Case Notes, Trade practices

No news is not always good news: Full Court finds that ACCC’s lack of response to letter seeking settlement is not a reason to reduce penalty

The Full Court (Rares, Jessup and Flick JJ) has marginally increased a penalty imposed by Marshall J on a hire car company (which operated in Tasmania under the banner Europcar) and one of its directors.

The case was brought by the ACCC against the company and its director for allegedly misleading or deceptive conduct in relation to fees charged (or not refunded) for damaged vehicles.  By the time of the trial, the parties were agreed that the impugned conduct was misleading and only penalty and costs were in issue.

The prescribed maximum penalties for the relevant conduct were $1.1 million for a company and $220,000 for an individual.  On appeal, it was uncontroversial that there were two relevant courses of conduct and so the maximum penalties were $2.2 million and $440,000 respectively.  (At trial, it was contended by the Commission that there were five courses of conduct but counsel for the Commission conceded that “it is of no great significance whether the Court considers there are two or five courses of conduct when one has regard to the totality principle.”)

The Full Court accepted that in imposing penalties of $200,000 and $40,000, the primary judge erred by taking into account the ACCC’s failure to respond to a February 2011 letter from the respondents which articulated a defence to the allegations against it (which at that stage were in the form of a letter from the Commission), set out a course of proposed corrective action and sought to engage in a discussion with a view to settlement.   The respondents in fact heard nothing further from the Commission until the proceeding was issued in November 2011.

The Full Court said: “ the circumstances of the present case, we accept the Commission’s submission that it was not open to the primary judge to reduce the penalty that would otherwise be appropriate because the Commission did not, before commencing its proceeding, engage in a sufficiently conscientious conversation with the respondents in an attempt to head off proposed litigation.”

Other than the misapplication of this discount, however, the Full Court considered that Marshall J’s penalties were “of an appropriate order”.  It increased them by 10% to $220,000 and $44,000.

The Full Court considered, nevertheless, that the ACCC’s failure to respond to the February 2011 letter merited an adverse costs order.  It therefore ordered that the “costs of the proceeding at first instance to which the Commission would otherwise be entitled as the successful party should be reduced by 15%.”

The Full Court’s decision can be found here and the first instance decision is here.

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