Australian Competition and Consumer Commission v Santo Pennisi
[2007] FCA 2100
•18 December 2007
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Santo Pennisi
[2007] FCA 2100AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v SANTO PENNISI
QUD 290 OF 2007AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v DOJOO PTY LTD
QUD 293 OF 2007LOGAN J
18 DECEMBER 2007
BRISBANE
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 290 OF 2007
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ProsecutorAND:
SANTO PENNISI
Defendant
JUDGE:
LOGAN J
DATE OF ORDER:
18 DECEMBER 2007
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.A penalty of $70,000 be imposed on the Defendant.
2.A period of 60 days be allowed to pay the penalty.
3.The Defendant pay the Prosecutor’s costs of and incidental to these proceedings, to be taxed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 293 OF 2007
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ProsecutorAND:
DOJOO PTY LTD
Defendant
JUDGE:
LOGAN J
DATE OF ORDER:
18 DECEMBER 2007
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.A penalty of $400,000 be imposed on the Defendant.
2.A period of 60 days be allowed to pay the penalty.
3.The Defendant pay the Prosecutor’s costs of and incidental to these proceedings, to be taxed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 290 OF 2007
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ProsecutorAND:
SANTO PENNISI
DefendantAND
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 293 OF 2007
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ProsecutorAND:
DOJOO PTY LTD
Defendant
JUDGE:
LOGAN J
DATE:
18 DECEMBER 2007
PLACE:
BRISBANE
REASONS FOR JUDGMENT
It falls to me now to impose penalties in respect of the convictions which were entered by the Court on 12 October 2007, as a consequence of the admission by Dojoo Pty Ltd and Santo Pennisi of the commission of particular offences against the Trade Practices Act 1974 (Cth) (the TPA). The proceedings relate to offences against s 75AZC(1)(a) of the TPA committed by the corporate Defendant. Mr Pennisi is alleged to have been knowingly concerned in the commission of those offences, and therefore taken to have committed them, by virtue of the operation of s 79(1) of the TPA.
There are, in all, 28 offences. The Australian Competition and Consumer Commission (the ACCC), as Prosecutor, and the Defendants, have agreed as to a Statement of Facts relevant to the commission of those offences. What follows is a rendition from that statement.
The corporate Defendant is a company registered in New South Wales. It has carried on business in that State under the registered business name of Ballina Petroleum Distributors. Mr Pennisi is one of four directors of the corporate Defendant. He is that company’s managing director. He runs its day-to-day business operations, without having to consult with his other directors. I take that to mean that, in terms of the day-to-day operations of the company, the board of directors consigns to him those managerial functions, and reserves to itself wider questions of corporate strategy.
The offences concerned bridge the period from 14 September 2004 to 22 June 2007. Over that period, the corporate Defendant was a re-seller of fuel supplied by BP Australia Pty Ltd (BP). It purchased fuel from BP and distributed it to service stations owned by the corporate Defendant or related entities in northern New South Wales, and to the Ballina Petroleum Distributor’s depot at North Ballina, also owned and operated by the corporate Defendant.
With the exception of one of the service stations - that known as BP Goonellabah, which was owned by the corporate Defendant – the other service stations were operated by licensees. Those licensing arrangements which they had with the corporate Defendant had no particular interest in the business of selling retail fuel, save that they were paid a fee of three cents per litre for all fuels sold by the corporate Defendant from their respective service stations. The bowsers at each of the service stations were owned by the corporate Defendant, as was the petrol which was sold through those bowsers. The corporate Defendant sold various types of fuel from the service stations, including petrol and diesel. The various types of petrol which were sold have different octane levels, or different octane ratings. Those ratings are shown on the fuel bowsers.
In addition, there was information in brochures produced by BP giving details of the benefits of the higher octane fuels. The types of fuel that are relevant to the 28 charges before the Court are:-
· a fuel known as BP Regular Unleaded petrol (Unleaded). This has an octane rating of 91 or higher and it is the most commonly sold fuel.
· BP Lead Replacement petrol (Lead Replacement) is no longer supplied. It had an octane rating of 96 or higher.
· BP Premium Unleaded (Premium) has an octane rating of 95 or higher; and finally
· BP Ultimate petrol (Ultimate) has an octane rating of 98 or higher.
The corporate Defendant owned three semi-trailer petrol tankers. It employed its own tanker drivers to collect fuel from the BP Refinery in Brisbane and distribute it to the service stations and depot. Each tanker has a capacity of some 45,000 litres and is divided into six compartments, thus enabling six different fuel types to be transported at any one time. The primary means by which one type of fuel is distinguished from another at the point of sale is by the markings on the petrol bowser. Common experience for most Australians would take one to that proposition.
At BP service stations an Unleaded bowser is usually labelled “Unleaded 91 octane”. A Premium bowser is usually labelled “BP Premium Unleaded 95 octane”. And an Ultimate bowser is usually labelled “BP Ultimate Unleaded 98 octane”. Prior to April 2005 a bowser selling Lead Replacement petrol was labelled, unsurprisingly, “Lead Replacement petrol”. A member of the public is otherwise unable to differentiate one type of fuel from another. BP promotes Ultimate fuel as having a number of benefits over Unleaded. In its promotional material BP represents that Ultimate is formulated to improve engine performance, reduce fuel consumption and provide less pollution.
BP also represents that Ultimate has three times less sulphur than regular Unleaded, plus engine cleaning additives, resulting in reduced and cleaner exhaust omissions and more effective and complete combustion. In terms of pricing, Unleaded is cheaper than Premium and Premium in turn is cheaper than Ultimate . The wholesale price difference paid by the corporate Defendant to BP for Unleaded compared with the higher octane fuels varied between an additional 3.18 to 5.45 cents per litre for Lead Replacement and Premium and an additional 6.36 to 9.09 cents per litre for Ultimate. The retail price difference between the fuels largely followed the wholesale price differences, although the retail price changed frequently during the relevant period.
Over many years the corporate Defendant has, on occasions, mixed types of fuels in tanks at the service stations. Initially mixing of fuels occurred, firstly, when estimates of fuel requirements exceeded actual requirements and in emergency situations such as impending flood conditions when, for safety reasons all available fuel was used to fill or partially fill fuel tanks. These practices did not necessarily reduce octane levels of fuel sold to the public.
Since at least September 2004 the corporate Defendant has mixed fuels in the tanks at the service stations for economic reasons and with a view to remaining competitive whilst maintaining its profit margins. Fuels such as Premium, Lead Replacement and Ultimate have been diluted with Unleaded petrol. This has cost the corporate Defendant less and yet it has sold for the same price as the undiluted fuel.
The procedure which the corporate Defendant followed was this:
(a)Firstly, at various times during the week Mr Pennisi would calculate the fuel requirements for the various service stations by reference to sales figures provided by the licensees and his estimation of the sales that would occur before new fuel supplies arrived. He then despatched a tanker to BP in Brisbane to collect the required amount of fuel.
(b)Secondly, the tanker driver would collect the fuel at BP Brisbane and be provided with a fuel delivery docket specifying the amount of each type of fuel taken in that tanker.
(c)Thirdly, Mr Pennisi gave tanker drivers instructions as to where the fuel was to be delivered and they unloaded the fuel at the various service stations in accordance with his directions as to the tanks into which fuel was to be unloaded.
(d)Fourthly, on occasions which are more particularly set out in the schedules which are annexed to the Statement of Facts tendered by the parties, Mr Pennisi would direct the tanker driver to place unleaded petrol into the tanks containing Premium, Lead Replacement or Ultimate at various service stations. The practice followed by the tanker drivers was that they would record the amount of unleaded petrol which was pumped into a tank containing Premium, Lead Replacement or Ultimate on the fuel delivery docket.
(e)Fifthly, Mr Pennisi reviewed the dockets produced by the tanker drivers and caused the office staff of the corporate Defendant to record in the relevant column of its day books the amount and type of fuel that was distributed to the relevant service stations. The amount of unleaded petrol placed in the “wrong” tank was recorded in the day book and then entered into the computer records of the corporate Defendant.
(f)Sixthly, these practices, when they occurred, generally had the result that octane levels of Premium, Lead Replacement or Ultimate were reduced below the octane levels which I have mentioned earlier.
It is extremely difficult, if not impossible, to calculate the precise amount of profit gained by the corporate Defendant from selling diluted fuel during the period covered by the charges. The corporate Defendant and Mr Pennisi have calculated that the following profits were made by the corporate Defendant - in the 2004/2005 financial year $15,000, in the 2005/2006 financial year $55,000 and in the 2006/2007 financial year $84,000. It is accepted by the Commission that this calculation reasonably reflects the level of actual profit made. The difficulty in accurately calculating the profit stems from the constant changing of the retail price of the fuel, sometimes a number of times per day. The calculation is based on the wholesale price differences which are more consistent but reflect the retail price differences.
Mr Pennisi’s daily responsibilities in the running of the corporate Defendant’s business were centred around estimating and ordering the amount of each type of fuel required for the service stations and directing the tanker drivers as to the tanks in which to place the fuel at the service stations. The more detailed aspects of his role in the company are specified in the agreed Statement. It was Mr Pennisi’s decision to conduct the practice of dilution of the octane levels of fuel to assist with competition and to maintain profit margins. He knew, or could reasonably suspect, each of the following:
(a)Firstly, that by placing Unleaded into Premium or Ultimate tanks the octane rating of the fuel in those tanks would be reduced below the represented octane level.
(b)Secondly, that by reducing the octane level every customer purchasing Premium or Ultimate after the octane levels were reduced was sold petrol that was below the represented quality or composition.
(c)Thirdly, that by placing unleaded fuel into the Lead Replacement tanks, the fuel in those tanks had a different composition to that represented on the bowsers.
(d)Fourthly, that by changing the composition of the fuel in the Premium or Ultimate tanks, every customer who purchased Premium or Ultimate after the unleaded fuel was added was sold petrol that was different in quality or composition to that represented.
(e)Fifthly, that customers were not aware that the fuel purchased by them was below the represented quality or composition.
The practice of adulterating fuel in this manner ceased on or about 27 June 2007. Neither the corporate Defendant nor Mr Pennisi has any previous convictions for criminal offences or violations of the TPA. Both the corporate Defendant and Mr Pennisi have co-operated fully with the Commission in its investigation by providing all relevant information and documentation as requested by the Commission. Each has indicated at the earliest possible opportunity that they intend to plead guilty to all of the charges and did so on 12 October this year.
What then is the appropriate penalty to impose both on the corporate Defendant and on Mr Pennisi in respect of that background? There was some debate before me as to the relevance, if any, in that sentencing exercise of s 79 (2) of the TPA which provides that:
Where a person is convicted of two or more offences constituted by, or relating to, contraventions of the same provision of Part VC, being contraventions that appear to the Court to have been of the same nature or a substantially similar nature and to have occurred at or about the same time (whether or not the person is also convicted of an offence or offences constituted by, or relating to, another contravention or other contraventions of that provision that were of a different nature or occurred at a different time), the Court shall not, in respect of the first-mentioned offences, impose on the person fines that, in the aggregate, exceed the maximum fine that would be applicable in respect of one offence by that person against that provision.
There can be no doubt that the offences concerned may be regarded as “of the same nature or a substantially similar nature.” The difficulty in terms of the submission made by the Defendants is the length of time over which they occurred. That, in my opinion, prevents them from being regarded as, in terms of that subsection, having occurred “at or about the same time.”
Other statutory provisions do intrude, though, in terms of the imposition of sentence. Section 4K(3) of the Crimes Act 1914 (Cth) (the Crimes Act) provides that:
Charges against the same person for any number of offences against the same provision of the law of the Commonwealth may be joined in the same information, complaint or summons if those charges are founded on the same facts, or form, or are part of, a series of offences of the same or a similar character.
There is no doubt that this s 4K(3) of the Crimes Act is applicable in the case of the corporate Defendant and Mr Pennisi. That being so, s 4K(4) of the Crimes Act is also relevant. It provides that:
If a person is convicted of two or more offences referred to in subsection (3) the court may impose one penalty in respect of both or all of those offences, but that penalty shall not exceed the sum of the maximum penalties that could be imposed if a separate penalty were imposed in respect of each offence.
The maximum penalty that is applicable in respect of any one corporate offence is specified in s 75AZC of the TPA. It is specified as a maximum of 10,000 penalty units. The effect of s 4AA of the Crimes Act is that a penalty unit is $110. Thus, the maximum penalty for each offence committed by a corporation against s 75AZC(1) is $1,100,000. The effect then, so far as the corporate Defendant is concerned, of s 4K(4) of the Crimes Act is, at least in terms of theoretical maximum, to multiply that particular amount 28 times in this case.
It was controversial before me as to whether that same theoretical maximum ought to apply in respect of Mr Pennisi. There is some reason to think that that may not be so, or at least perhaps may not have been intended to be so. The reasons for that were developed by reference to amending statutes and associated explanatory material in the very helpful submissions advanced on behalf of the Defendants.
In those submissions reference was made, inter alia, to the extending provisions of s6 of the TPA. One sees there in s 6(6) the following:
Despite anything in Part VC, if a person other than a corporation is convicted of an offence against a provision of that Part, being a provision that applies in relation to the person as provided by this section, the offence is taken to be punishable on conviction by a fine not exceeding 2000 penalty units.
In other words, where the extending provisions of s6 have application so as to render a person other than a corporation liable to be convicted of an offence against a provision of Part VC, the maximum fine is a fine not exceeding 2000 penalty units. One can see therefore that there is, where the extending provisions are applicable, a differentiation as between the penalty applicable for a breach of s 75AZC by a corporation, which attracts a penalty of 10,000 penalty units, compared with a breach by a person other than a corporation, which attracts a fine not exceeding 2000 penalty units, a ratio, in other words, of five to one as between corporate penalty and natural person penalty.
From this it is submitted that there ought to be given effect in relation to Mr Pennisi a maximum penalty of, for each offence, 2000 penalty units. The difficulty with this submission is that it is not via the extending provision, s 6, that he is rendered liable to be prosecuted. Rather, his personal liability is derived from the operation of s 75AZC(1) read in conjunction with s 79 (1) of the TPA.
The words “and is punishable accordingly,” in s 79(1) were not the subject of my being taken to any particular authority in submissions made, either on behalf of the Commission or the Defendants.
The language, though, does have a particular provenance in Federal law. In particular one finds, in the now former s 5 of the Crimes Act, similar language. Section 5 of the Crimes Act was the subject of consideration by the members of the Full Court of the High Court in Mallan v Lee (1949) 80 CLR 198.
It is not necessary to descend into the detail of everything that was said by each member of the Court in respect of the operation of s 5. There are, though, some comments which offer guidance, in my opinion, as to the approach to take to s 79 so far as its impact on the appropriate maximum penalty where Mr Pennisi is concerned. In that case, at 205, Latham CJ observed:
The Crimes Act, s5, provides that any person who aids etc or by act or omission is in any way directly or indirectly knowingly concerned in or party to the commission of “any offence against any law of the Commonwealth… shall be deemed to have committed that offence and shall be punishable accordingly.
His Honour continued:
Section 5 of the Crimes Act is an aiding and abetting section –
His Honour then cites authority –
and it can apply only where what has been called the principal offence has been committed.
Later, at 212, his Honour continued:
There is no doubt that a person who falls within the terms of the section has infringed s5. But s5 provides no penalty for any offence. In order to ascertain what penalty is permissible it is necessary to look at the “law of the Commonwealth” against which the offence has been committed. The person is deemed to have committed an offence against that law and is “punishable accordingly.” Thus, the penalty applicable is the penalty appropriate to the offence against the law of the Commonwealth which a Defendant is deemed to have committed. That is the offence for which he is prosecuted, and the law relating to prosecutions for that offence is the law which is applicable.
In his judgment, Dixon J, as Sir Owen then was, observed at 216:
Although it can form no part of the grounds of my decision, I think that it is desirable to add that I agree in the interpretation given by Ligertwood J to the concluding words of s5 of the Crimes Act, “and shall be punishable accordingly.” That is to say, I think they mean that the accessory shall be liable to be tried, convicted, and punished as a principal offender. It would follow that where a prosecution for the principal offence is subject to a limitation in point of time the limitation would apply to the exclusion of that stated in section 21 (1) of the Crimes Act...
The remaining member of the Court, McTiernan J, did not directly deal with the subject but I infer from the following comments made by his Honour at 218 that he had a similar view of the operation of the section, so far as penalty is concerned, to that given by the then Chief Justice. Having made reference to the terms of section 5, McTiernan J observed:
The charge against the appellant is that he “by act was directly knowingly concerned in” the understatement of income in breach of s230 on behalf of a company of which he was the public officer. Besides the argument that s5 did not apply to the understatement, it was argued that the particular participation by the appellant alleged in the charge was not aiding and abetting and while an aider and abettor was punishable as a principal offender, a person connected with the offence in the manner charged in the complaint could not be so punishable. It is a matter for the legislature whether if a person is not an aider and abettor in the strict sense, he should be subject to the same
And I emphasise the word “same” there –
criminal liability as an aider and abettor.
To return, then, to s 79 of the TPA, like s 5 of the Crimes Act, it does not, itself, specify any particular penalty but rather uses the words, “taken to have contravened that provision and is punishable accordingly.”
That, in my opinion, directs one to the penalty that is applicable for the particular provision contravened and, in this case, there is but one penalty specified and that is 10,000 penalty units. It follows, in my opinion, as a matter of construction, that the maximum penalty applicable in respect of each offence committed by Mr Pennisi is 10,000 penalty units and, again, by a process of mathematical extrapolation, 28 times that sum, per force of the operation of s 4K of the Crimes Act.
If that result were not intended by Parliament, then it is a matter for Parliament to amend the legislation, so as, perhaps, to accord with that which would apply, were the extending provisions of s 6 applicable.
Those construction matters having been dealt with, it remains to observe that quite apart from the operation of s 4K, there is, as has been submitted by each side, to be taken into account what is known as the totality principle in relation to the sentencing of both the corporate Defendant and the individual Defendant. It is particularly having regard to that totality principle, that I have used the adjectives, “theoretical maximum”, by reference to that mathematical extrapolation of 28 times the penalty applicable for any one individual offence.
The Crimes Act also intrudes in relation to factors which are relevant in the sentencing of a Federal offender. I refer, in that regard, to Part 1B and, in particular, to s 16A (2) of the Crimes Act. That section provides what one might term a checklist, in respect of matters to which a Court should advert to the extent that they are relevant and known to the Court when sentencing a Federal offender. There is no particular novelty in the factors which are set out s 16A(2). Rather, they are matters which, by the ordinary application of general sentencing principle, a Court ought to consider in appropriate circumstances when sentencing any offender.
They do, though, provide a convenient check list and I shall use them, therefore, as touchstones when discussing the factors pertinent to the sentencing of each of the Defendants.
The first matter to be taken into account is: “the nature and circumstances of the offence,” s 16A (2)(a) of the Crimes Act. I have already detailed, by reference to the agreed Statement, the circumstances of the offences.
The Commission submits, and I agree, that aggravating features in this matter include the following:
(a)Firstly, the offences constitute a serious breach of trust in relation to consumers.
(b)Secondly, they involve a serious departure from the standards of commercial probity, and involve offences which are difficult to detect.
(c)Thirdly, the Defendant’s conduct was deliberate, and engaged in by its most senior manager.
(d)Fourthly, the conduct occurred over a period of something approaching three years.
(e)Fifthly, the offences involve a pattern of deliberate deception, affecting a large number of the members of the consuming public in different geographical locations.
(f)Finally, the offences were only detected after an investigation by journalists attached to a television station. Whilst it may be said that the offences occurred at differing geographical locations, the geographic location was nonetheless a relatively compressed one. By that I mean, in and about Ballina and northern New South Wales.
There are both aggravating and mitigating factors involved in that last observation: aggravating in the sense that for those who were consumers in that geographical area, the chance of their encountering adulterated fuel was heightened by the number of outlets where that was prevalent; mitigating in the sense that the area was compressed geographically, rather than nationwide.
Next consideration, “other offences (if any) that are required or permitted to be taken into account”: s 16A(2)(b). This is not applicable. Neither Defendant has any criminal antecedents.
Next consideration, did the offences form part of a course of conduct consisting of a series of criminal acts of the same or of similar character?: s 16A(2)(c). The plain answer, in respect of this particular consideration, is that the offences did constitute a series of criminal acts of the same or a similar character.
Next consideration, “the personal circumstances of any victim of the offence”: s 16A(2)(d). It is difficult to identify, by name, any particular victim of the offence. There is no doubt that there were two classes of victims, retail consumers and also, not insignificantly, a public corporation under whose good name the fuel was retailed, namely BP.
The consumers were in a position of vulnerability - vulnerability in the sense that they had no particular means by which they could identify whether they were indeed receiving a type of fuel that they desired to put into their motor car. Consumers – and, lest there be any doubt about that - a consumer is an ordinary Australian passing through Ballina, perhaps on holidays with a family, perhaps on business. In any event, they were reliant upon the labelling that was present on the bowser and that labelling, to the knowledge of the managing director of the corporate Defendant, for almost three years, was apt, at the very least, to mislead them, given the adulterated fuel that was placed in the fuel tanks of the service station outlets.
BP is a well-known public company. According to that company, the conduct has tarnished its reputation in the marketplace. A Deed has been entered into as between BP and the corporate Defendant to try to address that particular damage. That involves the assumption of a responsibility on the part of the Defendant in respect of particular claims made on BP by card customers.
That may not be the only loss to which BP is exposed. It has lost a wholesale margin, it may be subject to claims from non-BP card customers for the difference in price paid, and also perhaps for claims against it under its “fuels guarantee” relating to loss or damage suffered by customers of the corporate Defendant through the use of low octane fuel in engines designed to run on high octane fuel.
Mr Pennisi has deposed, drawing on his knowledge as a mechanic, that such damage is unlikely. The fact that the corporate Defendant has entered into a Deed which, inter alia, covers a possible exposure to damage resulting to engines from adulterated fuel, does, however, place at least an interrogative note over that particular opinion. It is, in any event, a not disinterested opinion. I approached the sentencing process on the basis that it is at least an open question as to whether or not there may be engine damage to the vehicles of particular consumers as a result of the provision of adulterated fuel.
The latter consideration in turn then engages with s 16A (2)(e): “any injury, loss or damages resulting from the offence.” In that regard, the consumers who purchased adulterated fuel have at least suffered a monetary loss. They didn’t get what they paid for. BP, one might readily infer, has to some extent at least had the goodwill associated with its trademarks, which it doubtless considers very valuable, diminished at least in the locale concerned. Again, as I have mentioned, whether or not there is any damage beyond that in terms of the engines of vehicles is at least an open question.
Section 16A(2)(f) concerns the degree to which a person has shown contrition for the offence. This is a very particular and relevant factor in this case. The corporate Defendant has made a donation to a local charity of $200,000 which will enable the purchase of land for a driver training facility. It has done that in circumstances where it was under no obligation to make any such donation. That does, in my opinion, evidence contrition. It is also in a sense a form of reparation to the community, in that whilst it is not readily possible to identify particular consumers by name who have been affected, the type of donation made at least can be seen to have the ability to benefit the motoring public through the better training of drivers or at least the enabling of a charity to undertake that task.
There is also contrition evident in the early plea of guilty, and for that matter in the co-operation with the Commission. It is submitted by the Commission that to some extent that co-operation may be perhaps a reaction to a certain inevitability of outcome following media exposure of an alleged practice. Whilst I do not completely discount that consideration, I temper it with the finding based on the submission made on behalf of the Defendants that the number and degree of offences that have been prosecuted is a direct reflection of the degree of co-operation that the Defendants have given to the Commission, and that co-operation has enabled the particular precision to be given to the offending history that one might apprehend would have been difficult indeed to give without that.
Section 16A(2)(g) especially requires a Court to take into account a plea of guilty in respect of an offence. I have already mentioned that fact and I do take it into account. It evidences a co-operation of the administration of justice and a saving of public moneys associated both with investigation and also prosecutorial proceedings and the expenditure of public moneys in terms of judicial time.
Section 16A(2)(h): “the degree to which the person has co-operated with law enforcement agencies in the investigation of the offence or of other offences.” I have already adverted to this and I take that into account. It is undoubtedly a mitigating factor.
Section 16A(2)(j): “The deterrent effect that any sentence or order under consideration may have on the person.” This is a relevant factor in this case at an individual level, although I apprehend that the deterrent effect has already been present in this case in respect of the corporate Defendant and Mr Pennisi. A sequel, understandably, to the detection of this conduct was a very swift response indeed by BP to transform what had hitherto been longstanding commercial relations as between the corporate Defendant and it. That has had the result of a spectacular diminution in the cash flow of the Defendant from that which had hitherto prevailed. The effect on profit annually is to be measured in millions of dollars. That in itself has proved, I have no doubt, salutary and a deterrent, and that effect will, at least indirectly, resonate with Mr Pennisi.
It transpires that the corporate Defendant is the trustee of a discretionary trust, one member of the class of eligible beneficiaries of which is Mr Pennisi. Other members of the Pennisi family are also members of the eligible class of beneficiaries. Thus the amount of money which can be appointed to any one beneficiary, in the exercise of the corporate Defendant’s discretion, in any given year, has been diminished by the offending conduct.
There remains, in terms of deterrent effect though, a question of general deterrence. It has been submitted by the Commission, and I agree, that these offences are not readily detectable. One might apprehend that it would be possible, with a large audit staff, taking samples regularly, to detect whether fuel in tanks was indeed of the octane level represented on a bowser. The cost of such a large audit team would inevitably though be passed on to the motoring public. Apart from that, one might apprehend that the offences would only come to light after either a particular, and perhaps spectacular effect on an engine, and some investigative work, then, related to that, or perhaps by an inside knowledge being exposed via a disgruntled employee.
That being the case, there is, in my opinion, a very particular call indeed for the Court to take into account general deterrence in imposing penalties on the corporate Defendant particularly, and also the individual, lest individuals be tempted, through greed, to cause corporations, over which they have control, to sell adulterated fuel to the public.
Section 16A(2)(k) requires that the Court take into account the need to ensure that a person is adequately punished for the offence. I have already adverted to considerations that are relevant to an adequate punishment.
Section 16A(2)(m): “the character, antecedents, age, means and physical or mental condition of the person.” Apparently, the corporate Defendant is a company which is well-off, and I infer that Mr Pennisi is also, via his association with the corporate Defendant and as a member of an eligible class of beneficiaries, not without means.
Finally, in that long litany of relevant considerations, I advert to s 16A(2)(n), “the prospect of rehabilitation of the person.” Both Defendants have co-operated with the Commission’s investigation. They have exhibited contrition and it seems very unlikely indeed that either will be tempted, having regard to the salutary experience of prosecution, to commit offences of this nature again. I have been informed that the corporate Defendant’s business is the result of many years of hard work by an earlier generation of the Pennisi family. It is evident from the material before me that the corporate Defendant’s business had matured through that hard work to a very successful business, generating a significant cash flow, and doubtless, with that, the fruits for later generations of an earlier generation’s hard work.
In a very real sense, there has been a squandering, by criminal conduct, of much of the fruits of that generational inheritance. There has been an effect on consumers that I have mentioned, and an effect on BP that I have mentioned.
It is submitted that, to some extent, the conduct was the result of the approach of an uneducated man to competition that had come into the retail petrol marketplace, as a result of the presence of Coles and Woolworths in that market. Moral behaviour, though, and conduct, is not a product of a sophisticated education. This type of conduct is, in a sense, as old as commerce itself. An innkeeper who adulterated his wine in biblical times, by the addition of water, was committing a similar sort of offence. And that is so, whether or not one has been to the best of tertiary institutions.
It does not take any particular level of education to realise that one is putting fuel that has a lower octane level, into a tank which has a high octane sign on it, and that that is not doing the right thing by one’s customers. I reject the submission that education had a particular role to play, in terms of the nature of the offending conduct. It was, undoubtedly, an unsophisticated response, but it was hardly a response which was the product of a lack of education.
I also take into account that a theme which underscores the TPA is the encouragement of competitive conduct by businesses in Australian society. What occurred here was an endeavour to subvert that by the use of a subterfuge by the supply of adulterated product so as to maintain, so it was thought, a competitive edge in the market place.
It has also been submitted to me that I should take into account the impact that a corporate penalty will have, at least indirectly, on an individual. In that regard, I have been referred to a decision of Weinberg J, in Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd (1999) ATPR 41716. In that case, at 43249, paragraph 39, Weinberg J observed:
Mr Strong submitted that I should not differentiate between the penalties imposed upon each defendant. I reject that submission. The evidence establishes clearly that Starite is beneficially owned by Mr Zappelli and the members of his family. He and his family also have a substantial interest in Dimmeys. By fining each defendant separately, the Court is, in effect, punishing Mr Zappelli and his interests twice. Their conduct may warrant separate punishment, but some recognition should be accorded to the fact that the two offences are closely related. In my view, these factors warrant the imposition of a somewhat lower penalty than would otherwise be merited upon one of the defendants. I accept Mr Wheelahan’s submission that the defendant to benefit should be Starite.
Also mentioned was a later decision of Heerey J, in Australian Competition and Consumer Commission v Commercial and General Publications Pty Ltd (No2) (2002) ATPR 41905, where Heerey J, having referred to a decision of Weinberg J, in Dimmeys Stores, observed, at paragraph 29, that:
In reality, the identity of the two defendants is the same, and the conduct, which contravened the TPA, is the same.
For that reason, he did oppose a penalty on the corporate Defendant.
The worth of the submission made, as to the applicability of this principle is somewhat diminished by the knowledge that Mr Pennisi is but a member of a class of beneficiaries of a discretionary trust, of which the corporate Defendant is trustee.
Nonetheless, the potential exists for there to be some overlap of impact and I take into account that there will be a resonance with Mr Pennisi personally, at least potentially, in respect of any penalty that is imposed on the corporate Defendant.
The submissions that have been made in respect of the range of appropriate penalties are disparate. I have, very helpfully, been referred, by both counsel for the Commission and counsel for the Defendants, to a number of earlier cases where judges of this Court have had occasion to impose penalties for breaches of this or a similar provision but, it must be said, in quite different circumstances and also, as was rightly observed in submissions, in some circumstances where the legislation had not been amended to reflect the present penalty regime.
Whilst I have had regard to these particular comparatives, it does seem to me to be a case where there is limited guidance only to be derived from them. The Prosecution’s submission is that the penalty range for the corporate Defendant is in the order of $425,000 to $500,000; the Defendant’s rather less than that in its submitted range and, so far as the individual is concerned, $75,000 to $100,000, again, the Defendant’s rather less than that submitted range.
The Commission has submitted that its maximum in that range does take into account the impact of co-operation and also an early plea of guilty. I think that is so and I would certainly regard a penalty greater than half a million dollars as appropriate for a corporate Defendant who did not exhibit those qualities. I do, though, with respect, consider that a maximum of half a million dollars, as submitted, does not give full voice to the benefits to society evidenced by the early plea of guilty, related contrition, and also co-operation with the administration of justice.
Taking all of those factors into account, and adopting the ability to impose one penalty given by statute, the penalty which I impose on the corporate Defendant is $400,000.
Taking into account the factors that I have mentioned in respect of Mr Pennisi, I impose a penalty of $70,000 on him.
In imposing the latter, I also accept that the suggested maximum for an individual on the part of the Commission, namely $100,000, does reflect, to some extent, the effect of mitigating factors. Again, though, and with respect, in my opinion, it does not give full voice to the early plea of guilty, evident contrition, and also the factor of shame in the community which is doubtless already suffered by Mr Pennisi personally and, I infer, by his wider family.
In each instance, I allow, as has been submitted for the Defendants and is not opposed by the Commission, 60 days to pay the amounts that I have imposed by way of penalty.
There is also an application on behalf of the Commission for costs, and I order that the Defendants pay the Commission’s costs of, and incidental to, these proceedings to be taxed.
I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate:
Dated: 9 January 2008
IN THE MATTER OF QUD 290 OF 2007
IN THE MATTER OF QUD 293 OF 2007
Counsel for the Prosecutor: D Boddice SC Solicitor for the Prosecutor: Director of Public Prosecutions (Commonwealth) Counsel for the Defendant: RIM Lilley SC with P Franco Solicitor for the Defendant: Walters Solicitors Date of Hearing: 18 December 2007 Date of Judgment: 18 December 2007
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