FEDERAL COURT OF AUSTRALIA Commonwealth of Australia v King [2019] FCA 787 File number: NSD 687 of 2018 Judge: PERRAM J Date of judgment: 30 May 2019 Catchwords: EDUCATION – penalties – where multiple contraventions of ss 117, 125 and 129 of National Vocational Education and Training Regulator Act 2011 (Cth) – where respondent provided, or offered to provide, vocational education and training ('VET') courses, and purported to issue VET statements of attainment without registration – where respondent admitted contraventions and cooperated in production of statement of agreed facts – where agreed submission on appropriate range of penalties – consideration of relevant penalty principles Legislation: Crimes Act 1914 (Cth) s 4F National Vocational Education and Training Regulator Act 2011 (Cth) ss 3, 5, 117, 125, 129, 137, 141 Vocational Education and Training (Commonwealth Powers) Act 2011 (Tas) s 5 Cases cited: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 Commonwealth v Jones [2018] FCA 1008 Commonwealth v Reid [2018] FCA 579 Commonwealth v Restar [2016] FCA 657 Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1 Markarian v The Queen [2005] HCA 25; 228 CLR 357 Date of hearing: 13 December 2018 Date of last submissions: 13 December 2018 Registry: New South Wales Division: General Division National Practice Area: Administrative and Constitutional Law and Human Rights Category: Catchwords Number of paragraphs: 24 Counsel for the Applicant: Mr P Melican Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr J Kitto Solicitor for the Respondent: James C Kitto Barrister & Solicitor ORDERS NSD 687 of 2018 BETWEEN: THE COMMONWEALTH OF AUSTRALIA Applicant AND: LEON VERE KING Respondent JUDGE: PERRAM J DATE OF ORDER: 30 MAY 2019 THE COURT ORDERS THAT: 1. The Commonwealth provide a short minute of order giving effect to these reasons within 21 days. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT PERRAM J: Introduction 1 The applicant, the Commonwealth, has sued the respondent, Mr King, for the imposition of a civil penalty under the National Vocational Education and Training Regulator Act 2011 (Cth) ('the Act'). Prior to the trial of the matter the parties reached an accommodation. They have agreed that a civil penalty of between $95,025 and $137,813 should be imposed upon Mr King and that certain declarations about his contravening conduct should be made. They also agree that Mr King should pay the Commonwealth's costs of the proceedings which they agree should be fixed at $75,000. For the reasons which follow, I will impose a civil penalty of $125,000 and make the other orders which are agreed. Background and contraventions 2 The Act regulates the provision of vocational education and training ('VET'). It does so by means, inter alia, of a registration scheme for registered training organisations ('RTOs') and an accreditation scheme for VET courses. By s 117(1), a person must not provide all or any part of a 'VET course' unless the person is registered as an 'NVR registered training organisation'. A civil penalty of 600 penalty units is prescribed for a contravention of this provision. Although it is not material to any issue in this case, it is to be noted that s 117(1) is subject to a jurisdictional limitation which means it only applies in States which have referred their legislative power to the Commonwealth to pass the Act under s 51(xxxvii) of the Constitution. The events in this case all took place in Tasmania which is a referring State: see s 5 of the Act and s 5(1) of the Vocational Education and Training (Commonwealth Powers) Act 2011 (Tas). 3 Returning to s 117, its full text is as follows: 117 Civil penalty—providing, or offering to provide, all or part of a VET course without registration (1) A person contravenes this subsection if: (a) the person provides, or offers to provide, all or part of a VET course in a referring State or a Territory; and (b) the person is not an NVR registered training organisation. Civil penalty: 600 penalty units. (2) A person contravenes this subsection if: (a) the person is a registered provider (other than a secondary school); and (b) the person provides, or offers to provide, all or part of a VET course in a non‑referring State; and (c) the person is not an NVR registered training organisation. Civil penalty: 600 penalty units. (Note omitted) 4 The expressions 'NVR registered training organisation' and 'VET course' are defined in s 3 in these terms: 3 Definitions ... NVR registered training organisation means a training organisation that is registered by the National VET Regulator as a registered training organisation under this Act. ... VET course means: (a) the units of competency of a training package that is endorsed by the Ministerial Council; or (b) the modules of a VET accredited course; or (c) the modules of a course accredited by a VET Regulator of a non‑referring State. 5 Some of these expressions are themselves the subject of further definitions in s 3 but it is not necessary to drill down any further. This is because the parties agree: (a) that Mr King was not an 'NVR registered training organisation'; and (b) that the two courses Mr King taught parts of were VET courses. During the relevant period, Mr King was the sole director and shareholder of Crown Consulting & Auditing Pty Ltd, which was itself the trustee of The King Family Trust trading as Crown Consulting and Auditing (ABN 19 348 951 647). Neither of those entities was an 'NVR registered training organisation'. The conduct in this case was all engaged in either by Mr King himself or through those entities. 6 The first course was a first aid training course. Mr King taught part of this course to approximately 10 staff of Incat Tasmania Pty Ltd ('Incat') on 20 January 2014 at premises in Launceston, Tasmania. The precise unit taught was 'HLTFA311A – apply first aid'. The second course was a traffic management course. Mr King taught part of this course to approximately 11 clients of an employment placement firm, Max Solutions Pty Ltd trading as Max Employment, on 8 September 2016 from premises in Launceston. He taught two units of the course, being 'RIIWHS302D – implement traffic management plan' and 'RIIWHS205D – control traffic with stop-slow bat'. 7 In both cases, his actions in doing so constituted contraventions of s 117(1). 8 Mr King also issued persons who attended various of his courses with certificates of attainment. These purported to be, but were not, VET statements of attainment. He did this on 31 occasions arising out of training provided on six occasions between May 2014 and 8 September 2016. All 31 certificates of attainment were in evidence. I will set one of them out so that the contraventions can be more fully understood. For privacy reasons, I have omitted the name of the person to whom the certificate was issued. I have also omitted the artwork. Whilst the certificates all differed to an extent, they did not do so to a material degree. CCA Pty Ltd – Training Certificate of Attainment This certificate is awarded to. [NAME OF RECIPIENT REDACTED]. For attendance & participation in: CONFINE SMALL WORKPLACE EMERGENCIES – PUAWER008B. – FIRE EXTINGUISHER & FIRE BLANKET. Date: 14th May 2014. Location of training: LAUNCESTON. TASMANIA. Signed: Date: (Artwork omitted.) 9 Each certificate also had in its bottom right corner the Nationally Recognised Training logo: 10 The certificates therefore had these features: they each purported to be a 'statement of attainment' (or some similar expression); they each contained descriptions and/or codes which were identical to or closely resembled VET units of competency; they each bore the National Recognised Training logo; they each had a provider number for a genuine RTO; they each appeared to be issued by a genuine organisation; and they each bore the name and/or signature of a purported authorised signatory. 11 However, the certificates of attainment were not genuine. The RTOs referred to on each of the statements could not have validly issued the statements because, variously, the units of competency were not within the scope of the registration of the RTOs to which they referred; the units of competency referred to had not even been an actual unit of competency for more than 12 months (or at all); or the registration of the RTO had been cancelled. I accept in those circumstances that the 31 certificates of attainment were not genuine. 12 Perhaps unsurprisingly, to issue non-genuine certificates of attainment involves more than one contravention of the Act. Two provisions are involved. The first is contained in s 125 which provides: 125 Civil penalty—making false or misleading representation relating to VET course or VET qualification A person contravenes this section if: (a) the person makes a representation that relates to: (i) all or part of a VET course; or (ii) a course that is held out as being a VET course; or (iii) part of a course that is held out as being part of a VET course; or (iv) a VET qualification; or (v) a qualification that is held out as being a VET qualification; and (b) the representation is false or misleading in a material particular. Civil penalty: 120 penalty units. 13 I am satisfied that this provision was contravened 31 times by the issue of the certificates. The same conduct also constituted a contravention of s 129 which is in these terms: 129 Civil penalty—purporting to issue VET statement of attainment A person contravenes this section if: (a) the person purports to issue a statement as a VET statement of attainment; and (b) the statement is not a VET statement of attainment. Civil penalty: 600 penalty units. 14 I am therefore satisfied that Mr King contravened the Act 33 times over a period of more than 2.5 years. It will be noted that the penalty for a breach of s 129 is much more severe than a breach of s 125 (600 penalty units as against 120 penalty units). Other relevant circumstances 15 There are some other circumstances which are also relevant to the imposition and determination of penalties. First, there is no doubt Mr King was motivated by financial gain in engaging in the impugned conduct. For each of the courses he conducted he issued invoices some of which were paid. So for example, in relation to the 11 persons from Incat, Mr King issued an invoice for $616 which was partly paid by Incat and partly by the persons who received the training. Mr King also issued an invoice for $2,035 to Max Employment for training. Invoices in the amounts of $940.50, $1,177, $1,350, $165, $550 and $203.50 were issued for various of Mr King's training activities. Some but not all of these were paid. Mr King has, it should also be noted, withdrawn some of the invoices and refunded some of the money. Secondly, by his actions Mr King has denied the persons and entities to whom he purported to provide training with the benefits of actual accreditation. In some cases, this has caused the persons concerned to have to undertake the training again in order to obtain proper accreditation. Thirdly, by his actions Mr King has undermined the creditability of the VET training system. Fourthly, Mr King has co-operated with the regulator by being interviewed by it, filing a response to the Commonwealth's concise statement in this Court, and co-operating with the regulator, the Australian Skills Quality Agency, in the settling of this proceeding including by way of agreeing to a statement of facts. An expensive hearing has been avoided. Finally, Mr King has not previously been found to have contravened the Act. The Appropriate Penalty 16 The imposition of a civil penalty for a contravention of the Act is governed by s 137 which provides as follows: 137 Federal Court or Federal Magistrates Court may impose pecuniary penalty Application for order (1) Within 6 years of a person (the wrongdoer) contravening a civil penalty provision, the National VET Regulator may apply on behalf of the Commonwealth to the Federal Court or the Federal Magistrates Court for an order that the wrongdoer pay the Commonwealth a pecuniary penalty. Court may order wrongdoer to pay pecuniary penalty (2) If the Federal Court or the Federal Magistrates Court is satisfied that the wrongdoer has contravened the civil penalty provision, the court may order the wrongdoer to pay to the Commonwealth for each contravention the pecuniary penalty that the court determines is appropriate (but not more than the amount specified for the provision). Determining amount of pecuniary penalty (3) In determining the pecuniary penalty, the Federal Court or the Federal Magistrates Court must have regard to all relevant matters, including: (a) the nature and extent of the contravention; and (b) the nature and extent of any loss or damage suffered as a result of the contravention; and (c) the circumstances in which the contravention took place; and (d) whether the person has previously been found to have engaged in any similar conduct by the court in proceedings under this Act. Civil evidence and procedure rules apply (4) The Federal Court or the Federal Magistrates Court must apply the rules of evidence and procedure for civil matters when hearing and determining an application for an order under this section. Note: The standard of proof in civil proceedings is the balance of probabilities, see section 140 of the Evidence Act 1995. Conduct contravening 2 or more provisions (5) If conduct contravenes 2 or more civil penalty provisions, proceedings may be instituted under this Act against a person for the contravention of any one or more of those provisions. However, the person is not liable to more than one pecuniary penalty for the same conduct. 17 The conduct giving rise to the contraventions of ss 125 and 129 is the same conduct. By reason, therefore, of s 137(5), Mr King cannot be liable for a civil penalty under both provisions. The Commonwealth accepted this and pursued only a penalty under s 129 alongside its case under s 117. The maximum penalty for a contravention of ss 117 and 129 is 600 penalty units. The value of the penalty unit is fixed by s 4F(1) of the Crimes Act 1914 (Cth) and increases from time to time. It is established that the value of the penalty unit under s 4F(1) is to be determined by reference to the form that s 4F took at the time of the relevant contravention. In this case, the conduct extended across a period ranging from 28 December 2012 through to 1 July 2017. At the start of that period the penalty unit was worth $170. On 31 July 2015 its value was increased to $180. It follows that the maximum penalty for a contravention of both provisions was $102,000 between 28 December 2012 and 30 July 2015 and $108,000 from 31 July 2015 onwards. One contravention of s 117 and 26 contraventions of s 129 occurred before 31 July 2015, and one contravention of s 117 and five contraventions of s 129 occurred after that date. This means that the theoretical maximum penalty is $3,402,000. It is relevant to have regard to the maximum penalty for it serves as a yardstick: Markarian v The Queen [2005] HCA 25; 228 CLR 357 ('Markarian') at 372 [31] per Gleeson CJ, Gummow, Hayne and Callinan JJ. This Court has found that the same considerations apply in the context of civil penalties: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 ('Reckitt') at 63 [154]-[155] per Jagot, Yates and Bromwich JJ. 18 In assessing the quantum of the penalty it is necessary to recall that the purpose for which it is to be imposed is to secure deterrence so as to promote the public interest in compliance: Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 at 506 [55], 507 [59] and 523-524 [110] per Keane J. As the reasons of Keane J show, the penalty must be pitched at such a level that it is not 'regarded by the offender or others as an acceptable cost of doing business.' The primacy of deterrence has been emphasised in determining penalties under the Act: see, e.g., Commonwealth v Jones [2018] FCA 1008 ('Jones') at [41]-[44]; Commonwealth v Restar [2016] FCA 657 at [37]-[42]; Commonwealth v Reid [2018] FCA 579 at [26]. 19 I accept that what has happened in this case has the potential to undermine public confidence in the vocational training sector. It is necessary to deter not only Mr King from engaging in the conduct again—that is, specific deterrence—but also to deter other persons who might be tempted to conduct unauthorised courses or to issue fake certificates of attainment (i.e., general deterrence). In that regard, it is to be observed that the conduct in question not only frays public confidence in the legitimacy of VET courses but also in the certificates of attainment. The former strikes at the users of the system which include not only those seeking vocational training but also employers seeking to provide their employees with vocational training. The latter has a wider effect and brings into disrepute the overall certification system. One group of people likely to lose confidence in the sector will be employers who may become sceptical of the worth of certificates of attainment. Another relevant matter is that the VET sector is so large that there is a substantial risk that contraventions of the Act—such as Mr King's—may go undetected. This is especially so when the financial benefits of contravening are potentially significant but the risk of detection is low. It is important therefore that these state of affairs be balanced by condign penalties. 20 Turning then to particular matters relevant to penalty, the Court is obliged to take into account 'all relevant matters' which includes the four mandatory matters set out in s 137(3): that is to say, the nature and extent of the contraventions, the nature and extent of any loss and damage suffered as a result of the contraventions, the circumstances in which the contraventions took place, and whether Mr King has previously contravened the Act. I have dealt with each of those matters above. I also take into account his co-operation referred to above at [15]. 21 There is considerable overlap between some of the contraventions. The Commonwealth and Mr King suggested that the 33 contraventions could be separated into eight separate groups each of which would constitute a course of conduct. The course of conduct approach is a tool of analysis designed to ensure that the person upon whom the penalty is imposed is not subjected to double punishment to the extent that there are overlapping contraventions: see Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1 ('Cahill') at 12-13 [39]-[42] per Middleton and Gordon JJ. It is also reflected in ss 141(3) and (4) of the Act which provide: 141 Continuing and multiple contraventions of civil penalty provisions … (3) Proceedings against a person for any number of orders to pay pecuniary penalties for contraventions of a civil penalty provision that are founded on the same facts, or form, or are part of, a series of contraventions of the same or a similar character, may be joined. (4) The Federal Court or the Federal Circuit Court may make a single order to pay a pecuniary penalty for all the contraventions described in subsection (3), but the penalty must not exceed the sum of the maximum penalties that could be ordered if a separate penalty were ordered for each of the contraventions. ... 22 Turning then to the eight courses of conduct, the first two were the two separate occasions on which Mr King conducted VET courses (i.e. the two separate breaches of s 117) and the remaining were the six separate occasions on which he issued the false certificates of attainment. In that regard, it should be noted that the 31 certificates were, indeed, issued in six separate tranches. It seems to me that I should accept that the parties' proposal in that regard. Of course, it does not mean that the matter is to be treated as if there were only eight contraventions and the maximum penalty continues to apply to each contravention: see, e.g., Cahill at 13 [42]. The recognition that there were eight courses of conduct merely aids in discerning the nature and extent of the wrongdoing. 23 Turning then to the question of penalty, this is to be approached by the process of instinctive synthesis explained in Markarian. This process is applied in the civil penalty context, though the synthesis is of a somewhat different kind: Reckitt at 68 [175]. Having regard to the above matters, I have decided to impose a penalty of $12,500 for each contravention of s 117 and $100,000 for the 31 contraventions of s 129 for a total penalty of $125,000. It is then necessary to consider whether this penalty would reflect the totality of the wrongdoing disclosed on the evidence in accordance with the totality principle: see, e.g., Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 at [81]-[82]; Jones at [46]. In my opinion, it does. I note also that it lies in the range suggested by the parties of $95,025 and $137,813. Orders 24 The Commonwealth in its further amended originating application also sought declaratory relief. There is no reason not to grant the declaratory relief sought. In any event, Mr King agreed to this. The declarations reflect accurately the contraventions which I have concluded were committed. As agreed, Mr King must pay the costs of the Commonwealth in the amount $75,000. The Commonwealth is to bring in minute of order giving effect to these conclusions within 14 days. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 30 May 2019