Federal Court of Australia

Australian Competition and Consumer Commission v Employsure Pty Ltd [2023] FCAFC 5

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    Order 1 made by the primary judge in NSD 2384 of 2018 on 29 November 2021 be set aside and in lieu thereof it be ordered that the Respondent pay to the Commonwealth of Australia within 30 days a pecuniary penalty of $3 million pursuant to s 224 of the Australian Consumer Law (ACL), contained in Sch 2 to the Competition and Consumer Act 2010 (Cth), in respect of the contraventions of the ACL identified in Order 1 made by the Full Court on 27 August 2021.

3.    Order 3 made by the primary judge in NSD 2384 of 2018 on 11 January 2022 be set aside and in lieu thereof it be ordered that the Respondent pay the Appellant’s costs of and incidental to the remitted penalty hearing to be taxed, if not agreed.

4.    The Respondent pay the Appellant’s costs of and incidental to the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    The Australian Competition and Consumer Commission (ACCC) appeals a civil penalty of $1 million imposed on Employsure Pty Ltd (Employsure) for contraventions of the Australian Consumer Law (ACL) on the basis it is manifestly inadequate, and a consequent costs order, as ordered in Australian Competition and Consumer Commission v Employsure Pty Ltd (No 2) [2021] FCA 1488 (Penalty Judgment (PJ)) and Australian Competition and Consumer Commission v Employsure Pty Ltd (No 3) [2022] FCA 3 (Costs Judgment (CJ)), respectively.

2    These orders were made by the primary judge following remittal after an appeal on liability for the contraventions was upheld in favour of the ACCC: Australian Competition and Consumer Commission v Employsure Pty Ltd [2021] FCAFC 142; (2021) 392 ALR 205 (Employsure FC).

Factual background

3    In summary, as explained in Employsure FC at [1]-[2], Employsure is a specialist workplace relations consultancy which advises employers and business owners across Australia in relation to the requirements of workplace relations and workplace health and safety legislation. It is a private company which has no affiliation with, or endorsement by, any government agency.

4    Through Google LLC, Employsure arranged the publication of online advertisements promoting its free employment-related advice service (Google Ads), which appeared on the screens of computers, tablets or smartphones in response to Google searches made by persons over the period from 10 August 2016 to 31 August 2018 (the relevant period). Employsure was aware that search terms such as “fair work commission”, “fair work Australia”, “fair work”, “fwc” and “fair work ombudsman” were frequently used by consumers seeking to visit the websites of major government agencies, namely the Fair Work Ombudsman and the Fair Work Commission. It selected those search terms as “keywords” in its search engine marketing strategy. Its use of such keywords meant that when a person making a Google search used search terms such as “fair work ombudsman”, “fair work Australia”, “fair work commission”, “Australia government fair work” or “Australia fair pay”, some of those terms appeared in the headline of the Google Ad. For example, when a person made a Google search using the term, “fair work ombudsman”, the headline of the Google Ad that appeared as the first search result said “Fair Work Ombudsman Help - Free 24/7 Employer Advice”. If users clicked on the hyperlink in the Google Ads they were taken to a landing webpage operated by Employsure, and if they telephoned the number provided in some of the Google Ads, they reached an Employsure representative. None of the Google Ads, however, made any mention of Employsure.

5    The fact that Employsure arranged the publication of the Google Ads, the contents of the advertisements, and the context in which the advertisements appeared on the pages of search results, was not contentious. The target audience of the Google Ads was business owners who are employers and who searched for employment-related advice on the internet: Employsure FC at [129]. The class of persons who own businesses and have at least some employees encompasses a wide cross-section of the public, which includes a broad range of individuals running a vast range of businesses: Employsure FC at [133]-[135].

6    The relevant facts are outlined in Employsure FC at [8]-[63] and [67]-[71], with each Google Ad depicted, and are unnecessary to repeat here. We note that salient features of the advertisements and the context in which they appear is further summarised in Employsure FC at [152]-[159].

Procedural history

7    Employsure FC concerned an appeal by the ACCC against the primary judge’s findings that by the publication of six Google Ads in the relevant period, Employsure did not represent that it was, or was affiliated with and/or endorsed by, a government agency (the Government Affiliation Representations). The Court allowed the appeal, concluding at [175]:

In relation to the alleged contravention of s 18 of the ACL, we are satisfied that the publication of each Google Ad conveyed the Government Affiliation Representations to the ordinary or reasonable business owner, or at least were likely to. In fact, the advice was to be provided by Employsure which is a private company which is not affiliated or endorsed by any government agency. Employsure’s conduct in causing the Google Ads to be published was misleading or deceptive or likely to be so in contravention of s 18.

8    At [177]-[178]:

In relation to s 29(1)(b), we are satisfied that publication of each Google Ad represented to ordinary or reasonable business owners that the advertised free advice was to be provided by the government agency named in the headline, and thus that it would be of the standard or quality to be expected from a government agency. Each advertisement thus represented that the service would be “of a particular standard, quality, value or grade” as required under s 29(1)(b). As the advice was, in fact, to be provided by Employsure which is a private company, the service was not of the represented standard or quality. Each Google Ad conveyed a representation which was false or misleading in contravention of s 29(1)(b): Optell at 67.

In relation to s 29(1)(h), we are satisfied that publication of each Google Ad represented to ordinary or reasonable business owners that (if the advertised free service was not to be provided by the government agency named in the headline) it was to be provided by some other entity affiliated with, in the sense of contracted by, the named government agency. Each advertisement thus represented that the person making the representation had an “approval or affiliation” by or with the government agency as required under s 29(1)(h). As Employsure had no such approval or affiliation, each Google Ad conveyed a representation which was false or misleading in contravention of s 29(1)(h).

9    As a consequence, in Australian Competition and Consumer Commission v Employsure Pty Ltd (No 2) [2021] FCAFC 157 the Full Court made the following declaration (Declaration):

It be declared that between 10 August 2016 and 31 August 2018, Employsure Pty Ltd (Employsure) has, in trade or commerce, in connection with the supply or possible supply of advisory services, by its use of the Google Ads service and through the six Google Ads identified in the schedules to the reasons for judgment of the Full Court dated 13 August 2021 which appeared on the screens of the computers, laptops or smartphones of business owners in response to their Google searches for “fair work ombudsman”, “fair work commission”, “fair work australia” and other related search terms, represented to business owners that Employsure is, is affiliated with, or is endorsed by a government agency when, in fact, Employsure is a private company that has no affiliation with, and is not endorsed by, any government agency; and Employsure thereby:

(a)    engaged in conduct which was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18(1) of the Australian Consumer Law (ACL) in Schedule 2 to the Competition and Consumer Act 2010 (Cth); and

(b)    made a false or misleading representation that:

(i)    its services are of a particular standard or quality in contravention of s 29(1)(b) of the ACL; and

(ii)    it has government sponsorship or approval in contravention of s 29(1)(h) of the ACL.

    (emphasis in original)

10    The question of the pecuniary penalty was remitted (remitted penalty hearing) to the primary judge who, as noted at [1] above, imposed a pecuniary penalty in the Penalty Judgment of $1 million and, relevantly, ordered that the ACCC pay 50% of Employsure’s costs of the remitted penalty hearing in the Costs Judgment.

11    For the reasons below, the appeal against those two judgments is allowed. We consider the appeal against each judgment in turn.

Penalty judgment

Summary

12    The primary judge summarised the parties’ respective cases on remittal. A detailed summary of the ACCC’s case is at [4]-[45], and Employsure’s at [46]-[54] (in lesser detail). The ACCC sought a pecuniary penalty of $5 million, and Employsure submitted it should be in the range of $500,000-$750,000. The primary judge explained that he had substantially adopted Employsure’s submissions in rejecting the ACCC’s case: at [46].

13    The primary judge referred to the relevant provisions at [55], and thereafter at [56]-[74]. Given the submissions advanced on the appeal, it is appropriate to note that the primary judge addressed imposing penalties for multiple contraventions at [60]-[67], with the issue of what constitutes a course of conduct addressed at [63]-[64], and totality at [65]-[67].

14    The primary judge concluded that characterising Employsure’s contravening conduct as a single course of conduct conformed with the findings of the Full Court and his earlier undisturbed findings, the technical context, and the manner in which the ACCC pleaded and ran its case below: at [76]. The primary judge recorded the submission of the ACCC that the difference between the parties should not be overstated, because even if it is a single course of conduct, the penalty can exceed the maximum for an individual contravention, and the fewer courses of conduct, “the greater the diversity and the richness of the individual contraventions contained within it”: at [77]. His Honour reasoned at [80]:

The Courts’ findings: The Full Court found, and declared, that each of the six Google Ads conveyed the same misleading representation of affiliation with, or endorsement by, a government agency: ACCC v Employsure (FFC No 1) at [175]-[179] and order 1 of 27 August 2021. That will not always be the case in proceedings brought under ss 18 and 29 of the ACL — different representations may exhibit different misleading characteristics. For example, in [Australian Competition and Consumer Commission v] Coles Supermarkets [Australia Pty Ltd [2015] FCA 330; 327 ALR 540], a representation “Baked Today” was found to convey a temporal representation that was false; while the representation “Baked Fresh” (and cognates) conveyed a representation about ingredients that was false. Here, however, the six Google Ads were all published on the same medium and were found to convey the same representation, on the basis of the same statements and omissions, albeit with reference to three government agencies: ACCC v Employsure (FFC No 1) at [150].

15    The primary judge at [81]-[83] referred to three applications of the principles concerning whether a group of representations can constitute a single course of conduct (Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd [2019] FCA 797; (2019) 136 ACSR 603; Australian Competition and Consumer Commission v Oticon Australia Pty Ltd [2018] FCA 1826; and Australian Competition and Consumer Commission v Viagogo AG (No 3) [2020] FCA 1423 (Viagogo)) before observing at [84] that “[w]hat each of these cases demonstrate is that analysis of the course of conduct principle is a very fact-specific exercise.” At [85], the primary judge concluded:

In the present case, there is no significant legal or factual separation in the six Google Ads. Each conveys the Government Affiliation Representation, albeit by reference to three government agencies (and noting that two of those agencies were effectively the same, because Fair Work Australia was replaced by the FWC). Furthermore, all six Google Ads were published on the same medium (unlike the position in Australian Competition and Consumer Commission v Pental Limited [2018] FCA 491 at [60]-[67] per Lee J or Viagogo AG at [120]-[122] per Burley J).

16    At [86], the primary judge accepted “Employsure’s submission that at all times, it was ultimately a matter for Google, through operation of its proprietary algorithms, to determine whether a particular Google Ad was displayed, as well as the precise manner in which it was displayed, taking into account a range of different matters”, and that Employsure played a limited role in these outcomes. The primary judge also found at [87] that the ACCC’s submission that there were six (or three) courses of conduct was inconsistent with how it ran its case on liability. The primary judge accepted Employsure’s submission that “the impugned Google Ads are appropriately viewed as a series of advertisements that had the common feature of conveying an affiliation with a government agency, and therefore should be treated as a single course of conduct”: at [89].

17    The primary judge then addressed factors relevant to the instinctive synthesis process.

18    As to specific deterrence, his Honour concluded that the need for specific deterrence in the present case was very low as; the contravening conduct was not deliberate; the company wanted to comply with its legal obligations; and compliance systems within Employsure had been improved (the ACCC not claiming any deficiency in the current system): at [94]. The primary judge rejected the submission that commercial drivers remained in place which may cause Employsure not to maintain proper compliance and vigilance: at [95]. His Honour concluded at [95] that there “is no evidentiary basis to justify any concern that Employsure needs to be reminded by a higher pecuniary penalty in the amount sought by the ACCC so that it and others do not view the contravening conduct as an acceptable cost of doing business”.

19    His Honour referred to general deterrence at [91], emphasising that the principal, and perhaps the only, object of penalties is to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others. At [96], the primary judge accepted that it is relevant to take into account the need to set a pecuniary penalty with a view to general deterrence, so as to emphasise to start-up or growth companies (as Employsure was during the relevant period) that their compliance systems must be adequate to meet their legal obligations. His Honour concluded that “a penalty of $5 million far exceeds that which is appropriate in order to achieve this and other relevant objectives”.

20    The primary judge next addressed the nature, extent and circumstances of the contraventions, making what he described as seven “key points”. We will briefly summarise each of these.

21    First, by the time a consumer visited a landing page, had a telephone call with a business sales consultant, and had a meeting with a business development manager, Employsure’s internal practices would result in the consumer being told that the services were provided by Employsure, and that it was not affiliated with or endorsed by the government. His Honour accepted that, even if customers were disabused by the time they signed a contract with Employsure, its misleading conduct gave it a marketing opportunity which it otherwise may not have had. The evidence did not indicate, however, that that opportunity was particularly profound: at [100]. Second, the significance of impressions or views of the Google Ads should not be overstated as it tells one only that a Google Ad was displayed in response to a search, in some manner, on the screen of a device and says nothing about whether any consumer read or even noticed that Google Ad: at [101]. Third, substantial sums of money are spent by businesses on Google Ads, and the nature of the industry in which Employsure operates does not, without more, justify an increase in the penalty that might otherwise be ordered: at [102]. Fourth, the features of Employsure’s current Google Ads are quite different to those that were the subject of the Full Court’s findings and there was no evidentiary basis for any concern that Employsure’s contravening conduct was continuing: at [103]. Fifth, there was no evidentiary foundation for the ACCC’s claim that the six Google Ads amounted to a specific and successful strategy to increase revenue. The evidence suggested the profit generated as a result of the contraventions was moderate: at [104]. Sixth, it was relevant to take into account the period of time over which the contravening conduct occurred. It was also relevant to take into account that the evidence before the Court in respect of the hearing on relief indicated that the “impressions” or “clicks” on Employsure’s Google Ads (including but not limited to the six Google Ads) related to a period of approximately 10 months: at [105]. Seventh, the primary judge accepted the ACCC’s submission that, in setting an appropriate pecuniary penalty, it is relevant to take into account the subject matter of the contravening conduct which, in effect, involved Employsure passing itself off as having an affiliation with one or more of the three government agencies, but concluded the ACCC had overstated the availability of an indemnity where wrong advice was provided by a government agency: at [106].

22    As to loss and damage, after describing the very divergent submissions of the parties and what were seen to be limitations of them, the primary judge concluded that “there is no reliable indication of the benefit obtained by Employsure by the six Google Ads, a fact that the ACCC candidly acknowledged and embraced”: at [107]-[112].

23    The primary judge accepted the ACCC’s summary of the relevant matters concerning Employsure’s size, which were not contested by Employsure. It was a medium-size private business with an annual revenue of around $150 million and an annual profit of approximately $25 million. His Honour also accepted Employsure’s submission that its size “is not something that can be propounded as a metric for penalty divorced from an examination of the contravening conduct”: at [113].

24    The primary judge noted at [114] that he had concluded in the judgment on liability (Australian Competition and Consumer Commission v Employsure Pty Ltd [2020] FCA 1409) that the conduct was not deliberate, which mitigated the pecuniary penalty that might otherwise be ordered. At [115]-[116], he concluded that having regard to the substance of the position and not merely nomenclature, the relevant staff involved were some distance from being senior management. His Honour also found that Edmund Mallett, Employsure’s chief executive officer, was not involved in the drafting of the six Google Ads, but he was involved in setting the advertising strategy of which the Google Ads formed a part. Although he had overall responsibility for digital marketing, he had limited personal involvement in the contravening conduct. At [117], the primary judge described the compliance features, concluding that there was no evidence of a culture of non-compliance by Employsure during the relevant period. The primary judge, at [118], rejected the submission that there had been limited co-operation. His Honour reasoned that Employsure was entitled to defend its position and that it also voluntarily provided documents, agreed a statement of facts and was pro-active in trying to resolve the proceeding before it commenced. At [120], the primary judge referred to the issue of parity, and said he took into account the cases referred to by the parties. He concluded they did not support the penalty sought by the ACCC. The primary judge also noted there were no prior contraventions: at [121].

25    The primary judge concluded that the appropriate penalty was $1 million: at [122]. His Honour declined to make the injunction sought: at [123]-[126]. As the decision not to grant injunctive relief is not appealed from, it is unnecessary for us to revisit the primary judge’s reasoning in this regard.

Construing the appeal against the Penalty Judgment

26    The ACCC alleged only one ground of appeal against the Penalty Judgment, namely that the penalty imposed was manifestly inadequate:

The learned trial judge erred in imposing a pecuniary penalty on the Respondent that was manifestly inadequate in that it did not adequately reflect the seriousness and extent of the contravening conduct, and was insufficient to achieve the objective of specific and general deterrence.

27    Despite that, in its submissions in support, the ACCC advanced what it identified as six errors which, it argued, produced the manifestly inadequate result. As relied on in this case, those matters may properly be characterised as particulars of the ground of appeal. Those particulars are as follows:

(1)    The penalty fails to bring to account Employsure’s size and profitability.

(2)    The penalty fails to bring to account the seriousness of the conduct, as the primary judge imposed the penalty on the basis of it being only one course of conduct.

(3)    The penalty fails to bring to account the full period of the contravening conduct.

(4)    The primary judge conflated the careful, intended design of the Google Ads with a “deliberate” strategy of contravention.

(5)    The primary judge erred in the application of the “course of conduct” and “totality” principles, without consideration of possible overlap.

(6)    The primary judge erred in considering Employsure’s costs in defending the proceedings.

(collectively, the “six particulars”)

28    In summary, the ACCC submitted that in his approach to the task of setting the penalty, the primary judge effectively minimised all aggravating factors and maximised all mitigating factors so as to set the penalty below the lowest end of the spectrum reasonably open. In that way, it submitted that error has resulted as the penalty does not fulfil its essential role of providing “appropriate deterrent value”. It submitted that manifest inadequacy is demonstrated by several different aspects of the primary judge’s reasoning and penalty analysis, being the six particulars, which individually or cumulatively, indicate that the penalty discretion miscarried overall.

What kind of error must be established for the ACCC to succeed on its appeal?

29    It is important at the outset to address issues that arise from the manner in which the ACCC advances its case, to appreciate how that approach impacts this appeal. Before doing so, it is appropriate to recall some principles about appellate intervention in the exercise of a discretion by a primary judge, for example, in the context of the imposition of a penalty, and specifically, the principles governing the assessment of whether a sentence or pecuniary penalty is manifestly inadequate.

30    House v The King (1936) 55 CLR 499 (House) is a foundational case in Australia on the role of appellate courts in assessing the exercise of a discretion by a primary judge. House makes clear that for an appellate court to intervene (at 504-505):

[i]t is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course.

31    The plurality, consisting of Dixon, Evatt and McTiernan JJ, identified two circumstances, in an oft-cited passage, in which an appellate court could exercise the trial judge’s discretion afresh because the original exercise miscarried. At 505, their Honours said:

[i]t must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so.

32    This is the first type of error identified in House. Their Honours continued (at 505):

It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

33    This second type of error identified in House is the kind with which appeals against a penalty for manifest inadequacy are concerned.

34    In Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 (Reckitt Benckiser) the Full Court applied House and later authority and discussed the nature of appeal with respect to the imposition of a civil penalty at [44]-[56] (see also Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (Agreed Penalties Case (HC)); Markarian v The Queen [2005] HCA 25; (1999) 228 CLR 357 (Markarian); Wong v The Queen [2001] HCA 64; (2001) 207 CLR 584 (Wong). In particular, their Honours discussed the role of error in an appeal with respect to penalty. In that context the Full Court observed at [51]-[53]:

Error may be specific, in the sense of apparent on the face of the reasons given, such as by application of a wrong principle in reaching the result (which may be evident by the primary judge addressing the wrong question), reaching the result by taking into account something that should not have been considered or by failing to take into account something that should have been considered, or by making a determinative error on the facts in the sense that the factual finding was not properly available to be taken into account in a way that affected the outcome.

Alternatively, error may be inferred from a result that cannot have been arrived at without some kind of operative error. The influence of the reasons given for the result arrived at on this process will vary. Reasons are not to be ignored, but nor do they necessarily confine in a rigid or inflexible way the scope of the appellate inquiry. It may be legitimate to have regard to what was said and not said in order to identify how the asserted erroneous result was reached. But for error to be inferred from the result, the result must be one which was not open on the evidence or facts found or agreed.

In all cases of specific error, the error must have either caused or materially contributed to the result. An error which has not in some material way affected the outcome will ordinarily result in the appeal court declining to intervene, at least as to the result.

(emphasis added)

35    And at [56]:

A finding of manifest inadequacy (or excess) can be supported by reference to specific errors. In that event, even if the asserted specific error is not established as a separate basis upon which the appeal must be allowed, it may nonetheless help to explain the overall result said to be erroneous. While Dinsdale [v The Queen [2000] HCA 54; (2000) 202 CLR 321] makes it clear that the appeal court does not have to attribute identified specific error in the reasoning of the sentencing judge, it is not precluded from doing so. This is especially so if a combination of such reasoning is asserted to produce or contribute to a manifestly inadequate (or excessive) result. It follows that the conclusion reached by this Court about grounds 1 to 7 may properly inform and support the conclusion properly to be reached about ground 8, whether or not our conclusions about any one of grounds 1 to 7 are themselves sufficient to require the primary judge’s order as to penalty to be set aside.

36    The error alleged by the ground of appeal in this case is of the nature referred to in Reckitt Benckiser at [52].

37    It is appropriate to recall that appellate intervention is not justified simply because an appellate court may have a different view as to the most appropriate sentence (Lowndes v The Queen [1999] HCA 29; (1999) 195 CLR 665 at [15]; Markarian at [28]) or where the sentence is markedly different from sentences that have been imposed in other cases (Wong at [58]; Hili v The Queen; Jones v The Queen [2010] HCA 45; (2010) 242 CLR 520 (Hili) at [59]). Rather, the appellant must demonstrate that the penalty is such that it may be inferred that there was a misapplication of principle by the sentencing judge, although when and how the error occurred is not apparent from the judge’s reasons: Wong at [58]; Hili at [58]–[59] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ, [75]–[76] per Heydon J.

38    It may be accepted, as explained in Reckitt Benckiser, that in alleging that a penalty is manifestly inadequate an appellant can support its case by identifying errors or other matters which, it says, explain the result. However, as apparent from [56] extracted above, the manner in which this case is pleaded is vastly different to Reckitt Benckiser, with there being seven specific errors pleaded in that case, the conclusions of which were said to be able to “inform and support” the conclusion with respect to the allegation of manifest inadequacy. As stated, there were no specific errors alleged in the amended notice of appeal in this proceeding: only the six particulars which we have extracted from the appellant’s submissions.

39    Where particulars are alleged, as in this case, nonetheless, the question for the Court remains throughout: has the ACCC established that the penalty imposed is manifestly inadequate? That is, even if the particulars are established, the appeal will not succeed unless it is established that the penalty is manifestly inadequate. That result does not inexorably follow. Similarly, if the particulars are not established, it does not follow that an appeal must fail, because it may be established that nonetheless the penalty is manifestly inadequate. Indeed, the question is not whether the particulars are established, but whether the penalty is manifestly inadequate.

40    It can be seen that “[t]he difference between cases of specific error and manifest excess [or inadequacy] is not merely a matter of convenient classification. It reflects a fundamental difference in what the appellate court does”: AB v The Queen [1999] HCA 46; (1999) 198 CLR 111 at [130] per Hayne J. 

41    The significance or impact of those particulars is necessarily limited, unless a specific error is identified as a separate ground of appeal. Alleging an error as a particular of a ground of manifest inadequacy does not equate to a ground of appeal. The particulars in this case are not even pleaded in the appeal ground. Nonetheless, we note that some of the particulars we have identified in the appellant’s written submissions allege specific errors (for example, particulars 5 and 6 above), which appear to invite the Court to address those matters in a manner not pleaded. That is, they appear to invite the Court to re-exercise the primary judge’s discretion on the basis of the specific error, without it being pleaded. Nothing in Reckitt Benckiser suggests that if specific error is alleged, it ought not be pleaded when there is also a ground with respect to manifest inadequacy. Asserting a specific error as a particular of a ground of manifest inadequacy can, as explained in Reckitt Benckiser, inform and support a conclusion of manifest inadequacy. However, if a specific error is pleaded as a ground of appeal, and established, the Court can intervene and resentence or repenalise, if that error was material to the outcome (Reckitt Benckiser at [53]). The appellant does not, in those circumstances, need to establish any manifest inadequacy.

Principles relevant to assessing a civil penalty

42    To assess whether the primary judge’s penalty in this case was, in all the circumstances, manifestly inadequate, we must have in mind the principles relevant to assessing a civil penalty. That being said, it is unnecessary to recite all the principles relevant to assessing a civil penalty, as they were referred to by the primary judge at [68]-[74]. Suffice to say that the nature of the court’s task in imposing a civil penalty under s 224(1) of the ACL, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (CCA), is to impose such pecuniary penalty as the court determines to be appropriate, having regard to all relevant matters including those set out in s 224(2): Viagogo AG v Australian Competition and Consumer Commission [2022] FCAFC 87 (Viagogo FC) at [129]. That process involves an intuitive or instinctive synthesis of all of the relevant factors: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330; (2015) 327 ALR 540 at [6]; TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190; (2012) 210 FCR 277 at [145]. Instinctive synthesis is the method by which the judge identifies all the factors that are relevant to the penalty and, after weighing all of those factors, reaches a conclusion that a particular penalty is the one that should be imposed: Markarian at [37]: and see Viagogo FC at [129]-[133], [148]-[151].

43    That said, three topics should be briefly addressed.

44    First, in considering the sufficiency of a penalty imposed, regard is ordinarily had, inter alia, to the maximum penalty. In this regard, in Markarian, the majority observed at [31]:

…careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick.

(emphasis added)

45    In a civil penalty context, the relevance of a prescribed maximum penalty as a yardstick was explained by the Full Court of the Federal Court in Reckitt Benckiser at [155]-[156] as follows:

The reasoning in Markarian about the need to have regard to the maximum penalty when considering the quantum of a penalty has been accepted to apply to civil penalties in numerous decisions of this Court both at first instance and on appeal (Director of Consumer Affairs, Victoria v Alpha Flight Services Pty Ltd [2015] FCAFC 118 at [43]; Australian, Competition and Consumer Commission v BAJV Pty Ltd [2014] FCAFC 52; (2014) ATPR 42-470 at [50]-[52]; Setka v Gregor (No 2) [2011] FCAFC 90; (2011) 195 FCR 203 at [46]; McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29; (2011) 202 IR 467 at [28]-[29]). As Markarian makes clear, the maximum penalty, while important, is but one yardstick that ordinarily must be applied.

Care must be taken to ensure that the maximum penalty is not applied mechanically, instead of it being treated as one of a number of relevant factors, albeit an important one. Put another way, a contravention that is objectively in the mid-range of objective seriousness may not, for that reason alone, transpose into a penalty range somewhere in the middle between zero and the maximum penalty. Similarly, just because a contravention is towards either end of the spectrum of contraventions of its kind does not mean that the penalty must be towards the bottom or top of the range respectively. However, ordinarily there must be some reasonable relationship between the theoretical maximum and the final penalty imposed.

46    This passage was more recently cited with approval in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 399 ALR 599 (Pattinson) at [53].

47    As to the maximum penalty in this case, the primary judge concluded at [70]:

During the Relevant Period the maximum penalty for contraventions by a company of a provision in Pt 3-1 of the ACL was $1.1 million: item 2 of s 224(3). This $1.1 million maximum applies to each of Employsure’s individual contraventions. However, given that Employsure engaged in numerous individual contraventions during the Relevant Period, the ACCC acknowledged that there “is no sensible aggregate maximum penalty” in this case (see Reckitt at [156]-[157]). I accept the ACCC’s submission that the course of conduct principle therefore provides a more useful analytical tool through which to assess the proportionality of a pecuniary penalty (see Australian Securities and Investments Commission v MLC Nominees [2020] FCA 1306 at [130] per Yates J and Australian Competition and Consumer Commission v Viagogo AG (No 3) [2020] FCA 1423 at [120]-[122] per Burley J).

(emphasis added)

48    That said, each of the at least hundreds of individual contraventions is capable of attracting a maximum penalty of $1.1 million.

49    Second, the primary purpose of any civil penalty regime is to ensure compliance with the statutory regime by deterring future contraventions: Agreed Penalties Case (HC) at [24]. The principal object of an order that a person pay a pecuniary penalty is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3; (2018) 262 CLR 157 at [116]. Civil pecuniary penalties are “primarily if not wholly protective in promoting the public interest in compliance [with the statute]”: Agreed Penalties Case (HC) at [55] and see also [59] and [110]. This point was emphasised more recently in Pattinson at [15]-[16], [43], and [45] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ.

50    The assessment of penalty of appropriate deterrent value will have regard to a number of factors including: (1) the nature and extent of the contravening conduct; (2) the amount of loss or damage caused; (3) the circumstances in which the conduct took place; (4) the size of the contravening company; (5) the degree of power it has, as evidenced by its market share and ease of entry into the market; (6) the deliberateness of the contravention and the period over which it extended; (7) whether the contravention arose out of the conduct of senior management or at a lower level; (8) whether the company has a corporate culture conducive to compliance, as evidenced by educational programs or other corrective measures in response to an acknowledged contravention; and (9) whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the relevant Act in relation to contravention: Pattinson at [18]. These are not to be considered to be a rigid list of factors to be ticked off: Pattinson at [19], but rather are to inform a multifactorial consideration that leads to a result arrived at by a process of “instinctive synthesis” addressing the relevant considerations: Reckitt Benckiser at [44].

51    Third, it is recognised that, ordinarily, separate contraventions arising from separate acts should attract separate penalties. However, where separate acts give rise to separate contraventions that are inextricably interrelated, they may be regarded as a “course of conduct” for penalty purposes: Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; (2018) 262 FCR 243 (Yazaki) at [234]. This avoids double punishment for those parts of the legally distinct contraventions that involve overlap in wrongdoing: see, for example, Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; (2010) 269 ALR 1 (Cahill) at [39] and [41]. Whether the contraventions should be treated as a single course of conduct is fact specific having regard to all of the circumstances of the case.

52    That course of conduct concept is separate from the principle of totality which requires the Court to make a “final check” of the penalties to be imposed on a wrongdoer, considered as a whole, to ensure that the total penalty does not exceed what is proper for the entire contravening conduct: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [1997] FCA 450; (1997) 145 ALR 36 at 53, citing Mill v The Queen [1988] HCA 70; (1988) 166 CLR 59. As previously explained, the primary judge concluded there was one course of conduct. However, the judge also said at [66] that “I have applied the totality principle here, with a view to ensuring that Employsure is not punished twice for common contraventions”. That approach is incorrect, as totality is not directed towards avoidance of double punishment. Moreover, and separately from that, the primary judge also found that there had been one course of conduct, and reasoned that this finding was made to avoid double punishment. We return to that below.

53    That said, the exercise of the penalty discretion involves imposing a penalty which is appropriate to secure specific and general deterrence through a single, evaluative or instinctive synthesis of all matters relevant to penalty.

Penalties in comparative cases

54    In resisting the submission that the penalty was manifestly inadequate, Employsure repeatedly referred to the penalty imposed on appeal in Reckitt Benckiser of $6 million which was said to relate to far more serious conduct. Although the conduct in Reckitt Benckiser was more serious than in this case, it is necessary to put that penalty in its context. Given the submission, it is appropriate to make some comments about the use of penalties in comparative cases.

55    In Reckitt Benckiser, the Full Court observed in imposing that penalty that that was the penalty the ACCC was seeking, described it as a modest stance, and recognised that when exercising the discretion on appeal, restraint is ordinarily called for: Reckitt Benckiser at [178]-[179]. The Court had earlier concluded (at [165]) when finding that the penalty imposed was manifestly inadequate that:

we are of the view that an appropriate penalty for the contraventions had to be not less than $6 million (and could have been many millions more, the ACCC’s figure of $6 million being at the bottom of the appropriate range in all the circumstances of this case).

56    The penalty hearing occurred after the respondent in that case made admissions to the contraventions on the first day of the hearing. The contraventions in Reckitt Benckiser occurred between January 2011 and December 2015.

57    In that context, although before the primary judge it referred to some cases where civil penalties were imposed that were said to be of assistance as comparative cases, the ACCC did not do so in this appeal. The primary judge did not regard any of those cases to be of assistance, because of the different circumstances. Given Employsure’s reference to Reckitt Benckiser, it is appropriate to refer to one of those cases, namely Viagogo, to put Reckitt Benckiser in context. In Viagogo, the primary judge imposed penalties of a total of $7 million for four categories of representations on Viagogo’s website (referred to in the judgment as the Official Site Representation; the Total Price Representation; the Part Price Representation; and the Quantity Representation). The penalties were: $2.5 million for contraventions of ss 29(1)(h) and 34 of the ACL by reason of the Official Site Representation; $1.5 million for contraventions of s 29(1)(i) of the ACL by reason of the Total Price Representation; $500,000 in respect of contraventions of s 48(1) of the ACL by reason of the Part Price Representation; and $2.5 million for contraventions of s 34 of the ACL by reason of the Quantity Representation. The appeal against the penalty as being manifestly excessive was dismissed: Viagogo FC. The Official Site Representation was in essence similar to the Government Affiliation Representations made by Employsure. The Official Site Representation made in Viagogo was, in simple terms, that a ticket reselling platform operated by the respondent was authorised by or endorsed by the primary ticket merchant for various events. In this case, the ACCC submitted that the $2.5 million penalty for the Official Site Representation was for an online advertisement that was available for only 57 days, whereas the period in this case was vastly longer. The contraventions in Viagogo occurred in 2017.

58    Penalties imposed in comparable cases may be of assistance and provide guidance in assessing the appropriateness of the penalty imposed (or to be imposed) as there should be some consistency in the penalties imposed as similar contraventions should incur similar penalties. The consistency sought is not numerical consistency, but rather consistent application of relevant legal principles: The Queen v Pham [2015] HCA 39; (2015) 256 CLR 550 (Pham) at [28] citing Hili at [49]. These concepts have resonance to the imposition of civil penalties: see for example, Australian Competition and Consumer Commission v Cabcharge [2010] FCA 1261 at [54]; Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68 at [63]; Australian Competition and Consumer Commission v Telstra Corporation Ltd [2010] FCA 790; 188 FCR 238 at [215]; Viagogo at [128]; Australian Competition and Consumer Commission v Samsung Electronics Australia Pty Ltd [2022] FCA 875 at [54]; and Australian Competition and Consumer Commission v Kimberly-Clark Australia Pty Ltd (No 2) [2021] FCA 102 at [46]. Care must be taken when considering other penalties imposed. It must be recognised that the previous penalties imposed do not establish a range which is the correct range, or that the upper or lower limits to the range are the correct upper and lower limits: Hili at [54]. Each case must turn on its own facts, and any reference to comparable cases must encompass the particular circumstances in which the penalty was imposed.

Consideration: did the penalty discretion miscarry?

The importance of deterrence in this case

59    As apparent from even the brief description of Employsure’s conduct provided above, it involved publication of six different Google Ads, involving three different governmental bodies. The Google Ads arose from three advertisement groups that were designed by Employsure with different features and were activated for publication across different periods of time. The six Google Ads would have displayed to different groups of consumers conducting certain searches (owing to the differing keywords underpinning the Google Ads), different messaging at different periods of time (owing to the different activation periods), and created a false perception of an association with different government agencies listed in the headlines, being, “Fair Work Ombudsman”, “Fair Work Commission” and “Fair Work Australia”.

60    As explained above, the facts that Employsure arranged the publication of the Google Ads, the contents of the advertisements, and the context in which the advertisements appeared on the pages of search results, were not contentious. Employsure in evidence during the liability hearing recognised that “the higher a website features in the search result, the more likely it is that it will be selected by [the] consumer”. Each Google Ad appeared as the first result on the page of search results: Employsure FC at [168]. The features of each Google Ad, and the circumstances in which it appeared are summarised in Employsure FC at [49]-[63]. Each of the Google Ads was a paid search result, being an advertisement created by or at the direction of Employsure, using the platform provided by Google.

61    Regardless of the manner in which the contravening conduct is assessed (with respect to a course or courses of conduct), it must be uncontroversial that there were at least hundreds, if not thousands, of individual contraventions. The penalty imposed was less than the maximum penalty for one contravention. This is not to suggest that the importance of the maximum penalty is to be overstated; it is one of a number of relevant factors in imposing penalty, accepted as an important one: Reckitt Benckiser at [154]-[156]. In a context where the object of imposing a penalty is principally deterrence, the circumstances of this case reflect that, in particular, the consideration of general deterrence in any penalty imposed is a weighty one.

62    As explained above at [59], there were different keywords underpinning the Google Ads (it is to be inferred designed so they would be displayed to different groups), the advertisements covered different time periods, conveyed different messaging, and relate to different government agencies. Employsure undertook steps calculated to give each Google Ad prominence in search results, for example, choosing the text to be included. Employsure was aware of certain search terms (including “fair work commission”, “fair work Australia”, “fair work”, “fwc” and “fair work ombudsman”) being used frequently by consumers for on-line visits to the websites of the Fair Work Ombudsman and the Fair Work Commission, each being a major government agency dealing with employment related matters and it selected those search terms as “keywords” in its search engine marketing strategy: Employsure FC at [62]. Employsure’s use of “keywords” meant that the advertisements’ headlines said either “Fair Work Ombudsman Help – Free 24/7 Employer Advice”, “Fair Work Australia – Free Fair Work Advice – fairworkhelp.com.au” or “Fair Work Commission Advice – Free Employer Advice”, in blue font, in the largest and most prominent typeface in the advertisement; and the advertisements omitted any reference whatsoever to Employsure. They did not state anywhere that the free help or advice offered in the headline was, in fact, not to be provided by the named government agency but by some unnamed private entity: Employsure FC at [150]. The choice of design was deliberate conduct to achieve a purpose of maximising its benefit.

63    Employsure designed the Google Ads to lure customers to them so as to drive up traffic to its business. As concluded in Employsure FC at [146]:

[t]he purpose of each Google Ad, placed as it was at the top of the list of search results, was to arrest the attention of a business owner conducting an employment-related internet search and have them contact Employsure by clicking on the hypertext or calling the telephone number (in relation to those advertisements in which a telephone number was provided).

64    Although the breaches of the ACL were not deliberate, the underlying conduct was deliberate (and not inadvertent): see, for example, Viagogo at [91] (an appeal to the Full Court was dismissed).

65    Regardless of any argument about how many people viewed the Google Ads, that audience was obviously considered sufficiently worthwhile by Employsure to continue their use in different forms over a significant period of time. That is also so regardless of the profit generated, which was in this case unascertainable. The target audience was business owners who are employers and who search for employment-related advice on the internet. Employsure represented in the Google Ads (without reference to Employsure) that its advertised free advice was sponsored or approved by a government agency named in the headline. The advertisements represented that the service would be a particular standard, quality, value or grade, when it was not.

66    In Employsure FC the Court concluded at [151]:

To again use the words of the plurality in TPG HCA [[2013] HCA 54; (2013) 250 CLR 640] (at [52]), the impression conveyed to ordinary or reasonable business owners that the free advice was to be provided by the named government agency, or by some other entity affiliated with that agency, was not “a consequence of selective attention or an unexpected want of sceptical vigilance on their part; rather, it was an unremarkable consequence of [Employsure’s] advertising strategy”. In our view the primary judge erred in failing to recognise the effectiveness of Employsure’s marketing strategy in relation to the presentation of information in the Google Ads.

67    This is to be considered in a context where the use of Google Ads is obviously a prevalent form of digital marketing. During the relevant period, Employsure was a start-up or growth company and it is important the penalty emphasises to other such companies the necessity of complying with their legal obligations, and having in place compliance systems adequate to ensure that occurs.

68    All this serves to illustrate the significance of general deterrence in the penalty imposed.

69    Any penalty must carry with it a sufficient sting to ensure that the penalty amount is not such as to be regarded by the parties or others as an acceptable cost of doing business.

70    That is so even if one accepts, as the primary judge found at [94], that there is a lesser need for specific deterrence in this case.

71    This is also in a context where Employsure was, at the time of the contraventions, a medium-size private business with an annual revenue of around $150 million and an annual profit of approximately $25 million. The circumstances of a contravenor, including its size and profitability, are relevant in assessing whether the penalty will be appropriately deterrent: Pattinson at [60].

Conclusion: the discretion miscarried

72    As explained above, the penalty that the primary judge imposed was less than the maximum penalty for a single contravention.

73    Weighing all the relevant factors, bearing in mind the protective and deterrent purpose of a pecuniary penalty, as applied to the facts of this case, and the size and financial position of Employsure, we are satisfied that the penalty of $1 million was manifestly inadequate. It failed to adequately reflect the seriousness of the contravening conduct, the variety of forms that it took and the period over which it occurred so that it did not achieve the necessary degree of general deterrence.

Re-imposing penalty

74    The discretion having miscarried below, it falls to this Court to exercise the penalty discretion afresh.

75    The contravening conduct and the importance of general deterrence in this exercise has been explained above, and it is unnecessary to repeat. Suffice to say the seriousness of that conduct must be reflected in the penalty imposed.

76    It is recognised that ordinarily separate contraventions arising from separate acts should attract separate penalties. However where separate acts give rise to separate contraventions which are inextricably interrelated, they may be regarded as a “course of conduct” for penalty purposes: Yazaki at [234]. This avoids double punishment for those parts of the legally distinct contraventions that involve overlap in wrongdoing: see for example, Cahill at [39] and [41]. Whether the contraventions should be treated as a single course of conduct is fact specific having regard to all of the circumstances of the case.

77    The ACCC’s case before the primary judge was that there were six different courses of conduct, or at least three. Properly considered, we find that there are at least three different courses of conduct (being one course of conduct for each government organisation that Employsure by its advertisement represented it had an affiliation with).

78    As the Court is considering the penalty afresh it is not constrained by any of the factual findings of the primary judge. Unlike some cases when the resentencing or re-penalising occurs in circumstances where there had been no challenge to the primary judge’s factual findings, in this appeal several findings of the primary judge have been challenged and were the subject of argument.

79    We do not agree with the primary judge’s conclusion, which accepted Employsure’s submission that the contraventions amounted to one course of conduct: see [13]-[16] above.

80    The primary judge reached the conclusion that there was a single course of conduct because he found that the six Google Ads “were all published on the same medium and were found to convey the same representation, on the basis of the same statements and omissions, albeit with reference to three government agencies”: PJ at [80] (italics in original). The primary judge also said the ACCC’s position was inconsistent with how it ran its case on liability.

81    It is important to recall that the rationale for the course of conduct principle is that it avoids double punishment for those parts of the legally distinct contraventions that involve overlap in wrongdoing. In Cahill at [39] the Court observed:

The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry.

82    Also see: Yazaki at [234].

83    Given the findings in Employsure FC, and taking into account the whole of Employsure’s conduct, it is difficult to see how there is a risk that Employsure will be penalised twice for what is essentially the same contravening conduct in circumstances where we have found that there were at least three courses of conduct. Although the advertisements the subject of the contraventions were directed to the same result, and had the same vice, they nonetheless reflected separate acts, directed at three different agencies. They covered differing time spans. The mere coincidence that the six Google Ads appeared on the same medium does not reflect that Employsure engaged in a single course of conduct. Nor does the fact that, viewed generically, the Google Ads all conveyed an affiliation with a government agency. It may have been part of an ongoing marketing or advertising campaign or strategy, but that does not, without more, suggest it was one course of conduct, not least because Employsure chose to misrepresent an association with the differing government agencies using differing advertisements and over differing periods. Those two factors (being the use of the same medium and government affiliation) appear to have been at the heart of the primary judge’s finding. Moreover, the reliance by the primary judge at [86] on the role of Google’s algorithms in displaying the Google Ads in his finding that Employsure had a limited role in the outcome failed to recognise Employsure’s necessary and substantial anterior role in the design of the Google Ads including, for example, the choice of the text to be included. The Full Court found in Employsure FC at [51], [53], [55], [57], [59] and [61] that it was uncontentious that each of the six Google Ads was a paid search result that always appeared as the first search result on the internet user’s screen during the relevant period. The Full Court explained (at [24]-[49]) how, by paying for a Google Ad to appear prominently in the list of search results on a user’s screen, Google’s algorithms will determine the order in which paid results appear at the top of the list.

84    Further, insofar as the primary judge concluded in PJ at [87] that the suggestion that more than one course of conduct was inconsistent with the ACCC’s case on liability, it cannot be accepted.

85    The assessment of whether a representation is conveyed for the purposes of the ACL is substantially different from whether conduct constitutes a course (or multiple courses) of conduct for penalty purposes for at least two reasons.

86    First, the assessment of whether conduct constitutes a course (or multiple courses) of conduct for penalty purposes involves a wider range of factual considerations that may be relevant and is informed by the purpose of preventing double punishment, whereas whether a representation is conveyed for the purposes of the ACL is a comparatively narrower inquiry, informed less by principle and more by factual inference. In a case of the present kind, it involves a two-step process of first, identifying the relevant class, and then asking whether the representation was conveyed to that class by the conduct: see for example, Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 199 per Gibbs CJ.

87    Second, the assessment of whether a representation is conveyed is a consideration made in the context of deciding whether conduct contravenes a legislative provision. This assessment is anterior to the assessment of whether multiple contraventions constitute one or several courses of conduct, which is made in the context of penalty assessment and only arises where contravention has been established.

88    For these reasons, it was not inconsistent for the ACCC to submit that there were multiple courses of conduct where it also argued that the same conduct conveyed one umbrella representation, namely the Government Affiliation Representations.

89    As explained above at [50], there are a number of considerations to be taken into account in assessing the appropriate deterrent value of a penalty. However, it is important to recall that the principal object of a penalty is deterrence, general and specific.

90    It may be accepted, as the primary judge found, that specific deterrence has a lesser role to play in the imposition of this penalty given Employsure’s more recent conduct directed towards improving its compliance systems, but it nonetheless still is of relevance. That is so even where there is no suggestion that there is any deficiency in the current system. It was also accepted by the ACCC below that Employsure was a company that wanted to comply with its legal obligations: PJ at [94]. Importantly, any limitation on the need for specific deterrence does not diminish the significance of general deterrence in the penalty imposed.

91    Given the purpose of imposing a pecuniary penalty, care must be taken not to unduly elevate the significance of any one consideration.

92    One can take the following two illustrations of where other considerations were elevated by the primary judge not in accordance with this principle and where the conclusions underpinning those considerations were themselves flawed.

93    First, the primary judge placed too great an emphasis on the possible “modesty” of Employsure’s profit from the Google Ads. The primary judge concluded that Employsure’s profit from the contravening conduct may have been “modest”, it was a small portion relative to all of Employsure’s Google Ads, and they obtained customers from other channels: PJ at [104]. In that context, it was also concluded that although the Declaration by the Full Court reflects that the conduct occurred over a period of more than two years, the evidence was that the impressions or clicks on the ads were for approximately a 10 month period: PJ at [105]. It is difficult to understand how a characterisation of the profit as “modest” can be made, as the amount of benefit is unascertainable. Indeed, the primary judge accepted that fact. Be that as it may, the magnitude of the profit is only one factor to consider in assessing the conduct as a whole. In addition to the primary judge placing too great an emphasis on this point in the context of deterrence being the primary consideration, his Honour also placed too great an emphasis on the role of actual or measurable profit in assessing the conduct as a whole. Employsure used the Google Ads for a period of just over two years, with them being accessible for that period. As explained above at [60], it can be inferred that Employsure considered it worthwhile and in its interests to continue to do so. Moreover, the contraventions relate to engaging in conduct that was misleading or deceptive, or likely to do so, and making false or misleading representations. Those contraventions are established regardless of any profit made. That this Google advertisement campaign might not have been as successful as others or that Employsure had other sources of customers might tell about the impact of the conduct. But such conduct nonetheless is to be deterred.

94    Second, as referred to above, the Declaration relates to the contraventions covering a period of over two years. Before the primary judge following the remittal, evidence was presented, it was said, not to challenge that fact, but to show that the Google Ads were only clicks or impressions over a 10 month period (being in relation to each of the six advertisements and over the same period). That evidence is unsatisfactory. It cannot be used to traverse the Declaration, especially given the two year time span was accepted by Employsure as accurate at the time it was made. There is no evidence as to how that acceptance occurred or why what was relied on before the primary judge at the liability hearing was different. The information appears inherently improbable. In any event, the penalty is to be imposed for the two year period, and as explained above, on any scenario, the Google Ads could be viewed and accessed during that period.

95    Further, it is to be recalled that the Full Court declared that Employsure made a false or misleading representation that it had government sponsorship or approval in contravention of s 29(1)(h) of the ACL: Declaration. Misrepresenting that one has government sponsorship or approval is very serious and must be deterred. In the context of this case, the business owners whom the Full Court found would have googled the relevant keywords and were at least likely to have been misled or deceived by the Google Ads may have been in commercial distress, and the majority were likely small business owners: Employsure FC [129] and [133]-[135]. It is unlikely that the ordinary small business owner would research the “fair work ombudsman” or the “fair work commission” unless they were in some form of commercial distress or need (for example, if faced with defending or potentially defending a claim in the Fair Work Commission). The ordinary small business owner, and indeed any member of Australian society, is entitled to rely on the belief that Commonwealth Government organisations exist to serve the public good; not to make a profit as was the case with Employsure, which made the representations that its services had government sponsorship or approval. In doing so, it falsely or misleadingly represented that its services were of a particular standard or quality: ACL s 29(1)(b); Declaration.

96    We consider this conduct to be very serious and consider there to be a great need for general deterrence in the circumstances.

97    Weighing all the relevant factors, and given the purposes of imposing a civil penalty, for the reasons above, we consider the penalty which should be imposed in lieu of that imposed by the primary judge is $3 million. In the circumstances, that level of penalty reflects the seriousness of the contraventions, satisfies the element of deterrence required, and contains a sufficient sting to ensure that the penalty amount is not such as to be regarded by Employsure or others as an acceptable cost of doing business.

98    We turn now to considering the second ground in the amended notice of appeal, being the ACCC’s appeal against the Costs Judgment.

Costs Judgment

What aspect of the Costs Judgment is appealed against?

99    In the Costs Judgment, the primary judge resolved the issue of costs of the original liability hearing (after the question of costs at that hearing was remitted) and costs of the remitted penalty hearing. Employsure FC disposed of the costs issue for the appeal on liability by awarding the costs of that appeal to the ACCC. The primary judge’s disposition of the costs of and incidental to the liability hearing is not appealed from. This appeal is only concerned with his Honour’s disposition of the costs of the remitted penalty hearing.

The primary judge’s reasons

100    The primary judge, relevantly for this aspect of the appeal, ordered that the ACCC pay 50% of Employsure’s costs of the remitted penalty hearing, as agreed or taxed.

101    The reason for doing so is at [17] of the Costs Judgment, as follows:

I do not accept that the ACCC should be awarded its party-party costs in respect of the remitted pecuniary penalty proceedings. I accept, of course, that the ACCC was successful in its limited appeal and was awarded its costs of the appeal. I do not accept, however, that it is appropriate that the ACCC should be awarded its costs of the remitted pecuniary penalty hearing in respect of the six Google Ads which were the subject of that appeal and the remitted pecuniary penalties hearing. That is because, at the remitted penalty hearing, the ACCC was unsuccessful in obtaining injunctive relief and the pecuniary penalty which Employsure was ordered to pay was in an amount which was 80% less than that sought by the ACCC (and slightly more than the amount suggested by Employsure). Taking all these matters into account, I consider that it is appropriate that the ACCC should pay 50% of Employsure’s costs of the remitted penalty hearing.

(emphasis added)

The appeal against the Costs Judgment and the parties’ submissions

102    The ACCC alleges by ground 2 that:

The learned trial judge at CJ [17] erred in exercising his discretion in relation to the costs of the relief hearing by departing from the award of costs as compensation by not awarding the Appellant any of its costs of the hearing and instead ordering that the Appellant pay 50% of the Respondent’s costs of the hearing, which was unreasonable, did not reflect the relative success of the parties in the hearing, and failed to give sufficient weight to the award of a penalty against the Respondent.

103    The ACCC submitted that the primary judge acted on a wrong principle in failing to approach the award of costs in the orthodox compensatory fashion, and it contended therefore the discretion miscarried in the sense contemplated by House at 504-505. The award of costs has not followed the award of the pecuniary penalty. It was submitted that the primary judge relied on the unsuccessful application for injunctive relief together with the quantum of the penalty awarded relative to the parties’ positions on this issue to award costs in Employsure’s favour. It was submitted that not only has the ACCC been deprived of its costs entirely but it has also been ordered to pay 50% of Employsure’s costs. Approaching costs in this way, rather than in the orthodox manner of identifying what the “event” is and whether there are multiple events that might suggest a different costs order, the judge erred and deviated from a principled approach to costs. The appellant submitted that just as there is a special reticence in making indemnity costs orders in cases brought by public regulators undertaking their statutory duties in a good faith manner, there should be a similar apprehension in this regard also: see, for example, Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 1844; (2007) ATPR 42-200 at [24].

104    Employsure submitted that no error has been established and that the award of costs was in accordance with established principles and within the bounds of a proper exercise of the costs discretion. It emphasised that the ACCC failed to obtain the relief it had sought in its Amended Originating Application (which included injunctions, corrective publication orders, non-party consumer redress orders, and orders under s 137H of the CCA) and that it refused Employsure’s offer of 13 February 2020 to resolve the proceedings for, inter alia, a pecuniary penalty of $3.3 million.

Principles relevant to exercise of costs discretion

105    Section 43 of the Federal Court of Australia Act 1976 (Cth) confers jurisdiction on the Court to award costs. The award involves the exercise of a discretionary judgment: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 at [25]. The disposition to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires: Gray v Richards (No 2) [2014] HCA 47; (2014) 89 ALJR 113 at [2]. That said, ordinarily, a successful party is entitled to an award of costs in its favour in the absence of special circumstances justifying some other order: see Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 (Vardalis) at [11]; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [67] per McHugh J, [134] per Kirby J; Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [6]–[7].

106    In Northern Territory of Australia v Sangare [2019] HCA 25; (2019) 265 CLR 164 (Sangare), the Court observed at [25]:

A guiding principle by reference to which the discretion is to be exercised – indeed, "one of the most, if not the most, important" principle – is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome.

(citations omitted)

107    Costs are not awarded by way of punishment, but are “compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings”: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 543 per Mason CJ, and see also at 562-563 per Toohey J and at 566-567 per McHugh J.

108    It is trite to observe that in an appeal from a discretionary judgment, it is not sufficient that an appellate court considers that it would have taken a different course if it had been in the position of the primary judge. Rather, it is necessary to establish that the discretion miscarried through an error of principle of the kind discussed in House at 504–505. These principles have been discussed earlier in these reasons.

Consideration: did the primary judge err in his exercise of the costs discretion?

109    We consider that the appellant’s submission must be accepted. For the reasons that follow, the discretion miscarried and hence can be re-exercised by this Court. Moreover, because the appeal against the penalty that his Honour imposed will be allowed, the costs of the penalty hearing below must be revisited in any event.

110    The appellant was the successful party in the remitted penalty hearing and absent special circumstance or conduct of the ACCC, the High Court has made clear that the position that the successful party be entitled to its costs should not be altered: Sangare at [25]. Although the appellant did not succeed in relation to the injunctive relief, that was only a small part of the hearing. We note that at [17] of CJ the primary judge placed some emphasis on the ACCC’s failure to obtain injunctive relief. Moreover and most significantly, although the appellant did not obtain the magnitude of penalty it sought, nonetheless, it did succeed in having a penalty imposed, and one greater than the respondents submitted was appropriate. There is no basis to suggest that a penalty hearing was not required. Likewise, there is no reason to conclude that the appellant otherwise misconducted the remitted penalty hearing. The appellant, as the successful party in a contested application that mostly concerned the imposition of penalty, should have had costs awarded in relation to the remitted penalty hearing in its favour. There is no proper basis to order that the appellant pay 50% of the respondent’s costs. Therefore, we conclude that the primary judge erred in his exercise of the costs discretion. Before re-exercising the costs discretion, we will consider two further matters.

111    First, we note that during the submissions Employsure relied, inter alia, on the fact that it had made what the primary judge described as an “offer of compromise” on 13 February 2020, prior to the commencement of the liability hearing (offer). It is worth noting that we have some reservations about that characterisation, as unlike in private proceedings, where an offer of a monetary amount (e.g. damages) as consideration for another party discontinuing a claim can resolve the proceedings, in a civil penalty case, such an offer in relation to a pecuniary penalty cannot bring the matter to an end. At its highest, in these circumstances, it can be construed as an offer to make joint submissions as to penalty. This is because the assessment of penalty, even where it is agreed, is a matter for the Court: see, for example, Agreed Penalties Case (HC); NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285. The Court is more than a rubber stamp, and must be satisfied that the proposed penalty is an appropriate one in all the circumstances: Agreed Penalties Case (HC) at [58] per French CJ, Kiefel, Bell, Nettle and Gordon JJ, and see Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49; (2021) 284 FCR 24. Moreover, the regulator’s position is different from that of a private litigant, as public interest considerations come into play. This is not to suggest such offers are not to be encouraged, but rather reflects the different nature of the proceedings.

112    In this case, the primary judge observed at [11] of CJ by way of background that the offer had been made and that Employsure had relied on it in applying for indemnity costs from the date of the offer. His Honour continued to consider Employsure’s application for indemnity costs at [18], where he found that “it was not unreasonable for the ACCC to reject that offer at that time in circumstances where the offer did not differentiate between different parts of Employsure’s conduct, including the conduct relating to six Google Ads in respect of which the ACCC ultimately succeeded”. His Honour found at [20] that insofar as the indemnity application related to the remitted penalty hearing, Employsure’s offer of compromise was neither renewed nor replaced by any offer by Employsure post Employsure FC. At [17], under the heading “Costs of the remitted pecuniary penalties hearing”, where the primary judge considered to whom to award costs in respect of the remitted penalty hearing, he made no mention of the offer. The offer was not a matter relied on by the primary judge to make the costs order in favour of Employsure in relation to the remitted penalty hearing and does not provide a basis or explanation for the costs order made in favour of Employsure. As we understand it, before the primary judge, the only relevance of the offer was to the assessment of indemnity costs. The finding that the ACCC did not act unreasonably in rejecting this offer being unchallenged, the rejection of the offer could not have (and should not have) any bearing on the question of whether, generally, the primary judge awarded costs to the correct party. The fact of the rejection of the offer therefore does not affect our conclusion that the discretion miscarried.

113    Second, we also note that the appeal on costs was not argued on the basis that if this Court imposed a higher penalty than the primary judge (as it has), then this fact should bear on the assessment of whether the primary judge’s costs discretion miscarried. Having found that the costs discretion miscarried because costs were awarded to the wrong party, we need not consider this point.

Re-exercising the costs discretion

114    It now falls to the Court to re-exercise the costs discretion with respect to the remitted penalty hearing. We consider, for the reasons above, that the appellant should be awarded its costs below.

115    We note the principle that a party should not necessarily be compensated for its costs of unsuccessful components of an otherwise successful application. In some circumstances it may even be appropriate for the successful party to pay the other party’s costs where the successful party failed on certain issues. So much was accepted by the ACCC. As Black CJ and French J (as his Honour then was) said in Vardalis at [11]:

•    Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.

•    A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties' costs of them. In this sense "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or law.

116    Here, the ACCC did not succeed on its application for injunctive relief. However, ordering an otherwise successful party to pay some of its costs requires justification in the circumstances of the case. In this case the conduct of the appellant could not properly be said to warrant the order made by the primary judge: Sangare at [25]. Nothing in the CJ, nor any other material before this Court, suggests that the ACCC conducted the remitted penalty hearing in a way warranting an order that it pay any of Employsure’s costs, in circumstances where a hearing was necessary (this was not a case where the parties were able to make joint submissions as to relief), a substantial penalty has ultimately been imposed, and the litigation was otherwise conducted in an appropriate manner.

117    We are also of the view that the ACCC should be awarded its entire costs of the remitted penalty hearing. Black CJ and French J in Vardalis observed that “[w]here a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed”. Here, because of the negligibility of the costs incurred in the failed pursuit of injunctive relief, we are not of the view that the circumstances make it reasonable for the ACCC to be deprived of its costs in an application which, as the public regulator, it needed to pursue and in which it was mostly successful.

118    As senior counsel for the ACCC submitted orally before this Court (and as was unchallenged by Employsure), the argument on the injunction at the remitted penalty hearing “took, with respect, all of five minutes”. Further, only three of fifty-nine paragraphs of the ACCC’s written submissions in chief and one of eighteen paragraphs of its written submissions in reply were directed to injunctive relief. While the proportion of written submissions directed to certain issues obviously cannot bind a court on its exercise of a costs discretion, in these circumstances, they provide a useful guide. We also reiterate that the ACCC had no option but to pursue penalty proceedings as this was not a case where the parties were able to make joint submissions as to penalty. For these reasons, we consider that the ACCC should be entitled to the entirety of its costs of and incidental to the remitted penalty hearing.

Conclusion

119    For the reasons above, the appellant has established its grounds of appeal. The pecuniary penalty order should be set aside and in lieu thereof a $3 million penalty be imposed. Further, Employsure should be ordered to pay the ACCC’s costs of and incidental to the remitted penalty hearing. By its amended notice of appeal the ACCC seeks its costs of the appeal. Having succeeded on both grounds of appeal, we also will order Employsure to pay the ACCC’s costs of this appeal.

Associate:

Dated:    8 February 2023