Federal Court of Australia

Australian Competition and Consumer Commission v BlueScope Steel Limited (No 6) [2023] FCA 1029

ORDERS

THE COURT DECLARES THAT:

1.    In these declarations and orders:

(a)    Apex Steel means Apex Steel Pty Ltd;

(b)    BlueScope means the First Respondent;

(c)    BlueScope Distribution means BlueScope Distribution Pty Ltd, a wholly owned subsidiary of BlueScope which conducted business as a distributor of flat steel products in Australia;

(d)    CCA means the Competition and Consumer Act 2010 (Cth);

(e)    CIPA means BlueScope’s Coated Industrial Products Australia division which was the division of BlueScope responsible for the manufacture and sale of flat steel products in Australia;

(f)    CIPA’s Distribution Market price lists means the list prices published by CIPA with respect to the sale of flat steel products to distributors in Australia;

(g)    Citic means Citic Australia Commodity Trading Pty Ltd;

(h)    CMC Steel means CMC Steel Distribution Pty Ltd;

(i)    Ellis means the second respondent;

(j)    NZSA means New Zealand Steel (Australia) Pty Ltd, a wholly owned subsidiary of BlueScope which conducted business as a steel trader for flat steel products in Australia supplying distributors and occasionally steel users;

(k)    OneSteel means OneSteel Trading Pty Ltd;

(l)    Selection Steel means Selection Steel Trading Pty Ltd;

(m)    Selwood Steel means Celhurst Pty Ltd trading as Selwood Steel;

(n)    Southern Steel means Southern Steel Group Pty Limited;

(o)    Vulcan Steel means Vulcan Steel Pty Ltd;

(p)    Wright Steel means Wright Steel (Sales) Pty Ltd;

(q)    Yieh Phui means Yieh Phui Enterprise Co. Ltd.

2.    BlueScope attempted to induce:

(a)    Selection Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Selection Steel would use CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the Act by conduct engaged in between 6 September 2013 and 8 January 2014;

(b)    Apex Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Apex Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 2 June 2014;

(c)    Southern Steel to contravene s 44ZZRJ of the CCA, by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Southern Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 2 September 2013 and 30 May 2014;

(d)    Vulcan Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Vulcan Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 5 June 2014;

(e)    Selwood Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Selwood Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the CCA by conduct engaged in on 30 October 2013;

(f)    CMC Steel to contravene s 44ZZRJ of the CCA, by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    CMC Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 9 September 2013 and 11 June 2014;

(g)    OneSteel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 10 September 2014 and 2 June 2014;

(h)    one or both of Wright Steel and Citic to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    one or both of Wright Steel and Citic would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists; and

(ii)    BlueScope and NZSA would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in on 12 September 2013; and

(i)    Yieh Phui to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Yieh Phui would sell flat steel products to import traders at a higher price than it was doing at the time of the meeting between BlueScope and Yieh Phui on 26 February 2014 by reference to CIPA’s Distribution Market price lists, within the meaning of s 76(1)(d) of the CCA.

3.    Ellis attempted to induce:

(a)    Selection Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Selection Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 8 January 2014;

(b)    Apex Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Apex Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 2 June 2014;

(c)    Southern Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Southern Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 2 September 2013 and 30 May 2014;

(d)    Vulcan Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Vulcan Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 6 September 2013 and 5 June 2014;

(e)    Selwood Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Selwood Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the CCA by conduct engaged in on 30 October 2013;

(f)    CMC Steel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    CMC Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 9 September 2013 and 11 June 2014;

(g)    OneSteel to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the CCA by conduct engaged in between 10 September 2014 and 2 June 2014;

(h)    one or both of Wright Steel and Citic to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    one or both of Wright Steel and Citic would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists; and

(ii)    BlueScope and NZSA would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the CCA by conduct engaged in on 12 September 2013; and

(i)    Yieh Phui to contravene s 44ZZRJ of the CCA by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Yieh Phui would sell flat steel products to import traders at a higher price than it was doing at the time of the meeting between BlueScope and Yieh Phui on 26 February 2014 by reference to CIPA’s Distribution Market price lists, within the meaning of s 76(1)(d) of the CCA.

THE COURT ORDERS THAT:

4.    BlueScope pay to the Commonwealth of Australia pecuniary penalties totalling $57,500,000 in respect of the attempts to induce contraventions of s 44ZZRJ of the CCA referred to in order 2 above being:

(a)    in respect of the attempt involving Selwood Steel referred to in order 2(e) above, $2.5 million;

(b)    in respect of the attempt involving Wright Steel referred to in order 2(h) above, $4 million;

(c)    in respect of the attempt involving Yieh Phui referred to in order 2(i) above, $6 million; and

(d)    in respect of each of the attempts involving Selection Steel, Apex Steel, Southern Steel, Vulcan Steel, CMC Steel and OneSteel referred to in orders 2(a), (b), (c), (d), (f) and (g) above, $7.5 million.

5.    Ellis pay to the Commonwealth of Australia pecuniary penalties totalling $575,000 in respect of the attempts to induce contraventions of s 44ZZRJ of the CCA referred to in order 3 above being:

(a)    in respect of the attempt involving Selwood Steel referred to in order 3(e) above, $25,000;

(b)    in respect of the attempt involving Wright Steel referred to in order 3(h) above, $40,000;

(c)    in respect of the attempt involving Yieh Phui referred to in order 3(i) above, $60,000; and

(d)    in respect of each of the attempts involving Selection Steel, Apex Steel, Southern Steel, Vulcan Steel, CMC Steel and OneSteel referred to in orders 3(a), (b), (c), (d), (f) and (g) above, $75,000.

6.    Ellis is not to pursue any claim or accept any indemnity under any directors and officers insurance policy to which BlueScope or Ellis is a party or an insured for payment or reimbursement of any part of the pecuniary penalty the subject of order 5.

7.    BlueScope and Ellis pay the Applicant’s costs of, and incidental to, this proceeding to be assessed on a lump sum basis if not agreed (either as to the overall quantum of costs or the proportion of costs to be borne by each of the Respondents).

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

REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

1    On 9 December 2022, the Court delivered judgment in Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5) [2022] FCA 1475 (Liability Judgment or LJ), finding that each of the respondents, BlueScope Steel Limited (BlueScope) and Jason Ellis (Mr Ellis), had attempted to induce nine competing suppliers of flat steel products in Australia to contravene s 44ZZRJ of the Competition and Consumer Act 2010 (Cth) (Act) by arriving at an understanding that contained a cartel provision. These reasons assume familiarity with the Liability Judgment and adopt the defined terms used in the Liability Judgment.

2    The ultimate findings of the Court in the Liability Judgment were that (at [1552]):

Each of BlueScope and Mr Ellis attempted to induce:

(a)    Selection Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Selection Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the Act;

(b)    Apex Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Apex Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the Act;

(c)    Southern Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Southern Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the Act;

(d)    Vulcan Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    Vulcan Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the Act;

(e)    Selwood Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Selwood Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the Act;

(f)    CMC Steel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    CMC Steel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia; and

(ii)    BlueScope Distribution would sell flat steel products to steel users in Australia in accordance with CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the Act;

(g)    OneSteel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the Act;

(h)    one or both of Wright Steel and Citic to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained cartel provisions, being provisions to the effect that:

(i)    one or both of Wright Steel and Citic would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists; and

(ii)    BlueScope and NZSA would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists,

within the meaning of s 76(1)(d) of the Act; and

(i)    Yieh Phui to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that Yieh Phui would sell flat steel products to import traders at a higher price than it was doing at the time of the Yieh Phui meeting by reference to CIPA’s Distribution Market price lists, within the meaning of s 76(1)(d) of the Act.

3    In these reasons, I will refer to the above conduct as the “offending conduct”. The offending conduct was undertaken by and on behalf of BlueScope and Mr Ellis pursuant to deliberate and planned commercial strategies that were described in the Liability Judgment as the benchmarking strategy and the overseas mill strategy, and which continued from the beginning of September 2013 until, in some cases, June 2014.

4    In its amended originating application, the ACCC sought by way of relief declaratory orders, the imposition of pecuniary penalties and a disqualification order against Mr Ellis.

5    The ACCC’s application for relief was heard on 12 April 2023.

6    In support of its application, the ACCC filed written submissions dated 10 March 2023 and tendered a number of documents, including (as against the first respondent) a statement of agreed facts dated 7 March 2023 agreed between the ACCC and the first respondent. On the application, the ACCC submitted that it would be appropriate for the Court to make the following orders:

(a)    declarations largely in the form of the Court’s ultimate findings, as set out above;

(b)    that BlueScope pay an aggregate pecuniary penalty of $83 million (if the applicable maximum penalty for each attempt is $10 million) or $120 million (if the applicable maximum penalty for six of the attempts is 10% of BlueScope’s turnover);

(c)    that Mr Ellis pay an aggregate pecuniary penalty between $600,000 and $800,000;

(d)    that Mr Ellis be disqualified from managing corporations for a period of 7 years (the disqualification order); and

(e)    that Mr Ellis be prevented from making any claim in respect of, seeking to rely upon, or accepting any indemnity under, any applicable insurance policy for payment or reimbursement of any part of the pecuniary penalty imposed by the Court (the non-indemnification order).

7    While the ACCC’s amended originating application included the proposed disqualification order, it did not include the proposed non-indemnification order. The ACCC submitted that it is not necessary to seek an express order for a personal payment or non-indemnification order because such an order is necessarily, if impliedly, sought in any claim for a civil pecuniary penalty and so not a matter requiring specific pleading (relying upon Australian Building and Construction Commission v Construction, Forestry, Maritime, Mining and Energy Union (No 4) (2021) 173 ALD 112 at [23]-[24] per Rares J). Mr Ellis did not contend that the ACCC was prevented from seeking the non-indemnification order by reason that the proposed order had not been included in the amended originating application. However, as discussed below, Mr Ellis contends that the Court does not have power under the Act to make the type of non-indemnification order sought by the ACCC.

8    On the application for relief, BlueScope filed written submissions dated 29 March 2023 and read the following affidavits:

(a)    an affidavit dated 24 March 2023 of Peter Armitage, a partner of Ashurst who was retained to provide legal services for BlueScope between approximately April 2016 and January 2018 with respect to the ACCC's investigation of BlueScope's conduct which became the subject of these proceedings;

(b)    an affidavit dated 28 March 2023 of Debra Joy Counsell, the Chief Legal Officer of BlueScope;

(c)    an affidavit dated 28 March 2023 of Nathan John Harle, the Reporting, Governance & Risk Manager at BlueScope;

(d)    an affidavit dated 29 March 2023 of Darren John Mackenzie, the General Counsel of BlueScope’s Australian Steel Products division; and

(e)    an affidavit dated 29 March 2023 of Liana Janet Witt, a partner of Gilbert + Tobin, the solicitors for BlueScope in these proceedings.

9    None of the above deponents were required for cross-examination. The ACCC objected to a small number of statements contained within the affidavits, largely on the basis that they were expressions of opinion or were conclusory in form. I considered that the objections related more to the weight to be given to the statements rather than their admissibility. I have taken the objections into account in assessing those statements.

10    BlueScope did not contest (other than in minor respects) the form of declaratory relief sought by the ACCC. In respect of pecuniary penalty, BlueScope submitted that an aggregate penalty in the range of $30-40 million was appropriate in all the circumstances.

11    On the application for relief, Mr Ellis filed written submissions dated 29 March 2023 and read an affidavit sworn by him on 27 February 2023 concerning his current financial position. Mr Ellis was cross-examined by the ACCC on that topic.

12    Mr Ellis did not contest the form of declaratory relief sought by the ACCC. In respect of pecuniary penalty, Mr Ellis submitted that an aggregate penalty in the range of $100,000 to $125,000 was appropriate in all the circumstances. In respect of both the disqualification order and the non-indemnification order, Mr Ellis submitted that the Court is not empowered to make the orders as sought by the ACCC. Mr Ellis further submitted that, even if the Court is empowered to make those orders, they were not appropriate in the circumstances of this case.

13    During the hearing of the application for relief, I invited further evidence or submissions with respect to two issues. The first concerned Mr Ellis’s salary and other remuneration from BlueScope during the period of the attempts to induce cartel conduct. The second concerned the loss or damage that could potentially have been suffered by purchasers of flat steel products in Australia if the attempts to induce the cartel conduct had been successful. In response to that invitation:

(a)    the ACCC tendered (as against Mr Ellis) a second statement of agreed facts dated 18 April 2023 agreed between the ACCC and Mr Ellis in relation to Mr Ellis’s salary and other remuneration from BlueScope during the period of the attempts;

(b)    on 19 April 2023, the ACCC filed a further submission on the question of potential loss or damage to purchasers of flat steel products in Australia;

(c)    on 26 April 2023, BlueScope filed a further submission on the question of potential loss or damage to purchasers of flat steel products in Australia; and

(d)    on 27 April 2023, Mr Ellis notified the Court that he adopted the further submission filed by BlueScope.

14    For the reasons that follow, I consider it appropriate to grant declaratory relief largely in the form proposed by the ACCC and to order that:

(a)    BlueScope pay an aggregate pecuniary penalty of $57,500,000; and

(b)    Mr Ellis pay an aggregate pecuniary penalty of $575,000,

in respect of their respective attempts to induce understandings with competitors that contained cartel provisions. I will not make the disqualification order sought by the ACCC. I consider that the Court is not empowered to make that order and, even if the Court has power, I would decline to make the order as a matter of discretion. I will, though, make the non-indemnification order. I consider that the Court has power to make such orders and the order is appropriate in the circumstances of this case.

Declaratory relief

15    The application for declaratory relief can be addressed relatively briefly. This Court has a broad discretionary power to make declarations of right under s 21 of the Federal Court of Australia Act 1976 (Cth).

16    As observed by the Full Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 (ABCC v CFMEU) at [90], the fact that the parties have agreed that a declaration of contravention should be made does not relieve the Court of the obligation to satisfy itself that the making of the declaration is appropriate. However, the Full Court also stated (at [93]):

Declarations relating to contraventions of legislative provisions are likely to be appropriate where they serve to record the Court’s disapproval of the contravening conduct, vindicate the regulator’s claim that the respondent contravened the provisions, assist the regulator to carry out its duties, and deter other persons from contravening the provisions: Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] ATPR 42-140 at [6], and the cases there cited; Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [95].

17    I am satisfied that the ACCC has a real interest in seeking declaratory relief in this proceeding. Declaratory relief serves to record the Court’s disapproval of the relevant conduct and to vindicate the ACCC’s claim that BlueScope and Mr Ellis attempted to induce nine competing suppliers of flat steel products in Australia to contravene s 44ZZRJ of the Act by arriving at an understanding that contained a cartel provision.

18    The Court is not bound by the form of the declarations proposed by the parties and must determine for itself whether the form is appropriate. As stated by the High Court in Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [89], a declaration that a person has contravened a statutory prohibition should indicate the gist of the findings that identify the contravention. The declaration should accurately reflect the contravening conduct in a concise way: Australian Competition and Consumer Commission v Danoz Direct Pty Ltd [2003] FCA 881; 60 IPR 296 per Dowsett J at [260].

19    As noted earlier, the form of declaratory relief sought by the ACCC largely reflects the ultimate findings made by the Court in the Liability Judgment. I consider that that form of declarations is appropriate.

Pecuniary penalty to be imposed on BlueScope

The statutory power to impose a pecuniary penalty

20    During the relevant period, s 76(1)(d) of the Act provided that if the Court is satisfied that a person has attempted to induce another person to contravene a provision of Pt IV (including relevantly s 44ZZRJ):

… the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.

21    The principles that guide the exercise of the Court’s discretion in the imposition of a pecuniary penalty under s 76(1) are well established. Save in two respects, the applicable principles were not in dispute between the parties. The first matter of dispute concerned the maximum penalty that may be imposed by the Court in the circumstances of this case. The second matter of dispute concerned the application of the statutory limitation period in s 77(2) to the conduct involving OneSteel. I will turn to those issues after briefly stating the uncontroversial principles.

Accepted principles

22    The following matters are uncontroversial.

23    First, the penalty to be imposed under s 76(1) is a penalty that the Court determines to be appropriate.

24    Second, the Court is empowered to impose a penalty on a person in respect of each act or omission by the person to which s 76(1) applies. In the present case, the parties were agreed that the relevant “acts” to which s 76(1) applied were each of the attempts to induce the nine suppliers of flat steel products to contravene s 44ZZRJ. The ACCC did not advance a contention that it was open to the Court to impose a penalty in respect of the separate acts undertaken by BlueScope that formed part of each attempt to induce the cartel conduct. I therefore proceed on the agreed basis that there were nine “acts” in total. As already noted, a question arises with respect to the application of the statutory limitation period in s 77(2) to the attempt involving OneSteel.

25    Third, the principal object of imposing a pecuniary penalty is deterrence; both the need to deter repetition of the contravening conduct by the contravener (specific deterrence) and to deter others who might be tempted to engage in similar contraventions (general deterrence): Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 (TPG) at [65] per French CJ, Crennan, Bell and Keane JJ; Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ and [110] per Keane J. The Court must seek to “put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene” the relevant statute: Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 (Pattinson) at [15] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ, citing Trade Practices Commission v CSR Limited [1991] ATPR 41-076 (TPC v CSR) at [50] per French J (as his Honour then was). The penalty imposed should not be regarded by the contravenor or others as an acceptable cost of doing business: TPG at [66] per French CJ, Crennan, Bell and Keane JJ) citing Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249 at [62]-[63]. A penalty should nonetheless be proportionate in the sense of striking “a reasonable balance between deterrence and oppressive severity” (Pattinson at [41], [46]-[47]). The question, therefore, is what is required to achieve deterrence in the specific circumstances of the case.

26    Fourth, the level of penalty required to achieve the objective of deterrence in a given case depends upon the facts and circumstances of the case. Section 76(1) requires the Court to take into account four specific considerations and all other relevant matters. The four specific considerations are:

(a)    the nature and extent of the act or omission;

(b)    any loss or damage suffered as a result of the act or omission;

(c)    the circumstances in which the act or omission took place; and

(d)    whether the person has previously been found by a court in proceedings under (relevantly) Pt IV to have engaged in any similar conduct.

27    In TPC v CSR (at 52,152-52,153), French J (as his Honour then was) listed a number of matters potentially relevant to the assessment of penalty under s 76 of the Act, some of which overlap with the mandatory considerations enumerated in s 76(1). Those factors have been referred to on many occasions in the assessment of penalties and have become known as the “French factors”. They are:

(a)    the nature and extent of the contravening conduct;

(b)    the amount of loss or damage caused;

(c)    the circumstances in which the conduct took place;

(d)    the size of the contravening company;

(e)    the degree of power it has, as evidenced by its market share and ease of entry into the market;

(f)    the deliberateness of the contravention and the period over which it extended;

(g)    whether the contravention arose out of the conduct of senior management or at a lower level;

(h)    whether the company has a corporate culture conducive to compliance with the Act as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention;

(i)    whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention.

28    Another factor that is relevant to the assessment of penalty is the size of any financial advantage obtained from the contravening conduct, as well as the intention or the potential to profit from the contravening conduct. Effective deterrence requires the penalty to be substantial relative to the possible gain that may have been achieved if the attempt to induce cartel conduct had been successful, adapting the observation of the Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 (Reckitt Benckiser) at [153]. As stated by the Full Court (Middleton, Beach and Moshinsky JJ) in Australian Competition and Consumer Commission v Cement Australia Pty Ltd (2017) 258 FCR 312 (Cement Australia), the intention to profit from contravening conduct must be deterred even if it could be shown by the contravenor that no actual profit was made, and that “the higher the intended benefit (even if not actually received), the higher the penalty required to satisfy the object of deterrence, all else being equal” (at [467]).

29    The majority in Pattinson confirmed that regard may properly be had to the above factors as potentially relevant considerations in the assessment of penalty, while recognising that they are not a rigid catalogue of matters for attention nor a legal checklist (at [18] and [19]). In discussing those factors, the majority observed (at [46]-[47]), in the context of s 546 of the Fair Work Act 2009 (Cth) (FW Act)):

46    … It is important to recall that an “appropriate” penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a “one-off” result of inadvertence by the contravenor rather than the latest instance of the contravenor’s pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law on the part of a union official, or where the official responsible for a deliberate breach has been disciplined by the union. In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.

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

30    Fifth, in fixing a penalty, the Court should have regard to the maximum penalty prescribed by the legislature: see Markarian v The Queen (2005) 228 CLR 357. However, the statutory maximum penalty is “but one yardstick that ordinarily must be applied” and must be treated as “one of a number of relevant factors”: Reckitt Benckiser at [155]-[156]. In Pattinson, the majority rejected an approach whereby the Court seeks to grade contraventions on a “scale of increasing seriousness, with the maximum to be reserved exclusively for the worst category of contravening conduct” (at [49]). The majority explained (at [55]) that:

… the maximum penalty does not constrain the exercise of the discretion under s 546 (or its analogues in other Commonwealth legislation), beyond requiring “some reasonable relationship between the theoretical maximum and the final penalty imposed”. This relationship of “reasonableness” may be established by reference to the circumstances of the contravenor as well as by the circumstances of the conduct involved in the contravention. That is so because either set of circumstances may have a bearing upon the extent of the need for deterrence in the penalty to be imposed. And these categories of circumstances may overlap.

31    Sixth, in determining the appropriate penalty for a multiplicity of civil penalty contraventions, the Court may have regard to two common law principles that originate in criminal sentencing: the “course of conduct” principle and the “totality” principle: Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243 (Yazaki Corporation) at [226]. Under the “course of conduct” principle, the Court considers whether the contravening acts or omissions arise out of the same course of conduct or the one transaction, to determine whether it is appropriate that a “concurrent” or single penalty should be imposed for the contraventions: Yazaki Corporation at [234]. The principle guards against the risk that the respondent is “doubly punished” in respect of multiple contravening acts or omissions that should be evaluated, for the purposes of assessing an appropriate penalty, as a lesser number of acts of wrongdoing: Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1 at [39] per Middleton and Gordon JJ. However, as noted by the Full Court in Yazaki Corporation (at [227]), it is not appropriate or permissible to treat multiple contravening acts or omissions as just one contravention for the purposes of determining the maximum limit dictated by the relevant legislation. Accordingly, the maximum penalty for the course of conduct is not restricted to the prescribed statutory maximum penalty for each contravening act or omission: Yazaki Corporation at [229]-[235]. The “totality” principle operates as a “final check” to ensure that the penalties to be imposed on a wrongdoer, considered as a whole, are just and appropriate and that the total penalty for related offences does not exceed what is proper for the entire contravening conduct in question: Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 (TNT Australia); Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53 per Goldberg J; Australian Competition and Consumer Commission v Coles Supermarkets [2014] FCA 1405 at [132] per Gordon J.

32    Seventh, in common with criminal sentencing, determining a civil penalty usually involves multi-factorial decision-making, identifying and balancing all the factors relevant to the contravention, and where the result is arrived at by a process of “instinctive synthesis” of the relevant factors: Reckitt Benckiser at [44].

Maximum penalty

33    The maximum penalty that the Court may impose on BlueScope in respect of the offending conduct was governed by s 76(1A) which relevantly provided as follows:

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

(aa)     for each act or omission to which this section applies that relates to section 44ZZRJ or 44ZZRK—the greatest of the following:

(i)     $10,000,000;

(ii)     if the court can determine the total value of the benefits that have been obtained (within the meaning of Division 1 of Part IV) by one or more persons and that are reasonably attributable to the act or omission—3 times that total value;

(iii)     if the Court cannot determine the total value of those benefits—10% of the annual turnover (within the meaning of Division 1 of Part IV) of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the act or omission occurred; …

34    The ACCC and BlueScope agreed that ss 76(1A)(aa)(ii) and (iii) have no application unless the Court is able to conclude that, relevantly, BlueScope obtained a benefit that was reasonably attributable to the attempts to induce cartel conduct.

35    In its further amended statement of claim, the ACCC alleged that BlueScope obtained a benefit from the attempts to induce contraventions of s 44ZZRJ because the acts constituting the attempts had the effect of making it more likely that BlueScope could profitably raise or maintain its prices for flat steel products. The premise for the allegation was that increasing the likelihood of raising prices constituted a benefit within the meaning of ss 76(1A)(aa)(ii) and (iii). The ACCC submitted that increasing the chance of making a profit (or increasing profits) has value and is something that is conventionally valued.

36    The ACCC submitted that BlueScope obtained a benefit (of that kind) from potentially six of the nine attempts to induce cartel conduct, but it was not possible to determine the total value of the benefits. The ACCC submitted that, in those circumstances, s 76(1A)(aa)(iii) was applicable to those attempts and that the maximum penalty was 10% of BlueScope’s annual turnover as defined in s 44ZZRB. In that regard, the ACCC and BlueScope agreed the following fact:

The annual turnover as defined in s 44ZZRB (being s 45AB as at the date the Proceeding commenced) of the Competition and Consumer Act 2010 (Cth) of BlueScope Steel Limited and its related bodies corporate for the 12 months ending at the end of each month during the period 1 September 2013 to 30 June 2014 was approximately $4,000,000,000.

37    On the basis of that agreed fact, the ACCC submitted that the applicable maximum penalty for each of those six attempts to induce cartel conduct was $400 million. In respect of each of the other attempts to induce cartel conduct, the ACCC submitted that the applicable maximum penalty was $10 million pursuant to s 76(1A)(aa)(i).

38    In support of its submission that BlueScope obtained a benefit from potentially six of the nine attempts to induce cartel conduct, the ACCC relied on the following findings made in the Liability Judgment:

(a)    First, commencing from October 2013, BlueScope began noting that some distributors were setting their prices using CIPA’s price lists as a benchmark or base level in accordance with the benchmarking strategy (LJ [1005], [1066]-[1067], [1129]-[1130], [1451], [1550]). At least four independent distributors were, for a time, pricing in this way: CMC Steel (LJ [1215]-[1216]); Southern Steel (LJ [1129[-[1130]; [1131]-[1132]; [1133]-[1134]; [1140]-[1141]; [1171]-[1172]; [1191]); OneSteel (LJ [1189]; [1225]-[1226]); and Vulcan Steel (LJ [1186]-[1187]; [1189]). At this time, BlueScope Distribution was also setting its prices in accordance with CIPA’s price lists (LJ [1175]-[1176]; [1217]-[1224]; [1230]-[1235]).

(b)    Second, the setting of prices by independent distributors and BlueScope Distribution by reference to CIPA’s price lists likely had the effect for BlueScope described in the Liability Judgment at [633]:

It is an obvious commercial fact that, if the benchmarking strategy was implemented successfully and distribution customers were able to earn higher margins on the sale of CIPA products, that would enable CIPA to maintain the level of its “net” prices (and avoid having to offer deeper discounts). That would result in higher sales revenue for CIPA.

(c)    Third, in promoting the benchmarking strategy to distributors, BlueScope made clear that the strategy was being promoted to other distributors in the market (LJ [641], [662], [735]). This was to reassure distributors that they would not face the risk of losing sales to distributors who were not following the strategy (LJ [1434]). A key occasion on which BlueScope made clear that the strategy was being promoted to other distributors in the market was at the Melbourne Airport meeting. The meeting was attended by representatives from four independent distributors and formed part of the conduct that constituted the attempts to induce cartel conduct (Southern Steel at LJ [1480(d)], Apex Steel at LJ [1472(b)], Vulcan Steel at LJ [1488(b)] and Selection Steel at LJ [1463(b)]). At the meeting each of the attendees, including Mr Smaller of Southern Steel and Mr Wells of Vulcan Steel, witnessed that BlueScope was promoting the benchmarking strategy to at least three other independent distributors. It follows that the conduct of Southern Steel and Vulcan Steel in pricing in accordance with the benchmarking strategy was induced, at least in part, by the attempts by BlueScope to induce the two other independent distributors in attendance at that meeting.

39    The ACCC submitted that, overall, the effect of the offending conduct was to confer on BlueScope the benefit of making it more likely that BlueScope could profitably raise or maintain its prices for flat steel products. The ACCC argued that that benefit is attributable to conduct in respect of six of the attempts to induce as set out above (ie, CMC Steel, Southern Steel, OneSteel, Vulcan Steel, Apex Steel and Selection Steel). In the alternative, the ACCC argued that the benefit is attributable to the four attempts in respect of distributors who did begin pricing in accordance with the benchmarking strategy (ie, CMC Steel, Southern Steel, OneSteel and Vulcan Steel).

40    I do not accept the ACCC’s submission that BlueScope obtained a benefit that was reasonably attributable to the attempts to induce cartel conduct.

41    Sections 76(1A)(aa)(ii) and (iii) refer to benefits that have been obtained by a person and that are reasonably attributable to the act or omission to which s 76 applies. The word “benefit” is defined broadly in s 44ZZRB as meaning “any advantage and is not limited to property”. Thus, the benefit is not confined to monetary profit. Nevertheless, it is implicit in the section that the benefit has a value, although it may not be possible for the Court to determine the value. Furthermore, and most significantly, the question whether a person has obtained a benefit from the act or omission to which s 76 applies is to be determined at the time of applying s 76 and imposing a penalty. It is at that time, effectively today, that the Court must determine whether a person has obtained a benefit.

42    In that statutory context, it is irrelevant whether, at some earlier point in time (and coincident with the conduct for which the penalty is to be imposed) a person experienced an increased chance to make a profit. If at the time of determining the penalty it is established that no increased profit (or other advantage which is susceptible of valuation) was ultimately obtained from the conduct, ss 76(1A)(aa)(ii) and (iii) can have no application. A chance of making a profit that does not come to fruition is not a benefit obtained.

43    The evidence adduced at trial, and the further evidence adduced in the penalty hearing, does not establish that BlueScope increased its profits or obtained any other benefit (susceptible of valuation) as a result of the attempts to induce cartel conduct. The evidence established that a material aim or objective of the benchmarking strategy and the overseas mill strategy was to bring about an increase in prices for the supply of flat steel products both at the manufacture/import level of the market and at the distribution level of the market (LJ [1430]). However, the benchmarking strategy could only succeed if a significant number of distributors implemented the strategy by adopting the prices in CIPA’s price lists as a benchmark (or floor price) in setting their own prices. Unless the strategy was adopted by a significant number of distributors, including BlueScope Distribution, those distributors that followed the strategy faced the risk of losing sales to distributors that did not (and offered lower prices) (LJ [1434]). Some of the counterparties rebuffed the attempt at the outset – this included Selection Steel (LJ [1174]), Wright Steel (LJ [764]) and Yieh Phui (LJ [1542]). Other counterparties were sceptical of the benchmarking strategy and did not believe that their competitors would price in accordance with the strategy – this included CMC Steel (LJ [895], [1215]), Brice Metals (part of Southern Steel) (LJ [1155]), and Vulcan Steel (LJ [1186]-[1189], [1197]-[1198]). Some of the counterparties told BlueScope that they supported the concept of the benchmarking strategy – this included OneSteel (LJ [938]), Southern Steel (LJ [1130]), [1134], [1141], [1172]) and CMC Steel (LJ [1215]). However, that does not establish that those distributors in fact set prices in accordance with CIPA’s price lists. The distributors that did attempt to price in that manner lost sales – this included Southern Steel (LJ [1132]) and SMS (LJ [1217], [1218] and [1224]). Overall, the attempts to induce cartel conduct failed (LJ [1435]).

44    Overall, there is no evidence to support a finding that any change to the pricing behaviour of distributors enabled BlueScope to increase its prices at the manufacture/import level of the market and thereby increase its profits. For those reasons, I consider that ss 76(1A)(aa)(ii) and (iii) have no application in this case and the maximum penalty for each of the attempts to induce cartel conduct is $10 million. The aggregate maximum penalty is therefore $90 million.

Limitation period in respect of the OneSteel attempt

45    During the relevant period, s 77 of the Act imposed a limitation period in respect of proceedings seeking a pecuniary penalty in the following terms:

(1)     The Commission may institute a proceeding in the Court for the recovery on behalf of the Commonwealth of a pecuniary penalty referred to in section 76.

(2)     A proceeding under subsection (1) may be commenced within 6 years after the contravention.

46    It can be observed that the limitation period imposed by s 77(2) refers to the period of 6 years after the “contravention”. Under s 76(1), the Court is empowered to impose a pecuniary penalty in respect of conduct that does not necessarily involve a contravention of a provision of Pt IV of the Act having occurred. In particular, a penalty can be imposed where a person has:

(a)    attempted to contravene such a provision;

(b)    has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene such a provision; or

(c)    has conspired with others to contravene such a provision.

47    The present case involves attempts to induce other persons to contravene s 44ZZRJ in circumstances where the attempts failed and no contraventions occurred.

48    The ACCC did not advance a submission that the limitation period imposed by s 77(2) was inapplicable because no contravention had occurred in this case. The parties proceeded on the implicit basis that the reference to “contravention” in s 77(2) must be read as including a reference to each act or omission to which s 76(1) applies and for which a penalty may be imposed.

49    The ACCC commenced this proceeding on 29 August 2019 by filing an originating application and a concise statement. When the proceeding was commenced, both the originating application and the concise statement omitted any reference to an attempt involving OneSteel. Pursuant to orders of the Court, on 19 December 2019 the ACCC filed a statement of claim. The statement of claim added a new allegation involving an attempt to induce OneSteel to arrive at an understanding containing a cartel provision. The conduct that was alleged to constitute the attempt spanned the time period from 10 September 2013 until 2 June 2014. However, at that time, the ACCC did not seek leave to amend its originating application to include a claim for a pecuniary penalty in respect of those newly added allegations. The ACCC subsequently sought leave to amend its originating application to seek a pecuniary penalty in relation to the OneSteel attempt. On 12 May 2020, I granted the ACCC leave to amend its originating application on the basis that the amendments took effect from 19 December 2019: see Australian Competition and Consumer Commission v BlueScope Steel Limited (No 2) [2020] FCA 625.

50    By its defence, BlueScope alleged that the ACCC’s claim for relief in respect of the allegations concerning OneSteel were “statute barred under s 77(2) of the Act”.

51    As noted earlier, the ultimate finding of the Court in the Liability Judgment with respect to the OneSteel attempt was that each of BlueScope and Mr Ellis attempted to induce OneSteel to contravene s 44ZZRJ by arriving at an understanding with BlueScope that contained a cartel provision, being a provision to the effect that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia, within the meaning of s 76(1)(d) of the Act (at [1552]). I also made the following findings (emphasis added):

1520         I find that the conduct of BlueScope and Mr Ellis with respect to OneSteel relied upon by the ACCC, taken as a whole, constituted steps towards the inducement of an understanding being reached between BlueScope and OneSteel containing a cartel provision, which steps were more than merely preparatory of the inducement and which were immediately and not merely remotely connected with the inducement. The cartel provision was that OneSteel would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to steel users in Australia.

…

1522         The conduct of BlueScope and Mr Ellis that constituted the attempt comprised the following (which is a summary of factual findings made earlier in these reasons):

(a)     On 10 September 2013, Messrs Ellis and Hennessy met with Mr Lewin of OneSteel during the Australian Steel Institute Conference on the Gold Coast. Mr Ellis asked how CIPA could win more of OneSteel’s business. Mr Lewin said that BlueScope would need to have a more competitive price. Mr Ellis responded with words to the effect that there was an opportunity for OneSteel to use CIPA’s list prices as a pricing benchmark when setting its prices to customers.

(b)     On 12 September 2013, Mr Kelso had a conversation with Mr Bolzan, the National Procurement Manager for OneSteel Metalcentre, in relation to the benchmarking strategy. Mr Kelso explained the strategy in words to the effect that: BlueScope was looking to re-jig its price lists so that they were easier to use and increase the upfront list price so that the gap between the import parity price and the list price was increased; and the list price would be set at a level which would allow OneSteel to achieve sufficient margins if it sold to that price. Mr Bolzan indicated that he agreed that if the OneSteel business could use the price list as the “rock bottom price” that they would sell at, their business health would be significantly better going forward. During the conversation, Mr Bolzan asked how he could be sure that the other distributors would do the same, confirming that Mr Bolzan understood that the strategy involved other distributors setting their prices in the same manner. Either during this conversation or a later conversation with Mr Bolzan, Mr Kelso explained that the list price was a baseline or benchmark that OneSteel could use when pricing their products to their end customers.

(c)     On 13 September 2013, Messrs Ellis and Hennessy met with Messrs Lambourne and Birchall, the General Manager and National Manager respectively of OneSteel, at the Qantas meeting rooms at Sydney Airport. Mr Ellis asked what BlueScope could do to increase sales to OneSteel. Mr Birchall said that BlueScope needed to lower its prices. Mr Ellis replied by saying words to the effect that there was an opportunity for OneSteel to raise its prices by using CIPA’s list prices as a benchmark and that CIPA was currently working on its December price list.

(d)     The conduct referred to in paras 1463(d) and (e).

(e)     On 17 September 2013, Mr Kelso had a discussion with OneSteel Sheet & Coil about CIPA’s proposed Distribution Market list prices for sheet and coil products in which OneSteel Sheet & Coil indicated that they were comfortable with the proposed prices.

(f)     On 17 September 2013, Mr Hennessy sent an email to Messrs Birchall and Szecsodi of OneSteel Sheet & Coil, copying Mr Lambourne of OneSteel and Messrs Ellis and Kelso of BlueScope, attaching a version of the December 2013 Benchmark spreadsheet. The email referred to “our recent discussions”. The email was sent with Mr Ellis’s express or tacit approval. Sending the December 2013 Benchmark spreadsheet to distributors represented a change from CIPA’s previous practices. Prior to this, BlueScope’s internal calculations of the kind contained in the December 2013 Benchmark spreadsheet (including the net price calculations) were not sent to distributors.

(g)     On 17 September 2013, Mr Kelso sent an email to Messrs Lewin and Bolzan of OneSteel Metalcentre, copying Mr Hennessy, and attaching an extract of the December 2013 Benchmark spreadsheet limited to plate products (which were distributed by OneSteel Metalcentre). The email referenced earlier discussions, including those at the Australian Steel Institute conference on the Gold Coast, and expressed the hope that OneSteel would “find that this is the right step in bringing some value back to Distributors in the market”.

(h)     On 19 September 2013, Mr Kelso sent an email to Messrs Birchall and Szecsodi of OneSteel Sheet & Coil attaching a copy of CIPA’s Distribution Market price list for sheet and coil products for December 2013. On 20 September 2013, Mr Kelso also sent an email to, amongst others, Messrs Bolzan and Lewin of OneSteel Metalcentre attaching CIPA’s Distribution Market price lists for a range of steel plate products for December 2013.

(i)     On 20 December 2014, Mr Cooper (in the absence of Mr Kelso) sent an email to (amongst others) Messrs Birchall and Szecsodi of OneSteel Sheet & Coil attaching a price notification letter, CIPA’s Distribution Market price list for sheet and coil products for March 2014 and the presentation titled “Distribution Sheet & Coil Price List Changes”. As noted in respect of Selection Steel above, for the first time these documents contained an express reference to recommended resale prices. On the same day, Mr Cooper also sent an email to, amongst others, Messrs Bolzan and Lewin of OneSteel Metalcentre attaching CIPA’s Distribution Market price lists for a range of steel plate products for March 2014. In contrast to CIPA’s Distribution Market price list for sheet and coil products which had at that time been reformulated to refer to “recommended resale prices”, the price notification letter and price lists for steel plate products did not use that expression. However, the covering email listed standard plate products with “recommended resale prices”.

(j)     On 4 February 2014, Mr Kelso sent an email to Messrs Bolzan and Lewin of OneSteel Metalcentre attaching a price notification letter and CIPA’s Distribution Market price lists for a number of steel plate products for April 2014. Again, the covering email listed standard plate products with “recommended resale prices”.

(k)     On 6 March 2014, Mr Kelso sent an email to (amongst others) Messrs Birchall and Szecsodi of OneSteel attaching a price notification letter and CIPA’s Distribution Market price list for sheet and coil products for May 2014. The price notification letter and the Distribution Market price list for sheet and coil products were in the same format as March 2014, including particularly the references to “recommended resale price” in both the price notification letter and the price list.

(l)     On 2 April 2014, Mr Kelso sent an email to (amongst others) Messrs Bolzan and Lewin of OneSteel Metalcentre attaching a price notification letter and CIPA’s Distribution Market price lists for a number of steel plate products for June 2014. Again, the covering email listed standard plate products with “recommended resale prices”.

(m)     On 30 April 2014, Mr Kelso sent an email to (amongst others) Mr Bolzan attaching a price notification letter and CIPA’s Distribution Market price list for sheet and coil products for July 2014. The price notification letter and the Distribution Market price list for sheet and coil products were largely in the same format as the versions since March 2014, including particularly the references to “recommended resale price” in both the price notification letter and the price list.

(n)    On 2 June 2014, Mr Kelso sent an email to (amongst others) Messrs Bolzan and Lewin of OneSteel Metalcentre attaching a price notification letter and CIPA’s Distribution Market price lists for a number of steel plate products for August 2014. Again, the covering email listed standard plate products with “recommended resale prices”.

52    It can be seen from the above extract that [1522(d)] incorporated by reference the conduct referred to in [1463(d)] and [1463(e)] which was as follows:

(d)     Prior to the CIPA pricing meeting held on 16 September 2013, Mr Ellis directed Mr Hennessy to release CIPA’s price lists for December 2013 to distributors and to speak with distributors about using the price lists in setting their prices.

(e)     At the CIPA pricing meeting held on 16 September 2013, Mr Hennessy told the pricing and sales managers that Mr Ellis and he had spoken to distributors and told them that there was an opportunity to use CIPA’s price lists as a benchmark when they were setting their prices, to help the distributors to increase their prices and therefore improve their profitability. The December 2013 Benchmark spreadsheet was created for that purpose and included an increase in CIPA’s list prices. The document explained the derivation of CIPA’s list prices for flat steel products to be delivered in December 2013, and calculated the sales margin that would be earned if BlueScope products were sold at the list prices and if imported products were bought at the stated import parity prices and sold at the list prices. It was not a document that had been previously created for use by distributors. In an email sent to pricing and sales managers on 16 September 2013, Mr Unicomb explained the strategy as setting a recommended retail price in the market for distributors to use as a base for their pricing, and which would hopefully increase margins in the channel. This occurred with Mr Ellis’s express or tacit approval. The senior sales managers understood that they were to communicate the benchmarking strategy in those terms. Mr Hennessy also encouraged the senior sales managers to inform distribution customers that they should have confidence to sell at the list prices because BlueScope was also reducing tactical pricing.

53    Two matters are immediately apparent from the above findings. First, it was the conduct of BlueScope and Mr Ellis with respect to OneSteel taken as a whole that constituted an attempt to induce the cartel conduct (arriving at an understanding that contained a cartel provision). Second, the conduct of BlueScope and Mr Ellis that constituted the attempt commenced on 10 September 2013 and continued until 2 June 2014. The question that arises is: how does s 77(2) apply in those circumstances?

54    In its written submissions, BlueScope argued that, in the circumstances described above, the ACCC is not permitted to seek a pecuniary penalty in respect of the OneSteel attempt. BlueScope argued that the conduct that pre-dated 19 December 2013 cannot be the subject of a penalty, and cannot be taken into account because this would create a risk that BlueScope would be penalised for conduct which Parliament has said should not be subject to a penalty (relying on Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd [2019] FCA 786; 370 ALR 637 at [149] per Perram J). In respect of the conduct after 19 December 2013, no finding has been made that this conduct, on its own, amounted to the relevant attempt to induce and therefore no penalty can be imposed in respect of that conduct. In the course of oral submissions, BlueScope advanced an alternative argument. It submitted that s 77(2) can be given a sensible operation by penalising those acts that are within the 6 year limitation period and not penalising those acts that are outside the limitation period.

55    The ACCC submitted that s 77(2) operates as a limitation provision, where the relevant cause of action is created by s 76 (relying on Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190 at [547] per Dowsett and Edelman JJ). On the findings made by the Court, the cause of action constituted by the OneSteel attempt was not complete until 2 June 2014. On that basis, the ACCC’s application under s 77(1) to recover on behalf of the Commonwealth a pecuniary penalty in respect of the OneSteel attempt is not time barred by s 77(2).

56    I accept the ACCC’s submission. As observed by the learned author of the Law of Limitation (Dal Pont, 2nd ed) at [2.1], time bars found in limitation statutes have long been characterised as primarily “procedural” in character, in the sense that they prescribe a procedural bar to pursuing an action rather than one that ousts the legal right in question. Most commonly, limitation periods are defined by reference to a cause of action, where the relevant time period is calculated from the accrual of the cause of action. In Bradford Old Bank v Sutcliffe [1918] 2 KB 833, Scrutton LJ stated the principle in the following terms (at 848):

The numerous cases decided on particular facts are all reducible to one principle. When the Statute of James provided that actions must be commenced within six years “next after the cause of such actions” it meant after the occurrence of all the facts which the plaintiff must prove as part of his case — that is, at the time when the plaintiff could first have brought his action and proved sufficient facts to sustain it: see per Lindley L.J. in Reeves v. Butcher [1891] 2 QB 509, as explained by the Court of Appeal in Coburn v. Colledge [1897] 1 QB 702.

57    Similarly, in Williams v Milotin (1957) 97 CLR 465, the High Court stated that a cause of action means “the essential ingredients in the title to the right which it is proposed to enforce” (at 474).

58    I consider that the same principle underlies the language of s 77(2) of the Act. The phrase “within 6 years after the contravention” should be construed as meaning within 6 years after the accrual or commission of the contravention. That requires the identification of all the facts that the ACCC must prove in order to establish the contravention. As noted earlier, the reference to “contravention” must be taken to include a reference to each act or omission to which s 76(1) applies and for which a penalty may be imposed. Accordingly, the application of s 77(2) in the present case requires the identification of all the facts that the ACCC was required to prove in order to establish the act or omission to which s 76(1) applies and for which a penalty may be imposed.

59    In the present case, the relevant “act or omission” to which s 76(1) applied was an attempt to induce OneSteel to arrive at an understanding containing a cartel provision. The conduct that was alleged by the ACCC to constitute the attempt spanned the time period from 10 September 2013 until 2 June 2014. In the Liability Judgment, I found that that conduct, taken as a whole, constituted the attempt. Neither the ACCC nor BlueScope advanced a case at trial that, if an attempt occurred, the conduct constituting the attempt was complete prior to 19 December 2013. In the penalty hearing, BlueScope submitted that the conduct that occurred before 19 December 2013 was more significant than the conduct that occurred after that date. It did not submit, however, that the attempt was complete prior to 19 December 2013.

60    Having regard to the case advanced by the ACCC, and the findings made in respect of that case, in my view the “act or omission” to which s 76(1) applied, being the attempt to induce OneSteel to arrive at an understanding containing a cartel provision, was committed or was complete on 2 June 2014. It follows that s 77(2) did not prevent the ACCC from seeking a penalty in respect of that conduct.

Consideration of the relevant factors

61    This section of the reasons considers the statutory factors required to be taken into account, together with other relevant considerations, in the assessment of appropriate penalties to be imposed on BlueScope. The factual findings referred to below are largely drawn from the Liability Judgment, although some matters were the subject of additional evidence given at the penalty hearing. In what follows, I have relied on the totality of the factual findings made in the Liability Judgment.

Nature and extent of the offending conduct

62    The nature and extent of the offending conduct includes consideration of whether the offending conduct was systematic, deliberate or covert (see J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission [2000] FCA 365; 172 ALR 532 at [158] and [163]) and the period over which it extended.

63    The offending conduct for which a penalty is to be imposed in this case constituted attempts to induce cartel conduct (arriving at understandings with competing suppliers of flat steel products that contained a cartel provision contrary to s 44ZZRJ). In Yazaki Corporation, the Full Court observed (at [257]) that an appropriate penalty for cartel conduct needs to reflect that such conduct is “generally regarded as the most pernicious of all breaches of competition law”, is “often attended by secrecy” and is “notoriously difficult to identify”, and may only be detected a long time after it manifests. Each of those descriptions is applicable to the attempts to induce cartel conduct the subject of this proceeding.

64    The benchmarking strategy and the overseas mill strategy were deliberate and systematic strategies the aim of which was to bring about an increase in prices for the supply of flat steel products both at the manufacture/import level of the market and at the distribution level of the market (LJ [1430]). BlueScope pursued the strategies from early September 2013 to as late as June 2014. Ultimately, none of the attempts to induce cartel conduct were successful. In some instances, the attempts were rebuffed because the counterparties believed that BlueScope’s proposal would or might involve a contravention of the law; in other instances, the attempts were ignored because the competitive pressure from imported steel made BlueScope’s proposal commercially unviable (LJ [11]). It is significant that the offending conduct did not cease because BlueScope management realised that the goal being pursued was prohibited by the Act.

65    The benchmarking strategy and the overseas mill strategy also had covert elements. The promotion by BlueScope of “recommended resale prices” was a mechanism or device by which BlueScope and Mr Ellis sought to induce understandings containing cartel provisions being reached (LJ [1437]). With respect to the Melbourne Airport meeting, Mr Ellis instructed his executive assistant to issue invitations in a manner that hid, to some extent, the attendees (LJ [693]). Mr Ellis informed Mr Hennessy that the meeting was sensitive, not to be put into their calendars, and not to be discussed with anyone else at BlueScope (LJ [701]). Mr Hennessy directed one of his subordinates to delete her emails referring to the intent of the benchmarking strategy in explicit terms (LJ [1236]-[1238]). Each of Mr Ellis and Mr Schulz sought to keep secret their conversation with Yieh Phui about its pricing into the Australian market. Mr Schulz removed the reference to discussions about pricing from the notes about the meeting with Yieh Phui (LJ [1406]-[1410]) and Mr Ellis omitted any such reference in his final report to BlueScope Australia’s chief executive officer, Mr Vassella (LJ [1413]).

66    As to the extent of the offending conduct, BlueScope attempted to induce nine competitors to arrive at the understandings, comprising seven domestic distributors, one import trader and one overseas manufacturer. Most of the domestic distributors held a significant national market share or a significant share in at least one of the state and territory markets in Australia (see LJ [533]). At the time of the offending conduct, Wright Steel was the largest importer of flat steel products into Australia and had a market share of approximately 10% (LJ [444]). In March 2014, Yieh Phui was the largest overseas steel mill importing into Australia apart from NZ Steel.

67    As described in the Liability Judgment, BlueScope’s managerial investment in the benchmarking strategy was significant (LJ [1439]). Internally, substantial work was carried out to revise (and increase) CIPA’s Distribution Market list prices and allow a greater discount to net prices. A large number of meetings were held with distributors to discuss the concept. The December 2013 Benchmark spreadsheet was developed to communicate detailed information about the recommended resale prices to distributors. Later, CIPA’s Distribution Market price list for sheet and coil products was reformulated to promote and facilitate the adoption of the recommended resale prices. The benchmarking strategy was a significant project which continued for at least eight months and involved numerous meetings and discussions between CIPA and distributors.

68    Differences in the nature and extent of the offending conduct between the attempts should be recognised. Wright Steel and Yieh Phui were direct competitors of CIPA at the manufacture/import level of the market, whereas the other seven distributors were downstream competitors (being competitors to BlueScope Distribution at the distribution level of the market). In that sense, the attempts involving Wright Steel and Yieh Phui can be described as the more “naked” or blatant attempts to induce cartel conduct. Against that, the attempt involving Wright Steel essentially involved a single meeting. Although the attempt involving Yieh Phui principally involved a single meeting, there was considerable planning. Apart from the attempt involving Selwood Steel, there is little to distinguish the nature and extent of the other attempts. Although the offending conduct involving CMC Steel, OneSteel, Vulcan Steel and Southern Steel might be described as more extensive than the offending conduct involving Selection Steel and Apex Steel, the purpose of the offending conduct was the same and the offending conduct was the result of the same commercial strategy. The attempt involving Selwood Steel largely involved a single meeting and may therefore be regarded as the least serious of the attempts. Having regard to the foregoing considerations, I would grade the attempts in ascending order of seriousness for the purposes of penalty as follows:

(a)    Selwood Steel;

(b)    Wright Steel;

(c)    Yieh Phui; and

(d)    CMC Steel, OneSteel, Vulcan Steel, Southern Steel, Selection Steel and Apex Steel.

The circumstances in which the offending conduct took place

69    The circumstances in which the offending conduct took place includes consideration of matters such as the commercial reasons for the conduct, the management level at which it occurred and the potential financial gain from the conduct.

70    As already stated, the aim of the benchmarking strategy and the overseas mill strategy was to bring about an increase in prices for the supply of flat steel products both at the manufacture/import level of the market and at the distribution level of the market (PJ [1430]). The strategies were conceived by Mr Ellis in response to the difficult financial circumstances being experience by BlueScope CIPA in 2013. The Liability Judgment summarised the circumstances as follows (at LJ 1431]):

… following the global financial crisis in 2008, demand for steel world-wide had declined and remained depressed for a number of years. The reduction in demand had led to an over-supply of steel production and distribution capacity. CIPA’s reported EBIT for FY2011 to FY2013 were losses of $1,063 million, $726 million and $45 million respectively. CIPA’s internal documents reported in 2013 that import competition was “intense” and CIPA had lowered domestic premiums to the import parity price in order to minimise market share decline. BlueScope’s flat steel distribution business also faced vigorous competition from a number of distributors in each region in which it operated and flat steel distributors had substantial excess capacity. BlueScope Distribution’s underlying EBIT for FY2011 to FY2013 were losses of $34 million, $36 million and $27 million respectively, with a forecast loss for FY2014 of $18 million. During 2013, distributors were experiencing poor profitability and there was significant price competition between distributors. CIPA received frequent complaints from distributors to the effect that their margins were being impacted by the prices being offered by other distributors and that they had to reduce margins to win business. Distributors also complained about their perception that BlueScope was selling steel to its own distributors (BSD, SMS and Impact Steel) at low prices.

71    A primary business objective for Mr Ellis when he commenced as the General Manager of Sales & Marketing at CIPA was to seek to convert export sales of flat steel products into domestic sales through increasing sales to distributors (LJ [647]). The benchmarking strategy and the overseas mill strategy were devised by Mr Ellis as part of a number of strategies to pursue that primary objective. As his title indicates, Mr Ellis was a senior manager at BlueScope. Mr Hennessy was also involved in the benchmarking strategy. He was CIPA’s Executive National Sales Manager Distribution (LJ [27]), a mid-level manager in the context of BlueScope. Mr Schulz was also involved in the overseas mill strategy. He was President of the International Markets Group (IMG) for BlueScope (LJ [205]).

72    In his role as General Manager, Sales & Marketing for CIPA, Mr Ellis reported directly to Mr Vassella, the Chief Executive Officer of BlueScope Australia and New Zealand (BANZ) (LJ [291]). Mr Ellis’s role included responsibility for:

(a)    sales of steel products in Australia;

(b)    oversight of BlueScope’s supply chain;

(c)    marketing of steel products in Australia;

(d)    innovation which encompassed improvements in the quality and standards of BlueScope’s steel products; and

(e)    trading which included the functions of CIPA’s IMG sales area.

73    In the Liability Judgment, I made the following findings with respect to Mr Vassella’s knowledge of the benchmarking strategy and the overseas mill strategy (at LJ [1550]-[1551]):

1550    I find that Mr Vassella was aware of the following elements of the benchmarking strategy: that CIPA was promoting its Distribution Market price lists as recommended resale prices; that CIPA’s aim in doing so was to bring about an increase in prices at the distribution level of the market, which would assist CIPA in both increasing its own prices and increasing sales volume to distributors; that CIPA was supporting the strategy by reducing tactical pricing support; that CIPA also wished to support the strategy by aligning NZSA’s prices in the market with CIPA’s prices; that the strategy was having some success in the market; and that CIPA proposed to raise the threat of anti-dumping actions with overseas steel mills.

1551    However, the evidence does not support the further finding that Mr Vassella was aware that, as part of the benchmarking strategy, BlueScope was attempting to induce distributors, or Wright Steel, to reach a price fixing understanding with BlueScope in relation to their prices. Nor does the evidence support a finding that Mr Vassella was aware that, as part of the overseas mill strategy, BlueScope was attempting to induce Yieh Phui to reach a price fixing understanding in relation to its prices.

74    It follows from those findings that Mr Ellis was the most senior BlueScope employee involved in the offending conduct. However, the matters disclosed by Mr Ellis to Mr Vassella, as set out in the Liability Judgment, should have alerted Mr Vassella to the risk that the strategies being implemented by Mr Ellis may have resulted in employees engaging in cartel conduct, or attempted cartel conduct, in contravention of the Act. There was no evidence that Mr Vassella took any steps to confirm or verify that the commercial strategies being implemented by Mr Ellis were compliant with the Act. This indicates that, at the relevant time, senior managers of BlueScope were not sufficiently attentive to the requirements of the Act.

75    The ACCC submitted that the potential financial gain to BlueScope from the offending conduct (had it been successful) was very large. It could be calculated as the increased margin that BlueScope would have obtained from converting export sales of flat steel products to domestic sales. The ACCC submitted that, in the financial year ending 30 June 2013, BlueScope exported 600,000 tonnes of flat steel products (LJ [582]). Of that total, 518,000 tonnes were hot rolled coil products. BlueScope had calculated that, in FY13, the weighted average domestic contribution margin on sales of hot rolled coil to distributors was approximately $389/tonne, whereas the weighted average contribution margin on export sales of hot rolled coil was approximately $118/tonne (LJ [581]). Taking that margin difference as an illustrative example, had BlueScope succeeded in converting the 518,000 tonnes of hot rolled coil it had exported in 2013 into domestic sales, it would have achieved increased profitability in the order of $140 million for each year in which it sustained the conversion. The ACCC further submitted that conversion of sales for other products, which accounted for the remaining 82,000 tonnes of BlueScope exports, would only have added to this financial benefit.

76    BlueScope submitted that the ACCC’s calculations are not supported by the findings made in the Liability Judgment, or by a proper consideration of the circumstances. BlueScope relied on the following matters:

(a)    First, BlueScope argued that it is fanciful to suggest that BlueScope could effectively stop all import competition, such that it could convert all of its exports into domestic sales.

(b)    Second, Mr Ellis pursued many initiatives to increase sales to distributors other than the benchmarking strategy (LJ [618]), including improving CIPA’s relationship with distributors (LJ [621]), restricting the provision of tactical pricing (LJ [622]), implementing an internal restructure (LJ [623]), introducing a “Last Right of Refusal” offer (LJ [624]) and simplifying CIPA’s price lists (LJ [625]). Mr Hennessy gave evidence that the benchmarking strategy was only “part” of a “larger plan” to increase BlueScope’s market share by capturing import volume (LJ [649]).

(c)    Third, the initiatives that had success in reducing imports were those most directly targeted at imports. For example, Mr Wright said that BlueScope’s “competitive activities” after September 2013 caused Wright Steel to lose volume (LJ [774]). Likewise, BlueScope’s anti-dumping actions in 2012 and 2014 caused distributors to purchase less imported flat steel from import traders, and more flat steel from BlueScope (LJ [285], [471], [479] and [590]).

(d)    Fourth, the overseas mill strategy was only one of three strategies aimed at reducing imports from overseas mills, the other two being threatening anti-dumping action and offering to buy steel that otherwise would be imported into Australia (LJ [1317]).

77    BlueScope submitted that contemporaneous records confirm that the benchmarking strategy was not expected by BlueScope to increase domestic sales revenue in a material way. BlueScope placed reliance on the BANZ Sales & Marketing Business Review dated February 2014 which did not identify any expected financial benefit from the benchmarking strategy (and identified a minimal benefit from the simplification of CIPA’s price list). The same document indicated that BlueScope was forecasting volume growth of only 79,000 tonnes in FY14 and only a further 23,000 tonnes in FY15. The document also records that BlueScope only thought that 260,000 tonnes of imports through non-aligned distributors were contestable, and only anticipated that the opportunity for new volume from non-aligned distributors in FY15 was 26,500 tonnes.

78    The assessment of the potential financial gain to BlueScope from the offending conduct necessarily involves estimation. As noted above, the attempts to induce cartel conduct were unsuccessful and it is not possible to conclude that BlueScope made any financial gain from the offending conduct. Nevertheless, there can be no doubt that BlueScope’s conduct was motivated by the potential for financial gain, and the Court ought to have regard to the overall value of the trade and commerce that could potentially have been affected by the offending conduct if it were successful. To repeat the observation of the Full Court in Cement Australia (at [467]), the higher the intended benefit from the offending conduct, the higher the penalty required to deter it.

79    Between FY10 and FY13, the volume of flat steel products supplied in Australia had reduced from 3.1 to 2.7 million tonnes, with CIPA’s share of production volume reducing from 2.3 to 1.8 million tonnes and imports increasing from 0.8 to 0.9 million tonnes (LJ [375]). In 2013, CIPA was exporting about 0.6 million tonnes of flat steel products (LJ [582]), and was earning a much lower margin on the exported product (LJ [581(d)]). CIPA’s reported EBIT for FY11 to FY13 were losses of $1,063 million, $726 million and $45 million respectively (LJ [584]). The commercial imperative for CIPA to replace imported flat steel products with its own domestic production was clear and the potential gains were very large. It can be accepted, as submitted by BlueScope, that it is unrealistic to believe that BlueScope could have replaced imported flat steel products entirely. BlueScope was, though, forecasting increased distribution volumes over FY14 and FY15 of about 100,000 tonnes, and also recognised that about 250,000 tonnes of imports acquired by non-aligned distributors were contestable. A BlueScope internal presentation from Messrs Vassella and Ellis dated 24 October 2013 and titled “CIPA Strategic Opportunity Workshop Introduction Pack” stated a strategic objective of converting approximately 370,000 tonnes of general export volume to domestic sales which would improve CIPA’s incremental contribution margin by up to $112 million per annum. As submitted by BlueScope, Mr Ellis had implemented a number of commercial initiatives in pursuit of that strategic objective. Taking the evidence as a whole, the potential financial gain to BlueScope from the offending conduct should not be measured as exceeding $100 million, but in my view it should be measured in the tens of millions of dollars. It is not possible to be more precise than that.

80    BlueScope’s actual financial performance in FY14 (the financial year in which the offending conduct occurred) demonstrates that the potential for gains in the tens of millions of dollars from the offending conduct was not fanciful. In FY14, CIPA’s EBIT was $65.4 million, an increase of $95.7 million on the prior year. A presentation given by Paul O’Malley (the Managing Director and Chief Executive Officer of BlueScope) and Charlie Elias (the Chief Financial Officer of BlueScope) on 25 August 2014 and titled “FY2014 Financial Results Presentation” stated that the increase in CIPA’s EBIT was “mainly due to higher domestic volumes, lower export volumes and increased spread” and that the spread increase was “driven by higher domestic prices and lower raw material costs (mainly coal), partly offset by net adverse FX movement”. Thus, in FY14, CIPA achieved its goals of higher domestic volumes, lower export volumes and higher domestic prices. For the reasons given above, however, it is not possible to find that those outcomes resulted from the offending conduct as opposed to other commercial strategies implemented by CIPA.

Any loss or damage suffered as a result of the offending conduct

81    Section 76(1) expressly enumerates as a mandatory consideration the extent of loss and damage suffered as a result of the acts or omissions for which a penalty is to be imposed. The significance of that consideration in the assessment of penalty is to be understood in light of the object of the Act which is to enhance the welfare of Australians through the promotion of competition (as per s 2 of the Act). Cartel conduct is prohibited by the Act because it is highly likely to harm the economic welfare of Australians. In general terms, the object of cartel conduct is to increase prices above the level that would prevail in a competitive market. When that occurs, loss and damage is typically suffered by those acquiring the relevant products (as well as causing flow on effects to the economy). As a general proposition (and all other things being equal), a higher penalty would be warranted for conduct that caused larger loss and damage.

82    The benchmarking strategy involved increasing the list prices in CIPA’s Distribution Market price lists for flat steel products and promoting those prices to distributors as “benchmark” prices. From the December 2013 price lists onwards, the list prices were revised upwards while distributors’ discounts were increased so that distributors’ net prices remained largely the same (LJ [1433]). If the attempts to induce cartel conduct had been successful, the relevant distributors would have increased their prices to the level of the CIPA price lists, thereby raising the cost of flat steel products to acquirers.

83    At the penalty hearing, the ACCC did not seek to collate and present to the Court any systematic review of the monthly increases in prices in CIPA’s Distribution Market price lists during the period of the offending conduct. Without that assistance, it is difficult to make any meaningful findings with respect to the increase in prices for flat steel products reflected in CIPA’s price lists. Nevertheless, the evidence adduced at trial showed that:

(a)    in the December 2013 CIPA price list for sheet and coil products, the prices were increased between $20 and $90 per tonne (being a percentage increase ranging from 2% to 8%) depending on the product (LJ [868], [964] and [968]);

(b)    in the March 2014 CIPA price list for sheet and coil products, the prices were increased by a further 1% to 3% depending on the product (LJ [1167]); and

(c)    in the April 2014 CIPA price list for sheet and coil products, the prices were further increased by amounts up to $50 per tonne (being percentage increases up to 4%) depending on the product (LJ [1203]).

84    The May and June 2014 CIPA price lists for sheet and coil products had no price increases (LJ [1227] and [1240]).

85    The factual findings made at trial suggest that some distributors attempted to increase their prices in line with CIPA’s list prices, but the evidence does not enable any assessment of the extent to which that occurred. The evidence was that, from October 2013, BlueScope began observing that some distributors were setting their prices using CIPA’s price lists as a benchmark or base level in accordance with the benchmarking strategy (LJ [1005], [1066]-[1067], [1129]-[1130], [1451]). There was also evidence that Southern Steel (and its related entities) had increased its margins to follow the list prices (LJ [1131]-[1132]; [1133]-[1134]; [1140]-[1141]). BlueScope was also told that OneSteel and Vulcan Steel were adopting the list prices (LJ [1189]; [1225]-[1226]). The evidence also indicated that BlueScope Distribution was attempting to set its prices in accordance with CIPA’s price lists (LJ [1217]-[1224]; [1235]).

86    Overall, the evidence before the Court does not enable any findings to be made about the extent of any actual loss or damage suffered as a result of the offending conduct.

87    Although no findings can be made about actual loss and damage, it is relevant to consider the potential for loss and damage to have eventuated if the attempts to induce cartel conduct were successful. The potential for loss and damage is a relevant aspect of the nature and extent of the conduct for which the penalty is to be imposed and the circumstances in which the conduct occurred. The BANZ Sales and Marketing Business Review dated February 2014 discloses that the largest volume products sold by BlueScope were hot rolled coil (approximately 450,000 tonnes pa), galvanised (approximately 400,000 tonnes pa) and painted Zincalume (approximately 380,000 tonnes pa). The CIPA price list increases in December 2013 were between $20 and $90 per tonne, and further list prices increases were made in March 2014 and April 2014. If and to the extent that distributors were able successfully to implement the CIPA price lists as their base or floor prices, it is apparent that very substantial cost increases could have been faced by acquirers of flat steel products. As BlueScope submitted, even if distributors had agreed to use CIPA’s price lists as their base or floor prices, they would have continued to face competition from imported flat steel products, and it cannot be assumed that market prices would have been sustained at increased levels. Nevertheless, the value of commerce that had the potential to be affected by the offending conduct was very substantial.

BlueScope’s size and financial position

88    In relation to the size and financial position of BlueScope, for a long time it has been accepted that the quantum of penalty required to achieve the object of deterrence will be larger where the Court is setting a penalty for a company with vast resources: see for example Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265; 215 ALR 301 at [39] per Goldberg J. To the same effect, the majority in Pattinson observed (at [60]) that, all other things being equal, a greater financial incentive will be necessary to persuade a well-resourced contravenor to abide by the law (rather than to adhere to its preferred policy) than will be necessary to persuade a poorly resourced contravenor that its unlawful policy preference is not sustainable.

89    BlueScope was and remains a very large, profitable and well-resourced company. It is and was at the relevant time the only Australian-based manufacturer of hot rolled coil, cold rolled coil, plate and metallic coated steel and is Australia’s largest producer of painted steel products (LJ [374]). In FY13, BlueScope supplied 1.8 million tonnes of flat steel products in Australia, which was approximately two-thirds of all such products supplied (LJ [375]). BlueScope’s current market capitalisation is in excess of $9.5 billion. In FY14, BlueScope’s total revenue was approximately $8 billion and its underlying EBIT was about $250 million. In that financial year, BlueScope reported a net loss of $82 million, reflecting the challenging trading conditions for steel suppliers (LJ [580]-[590]), although BlueScope also advised that the underlying result was a net profit of $112 million. Since that time, BlueScope’s revenues and profits have substantially increased. In FY22, its revenues were $19 billion and its net profit was $2.8 billion.

90    As submitted by BlueScope, the offending conduct occurred in only part of BlueScope’s overall business, principally focussed on CIPA’s Distribution Markets sales area and the IMG (International Markets Group) sales area. CIPA’s total sales revenue in FY14 was $3.6 billion, comprising approximately 45% of BlueScope’s total sales revenue in that financial year. CIPA’s total sales revenue in the Distribution Markets segment (including but not limited to flat steel products) in FY14 was $817 million, comprising approximately 10% of BlueScope’s total sales revenue in that financial year.

Corporate culture conducive to compliance with the Act

91    Darren Mackenzie is the General Counsel of the Australian Steel Products division of BlueScope and gave evidence concerning the measures BlueScope had in place during the period of the offending conduct to promote a culture of, and achieve compliance with, the Act, and the measures and enhancements BlueScope has made to its competition law compliance framework since it became aware of the ACCC’s investigation into conduct that led to this proceeding.

92    During the period of the offending conduct, BlueScope had what appear to be appropriate directives to its staff to comply with all relevant laws including competition laws, and appropriate training to educate staff about the requirements of competition law. In relation to the prohibition of cartel conduct, the training material identified that customers may also be competitors and included specific warnings about inducing a reseller not to discount its prices. The training materials included the following pertinent warning (emphasis in original):

Supplier may issue a genuine recommended retail price list (ie, there must be no obligation to comply with recommended prices)

93    In a section of BlueScope’s Competition and Consumer Law Guidelines titled “Rules of the Road”, the following warnings were given (emphasis in original):

Rule five: Avoid discussing pricing, terms of sale and other commercially sensitive information with competitors. When dealing with competitors who are not customers, we must never discuss pricing or other terms of supply. We should also strictly avoid any discussions with competitors about bids or tenders, customers, markets supplied, production or supply levels, or other commercially sensitive information.

If a competitor is a customer, discussions should be confined solely to the products that BlueScope Steel is supplying or proposing to supply to that customer and the terms of that supply.

Rule six: Resellers of BlueScope products are free to set their own resale prices

Always let resellers determine their own resale prices, never attempt to prevent a reseller from selling or advertising BlueScope's products below a minimum resale price. Never withhold supply or other benefits from a supplier, or threaten to do so, because a reseller has been discounting BlueScope's products.

…

Rule nine: Always be on the lookout for possible breaches of the competition and consumer laws

Never ignore a possible breach. If you suspect a breach has taken place or become aware of a competitor engaging in anti-competitive conduct against BlueScope Steel, immediately bring the matter to the attention of your BlueScope Steel legal counsel.

94    In 2013, BlueScope also had in place processes for employees to report suspected business misconduct (ie, whistleblower processes). In addition to the option of reporting issues to a manager or supervisor, employees were able to contact the Business Conduct Reporting Hotline, via email, post, website or phone, which was managed by an independent third party.

95    Experience shows that corporate compliance programs sometimes fail to prevent unlawful conduct occurring. In some cases, that will be caused by a wilful disregard of the law and corporate compliance directives, while in other cases it will be caused by a degree of ignorance with respect to the operation of the law and sometimes a degree of wilful ignorance. The cause in the present case is not entirely clear, although Mr Ellis’s behaviour when organising the Melbourne Airport meeting reveals an awareness that the meeting may contravene the competition law (see LJ [728]). There were other warnings to Mr Ellis and Mr Hennessy. In an email on 15 October 2013, Mr Simpkin asked to meet separately with Mr Ellis, rather than in a joint meeting with Southern Steel, and told Messrs Hennessy and Ellis that he had received legal advice that attending a joint meeting raised “anti-competition implications” (LJ [1061]). It also appears that Mr Ellis had received legal advice at least about the overseas mill strategy, but the content of that advice was not adduced in evidence at trial or at the penalty hearing (LJ [1343]-[1345], [1404(h)]).

96    As stated earlier, the matters disclosed by Mr Ellis to Mr Vassella about the benchmarking strategy and the overseas mill strategy should also have alerted Mr Vassella to the risk that the strategies being implemented by Mr Ellis may have resulted in employees engaging in cartel conduct, or attempted cartel conduct, in contravention of the Act. However, there was no evidence that any steps were taken by BlueScope to confirm or verify that the commercial strategies being implemented by Mr Ellis were compliant with the Act.

97    As often happens within a corporation, subordinates are unwilling to challenge directives given by their reporting manager even though the directive may involve unlawful or potentially unlawful conduct. Mr Hennessy gave evidence that he went along with the Melbourne Airport meeting because Mr Ellis was his boss. Mr Hennessy also gave evidence that, when creating records of meetings he attended with distributors in relation to the benchmarking strategy, he deliberately omitted reference to the pricing discussions because he considered that the discussions were potentially illegal. It is apparent that, despite his concerns, Mr Hennessy never sought to raise those concerns through BlueScope’s whistleblowing processes. Mr Schulz gave evidence that he conducted competition law training at BlueScope and that he was aware that it was a criminal offence under Australian law to be involved in cartel conduct, including in trying to set prices with competitors. However, Mr Schulz said that he formed the impression that Mr Ellis was an aggressive, authoritarian figure within BlueScope and Mr Schulz became wary of Mr Ellis, believing that Mr Ellis could potentially cause “repercussions” to Mr Schulz’s career within BlueScope if Mr Schulz did not carry out Mr Ellis’s instructions. Mr Schulz believed that he had to agree with Mr Ellis and carry out Mr Ellis’s instructions. Mr Schulz gave evidence that, when creating a record of the meeting with Yieh Phui (part of the offending conduct), he omitted reference to the pricing discussion because he “knew it was improper to talk with competitors about price” and he wanted to leave that aspect to Mr Ellis to decide how much, if anything, to report to senior management (LJ [1410]). Like Mr Hennessy, Mr Schulz never sought to raise concerns through BlueScope’s whistleblowing processes.

98    As described in the Liability Judgment, the influence that Mr Ellis held over Mr Hennessy and Mr Schulz continued during the time that the ACCC was conducting its investigations into the offending conduct between April 2016 and March 2017. Mr Ellis urged each of Mr Hennessy and Mr Schulz to give information to the ACCC that was false or misleading, knowing that the information was false or misleading (LJ [296]). Each of Mr Hennessy and Mr Schulz acquiesced with Mr Ellis’s requests for a period of time including, in the case of Mr Schulz, giving false information to the ACCC (see LJ [301]-[328]).

99    Mr Mackenzie deposed that, as a result of the ACCC’s investigation of the offending conduct, in or around March 2017 he was asked to develop and implement appropriate measures to enhance and strengthen BANZ’s competition law compliance program, taking into account the conduct that was the subject of the ACCC investigation. Those measures included:

(a)    changes to organisational structures including roles, responsibilities and reporting lines (including that the head of IMG no longer reported to the General Manager of Sales and Marketing but reported to the CFO of BANZ);

(b)    separation of CIPA’s manufacturing and distribution sales teams;

(c)    implementation of specific competition law guidelines and protocols on cartel conduct and engaging with other industry participants for BlueScope’s Australian Steel Product employees;

(d)    information barriers and protocols, together with associated system changes, to support the foregoing changes;

(e)    enhanced and expanded competition and consumer law compliance training program for BlueScope’s Australian Steel Products division;

(f)    launch of a dedicated Competition and Consumer Law Intranet for BANZ, and subsequently, for the Australian Steel Products division;

(g)    increased dedicated and specialist in-house advisory capabilities on competition and consumer law matters and embedding in-house lawyers into business processes;

(h)    reinforcing and enhancing BlueScope’s whistleblowing processes and hotline to report potential misconduct or breaches of laws, including competition laws; and

(i)    an audit to assess the effectiveness of BlueScope’s enhanced compliance controls.

100    Mr Mackenzie deposed that, following the implementation of the enhanced measures referred to in the previous paragraph, he has observed that there has been an increase in the number of proactive requests for competition law advice from employees to both himself and the BANZ and Australian Steel Products division legal teams.

101    Mr Mackenzie’s evidence satisfies me that BlueScope has made strenuous efforts to implement stronger compliance practices and procedures to prevent the recurrence of the offending conduct or any similar conduct in the future.

Prior contraventions

102    It is common ground that BlueScope has not previously been the subject of any proceedings in which it has been alleged, or found liable for, a contravention or an attempted contravention of the cartel conduct prohibitions or any other competition provision of the Act.

BlueScope’s cooperation with the ACCC and contrition

103    The ACCC submitted that at no time has BlueScope demonstrated meaningful cooperation with the ACCC or any contrition for the offending conduct. The ACCC relied on the facts that BlueScope contested liability at trial and put certain matters in issue, particularly the definition of markets and the identification of competitors, where the contention lacked substance (LJ [19]).

104    BlueScope submitted that it provided meaningful cooperation during the ACCC investigation stage. In that regard, BlueScope relied on the evidence of Peter Armitage, a partner of Ashurst, and Liana Witt, a partner of Gilbert + Tobin. Mr Armitage gave evidence that it was BlueScope who informed the ACCC of the conversations that took place between Mr Ellis and Mr Hennessy in relation to the ACCC’s investigation. Ms Witt gave evidence that, at the request of the ACCC, BlueScope took steps that facilitated voluntary interviews between the ACCC and multiple BlueScope employees and agents, including voluntary interviews with Mr Inomata, Mr Lee and Mr Lakhotia, who were located overseas. BlueScope also voluntarily produced documents and information at the request of the ACCC on at least 15 occasions, which comprised at least 3,000 documents.

105    With respect to contrition, at the penalty hearing BlueScope expressed regret for the offending conduct and apologised for it. BlueScope stated that it considers the conduct to be unacceptable and is determined to ensure that it never happens again. BlueScope also relied on the evidence of Debra Counsell who is the Chief Legal Officer at BlueScope. Ms Counsell gave the following evidence:

(a)    On behalf of BlueScope, Ms Counsell deposed that BlueScope deeply regrets the offending conduct and apologises for it. She deposed that the offending conduct is not the type of conduct that BlueScope endorses or approves, and BlueScope wants to ensure that it does not recur.

(b)    As a result of the ACCC’s investigation, BlueScope scrutinised its competition law training and strengthened its governance processes with the assistance of external lawyers.

(c)    Regardless of the legality of the offending conduct, BlueScope does not endorse or approve of it. When the ACCC commenced the proceeding in August 2019, BlueScope issued an ASX announcement which contained the following statements:

BlueScope Chairman John Bevan said, “These are serious allegations and the Board is treating them very seriously. Since becoming aware of the ACCC’s investigation, we have constructively engaged with the ACCC and conducted our own internal investigation. While we have not seen all of the evidence that has been relied on by the ACCC, based on what we know today, we do not believe that BlueScope, or any current or former employees, have engaged in cartel conduct.”

BlueScope’s Managing Director and Chief Executive Officer, Mark Vassella said, “The alleged conduct does not represent the BlueScope way, or the values that we work hard to instil in our team. We take matters of competition law compliance and corporate governance extremely seriously.”

106    Cooperation with the ACCC that leads to the narrowing or resolution of proceedings has long been regarded as a relevant factor in the assessment of penalty, and can properly reduce the penalty that would otherwise be imposed. However, cooperation is typically recognised where there has been an admission of liability which avoids long and expensive litigation: see for example Trade Practices Commission v Carlton & United Breweries Ltd (1990) 24 FCR 532 at 542 per Northrop J; TNT Australia at 40,169; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (NW Frozen Foods) at 291 per Burchett and Kiefel JJ. While cooperation with the ACCC in the course of an investigation is to be encouraged and, for that reason, may be given some recognition in the assessment of a penalty (see for example NW Frozen Foods at 289), it will not carry significant weight where the allegations have been fully contested at trial.

107    Conversely, the fact that a respondent defends proceedings is not an aggravating factor and will not result in any additional penalty beyond what would otherwise be the case: Australian Competition and Consumer Commission v IPM Operation & Maintenance Loy Yang Pty Ltd (No 2) [2007] FCA 11 at [61]-[65] (Young J). As observed by Burchett J in TNT Australia (at 40,170):

The contravener who fights the case to the bitter end will obtain no discount, but the penalty imposed will be the proper penalty, and no more.

108    In the present case, BlueScope fought the allegations to the bitter end. I found that aspects of the defences raised, concerning the markets in which it supplied flat steel products and the identification of its competitors, lacked substance. No additional penalty is to be imposed on that account. It can also be accepted, as BlueScope submitted, that there was significant dispute about the events that occurred which were ultimately resolved at trial.

109    Having regard to BlueScope’s overall response to the ACCC’s investigation and decision to contest the allegations, I do not consider that any material discount should be afforded to BlueScope on the basis of cooperation.

110    As to contrition, I regard the statement of regret and apology offered by BlueScope as sincere. The statement is supported by the actions taken by BlueScope since the ACCC’s investigation to strengthen its compliance processes to avoid any repetition of the offending conduct. I accept that BlueScope is committed to avoiding any further contravention of competition law, and that factors into the assessment of an appropriate penalty.

Conclusion on appropriate penalties    

111    BlueScope did not submit that the offending conduct, or any part of it, should be characterised as a single course of conduct for the assessment of an appropriate penalty. Despite that, I cannot ignore the fact that the offending conduct involving the Australian suppliers (the import trader, Wright Steel, and the seven distributors) was undertaken as part of the benchmarking strategy. Whether or not the offending conduct involving the Australian suppliers is properly characterised as a single course of conduct, the totality principle requires the Court to ensure that the penalties to be imposed on BlueScope, considered as a whole, are just and appropriate and that the total penalty for related offences does not exceed what is proper for the entire contravening conduct in question. I have taken those considerations into account in determining the total penalties to be imposed.

112    Weighing all of the considerations referred to above, I consider that the offending conduct requires a substantial penalty. In the circumstances of this case, only a substantial penalty for each of the attempts to induce cartel conduct will serve the objectives of specific and general deterrence. That is due to the facts that: the conduct is of a serious kind (an attempt to induce cartel conduct); it was carried out at a senior level of the company; it had the potential to occasion significant loss and damage to acquirers of flat steel products and associated economic harm to Australia; it had the potential to deliver substantial financial gain to BlueScope; and BlueScope is a very large and profitable company. Nevertheless, I also take into account that: BlueScope has made substantial efforts to strengthen its compliance processes; and BlueScope has not previously been found to have contravened the cartel conduct prohibitions or any other competition provision of the Act.

113    In imposing penalties for each of the attempts, recognition must be given to the different nature and extent of the offending conduct which I have discussed earlier. Taking those matters into account, I consider that the following penalties for each of the attempts is appropriate:

(a)    in respect of the attempt involving Selwood Steel, $2.5 million;

(b)    in respect of the attempt involving Wright Steel, $4 million;

(c)    in respect of the attempt involving Yieh Phui, $6 million; and

(d)    in respect of each of the attempts involving CMC Steel, OneSteel, Vulcan Steel, Southern Steel, Selection Steel and Apex Steel, $7.5 million,

being an aggregate penalty of $57.5 million.

Pecuniary penalty and other relief sought against Mr Ellis

Overview

114    As referred to earlier, the ACCC seeks the following relief against Mr Ellis:

(a)    that Mr Ellis pay an aggregate pecuniary penalty between $600,000 and $800,000;

(b)    that Mr Ellis be disqualified from managing corporations for a period of 7 years (the disqualification order); and

(c)    that Mr Ellis be prevented from making any claim in respect of, seeking to rely upon, or accepting any indemnity under, any applicable insurance policy for payment or reimbursement of any part of the pecuniary penalty imposed by the Court (the non-indemnification order).

115    In my view, it is appropriate to consider the ACCC’s application for a disqualification order against Mr Ellis before considering the application for the imposition of a pecuniary penalty. That is because the imposition of a disqualification order is a relevant factor in determining an appropriate penalty to be imposed. In Australian Securities and Investments Commission v Wooldridge [2019] FCAFC 172, the Full Court approved the principle that the imposition of a disqualification order on a person under s 206C of the Corporations Act 2001 (Cth) (Corporations Act) is relevant to the assessment of any additional penalty to be imposed and, for that reason, the Court should assess the question of disqualification prior to pecuniary penalties (at [56]-[58]). The Full Court approved the following statement of Santow J in Australian Securities and Investments Commission v Adler (No 5) [2002] NSWSC 483; (2002) 42 ACSR 80 at [126]:

… in assessing a pecuniary penalty it is important to consider the consequences of an associated disqualification order for the defendant. If the making of such an order has significant consequences they may operate as a factor in favour of a lesser penalty. Where the disqualification order does not have significant consequences for the defendant, the prohibition order is likely only to be marginally relevant.

116    I consider that this is the correct approach notwithstanding that a disqualification order under s 86E is not a penalty (see s 86E(3B)). Such an order would nevertheless be a significant adverse imposition on Mr Ellis, and may diminish his future earnings. Even extra-curial detriment arising from the offending conduct is relevant to the assessment of penalty (see ABCC v CFMEU at [104]).

Disqualification order

117    The ACCC seeks the disqualification order against Mr Ellis under s 86E(1) of the Act or, in the alternative, under s 80.

118    Section 86E(1) provides as follows:

On application by the Commission, the Court may make an order disqualifying a person from managing corporations for a period that the Court considers appropriate if:

(a)     the Court is satisfied that the person has contravened, has attempted to contravene or has been involved in a contravention of Part IV; and

(b)     the Court is satisfied that the disqualification is justified.

119    Thus, the Court is empowered to make a disqualification order if it is satisfied that the person has contravened, has attempted to contravene or has been involved in a contravention of Pt IV. The latter phrase is defined in s 75B to refer to a person who:

(a)    has aided, abetted, counselled or procured the contravention;

(b)    has induced, whether by threats or promises or otherwise, the contravention;

(c)    has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d)    has conspired with others to effect the contravention.

120    In this proceeding, the ACCC did not allege, and the Court has not found, that Mr Ellis engaged in any of the conduct referred to in s 86E(1). The Court found that Mr Ellis attempted to induce a contravention of Pt IV. That conduct is not referred to in s 86E(1).

121    The ACCC contended that, while the terms of s 86E(1) do not expressly refer to an attempt to induce a contravention of Pt IV of the Act, the section should be construed as including that conduct. The ACCC advanced that contention on two bases. First, it submitted that a beneficial construction ought to be given to the provision in light of its protective purpose (relying upon Australian Competition and Consumer Commission v Renegade Gas Pty Ltd (trading as SupagasNSW) [2014] FCA 1135 at [92]-[94] per Gordon J; New South Wales Aboriginal Land Council v Minister Administering the Crown Land Act (2016) 260 CLR 232 at [32] per French CJ, Kiefel, Bell and Keane JJ and [92] per Gageler J). Second it submitted that, having regard to the purpose of s 86E, there is no apparent reason why the legislature would have excluded an attempt to induce a contravention of Pt IV of the Act from its ambit and the Court should conclude that the omission of that conduct was due to inadvertence, relying on Mills v Meeking (1990) 169 CLR 214 (Mills v Meeking) at 235 per Dawson J.

122    I reject the ACCC’s contention. To read s 86E as extending to an attempt to induce a contravention of Pt IV of the Act would be an exercise of judicial amendment of the provision, not statutory construction. It is well established that, while statutory construction begins with a consideration of the text itself, the meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision and the mischief it is seeking to remedy: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27 at [4] per French CJ, at [47] per Hayne, Heydon, Crennan and Kiefel JJ; SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362 at [14] per Kiefel CJ, Nettle and Gordon JJ; [36]-[37] per Gageler J. Further, s 15AA of the Acts Interpretation Act 1901 (Cth) requires the Court to prefer an interpretation of a statutory provision that would best achieve the purpose or object of the Act (whether or not the purpose or object is expressly stated in the Act). However, those principles do not permit the Court to rewrite the statutory text. As explained by Dawson J in Mills v Meeking at 235 (emphasis added):

The approach required by s. 35 [of the Interpretation of Legislation Act 1984 (Vic)] needs no ambiguity or inconsistency; it allows a court to consider the purposes of an Act in determining whether there is more than one possible construction. Reference to the purposes may reveal that the draftsman has inadvertently overlooked something which he would have dealt with had his attention been drawn to it and if it is possible as a matter of construction to repair the defect, then this must be done. However, if the literal meaning of a provision is to be modified by reference to the purposes of the Act, the modification must be precisely identifiable as that which is necessary to effectuate those purposes and it must be consistent with the wording otherwise adopted by the draftsman. Section 35 requires a court to construe an Act, not to rewrite it, in the light of its purposes.

123    In the same case, Mason CJ and Toohey J observed (at 223):

If the language of a statute is ambiguous or uncertain, a risk of injustice will bear upon the construction to be given to words used. But, if the language is not ambiguous or uncertain, a court will apply its ordinary and grammatical meaning unless to do so will give the statute an operation which obviously was not intended …

124    Section 86E is clear in its terms and no ambiguity arises. Contrary to the ACCC’s submission, it is not open to the Court to infer that the omission of conduct constituting an attempt to induce a contravention of Pt IV of the Act from s 86E was due to inadvertence. An examination of the provisions of Pt VI of the Act, which empower the Court to impose remedies for contraventions of the Act and other accessorial and ancillary conduct, reveals that the provisions are not uniform in the range of conduct to which they apply. Each of s 76 (pecuniary penalties) and s 80 (injunctions) expressly apply to conduct constituting an attempt to induce a contravention of Pt IV of the Act. However, most other remedial powers do not apply to that conduct. As has already been seen, s 75B relevantly defines the phrase “involved in a contravention of Part IV”. It includes a range of accessorial and ancillary conduct, but does not include an attempt to induce a contravention of Pt IV of the Act. That defined phrase is then used in ss 81 (divestiture), 82 (damages), 86E (disqualification) and 87 (other compensatory and remedial orders). Under s 86C, non-punitive orders may only be imposed on a person who has engaged in contravening conduct. Conversely, under s 86D, an adverse publicity order (which is described as a punitive order) may be imposed on a person who has been ordered to pay a pecuniary penalty under s 76. Thus, the exclusion of conduct constituting an attempt to induce a contravention of Pt IV of the Act from s 86E must be regarded as a deliberate legislative choice. The Court cannot infer that the omission is a “defect” able to be repaired by the Court.

125    The ACCC submitted that an alternative source of power for the Court to impose a disqualification order against Mr Ellis is s 80(1) of the Act, which empowers the Court to grant an injunction against a person who has attempted to induce a contravention of Pt IV. Section 80(1) relevantly provides as follows:

(1)    Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:

(a)     a contravention of a provision of:

(i)     Part IV; or

(ii)     Division 2 or 5 of Part IVB; or

  (b)     attempting to contravene such a provision; or

(c)     aiding, abetting, counselling or procuring a person to contravene such a provision; or

(d)     inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; or

(e)     being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or

(f)     conspiring with others to contravene such a provision;

the Court may grant an injunction in such terms as the Court determines to be appropriate.

126    In support of that submission, the ACCC relied on the reasoning of the Full Court in Foster v Australian Competition and Consumer Commission (2006) 149 FCR 135 (Foster). At first instance, Mr Foster had been found guilty of conduct in contravention of Pt V of the Act arising from his involvement in a business which had promoted weight loss products. The trial judge had granted an injunction restraining Mr Foster, for five years, from being directly or indirectly knowingly concerned in the promotion or conduct by a corporation of any business relating to weight loss, cosmetic or health industry products or services of any kind. On appeal to the Full Court, Mr Foster challenged the scope of the injunction, arguing that its terms went beyond the power conferred on the Court by s 80 of the Act as the injunction prohibited him from engaging in what would otherwise have been lawful activity. The Full Court dismissed the appeal, stating (at [35]):

If the Court considers that a complete prohibition, whether permanently or for a specified period, on a respondent’s engaging in a particular field of commercial activity or industry is required to protect the public from conduct of the kind which constituted the contravention, s 80 is wide enough to support such a prohibition as a matter of power.

127    The ACCC submitted that a disqualification order against Mr Ellis is appropriate in the circumstances of this case having regard to the following matters: the attempts to induce contraventions were of a serious nature; Mr Ellis’s conduct in relation to the trial, in which he was found to be a dishonest witness (LJ [599]), and during the ACCC’s investigation, in which he attempted to conceal evidence (LJ [309]), suggest that Mr Ellis has no contrition in relation to the contravening conduct; and Mr Ellis has offered no evidence of hardship consequential upon a disqualification order being made. The ACCC submitted that the risk of recidivism attached to Mr Ellis’s lack of contrition thus outweighs any hardship that might be suffered by Mr Ellis as a consequence of a disqualification order in the terms sought.

128    Relying on the canon of statutory construction encapsulated in the maxim expressum facit cessare tacitum, Mr Ellis contended that the Court is not empowered to make a disqualification order under s 80(1) of the Act. This is because the power to make a disqualification order is expressly provided for in s 86E, and is subject to the limitation contained in that provision (relevantly, that the order cannot be made against a person who has attempted to induce a contravention of Pt IV).

129    In support of that contention, Mr Ellis placed reliance on the decision of the Full Court in Medibank Private Ltd v Cassidy (2002) 124 FCR 40. In that case, the chief executive officer of the ACCC (Mr Cassidy) commenced a proceeding against Medibank Private Ltd alleging that it had engaged in misleading or deceptive conduct in contravention of s 12DA(1) of the Australian Securities and Investments Commission Act 1989 (Cth) (ASIC Act). An order was sought under s 12GD of the ASIC Act (equivalent to s 80 of the Act) directing Medibank to compensate persons who had been misled by Medibank's misrepresentations. However, s 12GM of the ASIC Act (equivalent to s 87 of the Act) empowered the ACCC to seek compensation on behalf of persons affected by misleading conduct, but only if the application identified those persons and they had given their consent in writing to the application being made. The Full Court concluded that, construing the legislative scheme as a whole, it was clear that the legislature had not intended that the power conferred by s 12GD of the Act was able to be exercised in a manner that avoided the express limitations on the exercise of the power conferred by s 12GM. In so concluding, the Full Court observed (at [32]):

When a statute confers both a general power, not subject to limitations and qualifications, and a special power, subject to limitations and qualifications, the general power cannot be exercised to do that which is the subject of the special power: see Leon Fink Holdings Pty Ltd v Australian Film Commission at 678.

130    In my view, making a disqualification order against Mr Ellis in the form sought by the ACCC (that Mr Ellis be disqualified from managing corporations for a period of 7 years) is not an appropriate exercise of the power conferred by s 80(1) of the Act. In reaching that conclusion, however, I do not place any reliance on the maxim expressum facit cessare tacitum. As observed by the High Court in Balog v Independent Commission Against Corruption (1990) 169 CLR 625 at 632, the maxim, whilst a valuable servant, is apt to be a dangerous master. The application of the maxim in construing s 80(1) of the Act faces two difficulties. First, the scope of s 80(1) was broadened to its present form in 1983 by the Statute Law (Miscellaneous Provisions) Act (No 1) 1983 (Cth), whereas s 86E was inserted into the Act some 23 years later by the Trade Practices Legislation Amendment Act (No 1) 2006 (Cth). It is not apparent that Parliament intended to alter the meaning and effect of s 80(1) by introducing s 86E. Second, the maxim has application where a statutory power is subject to procedural or other limitations such that it is possible to discern a legislative intention that the statute confers only one power to take the relevant action: see R v Wallis; Ex parte Employers Association of Wool Selling Brokers (1949) 78 CLR 529 at 550 per Dixon J; Minister for Immigration and Multicultural Affairs v Nystrom (2006) 228 CLR 566 at [59] per Gummow and Hayne JJ. Section 86E is not subject to any procedural or other limitations save that, unlike s 80(1), the power may not be exercised in respect of conduct constituting an attempt to induce a contravention. That difference between the scope of ss 80(1) and 86E provides a weak foundation for the maxim.

131    Rather, my conclusion rests upon well-established principles concerning the purpose and scope of s 80(1) of the Act and which guide the exercise of the power. It can be accepted that the power conferred by s 80(1) is broad and, since its amendment in 1983, is not limited to restraining conduct that would otherwise be a breach of the Act: see ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248 (ICI) and Foster. It is not, though, unlimited – it is confined by reference to the scope and purposes of the Act: OD Transport Pty Ltd v WA Government Railways Commission (1987) 13 FCR 500 at 508 per French J (as his Honour then was). In ICI, Lockhart J described the power as giving the Court capacity to formulate the appropriate remedy to suit the needs of the case (at 258), while Gummow J said that the terms of an injunction would not be appropriate if the conduct enjoined does not have the relationship required by s 80 with a contravention of the Act (at 267). In Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197, Merkel J said (at 202):

The width of the power conferred by s 80 and its public interest character obviously give the court great amplitude in determining appropriate injunctive orders in a particular case. However, there are limitations on the Court's power under the section. Confinement of the power by reference to the scope and purpose of the TPA, and in particular s 80, is one limitation on the power. However, there are at least two further limitations. The power to make orders under s 80 is only enlivened in a proceeding which alleges that there has been a contravention of a provision of Pt IV, IVA or V of the TPA. As was said by Gummow J ICI at FCR 267, the terms of an injunction granted under s 80 must, on their face, operate upon a range of conduct which has "the relationship required by s 80 with contravention of the Act". Irrespective of whether the injunction is sought or granted under s 80(1) or s 80(1AA), there must be a nexus between the conduct alleged or found to constitute the relevant contraventions and the injunctions granted.

132    In Foster, the Full Court concluded that an injunction restraining Mr Foster from being involved in the promotion or conduct of any business relating to weight loss, cosmetic or health industry products or services was within the scope of the power. However, the injunction was confined to a particular field of commercial activity in which Mr Foster had engaged in contravening conduct. The Full Court considered that there was a “demonstrable nexus between the proven contravention of the Act and the terms of the injunction granted” (at [38]).

133    In contrast to Foster, the ACCC seeks an order that Mr Ellis be disqualified from managing corporations for a period of 7 years. The proposed order is not confined to the steel industry in which the offending conduct occurred, and has no real connection with the offending conduct other than the fact the conduct occurred whilst Mr Ellis was a manager at BlueScope. I consider that the proposed order extends beyond the range of conduct for which an injunction under s 80(1) may be granted, in that there is an insufficient nexus between the offending conduct and the conduct which is to be restrained.

134    Accordingly, I will not make the disqualification order sought by the ACCC.

Pecuniary penalty

135    Mr Ellis is subject to the imposition of a pecuniary penalty under s 76(1)(d) for the offending conduct in the same manner as BlueScope. Many of the factors relevant to the assessment of the penalty to be imposed on BlueScope are equally applicable to the assessment of the penalty to be imposed on Mr Ellis and will not be repeated. The following considerations are specific to the imposition of a penalty on an individual (as opposed to a corporation) and Mr Ellis’s personal circumstances.

Maximum penalty

136    Under s 76(1B), the maximum penalty that may be imposed on an individual for each act or omission to which s 76 applies is $500,000. Thus, the maximum penalty for each of the attempts is $500,000. The aggregate maximum penalty is therefore $4.5 million.

Mr Ellis’s role in the offending conduct

137    Mr Ellis had a central role in the offending conduct. Each of the alleged attempts was the outworking of the benchmarking strategy or, in the case of Yieh Phui, the overseas mill strategy, devised by Mr Ellis and implemented under his direction (LJ [1423]). While other employees of BlueScope were involved in the offending conduct, each acted in accordance with directions given (directly or indirectly) by Mr Ellis. Further, Mr Ellis was directly and personally involved in most of the key meetings with the counterparties, including:

(a)    the Melbourne Airport meeting on 6 September 2013 (LJ [701]);

(b)    the meetings with CMC Steel, Vulcan Steel and OneSteel at the Australian Steel Institute Conference on 9 and 10 September 2013 (LJ [736]), [739], [742]);

(c)    the meeting with Mr Wright on 12 September 2013 (LJ [804]);

(d)    the meeting with Selection Steel on 13 September 2013 (LJ [838]);

(e)    the meeting with OneSteel on 13 September 2013 (LJ [854]);

(f)    the meeting with CMC Steel in mid-September 2013 (LJ [894]);

(g)    the meeting with CMC Steel on 22 October 2013 (LJ [1065]);

(h)    the meeting with Selwood Steel on 30 October 2013 ([1127]); and

(i)    the meeting with Yieh Phui on 26 February 2014 (LJ [1359]).

138    It follows that Mr Ellis bears full responsibility for the offending conduct.

Mr Ellis’s cooperation and contrition

139    On the matters of cooperation and contrition, there is nothing that can be said in Mr Ellis’s favour and no discount to penalty should be given.

140    Following the commencement of the ACCC’s investigation of the offending conduct, Mr Ellis urged each of Mr Hennessy and Mr Schulz to give information to the ACCC that was false or misleading, knowing that the information was false or misleading (LJ [296]). On 8 December 2019, Mr Ellis was charged with two counts of inciting the obstruction of a Commonwealth official pursuant to ss 11.4(1) and 149(1) of the Commonwealth Criminal Code arising out of the discussions he had had with Messrs Hennessy and Schulz in relation to the ACCC investigation. On 1 September 2020, Mr Ellis pleaded guilty to a single “rolled-up” charge of inciting the obstruction of a Commonwealth official (LJ [297]). Mr Ellis submitted, and I accept, that he should not be punished twice for that conduct. However, the conduct is relevant to the assessment of cooperation and contrition.

141    The fact that Mr Ellis contested the ACCC’s allegations at trial is not an aggravating factor and will not result in any additional penalty beyond what would otherwise be the case. Similarly, while an absence of evidence as to contrition would mean that Mr Ellis would receive no discount to penalty, this would not aggravate the penalty: Director of the Fair Work Building Industry Inspectorate v Stephenson (2014) 146 ALD 75 at [87] per White J.

Mr Ellis’s financial position

142    Mr Ellis submitted that he has limited financial means and that this should be taken into account in the assessment of penalty. In support of that submission, Mr Ellis relied on the principles that:

(a)    a penalty must not be so high as to be oppressive or crushing (referring to Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd [1978] ATPR 40-091 at 17,896 per Smithers J; NW Frozen Foods at 293 per Burchett and Kiefel JJ; and Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [215] per Middleton J); and

(b)    a lesser penalty will be imposed on a corporation or individual with a reduced capacity to pay (referring to Schneider Electric (Australia) Pty Ltd v ACCC (2003) 127 FCR 170 at [13] per Sackville J and at [58] per Merkel J, with Black CJ agreeing; Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247; ATPR 42-091 (High Adventure) at [14] per Heerey, Finkelstein and Allsop JJ; and Australian Securities and Investments Commission v Kobelt [2017] FCA 387 at [108] per White J).

143    I accept that the respondent’s financial means is a factor that should be taken into consideration in the assessment of an appropriate penalty. That is a long-standing principle. Recently, the High Court majority in Pattinson observed (at [60]) that, all other things being equal, a greater financial incentive will be necessary to persuade a well-resourced contravenor to abide by the law than will be necessary to persuade a poorly resourced contravenor that its unlawful policy preference is not sustainable. However, the majority in Pattinson also made clear that both the circumstances of the contravenor and the circumstances of the contravention may be relevant to the assessment of the level of penalty required to achieve deterrence (at [56]-[57]). In that respect, Mr Ellis overstates the effect of the authorities referred to by him. A penalty is not oppressive merely because it is beyond the respondent’s financial means to pay; a penalty is oppressive when it is greater than is necessary to achieve the object of deterrence: NW Frozen Foods at 293. The authorities recognise that the objective of general deterrence may require the imposition of a penalty that is beyond the respondent’s financial means and which may cause insolvency: see High Adventure at [11]; Australian Competition and Consumer Commission v Cryosite Ltd [2019] FCA 116; 135 ACSR 231 at [78] per Beach J. As the Full Court observed in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513 (at [19] and [20]), there will be situations where, notwithstanding that a company is in liquidation, it is appropriate, for one or a range of factors, to impose a penalty; for example, a court may impose a penalty on a company in liquidation if, to do so, would clearly and unambiguously signify to companies or traders in a discrete industry that a penalty of a particular magnitude was appropriate if others in the industry sector engaged in the same or similar conduct.

144    Mr Ellis filed an affidavit setting out his financial position in each financial year since the financial year ending 30 June 2020, in accordance with orders of the Court that had been sought by the ACCC and Mr Ellis and made by consent. Mr Ellis was cross-examined. I make the following findings with respect to that evidence.

145    In the financial year ending 30 June 2020, the sole source of Mr Ellis’s income was a distribution of $90,000 from the Curl Curl Trust, a discretionary trust of which Mr Ellis was a beneficiary until 18 November 2021. Mr Ellis explained that the Curl Curl Trust was amended on 18 November 2021 to remove Mr Ellis as a beneficiary, or a member of any eligible class of beneficiaries, because the National Australia Bank informed the Curl Curl Trust that it would not agree to a refinance a loan if Mr Ellis continued to have any connection to the Curl Curl Trust. This was due to Mr Ellis’s criminal conviction on 15 December 2020 on two counts of inciting the obstruction of a Commonwealth official. The trustee of the Curl Curl Trust is Sophon Investments Pty Ltd. Mr Ellis was previously the sole director and shareholder of that company. Mr Ellis subsequently transferred the shares in the company to his wife, Sophie Ellis, and was also replaced as a director by his wife. Mr Ellis’s wife continues to hold the shares in the company, but the company’s director is now Mr Ellis’s brother-in-law. Mr Ellis confirmed that he and his wife discussed with his brother-in-law what distributions are to be made from the Curl Curl Trust.

146    In the financial year ending 30 June 2021, the source of Mr Ellis’s income was as an employee of Stoddart Group Pty Limited, a metal roofing installer. Mr Ellis was employed by Stoddart from 1 July 2020 to 4 February 2021. During that financial year, Mr Ellis did not receive any distribution of ordinary income from the Curl Curl Trust or from any other source.

147    In the financial year ending 30 June 2022, Mr Ellis provided consulting services to various steel mills and steel trading businesses outside of Australia and metals-based businesses in Australia through a company called J T Ellis Consulting Pty Ltd (JTEC). Mr Ellis established JTEC with his wife and was a director until the end of 2020 when he resigned as director. His wife continues as the sole director. Mr Ellis does not have a written contract with the company and the amounts paid to him are determined through a conversation with his wife. As at the date of giving evidence, Mr Ellis had received periodic payments from JTEC totalling $10,000 in respect of the financial year ending 30 June 2022, but had not received a final declaration of income and was not able to estimate the amount that will be paid to him by way of a final declaration of income.

148    In respect of the financial year ending 30 June 2023, Mr Ellis expected that income from JTEC would be his sole source of income. As at the date of giving evidence, Mr Ellis had received periodic payments from JTEC totalling $7,500.

149    Mr Ellis deposed that he does not hold a beneficial interest in any shares and does not own any real estate or personal property valued over $10,000. In cross-examination, Mr Ellis gave evidence that the Curl Curl Trust owns 25% of the units in a unit trust which is developing industrial land in Newcastle. Mr Ellis confirmed that he continues to manage that investment on behalf of the Curl Curl Trust, notwithstanding that he is no longer a beneficiary of the Trust and he is no longer a director of the trustee company, Sophon Investments Pty Ltd. Mr Ellis said in cross-examination that he did not know the value of that investment. Mr Ellis said that the Curl Curl Trust also has around $600,000 in cash and a $400,000 liability.

150    Mr Ellis’s affidavit set out the monthly balances of his bank accounts between July 2020 and January 2023. The closing balance as at 23 February 2023 was $129.45. However, the monthly balances show three substantial deposits: an amount of approximately $646,000 in November 2020, an amount of approximately $138,000 in December 2020 and an amount of approximately $69,000 in December 2021. In cross-examination, Mr Ellis said that the source of those funds was a loan from the Curl Curl Trust. The amounts paid into the bank accounts in November and December 2020 were subsequently withdrawn, and Mr Ellis said that the funds were used to repay loans to his parents. The amount paid into the bank accounts in December 2021 were also subsequently withdrawn, but Mr Ellis did not recall the purpose for which the funds were expended.

151    Mr Ellis’s affidavit also set out the value of his loans in excess of $10,000 in each of the financial years since 30 June 2020. As at 30 June 2021, Mr Ellis had a loan of $650,000 from the Curl Curl Trust and a loan of $175,319 from JTEC. In cross-examination, Mr Ellis confirmed that the loan from the Curl Curl Trust was subsequently forgiven. That decision was made by Mr Ellis and his wife (notwithstanding that Mr Ellis’s brother-in-law was the director of the trustee company). The loan from JTEC was reduced to $81,880 as at 30 June 2022 by way of offsetting the value of Mr Ellis’s work for JTEC.

152    The evidence that was adduced does not present a clear picture of Mr Ellis’s overall financial means. It is clear that Mr Ellis owns virtually no assets and has no financial resources in his own name. It is also clear that that circumstance is not the result of any financial disaster suffered by Mr Ellis, but is the result of his own financial planning choices. His immediate family owns one or more investments through the Curl Curl Trust, and Mr Ellis appears to be the decision-maker in respect of at least one of those investments. The value of that investment was not the subject of evidence given to the Court. Further, there is no clear information about his current earnings and his future earning potential.

153    Mr Ellis has had a long career in the steel industry, working in Australia and in many Asian countries, commencing with BHP in 1993 (LJ [287]). It can be inferred that he earned reasonable remuneration throughout that period. The ACCC and Mr Ellis tendered a statement of agreed facts concerning Mr Ellis’s earnings at BlueScope during the period of the offending conduct. The agreed facts were as follows:

1.         Mr Ellis’ remuneration package for the position of General Manager Sales and Marketing BlueScope ANZ, BlueScope Steel Limited with effect from 1 September 2013 comprised the following:

a.     total fixed pay of $490,200 comprising base pay of $430,000 and superannuation or pension contributions of $60,200;

b.     short term incentive plan (target award) of $172,000 subject to the financial performance of BlueScope Steel Limited and the terms and conditions of his employment contract; and

c.     long term incentive plan subject to the share price of BlueScope Steel Limited and the terms and conditions of his employment contract.

2.         On 1 September 2014, Mr Ellis was awarded a payment of $199,864 under the short term incentive plan, which was to be paid on 24 September 2014.

154    Thus, Mr Ellis earned approximately $600,000 in the year that he commenced as General Manager of Sales and Marketing at BlueScope CIPA, also being the period of the offending conduct. Mr Ellis remained employed in that position at BlueScope until March 2017. From April 2017 until August 2017, Mr Ellis was the VP Innovation and Product Development for CIPA (LJ [290]). From October 2017 until the time of giving evidence at trial (in about September 2021), Mr Ellis was the Deputy Chairman of EmPower Steel Co. Ltd.

155    The foregoing evidence confirms the inference that I readily draw that Mr Ellis currently owns no assets by reason of his own financial planning choices, and that such wealth that he has gained over the years is held by other members of his family. Having regard to those matters, I place limited weight on the fact that Mr Ellis owns no assets in the assessment of penalty. Given Mr Ellis’s financial circumstances, it can be accepted that any penalty imposed by the Court may not be paid. That is so whether the penalty is within the range of $100,000 to $125,000 as put forward by Mr Ellis, or the range of $600,000 to $800,000 as put forward by the ACCC. The penalty will only be paid if others, no doubt at Mr Ellis’s request, choose to make funds available for that purpose. In those circumstances, I consider that in the assessment of an appropriate penalty the Court should give greater weight to the objective of general deterrence.

Conclusion on appropriate penalty

156    As already noted, many of the factors relevant to the assessment of the penalty to be imposed on BlueScope are equally applicable to the assessment of the penalty to be imposed on Mr Ellis. Mr Ellis had a central role in the offending conduct. I consider that BlueScope has shown greater contrition in comparison to Mr Ellis.

157    Plainly, the financial capacity of BlueScope to pay a penalty vastly exceeds the capacity of Mr Ellis. The maximum penalty that may be imposed on Mr Ellis is one twentieth of the maximum penalty that may be imposed on BlueScope, but that statutory ratio does not reflect the circumstances of the present case which involve a very large corporation. Further, the totality principle has particular application in the case of penalties to be imposed on an individual. I am concerned to ensure that the total of the penalties to be imposed on Mr Ellis is just and appropriate for the entirety of the offending conduct.

158    Taking into account the matters considered above and particularly the totality principle, I consider it appropriate to impose penalties on Mr Ellis that are 1% of the penalties imposed on BlueScope. I consider that the following penalties for each of the attempts is appropriate:

(a)    in respect of the attempt involving Selwood Steel, $25,000;

(b)    in respect of the attempt involving Wright Steel, $40,000;

(c)    in respect of the attempt involving Yieh Phui, $60,000; and

(d)    in respect of each of the attempts involving CMC Steel, OneSteel, Vulcan Steel, Southern Steel, Selection Steel and Apex Steel, $75,000,

being an aggregate penalty of $575,000.

Non-indemnification order

159    The ACCC also seeks a non-indemnification order, being an order that Mr Ellis be prevented from making any claim in respect of, seeking to rely upon, or accepting any indemnity under, any applicable insurance policy for payment or reimbursement of any part of the pecuniary penalty imposed by the Court.

160    It is uncontroversial that, on 18 October 2019, Mr Ellis’s solicitors wrote to Chubb Insurance Australia Limited (Chubb) to notify it of Mr Ellis’s claim for indemnity under a Directors and Officers Liability Policy issued by ACE Insurance Limited to BlueScope Steel Limited for the period 30 June 2015 to 30 June 2016 (D&O Policy). The letter stated:

In the event any penalty is awarded against Mr Ellis, our client foreshadows that he will seek indemnity under the write back provided by extension clause 3.12 of the policy.

161    Clause 3.12 of the D&O Policy states:

3.12 Pecuniary Penalties

The Insurer will pay to or on behalf of Insured Persons any amount the Insured Person is legally obligated to pay as a fine or penalty, to the extent permitted by law.

162    The ACCC contends that s 76(1) includes the power to make a personal payment or non-indemnification order, relying on the decision of the High Court majority in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 (ABCC). The ACCC submitted that, given Mr Ellis’s central, ongoing and relentless role in the attempts to induce the price fixing understandings, his conduct during the investigation and trial, and his absence of contrition, a non-indemnification order is necessary to ensure that he feels a “real sting or burden” of any penalty ordered and that the penalty achieves the required deterrent effect.

163    Mr Ellis submitted that the majority judgment in ABCC, which concerned s 546(1) of the FW Act, provides no authority for the proposition that the Court has an implied power in s 76(1) to make an order preventing Mr Ellis from accepting any indemnity. First, in ABCC, the Court was concerned with an indemnity a respondent had obtained from another respondent, and not an indemnity under a policy of insurance with an arm’s length third party insurer. Second, there was no provision in the FW Act that expressly regulated indemnities. In contrast, the Act addresses the question of indemnities with respect to the imposition of pecuniary penalties under s 76. Section 77A provides that a body corporate must not indemnify a person in respect of, relevantly, a pecuniary penalty incurred as an officer of the body corporate. Mr Ellis submitted that s 77A does not apply to contracts of insurance with an arm’s length insurer. Mr Ellis also noted that the Act does not contain a provision that is equivalent to s 199B of the Corporations Act which prohibits a body corporate from paying a premium for a contract insuring an officer of the company against certain liabilities (specifically, a liability arising out of conduct involving a wilful breach of duty in relation to the company or a contravention of ss 182 or 183 of the Corporations Act).

164    I accept the ACCC’s contention and reject Mr Ellis’s submissions to the contrary. In my view, the reasoning of the High Court majority in ABCC is applicable to s 76(1) of the Act, and the inclusion of s 77A in the Act does not affect the High Court majority’s reasoning.

165    In ABCC, the High Court concluded that s 546(1) of the FW Act carried with it an implied power to make an order that a contravenor (in that case, Mr Myles) pay a pecuniary penalty order personally and not seek or accept indemnity from a co-contravener (the CFMEU). Section 546(1) of the FW Act was framed in similar terms to s 76(1) of the Act and stipulated, relevantly, that the Federal Court:

… may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.

166    The majority’s conclusion was based on the principle of construction that a grant of power carries with it everything necessary for its exercise: that includes the power to make orders which are reasonably required or legally necessary to the accomplishment of what is specifically provided to be done by the statute (at [40] per Kiefel CJ and at [115] and [118] per Keane, Nettle and Gordon JJ). With respect to the power to order a person to pay a pecuniary penalty under s 546(1), Keane, Nettle and Gordon JJ observed (at [116], citations omitted):

116    As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty’s general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d’être of its imposition.

167    In my view, the foregoing reasoning is directly applicable to s 76(1) of the Act, given that the language and purpose of the provision is relevantly identical to s 546(1) of the FW Act.

168    Contrary to the submissions advanced by Mr Ellis, the reasoning of the High Court majority was not confined to the circumstance that one co-offender may pay the penalty imposed on another co-offender. Justices Keane, Nettle and Gordon made clear that the possibility of an indemnity being given by one co-offender to another is only one of the circumstances to which a “personal payment” order under s 546(1) might be directed. Their Honours said (at [119] and [120], citations omitted):

119    … s 546 also imports implied power to achieve the effect which a pecuniary penalty is calculated to achieve by ordering that a contravener pay the penalty personally; or where, as here, joint contraveners are ordered to pay pecuniary penalties in respect of certain contraventions – each according to his, her or its relative share of responsibility for the contravention – implied power to achieve the relative degrees of sting or burden determined by the judge by ordering that neither contravener seek or accept indemnity or contribution from the other. The implied power to make a personal payment order is closely analogous to the court’s power to order a contemnor to pay a fine personally, and an order that joint contraveners not indemnify each other in respect of the penalties imposed on each of them is essentially similar.

120    Given that s 546 expressly empowers the court to order a specific person to pay a pecuniary penalty, it is no stretch to accept that there is power in s 546 to make orders designed to ensure that the person against whom the order is made cannot avoid the incidence of the penalty. It is to take too narrow a view of the purpose of s 546 to regard the provision as being concerned with no more than that an amount of money be paid by someone in discharge of a debt created by order of the court. Section 546 is not about the creation and collection of debts; it is about penalising a contravention of the law. It is to take too narrow a view of the extent of the power conferred by s 546 to deny that it extends to the making of orders designed to ensure that a particular person cannot defeat the purpose of an order that the person pay the penalty imposed on him or her.

169    Again, the foregoing reasoning is directly applicable to s 76(1) of the Act.

170    As recognised by the High Court majority, a personal payment order may create problems of enforcement, including vexed questions of identifying the source of funds used for payment (at [47] per Kiefel CJ and at [131] per Keane, Nettle and Gordon JJ). The majority considered, however, that concerns about enforcement cannot be determinative. No doubt, in framing a personal payment or non-indemnification order, the Court will take account of any such difficulties that might be presented on the facts before the Court.

171    Also contrary to the submissions advanced by Mr Ellis, the inclusion of s 77A in the Act does not affect the reasoning of the High Court majority. Section 77A provided as follows:

77A     Indemnification of officers

(1)     A body corporate (the first body), or a body corporate related to the first body, must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer of the first body:

(a)     a civil liability;

(b)     legal costs incurred in defending or resisting proceedings in which the person is found to have such a liability.

Penalty: 25 penalty units.

(2)     For the purposes of subsection (1), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings.

Definitions

(3)     In this section:

civil liability means a liability to pay a pecuniary penalty under section 76 for a contravention of a provision of Part IV.

officer has the same meaning as in the Corporations Act 2001.

172    In ABCC, Mr Myles placed reliance on s 77A of the Act, and the similar provision in s 199A of the Corporations Act, to argue that the express inclusion of such provisions, restricting the circumstances in which indemnities may be given for pecuniary penalties, suggests that the power to impose a pecuniary penalty in s 546(1) of the FW Act does not include an implied power to similar effect. The High Court majority rejected that argument, observing that the express prohibitions (in s 77A of the Act and s 199A of the Corporations Act) reflect a policy which the legislature has determined should be applied universally. Chief Justice Kiefel concluded that those provisions do not negative an implied power to make orders that “render a pecuniary penalty order effective” (at [46]). Keane, Nettle and Gordon JJ concluded (at [128]) that those provisions:

… contribute nothing to the task of construing the power to make appropriate orders under s 545(1), which are dependent upon the particular circumstances of each case. A fortiori, they contribute nothing to the task of determining the scope of the power implicit in s 546 to accomplish the specific remedy imposed by a pecuniary penalty order according to the circumstances of each case.

173    Once again, that reasoning is equally applicable to s 76(1) of the Act. Section 77A applies to all cases falling within the ambit of that section (a body corporate giving an indemnity to an officer in respect of a liability to pay a pecuniary penalty under s 76 for a contravention of a provision of Pt IV) regardless of the circumstances. The section does not, by implication, limit or reduce the power given to the Court by s 76(1) to order a person to pay a pecuniary penalty and to make such other orders as are considered necessary for the effective imposition of the pecuniary penalty.

174    For those reasons, I consider that the Court has power under s 76(1) to make an order preventing Mr Ellis from making a claim or accepting indemnity under any directors and officers insurance policy to which BlueScope or Mr Ellis is a party or an insured for payment or reimbursement of any part of the pecuniary penalty to be imposed on Mr Ellis.

175    I also consider that it is appropriate that such an order be made in this case. If Mr Ellis were to claim and obtain indemnity for the pecuniary penalty under the D&O Policy, the pecuniary penalty would be entirely devoid of sting or burden. As observed by the majority in ABCC, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the reason for its imposition. For the reasons given above, the conduct in the present case warrants a significant penalty to deter repetition by Mr Ellis and by others who may otherwise calculate that the rewards from such conduct outweigh the risks of detection. It is important that the deterrent effect of the penalty being imposed is not undermined by the ability of company directors and officers to insure against the financial cost of the penalty.

Conclusion

176    In conclusion, the orders to be made are as follows.

177    First, declarations of contravention largely in the form sought by the ACCC will be made.

178    Second, the following penalties for each of the attempts will be imposed on BlueScope:

(a)    in respect of the attempt involving Selwood Steel, $2.5 million;

(b)    in respect of the attempt involving Wright Steel, $4 million;

(c)    in respect of the attempt involving Yieh Phui, $6 million; and

(d)    in respect of each of the attempts involving CMC Steel, OneSteel, Vulcan Steel, Southern Steel, Selection Steel and Apex Steel, $7.5 million,

being an aggregate penalty of $57.5 million.

179    Third, the following penalties for each of the attempts will be imposed on Mr Ellis:

(a)    in respect of the attempt involving Selwood Steel, $25,000;

(b)    in respect of the attempt involving Wright Steel, $40,000;

(c)    in respect of the attempt involving Yieh Phui, $60,000; and

(d)    in respect of each of the attempts involving CMC Steel, OneSteel, Vulcan Steel, Southern Steel, Selection Steel and Apex Steel, $75,000,

being an aggregate penalty of $575,000.

180    Fourth, a non-indemnification order will be made that Mr Ellis is not to pursue any claim or accept any indemnity under any directors and officers insurance policy to which BlueScope or Mr Ellis is a party or an insured for payment or reimbursement of any part of the pecuniary penalty imposed on him.

181    Finally, an order will be made for BlueScope and Mr Ellis to pay the ACCC’s costs of, and incidental to, this proceeding.

Associate:

Dated:    29 August 2023