravening conduct;
(b)the amount of loss or damage caused;
(c)the circumstances in which the conduct took place;
(d)the size of the contravening company;
(e)the degree of power it has, as evidenced by its market share and ease of entry into the market;
(f)the deliberateness of the contravention and the period over which it extended;
(g)whether the contravention arose out of the conduct of senior management or at a lower level;
(h)whether the company has a corporate culture conducive to compliance with the Act as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention;
(i)whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention.
Another factor that is relevant to the assessment of penalty is the size of any financial advantage obtained from the contravening conduct, as well as the intention or the potential to profit from the contravening conduct. Effective deterrence requires the penalty to be substantial relative to the possible gain that may have been achieved if the attempt to induce cartel conduct had been successful, adapting the observation of the Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 (Reckitt Benckiser) at [153]. As stated by the Full Court (Middleton, Beach and Moshinsky JJ) in Australian Competition and Consumer Commission v Cement Australia Pty Ltd (2017) 258 FCR 312 (Cement Australia), the intention to profit from contravening conduct must be deterred even if it could be shown by the contravenor that no actual profit was made, and that “the higher the intended benefit (even if not actually received), the higher the penalty required to satisfy the object of deterrence, all else being equal” (at [467]).
The majority in Pattinson confirmed that regard may properly be had to the above factors as potentially relevant considerations in the assessment of penalty, while recognising that they are not a rigid catalogue of matters for attention nor a legal checklist (at [18] and [19]). In discussing those factors, the majority observed (at [46]-[47]), in the context of s 546 of the Fair Work Act 2009 (Cth) (FW Act)):
46… It is important to recall that an “appropriate” penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a “one-off” result of inadvertence by the contravenor rather than the latest instance of the contravenor’s pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law on the part of a union official, or where the official responsible for a deliberate breach has been disciplined by the union. In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
47The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors of the kind adverted to by French J in CSR. For example, where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
Fifth, in fixing a penalty, the Court should have regard to the maximum penalty prescribed by the legislature: see Markarian v The Queen (2005) 228 CLR 357. However, the statutory maximum penalty is “but one yardstick that ordinarily must be applied” and must be treated as “one of a number of relevant factors”: Reckitt Benckiser at [155]-[156]. In Pattinson, the majority rejected an approach whereby the Court seeks to grade contraventions on a “scale of increasing seriousness, with the maximum to be reserved exclusively for the worst category of contravening conduct” (at [49]). The majority explained (at [55]) that:
… the maximum penalty does not constrain the exercise of the discretion under s 546 (or its analogues in other Commonwealth legislation), beyond requiring “some reasonable relationship between the theoretical maximum and the final penalty imposed”. This relationship of “reasonableness” may be established by reference to the circumstances of the contravenor as well as by the circumstances of the conduct involved in the contravention. That is so because either set of circumstances may have a bearing upon the extent of the need for deterrence in the penalty to be imposed. And these categories of circumstances may overlap.
Sixth, in determining the appropriate penalty for a multiplicity of civil penalty contraventions, the Court may have regard to two common law principles that originate in criminal sentencing: the “course of conduct” principle and the “totality” principle: Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243 (Yazaki Corporation) at [226]. Under the “course of conduct” principle, the Court considers whether the contravening acts or omissions arise out of the same course of conduct or the one transaction, to determine whether it is appropriate that a “concurrent” or single penalty should be imposed for the contraventions: Yazaki Corporation at [234]. The principle guards against the risk that the respondent is “doubly punished” in respect of multiple contravening acts or omissions that should be evaluated, for the purposes of assessing an appropriate penalty, as a lesser number of acts of wrongdoing: Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1 at [39] per Middleton and Gordon JJ. However, as noted by the Full Court in Yazaki Corporation (at [227]), it is not appropriate or permissible to treat multiple contravening acts or omissions as just one contravention for the purposes of determining the maximum limit dictated by the relevant legislation. Accordingly, the maximum penalty for the course of conduct is not restricted to the prescribed statutory maximum penalty for each contravening act or omission: Yazaki Corporation at [229]-[235]. The “totality” principle operates as a “final check” to ensure that the penalties to be imposed on a wrongdoer, considered as a whole, are just and appropriate and that the total penalty for related offences does not exceed what is proper for the entire contravening conduct in question: Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 (TNT Australia); Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53 per Goldberg J; Australian Competition and Consumer Commission v Coles Supermarkets [2014] FCA 1405 at [132] per Gordon J.
Seventh, in common with criminal sentencing, determining a civil penalty usually involves multi-factorial decision-making, identifying and balancing all the factors relevant to the contravention, and where the result is arrived at by a process of “instinctive synthesis” of the relevant factors: Reckitt Benckiser at [44].
Maximum penalty
The maximum penalty that the Court may impose on BlueScope in respect of the offending conduct was governed by s 76(1A) which relevantly provided as follows:
(1A) The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed:
(aa) for each act or omission to which this section applies that relates to section 44ZZRJ or 44ZZRK—the greatest of the following:
(i) $10,000,000;
(ii) if the court can determine the total value of the benefits that have been obtained (within the meaning of Division 1 of Part IV) by one or more persons and that are reasonably attributable to the act or omission—3 times that total value;
(iii) if the Court cannot determine the total value of those benefits—10% of the annual turnover (within the meaning of Division 1 of Part IV) of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the act or omission occurred; …
The ACCC and BlueScope agreed that ss 76(1A)(aa)(ii) and (iii) have no application unless the Court is able to conclude that, relevantly, BlueScope obtained a benefit that was reasonably attributable to the attempts to induce cartel conduct.
In its further amended statement of claim, the ACCC alleged that BlueScope obtained a benefit from the attempts to induce contraventions of s 44ZZRJ because the acts constituting the attempts had the effect of making it more likely that BlueScope could profitably raise or maintain its prices for flat steel products. The premise for the allegation was that increasing the likelihood of raising prices constituted a benefit within the meaning of ss 76(1A)(aa)(ii) and (iii). The ACCC submitted that increasing the chance of making a profit (or increasing profits) has value and is something that is conventionally valued.
The ACCC submitted that BlueScope obtained a benefit (of that kind) from potentially six of the nine attempts to induce cartel conduct, but it was not possible to determine the total value of the benefits. The ACCC submitted that, in those circumstances, s 76(1A)(aa)(iii) was applicable to those attempts and that the maximum penalty was 10% of BlueScope’s annual turnover as defined in s 44ZZRB. In that regard, the ACCC and BlueScope agreed the following fact:
The annual turnover as defined in s 44ZZRB (being s 45AB as at the date the Proceeding commenced) of the Competition and Consumer Act 2010 (Cth) of BlueScope Steel Limited and its related bodies corporate for the 12 months ending at the end of each month during the period 1 September 2013 to 30 June 2014 was approximately $4,000,000,000.
On the basis of that agreed fact, the ACCC submitted that the applicable maximum penalty for each of those six attempts to induce cartel conduct was $400 million. In respect of each of the other attempts to induce cartel conduct, the ACCC submitted that the applicable maximum penalty was $10 million pursuant to s 76(1A)(aa)(i).
In support of its submission that BlueScope obtained a benefit from potentially six of the nine attempts to induce cartel conduct, the ACCC relied on the following findings made in the Liability Judgment:
(a)First, commencing from October 2013, BlueScope began noting that some distributors were setting their prices using CIPA’s price lists as a benchmark or base level in accordance with the benchmarking strategy (LJ [1005], [1066]-[1067], [1129]-[1130], [1451], [1550]). At least four independent distributors were, for a time, pricing in this way: CMC Steel (LJ [1215]-[1216]); Southern Steel (LJ [1129[-[1130]; [1131]-[1132]; [1133]-[1134]; [1140]-[1141]; [1171]-[1172]; [1191]); OneSteel (LJ [1189]; [1225]‑[1226]); and Vulcan Steel (LJ [1186]-[1187]; [1189]). At this time, BlueScope Distribution was also setting its prices in accordance with CIPA’s price lists (LJ [1175]‑[1176]; [1217]-[1224]; [1230]-[1235]).
(b)Second, the setting of prices by independent distributors and BlueScope Distribution by reference to CIPA’s price lists likely had the effect for BlueScope described in the Liability Judgment at [633]:
It is an obvious commercial fact that, if the benchmarking strategy was implemented successfully and distribution customers were able to earn higher margins on the sale of CIPA products, that would enable CIPA to maintain the level of its “net” prices (and avoid having to offer deeper discounts). That would result in higher sales revenue for CIPA.
(c)Third, in promoting the benchmarking strategy to distributors, BlueScope made clear that the strategy was being promoted to other distributors in the market (LJ [641], [662], [735]). This was to reassure distributors that they would not face the risk of losing sales to distributors who were not following the strategy (LJ [1434]). A key occasion on which BlueScope made clear that the strategy was being promoted to other distributors in the market was at the Melbourne Airport meeting. The meeting was attended by representatives from four independent distributors and formed part of the conduct that constituted the attempts to induce cartel conduct (Southern Steel at LJ [1480(d)], Apex Steel at LJ [1472(b)], Vulcan Steel at LJ [1488(b)] and Selection Steel at LJ [1463(b)]). At the meeting each of the attendees, including Mr Smaller of Southern Steel and Mr Wells of Vulcan Steel, witnessed that BlueScope was promoting the benchmarking strategy to at least three other independent distributors. It follows that the conduct of Southern Steel and Vulcan Steel in pricing in accordance with the benchmarking strategy was induced, at least in part, by the attempts by BlueScope to induce the two other independent distributors in attendance at that meeting.
The ACCC submitted that, overall, the effect of the offending conduct was to confer on BlueScope the benefit of making it more likely that BlueScope could profitably raise or maintain its prices for flat steel products. The ACCC argued that that benefit is attributable to conduct in respect of six of the attempts to induce as set out above (ie, CMC Steel, Southern Steel, OneSteel, Vulcan Steel, Apex Steel and Selection Steel). In the alternative, the ACCC argued that the benefit is attributable to the four attempts in respect of distributors who did begin pricing in accordance with the benchmarking strategy (ie, CMC Steel, Southern Steel, OneSteel and Vulcan Steel).
I do not accept the ACCC’s submission that BlueScope obtained a benefit that was reasonably attributable to the attempts to induce cartel conduct.
Sections 76(1A)(aa)(ii) and (iii) refer to benefits that have been obtained by a person and that are reasonably attributable to the act or omission to which s 76 applies. The word “benefit” is defined broadly in s 44ZZRB as meaning “any advantage and is not limited to property”. Thus, the benefit is not confined to monetary profit. Nevertheless, it is implicit in the section that the benefit has a value, although it may not be possible for the Court to determine the value. Furthermore, and most significantly, the question whether a person has obtained a benefit from the act or omission to which s 76 applies is to be determined at the time of applying s 76 and imposing a penalty. It is at that time, effectively today, that the Court must determine whether a person has obtained a benefit.
In that statutory context, it is irrelevant whether, at some earlier point in time (and coincident with the conduct for which the penalty is to be imposed) a person experienced an increased chance to make a profit. If at the time of determining the penalty it is established that no increased profit (or other advantage which is susceptible of valuation) was ultimately obtained from the conduct, ss 76(1A)(aa)(ii) and (iii) can have no application. A chance of making a profit that does not come to fruition is not a benefit obtained.
The evidence adduced at trial, and the further evidence adduced in the penalty hearing, does not establish that BlueScope increased its profits or obtained any other benefit (susceptible of valuation) as a result of the attempts to induce cartel conduct. The evidence established that a material aim or objective of the benchmarking strategy and the overseas mill strategy was to bring about an increase in prices for the supply of flat steel products both at the manufacture/import level of the market and at the distribution level of the market (LJ [1430]). However, the benchmarking strategy could only succeed if a significant number of distributors implemented the strategy by adopting the prices in CIPA’s price lists as a benchmark (or floor price) in setting their own prices. Unless the strategy was adopted by a significant number of distributors, including BlueScope Distribution, those distributors that followed the strategy faced the risk of losing sales to distributors that did not (and offered lower prices) (LJ [1434]). Some of the counterparties rebuffed the attempt at the outset – this included Selection Steel (LJ [1174]), Wright Steel (LJ [764]) and Yieh Phui (LJ [1542]). Other counterparties were sceptical of the benchmarking strategy and did not believe that their competitors would price in accordance with the strategy – this included CMC Steel (LJ [895], [1215]), Brice Metals (part of Southern Steel) (LJ [1155]), and Vulcan Steel (LJ [1186]-[1189], [1197]-[1198]). Some of the counterparties told BlueScope that they supported the concept of the benchmarking strategy – this included OneSteel (LJ [938]), Southern Steel (LJ [1130]), [1134], [1141], [1172]) and CMC Steel (LJ [1215]). However, that does not establish that those distributors in fact set prices in accordance with CIPA’s price lists. The distributors that did attempt to price in that manner lost sales – this included Southern Steel (LJ [1132]) and SMS (LJ [1217], [1218] and [1224]). Overall, the attempts to induce cartel conduct failed (LJ [1435]).
Overall, there is no evidence to support a finding that any change to the pricing behaviour of distributors enabled BlueScope to increase its prices at the manufacture/import level of the market and thereby increase its profits. For those reasons, I consider that ss 76(1A)(aa)(ii) and (iii) have no application in this case and the maximum penalty for each of the attempts to induce cartel conduct is $10 million. The aggregate maximum penalty is therefore $90 million.
Limitation period in respect of the OneSteel attempt
During the relevant period, s 77 of the Act imposed a limitation period in respect of proceedings seeking a pecuniary penalty in the following terms:
(1) The Commission may institute a proceeding in the Court for the recovery on behalf of the Commonwealth of a pecuniary penalty referred to in section 76.
(2) A proceeding under subsection (1) may be commenced within 6 years after the contravention.
It can be observed that the limitation period imposed by s 77(2) refers to the period of 6 years after the “contravention”. Under s 76(1), the Court is empowered to impose a pecuniary penalty in respect of conduct that does not necessarily involve a contravention of a provision of Pt IV of the Act having occurred. In particular, a penalty can be imposed where a person has:
(a)attempted to contravene such a provision;
(b)has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene such a provision; or
(c)has conspired with others to contravene such a provision.
The present case involves attempts to induce other persons to contravene s 44ZZRJ in circumstances where the attempts failed and no contraventions occurred.
The ACCC did not advance a submission that the limitation period imposed by s 77(2) was inapplicable because no contravention had occurred in this case. The parties proceeded on the implicit basis that the reference to “contravention” in s 77(2) must be read as including a reference to each act or omission to which s 76(1) applies and for which a penalty may be imposed.
The ACCC commenced this proceeding on 29 August 2019 by filing an originating application and a concise statement. When the proceeding was commenced, both the originating application and the concise statement omitted any reference to an attempt involving OneSteel. Pursuant to orders of the Court, on 19 December 2019 the ACCC filed a statement of claim. The statement of claim added a new allegation involving an attempt to induce OneSteel to arrive at an understanding containing a cartel provision. The conduct that was alleged to constitute the attempt spanned the time period from 10 September 2013 until 2 June 2014. However, at that time, the ACCC did not seek leave to amend its originating application to include a claim for a pecuniary penalty in respect of those newly added allegations. The ACCC subsequently sought leave to amend its originating application to seek a pecuniary penalty in relation to the OneSteel attempt. On 12 May 2020, I granted the ACCC leave to amend its originating application on the basis that the amendments took effect from 19 December 2019: see Australian Competition and Consumer Commission v BlueScope Steel Limited (No 2) [2020] FCA 625.
By its defence, BlueScope alleged that the ACCC’s claim for relief in respect of the allegations concerning OneSteel were “statute barred under s 77(2) of the Act”.
As noted earlier, the ultimate finding of the Court in the Liability Judgment with respect to the OneSteel attempt was that each of BlueScope and Mr Ellis attempted to induce OneSteel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the Act (at [1552]). I also made the following findings (emphasis added):
1520 I find that the conduct of BlueScope and Mr Ellis with respect to OneSteel relied upon by the ACCC, taken as a whole, constituted steps towards the inducement of an understanding being reached between BlueScope and OneSteel containing a cartel provision, which steps were more than merely preparatory of the inducement and which were immediately and not merely remotely connected with the inducement. The cartel provision was that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia.
…
1522 The conduct of BlueScope and Mr Ellis that constituted the attempt comprised the following (which is a summary of factual findings made earlier in these reasons):
(a) On 10 September 2013, Messrs Ellis and Hennessy met with Mr Lewin of OneSteel during the Australian Steel Institute Conference on the Gold Coast. Mr Ellis asked how CIPA could win more of OneSteel’s business. Mr Lewin said that BlueScope would need to have a more competitive price. Mr Ellis responded with words to the effect that there was an opportunity for OneSteel to use CIPA’s list prices as a pricing benchmark when setting its prices to customers.
(b) On 12 September 2013, Mr Kelso had a conversation with Mr Bolzan, the National Procurement Manager for OneSteel Metalcentre, in relation to the benchmarking strategy. Mr Kelso explained the strategy in words to the effect that: BlueScope was looking to re-jig its price lists so that they were easier to use and increase the upfront list price so that the gap between the import parity price and the list price was increased; and the list price would be set at a level which would allow OneSteel to achieve sufficient margins if it sold to that price. Mr Bolzan indicated that he agreed that if the OneSteel business could use the price list as the “rock bottom price” that they would sell at, their business health would be significantly better going forward. During the conversation, Mr Bolzan asked how he could be sure that the other distributors would do the same, confirming that Mr Bolzan understood that the strategy involved other distributors setting their prices in the same manner. Either during this conversation or a later conversation with Mr Bolzan, Mr Kelso explained that the list price was a baseline or benchmark that OneSteel could use when pricing their products to their end customers.
(c) On 13 September 2013, Messrs Ellis and Hennessy met with Messrs Lambourne and Birchall, the General Manager and National Manager respectively of OneSteel, at the Qantas meeting rooms at Sydney Airport. Mr Ellis asked what BlueScope could do to increase sales to OneSteel. Mr Birchall said that BlueScope needed to lower its prices. Mr Ellis replied by saying words to the effect that there was an opportunity for OneSteel to raise its prices by using CIPA’s list prices as a benchmark and that CIPA was currently working on its December price list.
(d) The conduct referred to in paras 1463(d) and (e).
(e) On 17 September 2013, Mr Kelso had a discussion with OneSteel Sheet & Coil about CIPA’s proposed Distribution Market list prices for sheet and coil products in which OneSteel Sheet & Coil indicated that they were comfortable with the proposed prices.
(f) On 17 September 2013, Mr Hennessy sent an email to Messrs Birchall and Szecsodi of OneSteel Sheet & Coil, copying Mr Lambourne of OneSteel and Messrs Ellis and Kelso of BlueScope, attaching a version of the December 2013 Benchmark spreadsheet. The email referred to “our recent discussions”. The email was sent with Mr Ellis’s express or tacit approval. Sending the December 2013 Benchmark spreadsheet to distributors represented a change from CIPA’s previous practices. Prior to this, BlueScope’s internal calculations of the kind contained in the December 2013 Benchmark spreadsheet (including the net price calculations) were not sent to distributors.
(g) On 17 September 2013, Mr Kelso sent an email to Messrs Lewin and Bolzan of OneSteel Metalcentre, copying Mr Hennessy, and attaching an extract of the December 2013 Benchmark spreadsheet limited to plate products (which were distributed by OneSteel Metalcentre). The email referenced earlier discussions, including those at the Australian Steel Institute conference on the Gold Coast, and expressed the hope that OneSteel would “find that this is the right step in bringing some value back to Distributors in the market”.
(h) On 19 September 2013, Mr Kelso sent an email to Messrs Birchall and Szecsodi of OneSteel Sheet & Coil attaching a copy of CIPA’s Distribution Market price list for sheet and coil products for December 2013. On 20 September 2013, Mr Kelso also sent an email to, amongst others, Messrs Bolzan and Lewin of OneSteel Metalcentre attaching CIPA’s Distribution Market price lists for a range of steel plate products for December 2013.
(i) On 20 December 2014, Mr Cooper (in the absence of Mr Kelso) sent an email to (amongst others) Messrs Birchall and Szecsodi of OneSteel Sheet & Coil attaching a price notification letter, CIPA’s Distribution Market price list for sheet and coil products for March 2014 and the presentation titled “Distribution Sheet & Coil Price List Changes”. As noted in respect of Selection Steel above, for the first time these documents contained an express reference to recommended resale prices. On the same day, Mr Cooper also sent an email to, amongst others, Messrs Bolzan and Lewin of OneSteel Metalcentre attaching CIPA’s Distribution Market price lists for a range of steel plate products for March 2014. In contrast to CIPA’s Distribution Market price list for sheet and coil products which had at that time been reformulated to refer to “recommended resale prices”, the price notification letter and price lists for steel plate products did not use that expression. However, the covering email listed standard plate products with “recommended resale prices”.
(j) On 4 February 2014, Mr Kelso sent an email to Messrs Bolzan and Lewin of OneSteel Metalcentre attaching a price notification letter and CIPA’s Distribution Market price lists for a number of steel plate products for April 2014. Again, the covering email listed standard plate products with “recommended resale prices”.
(k) On 6 March 2014, Mr Kelso sent an email to (amongst others) Messrs Birchall and Szecsodi of OneSteel attaching a price notification letter and CIPA’s Distribution Market price list for sheet and coil products for May 2014. The price notification letter and the Distribution Market price list for sheet and coil products were in the same format as March 2014, including particularly the references to “recommended resale price” in both the price notification letter and the price list.
(l) On 2 April 2014, Mr Kelso sent an email to (amongst others) Messrs Bolzan and Lewin of OneSteel Metalcentre attaching a price notification letter and CIPA’s Distribution Market price lists for a number of steel plate products for June 2014. Again, the covering email listed standard plate products with “recommended resale prices”.
(m) On 30 April 2014, Mr Kelso sent an email to (amongst others) Mr Bolzan attaching a price notification letter and CIPA’s Distribution Market price list for sheet and coil products for July 2014. The price notification letter and the Distribution Market price list for sheet and coil products were largely in the same format as the versions since March 2014, including particularly the references to “recommended resale price” in both the price notification letter and the price list.
(n)On 2 June 2014, Mr Kelso sent an email to (amongst others) Messrs Bolzan and Lewin of OneSteel Metalcentre attaching a price notification letter and CIPA’s Distribution Market price lists for a number of steel plate products for August 2014. Again, the covering email listed standard plate products with “recommended resale prices”.
It can be seen from the above extract that [1522(d)] incorporated by reference the conduct referred to in [1463(d)] and [1463(e)] which was as follows:
(d) Prior to the CIPA pricing meeting held on 16 September 2013, Mr Ellis directed Mr Hennessy to release CIPA’s price lists for December 2013 to distributors and to speak with distributors about using the price lists in setting their prices.
(e) At the CIPA pricing meeting held on 16 September 2013, Mr Hennessy told the pricing and sales managers that Mr Ellis and he had spoken to distributors and told them that there was an opportunity to use CIPA’s price lists as a benchmark when they were setting their prices, to help the distributors to increase their prices and therefore improve their profitability. The December 2013 Benchmark spreadsheet was created for that purpose and included an increase in CIPA’s list prices. The document explained the derivation of CIPA’s list prices for flat steel products to be delivered in December 2013, and calculated the sales margin that would be earned if BlueScope products were sold at the list prices and if imported products were bought at the stated import parity prices and sold at the list prices. It was not a document that had been previously created for use by distributors. In an email sent to pricing and sales managers on 16 September 2013, Mr Unicomb explained the strategy as setting a recommended retail price in the market for distributors to use as a base for their pricing, and which would hopefully increase margins in the channel. This occurred with Mr Ellis’s express or tacit approval. The senior sales managers understood that they were to communicate the benchmarking strategy in those terms. Mr Hennessy also encouraged the senior sales managers to inform distribution customers that they should have confidence to sell at the list prices because BlueScope was also reducing tactical pricing.
Two matters are immediately apparent from the above findings. First, it was the conduct of BlueScope and Mr Ellis with respect to OneSteel taken as a whole that constituted an attempt to induce the cartel conduct (arriving at an understanding that contained a cartel provision). Second, the conduct of BlueScope and Mr Ellis that constituted the attempt commenced on 10 September 2013 and continued until 2 June 2014. The question that arises is: how does s 77(2) apply in those circumstances?
In its written submissions, BlueScope argued that, in the circumstances described above, the ACCC is not permitted to seek a pecuniary penalty in respect of the OneSteel attempt. BlueScope argued that the conduct that pre-dated 19 December 2013 cannot be the subject of a penalty, and cannot be taken into account because this would create a risk that BlueScope would be penalised for conduct which Parliament has said should not be subject to a penalty (relying on Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd [2019] FCA 786; 370 ALR 637 at [149] per Perram J). In respect of the conduct after 19 December 2013, no finding has been made that this conduct, on its own, amounted to the relevant attempt to induce and therefore no penalty can be imposed in respect of that conduct. In the course of oral submissions, BlueScope advanced an alternative argument. It submitted that s 77(2) can be given a sensible operation by penalising those acts that are within the 6 year limitation period and not penalising those acts that are outside the limitation period.
The ACCC submitted that s 77(2) operates as a limitation provision, where the relevant cause of action is created by s 76 (relying on Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190 at [547] per Dowsett and Edelman JJ). On the findings made by the Court, the cause of action constituted by the OneSteel attempt was not complete until 2 June 2014. On that basis, the ACCC’s application under s 77(1) to recover on behalf of the Commonwealth a pecuniary penalty in respect of the OneSteel attempt is not time barred by s 77(2).
I accept the ACCC’s submission. As observed by the learned author of the Law of Limitation (Dal Pont, 2nd ed) at [2.1], time bars found in limitation statutes have long been characterised as primarily “procedural” in character, in the sense that they prescribe a procedural bar to pursuing an action rather than one that ousts the legal right in question. Most commonly, limitation periods are defined by reference to a cause of action, where the relevant time period is calculated from the accrual of the cause of action. In Bradford Old Bank v Sutcliffe [1918] 2 KB 833, Scrutton LJ stated the principle in the following terms (at 848):
The numerous cases decided on particular facts are all reducible to one principle. When the Statute of James provided that actions must be commenced within six years “next after the cause of such actions” it meant after the occurrence of all the facts which the plaintiff must prove as part of his case — that is, at the time when the plaintiff could first have brought his action and proved sufficient facts to sustain it: see per Lindley L.J. in Reeves v. Butcher [1891] 2 QB 509, as explained by the Court of Appeal in Coburn v. Colledge [1897] 1 QB 702.
Similarly, in Williams v Milotin (1957) 97 CLR 465, the High Court stated that a cause of action means “the essential ingredients in the title to the right which it is proposed to enforce” (at 474).
I consider that the same principle underlies the language of s 77(2) of the Act. The phrase “within 6 years after the contravention” should be construed as meaning within 6 years after the accrual or commission of the contravention. That requires the identification of all the facts that the ACCC must prove in order to establish the contravention. As noted earlier, the reference to “contravention” must be taken to include a reference to each act or omission to which s 76(1) applies and for which a penalty may be imposed. Accordingly, the application of s 77(2) in the present case requires the identification of all the facts that the ACCC was required to prove in order to establish the act or omission to which s 76(1) applies and for which a penalty may be imposed.
In the present case, the relevant “act or omission” to which s 76(1) applied was an attempt to induce OneSteel to arrive at an understanding containing a cartel provision. The conduct that was alleged by the ACCC to constitute the attempt spanned the time period from 10 September 2013 until 2 June 2014. In the Liability Judgment, I found that that conduct, taken as a whole, constituted the attempt. Neither the ACCC nor BlueScope advanced a case at trial that, if an attempt occurred, the conduct constituting the attempt was complete prior to 19 December 2013. In the penalty hearing, BlueScope submitted that the conduct that occurred before 19 December 2013 was more significant than the conduct that occurred after that date. It did not submit, however, that the attempt was complete prior to 19 December 2013.
Having regard to the case advanced by the ACCC, and the findings made in respect of that case, in my view the “act or omission” to which s 76(1) applied, being the attempt to induce OneSteel to arrive at an understanding containing a cartel provision, was committed or was complete on 2 June 2014. It follows that s 77(2) did not prevent the ACCC from seeking a penalty in respect of that conduct.
Consideration of the relevant factors
This section of the reasons considers the statutory factors required to be taken into account, together with other relevant considerations, in the assessment of appropriate penalties to be imposed on BlueScope. The factual findings referred to below are largely drawn from the Liability Judgment, although some matters were the subject of additional evidence given at the penalty hearing. In what follows, I have relied on the totality of the factual findings made in the Liability Judgment.
Nature and extent of the offending conduct
The nature and extent of the offending conduct includes consideration of whether the offending conduct was systematic, deliberate or covert (see J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission [2000] FCA 365; 172 ALR 532 at [158] and [163]) and the period over which it extended.
The offending conduct for which a penalty is to be imposed in this case constituted attempts to induce cartel conduct (arriving at understandings with competing suppliers of flat steel products that contained a cartel provision contrary to s 44ZZRJ). In Yazaki Corporation, the Full Court observed (at [257]) that an appropriate penalty for cartel conduct needs to reflect that such conduct is “generally regarded as the most pernicious of all breaches of competition law”, is “often attended by secrecy” and is “notoriously difficult to identify”, and may only be detected a long time after it manifests. Each of those descriptions is applicable to the attempts to induce cartel conduct the subject of this proceeding.
The benchmarking strategy and the overseas mill strategy were deliberate and systematic strategies the aim of which was to bring about an increase in prices for the supply of flat steel products both at the manufacture/import level of the market and at the distribution level of the market (LJ [1430]). BlueScope pursued the strategies from early September 2013 to as late as June 2014. Ultimately, none of the attempts to induce cartel conduct were successful. In some instances, the attempts were rebuffed because the counterparties believed that BlueScope’s proposal would or might involve a contravention of the law; in other instances, the attempts were ignored because the competitive pressure from imported steel made BlueScope’s proposal commercially unviable (LJ [11]). It is significant that the offending conduct did not cease because BlueScope management realised that the goal being pursued was prohibited by the Act.
In Foster, the Full Court concluded that an injunction restraining Mr Foster from being involved in the promotion or conduct of any business relating to weight loss, cosmetic or health industry products or services was within the scope of the power. However, the injunction was confined to a particular field of commercial activity in which Mr Foster had engaged in contravening conduct. The Full Court considered that there was a “demonstrable nexus between the proven contravention of the Act and the terms of the injunction granted” (at [38]).
In contrast to Foster, the ACCC seeks an order that Mr Ellis be disqualified from managing corporations for a period of 7 years. The proposed order is not confined to the steel industry in which the offending conduct occurred, and has no real connection with the offending conduct other than the fact the conduct occurred whilst Mr Ellis was a manager at BlueScope. I consider that the proposed order extends beyond the range of conduct for which an injunction under s 80(1) may be granted, in that there is an insufficient nexus between the offending conduct and the conduct which is to be restrained.
Accordingly, I will not make the disqualification order sought by the ACCC.
Pecuniary penalty
Mr Ellis is subject to the imposition of a pecuniary penalty under s 76(1)(d) for the offending conduct in the same manner as BlueScope. Many of the factors relevant to the assessment of the penalty to be imposed on BlueScope are equally applicable to the assessment of the penalty to be imposed on Mr Ellis and will not be repeated. The following considerations are specific to the imposition of a penalty on an individual (as opposed to a corporation) and Mr Ellis’s personal circumstances.
Maximum penalty
Under s 76(1B), the maximum penalty that may be imposed on an individual for each act or omission to which s 76 applies is $500,000. Thus, the maximum penalty for each of the attempts is $500,000. The aggregate maximum penalty is therefore $4.5 million.
Mr Ellis’s role in the offending conduct
Mr Ellis had a central role in the offending conduct. Each of the alleged attempts was the outworking of the benchmarking strategy or, in the case of Yieh Phui, the overseas mill strategy, devised by Mr Ellis and implemented under his direction (LJ [1423]). While other employees of BlueScope were involved in the offending conduct, each acted in accordance with directions given (directly or indirectly) by Mr Ellis. Further, Mr Ellis was directly and personally involved in most of the key meetings with the counterparties, including:
(a)the Melbourne Airport meeting on 6 September 2013 (LJ [701]);
(b)the meetings with CMC Steel, Vulcan Steel and OneSteel at the Australian Steel Institute Conference on 9 and 10 September 2013 (LJ [736]), [739], [742]);
(c)the meeting with Mr Wright on 12 September 2013 (LJ [804]);
(d)the meeting with Selection Steel on 13 September 2013 (LJ [838]);
(e)the meeting with OneSteel on 13 September 2013 (LJ [854]);
(f)the meeting with CMC Steel in mid-September 2013 (LJ [894]);
(g)the meeting with CMC Steel on 22 October 2013 (LJ [1065]);
(h)the meeting with Selwood Steel on 30 October 2013 ([1127]); and
(i)the meeting with Yieh Phui on 26 February 2014 (LJ [1359]).
It follows that Mr Ellis bears full responsibility for the offending conduct.
Mr Ellis’s cooperation and contrition
On the matters of cooperation and contrition, there is nothing that can be said in Mr Ellis’s favour and no discount to penalty should be given.
Following the commencement of the ACCC’s investigation of the offending conduct, Mr Ellis urged each of Mr Hennessy and Mr Schulz to give information to the ACCC that was false or misleading, knowing that the information was false or misleading (LJ [296]). On 8 December 2019, Mr Ellis was charged with two counts of inciting the obstruction of a Commonwealth official pursuant to ss 11.4(1) and 149(1) of the Commonwealth Criminal Code arising out of the discussions he had had with Messrs Hennessy and Schulz in relation to the ACCC investigation. On 1 September 2020, Mr Ellis pleaded guilty to a single “rolled-up” charge of inciting the obstruction of a Commonwealth official (LJ [297]). Mr Ellis submitted, and I accept, that he should not be punished twice for that conduct. However, the conduct is relevant to the assessment of cooperation and contrition.
The fact that Mr Ellis contested the ACCC’s allegations at trial is not an aggravating factor and will not result in any additional penalty beyond what would otherwise be the case. Similarly, while an absence of evidence as to contrition would mean that Mr Ellis would receive no discount to penalty, this would not aggravate the penalty: Director of the Fair Work Building Industry Inspectorate v Stephenson (2014) 146 ALD 75 at [87] per White J.
Mr Ellis’s financial position
Mr Ellis submitted that he has limited financial means and that this should be taken into account in the assessment of penalty. In support of that submission, Mr Ellis relied on the principles that:
(a)a penalty must not be so high as to be oppressive or crushing (referring to Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd [1978] ATPR 40-091 at 17,896 per Smithers J; NW Frozen Foods at 293 per Burchett and Kiefel JJ; and Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [215] per Middleton J); and
(b)a lesser penalty will be imposed on a corporation or individual with a reduced capacity to pay (referring to Schneider Electric (Australia) Pty Ltd v ACCC (2003) 127 FCR 170 at [13] per Sackville J and at [58] per Merkel J, with Black CJ agreeing; Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247; ATPR 42-091 (High Adventure) at [14] per Heerey, Finkelstein and Allsop JJ; and Australian Securities and Investments Commission v Kobelt [2017] FCA 387 at [108] per White J).
I accept that the respondent’s financial means is a factor that should be taken into consideration in the assessment of an appropriate penalty. That is a long-standing principle. Recently, the High Court majority in Pattinson observed (at [60]) that, all other things being equal, a greater financial incentive will be necessary to persuade a well-resourced contravenor to abide by the law than will be necessary to persuade a poorly resourced contravenor that its unlawful policy preference is not sustainable. However, the majority in Pattinson also made clear that both the circumstances of the contravenor and the circumstances of the contravention may be relevant to the assessment of the level of penalty required to achieve deterrence (at [56]-[57]). In that respect, Mr Ellis overstates the effect of the authorities referred to by him. A penalty is not oppressive merely because it is beyond the respondent’s financial means to pay; a penalty is oppressive when it is greater than is necessary to achieve the object of deterrence: NW Frozen Foods at 293. The authorities recognise that the objective of general deterrence may require the imposition of a penalty that is beyond the respondent’s financial means and which may cause insolvency: see High Adventure at [11]; Australian Competition and Consumer Commission v CryositeLtd [2019] FCA 116; 135 ACSR 231 at [78] per Beach J. As the Full Court observed in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513 (at [19] and [20]), there will be situations where, notwithstanding that a company is in liquidation, it is appropriate, for one or a range of factors, to impose a penalty; for example, a court may impose a penalty on a company in liquidation if, to do so, would clearly and unambiguously signify to companies or traders in a discrete industry that a penalty of a particular magnitude was appropriate if others in the industry sector engaged in the same or similar conduct.
Mr Ellis filed an affidavit setting out his financial position in each financial year since the financial year ending 30 June 2020, in accordance with orders of the Court that had been sought by the ACCC and Mr Ellis and made by consent. Mr Ellis was cross-examined. I make the following findings with respect to that evidence.
In the financial year ending 30 June 2020, the sole source of Mr Ellis’s income was a distribution of $90,000 from the Curl Curl Trust, a discretionary trust of which Mr Ellis was a beneficiary until 18 November 2021. Mr Ellis explained that the Curl Curl Trust was amended on 18 November 2021 to remove Mr Ellis as a beneficiary, or a member of any eligible class of beneficiaries, because the National Australia Bank informed the Curl Curl Trust that it would not agree to a refinance a loan if Mr Ellis continued to have any connection to the Curl Curl Trust. This was due to Mr Ellis’s criminal conviction on 15 December 2020 on two counts of inciting the obstruction of a Commonwealth official. The trustee of the Curl Curl Trust is Sophon Investments Pty Ltd. Mr Ellis was previously the sole director and shareholder of that company. Mr Ellis subsequently transferred the shares in the company to his wife, Sophie Ellis, and was also replaced as a director by his wife. Mr Ellis’s wife continues to hold the shares in the company, but the company’s director is now Mr Ellis’s brother-in-law. Mr Ellis confirmed that he and his wife discussed with his brother-in-law what distributions are to be made from the Curl Curl Trust.
In the financial year ending 30 June 2021, the source of Mr Ellis’s income was as an employee of Stoddart Group Pty Limited, a metal roofing installer. Mr Ellis was employed by Stoddart from 1 July 2020 to 4 February 2021. During that financial year, Mr Ellis did not receive any distribution of ordinary income from the Curl Curl Trust or from any other source.
In the financial year ending 30 June 2022, Mr Ellis provided consulting services to various steel mills and steel trading businesses outside of Australia and metals-based businesses in Australia through a company called J T Ellis Consulting Pty Ltd (JTEC). Mr Ellis established JTEC with his wife and was a director until the end of 2020 when he resigned as director. His wife continues as the sole director. Mr Ellis does not have a written contract with the company and the amounts paid to him are determined through a conversation with his wife. As at the date of giving evidence, Mr Ellis had received periodic payments from JTEC totalling $10,000 in respect of the financial year ending 30 June 2022, but had not received a final declaration of income and was not able to estimate the amount that will be paid to him by way of a final declaration of income.
In respect of the financial year ending 30 June 2023, Mr Ellis expected that income from JTEC would be his sole source of income. As at the date of giving evidence, Mr Ellis had received periodic payments from JTEC totalling $7,500.
Mr Ellis deposed that he does not hold a beneficial interest in any shares and does not own any real estate or personal property valued over $10,000. In cross-examination, Mr Ellis gave evidence that the Curl Curl Trust owns 25% of the units in a unit trust which is developing industrial land in Newcastle. Mr Ellis confirmed that he continues to manage that investment on behalf of the Curl Curl Trust, notwithstanding that he is no longer a beneficiary of the Trust and he is no longer a director of the trustee company, Sophon Investments Pty Ltd. Mr Ellis said in cross-examination that he did not know the value of that investment. Mr Ellis said that the Curl Curl Trust also has around $600,000 in cash and a $400,000 liability.
Mr Ellis’s affidavit set out the monthly balances of his bank accounts between July 2020 and January 2023. The closing balance as at 23 February 2023 was $129.45. However, the monthly balances show three substantial deposits: an amount of approximately $646,000 in November 2020, an amount of approximately $138,000 in December 2020 and an amount of approximately $69,000 in December 2021. In cross-examination, Mr Ellis said that the source of those funds was a loan from the Curl Curl Trust. The amounts paid into the bank accounts in November and December 2020 were subsequently withdrawn, and Mr Ellis said that the funds were used to repay loans to his parents. The amount paid into the bank accounts in December 2021 were also subsequently withdrawn, but Mr Ellis did not recall the purpose for which the funds were expended.
Mr Ellis’s affidavit also set out the value of his loans in excess of $10,000 in each of the financial years since 30 June 2020. As at 30 June 2021, Mr Ellis had a loan of $650,000 from the Curl Curl Trust and a loan of $175,319 from JTEC. In cross-examination, Mr Ellis confirmed that the loan from the Curl Curl Trust was subsequently forgiven. That decision was made by Mr Ellis and his wife (notwithstanding that Mr Ellis’s brother-in-law was the director of the trustee company). The loan from JTEC was reduced to $81,880 as at 30 June 2022 by way of offsetting the value of Mr Ellis’s work for JTEC.
The evidence that was adduced does not present a clear picture of Mr Ellis’s overall financial means. It is clear that Mr Ellis owns virtually no assets and has no financial resources in his own name. It is also clear that that circumstance is not the result of any financial disaster suffered by Mr Ellis, but is the result of his own financial planning choices. His immediate family owns one or more investments through the Curl Curl Trust, and Mr Ellis appears to be the decision-maker in respect of at least one of those investments. The value of that investment was not the subject of evidence given to the Court. Further, there is no clear information about his current earnings and his future earning potential.
Mr Ellis has had a long career in the steel industry, working in Australia and in many Asian countries, commencing with BHP in 1993 (LJ [287]). It can be inferred that he earned reasonable remuneration throughout that period. The ACCC and Mr Ellis tendered a statement of agreed facts concerning Mr Ellis’s earnings at BlueScope during the period of the offending conduct. The agreed facts were as follows:
1. Mr Ellis’ remuneration package for the position of General Manager Sales and Marketing BlueScope ANZ, BlueScope Steel Limited with effect from 1 September 2013 comprised the following:
a. total fixed pay of $490,200 comprising base pay of $430,000 and superannuation or pension contributions of $60,200;
b. short term incentive plan (target award) of $172,000 subject to the financial performance of BlueScope Steel Limited and the terms and conditions of his employment contract; and
c. long term incentive plan subject to the share price of BlueScope Steel Limited and the terms and conditions of his employment contract.
2. On 1 September 2014, Mr Ellis was awarded a payment of $199,864 under the short term incentive plan, which was to be paid on 24 September 2014.
Thus, Mr Ellis earned approximately $600,000 in the year that he commenced as General Manager of Sales and Marketing at BlueScope CIPA, also being the period of the offending conduct. Mr Ellis remained employed in that position at BlueScope until March 2017. From April 2017 until August 2017, Mr Ellis was the VP Innovation and Product Development for CIPA (LJ [290]). From October 2017 until the time of giving evidence at trial (in about September 2021), Mr Ellis was the Deputy Chairman of EmPower Steel Co. Ltd.
The foregoing evidence confirms the inference that I readily draw that Mr Ellis currently owns no assets by reason of his own financial planning choices, and that such wealth that he has gained over the years is held by other members of his family. Having regard to those matters, I place limited weight on the fact that Mr Ellis owns no assets in the assessment of penalty. Given Mr Ellis’s financial circumstances, it can be accepted that any penalty imposed by the Court may not be paid. That is so whether the penalty is within the range of $100,000 to $125,000 as put forward by Mr Ellis, or the range of $600,000 to $800,000 as put forward by the ACCC. The penalty will only be paid if others, no doubt at Mr Ellis’s request, choose to make funds available for that purpose. In those circumstances, I consider that in the assessment of an appropriate penalty the Court should give greater weight to the objective of general deterrence.
Conclusion on appropriate penalty
As already noted, many of the factors relevant to the assessment of the penalty to be imposed on BlueScope are equally applicable to the assessment of the penalty to be imposed on Mr Ellis. Mr Ellis had a central role in the offending conduct. I consider that BlueScope has shown greater contrition in comparison to Mr Ellis.
Plainly, the financial capacity of BlueScope to pay a penalty vastly exceeds the capacity of Mr Ellis. The maximum penalty that may be imposed on Mr Ellis is one twentieth of the maximum penalty that may be imposed on BlueScope, but that statutory ratio does not reflect the circumstances of the present case which involve a very large corporation. Further, the totality principle has particular application in the case of penalties to be imposed on an individual. I am concerned to ensure that the total of the penalties to be imposed on Mr Ellis is just and appropriate for the entirety of the offending conduct.
Taking into account the matters considered above and particularly the totality principle, I consider it appropriate to impose penalties on Mr Ellis that are 1% of the penalties imposed on BlueScope. I consider that the following penalties for each of the attempts is appropriate:
(a)in respect of the attempt involving Selwood Steel, $25,000;
(b)in respect of the attempt involving Wright Steel, $40,000;
(c)in respect of the attempt involving Yieh Phui, $60,000; and
(d)in respect of each of the attempts involving CMC Steel, OneSteel, Vulcan Steel, Southern Steel, Selection Steel and Apex Steel, $75,000,
being an aggregate penalty of $575,000.
Non-indemnification order
The ACCC also seeks a non-indemnification order, being an order that Mr Ellis be prevented from making any claim in respect of, seeking to rely upon, or accepting any indemnity under, any applicable insurance policy for payment or reimbursement of any part of the pecuniary penalty imposed by the Court.
It is uncontroversial that, on 18 October 2019, Mr Ellis’s solicitors wrote to Chubb Insurance Australia Limited (Chubb) to notify it of Mr Ellis’s claim for indemnity under a Directors and Officers Liability Policy issued by ACE Insurance Limited to BlueScope Steel Limited for the period 30 June 2015 to 30 June 2016 (D&O Policy). The letter stated:
In the event any penalty is awarded against Mr Ellis, our client foreshadows that he will seek indemnity under the write back provided by extension clause 3.12 of the policy.
Clause 3.12 of the D&O Policy states:
3.12 Pecuniary Penalties
The Insurer will pay to or on behalf of Insured Persons any amount the Insured Person is legally obligated to pay as a fine or penalty, to the extent permitted by law.
The ACCC contends that s 76(1) includes the power to make a personal payment or non‑indemnification order, relying on the decision of the High Court majority in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 (ABCC). The ACCC submitted that, given Mr Ellis’s central, ongoing and relentless role in the attempts to induce the price fixing understandings, his conduct during the investigation and trial, and his absence of contrition, a non-indemnification order is necessary to ensure that he feels a “real sting or burden” of any penalty ordered and that the penalty achieves the required deterrent effect.
Mr Ellis submitted that the majority judgment in ABCC, which concerned s 546(1) of the FW Act, provides no authority for the proposition that the Court has an implied power in s 76(1) to make an order preventing Mr Ellis from accepting any indemnity. First, in ABCC, the Court was concerned with an indemnity a respondent had obtained from another respondent, and not an indemnity under a policy of insurance with an arm’s length third party insurer. Second, there was no provision in the FW Act that expressly regulated indemnities. In contrast, the Act addresses the question of indemnities with respect to the imposition of pecuniary penalties under s 76. Section 77A provides that a body corporate must not indemnify a person in respect of, relevantly, a pecuniary penalty incurred as an officer of the body corporate. Mr Ellis submitted that s 77A does not apply to contracts of insurance with an arm’s length insurer. Mr Ellis also noted that the Act does not contain a provision that is equivalent to s 199B of the Corporations Act which prohibits a body corporate from paying a premium for a contract insuring an officer of the company against certain liabilities (specifically, a liability arising out of conduct involving a wilful breach of duty in relation to the company or a contravention of ss 182 or 183 of the Corporations Act).
I accept the ACCC’s contention and reject Mr Ellis’s submissions to the contrary. In my view, the reasoning of the High Court majority in ABCC is applicable to s 76(1) of the Act, and the inclusion of s 77A in the Act does not affect the High Court majority’s reasoning.
In ABCC, the High Court concluded that s 546(1) of the FW Act carried with it an implied power to make an order that a contravenor (in that case, Mr Myles) pay a pecuniary penalty order personally and not seek or accept indemnity from a co-contravener (the CFMEU). Section 546(1) of the FW Act was framed in similar terms to s 76(1) of the Act and stipulated, relevantly, that the Federal Court:
… may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.
The majority’s conclusion was based on the principle of construction that a grant of power carries with it everything necessary for its exercise: that includes the power to make orders which are reasonably required or legally necessary to the accomplishment of what is specifically provided to be done by the statute (at [40] per Kiefel CJ and at [115] and [118] per Keane, Nettle and Gordon JJ). With respect to the power to order a person to pay a pecuniary penalty under s 546(1), Keane, Nettle and Gordon JJ observed (at [116], citations omitted):
116As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty’s general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d’être of its imposition.
In my view, the foregoing reasoning is directly applicable to s 76(1) of the Act, given that the language and purpose of the provision is relevantly identical to s 546(1) of the FW Act.
Contrary to the submissions advanced by Mr Ellis, the reasoning of the High Court majority was not confined to the circumstance that one co-offender may pay the penalty imposed on another co-offender. Justices Keane, Nettle and Gordon made clear that the possibility of an indemnity being given by one co-offender to another is only one of the circumstances to which a “personal payment” order under s 546(1) might be directed. Their Honours said (at [119] and [120], citations omitted):
119… s 546 also imports implied power to achieve the effect which a pecuniary penalty is calculated to achieve by ordering that a contravener pay the penalty personally; or where, as here, joint contraveners are ordered to pay pecuniary penalties in respect of certain contraventions – each according to his, her or its relative share of responsibility for the contravention – implied power to achieve the relative degrees of sting or burden determined by the judge by ordering that neither contravener seek or accept indemnity or contribution from the other. The implied power to make a personal payment order is closely analogous to the court’s power to order a contemnor to pay a fine personally, and an order that joint contraveners not indemnify each other in respect of the penalties imposed on each of them is essentially similar.
120Given that s 546 expressly empowers the court to order a specific person to pay a pecuniary penalty, it is no stretch to accept that there is power in s 546 to make orders designed to ensure that the person against whom the order is made cannot avoid the incidence of the penalty. It is to take too narrow a view of the purpose of s 546 to regard the provision as being concerned with no more than that an amount of money be paid by someone in discharge of a debt created by order of the court. Section 546 is not about the creation and collection of debts; it is about penalising a contravention of the law. It is to take too narrow a view of the extent of the power conferred by s 546 to deny that it extends to the making of orders designed to ensure that a particular person cannot defeat the purpose of an order that the person pay the penalty imposed on him or her.
Again, the foregoing reasoning is directly applicable to s 76(1) of the Act.
As recognised by the High Court majority, a personal payment order may create problems of enforcement, including vexed questions of identifying the source of funds used for payment (at [47] per Kiefel CJ and at [131] per Keane, Nettle and Gordon JJ). The majority considered, however, that concerns about enforcement cannot be determinative. No doubt, in framing a personal payment or non-indemnification order, the Court will take account of any such difficulties that might be presented on the facts before the Court.
Also contrary to the submissions advanced by Mr Ellis, the inclusion of s 77A in the Act does not affect the reasoning of the High Court majority. Section 77A provided as follows:
77A Indemnification of officers
(1) A body corporate (the first body), or a body corporate related to the first body, must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer of the first body:
(a) a civil liability;
(b) legal costs incurred in defending or resisting proceedings in which the person is found to have such a liability.
Penalty: 25 penalty units.
(2) For the purposes of subsection (1), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings.
Definitions
(3) In this section:
civil liability means a liability to pay a pecuniary penalty under section 76 for a contravention of a provision of Part IV.
officer has the same meaning as in the Corporations Act 2001.
In ABCC, Mr Myles placed reliance on s 77A of the Act, and the similar provision in s 199A of the Corporations Act, to argue that the express inclusion of such provisions, restricting the circumstances in which indemnities may be given for pecuniary penalties, suggests that the power to impose a pecuniary penalty in s 546(1) of the FW Act does not include an implied power to similar effect. The High Court majority rejected that argument, observing that the express prohibitions (in s 77A of the Act and s 199A of the Corporations Act) reflect a policy which the legislature has determined should be applied universally. Chief Justice Kiefel concluded that those provisions do not negative an implied power to make orders that “render a pecuniary penalty order effective” (at [46]). Keane, Nettle and Gordon JJ concluded (at [128]) that those provisions:
… contribute nothing to the task of construing the power to make appropriate orders under s 545(1), which are dependent upon the particular circumstances of each case. A fortiori, they contribute nothing to the task of determining the scope of the power implicit in s 546 to accomplish the specific remedy imposed by a pecuniary penalty order according to the circumstances of each case.
Once again, that reasoning is equally applicable to s 76(1) of the Act. Section 77A applies to all cases falling within the ambit of that section (a body corporate giving an indemnity to an officer in respect of a liability to pay a pecuniary penalty under s 76 for a contravention of a provision of Pt IV) regardless of the circumstances. The section does not, by implication, limit or reduce the power given to the Court by s 76(1) to order a person to pay a pecuniary penalty and to make such other orders as are considered necessary for the effective imposition of the pecuniary penalty.
For those reasons, I consider that the Court has power under s 76(1) to make an order preventing Mr Ellis from making a claim or accepting indemnity under any directors and officers insurance policy to which BlueScope or Mr Ellis is a party or an insured for payment or reimbursement of any part of the pecuniary penalty to be imposed on Mr Ellis.
I also consider that it is appropriate that such an order be made in this case. If Mr Ellis were to claim and obtain indemnity for the pecuniary penalty under the D&O Policy, the pecuniary penalty would be entirely devoid of sting or burden. As observed by the majority in ABCC, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the reason for its imposition. For the reasons given above, the conduct in the present case warrants a significant penalty to deter repetition by Mr Ellis and by others who may otherwise calculate that the rewards from such conduct outweigh the risks of detection. It is important that the deterrent effect of the penalty being imposed is not undermined by the ability of company directors and officers to insure against the financial cost of the penalty.
CONCLUSION
In conclusion, the orders to be made are as follows.
First, declarations of contravention largely in the form sought by the ACCC will be made.
Second, the following penalties for each of the attempts will be imposed on BlueScope:
(a)in respect of the attempt involving Selwood Steel, $2.5 million;
(b)in respect of the attempt involving Wright Steel, $4 million;
(c)in respect of the attempt involving Yieh Phui, $6 million; and
(d)in respect of each of the attempts involving CMC Steel, OneSteel, Vulcan Steel, Southern Steel, Selection Steel and Apex Steel, $7.5 million,
being an aggregate penalty of $57.5 million.
Third, the following penalties for each of the attempts will be imposed on Mr Ellis:
(a)in respect of the attempt involving Selwood Steel, $25,000;
(b)in respect of the attempt involving Wright Steel, $40,000;
(c)in respect of the attempt involving Yieh Phui, $60,000; and
(d)in respect of each of the attempts involving CMC Steel, OneSteel, Vulcan Steel, Southern Steel, Selection Steel and Apex Steel, $75,000,
being an aggregate penalty of $575,000.
Fourth, a non-indemnification order will be made that Mr Ellis is not to pursue any claim or accept any indemnity under any directors and officers insurance policy to which BlueScope or Mr Ellis is a party or an insured for payment or reimbursement of any part of the pecuniary penalty imposed on him.
Finally, an order will be made for BlueScope and Mr Ellis to pay the ACCC’s costs of, and incidental to, this proceeding.
I certify that the preceding one hundred and eighty-one (181) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan. Associate:
Dated: 29 August 2023
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