FEDERAL COURT OF AUSTRALIA

Australian Communications and Media Authority v Limni Enterprises Pty Ltd (formerly known as Red Telecom Pty Ltd) [2022] FCA 795

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 570 of the Telecommunications Act 1997 (Cth) (Telco Act), the first respondent is to pay to the Commonwealth of Australia a pecuniary penalty of:

(a)    $90,000 in respect of the conduct in contravention of s 101(1) of the Telco Act by its failure to comply with the TIO determination 2016/06/07401 dated 3 October 2018 requiring payment to the Axis Brokerage & Trading Company Pty Ltd as declared in paragraph 1.1 of the declarations made on 10 June 2020;

(b)    $60,000 in respect of the conduct in contravention of s 101(1) of the Telco Act by its failure to comply with the TIO determination 2018/04/03847 dated 14 November 2018 requiring payment to Angie's Travel Pty Ltd as declared in paragraph 1.2 of the declarations made on 10 June 2020;

(c)    $70,000 in respect of the conduct in contravention of s 101(1) of the Telco Act by its failure to comply with the TIO determination 2018/06/08097 dated 19 February 2019 requiring payment to Hinterland Smash Pty Ltd as declared in paragraph 1.3 of the declarations made on 10 June 2020;

(d)    $80,000 in respect of the conduct in contravention of s 101(1) of the Telco Act by its failure to comply with the TIO determination 2018/02/07262 dated 5 April 2019 which required payment to Joycey's Sportz Pty Ltd as declared in paragraph 1.4 of the declarations made on 10 June 2020;

(e)    $40,000 in respect of the conduct in contravention of s 101(1) of the Telco Act by its failure to comply with the TIO determination 2017/07/17568 dated 4 April 2019 which required payment to KJ Real Estate Pty Ltd as declared in paragraph 1.1 of the declarations made on 23 July 2020;

(f)    $50,000 in respect of the conduct in contravention of s 101(1) of the Telco Act by its failure to comply with the TIO determination 2018/08/01018 dated 21 June 2019 which required payment to Ms Diana Canepa as declared in paragraph 1.2 of the declarations made on 23 July 2020; and

(g)    $60,000 in respect of the conduct in contravention of s 101(1) of the Telco Act by its failure to comply with the TIO determination 2018/04/06536 dated 21 June 2019 which required payment to the Stewart Family Trust as declared in paragraph 1.5 of the declarations made on 10 June 2020.

2.    Pursuant to section 570 of the Telco Act, the second respondent is to pay to the Commonwealth of Australia a pecuniary penalty of:

(a)    $30,000 in respect of his involvement in the first respondent’s conduct in contravention of s 101(1) of the Telco Act with respect to the TIO determination 2016/06/07401 dated 3 October 2018 requiring payment to the Axis Brokerage & Trading Company Pty Ltd as declared in paragraphs 2.1, 2.2 and 2.3 of the declarations made on 23 July 2020;

(b)    $11,250 in respect of his involvement in the first respondent’s conduct in contravention of s 101(1) of the Telco Act with respect to the TIO determination 2018/04/03847 dated 14 November 2018 requiring payment to Angie's Travel Pty Ltd as declared in paragraphs 2.1, 2.2 and 2.4 of the declarations made on 23 July 2020;

(c)    $19,125 in respect of his involvement in the first respondent’s conduct in contravention of s 101(1) of the Telco Act with respect to the TIO determination 2018/06/08097 dated 19 February 2019 requiring payment to Hinterland Smash Pty Ltd, as declared in paragraphs 2.1, 2.2 and 2.5 of the declarations made on 23 July 2020;

(d)    $22,875 in respect of his involvement in the first respondent’s conduct in contravention of s 101(1) of the Telco Act with respect to the TIO determination 2018/02/07262 dated 5 April 2019 which required payment to Joycey's Sportz Pty Ltd as declared in paragraphs 2.1, 2.2 and 2.7 of the declarations made on 23 July 2020;

(e)    $4,125 in respect of his involvement in the first respondent’s conduct in contravention of s 101(1) of the Telco Act by failing to comply with the TIO determination 2017/07/17568 dated 4 April 2019 which required payment to KJ Real Estate Pty Ltd as declared in paragraphs 2.1, 2.2 and 2.6 of the declarations made on 23 July 2020;

(f)    $11,250 in respect of his involvement in the first respondent’s conduct in contravention of s 101(1) of the Telco Act by failing to comply with the TIO determination 2018/08/01018 dated 21 June 2019 which required payment to Ms Diana Canepa, as declared in paragraphs 2.1, 2.2 and 2.8 of the declarations made on 23 July 2020; and

(g)    $16,500 in respect of his involvement in the first respondent’s conduct in contravention of s 101(1) of the Telco Act by failing to comply with the TIO determination 2018/04/06536 dated 21 June 2019 which required payment to the Stewart Family Trust, as declared in paragraphs 2.1, 2.2 and 2.9 of the declarations made on 23 July 2020,

which involvement was in contravention of s 101(2) of the Telco Act.

3.    The first respondent is to file and serve any submissions as to costs (limited to 5 pages) on or before 4pm on Tuesday, 26 July 2022.

4.    The applicant is to file and serve any submissions on costs in response (limited to 5 pages) on or before 4pm on Tuesday, 9 August 2022.

5.    The first respondent is to file and serve any submissions in reply (limited to 3 pages) by 4pm on Friday, 12 August 2022.

6.    The submissions referred to in orders 3, 4 and 5 above are to be formatted with 1.5 spacing and no less than 12 point font.

7.    The second respondent is to pay the applicant’s costs as agreed or taxed.

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

REASONS FOR JUDGMENT

PERRY J:

1.    INTRODUCTION

1    By these proceedings, the Australian Communications and Media Authority (ACMA) sought declarations and civil penalties against the first respondent, Limni Enterprises Pty Ltd (ACN 151 363 147) (in liq), (formerly Red Telecom Pty Ltd) (Red Telecom) that Red Telecom contravened s 101(1) of the Telecommunications Act 1997 (Cth) (Telco Act). ACMA alleged that Red Telecom failed to comply with the Telecommunications Industry Ombudsman (TIO) alternative dispute resolution scheme established pursuant to s 132 of the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth) (TCPSS Act) and related instruments, in failing to comply with seven separate determinations by the TIO (the TIO determinations) in favour of various consumers (the Relevant Customers). ACMA also alleged that the second respondent, Mr Nicholas Kontaxis, was directly or indirectly knowingly concerned in, or party to, and aided, abetted, counselled or procured, Red Telecom’s contravening conduct, and relevantly sought declaratory relief and civil penalties against Mr Kontaxis. Mr Kontaxis was the sole director and shareholder of Red Telecom at all relevant times.

2    Initially, at the case management hearing held on 28 April 2020, the respondents indicated that they intended, by way of defence, to challenge the validity of the TIO determinations. They subsequently filed a joint defence dated 29 May 2020 admitting Red Telecom’s liability for five of the TIO determinations, denying that Red Telecom had failed to comply with two of the TIO determinations, and not admitting Mr Kontaxis’ accessorial liability for any contraventions of the TIO determinations. However, ultimately no collateral challenge was made to any of the TIO determinations and, insofar as liability had been put in issue, the defence was abandoned by way of consent orders (see [3] below). As ACMA submitted, that was a forensic choice made by the respondents when they were legally represented.

3    On 10 June 2020 and 23 July 2020, the Court made declarations by consent against both respondents as to their respective liability in relation to the seven separate contraventions. By those declarations, the Court declared that:

4    The factual foundation for these declarations is found in admissions made in the joint defence filed on 29 May 2020 and the affidavits of Adam Ian Zwi affirmed on 9 June 2020 and 7 July 2020, which were read at the time of the making of the declarations with the consent of the parties: Joint Schedule of Objections to Evidence filed on 26 April 2021 (Joint Schedule) at [2(a)].

5    Leave to continue proceedings against Red Telecom was granted on 11 November 2020 after it went into liquidation and Red Telecom filed a submitting appearance save as to costs.

6    As liability for the contraventions has been admitted and the injunctive relief relating to a compliance training program was, in all of the circumstances, not pressed, the only remaining issue is the assessment of the appropriate pecuniary penalties to be imposed on each of the respondents pursuant to s 570(1) of the Telco Act.

7    ACMA seeks a total penalty with respect to the contraventions of the Telco Act as against Red Telecom of $400,000, and a total penalty as against Mr Kontaxis of $200,000.

8    For the reasons set out below, I consider that total penalties against Red Telecom should be imposed in the sum of $450,000.00 and against Mr Kontaxis in the sum of $115,125.00.

2.    EVIDENCE

2.1    Evidence relied upon by the parties

9    ACMA primarily relied upon documentary evidence contained in its consolidated tender bundle (CTB) (exhibit A1) which comprised five volumes, in addition to the two-volume Court Book (CB). Given the volume of the documentation, I indicated at the start of the hearing that I expected to be taken to anything that is particularly relied upon by the parties, to which counsel for ACMA agreed (T7.18-7.26) and counsel for the respondent raised no difficulty.

10    ACMA also relied upon the following witnesses, subject to my rulings on objections:

(1)    Adam Ian Zwi, solicitor (affidavits dated 7 July 2020 (second Zwi affidavit), 5 August 2020 (third Zwi affidavit), 9 October 2020 (sixth Zwi affidavit) save for paragraphs 4 and 21 to 29, and 13 October 2020 (seventh Zwi affidavit), which were each affirmed on 28 May 2021);

(2)    Peter Sutton, Manager, Telecommunications Compliance and Enforcement section of ACMA, affirmed on 19 May 2021 (Sutton affidavit), save for paragraph 5 including the heading immediately above that paragraph.

11    Paragraph 24 of the sixth Zwi affidavit was also received in evidence as exhibit R1.

12    In addition, ACMA relied upon the evidence of two consumer witnesses for insight into the effect of the contraventions upon the Relevant Customers (subject to my rulings on objections), namely:

(1)    Henry John Ross Stewart, sole director of Laprenda Pty Ltd, trading as Countrywide Embroidery and trustee of the Stewart Family Trust, dated 11 December 2020 and sworn on 31 May 2021 (Stewart affidavit); and

(2)    Robert Eric Joyce, office manager at Joycey’s Sportz Pty Ltd, trading as Caboolture Indoor Sports, dated 14 December 2020 and sworn on 31 May 2021 (Joyce affidavit).

13    Mr Joyce was cross-examined, as was Mr Stewart, via audiovisual link.

14    Subject to my rulings on objections, Mr Kontaxis relied upon the following evidence:

(1)    Mr Nicholas Kontaxis (affidavits sworn on 14 July 2020 (second Kontaxis affidavit), 22 July  2020 (third Kontaxis affidavit), and 10 March 2021 (fourth Kontaxis affidavit)); and

(2)    Mr Terence Paul Sperber, solicitor for the second respondent (affidavits sworn on 9 October 2020 (first Sperber affidavit) and 12 October 2020 (second Sperber affidavit)).

15    Mr Kontaxis was also cross-examined.

2.2    Reasons for advance ruling with respect to objections to the fourth Kontaxis affidavit under s 192A, Evidence Act 1995 (Cth)

16    Pursuant to consent orders made on 20 April 2021, ACMA sought an advance ruling with respect to objections to evidence raised under s 192A of the Evidence Act 1995 (Cth) (Evidence Act) with respect to the fourth Kontaxis affidavit, sworn on 10 March 2021. Specifically, ACMA raised a large number of objections to the affidavit, as set out in the Joint Schedule. The Joint Schedule contained those objections which remained outstanding following a mediation and further consultation between the parties’ legal representatives.

17    As ACMA explained in its submissions regarding the outstanding objections (AOS) at [2]:

The ruling sought will assist the parties in their preparations for hearing. In this case it has the capacity to halve the necessary hearing time. If the ACMA’s objections are upheld it will eliminate the necessity for substantial reply evidence and will result in limited evidence and witnesses being called by the ACMA. It will save a considerable amount of time, effort and money if the objected to material is ruled to be inadmissible now.

18    ACMA submitted (and it is not in issue) that:

If the Court accepts the overarching relevance objection (explained below and at the front of the Joint Schedule) the Court need not consider the objections on a line-by-line basis as all objections in Part A of the Joint Schedule are caught. Assuming this outcome, the Court need only rule upon Part B of the Joint Schedule.

(AOS at [7].)

19    On 13 May 2021, I made the following orders largely upholding the objections to the fourth Kontaxis affidavit:

1.    The objections to the affidavit of Mr Nicholas Kontaxis sworn on 10 March 2021 contained in Part A of the Joint Schedule of Objections to Evidence filed on 26 April 2021 are upheld on the ground that the evidence is not relevant and admissible under s 56(2) of the Evidence Act 1995 (Cth), save that:

a.    The objection to the first sentence of paragraph [48] is dismissed;

b.    The parties are agreed that paragraphs [55], [56], [57], [58] to [64], and [85] to [92] are limited to evidence of the witness’ understanding of the matters referred to therein pursuant to s 136 of the Evidence Act 1995 (Cth); and

c.    The objections to paragraphs [170] and [199] are dismissed.

2.    With respect to the objections to the affidavit of Mr Nicholas Kontaxis sworn on 10 March 2021 contained in Part B of the Joint Schedule of Objections to Evidence filed on 26 April 2021:

a.    The objection to paragraph [241] is dismissed;

b.    The rulings on the objections to paragraphs [242] and [264] are deferred pending clarification on whether it is proposed to read the further affidavits referred to in those paragraphs and upon the determination of any objections to those affidavits;

c.    The objection to paragraphs [243] to [251] and [252] to [260] inclusive is dismissed in that, if the paragraphs are sought to be read, they will be received as provisionally relevant pursuant to s 57 of the Evidence Act 1995 (Cth);

d.    The objections to paragraphs [268] and [274] are upheld; and

e.    The second sentence of paragraph [266] is without foundation given the rulings with respect to the Part A objections and is not admissible.

20    My reasons for so ruling may be shortly stated. First, given that the Court has declared by consent that Mr Kontaxis was “directly or indirectly knowingly concerned in or party to; and aided, abetted, counselled or procured” the contravening conduct of Red Telecom, it is not open to Mr Kontaxis to attempt to reopen matters properly going to the issue of liability rather than penalty. As such, I agreed with ACMA’s general objections set out in Part A of the Joint Schedule. Secondly, Mr Kontaxis’ evidence as to his complaints about the processes and enforcement practices allegedly engaged in, in particular, by the TIO appeared to invite the Court to undertake a general enquiry into those processes and practices which was irrelevant to the remaining issue in the matter and beyond the power of the Court to undertake. That remaining issue is to determine an appropriate penalty for the respondents to deter future contravening conduct by Mr Kontaxis (specific deterrence) and to deter contravening conduct by other industry participants (general deterrence). The processes of the TIO, as well as of ACMA to the extent that these were also sought to be impugned by Mr Kontaxis, are not relevantly in issue. In other words, those matters cannot logically bear upon the question of assessing an appropriate civil penalty for Mr Kontaxis (or Red Telecom), the purpose of which is primarily, if not exclusively, of specific and general deterrence. The question, therefore, as to whether Mr Kontaxis’ complaints against ACMA have any merit cannot be the subject of any decision in the context of these proceedings. Finally, with respect to the deferred rulings on paragraphs [242] and [264] of the fourth Kontaxis affidavit, ACMA was given the opportunity to make submissions after the hearing if it maintained those objections (T79.46-80.22), but did not take up that opportunity. In those circumstances, those objections should be treated as having been abandoned and the paragraphs taken as read.

3.    GRANT OF LEAVE TO PROCEED AGAINST THE FIRST RESPONDENT IN LIQUIDATION

21    By an interlocutory application dated 10 November 2020 supported by the affidavit of Adam Ian Zwi made 10 November 2020 (eighth Zwi affidavit), ACMA sought leave to continue the proceedings against Red Telecom in liquidation pursuant to s 500(2) of the Corporations Act 2001 (Cth) (Corporations Act). Orders were also sought that, in the event that the Court imposes a pecuniary penalty on Red Telecom, or orders costs against it, ACMA is not to take steps against Red Telecom to enforce payment without further leave of the court. Those orders were neither consented to, nor opposed by, the liquidators (eighth Zwi affidavit at [5]). The application for leave to proceed was granted and orders made accordingly on 11 November 2020. The liquidators filed a submitting appearance, as they had intimated in their response to the interlocutory application.

22    It was agreed that I would include short reasons for granting that leave in my final reasons on penalty, to which I now turn.

23    Section 500(2) of the Corporations Act provides that after the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. The applicable principles are conveniently summarised in ACMA’s submissions in its application for leave to continue the proceedings against the first respondent as follows:

9.    Generally, claimants should proceed by way of lodgement of a proof of debt, unless there is some good reason why a departure is justified.

10.    The question of whether leave should be granted turns upon the exercise of discretion and upon consideration of all of the circumstances of the particular case and cannot be approached as a "shopping list" of factors: Australian Competition and Consumer Commission v Birubi Art Pty Ltd (No 2) [2018] FCA 1785 (Biribi (No 2)) at [9(1)] citing Australian Competition and Consumer Commission v ACN 135 183 372 (Administrators Appointed) (formerly known as Energy Watch Pty Ltd) [2012] FCA 586 (Energy Watch) at [5] (Marshall J) & Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1305; (2011) 285 ALR 207 at [40] (Hammerschlag J).

11.    Factors relevant to the exercise of discretion include matters such as the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, the stage to which the proceedings, if already commenced, may be progressed and the prospect that a proof of debt will be rejected: Biribu (No 2) at [8] (per Perry J); Fair Work Ombudsman v Blue Sky Kids Land Pty Ltd (in liquidation) [2020] FCA 718 (Blue Sky Kids) at [9] (per Katzmann J).

12.    Particular weight has been given to public interest factors in previous cases brought before this Court: Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (Subject to Deed of Company Arrangement) [2016] FCA 1246 (Phoenix) at [86], [88] and [89] respectively; approved on appeal in Phoenix Institute of Australia Pty Ltd v Australian Competition and Consumer Commission [2017] FCAFC 155 at [15]-[16] (the Court); Australian Competition and Consumer Commission v Advanced Medical Institute Pty Limited (Administrator Appointed) (No 3) [2011] FCA 348 (Advanced Medical) at [5] - [6] (North J); and more recently in Blue Sky Kids at [11] (per Katzmann J). For example, in Biribu (No 2) at [10] (per Perry J):

(1)    the purpose of a civil penalty, and thus of such proceedings, being to primarily, if not wholly, protect the public interest in corporations complying with the [Australian Consumer Law] by putting a price on contraventions that is sufficiently high to deter repetition by the contravener and by others tempted to contravene;

(2)    the fact that even if a company is in liquidation, it may still be appropriate to order that it pay penalties as a measure of the Court's disapproval of the contraventions and as a measure of the seriousness with which they are regarded, including for the purposes of general deterrence;

(3)    the fact that, in seeking declaratory and other relief, the ACCC's real interest is to vindicate a public right that has been breached; and

(4)    the significant public interest in declarations of contravening conduct and the imposition of penalties being on the public record in aid of deterrence, which is not defeated by the fact that the company is in liquidation and may be unable to pay the penalties.

13.    The capacity to pay any penalties imposed is not a proper or relevant consideration (see Birubi (No 2) at [11]). The fact that a company is in liquidation "should not dissuade the Court from assessing appropriate penalties because they may still have an important general deterrent effect even though they may not be recovered": Birubi (No 2) at [14]; ACCC v Birubi Art Pty Ltd (in liq) (No 3) [2019] FCA 996 (Birubi (No 3)) (penalty judgment) at [23] (per Perry J). See also Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) [2017] FCA 521 (AIPE) at [26(5)] (per Bromwich J).

14.    Penalties are imposed to serve as a warning of the Court's attitude to contraventions of this nature and as a measure of the Court's disapproval, consistent with the objective of deterrence: Birubi (No 3) at [24]-[25].

24    ACMA submitted that similar public interest factors in the present case weighed heavily in favour of the exercise of discretion to grant leave to proceed. I agree for the following reasons.

25    First, ACMA is the regulatory body charged with ensuring compliance with, and accountability for contraventions of, the Telco Act as an integral part of a statutory regime designed to protect consumers. As such, its interest is not that of a private litigant but it is concerned with enforcing the law in the public interest.

26    Secondly, at the time that Red Telecom went into liquidation the Court had already made declarations that Red Telecom contravened s 101(1) of the Telco Act on seven occasions (see [3] above). Given that Red Telecom had engaged in multiple breaches of consumer protection legislation and that the relief sought includes the imposition of substantial civil penalties for those breaches, I accept that there is a strong public interest in the proceedings continuing so that appropriate relief can be granted.

27    Thirdly and related to the last point, even though specific deterrence is not relevant vis-à-vis Red Telecom, general deterrence remains highly relevant with the aim of ensuring that penalties are imposed at a level sufficient to serve as a warning to those bound by the TIO Scheme as to the seriousness of the consequences of failing to comply with that scheme.

28    Fourthly, as ACMA also submitted, the proceedings are at an advanced stage with the Court having already made declarations as to liability: see by analogy Australian Competition and Consumer Commission v Birubi Art Pty Ltd (No 2) [2018] FCA 1785 (Birubi (No 2)) at [16].

29    In the fifth place, ACMA rightly submitted that a significant factor favouring the exercise of discretion to grant leave to proceed is the fact that relief cannot be obtained by way of a proof of debt: Birubi (No 2) at [15]; Australian Competition and Consumer Commission v Link Solutions Pty Ltd [2008] FCA 1790; (2008) 68 ACSR 561 at [11] (per Bennett J); Fair Work Ombudsman v Blue Sky Kids Land Pty Ltd (in liquidation) [2020] FCA 718 (Blue Sky Kids) at [9] (Katzmann J). As such this is not a case where there is a choice between an action, on the one hand, and a proof of debt, on the other hand.

30    Finally, the liquidators had indicated their intention to file a submitting appearance in the proceeding thereby minimising any likely prejudice to the creditors (see also Birubi (No 2) at [17]).

31    It follows for all of these reasons that I considered it appropriate to grant leave to proceed against Red Telecom in liquidation.

4.    BACKGROUND

4.1    The TIO Scheme

32     Section 101 of the Telco Act provides that:

(1)    A service provider must comply with the service provider rules that apply to the provider.

Note:    Service provider rules is defined by section 98.

(2)    A person must not:

  (a)    aid, abet, counsel or procure a contravention of subsection (1); or

(b)    induce, whether by threats or promises or otherwise, a contravention of subsection (1); or

(c)    be in any way, directly or indirectly, knowingly concerned in, or party to, a contravention of subsection (1); or

(d)    conspire with others to effect a contravention of subsection (1).

(3)    Subsections (1) and (2) are civil penalty provisions.

Note: Part 31 provides for pecuniary penalties for breaches of civil penalty provisions.

33    Red Telecom was a “service provider” within the meaning of s 86 of the Telco Act (defence at [3]). As a result, by virtue of s 101(1) of the Telco Act it was required to comply with the “service provider rules” which are set out in schedule 2 to the Telco Act (see the definition of “service provider rules” in s 98(1), Telco Act).

34    Red Telecom was also an “eligible carriage service provider” within the meaning of s 127 of the TCPSS Act (defence at [3]). In turn, as an “eligible carriage service provider”, it was mandatory for Red Telecom to enter into the TIO Scheme under s 128(1) of the TCPSS Act.

35    By virtue of s 132 of the TCPSS Act, a carriage service provider who is a member of the TIO Scheme must comply with the alternative dispute resolution Scheme which is operated by the TIO.

36    TIO in turn is governed by the TIO Constitution and Terms of Reference (TOR). Importantly, compliance with TIO decisions are mandatory upon the consumer accepting the TIO decision (cl 3.14, TOR). Each member agrees to be bound by the TOR (cl 17, Constitution).

37    I note that in Australian Communications Authority v Viper Communications Pty Ltd [2000] FCA 1664; (2000) 108 FCR 173 at [18]-[30], Matthews J explained the history of the TIO Scheme.

38    Red Telecom admitted that it had been a member of the TIO Scheme since August 2013 and of the TIO, and that was bound by the TIO Constitution and TOR (defence at [3]). The TIO Scheme Membership form for Red Telecom dated 6 August 2013 was in evidence (exhibit NK10, fourth Kontaxis affidavit; CB792). It identified Mr Kontaxis as the director and the person who will handle TIO complaints. Importantly, Mr Kontaxis in his capacity as director of Red Telecom signed Part 5 of the form headed “Agreement”. Under cl 2.1 of the Agreement, Red Telecom agreed that it “shall comply in every respect” with the Memorandum of Association of the TIO, Articles of Association of the TIO as amended from time to time, and the TIO Constitution (CB795).

39    The significance of the TIO alternative dispute resolution scheme to the objects of the Telco Act was explained by Foster J in Australian Communications and Media Authority v Bytecard Pty Ltd [2013] FCA 38 (Bytecard) at [57] in accepting ACMA’s written submissions as follows:

The telephone and internet are, notoriously, a vital aspect of a significant number of small businesses’ and households’ employment, commercial, educational, domestic and/or recreational activities. The provisions of Division 5 of Part 4 of the Telco Act, and the TIO scheme established under it, are designed to provide a free, independent alternative dispute resolution scheme for small business and residential consumers in Australia with unresolved complaints about their telephone or internet services. The scheme seeks to provide for the independent, just, informal and speedy resolution of such complaints. This advances the objects of the Act set out in s 3, including the main objects of providing:

... a regulatory framework that promotes:

(a) the long-term interests of end-users of carriage services or of services provided by means of carriage services; and

(b) the efficiency and international competitiveness of the Australian telecommunications industry; and

(c) the availability of accessible and affordable carriage services that enhance the welfare of Australians…

40    It was not in dispute that there was no avenue for merits review from a TIO determination. Judicial review is however available: Australian Communications Authority v Viper [2001] FCA 637; 110 FCR 380.

4.2    Red Telecom and Mr Kontaxis

41    Mr Kontaxis was a director of Red Telecom from 2013 until 30 September 2020 when Red Telecom’s network business was acquired by United Lifestyle Group Networks Pty Ltd (United). On 7 October 2020, liquidators were appointed to Red Telecom. By that time, Mr Kontaxis had worked in the telecommunications industry for over 15 years, commencing in 2003 when he started in a marketing role at a telecommunications company called Sietek. He was promoted to a sales representative role in 2004, and in 2006 to regional sales manager at which time he relocated to Melbourne with the company. He underwent technical training in telecommunications at various stages of his employment with Sietek. He returned to Sydney in 2010 where he completed a graduate certificate in marketing with the University of Technology Sydney and worked as a business development manager for the next three years at another telecommunications company, Commander.

42    Mr Kontaxis started the Red Telecom business in 2012 at the age of 31, with his then business partner. In the third Kontaxis affidavit, Mr Kontaxis described Red Telecom’s business as follows:

30.    Red Telecom was a business-to-business orientated company. Its offering was based on a two-part model, with target customers being other small to medium businesses:

a)    The first part was as a telecommunications network service provider; and

b)    The second part was providing telephony and other hardware and accessories for businesses.

31.    The network services aspect was for office phone lines and internet services.

32.    The hardware aspect was for office telephone systems but also included related accessories such as copiers and security equipment (such as closed circuit television). To this end the hardware aspect offered more than simply telecommunications.

…

40.    Red Telecom also provided network services separately from the hardware. Those services included PSTN lines (Public Switched Telephone Network, i.e. normal copper telephone lines), ISPN (Integrated Service Digital Network), VOIP (Voice Over Internet Protocol), ADSL (Asymmetric Digital Subscriber Line), NBN (National Broadband Network), ethernet, mobile and mobile data. Red Telecom was an authorised reseller of NBN. These services were ongoing monthly reoccurring services.

…

48.    In approximately seven years of operation, we serviced approximately 1,200 customers.

43    Mr Kontaxis gave evidence of how hard he worked in building up the business and regarding the growth of the business. He bought out his then business partner’s share in Red Telecom in 2015 and took on management of the business himself, while continuing as a field sales representative.

44    By 2018, the company employed about 35 staff across its Sydney, Newcastle and Brisbane operations. The staff were employed in various roles including sales, customer service, accounts, administration, and marketing, and included internal technicians. The company also had its own fleet of service and maintenance vehicles.

45    The number of active network customers of Red Telecom fluctuated between 2013 and 2020 (as new customers were added and some contracts expired) but was at its highest in 2018 when Red Telecom was servicing 823 active customers. Significantly, Mr Kontaxis gave evidence that throughout the growth of the company, he was “heavily involved in most decisions, as the business’ sole director” (fourth Kontaxis affidavit at [83]).

46    Mr Kontaxis also explained that in 2015, Red Telecom became a sponsor of the Sydney Children’s Hospital and referred to the company’s commitment to employing from disadvantaged groups, as well as to the fact that Red Telecom was a finalist on a number of occasions in small business awards between 2012 and 2020.

4.3    The complaints against Red Telecom dealt with by the TIO

47    Mr Kontaxis accepted that he was the ultimate decision-maker about whether to comply with the TIO determinations (T53.2). He also accepted that:

(1)    he was the one who decided to challenge the seven TIO determinations the subject of these proceedings (T53.30-34); and

(2)    he chose not to pay each of the TIO determinations on their due date despite, at least in the case of the Axis, Canepa and Stewart Family Trust (as defined in [50] below) TIO determinations, having funds which exceeded the amounts owing to them on the due date (T68.44-69).

48    As such, as ACMA submitted, Mr Kontaxis accepted that he was the controlling mind of Red Telecom in terms of the decision not to pay the determinations while he sought avenues for review (T87.44-46).

49    With respect to complaints against Red Telecom dealt with by the TIO and Red Telecom’s response to those complaints, Mr Kontaxis’ evidence in chief, in the third Kontaxis affidavit, was that:

116.    A common feature of the type of complaints the TIO was dealing with involve directing Red Telecom to pay monetary sums to customers.

117.    This included the TIO directing Red Telecom to “pay out” customers finance contracts or paying customers for Customer Service Guarantee (CSG) compensation.

…

133.    When we received the TIO decisions, I felt that Red Telecom was faced with the choice of continuing to just pay the monetary components or oppose them. If there had had only been a few, and the relationship had been as it was before 2016, I would have paid the monetary components … I made a decision to challenge parts of the decisions.

135.    … the finance payout and CSG components of the decisions were not paid…

136.    The 7 TIO decisions the subject of this proceeding are decisions where we took this approach.

…

170.    From at least 2017 until mid-2020, I was looking for avenues to appeal TIO decisions. This was both before and after the first TIO referral to the ACMA and also after commencement of this proceeding.

…

191.    In late 2019, after speaking with family members and colleagues for their views, I decided to change my approach away from political avenues and instead, get some specialised legal advice.

…

193.    In November 2019 I met with many solicitors for advice …

194.    On 10 January 2020, I contacted Hamish Frazer, a partner of Bird and Bird. Mr Frazer is the lead partner of the firm’s IT and communications departments in Sydney. After speaking with all of these solicitors, the common advice was that the area of law involving the TIO was concluded and the right to appeal was uncertain, difficult to grasp and complex.

4.4    The present proceedings

50    The seven TIO determinations with which Red Telecom did not comply in contravention of s 101(1) of the Telco Act, and in which Mr Kontaxis was directly or indirectly knowing concerned in or a party, were as follows:

(1)    TIO determination 2016/06/07401 dated 3 October 2018 that Red Telecom pay, by the specified date (24 October 2018), an amount of $20,258.80 in respect of a complaint lodged with the TIO by a customer, the Axis Brokerage & Trading Company Pty Ltd (Axis);

(2)    TIO determination 2018/04/03847 dated 14 November 2018 that Red Telecom pay, by the specified date (3 December 2018), an amount of $4,177.87 in respect of a complaint lodged with the TIO by a customer, Angie’s Travel Pty Ltd (Angie’s Travel);

(3)    TIO determination 2018/06/08097 dated 19 February 2019 that Red Telecom pay, by the specified date (27 February 2019), an amount of $10,750.86 in respect of a complaint lodged with the TIO by a customer, Hinterland Smash Pty Ltd (Hinterland);

(4)    TIO determination 2017/07/17568 dated 4 April 2019 that Red Telecom pay, by the specified date (11 April 2019), an amount of $1,012.34 in respect of a complaint lodged with the TIO by a customer, KJ Real Estate Pty Ltd (KJ Real Estate);

(5)    TIO determination 2018/02/07262 dated 5 April 2019 that Red Telecom pay, by the specified date (26 April 2019), an amount of $12,544.87 in respect of a complaint lodged with the TIO by a customer, Joycey’s Sportz Pty Ltd (Joycey’s Sportz);

(6)    TIO determination 2018/08/01018 dated 21 June 2019 that Red Telecom pay, by the specified date (5 July 2019), an amount of $5,895.60 in respect of a complaint lodged with the TIO by a customer, Ms Diana Canepa (Canepa); and

(7)    TIO determination 2018/04/06536 dated 21 June 2019 that Red Telecom pay, by the specified date (5 July 2019), an amount of $8,421.60 in respect of a complaint lodged with the TIO by a customer, the Stewart Family Trust (Stewart Family Trust).

(Declarations made on 10 June 2020 and 23 July 2020.)

51    On 1 November 2019, ACMA sent correspondence to Mr Kontaxis urging him to take “immediate steps to pay the funds” required by the TIO determinations 1 to 6 above (CTB at TB/T39).

52    On 4 November 2019, ACMA issued a statutory notice to Mr Kontaxis under s 521(2) of the Telco Act requiring production of information and documents specified in schedule B to the notice in order to assist its investigation into his involvement in potential contraventions of s 101(2) of the Telco Act, as the director of Red Telecom, regarding its failure to comply with a number of TIO determinations (Sutton affidavit, 19 May 2021, at [6]-[9]).

53    On 8 November 2019, ACMA wrote to Mr Kontaxis stating that “as mentioned in our letter of 1 November your compliance with the TIO determinations may negate the need for court proceedings” and that the “opportunity for any such action is fast closing and must include payment of the funds owed to affected customers”, giving notice of its apparent intention to bring these proceedings (CTB at TB/T42).

5.    DETERRENCE

5.1    The primacy of deterrence, and its implications, in assessing the appropriate penalty

54    Pursuant to s 570(1) of the Telco Act, if the Court is satisfied that a person has contravened a civil penalty provision, the Court may order the person to pay such pecuniary penalty, in respect of each contravention, as the Court determines to be appropriate. Section 570(2) further provides that:

(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.

55    It is well established that the purpose of civil penalties “is primarily if not wholly protective in promoting the public interest in compliance”: Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (Commonwealth v Director) at [55] (French CJ, Kiefel, Bell, Nettle and Gordon JJ (with whose reasons Keane J agreed at [79])); see also Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 96 ALJR 426 (Pattinson) at [9] and [15] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). The primacy of deterrence is equally applicable to the assessment of civil penalties under s 570 of the Telco Act: Australian Communications and Media Authority v TPG Internet Pty Ltd [2014] FCA 382; (2014) 221 FCR 502 (TPG (FCA)) at [61] (Bromberg J); Bytecard at [41]-[42] (Foster J) (citing Trade Practices Commission v CSR Limited [1990] FCA 762; (1991) ATPR 41-076 (CSR) at 52,152 (French J (as his Honour then was)). As ACMA submitted (at AS [31]), there are other relevant factors that have been identified and applied in the authorities concerning the determination of civil penalties, including for the purposes of s 570 of the Telco Act. As the Full Court has observed, these other factors, which relate to both the objective features of the contravening conduct and the subjective circumstances of the contravener, may be relevant “because they directly bear on the assessment of the penalty that is necessary to achieve general and specific deterrence” in the circumstances of the case (quoting Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49; (2021) 284 FCR 24 (Volkswagen) at [150]).

56    It follows that the various factors under s 570(2) of the Telco Act relevant to setting the penalty amount fall to be considered in the context of setting a penalty of appropriate deterrent value so as to ensure that the penalty cannot be regarded by the respondents and others merely as an acceptable cost of doing business or an economically rational choice: see further by analogy Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 (TPG (HCA)) at [66] (French CJ, Crennan, Bell and Keane JJ), Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 (Singtel Optus (FCAFC)) at [62] (the Court); and Pattinson at [17] and [66]. In other words, as the Full Court held in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 (Reckitt) at [151], the penalty imposed needs to “make the risk/benefit equation less palatable to a potential wrongdoer and the deterrence sufficiently effective in achieving voluntary compliance”. It also follows that “the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression”: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 (NW Frozen Foods) at 293 (Burchett and Kiefel JJ). As six members of the High Court recently held in Pattinson at [10] at [10]:

… What is required is that there be “some reasonable relationship between the theoretical maximum and the final penalty imposed”. That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546 [of the Fair Work Act 2009 (Cth) conferring power to impose civil pecuniary penalties]: the deterrence of future contraventions of a like kind by the contravenor and by others.

(Footnotes omitted.)

57    Thus the High Court in Pattinson held that the penalties imposed by the primary judge were appropriate “because they were no more than might be considered to be reasonably necessary … to make the continuation of the CFMMEU’s non-compliance with the law, amply demonstrated by the history of its contraventions, too expensive to maintain” (at [9]) (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). However, as their Honours then proceeded to explain, there is no place for the notion that a civil penalty must be proportionate to the seriousness of the conduct comprising the contravention or that the maximum penalty should be reserved for the most serious examples of offending (at [10]; see also at [49]-[55]). This also suggests that insofar as ACMA submitted that certain factors should be regarded as “aggravating” factors or factors relevant potentially to a “discount” in the penalty that might otherwise be imposed, its submissions were in error insofar they appear to suggest a focus not upon deterrence, but upon punishment.

58    The primary object of deterrence also leaves little scope, if any, for the Court to take into account matters such as personal hardship which setting a particular penalty may impose upon the wrongdoer save insofar as it is relevant to deterrence. Thus in Australian Competition and Consumer Commission v High Adventure Pty Limited [2005] FCAFC 247; (2006) ATPR 42-091, the Full Court held that:

11    … as deterrence (especially general deterrence) is the primary purpose lying behind the penalty regime, there inevitably will be cases where the penalty that must be imposed will be higher, perhaps even considerably higher, than the penalty that would otherwise be imposed on a particular offender if one were to have regard only to the circumstances of that offender. In some cases the penalty may be so high that the offender will become insolvent. That possibility must not prevent the Court from doing its duty for otherwise the important object of general deterrence will be undermined.

(See further the helpful discussions of the authorities in, e.g., Federal Commissioner of Taxation v Arnold (No 2) [2015] FCA 34; (2015) 324 ALR 59 at [200]-[204] (Edmonds J); and Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 7) [2016] FCA 484 (SensaSlim) at [20]-[29] (Yates J); and by analogy, Registrar of Aboriginal and Torres Strait Islander Corporations v Matcham (No 2) [2014] FCA 27; (2014) 97 ACSR 412 (Matcham) at [250]-[254] (Jacobson J).)

5.2    General deterrence considerations in the present case

59     I accept ACMA’s submission that it is important to set a penalty for both respondents that will deter other businesses and individuals from participating in similar contraventions. (applicant’s penalty submissions dated 24 May 2021 (AS) at [14]).

60    In this regard, it is apparent from the legislated maximum penalties (set out below at [78]) that “the legislature has given the clearest possible indication that contraventions of s 101(1) or (2) are to be considered as serious matters when the Court comes to the question of imposing a civil penalty”, as Foster J held in Bytecard at [40]. No doubt this reflects the essential nature of telecommunication services in modern society, including their importance to Australia’s economic prosperity. In this regard, Foster J in Bytecard at [57] agreed with ACMA’s written submissions in that case that:

Abiding by the ‘umpire's decision’ [made under the TIO alternative dispute resolution scheme] is self evidently an important part of the TIO Scheme. If members of the TIO Scheme fail to comply with determinations of the TIO the effectiveness of the Scheme is likely to quickly and significantly diminish and thereby potentially have consequences such as the following:

[1]    discouraging Australian small businesses and households who experience difficulties with their telephone and/or internet services from seeking redress;

[2]    reducing public confidence in Australia's telephone and/or internet service industry;

[3]    discouraging the use of telephone and/or internet services;

[4]    increasing the resources required by the TIO and the ACMA to try and ensure compliance with the Telco Act, and

[5]    undermining the objects of the Telco Act.

61    I also agree with ACMA’s submissions that:

16.    Second, if the burden of a penalty is seen to be less than the cost of an effective compliance program, eligible carriage service providers may be tempted to prefer to absorb the risk of being caught over compliance with the TIO Scheme. Such an approach would, in turn, give contravening companies an advantage over those which do absorb the proper costs of compliance: for example, Reckitt at [152].

17.    Third, the penalty imposed will be in the interests of affected consumers, the public more broadly and telecommunications service providers. Accordingly, the imposition of an appropriate penalty in the present case will validate the behaviour and efforts of compliant businesses and send a warning to non-compliant ones.

(Emphasis in original.)

62    Finally, as earlier mentioned, general deterrence considerations continue to apply notwithstanding that Red Telecom is now in liquidation. For example, in Australian Competition and Consumer Commission v Birubi Art Pty Ltd (in liq) (No 3) [2019] FCA 996 (Birubi (No. 3)) I held that:

22    Given that Birubi is in liquidation, it is unlikely that Birubi would be able to pay any pecuniary penalty in any event. However, even if Birubi were not already in liquidation, it follows from this and other authorities to like effect that the fact that the penalties proposed would have significantly exceeded Birubi’s annual income … and may have caused it to become insolvent, would not have constituted a mitigating factor that might have justified a lesser penalty if the Court were satisfied that penalties at the level proposed were necessary in order to have the appropriate deterrent effect.

23    Nor, as the ACCC submits, should the fact that Birubi is now in liquidation dissuade the Court from assessing appropriate penalties because they may still have an important general deterrent effect even though they may not be recovered. For reasons I develop below, that deterrent effect is of particular importance in the present context given the economic, social and cultural harms to Indigenous Australians which may flow from businesses misrepresenting the provenance of art and souvenirs as Australian Indigenous art and artefacts. Thus, as the Full Court explained in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liq) [2007] FCAFC 146; (2007) 161 FCR 513:

20.     … a court may impose a penalty on a company in liquidation if, to do so, would clearly and unambiguously signify to, for example, companies or traders in a discrete industry that a penalty of a particular magnitude was appropriate (and was of a magnitude which might be imposed in the future) if others in the industry sector engaged in the same or similar conduct. …

24    By way of illustration, the Full Court referred to the decision of O’Loughlin J in Australian Competition and Consumer Commission v The Vales Wine Company Pty Ltd (1996) ATPR 41-528 (Vales Wine) in which his Honour observed that even though the company was in liquidation and there would be no hope of recovering any penalties or costs, that should not dissuade the Court from assessing appropriate penalties to “serve as a warning throughout the wine industry and elsewhere of the attitude of the Court to offences of this nature” (at 42,776).

(See also, e.g., Australian Competition and Consumer Commission v SIP Australia Pty Limited [2003] FCA 336; (2003) ATPR 41-937 at [59] (Goldberg J); and SensaSlim at [20]-[28] (Yates J)).

5.3    Specific deterrence considerations: Red Telecom

63    As Red Telecom is in liquidation, ACMA did not put forward any submissions suggesting that specific deterrence was a relevant consideration in setting an appropriate penalty against Red Telecom (AS at [19]).

5.4    Specific deterrence considerations: Mr Kontaxis

5.4.1    Is specific deterrence relevant to Mr Kontaxis given his current intention never to work in the telecommunications industry again?

64    ACMA submitted that there was a need to impose a penalty which would specifically deter Mr Kontaxis from engaging in similar conduct in the future given that, as the sole shareholder and director of Red Telecom, Mr Kontaxis was the guiding mind of Red Telecom. Mr Kontaxis, however, submitted that specific deterrence should not be a factor in assessing penalty in the circumstances of his case.

65    There are a number of considerations to be considered in determining the need for, and the weight to be given to, specific deterrence with respect to Mr Kontaxis.

66    First, he is not presently employed in the telecommunications sector. While he initially took a job as a truck driver due to the restraint of trade clause, at the time of the trial he was unemployed and seeking financial assistance from Centrelink (fourth Kontaxis affidavit at [268]-[269]).

67    Secondly, Mr Kontaxis is subject to a restraint of trade clause under an agreement between Red Telecom, Mr Kontaxis and United for the acquisition of Red Telecom’s consumer base that was executed on 30 September 2020 (fourth Kontaxis affidavit at [261]-[262] and CTB438-439; T48.45-49.13 (Mr Kontaxis)). The restraint of trade under clause 9 apparently imposes a “non-competition” restraint on Mr Kontaxis (in his capacity as guarantor under the agreement) of three years (cls 9.1(a) and 9.3(c)) and a “non-solicitation” restraint on him of between one and five years depending on the specific restraint (cls 9.2 and 9.4). However, the drafting of these provisions is very poor and the clause confusing as a consequence. It is entirely tenable therefore that Mr Kontaxis, who described the restraints as “complicated”, did not properly understand them as he said in cross-examination, particularly where he did not engage a lawyer to represent him in the sale of the business but acted effectively on his brother’s “ok” after his brother, who is a lawyer, read it for him (T47.15-48.7, and 48.45-49.17). I also accept Mr Kontaxis’ evidence that he would not ask for the period of the restraint of trade clause in his contract with United to be shortened, given his evidence as to his intention never to return to the telecommunications sector (see T49.15-19 and T76.4-16; and fourth Kontaxis affidavit at [263]).

68    Thirdly and related to this, I accept Mr Kontaxis’ emphatic evidence in cross-examination that he does not intend to work again in the telecommunications industry. As he put it in cross-examination “Absolutely not. … No chance on God’s earth” (T42.28 and 42.31; see also e.g. T49.20-22). That intention is borne out of his strongly held views that he has been treated harshly by the regulators, that he should have had a right of merits review from the TIO determinations, and that the amounts which Red Telecom was required to pay under the TIO determinations were unfair (see e.g. T55.34-46; T71.36-39; T76.4-16). It is also related to the fact, which I accept, that the proceedings have taken “a massive toll” personally on him, as a result of which he has sought assistance from a counsellor and psychologist (T76.13 and T77.35-40; fourth Kontaxis affidavit at [271]-[273], referring to Annexures NK41 and NK42 at CB915-919). However, he had to stop the sessions with the psychologist and counsellor because he could no longer afford them (fourth Kontaxis affidavit at [271]).

69    Fourthly, with respect to the last of these matters, ACMA did not dispute Mr Kontaxis’ evidence as to his health and, in particular, the toll which his interactions with the regulator and the proceedings have taken upon his mental health. That evidence comprised reports by Ms Gawronski, Psychotherapist, Counsellor and Criminologist, and Ms Guzel, Senior Psychologist (Annexures NK41 and NK42 respectively to the fourth Kontaxis affidavit). In her report dated 8 March 2021, Ms Gawronski explained that Mr Kontaxis had presented for counselling on 30 August 2019, and has attended regular counselling sessions since then. She opined that “[o]n initial testing with DASS-21 Mr Kontaxis scored in the severe range for stress while his anxiety was moderate and depression insignificant” (CB916). However, she found that subsequently Mr Kontaxis’ distress arising from his perception that he had been treated unfairly by the TIO and customers of Red Telecom and from being the subject of the Federal Court proceedings “has had a major negative impact of [sic] his mental, physical and emotional health” (CB917). She further observed that “Mr Kontaxis is at present far more depressed than he was in 2019 due to the constant and pervasive pressures the business has caused him. The legal action has also heightened his anxiety levels” (CB917). Mr Kontaxis also underwent periodic psychological treatment with Ms Guzel. She opined that he “initially presented as [a] highly stressed and anxious young man who was experiencing a range of difficulties with his telecommunications business” and that she would continue to work with him “to enable him to adjust to the current and any other significant stressors he has to deal with” (CB919).

70    Fifthly, while at the time of trial Mr Kontaxis was unemployed, he does also hold qualifications capable of being utilised outside the telecommunications industry, being his marketing qualification, truck driving licence and forklift licence, and may therefore be able to obtain employment in other fields quite apart from any other qualifications which he may acquire in the future (T42.37-40).

71    However, notwithstanding these considerations Mr Kontaxis still has much of his working life ahead of him, being only 40 or 41 years of age. Furthermore, once the restraint of trade clause ceases to operate, he will be free to work again in the telecommunications industry and to operate a telecommunications business. Given these factors and the extent of his knowledge and experience in the telecommunications industry, I consider that there still remains a real, and not remote, possibility that his intentions may change at some time in the future (although I would not put it any higher than a real possibility) and that he may therefore work again in that field despite the fact that I accept the veracity of his current intentions. This is not, for example, a case where the individual concerned is permanently physically or mentally disabled such that there is no realistic possibility that she or he could ever return to work in the sector. I therefore reject the submission that specific deterrence is not a relevant factor in Mr Kontaxis’ case. However, in all of the circumstances I would give specific deterrence less weight than general deterrence because the likelihood that Mr Kontaxis will return to the telecommunications sector is low and the consequences of his decision not to comply with the determinations in question here have taken such a serious toll on him personally that the risk that he would again fail to comply with the TIO Scheme is reduced even if he did return, notwithstanding his lack of contrition.

5.4.2    Considerations relevant to the weight to be given to specific deterrence in Mr Kontaxis’ case

72    ACMA submitted on the basis of Mr Kontaxis’ evidence in cross-examination that:

One significant factor that has come from the evidence is Mr Kontaxis still doesn’t understand why he’s here today. He’s – there’s no real remorse or insight that has been expressed. Certainly, there was no – there has been no apology and it’s quite clear from that fact that there may be a need for the specific deterrence.

(T86.27-30)

73    I accept that submission. As I have earlier mentioned, Mr Kontaxis continues to feel very passionately that the TIO determinations were unfair, he has been poorly treated by the regulator, and he should have had a right to have the TIO determinations reviewed. This sentiment is encapsulated in his evidence that “I don’t even understand why I’m here today, to be honest” (T47.22). As he further said in answer to a question relating to Red Telecom’s capacity to pay the TIO determinations when they fell due:

… we were going to pay. We just didn’t feel that that amount was fair. I’m a small business too. You bring up these two guys as a small business in here, you bring me to court, you – you want to come at me as if I’ve done something criminal, because that’s – that’s what I’ve been told a civil penalty is. I still don’t understand. But these people that have these businesses have been around a lot longer than me and actually probably turned over more money, but again, I – I’m just making it very clear it’s not that we did not want to pay. We just felt that that part of the decision was just now unfair, and like any other judicial system, we thought – or I believed – I will just take “we” out of it. I thought that I could get it overturned, just like when you get a parking ticket, just like you get anything else in life, there is an avenue for appeal. Unfortunately, in this case the TIO is judge, jury and executioner, and that’s why we’re here today.

(T66.34-46)

74    However, while Mr Kontaxis clearly feels very aggrieved, the important point in considering the weight to be given to specific deterrence in assessing the appropriate penalty is that his evidence shows a lack of insight into his contraventions and a lack of remorse. His evidence in cross-examination in particular lends no support to the submission for Mr Kontaxis that he has acknowledged or apologised for his wrongdoing (cf second respondent’s submissions on penalty in reply dated 21 June 2021 (RCS) at [7]). In this regard, Red Telecom, of which Mr Kontaxis was the controlling mind, wished to participate in the telecommunications industry as a service provider and therefore was required to abide by the regime that regulates that industry, including the alternative dispute resolution scheme operated by the TIO to which Red Telecom agreed and the determinations made under that scheme. The fact that Mr Kontaxis disagrees with the structure of that scheme, including the lack of any merits review of the TIO determinations, and with the amounts which he was required to pay under the seven TIO determinations, cannot absolve him or Red Telecom from the consequences of non-compliance; nor can they operate as mitigating factors.

75    I also accept that the deliberateness of Mr Kontaxis’ conduct in deciding not to comply with the TIO determinations is relevant to specific, as well as general, deterrence.

5.5    Statutory maximum and whether the course of conduct principle applies?

76    The course of conduct principle has frequently been applied in imposing penalties for breaches of the Australian Consumer Law (ACL), as contained in sch 2 of the Competition and  Consumer Act 2010 (Cth), particularly when the number of legally distinct breaches is large: see e.g. Reckitt at [139]-[145] (the Court); and Singtel Optus (FCAFC) at [51]-[55]. The course of conduct principle was explained by the Full Court in Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; (2018) 262 FCR 243 as follows:

234    The “course of conduct” or “one transaction” principle means that consideration should be given to whether the contraventions arise out of the same course of conduct or the one transaction, to determine whether it is appropriate that a “concurrent” or single penalty should be imposed for the contraventions. The principle was explained by Middleton and Gordon JJ in Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 194 IR 461 at [39]:

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.

(Emphasis omitted.)

77    However, as I explained in Birubi (No 3), the course of conduct principle is a useful “tool of analysis” in the civil penalty process which can, but need not necessarily, be used in the particular case: Australian Competition and Consumer Commission v Cement Australia [2017] FCAFC 159; (2017) 258 FCR 312 (Cement Australia) at [424] (the Court). Furthermore, when applied, the principle does not convert many separate contraventions into a single contravention; nor does it impose a “de facto limit” upon the available maximum penalty: see Yazaki at [231]-[232]. Ultimately, the object remains to ensure that the penalties imposed are of appropriate deterrent value: Cement Australia at [424] (the Court).

78    ACMA submitted that this is not a case where the contraventions should be regarded as part of the same course of conduct given that each contravention related to a different TIO determination relating to a different consumer and relating to different periods of time (T104.12-19). On ACMA’s approach, therefore, the maximum total penalties against each respondent are as follows:

(1)    with respect to Red Telecom $10 million for each contravention, with a total maximum of $70 million (see s 570(3)(a), Telco Act); and

(2)    with respect to Mr Kontaxis $50,000 for each contravention, with a total maximum penalty of $350,000 (see s 570(4)(b), Telco Act).

79    As earlier stated, ACMA seeks total penalties of $400,000 against Red Telecom and $200,000 against Mr Kontaxis.

80    Mr Kontaxis took issue with ACMA’s submission that the contraventions by him should not be treated as a single course of conduct. Rather, he contended in his submissions that:

22.    Jurisprudentially the inquiry must start with the pleading. The accessorial liability of Mr Kontaxis derives from his singular decision to stop paying the determinations due to his dissatisfaction with the TIO, i.e. a singular decision to engage in a course of conduct. That is different to Red Telecom’s conduct that underpinned each of the determinations. It is different again to Bytecard.

23.    It has also been explained by Mr Kontaxis as a singular decision motivated by the search for an avenue of review to remedy a perceived injustice. … Those avenues were (remarkably) unavailable. But the contravening decision was in the one course of conduct. It should be dealt with accordingly, and if there indeed necessarily be a fine, that it be a singular amount recognising the singular or cumulative position.

24.    When the Court comes to perform its instinctive synthesis, it should therefore look at the loss and damage caused by the failure to pay determinations on time (minimal), the damage caused to Mr Kontaxis (significant) and the surrounding circumstances (complex) to form the view as to what the appropriate penalty should be for the singular decision.

81    In my view, Mr Kontaxis’ submission that the contraventions should be treated as a single course of conduct must be rejected. Rather, I agree with ACMA that this is not an appropriate case to treat the contraventions as part of the same course of conduct, having regard to the following considerations (AS at [27]):

[1]    while the Respondents’ contraventions involve the same general modus operandi [citing Commissioner of Taxation v Bogiatto (No 2) [2021] FCA 98], they each occurred at different times in respect of different customers;

[2]    each contravention arose from separate consumer contracts; and

[3]    the steps that Red Telecom was required to take to comply with each TIO [d]etermination were different. To the extent all TIO [d]eterminations required Red Telecom to pay amounts to Relevant Customers, those amounts were different and were calculated on different bases.

82    Similarly, in Bytecard Foster J held that each of the five contraventions arising from failures to comply with determinations of the TIO over a period of four years and two contraventions arising from a failure to comply with written directions from ACMA were “separate and distinct and did not, in my judgment, comprise a course of conduct” (at [69]). While the submissions for Mr Kontaxis assert in effect that no analogy can be drawn between his case and that in Bytecard, no reasons are given for that assertion although, of course, each case ultimately turns on its own facts. However there is no support in Bytecard or any of the other authorities referred to by the parties for the proposition that the fact that the wrongdoer made a decision not to comply with a number of TIO determinations for essentially the same reason necessarily means that the contraventions should be treated as a single course of conduct as Mr Kontaxis effectively submitted.

83    It follows for these reasons that a penalty for each contravention is appropriate.

5.6    Factors informing appropriate penalties

84    As earlier set out, s 570(2) of the Telco Act requires the Court to have regard to “all relevant matters” when determining the appropriate penalty (see above at [54]).

85    In addition, Bromberg J held in TPG (FCA) at [60] with respect to the Telco Act that:

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 [Telco] 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 Telco 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 Telco 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.

86    The High Court recently explained the way in which such factors might bear upon the assessment of the appropriate penalty in Pattinson in the following passage:

46    The penalty that is appropriate to protect the public interest by deterring future contraventions of the [Fair Work Act 2009 (Cth)] may also be moderated by taking into account other factors of the kind adverted to by French J in CSR. For example, where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.

87    It is also important to bear in mind, as ACMA however submitted, that such lists are not to be regarded as a ‘rigid catalogue’ of matters for consideration (AS at [32] quoting Matcham at [173] and [233]). As ACMA contended, “[i]t may not be necessary, or even helpful, to address each factor in a seriatim, free-standing way. The critical requirement is that all relevant matters are addressed, in substance and transparently” (AS at [32]).

88    With respect to the first of these considerations, in considering the appropriate penalty to secure deterrence, some consideration must be given to the size and financial position of the contravener. The sum required to achieve the object of the deterrence will be larger where the company has vast resources than in the case, as here, of a relatively small company: NW Frozen Foods at 293 (Burchett and Kiefel JJ); Australian Competition and Consumer Commission v Visa [2015] FCA 1020; (2010) 339 ALR 413 at [96] (Wigney J).

89    However, even where the penalty necessary to provide effective deterrence is large, the amount of the penalty cannot be so high as to be oppressive. As Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ held in Pattinson with respect to the power to impose a civil pecuniary penalty under s 546 of the Fair Work Act 2009 (Cth):

40    … The discretion conferred by s 546 is, like any discretionary power conferred by statute on a court, to be exercised judicially, that is, fairly and reasonably having regard to the subject matter, scope and purpose of the legislation. In a civil penalty context, Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission said:

[I]nsistence upon the deterrent quality of a penalty should be balanced by insistence that it “not be so high as to be oppressive”. 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.

41    It may therefore be accepted that s 546 requires the court to ensure that the penalty it imposes is “proportionate”, where that term is understood to refer to a penalty that strikes a reasonable balance between deterrence and oppressive severity.

(Footnotes omitted.)

5.7    The submission that ACMA’s legal costs are relevant to assessment of the appropriate penalty

90    It is convenient at this point to address a significant issue between the parties. Mr Kontaxis submitted that the extent of ACMA’s legal costs should be taken into account in assessing the appropriate penalty to be imposed on him, given the reality that any award of costs against the respondents would be borne solely by Mr Kontaxis because Red Telecom is in liquidation. In support of this submission, Mr Kontaxis relied upon ACMA’s evidence that, as at 9 October 2020 and therefore well before the trial, it had incurred approximately $248,000 in legal fees and disbursements, being an amount well in excess of the penalty sought against Mr Kontaxis: sixth Zwi affidavit at [24]. Furthermore, no doubt, as Mr Kontaxis submitted, the amount of costs and disbursements incurred by ACMA with respect to the proceeding would likely have increased significantly beyond that sum by the conclusion of the trial.

91    Mr Kontaxis was unable to identify any authority directly in support of his submission as to the relevance of legal costs to the assessment of civil penalties. However, he relied upon the decision of the New South Wales Court of Criminal Appeal in Environmental Protection Authority v Barnes [2006] NSWCCA 246 (Barnes (CCA)) involving an appeal against sentence by the relevant prosecutorial authority, the Environment Protection Authority. The primary judge in that case had held in the exercise of discretion under s 253 of the Criminal Procedure Act 1986 (NSW) (as it then stood) that it was appropriate to make an order for costs in the prosecutor’s favour and to take the amount of those costs into account in assessing penalty “because if substantial they will clearly impact on the ability of the Defendant to pay a fine” (quoting Environment Protection Authority v Barnes [2006] NSWLEC 2 at [77] (Pain J)). Justice Pain then held that “[h]ad the costs not been so great I would have imposed a much higher penalty” (as quoted in Barnes (CCA) at [77]). In this regard, I note that her Honour had also found at the trial, among other mitigating factors, that Mr Barnes was a person of limited means (see Barnes (CCA) at [76]).

92    The question on appeal in Barnes (CCA) was relevantly whether the criminal penalties imposed on Mr Barnes were manifestly inadequate. Kirby J (with whose reasons Mason P and Hoeben J agreed at [1] and [92] respectively) held that they were not, finding that:

78    The assertion by the appellant that the penalty imposed was “a minuscule proportion of the maximum penalty” is not entirely accurate. The individual fines (which totalled $4,500) had, in each case, been discounted by 25% to take account of the pleas of guilty. But, more than that, the costs of $15,727.13 were an important aspect of the punishment of Mr Barnes. Quite apart from his own costs, he was required, by reason of his breaches of the law, to pay slightly in excess of $20,000.

…

88    … As a matter of first impression, the fines imposed appeared unduly lenient, suggesting error. However, the fines were part only of the penalty. Mr Barnes was obliged to pay substantial costs. Her Honour made it clear that, but for that fact, the fines she would have imposed would have been much higher.

93    It does not necessarily follow, however, that, because liability to pay the prosecution’s costs may be taken into account in assessing criminal penalties, liability to pay the legal costs of the regulator enforcing a civil penalty provision is relevant to the assessment of the civil penalties. Thus, in Pattinson at [14], Keifel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ held that “basic differences’ between criminal prosecutions and civil penalty proceedings mean there are limits to the transplantation of principles from the former context to the latter”.

94    It has already been seen that it is no part of the purpose of civil penalties to punish. As such costs cannot be regarded as part of any “punishment” for contravening a civil penalty provision, in contrast to the approach adopted in Barnes (CCA) in the criminal context. Furthermore, as ACMA submitted, costs and civil penalties serve different purposes (ACS at [11]). While the purpose of imposing a civil penalty is focused upon deterrence, the purpose of an award of costs is compensatory in the sense of indemnifying the successful party for the expense incurred by the successful party by reason of the legal proceedings: see Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 543 (Mason CJ) and 567 (McHugh J); Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 (Ruddock (No. 2)) at [11]-[12] (Black CJ and French J). It is also true that, if (as he has foreshadowed) in due course Mr Kontaxis may take issue with the reasonableness of ACMA’s costs, the proper remedy is for an assessment of the reasonableness of ACMA’s costs to be made on a taxation.

95    The highest it might be put, in my view, in the civil penalty context is that a liability to pay the costs of the regulator might be able to be taken into account in ensuring that the penalties to be imposed are not oppressive and thereby exceed the level required to achieve the objects of specific and general deterrence. On the other hand, there may be strong policy reasons as to why that approach might not be taken or which call for a high degree of caution before adopting such an approach. In particular, it might become a disincentive for a respondent to co-operate with the regulator if the respondent’s liability for the regulator’s costs could, in effect, be offset to some degree against the civil penalty which might otherwise be imposed. In any event, it is unnecessary to determine this question in this case because of Mr Kontaxis’ failure to give evidence as to his complete financial position.

5.8    Penalties sought by ACMA

96    Collectively, ACMA seeks a total penalty as against Red Telecom of $400,000, and a total penalty as against Mr Kontaxis of $200,000 which it submitted is proportionate and appropriate in the circumstances for the reasons elaborated upon below.

97    More specifically, ACMA submitted that the following proposed penalties for each contravention would have appropriate deterrent effect, taking into account the principles above and the totality principle:

(1) in respect of the failure to comply with the TIO determination of 3 October 2018 which required payment to Axis of $20,258.80 by 24 October 2018 where full payment was not made until September 2020:

(a)    as against Red Telecom, a penalty of $84,000; and

(b)    as against Mr Kontaxis, a penalty of $42,000.

(2)in respect of the failure to comply with the TIO determination of 14 November 2018 which required payment to Angie's Travel of $4,177.87 by 3 December 2018 where full payment was not made until July 2020:

(a)    as against Red Telecom, a penalty of $50,000; and

(b)    as against Mr Kontaxis, a penalty of $25,000.

(3) in respect of the failure to comply with the TIO determination of 19 February 2019 which required payment to Hinterland of $10,750.86 by 27 February 2019 where full payment was not made until September 2020:

(c)    as against Red Telecom, a penalty of $63,000; and

(d)    as against Mr Kontaxis, a penalty of $31,500.

(4) in respect of the failure to comply with the TIO determination of 4 April 2019 which required payment to KJ Real Estate of $1,012.34 by 11 April 2019 where full payment was not made until July 2020:

(e)    as against Red Telecom, a penalty of $40,000; and

(f)    as against Mr Kontaxis, a penalty of $20,000.

(5 )in respect of the failure to comply with the TIO determination of 5 April 2019 which required payment to Joycey's Sportz of $12,544.87 by 26 April 2019 where full payment was not made until September 2020:

(g)    as against Red Telecom, a penalty of $63,000; and

(h)    as against Mr Kontaxis, a penalty of $31,500.

(6) in respect of the failure to comply with the TIO determination of 21 June 2019 which required payment to Canepa of $5,895.60 by 5 July 2019 where full payment was not made until September 2020:

(i)    as against Red Telecom, a penalty of $50,000; and

(j)    as against Mr Kontaxis, a penalty of $25,000.

(7) in respect of the failure to comply with the TIO determination of 21 June 2019 which required payment to Stewart Family Trust of $8,421.60 by 5 July 2019 where full payment was not made until July 2020:

(k)    as against Red Telecom, a penalty of $50,000; and

(l)    as against Mr Kontaxis, a penalty of $25,000.

98    The penalties sought by ACMA are usefully summarised in the following table:

(AS at Annexure 1.)

99    As I later explain, I consider that the penalties sought against Mr Kontaxis by ACMA with respect to certain contraventions exceed that necessary to achieve the object of deterrence and therefore would be oppressive in the sense explained in the authorities. I also consider that the penalties sought against Red Telecom are, in respect of certain contraventions, too low and that higher penalties are required in order to have the appropriate general deterrent effect.

100    I also note that while Red Telecom paid the full amount owing to each of the Stewart Family Trust and Angie’s Travel on 9 and 10 July 2020 respectively and KJ Real Estate on 24 July 2020, payments were made to AGS in five instalments between 5 August 2020 and 21 September 2020 for rateable distribution to the remaining Relevant Customers, namely, Axis, Hinterland, Joycey’s Sportz and Ms Canepa (First Notice to Admit at [35], [36], [43], [45], [46], [50], [51]-[53] (admitted)).

5.9    The nature, extent and duration of conduct (s 570(2)(a), Telco Act)

101    I accept ACMA’s submission that the conduct the subject of the contraventions is serious and demonstrated a lack of respect on the part of Red Telecom and Mr Kontaxis for the TIO Scheme and for the customers to whom payments in accordance with the TIO determinations were delayed. In this regard I have already referred to the pertinent observations by Foster J in Bytecard as to the significance of the TIO Scheme established under the Telco Act (see above at [39]). The seriousness of the conduct in this case is heightened given that the contraventions were not isolated incidents and that the delays were substantial, varying between 12 and 23 months. Furthermore, payments were not made until after the proceedings had been instituted in December 2019, with the last of the payments due under the TIO determinations not made until September 2020 following court orders requiring payment. It follows that I agree with ACMA’s submission that the respondents’ conduct was serious, systematic and of significant duration (AS at [39]).

102    I also accept that Mr Kontaxis derived some financial benefits from Red Telecom (in addition to wages) while the Relevant Customers went unpaid, including payments for his Toyota car and some non-business expenses: see the Account Transaction for Red Telecom for the period 1 July 2018 to 20 November 2020 (Red Telecom Record of Transactions) at CTB995; and T61.22-34, T62.34-41 (Mr Kontaxis). In this regard, the tenor of Mr Kontaxis’ evidence was that the accounts for Red Telecom were kept by a bookkeeper employed by Red Telecom, the bookkeeper generally ran things past him and would not do something without his permission, the accounts documented withdrawals of money paid to him, and that he chose when he would take out non-business expenses (T61.1-13, T61.31-42, T62.40-41) (Mr Kontaxis)). However, it is difficult, with respect, to give this factor any great weight. First, ACMA accepted that it was unnecessary to determine precisely the extent of financial benefits received by Mr Kontaxis during the relevant period (ACS at [16]) and no such figure was put to him in cross-examination. Mr Kontaxis was taken only to a couple of entries in the Red Telecom Record of Transactions. Secondly, no calculations were in evidence establishing that any payments to Mr Kontaxis entered into the Red Telecom Record of Transactions were in such amounts as to place Red Telecom in a position at any point in time where it was unable to make the payments to consumers.

103    Rather the following line of cross-examination established that Red Telecom had funds to pay each of the Relevant Customers the amounts due to them under the TIO determinations at least as at each date on which all or some of those amounts fell due for payment:

MS GAVEN: Mr Kontaxis, do you accept by looking at the date for 24 October on court tender bundle book 559 that the balance was $11,498.61?

MR KONTAXIS: Yes.

MS GAVEN: Okay. If you write that figure down, then we will go to the next, the next bank account, which you will find at 572. Well, if you turn to page 567 – it’s behind tab 94 – you will see another bank account addressed to the director. It’s at a Marrickville address for Red Telecom Proprietary Limited. That’s one of the other bank accounts for Red Telecom?

MR KONTAXIS: Yes.

MS GAVEN: If you turn to 572 of the tender bundle, you will see that on the – at the end of the entries on 24 October – well, actually, at least part way down, there’s 18,537. But at some point on 24 October, there was 69,000 in credit balance. Do you accept that that’s the amount that was in that bank account on that date?

MR KONTAXIS: Yes.

MS GAVEN: And those two matters together, if you – if it was taken at 69,000 would be more than the amount owing to Axis, which was $20,258.80 on that date; you accept that?

MR KONTAXIS: Yes.

MS GAVEN: And there’s a further bank account at 584 if you turn behind tab 95. It’s at the last page of this – it’s the last page of this volume, and there’s a credit there of $5019.14?

MR KONTAXIS: Yes.

MS GAVEN: And all those put together, if you do a quick calculation, well exceeds the amount owing to Axis on that date; you will accept that?

MR KONTAXIS: Sure, yes.

MS GAVEN: And instead of paying Axis on that date, you chose not to pay Axis on that date?

MR KONTAXIS: Yes.

MS GAVEN: And you had made a similar decision with respect to Angie’s Travel?

MR KONTAXIS: Yes.

MS GAVEN: And a similar decision with respect to Hinterland?

MR KONTAXIS: Yes.

MS GAVEN: And a similar decision with respect to KJ Real Estate?

MR KONTAXIS: Yes.

MS GAVEN: And a similar decision with respect to Joycey’s Sport?

MR KONTAXIS: Yes.

MS GAVEN: And at the time that Canepa and Stewart were due to be paid, you could have – the amount in your bank accounts actually meant you could have paid one or the other, but you chose not to pay either of them either?

MR KONTAXIS: Yes.

104    The decisions not to pay the TIO determinations was explained by Mr Kontaxis’ evidence that that decision “[d]idn’t have anything to do with the money. I was trying to get them [the TIO determinations] overturned” (T66.26-27). Thus the decisions not to pay the TIO determinations when they were due was, as Mr Kontaxis accepted, a deliberate decision by him in circumstances where he had control over all payments by Red Telecom over the relevant period and was the governing mind of the corporation.

5.10    The circumstances in which the contraventions took place (s 570(2)(c), Telco Act): Red Telecom

105    ACMA submitted that the following circumstances in which the contraventions by Red Telecom took place should be considered as aggravating factors for the purpose of assessing the penalty, namely:

(1)    the deliberateness of the conduct;

(2)    the existence of a culture within the company that was antithetical to compliance;

(3)    the failure to pay the Relevant Customers despite having funds to do so, until court orders were made requiring compliance; and

(4)    personal payments to Mr Kontaxis allegedly made by Red Telecom throughout the period of the contraventions.

106    For the reasons set out below, I consider that the first three of these circumstances are highly relevant, but do not accept that any great weight can be given to the fourth.

107    First, as the evidence to which I have just referred makes clear, Red Telecom’s conduct in deciding not to comply with the TIO determinations was deliberate and was made by Mr Kontaxis as the sole director, in order to challenge or oppose the Determinations. I accept ACMA’s submission that that conduct must be discouraged in the strongest possible terms. Furthermore, Red Telecom maintained its opposition to complying with the determinations even after having received “common advice” from at least six different lawyers in November 2019 and January 2020 to the effect (in Mr Kontaxis’ words) that “the right to appeal was uncertain, difficult to grasp and complex” (fourth Kontaxis affidavit at [193]-[194]) and therefore having taken the risk of withholding payment, complying only well after these proceedings were instituted. By analogy, in Universal Music Pty Ltd v Australian Competition & Consumer Commission [2003] FCAFC 193; (2003) 131 FCR 529 (Universal Music), the Full Court held, with respect to the contravening anti-competitive conduct in that case that:

308. As we have said, the contravening conduct was plainly and deliberately anti-competitive in its intent. It was conduct which, at least, ran a serious risk of being in breach of the Act. If this was appreciated, then the fact that the risk came home against expectations does not entitle the perpetrator to a discount. If the existence of the risk was not appreciated, then the company concerned misunderstood the law applicable to an important area of commerce and would not be entitled to any discount.

309. The fact that legal advice was obtained by one of the parties is also of little consequence. It illustrates that the risk was appreciated. However, legal advice is obtained for the benefit of the company and only for the benefit of the company. It is not a discounting factor. If legal advice is wrong, that is a matter between the company and the legal advisor.

310. In our opinion, to give a substantial discount for these factors sends the wrong signal to the commercial community. It will encourage risk-taking… Many cases of contravening conduct can be described as complex and uncertain as to result. …. If a company “takes the odds”, it must expect serious consequences if it miscalculates. As was said by the Full Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 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 …

108    Secondly, I accept ACMA’s contention (at AS [42]) that there was a culture within Red Telecom that was antithetical to compliance given the repeated nature of the contraventions and the involvement of senior management in the company’s contraventions by reason of Mr Kontaxis’ admitted liability.

109    Thirdly, Red Telecom had sufficient funds to pay the Relevant Customers at various times before ultimately doing so following Court orders requiring it to do so. I accept that this demonstrates a lack of respect for the TIO determinations and Scheme, and that the interests of the Relevant Customers were deliberately disregarded.

110    Finally, ACMA submitted that it was also relevant that Red Telecom made personal payments to Mr Kontaxis throughout the period of the contraventions while failing to make payments to customers required by the TIO (AS at [44]). To the extent that ACMA’s pretrial submissions alleged that these payments included loans to Mr Kontaxis, the submission was not supported by the evidence and appears to have been based upon a misreading of the company’s accounts by ACMA’s legal representatives, as ACMA’s counsel apparently accepted: see T59.35-60.27. Otherwise, this is not a factor to which I can attach great weight for the reasons I have earlier given.

5.11    The circumstances in which the contraventions took place (s 570(2)(c), Telco Act): Mr Kontaxis

111    ACMA submitted for similar reasons that the following three circumstances of Mr Kontaxis’ contraventions are “aggravating” factors for the purpose of assessing the appropriate penalty to be imposed on him, namely:

(2)    the deliberate nature of Mr Kontaxis’ conduct;

(3)    his intentional disregard for the TIO determinations and Relevant Customers; and

(4)    his receipt of financial benefits in addition to wages from Red Telecom over the period that Red Telecom withheld fines from the Relevant Customers.

112    For the reasons I have earlier given, I do not attach any great weight to the third of these considerations.

113    However I accept that considerable weight should be given to the first and second circumstances in assessing the appropriate penalty with respect to Mr Kontaxis’ contraventions. In so finding, I agree with ACMA’s submissions at AS [46] to the following effect:

First, Mr Kontaxis’ conduct was clearly deliberate. He was responsible for deciding not to comply, obtaining advice, and taking risks notwithstanding the advice [which I have summarised above at [107] above]. He was Red Telecom’s guiding mind and ultimately responsible for the contraventions. The deliberateness of his role in the contraventions is clear from the following admissions and non-contentious facts:

[1]    Mr Kontaxis was the sole director and shareholder of Red Telecom;

[2]    Mr Kontaxis caused Red Telecom to join the TIO Scheme, was described on Red Telecom’s membership form as the “person that will handle TIO complaints” and was the ultimate decision maker about whether or not to take steps to comply with the relevant TIO Determinations;

[3]    as sole director, Mr Kontaxis’ day to day duties included ensuring compliance with any determinations made by the TIO;

[4]    each of the TIO Determinations was sent directly to Mr Kontaxis;

[5]    each of the Relevant Customers’ acceptance forms was sent either directly to Mr Kontaxis or to an email address to which he had access; and

[6]    Mr Kontaxis expressly states that it was his decision not to pay the seven TIO decisions the subject of these proceeding.

114    I also accept that Mr Kontaxis displayed intentional disregard for the TIO’s determinations and Relevant Customers, including in his communications with employees of the TIO and customers. The following two examples referred to by ACMA in its submissions at [47] illustrate the last of these points.

(1)    First, in response to an email from Jerome Chapman, Dispute Resolution Specialist, TIO, on 24 June 2019 advising that Ms Canepa had accepted the TIO Determination with respect to her complaint and that the Determination was now binding, Mr Kontaxis sent an email later that day to the TIO in the following terms:

Thank you Jerome,

But this is not happening.

How dare you order a small business like us to pay out this sort of money.

Judi [Jones, the TIO],

What are you doing?

[CTB, vol. 1, tab 28 at p. 132]

(2)    It is also illustrated by Mr Kontaxis’ email on 14 May 2019 to the TIO after being advised of the KJ Real Estate Determination dated 4 April 2019:

Hi Jerome,

As discussed with you previously.

We will not be crediting this account because the charges are clear,

Thank you

5.12    Loss or damage caused by the conduct (s 570(2)(b), Telco Act)

115    The Relevant Customers were deprived of the amounts to which they were entitled under the TIO determinations for significant periods of time ranging between 12 and 23 months. Furthermore, while the sums owing under the determinations were not necessarily large, varying between approximately $1,000 and $20,000, it was not disputed that Red Telecom primarily provided telecommunication services to individuals and small businesses and therefore the significance of the amounts owed under the TIO determinations need to be considered in that context. This is particularly so in the context of the Covid-19 pandemic in Australia from at least March 2020.

116    ACMA led evidence from only two of the Relevant Customers, namely, Mr Joyce, representing Joysey’s Sportz, and Mr Stewart, representing the Stewart Family Trust. No explanation was given as to why evidence was not led from the other five Relevant Customers. In those circumstances, it is not possible to make specific findings as to any loss or damage suffered by those other five customers. However, given that Red Telecom’s primary customer base was comprised of individuals and small businesses, it may reasonably be inferred that the extensive delay in complying with those five TIO determinations: (1) may have caused some stress and anxiety to at least some of these other customers; and (2) may also have resulted in, or added to, possible financial stress given, in particular, that the delay overlapped the Covid-19 pandemic and that the amounts concerned were not insignificant.

117    Mr Joyce is the office manager at Joycey’s Sportz trading as Caboolture Indoor Sports (CIS). CIS is Mr Joyce’s son’s business although both Mr Joyce and his son have invested money in the business. Mr Joyce had responsibility for dealing with Red Telecom and the TIO on behalf of CIS and accepted the TIO Determination on 8 April 2019 on behalf of CIS. The TIO Determination required Red Telecom, among other things, to pay CIS the cost of CIS cancelling the finance contract it had with Team Leasing (for the financing of phone equipment) within five working days of CIS providing evidence of the cancellation cost to Red Telecom. On 16 April 2019, Mr Joyce advised Red Telecom that the cost of cancelling the finance contract was $12,544.87.

118    Payment to CIS under the TIO determination of $12,554.87 from Red Telecom was due in April 2019. However, the amount due was paid substantially late in three instalments over the period 13 August 2020 to 24 September 2020. On receipt of the instalments, those monies were applied to pay out the finance contract with Team Leasing (taken over by Multipi) which was underwritten by a company called Thorn. Mr Joyce spent significant time dealing with finance companies, the collections agency, and Red Telecom as a result of Red Telecom’s delay in paying the monies due under the Joycey’s Sportz TIO determination. He found the process of trying to explain to Multipli and Thorn that CIS was in the process of regaining the $12,544.87 very frustrating and had to explain CIS’ position to a number of different people within those organisations. He also explained that due to some difficulties encountered in porting the lines, it took CIS until on or about 19 December 2019 to actually port their lines away from Red Telecom and even after the lines were ported, Red Telecom continued to send CIS bills. In cross-examination, Mr Joyce explained that, after receiving the monies from Red Telecom which the TIO had determined were payable, his company attempted to return the telephone equipment to Red Telecom after contacting Red Telecom to obtain the address but the equipment was returned marked “return to sender” (T26).

119    Mr Joyce’s affidavit evidence as to the financial impact of the significant delay in payment of the monies due under the Joycey’s Sportz TIO Determination was unchallenged:

24.    CIS is a small business. It employs approximately 12 casual employees, whose hours add up to approximately 4 staff on a full time equivalent basis. It has an annual turnover of between $750,000 and $850,000.

25.    Between April 2019 and September 2020 CIS had very small profits, and regularly had a negative bank balance.

26.    $12,544.87 is a significant amount for CIS and we could not afford to pay this money outright without receiving the money from Red Telecom first. If CIS had had to pay the $12,544.87 itself, the business probably would have closed. The business does not have many assets, so if it closed we would be left with very little.

27.    The business also suffered because of disruptions caused by Covid-19.

120    Mr Joyce concluded in his affidavit that:

28.    Dealing with Multipli, Thorn, Cornwalls [a collection agency] and Red Telecom after the Determination was extremely time consuming. Collectively, I estimate that I received in excess of 55 emails from these companies and I sent them in excess of 40 emails. I also corresponded with the TIO and the ACMA regarding Red Telecom’s failure to pay the $12,544.87. I estimate that I spent at least 70 hours in emails, phone calls and discussions (both external and internal) as a result of Red Telecom’s non-compliance with the Determination. This is time that has been taken away from the business and has had a financial impact.

29.    The process set out above, and not receiving the $12,544.87 in full until late September 2020, also caused me and my son a lot of stress, angst, frustration and anxiety. Not receiving the money weighs on your mind. It was hanging over our heads for approximately 17 months.

121    This evidence was also unchallenged.

122    Turning then to Mr Stewart’s evidence, Mr Stewart is the sole director of Laprenda Pty Ltd (Laprenda) t/a Countrywide Embroidery. Laprenda is the trustee for the Stewart Family Trust. Countrywide Embroidery sells clothing and provides embroidery services in Clontarf, Queensland, such as shirts and aprons to cafes, and uniforms to schools and sporting teams.

123    The TIO made the Countrywide Embroidery Determination on 21 June 2019. The determination required Red Telecom to pay Countrywide Embroidery $8,421.60 within 10 working days of Mr Stewart’s acceptance of the determination which occurred on the same day.

124    Mr Stewart has run Countrywide Embroidery for approximately 35 years. It is a small family business which employs Mr Stewart, his wife, three of his children and three other employees. In the context of his business, $8,421.60 was a significant amount, being equal to one and a half weeks’ worth of wages for all staff, and Mr Stewart therefore understandably explained that payment of that sum therefore “would have made a big difference to Countrywide Embroidery, particularly during the first few months of Covid” (Stewart affidavit at [9]). The COVID-19 pandemic was very difficult for Countrywide Embroidery. As Mr Stewart explained, “When Covid hit our usual customers (e.g. cafes, sports teams, schools) were closed or stopped placing orders. Nobody was buying anything. We were down to nothing. All the while we were expecting the $8,421.60 to come through” (Stewart affidavit at [9]). The extent of the financial difficulties that COVID-19 posed for the small business is illustrated by Mr Stewart’s evidence that, from time to time while waiting for payment from Red Telecom, Mr Stewart lent Countrywide Embroidery money from his personal bank account in order to pay staff and suppliers and meet all of the business’ obligations. The financial stress suffered by Countrywide Embroidery and the stress suffered by Mr Stewart personally as a result of the pandemic was plainly aggravated by Red Telecom’s delay in paying the monies due under the TIO determination (T29-30; Stewart affidavit at [12]).

125    The evidence therefore amply supports ACMA’s submission that in both cases, the amounts owed by Red Telecom under the TIO determinations, cannot be regarded as insignificant given the size of the businesses in question, and the delayed payment by Red Telecom to those businesses caused stress, frustration and anxiety.

5.13    Mitigation of loss and damage caused by the conduct

126    While Red Telecom ultimately paid the amounts to the Relevant Customers to which they were entitled under the TIO determinations, that did not occur until well after proceedings by ACMA had been commenced, following repeated requests to do so by ACMA, and only after the Court made orders requiring payment. Furthermore, the evidence to which I have earlier referred established that Red Telecom had sufficient funds in its bank account to pay the Relevant Customers much earlier than it did and, in at least some cases, as at the date on which the payments were required to be made under the TIO determinations. In those circumstances, I accept ACMA’s submission that Red Telecom delayed payment unnecessarily and failed to mitigate the harm caused to the Relevant Customers at the earliest opportunity and in so doing, showed disregard for the interests of the Relevant Customers.

5.14    Size of the contravener, financial position, and benefits

5.14.1    Red Telecom

127    While Red Telecom is in liquidation and is not expected to have any capacity to pay a penalty, this does not detract from the need to set an appropriate penalty for the purpose of general deterrence as I have earlier explained. The total benefit to Red Telecom of the contraventions was approximately $63,000 which it retained for significant periods of time after failing to pay the monies owed under the TIO determinations to the Relevant Customers.

5.14.2    Mr Kontaxis

128    As the authorities to which I have earlier referred established, the primary object of deterrence leaves little, if any, scope for the Court to take into account personal hardship which the penalty may impose upon the wrongdoer. As a further example, ACMA referred to Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265; (2005) 215 ALR 301 where Goldberg J explained at [87] that:

… It should not be thought that because a middle or lower management level employee is proceeded against for being involved in a contravention of a Pt IV [of the Trade Practices Act 1974 (Cth)] provision, that the penalty will bear a relativity to the employee’s financial resources and that a penalty appropriate having regard to the seriousness of the contravention and the need for a general deterrence component to be included will not be imposed. If the end result is that such an employee may be compelled to seek the protection of the bankruptcy laws, that may only reflect the seriousness of the contravention and the need for a general deterrence component, rather than the conclusion that the penalty was inappropriate having regard to the financial resources of the employee.

129    However, as I have also earlier explained, the penalty must not exceed that which is necessary to achieve the object of deterrence and thereby become an instrument of oppression. The importance of this was emphasised by the High Court in the recent decision in Pattinson which I have earlier discussed.

130    ACMA did not dispute Mr Kontaxis’ evidence as to his health and, in particular, the toll which his interactions with the regulators and the proceedings have taken upon mental health; nor did ACMA dispute that he was unemployed or, of course, that Red Telecom, being the company which he had built up, was in liquidation.

131    The evidence did establish that Mr Kontaxis owns two properties which are located in Marrickville and Hurstville. He estimated the value of the Marrickville home to be $620,000 with a mortgage of approximately $550,000 and the value of the Hurstville property to be around $740,000 with a mortgage of $720,000 owing (T75.3-20). He denied in cross-examination that the Marrickville property was worth about $800,000 and the Hurstville property, at least $850,000 (T72.26-30 and T73.20-26). While no independent valuation of the properties was in evidence from either party and therefore no finding can be made as to the value of these properties, I accept Mr Kontaxis’ evidence that there are substantial mortgages over both properties and that these are not luxury properties likely to realise significant sums. Nor was the contrary suggested in cross-examination.

132    However, as ACMA submitted, the limited evidence adduced by Mr Kontaxis as to his financial position does not properly equip the Court to make any considered assessment of his financial position (AS at [63]-[64]). Nor is there sufficient evidence to establish that Mr Kontaxis would be incapable of paying the penalty sought by ACMA. However, it can be inferred that imposing a penalty at the level sought by ACMA would be likely to impose significant financial hardship upon Mr Kontaxis. Notwithstanding that, ultimately the task is to reach an assessment of the penalties appropriate to achieve the object of deterrence rather than to determine the appropriateness of the penalty by reference to Mr Kontaxis’ financial resources.

5.15    Prior similar conduct (s 570(2)(d), Telco Act)

133    Neither Red Telecom nor Mr Kontaxis have been found to have contravened the Telco Act by the Court in the past.

5.16    Co-operation and corrective action

134    It is not in issue, as ACMA submitted at AS [67], that co-operation with authorities during the course of investigations and subsequent proceedings can reduce the penalty. As ACMA further submitted:

…This is so because cooperation may increase the likelihood of cooperation in future cases in a way that furthers the object of the legislation, frees up the regulator's resources and thereby increases the likelihood of other contraveners being detected and brought to justice, and facilitates the course of justice. For example, Commonwealth v Director at [46]; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 at 293-294; Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41,993 at [55].

The size of any discount will vary according to the circumstances of the particular case and the extent of any cooperation. There may be no discount, or only a small one, where a respondent makes admissions late in the proceedings and where those admissions are mere acceptance of the inevitable: Bytecard at [61].

(AS at [67]-[68].)

135    The respondents demonstrated minimal co-operation only during the investigation and the course of these proceedings, As such, they are entitled to no more than a small discount for having ultimately admitted liability for all seven TIO determinations and thereby avoided a trial on liability. In reaching this view, I have had particular regard to the following matters.

(1) Despite ACMA urging Red Telecom and Mr Kontaxis to take immediate steps to pay the TIO determinations during ACMA’s investigation into Red Telecom’s conduct so as to negate the need for court proceedings, Red Telecom declined to do so (see letter dated 1 November 2019 from ACMA to Mr Kontaxis as Director of Red Telcom at CTB vol. 1, tab 41, p. 276; and email to Mr Kontaxis on 8 November 2019 from ACMA at CTB vol. 1, tab 44, p. 297; see also at [51] and [53] above).

(2) Red Telecom also failed to comply (and Mr Kontaxis failed to cause Red Telecom to comply) with a notice under s 521(2) of the Telco Act requiring certain information (Sutton affidavit at [6]-[9]; see also at [52] above).

(3) While Red Telecom admitted five of the seven contraventions in its joint defence which Mr Kontaxis filed on 29 May 2020, its defence to the remaining two alleged contraventions (the KJ Real Estate TIO Determination and the Canepa TIO Determination) was held to be “plainly deficient in that it fails to identify the material facts which constitute the basis on which the liability is denied with respect to KJ Real Estate and Ms Canepa”, as were the pleadings in the joint defence on the basis of which Mr Kontaxis did not admit responsibility for all seven alleged contraventions: see Australian Communications and Media Authority v Red Telecom [2020] FCA 996 at [17] (Perry J). Ultimately on 23 July 2020 Red Telecom and Mr Kontaxis admitted liability for all seven alleged contraventions, as I have earlier explained.

(4) The payments due under the TIO determinations were made only after ACMA instituted proceedings to enforce the TIO determinations and well after the proceedings were instituted.

6.    CONCLUSION: SYNTHESISING THE FACTORS AND APPLYING THE TOTALITY PRINCIPLE

136    As I explained in Birubi (No. 3) with respect to the ultimate assessment of the appropriate civil penalty:

78    … in common with criminal sentencing, the process of arriving at the appropriate civil penalty under the ACL (and its predecessor, the Trade Practices Act 1974 (Cth)) involves an intuitive or instinctive synthesis of all of the relevant factors rather than a sequential mathematical process: [Australian Competition and Consumer Commission v] Coles Supermarkets [[2015] FCA 330; (2015) 327 ALR 540] at [6] (Allsop CJ). This does not of course mean that all of the considerations which are relevant to criminal sentencing are also relevant to assessing an appropriate civil penalty. Rather it is the process itself which is the same. Instinctive synthesis in this sense was helpfully described by McHugh J in Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 as meaning:

51.    … the method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case” (at [51])

(See also by analogy Barbaro v The Queen [2014] HCA 2; (2014) 253 CLR 58 (Barbaro) at [34]-[35] (French CJ, Hayne, Kiefel and Bell JJ).)

79    This does not mean that the final result is a “gut reaction”, as the Full Court explained in Reckitt at [175]. Rather, it must be the outcome of a reasoned and transparent process.

137    With respect to the factors underlying the different penalties proposed by ACMA for each contravention, Ms Gaven, counsel for ACMA, explained that:

… it’s a combination of factors, your Honour, and it’s attributable to the amount that was owing and the length of time over which the payment was not forthcoming. … But there has been some attempts to take into account those two … considerations, and, obviously, considering the maximums and then adjusting appropriately down. … it’s the signalling of the penalty shouldn’t be such that industry participants think that it’s – you know, they can factor it into the cost of doing business …

(T85.9-11, 85.31-36, 86.1-2.)

138    Finally, as I held in Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd [2019] FCA 797; (2019) 136 ACSR 603 with respect to the totality principle:

59    … the Court must consider all of the contravening conduct and determine whether the total penalty for each offence aggregated together exceeds that which is proper for the entire contravening conduct involved (the totality principle): Mill v The Queen (1988) 166 CLR 59 (Mill) at 63 (the Court) (by analogy). As such, the totality principle operates as a final check of the penalties to be imposed on the respondent, considered as a whole. As Goldberg J explained in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 (Safeway Stores) at 53:

The totality principle is designed to ensure that overall an appropriate sentence or penalty is [imposed] and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved.

60    The application of the totality principle will not necessarily result in a reduction in the penalty. Rather, as the parties submit, in cases where the Court considers that the cumulative total of the penalties to be imposed would be too high or too low, it should alter the final penalties to ensure that they are “just and appropriate”: Safeway Stores at 53 (quoting Mill at 63).

139    In this regard, ACMA submitted that:

… the application of the totality principle does not necessitate a reduction to the total penalty against either Respondent. The overall penalties sought against each Respondent are appropriate and proportionate, having regard to the nature and deliberateness of the contraventions. In the case of Red Telecom, the penalties proposed are significantly lower than the statutory maximum. In the case of Mr Kontaxis the penalties proposed are in total between 50% and 60% of the total statutory maximum, reflecting (in addition to the seriousness and the flagrancy of the contraventions) the need for specific deterrence of Mr Kontaxis, general deterrence of other industry participants from contravening in a similar way, and Mr Kontaxis’ pivotal role.

(AS at [79].)

140    On the other hand, counsel for Mr Kontaxis submitted that:

… [t]here is still no attempt made to justify the extraordinary magnitude of the penalty or its quantification in the context of an accessorial liability allegation. Quite simply, such an extraordinary penalty is unsustainable and significantly out of kilter with what would be expected, particularly in circumstances where there has been no real proof of loss on behalf [of] the recipients of the determinations.

The need for specific deterrence is low. The need for general deterrence is low. The Second Respondent has suffered significant pain and anguish. He has been put through the litigation process. He has been cross-examined. He has had to expose personal details about his finances and mental health. For that reason, he continues to submit that a penalty (if any) ought also be at the lowest end of the scale, keeping in mind the question of costs which is yet to be determined.

(RCS at [23]-[24].)

141    Applying these principles and factors, the question then arises as to the identification of specific penalties having the appropriate deterrent value for the seven contraventions by each of Red Telecom and Mr Kontaxis.

142    While in line with the principles I have earlier explained, a number of the factors on which Mr Kontaxis relies are not relevant to the primary objective of a civil penalty being specific and general deterrence, it is important to ensure that the penalty goes no higher than that which is necessary to achieve that primary objective. Furthermore, to the extent that ACMA’s submissions might suggest that the civil penalty must be proportionate to the seriousness of the conduct comprising the contravention or that the maximum penalty should be reserved for the most serious offending, they are inconsistent with the decision in Pattinson (delivered after ACMA’s written submissions): see above at [57].

143    A number of factors make it clear that the objective seriousness of the conduct by Red Telecom and Mr Kontaxis is considerable. These include:

(1)    the deliberate nature of the decisions not to comply with the TIO determinations as and when payment under those determinations was due;

(2)    the substantial delay in making payment to each of the Relevant Customers;

(3)    the fact that the significance of the amounts required to be paid under the TIO determinations needed to be appreciated in the context where Red Telecom primarily serviced small businesses and individuals;

(4)    the lack of respect on the part of Red Telecom for the TIO Scheme and consideration for the interests of Relevant Customers;

(5)    the fact that the contraventions were not isolated incidents;

(6)    the failure to co-operate with the regulator until at a late stage in the legal proceedings; and

(7)    the financial and personal stress that the delay caused in the case of at least two of the Relevant Customers (Joycey’s Sportz and the Stewart Family Trust) and the fact that in the case of Ms Canepa, the customer was an individual and not a corporate entity.

144    Furthermore, the respondents made the decision to take the risk of being in breach of the Telco Act while exploring the possibility of a challenge the TIO determinations and, for the reasons given in Universal Music, it is important that the penalty should make it clear that the taking of such risks is not to be encouraged. On the other hand, the respondents ultimately admitted liability for all seven of the TIO determinations, thereby avoiding a trial on liability. This can be given some, but only limited, weight because it occurred so late in the litigation.

145    In Mr Kontaxis’ case, additional significant factors include the following:

(1)    the lack of any real contrition or insight into the contraventions;

(2)    the fact that the decisions not to pay the TIO determinations as and when they were due were deliberate decisions by him in circumstances where he had control over all payments by Red Telecom and was the governing mind of the corporation;

(3)    the fact that Mr Kontaxis’ conduct at least at times demonstrated disregard for the interests of the Relevant Customers and the TIO determinations.

146    Furthermore, contrary to ACMA’s submissions, I do not accept that any great weight could be given to the fact that Mr Kontaxis received at least some financial benefit from Red Telecom in addition to his wages during the period of the delay for the reasons I have earlier explained. I also consider that the penalties sought against Mr Kontaxis by ACMA exceeded in certain instances the amounts required for specific and general deterrence. For example, while I accept that the seriousness of the failure to comply with the determination requiring payment to KJ Real Estate is not simply determined by the amount in issue ($1,012.34), the amount which ACMA sought in penalty for the failure to pay was effectively 20 times the amount owing in circumstances where there was no evidence of loss or damage. The same applies with respect to the penalty sought against Mr Kontaxis with respect to the failure to comply with the Angie’s Travel TIO determination, which amounted to approximately six times the amount due to Angie’s Travel under that TIO determination. In addition, I accept that the likelihood that Mr Kontaxis would return to the telecommunications industry is low and have therefore given greater weight to the need for general deterrence than for specific deterrence.

147    Having regard to all of these considerations, I consider, subject to the totality principle, that the appropriate penalty for each of the contraventions is as follows:

(1) in respect of the failure to comply with the TIO determination 2016/06/07401 (the Axis Determination) dated 3 October 2018 which required payment to Axis of $20,258.80 by 24 October 2018, where full payment was not made until September 2020:

(a)    as against Red Telecom, a penalty of $90,000; and

(b)    as against Mr Kontaxis, a penalty of $40,000.

(2) in respect of the failure to comply with the TIO determination 2018/04/03847 (the Angie’s Travel Determination) dated 14 November 2018 which required payment to Angie's Travel of $4,177.87 by 3 December 2018, where full payment was not made until July 2020:

(a)    as against Red Telecom, a penalty of $60,000; and

(b)    as against Mr Kontaxis, a penalty of $15,000.

(3) in respect of the failure to comply with the TIO determination 2018/06/08097 (the Hinterland Determination) dated 19 February 2019 which required payment to Hinterland of $10,750.86 by 27 February 2019, where full payment was not made until September 2020:

(c)    as against Red Telecom, a penalty of $70,000; and

(d)    as against Mr Kontaxis, a penalty of $25,500.

(4) in respect of the failure to comply with the TIO determination 2018/02/07262 (the Joycey’s Sportz Determination) dated 5 April 2019 which required payment to Joycey's Sportz of $12,544.87 by 26 April 2019, where full payment was not made until September 2020:

(e)    as against Red Telecom, a penalty of $80,000; and

(f)    as against Mr Kontaxis, a penalty of $30,500.

(5) in respect of the failure to comply with the TIO determination 2017/07/17568 (the KJ Real Estate Determination) dated 4 April 2019 which required payment to KJ Real Estate of $1,012.34, by 11 April 2019 where full payment was not made until July 2020:

(g)    as against Red Telecom, a penalty of $40,000; and

(h)    as against Mr Kontaxis, a penalty of $5,500.

(6) in respect of the failure to comply with the TIO determination 2018/08/01018 (the Canepa Determination) dated 21 June 2019 which required payment to Ms Canepa of $5,895.60 by 5 July 2019, where full payment was not made until September 2020:

(i)    as against Red Telecom, a penalty of $50,000; and

(j)    as against Mr Kontaxis, a penalty of $15,000.

(7) in respect of the failure to comply with the TIO determination 2018/04/06536 (the Stewart Family Trust Determination) dated 21 June 2019 which required payment to Stewart Family Trust of $8,421.60 by 5 July 2019, where full payment was not made until July 2020:

(k)    as against Red Telecom, a penalty of $60,000; and

(l)    as against Mr Kontaxis, a penalty of $22,000.

148    This leads to total penalties against Red Telecom in the sum of $450,000.00 and against Mr Kontaxis in the sum of $153,500.00. Applying the totality principle, I do not consider that the cumulative total of the penalties vis a vis Red Telecom is too high or too low so as to require adjustment in order to ensure that it is are “just and appropriate”.

149    However, in Mr Kontaxis’ case the cumulative total of the civil penalties which I proposed to impose and have set out above would be too high. I consider that it is necessary to reduce the cumulative total of the penalties in Mr Kontaxis’ case to the sum of $115,125 (being a reduction of 25%) in order that that total is just and appropriate. This results in the following pro-rata adjustments to the individual penalties in Mr Kontaxis’ case, as follows:

(1) with respect to the Axis Determination, a penalty of $30,000;

(2) with respect to the Angie's Travel Determination, a penalty of $11,250;

(3) with respect to the Hinterland Determination, a penalty of $19,125;

(4) with respect to the Joycey's Sportz Determination, a penalty of $22,875;

(5) with respect to the KJ Real Estate Determination, a penalty of $4,125;

(6) with respect to the Canepa Determination, a penalty of $11,250; and

(7) with respect to the Stewart Family Trust Determination, a penalty of $16,500.

150    Finally, Mr Kontaxis is to pay ACMA its costs as agreed or taxed. Red Telecom, which submitted save as to costs, is to be afforded the opportunity to file written submissions as to costs within 14 days, with any submissions in response from ACMA to be filed and served within a further 14 days. Any reply is to be filed and served within three working days.

Associate:

Dated:    11 July 2022