FEDERAL COURT OF AUSTRALIA

Australian Communications and Media Authority v TPG Internet Pty Ltd [2014] FCA 382

THE COURT DECLARES THAT:

1.    On 193 occasions, the first occurring on 15 March 2011 and the last occurring on 21 September 2011, TPG Internet Pty Ltd (TPG) failed to give end users access to the emergency call service operated by the emergency call person for 000 and 112, in contravention of s 13 of the Telecommunications (Emergency Call Service) Determination 2009 (the Determination) and s 148(1) of the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth) (TCPSS Act).

2.    During the period of 15 March 2011 to 21 September 2011, TPG failed to ensure that its controlled networks and/or controlled facilities gave the end users of 5,979 standard telephone services supplied by TPG access to emergency call services, in contravention of s 19 of the Determination and s 148(1) of the TCPSS Act.

THE COURT ORDERS THAT:

3.    The Respondent pay to the Commonwealth of Australia by way of penalty:

(i)    $200,000 for the contraventions of s 13 of the Determination and s 148(1) of the TCPSS Act described in the first declaration; and

(ii)    $200,000 for the contravention of s 19 of the Determination and s 148(1) of the TCPSS Act described in the second declaration.

4.    Should a proposed consent order as to costs not be filed by 22 April 2014, the parties file and exchange short written submissions as to costs as follows:

(i)    the applicant on or before 24 April 2014;

(ii)    the respondent on or before 29 April 2014.

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

REASONS FOR JUDGMENT

1    The Australian Communications and Media Authority (ACMA) seeks declarations and the imposition of pecuniary penalties for alleged contraventions by TPG Internet Pty Ltd (TPG) of the Telecommunications (Emergency Call Service) Determination 2009 (the Determination) and the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth) (TCPSS Act). ACMA alleges that in contravention of ss 13 and 19 of the Determination and consequently in contravention of the TCPSS Act, TPG failed to ensure its systems and networks enabled specified end users of home phone services it supplied to access the “000” emergency call service (s 19) and failed to give that access when calls were made to the “000” service (s 13). The alleged failures occurred in relation to home phone services which were treated by TPG as ‘suspended’ or ‘inactive’.

2    ACMA is a body corporate established by s 6 of the Australian Communications and Media Authority Act 2005 (Cth) (ACMA Act). ACMA has a broad range of statutory functions, including regulating telecommunications in accordance with the Telecommunications Act 1997 (Cth) (TC Act) and the TCPSS Act: s 8(1)(a) ACMA Act.

3    TPG is a provider of communication services including telephony services and is a “carriage service provider” within the meaning of s 87(1) of the TC Act. TPG also operates a “controlled network” and at least one “controlled facility” within the meaning of s 14(2) and (3) of the TC Act.

4    ACMA’s specific allegations are that during the period 15 March 2011 to 21 September 2011, TPG failed to ensure that its controlled networks and/or its controlled facilities gave end users of 5,979 standard telephone services supplied by TPG access to emergency call services accessed by dialling 000 (the emergency call service), in contravention of s 19 of the Determination and s 148(1) of the TCPSS Act. ACMA also alleges that during that same period, on 193 occasions, TPG failed to connect calls made by end users to the emergency call service, in contravention of s 13 of the Determination and s  148(1) of the TCPSS Act.

5    TPG admits that it contravened s 19 of the Determination and does not challenge the making of a declaration in the form sought by ACMA in relation to that contravention. However, it disputes the quantum of the pecuniary penalty sought by ACMA as well as ACMA’s claim that it is liable for contraventions of s 13 of the Determination.

6    The facts are not in contention and the parties have filed a statement of agreed facts. The issues for determination are: (i) whether TPG breached s 13 of the Determination on 193 occasions and if so, what penalty ought to be imposed for those contraventions; and (ii) what penalty ought to be imposed for TPG's admitted contravention of s 19 of the Determination.

BACKGROUND

7    From October 2010, TPG offered a home phone service product that was a landline telephone service for end users to make voice telephone calls, including calls to the emergency call service (the TPG home phone service or the service). The service was a pre-paid service. In 2011, the terms of supply for the service included a requirement in the following terms:

At the time of registration, we debit $20 that is kept as a Security Deposit and used to pay for all home phone call usage charges. Once your deposit goes below $5, we will debit a sufficient amount from your bank account/credit card to top it back up again to $20. If your usage is high, this can occur more than once per month and more than $20 might need to be debited. You authorise to [sic] make such debits to your account/credit card. Your service will become inactive if our attempts to debit credit card/bank account to top up your deposit are unsuccessful. Any unused Security Deposit will be refunded back to you once you cancel the service.

8    The systems operating the TPG “controlled network” and “controlled facilities” for the TPG home phone service (the TPG systems) were originally designed so that for the period of time a customer failed to maintain an appropriate credit balance, calls made from that customer's TPG home phone service would not be connected, other than for calls to the emergency call service which would always be connected. Customers with a credit balance below $5 were given one week’s notice before calls other than calls to the emergency call service were “barred” from their service. When the customer’s credit balance was restored to at least $5, the barring of calls would cease.

9    The term “barred” means that the service will not carry calls of the specific barred type. Other than barring all calls apart from calls to the emergency call service, types of calls that are commonly barred from a service include calls to mobile phones, long distance calls and international calls. The status of a TPG home phone service is referred to as a “service category”. “Barred All” refers to the service category for which all outgoing calls are barred other than calls to the emergency call service. TPG also refers to services in that category as being ‘suspended’ or ‘inactive’.

10    The TPG home phone service combines voice over internet protocol or ‘VOIP’ technology with features of ordinary analogue phone services, such as ordinary handsets and phone numbers. For end users, the service operates in the same way as an ordinary telephone service. However, a complex hardware and software system sits behind the consumer interface to enable voice to be converted from a normal sound wave into digital form for transmission over an internet protocol or ‘IP’ network. That software also keeps track of the status of a customer’s service to determine whether any, and if so what type of calls, have been barred from that customer’s service.

11    When a phone call is made from a TPG home phone service, the call is transmitted to a group of computers, known as a server cluster, where software programmed by TPG directs the call to be processed in accordance with the status of the account. Mr John Vernon, a voice network engineer and architect for TPG, was entirely responsible for the design and creation of this software.

12    Prior to the launch of the TPG home phone service product in October 2010, Mr Vernon tested the software he had written to ensure that calls were properly processed. Mr Vernon was aware of the requirements for calls to the emergency call service to be carried and he conducted tests to ensure that 000 calls would be carried from all TPG home phone services, including those that were regarded by TPG as ‘suspended’ or ‘inactive’. Those tests were all successful.

13    From its inception, the TPG home phone service product was popular and growth in customer numbers required rapid expansion of the TPG systems.

14    In March 2011, TPG took steps to increase the capacity of its systems. This was done, in part, by splaying outbound voice call traffic through two different pathways to the server cluster. In order to make the splay work, Mr Vernon amended the software code so that an additional number was automatically added to the destination number of each outbound call made from a TPG home phone service which directed the call through one of the two pathways. The new software code had to be incorporated individually for each service category. However, because of an oversight, Mr Vernon did not think to make the amendment to the service category described as “barred all”. The result of this oversight was that calls from services in the “barred all” category made to the emergency call service simply failed. The evidence indicates that an end user making such a call would have heard a voice message saying, “calls to that number are not available” or words to that effect.

15    After making changes to the software code, Mr Vernon conducted tests to ensure the TPG systems were operating correctly. However, Mr Vernon failed to conduct tests in relation to ‘suspended’ or ‘inactive’ services. Despite knowing that it was TPG’s intention that calls to the emergency call service be connected even if a service was ‘suspended’ or ‘inactive’, Mr Vernon failed to program the software in such a way or to check whether outbound calls to the emergency call service could be made from a ‘suspended’ or ‘inactive’ service.

16    TPG did not become aware of the error in the system upgrade until 20 September 2011. Complaints from end users who had difficulties calling a number were ordinarily passed on to Mr Vernon. Prior to 20 September 2011, Mr Vernon was not told about any complaints that calls made by end users to the emergency call service were not being carried.

17    The software programming error was discovered by TPG on 20 September 2011 in what were extremely unfortunate circumstances.

18    TPG had supplied a home phone service to a married couple (who need not be named) from 28 January 2011. In accordance with the terms of supply set out earlier at [7], it was a term of the supply of the service that the couple maintain a credit balance of at least $5. On 12 September 2011, TPG sent an email to the husband informing him that TPG had attempted to debit his credit card and that the debit had been declined by his bank. A further email was sent the following day indicating the account was $5 in arrears. The couple were overseas at the time and did not read the emails until they returned. Their credit card had been suspended by their bank due to suspected fraudulent activity.

19    On 19 September 2011 at 4:09 pm, TPG ‘suspended’ the home phone service of the couple. The result was that any calls made from the couple's TPG home phone service would not be connected.

20    On the morning of 20 September 2011, the husband called TPG from his mobile phone to discuss the couple's inability to make calls from their TPG home phone service. Due to poor reception on the mobile phone, the TPG representative called the husband on the couple’s TPG home phone service. Shortly thereafter, the husband became very unwell. His wife attempted to call the emergency call service from the TPG home phone service and heard a recorded message saying that the call could not be connected. She then tried to call the emergency call service from her mobile phone but due to a lack of mobile service coverage inside the house, the call was unsuccessful. The wife then moved outside and approximately a minute after she had initially dialled 000 from the TPG home phone service, she was connected to the emergency call service from her mobile phone and an ambulance was dispatched, although not as a priority. Shortly thereafter, the husband suffered a heart attack.

21    The wife’s sister, who was also at the couple's home at the time, made a further call to the emergency call service about five minutes after the first successful mobile call was made. This call too had to be made from outside the house due to a lack of mobile service coverage inside the house.

22    The inability to make calls from inside the couple's house caused a number of difficulties, namely:

    information about the husband's condition could not be relayed to the emergency call service call-taker;

    information and instructions from the call-taker could not be relayed to those persons who were with the husband; and

    the wife’s sister, who was some distance away from the house when she called the emergency call service, did not know the street address of the house.

23    An ambulance arrived 27 minutes after the first successful call to 000 was made and the husband was taken to the hospital. On 24 September 2011, he passed away.

24    After becoming aware on 20 September 2011 of its failure to provide access to the emergency call service, TPG immediately took steps to rectify the failure and corrective action was progressively rolled out and tested across the TPG systems beginning on the same day.

25    It is agreed between the parties that between 15 March and 21 September 2011, the customers of 5,979 TPG home phone services failed to maintain an appropriate credit balance and, as a result of the error in the TPG systems upgrade, the end users of these services did not have access to the 000 emergency call service during the periods for which their service was ‘suspended’ until the required credit balance was restored.

26    In addition, during that same period, 193 calls were made to the emergency call service from 100 of the 5,979 ‘suspended’ TPG home phone services. None of those calls were connected.

THE LEGISLATIVE SCHEME

27    The TCPSS Act requires ACMA to make a determination imposing obligations on carriage service providers such as TPG, in relation to the provision of emergency call services. The TCPSS Act provides:

147    Provision of emergency call services

(1)     The ACMA must make a written determination imposing requirements on any or all of the following:

(a) carriers;

(b) carriage service providers;

(c) emergency call persons;

in relation to emergency call services.

(2) In making a determination under this section, the ACMA must have regard to the following:

(a)    the objective that a carriage service provider who supplies a standard telephone service should provide each-end user of that standard telephone service with access, free of charge, to an emergency call service, unless the ACMA considers that it would be unreasonable for such access to be provided;

…

(7) A determination under this section is a legislative instrument.

    …

148    Compliance with determination

(1)    A person on whom a requirement is imposed by a determination in force under section 147 must comply with the determination.

…

(4) Subsections (1) and (3) are civil penalty provisions.

Note:    Part 31 of the Telecommunications Act 1997 provides for pecuniary penalties for breaches of civil penalty provisions. This provision is a civil penalty provision for the purposes of that Act.

28    Pursuant to the power given in s 147(1) of the TCPSS Act, ACMA made the Determination. There is no issue that TPG was subject to the Determination and was obliged to comply with its requirements. The sections in the Determination of relevance to this proceeding are as follows:

13    Giving end-user access to emergency call service operated by emergency call person for 000 and 112

    (1)    This section applies if:

(a) a carriage service provider supplies an emergency telephone service; and

(b) an end-user makes a call on the service using the emergency service number 000.

    (2)     The provider must give the end-user access to the emergency call service operated by the emergency call person for 000 and 112 unless:

(a)     subject to section 14, the service used to make the call is a location independent communications service that is not a standard telephone service; or

(b)     the service used to make the call is a satellite service and the call is transferred to a network other than an Australian based terrestrial network.

19     Requirements for carriage service provider - controlled networks and controlled facilities

A carriage service provider must ensure that its controlled networks and controlled facilities give an end-user access to emergency call services whether or not a number is currently issued to the end-user in relation to a service, unless:

    (a)     it is not technically feasible to give the access; or

    (b)     a matter beyond the control of the provider materially and adversely affects the provider's technical ability to give the access.

29    Section 13(1)(a) of the Determination applies to a carriage service provider who supplies an “emergency telephone service”. That term is defined in the Dictionary to the Determination to include any one of a number of items including, relevantly, a “standard telephone service”. The term standard telephone service is not defined in the Determination but is defined in s 6(1) of the TCPSS Act to relevantly mean, in broad terms, a carriage service provided for the purposes of voice telephony, which passes the “connectivity test”. That definition is applicable to the Determination because terms used in a legislative instrument have the same meaning as in the enabling legislation: s 13(1) of the Legislative Instruments Act 2003 (Cth).

30    Whether a ‘suspended’ or ‘inactive’ TPG home phone service met the connectivity test, was the subject of competing submissions and is ultimately the point upon which TPG’s liability for any breach of s 13 of the Determination rests. The connectivity test is defined in s 6(2) of the TCPSS Act as follows:

A service passes the connectivity test if an end-user supplied with the service… [for the purpose of voice telephony or for other purposes] is ordinarily able to communicate, by means of the service, with each other end-user who is supplied with the same service for the same purpose, whether or not the end-users are connected to the same telecommunications network.

[Emphasis added.]

31    Section 148(1) of the TCPSS Act, as set out above, provides that a person upon whom a requirement is imposed by a determination in force under s 147, is required to comply with the determination. Section 148(1) is a civil penalty provision: s 148(4) TCPSS Act.

32    Section 570 of the TC Act establishes this Court's power to impose pecuniary penalties for breaches of a “civil penalty provision”. A “civil penalty provision” is defined by s 7 of the TC Act to include s 148(1) of the TCPSS Act. Therefore penalties for any breach of the Determination which in turn constitute a breach of s 148(1) of the TCPSS Act, may be imposed under s 570 of the TC Act.

33    Section 570 of the TC Act relevantly provides:

(1)     If the Federal Court is satisfied that a person has contravened a civil penalty provision, the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each contravention, as the Court determines to be appropriate.

(2)     In determining the pecuniary penalty, the Court must have regard to all relevant matters, including:

    (a) the nature and extent of the contravention; and

(b)     the nature and extent of any loss or damage suffered as a result of the contravention; and

    (c) the circumstances in which the contravention took place; and

     (d) whether the person has previously been found by the Court in proceedings under this Act to have engaged in any similar conduct.

(3)     The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed:

    (a)    in the case of a contravention of subsection 68(1) or (2) or 101(1) or (2) - $10 million for each contravention; or

    (b) in any other case - $250,000 for each contravention.

(4)     The pecuniary penalty payable under subsection (1) by a person other than a body corporate is not to exceed $50,000 for each contravention.

(4A) …

(4B) …

(5)     If conduct constitutes a contravention of 2 or more civil penalty provisions, proceedings may be instituted under this Act against a person in relation to the contravention of any one or more of those provisions. However, the person is not liable to more than one pecuniary penalty under this section in respect of the same conduct...

(6) …

(7)     In this section:

this Act includes:

    (a)     the Telecommunications (Consumer Protection and Service Standards) Act 1999 and regulations under that Act; and

(b)    Part 6 of the Telecommunications Universal Service Management Agency Act 2012.

CONSIDERATION

Did TPG contravene s 13 of the Determination?

34    The critical issue to be determined in relation to this alleged contravention is whether the supply by TPG of a ‘suspended’ or ‘inactive’ TPG home phone service constituted the supply of an “emergency telephone service”, within the meaning of s 13(1)(a) of the Determination. By reference to s 13(1)(a) and its requirement that there be a supply, and because the term “emergency telephone service” is to be understood by reference to the definition of a “standard telephone service” found in s 6 of the TCPSS Act which in turn engages the “connectivity test”, whether TPG is liable for any breach of s 13 turns on whether:

(i)    TPG supplied any service to end users of a ‘suspended’ or ‘inactive’ service; and (if so)

(ii)    whether the service supplied is a service which satisfies the “connectivity test” because it is a service by which end users are “ordinarily able to communicate” with other end users by means of the service.

35    TPG contended that the service it supplied did not satisfy the connectivity test set out in s 6(2) of the TCPSS Act. Although it also relied on the second limb of the connectivity test (“ordinarily able to communicate”), its main contention was that an end user was not being “supplied with a service” (within the meaning of that phrase in the connectivity test) in circumstances where the service had become ‘inactive’ or was ‘suspended’. TPG argued that on each of the 193 occasions that an attempt was made to call the emergency call service from a ‘suspended’ or ‘inactive’ service, the account holder had failed to comply with its contractual obligations and the service had been rendered inactive such that no calls could be made from the service. TPG argued that in such circumstances there could be no supply of a voice telephony service, within the meaning of the connectivity test, because there was no agreement to supply such a service.

36    TPG’s alternative argument, based upon the second limb of the connectivity test, was that callers from ‘inactive’ services were not able to communicate with other end users by means of that service. Therefore, TPG contended that the “ordinary” state of affairs for an ‘inactive’ service was that end users were unable to telephone other end users. As a service could remain ‘inactive’ for many months or even years, TPG contended that it would be nonsensical to suggest that end users of such a service were “ordinarily” able to make calls.

37    ACMA contended that in circumstances where a TPG home phone service was ‘suspended’ or became ‘inactive’ in the manner contemplated by the terms of supply for the TPG home phone service, a service was nevertheless being provided. That contention rested upon a distinction between the temporary suspension of all outgoing calls and the cancellation of the service. That distinction is based on the text of the extract from TPG’s terms of supply set out at [7] which states that a service will become “inactive” where attempts to top up a customer's security deposit are unsuccessful and that the balance of any security deposit will be returned to a customer when the customer “cancels” the service. ACMA contended that the barring of outbound calls was not a cancellation of the service and did not result in the termination of a supply because some service was still being supplied, namely a customer could still receive inbound calls.

38    As to TPG’s alternative contention, ACMA contended that the term “ordinarily” refers to the ordinary capacity of the service to carry calls and that TPG's approach to construction would allow a carriage service provider, through its suspension practices, to become the decision maker about whether a service passes the connectivity test.

39    The applicable principles of statutory construction are uncontroversial. Whilst the task of statutory construction must begin with a consideration of the text itself, in construing the text it is often necessary to give consideration to the context, including the general purpose and policy of the provision: Alcan Alumina (NT) Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [47] (Hayne, Heydon, Crennan and Kiefel JJ). Where the text is capable of different meanings, the general purpose and policy of the provision become important guides to the meaning of the text: EnergyAustralia Yallourn Pty Ltd v Construction, Forestry, Mining and Energy Union [2014] FCAFC 8 at [12] (North and Bromberg JJ); and see ss 15AA and 15AB of the Acts interpretation Act 1901 (Cth); Alcan [4]-[5] (French CJ); and Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at [44] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).

40    Dealing with TPG’s alternative contention first, whilst the contention focused on the word “ordinarily”, the issue actually turns on the intended meaning of the word “service”. The context in which the term “service” is used strongly suggests that when the connectivity test speaks of “a service” it means a particular kind of service not a particular service to a particular end user. That conclusion is apparent from the phrase “the same service” which is used in the fourth line of the connectivity test. Once it is understood that the connectivity test is dealing with a kind of service and not a particular service, it is evident that the phrase “ordinarily able to communicate” is addressing the usual capacity of a kind of service rather than the actual capacity of a particular service being provided to a particular end user. That construction is confirmed by the relevant Explanatory Memorandum.

41    The Explanatory Memorandum to the TCPSS Act specifically addresses the meaning of the words “ordinarily able to communicate” in s 6(2) of that Act. The Explanatory Memorandum states:

‘Ordinarily able to communicate’ means that the service has been designed to enable end users to communicate with other end-users of the service unless something happens to prevent this, for example, network outage or call barring.

[Emphasis added.]

42    It is clear from this passage that the connectivity test is not intended to deal with an end user's ability to make calls at a particular point in time but rather what the service supplied is designed to do. If the service is designed to enable end users to communicate with one another in the manner referred to, then the service is the kind of service that will satisfy the the connectivity test. That is so despite the fact that when that kind of service is provided, extraordinary circumstances, such as call barring (to which the Explanatory Memorandum specifically refers) may result in an incapacity to communicate at particular points in time.

43    There is no issue that the TPG home phone service was a kind of service by which the end user supplied with such a service is ordinarily able to communicate with other end users supplied with the same kind of service. Accordingly, the TPG home phone service met the description of “service” used by the connectivity test. It follows that TPG’s alternative contention should be rejected as that contention is incorrectly premised on the actual performance of a particular service rather than the capacity of the kind of service in question.

44    Turning then to consider TPG’s primary contention that there was no supply of a service to end users of TPG home phone services that were ‘inactive’ or ‘suspended’ such that the connectivity test could not be satisfied, it is necessary to consider the nature of what was being supplied by TPG and what the designation ‘suspended’ or ‘inactive’ meant in relation to a TPG home phone service.

45    Mr Vernon deposed that a TPG home phone service could, depending upon what a customer selected, be comprised of a range of categories providing different capacities or functions. Those categories were:

    No Barring

    Barred International

    Barred Mobile

    Barred Mobile and International

    Barred Long Distance

    Barred Long Distance and International

    Barred Long Distance and Mobile

    Barred Long Distance, Mobile and International

    Barred All

46    Although not expressly dealt with, a fair inference can be drawn from the evidence that the TPG home phone service also included the provision of incoming calls and that end users of the TPG home phone service were able to receive inbound calls even when the outgoing call facility was in the “Barred All” category.

47    At [29] of the statement of agreed facts, a reference is made to an inbound call being received by a customer with a TPG home phone service for which all outgoing calls were barred as a result of the account being ‘suspended’. Counsel for TPG fairly and appropriately pointed the Court to this evidence and did not seek to demur from the proposition that on this evidence an inference was available that end users of ‘inactive’ or ‘suspended’ TPG home phone services still receive inbound calls. I draw that inference and make that finding.

48    It follows that the designation ‘inactive’ or ‘suspended’ is used by TPG to refer to the state of activity of the outbound calling functions provided by the TPG home phone service. That use is consistent with the distinction relied upon by ACMA between a service becoming “inactive” and a service being “cancelled” made by the text of the terms of supply set out at [7] above. An “inactive” service is thus to be understood as a service for which the ability to make outward bound calls has been suspended. The suspension of outward bound calls is not therefore to be understood as resulting in the cancellation of the TPG home phone service or the termination of the contract pursuant to which that service is supplied. Those findings necessarily lead to the rejection of the two contentions made by TPG in support of its primary argument.

49    First, if as TPG contended, it is s 19 and not s 13 of the Determination which is directed to situations where no service is being supplied by a carriage service provider to an end user, on the facts, supply of a service by TPG to the 100 customers in question continued despite the suspension of outward bound calls and subsisted as at the time that the 193 calls in question were attempted to be made to the emergency call service.

50    Second, the necessity for there to be a supply to an end user for s 13 to be engaged arises from the terms of s 13(1)(a) and not, as TPG contended, from the word “supply” in the connectivity test. That is so because the connectivity test is dealing with a species of a supply and not a particular supply.

51    Section 13 is engaged where “a carriage service provider supplies an emergency telephone service”. On the facts, TPG continued to supply a service to the 100 customers in question despite the barring of all outward bound calls. Section 13 will, in those circumstances, be engaged if the service supplied meets the description of an “emergency telephone service”. That, as I have previously explained, is dependent upon the service being a service of a kind that satisfies the connectivity test. For the reasons already explained, the TPG home phone service is a kind of service by which an end user is “ordinarily able to communicate” with other end users and, in that respect, satisfies the connectivity test. It follows that whilst the functionality at a point in time of the particular service provided by TPG to the 100 customers in question was restricted by the barring of outbound calls, the nature of the service provided was nevertheless a service of the kind which satisfied the connectivity test. It therefore follows that the 100 customers in question were being supplied with an “emergency telephone service” and that s 13 of the Determination was engaged.

52    The construction I prefer is buttressed by the fact that the applicable legislative provisions have a beneficial purpose and should be given “a fair and liberal interpretation in order that they achieve the Act’s beneficial purposes”: AB v Western Australia (2011) 244 CLR 390 at [38] (the Court). That is so despite their penal aspect: Waugh v Kippen (1986) 160 CLR 156 at 164-165 (Gibbs CJ, Mason, Wilson and Dawson JJ). The dominant purpose of ss 13 and 19 of the Determination is to ensure comprehensive access to a vital public service wherever reasonably possible. That access is required to be provided to end users free of charge: s 53 of the Determination. Sections 13, 19 and 53 of the Determination reflect the objective set out in s 147(2)(a) of the TCPSS Act:

…that a carriage service provider who supplies a standard telephone service should provide each-end user of that standard telephone service with access, free of charge, to an emergency call service, unless the ACMA considers that it would be unreasonable for such access to be provided.

53    In that context, it would be surprising if by reference to the definition of a “standard telephone service”, it was intended that because a customer had failed to maintain a credit balance for the telephone account, a carriage service provider should be excused from its generally applicable obligation to provide access to the emergency call service from an extant telephone service.

DECLARATIONS

54    In light of these conclusions, I am prepared to make a declaration regarding TPG’s contravention of s 13 of the Determination. The Court will declare that on 193 occasions, the first occurring on 15 March 2011 and the last occurring on 21 September 2011, TPG failed to give end users access to the emergency call service operated by the emergency call person for 000 and 112, in contravention of s 13 of the Determination and s 148(1) of the TCPSS Act.

55    In relation to TPG’s contravention of s 19 of the Determination, there is no issue that a declaration should be made in the terms sought by ACMA. Accordingly, the Court will declare that during the period of 15 March 2011 to 21 September 2011, TPG failed to ensure that its controlled networks and/or controlled facilities gave the end users of 5,979 standard telephone services supplied by TPG access to emergency call services, in contravention of s  19 of the Determination and s 148(1) of the TCPSS Act.

PECUNIARY PENALTIES

The Guiding Principles

56    Section 570(1) of the TC Act provides that where the Court is satisfied that a person has contravened a civil penalty provision, the Court may impose such pecuniary penalty as it determines to be appropriate. Whilst the Court may have regard to a broad range of factors in fixing the appropriate penalty, s 570(2) sets out four non-exclusive mandatory factors which the Court must take into account. They are:

(a)    the nature and extent of the contravention; and

(b)    the nature and extent of any loss or damage suffered as a result of the contravention; and

(c)    the circumstances in which the contravention took place; and

(d)    whether the person has previously been found by the Court in proceedings under the TC Act to have engaged in any similar conduct.

57    The High Court in Markarian v R (2005) 228 CLR 357 set out the guiding principles to be applied in arriving at an appropriate penalty in the context of sentencing for a criminal offence. In that case, Gleeson CJ, Gummow, Hayne and Callinan JJ held:

    the assessment of the appropriate penalty is a discretionary judgment based on a consideration of all relevant factors (at [27]);

    “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” (at [31]);

    however, it will rarely be appropriate for a court to first look at the maximum penalty and proceed by making a proportional deduction from that maximum (at [31]);

    the court should not adopt a mathematical approach of increments or decrements from a pre-determined range or from an “objective” sentence, or assign specific numerical or proportionate value to the various relevant factors. Rather, it should arrive at an “instinctive synthesis” based on all the relevant factors (at [37] citing passages from Wong v R (2001) 207 CLR 584 at [74]-[76] (Gaudron, Gummow and Hayne JJ) which were recently endorsed in Barbaro v R (2014) 305 ALR 323 at [34] (French CJ, Hayne, Kiefel and Bell JJ)); and

    as the law strongly favours transparency, accessible reasoning is necessary and, while there may be occasions where some indulgence in an arithmetical process will better serve this end, this will not be the case where there are numerous and complex considerations that must be weighed (at [39]).

58    The approach to sentencing described in Markarian has been held in this Court to apply to the imposition of civil pecuniary penalties (see for example Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [27] (Gray J), at [55] and [78] (Graham J) and at [108] (Buchanan J); and TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at [146] (Jacobson, Bennett and Gilmour  JJ), later overturned on appeal to the High Court but not on this issue) and has been widely applied in cases involving the assessment of penalties under s 76 and 76E of the Trade Practices Act 1974 (Cth) (Trade Practices Act) (now s 224 of Sch 2 of the Competition and Consumer Act 2010 (Cth)).

59    While it appears there have been no decided cases involving the imposition of a penalty for a breach of the Determination, a number of cases have considered the proper approach to the imposition of penalties under s 570 of the TC Act. Those cases have considered s 570 to be very similar to ss 76 and 76E of the Trade Practices Act and have applied the principles developed in respect of the Trade Practices Act to the determination of penalties under the TC Act: Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [201]-[202] (Middleton J); Australian Communications and Media Authority v WE.NET.AU Pty Ltd [2008] FCA 1530 at [12] (Collier J).

60    A checklist of matters which judges of this Court have regarded as of assistance in assessing penalties for contraventions of the Trade Practices Act is set out in the judgment of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 292. An updated checklist of guiding considerations is set out by Perram J in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246 at [11]. On appeal, that checklist was referred to without demur by Keane CJ, Finn and Gilmour JJ at [37] of Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249. The list, adapted to refer to the TC Act for present purposes, identifies what I consider to be the relevant factors which I ought take into account as follows:

    the size of the contravening company;

    the deliberateness of the contravention and the period over which it extended;

    whether the contravention arose out of the conduct of senior management of the contravener or at some lower level;

    whether the contravener has a corporate culture conducive to compliance with [the TC Act] as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention;

    whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of [the TC Act] in relation to the contravention;

    whether the contravener has engaged in similar conduct in the past;

    the financial position of the contravener; and

    whether the contravening conduct was systematic, deliberate or covert.

61    A further important consideration should be emphasised. Numerous authorities have recognised that the primary reason for the imposition of pecuniary penalties in the context of s 570 of the TC Act and other similar provisions, is the need to deter repetition of the contravening conduct by the contravener (“the need for specific deterrence”) and to deter others who might be tempted to engage in similar contraventions (“the need for general deterrence”): ACCC v Telstra at [190] and [203] (Middleton J); Australian Communications and Media Authority v Bytecard Pty Ltd [2013] FCA 38 at [41]-[42] (Foster J); and see Australian Competition and Consumer Commission v High Adventure Pty Limited [2005] FCAFC 247 at [11] (Heerey, Finkelstein and Allsop JJ).

62    As the Full Court in NW Frozen Foods said at 294-295:

The Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay…

63    In Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) (2002) 190 ALR 169 at [17]-[18], Finkelstein J observed that deterrence was the means by which a corporation is to be hindered from engaging in contravening conduct and that it followed that the penalty must be set “at a meaningful level”. That is, it must be sufficiently large to be an effective deterrent.

Consideration of principles

64    The conduct which led TPG to contravene the Determination in this case was Mr Vernon's code writing error during the upgrade of the TPG systems in March 2011 and TPG’s failure to implement policies and procedures to prevent or to detect that error.

65    While Mr Vernon's programming error may have been inadvertent, I do not regard TPG’s conduct as inadvertent. In 2011, TPG did not have any policy or process in place to ensure that its controlled networks maintained 000 connectivity for all customers. TPG had an obligation to implement appropriate policies to ensure that programming or other errors which denied access to the emergency call service did not occur and its conduct cannot be explained away as merely a “process failure”: ACCC v Telstra at [237] (Middleton J). It would have been sensible, easy and inexpensive for TPG to develop a written protocol reminding a person in Mr Vernon's position that it was necessary to ensure, as part of the systems upgrade, that 000 connectivity was maintained for all service categories. It also would have been reasonable and not particularly onerous to have in place a system for checking 000 connectivity on a regular basis, in the manner TPG has now implemented. That Mr Vernon was writing a code for the systems upgrade “in the early morning hours” largely without input from other employees of TPG and without rigorous checking following the upgrade, also indicates that TPG had a lax approach to compliance with important regulations. None of that conduct is to be regarded as inadvertent.

66    The degree of culpability of TPG should, consistently with s 570(2)(a) of the TC Act, reflect the nature and extent of the contraventions concerned. End users of 5,979 TPG home phone services were denied the capacity to access the 000 emergency call service (for varying lengths of time) over a period of more than six months. During this period, 193 calls to 000 were not connected. ACMA accepted that approximately 50% of these calls were likely to be accidental or hoax calls. Nonetheless, a large number of calls that related to legitimate emergencies were not connected. The lack of immediate access to the emergency call service in the event of an emergency can have very serious consequences. Apart from the increased anxiety and stress involved for those seeking access, TPG's failure could easily have led to the death of a person who might otherwise have been saved because urgent medical assistance could not be requested in the absence of access to the emergency call service. The agreed facts do not go so far as to show that in the case of the husband and wife described earlier, the lack of access to the emergency call service caused or contributed to the husband's death. However, they do demonstrate that in the case of at least one TPG customer experiencing a serious medical emergency and who died three days later, end users were unable to contact the emergency call service through a TPG home phone service.

67    There is no evidence of any loss and damage caused by TPG’s conduct. TPG is entitled to be penalised on the basis that its conduct did not in fact cause any loss or damage: Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) (2011) 279 ALR 609 at [79] (Perram J); approved in Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 at [138] and [162] (Greenwood, Logan and Yates JJ). However the lack of proven loss or damage, whilst a mitigating factor, does not significantly detract from my view that the nature and extent of TPG's contravening conduct was significant and serious.

68    After receiving notification on 20 September 2011 that calls from ‘suspended’ or ‘inactive’ TPG home phone services were not being connected, TPG took immediate steps to rectify the problem. The software code error was rectified across the network by 2:00 pm on 21 September 2011.

69    In 2013, TPG took steps to ensure that actions of the kind that caused TPG to breach ss 13 and 19 of the Determination would not occur again. Mr Vernon deposed that on 3 May 2013, he developed a report for the 000 call type which provides evidence of any difficulties that might be occurring with calls to 000 and which is circulated daily to senior executives of TPG. On 14 June 2013, Mr Vernon published a test document which must be completed if changes are made to the software for the server cluster. On 20 September 2013, Mr Vernon rewrote the software for the server cluster so that if further changes are to be made, one change to the global configuration will be replicated for all service categories. There will be no need to make changes for each service category separately. Mr Vernon deposed that there is a “very reduced likelihood of a similar incident occurring” and he does not believe there are further steps, beyond those already implemented, that can be practically taken to ensure the error does not occur again. He also stated that the requirement to maintain 000 connectivity now receives a high degree of focus within TPG’s business.

70    TPG argued that in assessing the appropriate penalty, I should take into account the fact that the company has a corporate culture of compliance. In that respect, TPG contended that it had sought to comply with its obligations under the Determination and when it realised that it may have failed to comply, it immediately took steps to rectify the problem and that it also put in place measures to ensure the problem would not be repeated. As I have already stated, the fact that TPG did not have policies and processes in place to ensure compliance from the outset and that it did not discover the problem for more than six months due to an absence of checking of 000 connectivity, suggests TPG did not have a reasonable and responsible approach to ensuring compliance with the Determination. Although TPG took immediate corrective steps following the discovery of the software problem, it did not put in place measures to reduce the likelihood of similar incidents occurring (described in the preceding paragraph) until May 2013. That was some 18 months after the discovery of the initial problem and many months after this proceeding was initiated. TPG’s substantial and unexplained delay in putting those measures in place does not provide a basis for much confidence that TPG has a corporate culture of compliance. It tends to suggest that the gravity and seriousness of its failures were not appreciated by TPG even well after this proceeding was instituted against it.

71    Amongst a range of other factors, ACMA advanced its case for the imposition of substantial penalties by reference to TPG's financial position. TPG is a subsidiary of TPG Telecom Limited which is an ASX listed company. In broad terms, the TPG business is the consumer business of the consolidated group. According to the statement of agreed facts, in the half-year to 31 January 2013, TPG Telecom Limited had a revenue of $357 million and its net profit after tax was $78.3 million. In that same period, TPG had a revenue of $230.6 million (TPG’s net profit after tax was not provided). The imposition of a meaningful penalty needs to take TPG’s financial position into account.

72    Although TPG has now taken responsible measures to better ensure its ongoing compliance with ss 13 and 19 of the Determination and has expressed its desire to ensure that the same contravening conduct is not repeated, a significant penalty is nevertheless appropriate to address the need for specific deterrence. The lateness with which TPG took readily available measures to guard against repeated non-compliance suggests that a meaningful penalty is necessary to encourage the maintenance of a timely and pro-active approach by TPG to its responsibilities so that its belated commitment to those responsibilities endures.

73    General deterrence will be best achieved by imposing a penalty that causes all industry participants to recognise the importance of having effective measures in place to ensure compliance with ss 13 and 19 of the Determination. Given the measures required to safeguard against non-compliance are relatively inexpensive, and putting the need for specific deterrence to one side, a penalty in the middle of the available range would likely be sufficient to deter others from engaging in similar contraventions. As the Full Court in NW Frozen Foods pointed out at 293, “Plainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression”.

74    In determining the penalty, I have also taken into account the fact that TPG has expressed remorse and that TPG has not previously been found to have contravened the Determination. TPG cooperated with ACMA in its investigation by responding in a timely way to compulsory notices to provide information issued by ACMA and by making some appropriate admissions. TPG has also contributed to reducing the potential cost of the litigation by agreeing to a statement of agreed facts and by conducting its defence in an exemplary manner. These mitigating considerations had the effect of reducing the penalty I might otherwise have imposed.

75    I have considered whether TPG’s contraventions arose out the conduct of senior management. While Mr Vernon's oversight was an important part of TPG’s contraventions and the evidence does not suggest Mr Vernon was a member of senior management, I do consider that senior management were to a large extent responsible for the contravention by failing to implement appropriate policies and checking procedures to ensure that 000 connectivity was accessible at all times.

76    Pursuant to s 570(3)(b) of the TC Act, the maximum pecuniary penalty for each contravention of the Determination is $250,000.

77    The parties agreed that TPG engaged in a single contravention of s 19 of the Determination and that, if found liable, TPG engaged in 193 contraventions of s 13 of the Determination. However, the parties disagreed as to the appropriate approach to determining the maximum available penalty.

78    TPG argued that by reason of s 570(5) of the TC Act it could only be liable for one pecuniary penalty for all of its contraventions. It argued that the relevant conduct was comprised of one action by one person in making a software programming error and that although there were multiple contraventions, it was the “same conduct” which led to all of those contraventions. On the basis of s 570(5) of the TC Act, TPG contended that a single pecuniary penalty of between $50,000 and $100,000 is appropriate.

79    ACMA contended that the conduct which contravened s 13 and that which contravened s 19 were not “the same” and that s 570(5) has no application. It also contended that whilst there was overlapping conduct in respect of the 193 contraventions of s 13, that overlap was not fatal to the imposition of distinct penalties for each contravention. Accordingly, ACMA contended that the maximum available penalty for the 193 contraventions was $48.5 million. ACMA acknowledged however, that it may be appropriate for the Court to impose an “overall penalty” rather than individual penalties for the contraventions of s 13. ACMA submitted that a penalty between $1.25 million and $1.75  million was appropriate for the contraventions of s 13 of the Determination. It further sought the imposition of a penalty of, or close to, the maximum penalty of $250,000 for the contravention of s 19 of the Determination.

80    The proper approach to determining the number of pecuniary penalties to which TPG may be liable for the 193 contraventions in question must begin with the text of s 570(5). That provision addresses circumstances in which the same conduct constitutes a contravention of two or more civil penalty provisions. Its effect is to provide that the same conduct may give rise to two or more contraventions of different civil remedy provisions but that in such a case, only one penalty may be imposed.

81    Section 570(5) has no application to multiple contraventions of the same provision. It has therefore nothing to say in relation to TPG’s liability for pecuniary penalties for the 193 contraventions of s 13 which I have found. TPG’s contention to the contrary must be rejected. However for reasons which I will shortly explain, the ‘same course of conduct’ and ‘totality’ principles need to be considered.

82    Section 570(5) would have application where the same conduct constituted a contravention of both ss 13 and s 19 of the Determination. That, however, is not the case here. The conduct which, in each case, constituted a breach of s 13 of the Determination was TPG’s failure to connect a particular end user to the emergency call service. The conduct which constituted a breach of s 19 of the Determination was TPG’s failure to ensure that its “controlled network” and “controlled facilities” provided the capacity for end users to access the emergency call service.

83    TPG’s submissions misidentified the conduct to which s 570(5) of the TC Act is directed. The submission wrongly focused on the conduct which led to the contraventions of ss 13 and 19 of the Determination and not the conduct which constituted a contravention of each of those different provisions.

84    The conduct of failing to connect a particular call is qualitatively different to the conduct of failing to maintain a system with a capacity to provide such connections. Each bears a different character irrespective of the fact that both failures may have emanated from the same underlying source.

85    For that reason, TPG is liable to a penalty in relation to its contravention of s 19 of the Determination separate from any penalty or penalties imposed in relation to the s 13 contraventions.

86    Although s 570(5) of the TC Act has no application, a single penalty for the multiple contraventions of s 13 of the Determination is nevertheless an available option in the exercise of the discretion conferred by s 570(1) of the TC Act. In the exercise of a broad discretion such as that conferred by s 570(1), courts have often considered it appropriate to impose a single civil pecuniary penalty for numerous contraventions arising out of a single course or pattern of conduct. This is done by the application of what is commonly referred to as the “course of conduct” or the “one transaction” principle. That principle recognises that where there is an interrelationship between the legal and factual elements of two or more contraventions, care must be taken to ensure that the contravener is not punished twice for what is essentially the same contravention: Construction, Forestry, Mining and Energy Union v Cahill (2010) 194 IR 461 at [39] (Middleton and Gordon JJ). Although, as their Honours said in that case at [42], a court is not compelled to utilise the principle, its application is appropriate in this case. Each of the contraventions of s 13 of the Determination was constituted by the failure of TPG to connect a particular call to the emergency call service. Each of those failures occurred for the same underlying reasons being the programming error and TPG’s failure to have in place appropriate policies and checking procedures. In those circumstances, each contravention may properly be characterised as arising from a single course of conduct. It is appropriate therefore that a single penalty be imposed for the 193 contraventions of s 13 of the Determination as though only one contravention had occurred.

87    For the reasons already given, the imposition of a penalty is a discretionary exercise involving the synthesising of relevant factors in order to arrive at a conclusion as to where the contravener’s conduct sits on a scale of wrongdoing set by reference to the maximum penalty which could be imposed. For the reasons just given, I consider that two separate penalties should be imposed. The maximum available penalty for each is $250,000. The highest end of the range should be reserved for the worst kind of contraventions and for repeat offenders. That is not this case, although I do consider the contraventions in this case to be particularly serious. Taking into account each of the factors earlier identified, in particular the need for specific deterrence and the nature and extent of the conduct involved, I consider that an appropriate penalty for TPG’s contravention of s 19 of the Determination is $200,000 and that the appropriate penalty for TPG’s contraventions of s 13 of the Determination is also $200,000.

88    The totality principle recognises that an assessment should be made to ensure that proposed penalties are not out of proportion to the conduct giving rise to contraventions when viewed collectively: see ACCC v Telstra at [230] (Middleton J). I have considered the totality principle in the context of a total penalty of $400,000 being imposed for the 194 contraventions in question. Taking account of the totality principle, I consider that a total penalty of $400,000 is appropriate.

89    Finally, although the matter was not argued, I am conscious that the recent High Court decision in Barbaro v R; Zirilli v R [2014] 88 ALJR 372 has raised a question as to whether I should take into account ACMA’s submissions on the appropriate penalty.

90    In Barbaro, a majority of the High Court (French CJ, Hayne, Kiefel and Bell JJ) held that in a criminal proceeding, a prosecutor should not be permitted to make a submission as to the appropriate specific penalty (or the range of penalties) which a sentencing judge should impose.

91    In Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2014] FCA 160, White J observed at [26]-[27] that the reasons of the High Court in Barbaro appear to have relevance to the imposition of civil penalties. In Australian Competition and Consumer Commission v Flight Centre Limited (No 3) [2014] FCA 292, Logan J applied Barbaro at [56] by considering himself bound not to take into account submissions as to the appropriate range of penalties to be imposed. Logan J reached that conclusion without the benefit of argument.

92    More recently, Middleton J considered in some detail the application of the reasoning of the High Court in Barbaro to the civil context. In Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2014] FCA 336, Middleton J held that by its decision in Barbaro, the High Court did not intend to exclude, in the civil context, the making of submissions by a regulator as to penalty. His Honour took the view that given the important distinctions that exist between the duties and interests of a prosecutor in a criminal proceeding and those of a civil regulator in a civil penalty proceeding and, without specific mention or consideration of the civil context, the High Court did not implicitly overrule earlier Full Court decisions which permit this Court to take into account a regulator’s submissions as to penalty, such as NW Frozen Foods and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72.

93    Whilst I am inclined to adopt the view taken by Middleton J in Energy Australia, I need not determine the issue. As should be apparent from the reasons I have given, my determination of the appropriate penalties has not been assisted by the penalty or penalty range contended for by ACMA. Whether or not those contentions are taken into account, I would arrive at the same result.

orders

94    In light of my conclusions, I will make the declarations sought by ACMA and order that TPG pay a pecuniary penalty to the Commonwealth of $200,000 in relation to the contravention of s 19 of the Determination and of $200,000 in relation to the contraventions of s 13 of the Determination. TPG sought an opportunity to make a submission as to costs after the delivery of these reasons. The orders I make will facilitate an exchange of submissions as to costs.

Associate:

Dated:    16 April 2014