FEDERAL COURT OF AUSTRALIA Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited [2022] FCA 1251 File number(s): VID 734 of 2021 Judgment of: O'CALLAGHAN J Date of judgment: 26 October 2022 Catchwords: CORPORATIONS – penalties – declarations – where bank issued documents setting out terms and conditions governing products to customers who subsequently did not receive benefits to which customers were entitled – where bank admitted that it made implied representations that it had, and would continue to have, adequate systems and processes in place to administer benefits when it did not have adequate systems and processes – where bank admitted to contraventions of ss 12DA(1) and 12DB(1)(e) of the Australian Securities and Investments Commission Act 2001 (Cth), ss 912A(1)(a) and 912A(1)(c) of the Corporations Act 2001 (Cth) and ss 47(1)(a) and 47(1)(d) of the National Consumer Credit Protection Act 2009 (Cth) – where parties agreed on penalty, form of declarations and adverse publicity order – orders made, including that bank pay a pecuniary penalty of $25 million Legislation: Australian Securities and Investments Commission Act 2001 (Cth) ss 1, 1(2)(g), 12BAA, 12BAB, 12BAB(1)(b), 12BAB(1)(g), 12BAB(7)(b), 12BB, 12BB(1), 12DA, 12DA(1), 12DB, 12DB(1), 12DB(1)(e), 12GB, 12GB(1)(f), 12GB(1)(g), 12GBA, 12GBA(1), 12GBA(2), 12GBA(2)(a), 12GBA(2)(b), 12GBA(2)(c), 12GBA(3), 12GBC, 12GLB, 12GLB(1)(a), 12GLB(1)(b), 320 Corporations Act 2001 (Cth) ss 761A, 784, 912A, 912A(1)(a), 912A(1)(c), 912D, 913B, 1657 Crimes Act 1914 (Cth) ss 4AA, 4AA(1), 4AA(3) Evidence Act 1995 (Cth) s 191(3)(a) Federal Court of Australia Act 1976 (Cth) s 21 National Consumer Credit Protection Act 2009 (Cth) ss 5, 5(1), 38, 47, 47(1), 47(1)(a), 47(1)(d) National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth) Sch 8, item 3 Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth) Schs 1, 2, 3 Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 96 ALJR 426 Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 Australian Securities and Investments Commission v BT Funds Management Ltd [2021] FCA 844 Australian Securities and Investments Commission v Colonial First State Investments Ltd [2021] FCA 1268 Australian Securities and Investments Commission v Commonwealth Bank of Australia [2018] FCA 941; (2018) 128 ACSR 289 Australian Securities and Investments Commission v Commonwealth Bank of Australia [2020] FCA 790 Australian Securities and Investments Commission v MLC Nominees Pty Ltd [2020] FCA 1306; (2020) 147 ACSR 266 Australian Securities and Investments Commission v National Australia Bank Ltd [2021] FCA 1013 Australian Securities and Investments Commission v Westpac Banking Corporation [2019] FCA 2147 Australian Securities and Investments Commission v Westpac Banking Corporation (The Consumer Credit Insurance Case) [2022] FCA 359; (2022) 158 ACSR 647 Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission (2021) 284 FCR 24 Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 246 Date of hearing: 4 May 2022 Counsel for the Plaintiff: Mr S Couper QC with Ms J Fumberger Solicitor for the Plaintiff: Australian Government Solicitor Counsel for the Defendant: Dr M Collins AM QC with Mr T Jeffrie and Mr M O'Haire Solicitor for the Defendant: Ashurst ORDERS VID 734 of 2021 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) Defendant order made by: O'CALLAGHAN J DATE OF ORDER: 26 OCTOBER 2022 THE COURT DECLARES THAT: 1. On 71,461 occasions during the period 10 December 2015 to 30 September 2021 (Breakfree Penalty Period), being: (a) each occasion that Australia and New Zealand Banking Group Limited (ANZ) issued documents setting out terms and conditions governing the Breakfree Package (Breakfree Contractual Documents) to a customer who opened the Breakfree Package and who subsequently did not receive benefits to which the customer was entitled under the Breakfree Contractual Documents (Breakfree Benefits); and (b) each first occasion after 10 December 2015 that ANZ sent an updated version of the Breakfree Contractual Documents to a customer who held an open Breakfree Package as at 10 December 2015 and who subsequently did not receive Breakfree Benefits in accordance with the customer's entitlement under the Breakfree Contractual Documents, ANZ, acting in trade or commerce in connection with the supply of financial services: (c) made implied representations that it had, and would continue to have, adequate systems and processes in place to administer Breakfree Benefits, each of which were financial services within s 12BAB(1)(g) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) in relation to 16 financial products within the meaning of s 12BAA of the ASIC Act (Relevant Breakfree Products) (as applicable), in accordance with the Breakfree Contractual Documents; and (d) made those representations when it did not have adequate systems and processes and did not have reasonable grounds (within the meaning of s 12BB(1) of the ASIC Act) for stating it would have systems in the future to administer the Breakfree Benefits on Relevant Breakfree Products in accordance with the Breakfree Contractual Documents, and ANZ therefore on 71,461 occasions during the Breakfree Penalty Period engaged in conduct in relation to the supply of financial services that: (e) was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act; and (f) made false and/or misleading representations concerning the benefits of services in contravention of s 12DB(1)(e) of the ASIC Act. 2. On 84,407 occasions during the period 10 December 2015 to 22 September 2020 (Offset Penalty Period), being: (a) each occasion that ANZ issued documents setting out terms and conditions governing offset accounts (Offset Contractual Documents) to a customer who opened an offset account and who subsequently did not receive benefits to which the customer was entitled under the Offset Contractual Documents (Offset Benefits); and (b) each first occasion after 10 December 2015 that ANZ sent an updated version of the Offset Contractual Documents to a customer who was entitled to receive Offset Benefits as at 10 December 2015 and who subsequently did not receive Offset Benefits in accordance with the customer's entitlement under the Offset Contractual Documents, ANZ, acting in trade or commerce in connection with the supply of financial services: (c) made implied representations that it had, and would continue to have, adequate systems and processes in place to administer Offset Benefits, each of which were financial services within s 12BAB(1)(g) of the ASIC Act in relation to 17 financial products within the meaning of s 12BAA of the ASIC Act (Relevant Offset Products) (as applicable), in accordance with the Offset Contractual Documents; and (d) made those representations when it did not have adequate systems and processes and did not have reasonable grounds (within the meaning of s 12BB(1) of the ASIC Act) for stating it would have systems in the future to administer the Offset Benefits on Relevant Offset Products in accordance with the Offset Contractual Documents, and ANZ therefore on 84,407 occasions during the Offset Penalty Period engaged in conduct in relation to the supply of financial services that: (e) was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act; and (f) made false and/or misleading representations in connection with the supply of financial services concerning the benefits of services in contravention of s 12DB(1)(e) of the ASIC Act. 3. On each of the 155,868 occasions that ANZ contravened ss 12DA(1) and 12DB(1)(e) of the ASIC Act as set out in paragraphs 1 and 2 above, ANZ breached: (a) its general obligation to comply with financial services laws in contravention of s 912A(1)(c) of the Corporations Act 2001 (Cth) (Corporations Act); and (b) its general obligation to comply with credit legislation in contravention of s 47(1)(d) of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act). 4. By ANZ's conduct during the Breakfree Penalty Period in: (a) failing to maintain adequate systems and processes to apply Breakfree Benefits or bonus interest, discounts or fee waivers on ancillary Breakfree Package products (Breakfree Ancillary Benefits) to customer accounts; and (b) failing to conduct adequate monitoring or analysis of its systems and processes and therefore not identifying in a timely way instances of customers not receiving Breakfree Benefits or Breakfree Ancillary Benefits, ANZ breached: (c) its obligation to do all things necessary to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly, and thereby contravened s 912A(1)(a) of the Corporations Act; and (d) its obligation to do all things necessary to ensure that the credit activities authorised by its Australian credit licence were engaged in efficiently, honestly and fairly, and thereby contravened s 47(1)(a) of the NCCP Act. 5. By ANZ's conduct during the Offset Penalty Period in: (a) failing to maintain adequate systems and processes to apply Offset Benefits to customer accounts; and (b) failing to conduct adequate monitoring or analysis of its systems and processes and therefore not identifying in a timely way instances of customers not receiving Offset Benefits, ANZ breached: (c) its obligation to do all things necessary to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly, and thereby contravened s 912A(1)(a) of the Corporations Act; and (d) its obligation to do all things necessary to ensure that the credit activities authorised by its Australian credit licence were engaged in efficiently, honestly and fairly, and thereby contravened s 47(1)(a) of the NCCP Act. THE COURT ORDERS THAT: 1. Within 30 days, ANZ pay to the Commonwealth of Australia a pecuniary penalty of $25,000,000 in respect of ANZ's conduct declared to be contraventions of s 12DB(1)(e) of the ASIC Act. 2. Within 30 days, ANZ take all reasonable steps to cause to be published, at its own expense, a notice in the terms set out in the Annexure to this Order in Arial font no less than 10 point (Written Notice), by: (a) for a period of no less than 180 days, maintaining a link to a PDF and/or webpage copy of the Written Notice in a visible area of ANZ's website home page (https://www.anz.com.au/personal/) and news room (https://www.media.anz.com/), ensuring that the link to the notice is identified by text as follows: "Notice ordered by Federal Court in ASIC case against ANZ about Breakfree Packages and Offset Accounts"; (b) for a period of no less than 180 days, maintaining a link to a PDF copy of the Written Notice in a visible area of ANZ's secure online banking login page (https://login.anz.com/internetbanking), ensuring that the link to the notice is identified by text as follows: "Notice ordered by Federal Court in ASIC case against ANZ about Breakfree Packages and Offset Accounts"; to be visible to current customers the next five times they visit the page. 3. ANZ pay ASIC's costs of and incidental to the proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Annexure – Proposed corrective notice Corrective Notice ordered by the Federal Court of Australia ANZ's conduct in making misleading representations where there were reasonable grounds to believe services would not be provided. On [date] 2022, O'Callaghan J of the Federal Court of Australia (in proceeding VID 734 of 2021) ordered ANZ to pay a pecuniary penalty of $25 million to the Commonwealth of Australia for its conduct in relation to the Breakfree package product (Breakfree Package) and offset accounts offered by ANZ (Offset Accounts). Customers who took up a Breakfree Package (Breakfree Customers) paid an annual fee to ANZ. In exchange for that annual fee, Breakfree Customers were entitled to fee waivers and interest rate discounts on eligible ANZ products, including home loans, credit cards and transaction accounts (Breakfree Benefits). The Breakfree Package also entitled Breakfree Customers to bonus interest, discounts or fee waivers on optional ancillary products (Breakfree Ancillary Benefits). Customers with Offset Accounts (Offset Customers) are entitled to reductions in the interest charged on eligible home and commercial loans linked to an ANZ Offset Account, calculated by reference to the balance in their Offset Account (Offset Benefits). Over the period from the mid-1990s to 22 September 2020 (for Offset Customers) and March 2003 to 30 September 2021 (for Breakfree Customers) (Relevant Period), ANZ failed to apply certain Breakfree Benefits, Breakfree Ancillary Benefits or Offset Benefits to certain customer accounts in accordance with the applicable terms and conditions. The Court found that over the Relevant Period a total of approximately 689,099 customer accounts were detrimentally affected by ANZ's conduct. ANZ has made or is in the process of making remediation payments totalling approximately $211,512,939.80 to impacted customers. This figure comprises the amounts charged in error, interest and compensation reflecting the time value of money (TVM). The Court ordered ANZ to pay the pecuniary penalty because, between 10 December 2015 and 30 September 2021 (Penalty Period), ANZ was found to have made false or misleading representations to customers that ANZ had, and would continue to have, adequate systems and processes in place to administer the Breakfree Benefits and the Offset Benefits in accordance with the applicable terms and conditions. During the Penalty Period, ANZ made 155,868 false or misleading representations to customers regarding the systems and processes in place to administer the Breakfree Benefits and Offset Benefits. Over this period, a total of 180,959 customer accounts were detrimentally affected by ANZ's conduct. ANZ has made or is in the process of making remediation payments totalling $33,813,608.47 (inclusive of interest and compensation reflecting TVM) to impacted customers. ANZ co-operated with ASIC during its investigations, admitted the contraventions and has remediated, or is in the process of remediating, those customers affected by the conduct described above. This Corrective Notice has been paid for by ANZ pursuant to the Court's orders. Further information For further information, visit ASIC's media release here. [to be hyperlinked] See the Court's judgment here. [to be hyperlinked] REASONS FOR JUDGMENT O'CALLAGHAN J: INTRODUCTION 1 By originating application dated 8 December 2021, the Australian Securities and Investments Commission (ASIC) commenced this proceeding in relation to conduct of Australia and New Zealand Banking Group Limited (ANZ) between the mid-1990s and September 2021 (the relevant period). ANZ is one of Australia's "big four" banks, and the relevant conduct involved representations to its customers that it had, and would continue to have, adequate systems and processes to provide those customers with contractual benefits that they were entitled to in respect of ANZ's products. The benefits the subject of the proceeding were those associated with ANZ's "Breakfree Package" and offset accounts. ANZ failed to apply these benefits to approximately 689,099 customer accounts in accordance with applicable terms and conditions over the relevant period. 2 The parties relied on joint written submissions dated 14 April 2022, and an amended statement of agreed facts dated 13 April 2022. The matter was heard on 4 May 2022. 3 ASIC sought, and ANZ consented to, the making of the declarations and orders in the form set out in the joint submissions, namely declarations of contraventions of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), the Corporations Act 2001 (Cth) (Corporations Act), and the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) (contraventions which are admitted by ANZ), an order that ANZ pay a pecuniary penalty of $25 million, and an order that ANZ publish a notice stating that it has been ordered to pay a pecuniary penalty because it has made false or misleading representations. 4 For the reasons set out below, in my view, it is appropriate to make the orders sought. RELEVANT STATUTORY PROVISIONS 5 ANZ currently holds, or has held in the past, the following licences: (1) an Australian Securities Dealer Licence at all times between 22 March 1995 and 1 October 2003, issued pursuant to s 784 of the Corporations Act (as in force prior to 11 March 2002) which authorised ANZ to (among other things) deal in securities; (2) an Australian Financial Services Licence at all times since 1 October 2003, issued pursuant to s 913B of the Corporations Act which authorises ANZ to (among other things) deal in financial products, including deposit products; and (3) an Australian Credit Licence at all times since 1 March 2011, issued pursuant to s 38 of the NCCP Act, which authorises ANZ to (among other things) deal in credit products, including home-lending products. 6 Accordingly, ANZ must comply with particular provisions under the ASIC Act, the Corporations Act, and the NCCP Act which govern these licences. 7 Sections 12DA and 12DB of the ASIC Act are contained in Subdivision D of Part 2, Division 2. They prohibit misleading or deceptive conduct, or the making of false or misleading representations, respectively, and provide relevantly as follows: 12DA Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. (1A) … (2) Nothing in sections 12DB to 12DN limits by implication the generality of subsection (1). 12DB False or misleading representations (1) A person must not, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion by any means of the supply or use of financial services: … (e) make a false or misleading representation that services have sponsorship, approval, performance characteristics, uses or benefits; … 8 Although ss 12DA and 12DB differ in their wording, there is no material difference between "misleading or deceptive conduct" and "false and misleading representations". See, by way of example only, Australian Securities and Investments Commission v MLC Nominees Pty Ltd [2020] FCA 1306; (2020) 147 ACSR 266 at 275 [47] (Yates J), and the cases cited therein. 9 The term "financial services" is defined in s 12BAB(1)(b) of the ASIC Act to include where a person deals in a financial product, and in s 12BAB(1)(g) to include providing a service that is otherwise supplied in relation to a financial product. The meaning of "dealing" is defined in s 12BAB(7)(b) to include issuing a financial product. The meaning of financial product is defined in s 12BAA, although it is not necessary here to set out that definition. 10 Section 12BB of the ASIC Act deems certain representations with respect to future matters to be misleading, relevantly as follows: 12BB Misleading representations with respect to future matters (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of Subdivision D (sections 12DA to 12DN), to be misleading. … (4) Subsection (1) does not by implication limit the meaning of a reference in this Division to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation. 11 On 13 March 2019, certain provisions of the ASIC Act, including some which are relevant to this proceeding, were amended by Schedule 2 to the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth) (Amending Act). Section 320 of the current version of the ASIC Act provides that "the amendments made by … the [A]mending Act apply in relation to the commission of an offence if the conduct constituting the commission of the offence occurs wholly on or after the commencement day" of the Amending Act, being 13 March 2019. The parties did not contend that any of ANZ's admitted contraventions occurred "wholly on or after" 13 March 2019. Accordingly, the parties agreed that I only need to consider the relevant provisions as they stood before 13 March 2019. 12 Section 12GB, as in force immediately prior to 13 March 2019, provided that a person who contravened s 12DB (among other provisions) was guilty of an offence punishable by a fine. 13 Before 13 March 2019, the court's power to order payment of a pecuniary penalty was found in s 12GBA of the ASIC Act. That provision, as in force immediately prior to 13 March 2019, provided relevantly as follows: 12GBA Pecuniary penalties (1) If the Court is satisfied that a person: (a) has contravened a provision of Subdivision C, D or GC (other than section 12DA); … … 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. (2) In determining the appropriate pecuniary penalty, the Court must have regard to all relevant matters including: (a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and (b) the circumstances in which the act or omission took place; and (c) whether the person has previously been found by the Court in proceedings under this Subdivision to have engaged in any similar conduct. … 14 Sections 12GB(1)(f), 12GB(1)(g) and 12GBA(3) provided that a pecuniary penalty payable for a breach of s 12DB must not exceed 10,000 penalty units for a body corporate. Under s 12GBC (as in force prior to 13 March 2019), ASIC could institute a proceeding to recover a pecuniary penalty referred to in s 12GBA within six years after the contravention. Accordingly, the period in respect of which ASIC sought a penalty for ANZ's contravening conduct was a shorter period than the relevant period, being 10 December 2015 to 30 September 2021 (the penalty period). 15 ASIC also sought an order pursuant to s 12GLB(1)(a) of the ASIC Act that "within 30 days of the order, ANZ take all reasonable steps to cause to be published, at its own expense, a notice stating that it has been ordered to pay a pecuniary penalty because it has made false or misleading representations". Section 12GLB of the ASIC Act, as in force prior to 13 March 2019, provided relevantly as follows: 12GLB Punitive orders requiring adverse publicity (1) The Court may, on application by ASIC, make an adverse publicity order in relation to a person who: (a) has been ordered to pay a pecuniary penalty under section 12GBA; or (b) is guilty of an offence under section 12GB. (2) In this section, an adverse publicity order, in relation to a person, means an order that: (a) requires the person to disclose, in the way and to third parties specified in the order, such information as is so specified, being information that the person has possession of or access to; and (b) requires the person to publish, at the person's expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order. … 16 This provision was also amended by the Amending Act such that the reference to "section 12GBA" in paragraph (1)(a) is now a reference to "section 12GBB". The parties submitted that the adverse publicity order was sought "under s 12GLB(1)(a) of the ASIC Act (for the period before 13 March 2019) and s 12GBB(1) (for the period from 13 March 2019)". They advanced alternative submissions that the court had power to make such an order under s 12GLB(1)(a) as in force prior to 13 March 2019, or "[i]f the court considers that its power to impose penalties for admitted contraventions which occurred on or after 13 March 2019 derives from s 12GBB(1) of the ASIC Act, the court similarly has power under s 12GLB(1)(a) of the ASIC Act (as in force from 13 March 2019)". However, in my view, and it seems to me that this was the parties' primary position as explained above, the power to order penalties in this case is found in s 12GBA as in force prior to 13 March 2019, because "the conduct constituting the commission of the offence" did not occur "wholly on or after" 13 March 2019. Accordingly, the version of s 12GLB relevant to this proceeding is that set out above. 17 Section 912A of the Corporations Act imposes certain general obligations upon a financial services licensee, being a person who holds a licence under s 913B authorising them to carry on a financial services business to provide financial services, relevantly as follows: (1) A financial services licensee must: (a) do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly … (b) … (c) comply with the financial services laws … 18 "Financial services laws" is defined in s 761A relevantly to include Chapter 7 of the Corporations Act (which includes s 912A) and Division 2 of Part 2 of the ASIC Act (which relevantly includes ss 12BB, 12DA and 12DB). 19 Section 47(1) of the NCCP Act also imposes similar general obligations upon licensees under that Act, being a person who holds an Australian credit licence, relevantly as follows: (1) A licensee must: (a) do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly … … (d) comply with the credit legislation … 20 "Credit legislation" is defined in s 5(1) relevantly to include the NCCP Act and Division 2 of Part 2 of the ASIC Act. 21 The Corporations Act and the NCCP Act were also amended by Schedules 1 and 3 of the Amending Act, respectively, such that s 912A(1)(a) of the Corporations Act and s 47(1)(a) of the NCCP Act each became a civil penalty provision from 13 March 2019 onwards. As with the amendments to the ASIC Act, these amendments were limited to circumstances where "the conduct constituting the contravention of the provision occurs wholly on or after" 13 March 2019. See s 1657 of the Corporations Act and item 3 of Schedule 8 of the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth). The parties' position was that, because ANZ has admitted to one contravention of each of s 912A(1)(a) and s 47(1)(a) spanning its conduct over the penalty period, no civil penalty is sought in respect of these contraventions. 22 Section 912A(1)(c) of the Corporations Act, s 47(1)(d) of the NCCP Act and s 12DA(1) of the ASIC Act are not civil penalty provisions and were not civil penalty provisions during the penalty period. THE FACTS 23 The parties agreed that, in accordance with s 191(3)(a) of the Evidence Act 1995 (Cth) and for the purposes of this proceeding, the relevant facts and admissions are those contained in the statement of agreed facts, from which I have derived the facts set out below. 24 I should add that on 6 October 2022, the parties notified my Associate via email that some of the estimated remediation amounts contained in the statement of agreed facts had changed, and that remediation was, as at the date of that email, still in progress. The parties' agreed position was that they did not propose to amend the statement of agreed facts, and that the changes to the estimates did not affect their submissions as to appropriate penalty. I agree. 25 The contraventions concern two products, namely ANZ's "Breakfree Package" and offset accounts. 26 Customers who took up the Breakfree Package (Breakfree customers) were entitled to benefits including an interest rate discount and waivers of certain fees or charges for eligible home lending products, transaction accounts, and a credit card account (Breakfree benefits). Breakfree customers were also entitled to bonus interest, discounts or fee waivers on optional ancillary products (Breakfree ancillary benefits). 27 Since the mid-1990s, ANZ has offered transactional offset accounts which can be linked to a home or business loan account. Customers with offset accounts (offset customers) were entitled to a reduction in the interest payable on their loan account each day by an amount calculated by applying the loan interest rate to the balance of the linked offset account (offset benefits). 28 From the mid-1990s to 22 September 2020 (for offset customers) and March 2003 to 30 September 2021 (for Breakfree customers), ANZ failed to apply all applicable Breakfree benefits, Breakfree ancillary benefits or offset benefits to approximately 689,099 customer accounts in accordance with applicable terms and conditions (the Breakfree benefits issues, Breakfree ancillary benefits issues and offset benefits issues, respectively). These failures meant that not all customers received the benefits to which they were entitled during the relevant period. 29 As described in further detail below, the contravening conduct was the result of ANZ's failure over the relevant period to maintain systems and processes that were adequate to administer the benefits, and to conduct adequate monitoring or analysis of its systems and processes to identify instances of customers not receiving benefits. During the relevant period, ANZ attempted to correct identified deficiencies in its systems and processes, and while it did implement improvements, those did not identify and address all instances of customers not receiving benefits. 30 ASIC accepted that ANZ's conduct constituting the contraventions was not dishonest, deliberate or intentional. 31 ANZ has made or is in the process of making remediation payments totalling $211,512,939.80 to impacted customers. This figure comprises the amounts charged in error, interest and compensation reflecting the time value of money. 32 ANZ remediated or is in the process of remediating adversely impacted customers as follows: (1) Breakfree customers adversely impacted by the Breakfree benefits issues during the penalty period were remediated or will be remediated in the amount of $30,207,581.31 (including interest and the time value of money); (2) ANZ anticipates making remediation payments to approximately 88,500 customer accounts adversely affected by the Breakfree ancillary benefits issues of an approximate estimate of $51.87 million, inclusive of the time value of money and interest; and (3) offset customers adversely impacted by the offset benefits issues during the penalty period were remediated in the amount of $3,491,799.70 (including interest but excluding the time value of money). 33 The table below, which was included in the statement of agreed facts, sets out the total number of accounts adversely affected, and the associated amounts that ANZ has paid or will pay by way of remediation to customers (for both the relevant period and the penalty period) with respect of each of the account errors (each described in further detail below) that resulted in customers not receiving Breakfree benefits or offset benefits. (Remediation in relation to the Breakfree ancillary benefits is detailed at [98]ff.) The figures include interest and the time value of money, except where otherwise specified. Error Period Accounts affected Remediation amount paid or payable Breakfree benefits issues Mortgage Breakfree and Offset Remediation Project Relevant period: 23 May 2006 – 1 Feb 2014 93,300 $48,000,000 Penalty period: N/A N/A Continuing Breakfree issues Relevant period: 23 May 2006 – 30 Sept 2021 268,449 $78,078,000.54 Penalty period: 10 Dec 2015 – 30 Sept 2021 77,756 $21,722,336.67 Standard and special offers scenarios Relevant period: 1 May 2013 – 1 Dec 2020 26,315 $11,819,742.18 Penalty period: 10 Dec 2015 – 1 Dec 2020 20,364 $8,145,060.81 Fixed rate scenarios Relevant period: 27 Feb 2012 – 6 May 2021 15,970 $9,230,000 Penalty period: 10 Dec 2015 – 6 May 2021 ANZ unable to provide at this time Additional scenarios Relevant period: 13 Nov 2012 – 30 April 2021 12,837 $642,158.47 Penalty period: 10 Dec 2015 – 30 April 2021 2,464 $340,183.83 Breakfree subtotal (relevant period): $147,769,901.19 Breakfree subtotal (penalty period): $30,207,581.31 Offset benefits issues Backdated transactions issue Relevant period: Mid-1990s – 1 Sept 2019 134,671 $4,158,320.43 Excludes accounts affected before 30 March 2009 Penalty period: 10 Dec 2015 – 1 Sept 2019 66,970 $1,453,856.50 Excludes time value of money Rejected transactions issue Relevant period: Mid-1990s – 17 Aug 2015 32,999 $5,121,588.11 Excludes accounts affected before 1 May 2008 Penalty period: N/A N/A Accrued offset benefit issue Relevant period: 8 May 2015 – 22 Sept 2020 16,058 $2,593,130.07 Penalty period: 10 Dec 2015 – 22 Sept 2020 15,208 $2,152,170.66 Offset subtotal (relevant period): $11,873,038.61 Offset subtotal (penalty period): $3,606,027.16 Breakfree and offset total Relevant period $159,642,939.80 Penalty period $33,813,608.47 Breakfree benefits issues and Breakfree ancillary benefits issues Overview 34 The first of the two products relevant to this proceeding is ANZ's Breakfree Package. 35 The facts set out in this section "Breakfree benefits issues and Breakfree ancillary benefits issues" relate to the periods between March 2003 and 30 September 2021 (the Breakfree relevant period), and the period between 10 December 2015 and 30 September 2021 (the Breakfree penalty period). 36 ANZ began offering the Breakfree Package in 2003. As at 30 September 2021, more than 1.42 million customers had taken up more than 840,000 Breakfree Packages. 37 As set out above, Breakfree customers were entitled to Breakfree benefits and Breakfree ancillary benefits. Each Breakfree customer entered into a contract with ANZ, governed by the ANZ Breakfree terms and conditions (the Breakfree terms and conditions) set out in documents issued to customers (the Breakfree contractual documents). If ANZ amended the Breakfree terms and conditions, Breakfree customers were notified. 38 The Breakfree benefits were applied to eligible products that were linked to the customer's Breakfree Package (relevant Breakfree products), including home lending products, deposit accounts, and credit card accounts. Those products were governed by the terms and conditions that ordinarily applied to those products. During the Breakfree relevant period, ANZ did not apply Breakfree benefits for certain Breakfree customers in relation to 29 Breakfree products. 39 Breakfree customers were required to pay an annual fee, and between 1 October 2003 and September 2021, ANZ collected $1,986,036,500 in annual fees, including approximately $118,000,000 charged to Breakfree customers the subject of the contraventions. 40 Over the Breakfree relevant period (including the Breakfree penalty period), ANZ failed to apply the Breakfree benefits to certain Breakfree products, as required by the Breakfree terms and conditions, with the consequence that it: (1) charged a proportion of Breakfree customers fees on certain Breakfree products that it was not entitled to charge under the Breakfree terms and conditions; and (2) charged a proportion of Breakfree customers interest on home lending products at rates higher than those it was entitled to charge under the Breakfree terms and conditions. 41 Although there are limitations on the availability of data to substantiate the occurrence of errors prior to 2006, the various errors identified below are likely to have dated back to the inception of the Breakfree Package in 2003. ANZ's systems and processes 42 The main reason behind ANZ's failure to apply the benefits to Breakfree products was that its systems and processes for administering those benefits were substantially manual and the controls associated with the processes were inadequate to prevent or detect errors. ANZ had three systems for originating loans: the Customer Account Processing System (CAP), the Mortgage Originating System (MOS), and the Retail Lending System (RLS). The RLS is a newer system and was rolled out during the Breakfree relevant period. 43 Each system had a different process for setting up a Breakfree Package, and required a lender manually to identify a loan as a Breakfree loan using a different method for each system. For loans originated in CAP following the Mortgage Breakfree and Offset Remediation Project (see [53] below), lenders had to enter one of three "solicitation identifiers" (or SOL ID) manually, but this was optional because not all customers had a Breakfree Package. If lenders did not enter a SOL ID, customers would not receive fee waivers. For certain types of loans, the SOL ID identified a range of applicable interest rate discounts, and the lender had to enter the correct discount. If a rate entered was outside the permitted range, a warning message would display but which the lender could override, which self-evidently meant that customers would not receive the correct discount rate if it was entered incorrectly. 44 Customers could also renew home loans already linked to a Breakfree Package. When a customer changed an aspect of their loan, ANZ generally used CAP, which, in certain circumstances, did not retain the SOL ID, and the lender would have to re-enter it. The system again alerted the lender if a discount entered was outside the permitted range, which could be overridden. 45 Customers could also opt in to the Breakfree Package after drawing down on their existing home loan. In those circumstances, the lender had to submit an internal request for the interest rate discount to be applied to the original loan, and submit a Breakfree application form to ANZ's Fulfilment Team, who had to set up the package in CAP manually, linking accounts to the Breakfree Package and applying fee waivers. 46 The method was the same for loans originated in MOS, except the credit assessor was responsible for flagging that a home loan application was for a loan eligible for Breakfree benefits and manually applying the correct discount. 47 For loans originated in RLS, lenders had to identify the loan application as one eligible for Breakfree benefits. RLS automatically applied the relevant interest rate discount and fee waivers to the loan. 48 For all three systems, lenders had to submit the loan application form and the Breakfree application form to the Fulfilment Team for further processing. The Fulfilment Team would then set up the Breakfree Package in ANZ's system, link the package to the customer's nominated credit card and transaction account, and apply the associated fee waivers. In some circumstances, lenders did not properly complete and submit, and/or the Fulfilment Team did not correctly process, application forms. 49 The administration of the Breakfree ancillary benefits was generally the responsibility of the team which administered the product to which the benefit related. With the exception of some products administered in CAP, the systems and processes for applying the Breakfree ancillary benefits were therefore different from those described above, but still shared many of the same complexities. 50 The operation of the above systems was substantially manual, and therefore susceptible to human error. Issues with the Breakfree benefits 2009 – 2014: Issues first identified and remediated 51 The issues with the Breakfree Package were first identified in 2009, when, during a review of the Breakfree Package in mid-2009, ANZ identified that certain customers were not receiving interest rate discounts on home lending products to which they were entitled. 52 In June 2010, ANZ notified ASIC of this in writing as a breach required to be reported under s 912D of the Corporations Act. 53 In 2010, ANZ established the Mortgage Breakfree and Offset Remediation Project (MBORP). This was designed to, among other things, identify, repair and remediate accounts that, from 23 May 2006, had not received discounts by reason of the issue regarding the application of interest rate discounts. (ANZ was unable to identify affected customers prior to 23 May 2006 because it did not have an identifier for Breakfree Packages until then, although the issue may have occurred before then.) 54 As part of MBORP, ANZ identified that causes of benefits not being applied included multiple variations and associated discounts being available to different customers at different times; unclear benefits and eligibility criteria; limited systems controls; exception reports not being clearly embedded into business-as-usual processes; steps to apply Breakfree benefits were not being performed; no ongoing review of the operational effectiveness of the Breakfree Package; and controls not being embedded into the risk framework for the Breakfree Package. 55 As part of MBORP, ANZ attempted to address issues with the Breakfree Package as follows. 56 During 2012 and 2013, ANZ made changes to its systems, which increased the level of automation or guidance. However, the systems still required manual input, including entering SOL IDs and the ability to override error messages for discounts outside the permitted range. 57 ANZ also introduced a series of exception reports in about April 2013 designed to detect when customers were not receiving Breakfree benefits in certain scenarios. However, the effectiveness of these reports was dependent on manual review and processing. The reports also could not detect all circumstances in which customers were not receiving benefits. 58 ANZ had an existing "Mortgage Sales Compliance" (MSC) report, which was designed to monitor, for loans originated in CAP or MOS, whether customers were receiving the applicable interest rate discount, and identify any incorrectly charged loan approval fees that should have been waived. In about June 2013, ANZ changed the definitions in the report to assist the MSC team better to detect where customers were potentially not receiving the correct discount. However, even after these changes, the MSC reports could not identify all instances where customers were not receiving some, or all, of their benefits, and were dependent on manual review and processing. Prior to 2016, there was no process to check that identified errors had been corrected, because a loan only appeared in the report in the month it was originated, and not subsequent reports regardless of whether or not the error had been addressed. 59 In about November 2012, ANZ updated the Breakfree terms and conditions to reduce their complexity and increase accessibility for customers, simplifying the discounting structure, package benefits and eligibility criteria and including changes for Breakfree ancillary benefits (see [91] below). 60 Between 2010 and early 2011, ANZ was also considering investing in an automated solution. However, in about January 2011, ANZ decided not to pursue this because it was in the process of implementing RLS, which would automate aspects of the administration of the Breakfree Package, and it considered that the other solutions described above would be adequate to resolve the issues. 61 Between 2010 and early 2014, with the assistance of an external consultant, ANZ created a series of rules to identify affected accounts and calculate remediation payments. The consultant validated these rules in late 2012. 62 The MBORP team subsequently developed business and technical requirements to enable it to conduct the remediation, including the repair of accounts which remained impacted. ANZ repaired impacted accounts in 2014 by resetting the interest rate margin and/or linking eligible accounts to the Breakfree Package in CAP. 63 In 2014, ANZ made remediation payments in relation to approximately 93,300 accounts which had not received applicable discounts between 23 May 2006 and February 2014, totalling approximately $48 million, including compensation reflecting the time value of money. 64 In about 2013, ANZ identified an issue in relation to customers not receiving their fee waivers under the Breakfree Package. These instances were detected through the exception reporting introduced as part of MBORP. In 2014, ANZ conducted a further remediation program for customers with open accounts who did not receive applicable fee waivers. ANZ is addressing limitations in relation to this remediation, as described further below at [76]. 2017 – 2019: Continuing Breakfree issues 65 MBORP attempted to fix issues known to ANZ between 2010 and early 2014. But the changes did not effectively address all circumstances in which customers were not receiving some, or all, of their benefits, and the issue of customers not receiving Breakfree benefits continued (continuing Breakfree issues). These issues were identified in about March 2017. 66 Between ANZ implementing system and control enhancements in 2012 and 2013 and the identification of the continuing Breakfree issues in March 2017, ANZ conducted reviews and assessments of the Breakfree Package. As part of the reviews, ANZ identified the risk that customers may not receive Breakfree benefits, limitations on controls, and areas for improvement, including in the design and implementation of exception reporting intended to prevent recurrence of the Breakfree benefits issues. 67 However, with the exception of an end-to-end process review in 2013, the reviews were targeted to specific issues, and none of them identified the continuing Breakfree issues or involved substantive analysis of customer data with a view to identifying errors. ANZ did not establish periodic reviews or audits to evaluate or assess substantively the effectiveness of the administration of the Breakfree Package. 68 In about March 2017, ANZ identified, from a sample of approximately 50 accounts, that about 10% did not have a loan administration charge waiver applied, and a smaller percentage had no interest rate discount applied. ANZ then undertook investigations to understand the scope and causes of customers not receiving Breakfree benefits, including obtaining data to conduct expanded sample testing, and undertaking data analysis. 69 As a result of these investigations, on 5 October 2017, ANZ notified ASIC of the continuing Breakfree issues in writing as a breach required to be reported under s 912D of the Corporations Act. 70 ANZ undertook three reviews in 2017 to identify areas for improvement in its systems and processes so it could rectify the continuing Breakfree issues: (1) In September, ANZ assessed the effectiveness of controls put in place through MBORP. This review identified that a number of controls were not working as effectively as they should have been and that MBORP had not considered a number of processes associated with establishing and maintaining the Breakfree Package. This report was provided to, among others, senior members of the Home Loans team. (2) In November, ANZ undertook an end-to-end review, which identified over 90 issues with existing processes for establishing and maintaining the Breakfree Package and proposed solutions. (3) In December, ANZ's Assurance function undertook a product review to assess whether there were any other potential issues or gaps. It identified, among other things, that the Breakfree Package was very complex and difficult for ANZ to deliver. The review was provided to, among others, a senior member of the Home Loans team. 71 Following these reviews, ANZ implemented measures designed to prevent further occurrences of the Breakfree benefits issues, including enhancing existing exception reports and developing new ones. In relation to interest rate discounts, the exception reports primarily focused on new loans and particular trigger events for existing loans. Where a trigger event occurred, existing customers had the discount applied as part of business-as-usual processes. Where ANZ did not apply the discount to a customer's loan as part of this process or did not identify that a discount had not been applied because of deficiencies with its exception reporting process, it applied the discount as part of remediation. 72 Between April and September 2019, ANZ enhanced existing forensic reports and introduced two exception reports to prevent further occurrences of the Breakfree benefits issues. 73 ANZ also undertook a project to expand the functionality of RLS, which automated the application of discounts and fee waivers on a home loan where the Breakfree Package and any applicable special offer discount were selected by staff. In about November 2017, RLS was used to originate 40% of loans in ANZ's Australia Branch Network. This rose to 85% for loans originated between June 2020 and May 2021. 74 As to remediation, ANZ began determining the scope for the remediation project for the continuing Breakfree issues on about 10 November 2017. It has conducted the remediation in stages for particular cohorts of customers. ANZ's practice is to notify customers of the Breakfree benefits issues at or around the time they receive their remediation payment. ANZ paid remediation to its first cohort of customers impacted by the continuing Breakfree issues in around July 2018. 75 The remediation program is ongoing, and not all customers have been notified or remediated. As at the date of the statement of agreed facts, ANZ anticipated completing the remediation at around the start of 2022. As part of the remediation process, ANZ is confirming whether Breakfree benefits have been correctly applied to accounts as part of business-as-usual processes, including exception reporting, and, where they have not, applying those benefits into the future. 76 As shown in the table at [33], remediation paid or payable by ANZ in relation to the continuing Breakfree issues, including interest and the time value of money, is approximately $78.078 million in the relevant period, and $21.722 million in the penalty period. This includes remediation of approximately $35.19 million to address deficiencies that were identified in ANZ's remediation program implemented in 2014. 2020 – 2021: Other scenarios 77 Even following attempts to fix the continuing Breakfree issues, further issues persisted. ANZ conducted an end-to-end review of the Breakfree Package in late 2020 which was designed to identify and address any remaining gaps in its systems or processes. This review identified over 100 process improvement opportunities and corresponding recommended actions. 78 ANZ identified three scenarios in which issues persisted in relation to the Breakfree Package, including two which were identified through the 2020 end-to-end review. ANZ has now implemented rectification measures and process improvements, including to address the three scenarios, and by 4 October 2021, ANZ completed all 44 of the high-priority recommendations arising from the 2020 review and implemented additional measures, including to strengthen actions already undertaken. 79 The first scenario identified was the standard and special offers scenario, where the applicable standard interest rate discount or an advertised special offer rate under the Breakfree Package was not always being applied to customer accounts correctly. This resulted in some customers receiving a discount less than what was applicable. Customers were impacted from 1 May 2013 (with earlier instances having been remediated as part of MBORP). 80 ANZ identified the standard and special offers scenarios in about February 2020, before the end-to-end review, and reported them to ASIC in writing in December 2020 as a breach required to be reported under s 912D of the Corporations Act. 81 A proportion of customers continued to be affected even following the implementation of the measures described at [71] above, because ANZ assumed in the rectification and remediation of the continuing Breakfree issues that a customer who was receiving at least the minimum discount had the correct discount applied. The MSC report was designed to detect instances where the correct discount was not applied, but was not effective to, and/or did not, address every such instance. 82 In December 2020, these scenarios were addressed by amendments to the MSC report. ANZ intends that other impacted customers will have their correct discount applied as part of the remediation process. In April and May 2021, ANZ ceased offering special offer discounts and simplified the standard discount tiers to reduce further the risk of errors. 83 The second scenario was the fixed rate scenario, where customers with a fixed rate home loan and "total eligible ANZ lending" did not always receive the applicable interest rate discount when: (1) the customer took up the Breakfree Package after entering into a fixed rate loan; or (2) the fixed rate loan was refixed for an additional period. These scenarios occurred from February 2012, when fixed loans first became eligible for a Breakfree interest rate discount. 84 The fixed rate scenarios were identified in about October 2020 as part of the 2020 end-to-end review. ANZ reported the fixed rate scenarios to ASIC in writing in February 2021 as a breach required to be reported under s 912D of the Corporations Act. 85 The fixed rate scenarios continued to impact customers following the implementation of the measures described at [71] above because: (1) Where customers took up the Breakfree Package after entering into a fixed rate loan, ANZ systems operated on the basis that the Breakfree interest rate discount was not applicable, and ANZ did not have a procedure to re-price the existing loan and waive any potential early repayment charges in these circumstances. To address this, ANZ updated the Breakfree terms and conditions so that an "eligible loan account" in relation to a fixed rate loan was defined as eligible for an interest rate discount only if it was linked to a Breakfree Package before the fixed term commenced. The discount would otherwise only apply from the commencement of the variable term. (2) In relation to loans that were re-fixed for an additional period, there was a coding gap in one of the exception reports introduced in 2018. In December 2020, ANZ addressed this by making changes to the MSC reports to identify instances where customers were not receiving their interest rate discount so that they could be refunded. ANZ intends that customers with existing fixed rate loans will have the correct discount applied on the earlier of the expiry of their fixed rate loan or as part of the remediation process. 86 The third scenario was a collection of additional scenarios identified through the 2020 end-to-end review, which had an estimated impact of approximately $642,158.47 between 2012 and 30 April 2021, impacting customers: (1) to whom loan approval fees or valuation administration fees were incorrectly charged but not refunded because of limitations on the MSC process; (2) who had a fee waiver implemented as part of a business-as-usual process but were not refunded for occasions where they had been incorrectly charged the fee in the past; (3) who had been permitted, at ANZ's discretion, to link an additional transaction account to their package, but did not receive associated fee waivers and/or refunds when fees were incorrectly charged; and (4) with an Equity Manager Account who had decreased their limit and, in particular circumstances, were entitled to an additional interest rate discount as a result. 87 On 26 July 2021, ANZ notified ASIC of the additional scenarios in writing as a breach required to be reported under s 912D of the Corporations Act. 88 The additional scenarios occurred because of limitations in exception reporting controls, which ANZ addressed through improvements between May and June 2021, including a comprehensive fee report designed to identify instances of fees charged under the Breakfree Package and not refunded. 89 In 2019, ANZ decided to decommission the Breakfree Package and introduce a simplified pricing structure for the underlying products. Once that structure has been developed and implemented, ANZ intends to decommission the Breakfree Package. ANZ intends to offer the new pricing structure, and announced in February 2022 that it would cease offering the Breakfree Package to new customers in March 2022 and decommission the Breakfree Package in or about September 2022. Issues with the Breakfree ancillary benefits 90 As described above, administration of Breakfree ancillary benefits was generally the responsibility of the team which administered the product to which the benefit related. Accordingly, with the exception of some products administered using CAP, the administration of the Breakfree ancillary benefits used different systems and processes to those used to administer the Breakfree benefits. However, these also involved manual elements and had limited controls to ensure that customers were receiving benefits. 91 In around 2011, as part of MBORP, ANZ considered the limitations with existing systems and processes for administering Breakfree ancillary benefits. The MBORP Steering Committee supported a proposal to remove some Breakfree ancillary benefits, given the need for uplift to systems, processes and governance in respect of them, and, for the remaining benefits, to clarify that customers were required to request the benefits and to take other steps to improve their governance and administration. These changes to the terms and conditions were included in the changes made in about November 2012 (see [59] above), and ANZ ceased offering Breakfree ancillary benefits in relation to some products in the same year. 92 ANZ did not conduct a broader remediation of Breakfree ancillary benefits as part of MBORP because, for some products, available data did not appear to enable identification of affected customers and, for other products, there was limited evidence of customer detriment. ANZ made this decision on the condition that any customer who complained about errors in respect of Breakfree ancillary benefits would be remediated. 93 As with the Breakfree benefits, there were continuing issues associated with the Breakfree ancillary benefits despite changes made as part of MBORP. From 2013, ANZ was aware of the risk that opt-in discounts on insurance premiums and certain benefits associated with ANZ's financial planning services would not be applied according to their terms and conditions. At the time, ANZ considered that this risk was managed by existing processes and staff training. However, during this period, these benefits were not always being applied. 94 In about early 2018, ANZ began making inquiries into the application of Breakfree ancillary benefits. 95 On 16 August 2019, ANZ notified ASIC of the Breakfree ancillary benefits issues in writing as a breach required to be reported under s 912D of the Corporations Act. 96 ANZ has undertaken or will undertake the following rectification steps in relation to the Breakfree ancillary benefits offered to eligible customers after November 2012: (1) In July 2018, ANZ implemented enhanced controls that confirmed whether eligible customers had received financial planning benefits. (2) In June 2021, ANZ introduced an exception reporting control relating to some insurance benefits designed to detect instances of non-application of those benefits, which addressed the issue for customers affected from 1 January 2021 onwards. For any further instances of customers not receiving benefits that are detected each month, customers will have their premium adjusted within the month that they are identified. 97 At the time customers with grandfathered Breakfree ancillary benefits are remediated, and unless the Breakfree Package has been decommissioned by that time, ANZ intends to apply the relevant Breakfree ancillary benefits to their account and create a monitoring report to verify that they continue to receive the benefits until decommissioning. 98 ANZ began determining the scope for the remediation project in relation to Breakfree ancillary benefits in about October 2019. ANZ is conducting the remediation in cohorts focusing on an affected product or products. For all cohorts, the remediation will, as far as practicable, cover the period from March 2003 to the date the benefit is applied to the account or the benefit is no longer applicable. 99 ANZ has made the following remediation payments to two cohorts of customers: (1) approximately $8.37 million, including compensation reflecting the time value of money, to approximately 15,239 impacted accounts of customers who did not receive benefits in relation to waiver of their car loan establishment fee and were adversely affected between March 2003 and November 2012; and (2) approximately $5.97 million, including compensation reflecting the time value of money, to approximately 9,392 impacted accounts of personal loan customers who did not receive benefits in relation to their personal loan interest rate discount or loan approval fee or loan administration charge waivers. 100 ANZ estimates that a further $37.53 million (including compensation representing interest and the time value of money) will be paid to approximately 63,869 accounts that did not receive other Breakfree ancillary benefits. The estimated impact within the relevant period is accordingly $51.87 million, including interest and the time value of money, and the estimated impact during the penalty period was approximately $7 million to $14 million in relation to between 10,800 to 23,600 impacted accounts. 101 ANZ is targeting completion of the overall remediation program by late 2023. Detriment and remediation 102 As a result of the issues with the Breakfree Package, ANZ charged fees and interest in error to a total of 416,871 Breakfree customer accounts. During the Breakfree penalty period, customers holding 98,781 accounts were detrimentally affected in that they were charged a total of $26,446,536.14 in fees and interest that they should not have been charged. 103 ANZ has remediated, or will remediate, these customers a total amount of $147,769,901.19, inclusive of amounts charged in error, interest, and compensation reflecting the time value of money, as described above. Of this amount, approximately $9,230,000 was yet to be remediated as at the date of the statement of agreed facts. 104 In relation to the Breakfree ancillary benefits, as explained above, ANZ has remediated or will remediate an estimated 88,500 Breakfree customer accounts approximately $51.87 million inclusive of interest and the time value of money. 105 However, some adversely affected customers will not be remediated. As at 26 August 2021, ANZ has paid $22,083.74 to charity in respect of 177 accounts, comprising former customer accounts where ANZ was unable to locate an address of the customer, executor or administrator to which a cheque could be sent based on ANZ's records and/or inquiries of an external address validation agency, or where the customer no longer had an open, eligible ANZ account and the remediation amount was less than $5 (for remediation on or after 1 September 2019) or $15 (for remediation prior to 1 September 2019 and after 8 April 2021). 106 Finally, in some instances, as a result of time taken in ANZ's remediation program and limitations in data, impacted customers have yet to be remediated and may not receive payment until 2022 or 2023. It may not be possible for ANZ to identify (and therefore remediate) some affected customers at all. 107 The parties agreed that impacted Breakfree customers incurred financial loss (up until the date they were remediated) as a result of the contravening conduct because they did not have the benefit of the funds for which they were incorrectly charged. Admissions 108 The parties agreed that ANZ's failure to apply the Breakfree benefits as required by the Breakfree terms and conditions arose out of ANZ's continuing failure over the Breakfree relevant period to: (1) maintain adequate systems and processes to apply Breakfree benefits to customer accounts; and (2) conduct adequate monitoring or analysis of its systems and processes relating to the Breakfree Package and therefore not identifying in a timely way instances of customers not receiving Breakfree benefits. 109 In particular: (1) from about 2003, ANZ's systems and processes for setting up and administering the Breakfree Package were highly complex and substantially manual (and therefore susceptible to error); (2) the Breakfree Package had unclear and numerous benefits and eligibility criteria that were difficult to administer in an environment reliant on multiple systems and manual data entry; (3) ANZ's controls associated with the processes indicated a lack of "deep knowledge/understanding of the purpose of Breakfree exception reports", were substantially manual and not always applied, and were inadequate to prevent or detect errors in the application of Breakfree benefits; (4) ANZ failed to design or implement controls associated with the processes that were adequate to prevent or detect errors in the application of Breakfree benefits; (5) after ANZ identified issues with the application of Breakfree interest rate discounts in 2009, it did not successfully identify or address all scenarios in which customers were not receiving Breakfree benefits or implement processes adequate to ensure the correct application of Breakfree benefits over time; (6) between 2014 and March 2017, ANZ did not identify the continuation or recurrence of errors in the application of Breakfree benefits; and (7) in the four years after ANZ discovered, in March 2017, that a proportion of Breakfree customers were continuing not to receive Breakfree benefits, steps taken by ANZ to rectify its systems and processes failed to identify or address these instances comprehensively, with the consequence that a proportion of Breakfree customers continued not to receive Breakfree benefits until September 2021. 110 The parties agreed that, during the Breakfree relevant period: (1) on each occasion that ANZ issued the Breakfree contractual documents to a Breakfree customer who opened the Breakfree Package and who subsequently did not receive Breakfree benefits; and (2) on the first occasion during the Breakfree penalty period that ANZ sent an updated version of the Breakfree contractual documents to a Breakfree customer who was an existing Breakfree customer at the start of the Breakfree penalty period and who subsequently did not receive Breakfree benefits, ANZ made implied representations that it had, and would continue to have, adequate systems and processes in place to administer Breakfree benefits on relevant Breakfree products (as applicable) in accordance with the Breakfree contractual documents (collectively, the Breakfree representations), being 416,871 occasions during the Breakfree relevant period and 71,461 occasions during the Breakfree penalty period. (I note that the parties' position was that the Breakfree ancillary benefits issues were not the subject of separate contraventions of ss 12DA or 12DB.) 111 ANZ makes the following admissions: (1) The relevant Breakfree products were each a financial product within the meaning of s 12BAA of the ASIC Act and the Breakfree benefits were each a financial service within the meaning of s 12BAB(1)(g) of the ASIC Act. (2) The Breakfree representations were made in trade or commerce in connection with the supply of financial services, within the meaning of s 12DB(1) of the ASIC Act and s 12DA(1) of the ASIC Act. (3) The Breakfree representations each made implied representations that the services had benefits within the meaning of s 12DB(1)(e) of the ASIC Act. (4) Further to the matters referred to in [108]-[109] above, the Breakfree representations were false or misleading within the meaning of s 12DB(1)(e) of the ASIC Act and misleading or deceptive within the meaning of s 12DA(1) of the ASIC Act. (5) The Breakfree representations each made implied representations with respect to a future matter within the meaning of s 12BB(1) of the ASIC Act. They were misleading, within the meaning of s 12BB(1) of the ASIC Act, in that, by no later than the commencement of the Breakfree penalty period, and further to the matters referred to in [108]-[109] above, ANZ did not have reasonable grounds for making the representations. (6) By making each Breakfree representation, ANZ: (a) made a false and/or misleading representation in contravention of s 12DB(1)(e) of the ASIC Act; and (b) engaged in misleading or deceptive conduct, or conduct that was likely to mislead or deceive, in contravention of s 12DA(1) of the ASIC Act. (7) On each occasion that ANZ contravened s 12DA(1) of the ASIC Act and on each occasion that ANZ contravened s 12DB(1)(e) of the ASIC Act, as set out above at (6), ANZ breached its general obligation to comply with financial services laws in contravention of s 912A(1)(c) of the Corporations Act. (8) On each occasion that ANZ contravened s 12DA(1) of the ASIC Act and on each occasion that ANZ contravened s 12DB(1)(e) of the ASIC Act, as set out above at (6), ANZ breached its general obligation to comply with credit legislation in contravention of s 47(1)(d) of the NCCP Act. (9) By its conduct in: (a) failing to maintain adequate systems and processes to apply Breakfree benefits or Breakfree ancillary benefits to customer accounts; and (b) failing to conduct adequate monitoring or analysis of its systems and processes and therefore not identifying in a timely way instances of customers not receiving Breakfree benefits or Breakfree ancillary benefits, ANZ breached: (c) its obligation to do all things necessary to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly, and thereby contravened s 912A(1)(a) of the Corporations Act; and (d) its obligation to do all things necessary to ensure that the credit activities authorised by its Australian credit licence were engaged in efficiently, honestly and fairly, and thereby contravened s 47(1)(a) of the NCCP Act. Offset benefits issues Overview 112 The second of the two products relevant to this proceeding is ANZ's offset accounts. 113 The facts set out in this section "Offset benefits issues" relate to the periods from about the mid-1990s to 22 September 2020 (the offset relevant period) and between 10 December 2015 and 22 September 2020 (the offset penalty period). 114 As set out above, ANZ has offered offset accounts since the mid-1990s, with offset customers being entitled to offset benefits in the form of reductions in interest payable. Interest on loan accounts accrues daily and is applied at the end of each interest cycle period (typically monthly). Offset benefits also accrue daily in the "Product Set-off sub-system", which calculates the applicable offset benefit adjustment at the end of each business day (as described at [119] below). Accrued offset benefits are applied at the end of each interest cycle period to reduce the accrued interest on linked loan accounts. Any remaining accrued interest is capitalised to the loan. 115 In opening an offset account, each customer entered into a contract with ANZ, governed by ANZ's terms and conditions in relation to offset accounts and home or business loan accounts (the offset terms and conditions) set out in documents (the offset contractual documents) issued to customers. If ANZ amended the offset terms and conditions, offset customers were notified. 116 From the time that ANZ's offset products were first offered, its systems did not accurately calculate and apply the full extent of offset benefits to linked loan accounts in the following circumstances: (1) from the mid-1990s to 1 September 2019, balance changes on non-business days were not recognised when calculating offset benefit amounts on those days (the backdated transactions issue); (2) from the mid-1990s, offset benefits were rejected and did not flow to a customer in specific situations known as the loan balance is zero scenario, which affected customers until 17 August 2015, and the transaction amount invalid scenario, which affected customers until 7 May 2015 (together, the rejected transactions issue); and (3) from 8 May 2015 to 22 September 2020, after the rejected transactions issue was resolved by changes to ANZ's systems, in certain circumstances customers did not receive their offset benefits in whole or in part where a payment was made during an interest cycle which reduced the balance of the loan to zero and was sufficient to pay off some or all of the accrued interest (the accrued offset benefit issue), collectively, the offset benefits issues. 117 The offset benefits issues impacted all ANZ home and commercial lending products for which offset accounts were available over the offset relevant period. The affected products (relevant offset products) were identified in two schedules to the statement of agreed facts. ANZ conducted separate remediation programs in relation to each issue, and has paid remediation in tranches. Its practice is to notify customers of the issue at or around the time they receive their remediation payment. Each remediation program is described in further detail below. Backdated transactions issue 118 The backdated transactions issue arose from differences between the operation of ANZ's loan and offset account technological sub-systems. 119 ANZ has different sub-systems within its CAP system: (1) the Integrated Loans Processing sub-system (ILS) deals with loan accounts and calculates the interest due on the outstanding balance; (2) the Integrated Deposit sub-system (IDS) deals with offset accounts, processes transactions relating to offset accounts, and updates account balances; and (3) the Product Set-off sub-system (PSO) calculates the applicable offset benefit adjustment at the end of each business day using balances drawn from the IDS and ILS. 120 The differences in the operation of the three sub-systems meant that over the offset relevant period: (1) if a home or business loan customer made a deposit into an offset account on a non-business day, their offset benefit was calculated on the basis of the (lower) balance of the offset account on the business day prior to the deposit, until the next business day; and (2) conversely, if a customer made a withdrawal from their offset account on a non-business day, their offset benefit was calculated on the basis of the (higher) balance of the offset account on the business day prior to the withdrawal. 121 It was more common for customers to make withdrawals on non-business days. 122 There were certain other scenarios where transactions (including interest rate changes) on either a loan account or a linked offset account were backdated in that the sub-systems did not recognise that the effective date of the transaction was prior to the date on which it was posted by ANZ for the purpose of offset benefit calculations. ANZ addressed these issues by updating its offset contractual documents (see [129]-[130] below). Customers who were adversely impacted by these other scenarios were remediated as part of the remediation program. 123 In about October 2010, as a result of work undertaken as part of MBORP, ANZ became aware: (1) of the effect of backdated transactions on offset account balances, including that the lack of alignment between the sub-systems meant that transactions backdated on one system did not automatically flow through to the others; and (2) that an exception report existed that detected where manual adjustments might be required for backdated transactions, but it was not being used to identify and adjust entitlements. 124 Between about October and December 2010, ANZ considered implementing an automated solution to address the backdated transactions issue as part of MBORP. However, in December 2010, based on an analysis of a sample of data, ANZ understood that "99% of transactions worked in the customer's favour, and the impact of the interest calculation was likely to be immaterial". On that basis, it decided that no further action was required and it did not take further steps to investigate or address the issue. Attendees at the meeting at which this decision was made included senior members of the Home Loans, Compliance and Retail Products teams. 125 ANZ, through MBORP, considered the impact of the backdated transactions issue on two further occasions in 2011 and 2013, in the context of designing a remediation program for customers whose offset accounts were not being properly linked to an eligible loan, but this did not lead ANZ to take any further steps to prevent recurrence of the issue. In February 2013, ANZ decided to pay additional remediation of approximately $1.80 to each adversely impacted customer in the remediation program because of the backdated transactions issue, reflecting an estimate of the benefit a customer might have received as a result of backdated transactions that worked in their favour, had their offset account been linked to their loan. 126 In about 2014, ANZ engaged an external legal adviser to conduct a privileged review of parts of its systems against certain terms and conditions relating to certain products. ANZ received a report from the review in May 2016. ANZ then undertook further investigations. 127 The backdated transactions issue was identified in or about May 2016. On 16 October 2017, ANZ notified ASIC of the matter in writing as a breach required to be reported under s 912D of the Corporations Act. 128 ANZ has implemented two changes to address the backdated transactions issue. 129 First, ANZ updated the offset terms and conditions to include the following: You should note that, for the purposes of calculating the offset amount for any given day, a transaction will be treated as effective on the date on which it is processed to your ANZ Home Loan Offset account or your linked ANZ loan, as applicable, unless we determine otherwise. 130 ANZ notified existing customers of this update between May and July 2019, and it took effect from 1 July 2019 for new customers and 2 September 2019 for existing customers. Thereafter and until 2 June 2020, the relevant systems continued to calculate a customer's offset amount in the same manner described at [120] above. 131 Secondly, ANZ commenced designing a system change in about March 2018, which was tested on 20 staff accounts and 2,500 external customer accounts in two pilot programs rolled out in May and August 2019. On 2 June 2020, ANZ implemented the system change across all customer cohorts. This enhanced the PSO so that any backdated transaction on an offset or loan account was reviewed on the next business day to determine whether the offset benefit applied to a customer's loan account needed to be adjusted. Following this review, an interest adjustment was generated for the transaction to ensure that, at the next interest charge date, any interest charged accurately reflected the full amount of the customer's offset benefit. 132 ANZ also implemented an exception report on 2 June 2020 to monitor the system change and verify that it was working. It identified one possible case related to backdated transactions, which resulted in $1.82 being remediated to the customer. ANZ has now made a system enhancement to cater for this scenario. 133 As to remediation, ANZ began determining a proposed remediation scope in about February 2019, and commenced remediation of the first cohort of customers in about June 2020. 134 Unless a customer's account was closed between 30 March 2009 and 30 June 2009 (inclusive), ANZ remediated customers impacted by the backdated transactions issue between 30 March 2009 and 1 September 2019. 135 ANZ has not identified data which would enable the remediation of impacted customers prior to 30 March 2009. As a result, ANZ cannot identify customers who were impacted by the backdated transactions issue from the mid-1990s to 29 March 2009, and who did not receive offset benefits as a result, nor can it estimate the loss to such customers or remediate them. 136 ANZ has not remediated customers impacted after 1 September 2019 on the basis that the updated terms and conditions became effective for existing customers on 2 September 2019. 137 ANZ estimates that approximately 964,000 customer accounts were potentially affected by the backdated transactions issue between 30 March 2009 and 1 September 2019, of which 134,671 did not have offset benefits applied in circumstances where they should have been applied. The remaining accounts were impacted by the backdated transactions issue in a favourable or neutral way, as in the case of accounts falling within the scenario set out at [120(2)] above. 138 On 31 August 2021, ANZ completed remediating the last tranche of impacted customers. It has made payments totalling $4,158,320.43 to 134,671 adversely impacted accounts, including compensation reflecting the time value of money. 139 As at 26 August 2021, ANZ has paid $18,977.83 to charity in respect of 13,921 accounts, comprising 21 former customer accounts where ANZ was unable to locate an address of the customer, executor or administrator to which a cheque could be sent based on ANZ's records and/or inquiries of an external address validation agency and 13,900 accounts where the customer no longer had an open, eligible ANZ account and the remediation amount was less than $5. It has also paid, or will pay, $20,413.84 to ASIC's "unclaimed money" in respect of 329 accounts for deregistered companies Rejected transactions issue 140 The rejected transactions issue arose from differences in the processing patterns of the ILS and PSO over the offset relevant period, which resulted in offset benefits being "rejected" and not offsetting interest on the linked loan account for a particular interest cycle. This arose in two scenarios, known as the transaction amount invalid scenario and loan balance is zero scenario. 141 ANZ notified ASIC of the rejected transactions issue in writing on 16 October 2017 as a breach required to be reported under s 912D of the Corporations Act. 142 The transaction amount invalid scenario arose in certain circumstances, prior to 8 May 2015, where a customer's offset benefit was greater than or equal to the amount of the calculated interest on their loan for the relevant interest cycle period. This principally arose where: (1) monthly interest was due to be charged on a business day following a weekend or public holiday; (2) a customer made a repayment on a non-business day before interest was charged; and (3) the loan balance was either fully offset by the balance in the offset account or the offset benefit exceeded the calculated interest after the repayment was taken into account. 143 But the issue could also arise in other circumstances. The additional scenarios which ANZ identified were where a customer's offset benefit was greater than or equal to the amount of the calculated interest on their loan: (1) due to a backdated credit transaction to a loan account, including a loan payment or repayment; (2) due to a backdated interest rate change or interest adjustment which affected the amount of interest accrued; or (3) in circumstances where the loan balance was reduced to zero due to a payment and then increased to a positive balance during the same interest cycle. 144 In all these circumstances, the full amount of the offset benefit adjustment was rejected by ANZ's systems and no offset benefit adjustment was applied for that interest cycle. 145 Prior to 9 May 2015, where an account was affected by the transaction amount invalid issue, ANZ had a process where a staff member would check an automatically generated rejected transaction report and manually apply interest adjustments to ensure customers received their full offset benefit. In approximately 87% of instances across the remediation period for the transaction amount invalid issue, this resulted in ANZ identifying and applying an adjustment equal to the interest charged in error. The estimated average amount refunded when the adjustment was applied is $482.39. There was no equivalent process in place for the loan balance is zero scenario. 146 The loan balance is zero scenario arose, prior to 18 August 2015, where a customer paid down to zero a home or business loan balance during an interest cycle but did not close the loan account. The ILS would check for a loan balance prior to applying the customer's offset benefit and, because the loan balance was zero, it would not apply the offset benefit to the accrued interest for the part of the month when there had been a loan balance (that is, before it was paid down to zero). That interest was then capitalised to the loan at the end of the interest cycle. 147 ANZ implemented two system changes in 2015 that resolved the rejected transactions issue: (1) on 8 May, ANZ implemented a system change as part of an initiative to automate the interest offset accrual process, which resulted in transactions no longer being rejected after that date in the transaction amount invalid scenario; and (2) on 18 August, ANZ implemented a system change to address issues with the May system change by removing a loan balance check, which resulted in transactions no longer being rejected in the loan balance is zero scenario. 148 While these system changes had the effect of addressing both rejected transactions issues, they were not directed to addressing these issues and ANZ was not aware of the issues at the time. The rejected transactions issue was only identified in May 2016. 149 In about 2018, ANZ conducted an investigation that concluded that there had been no recurrence of the two rejected transactions errors following the 2015 system changes. 150 Between February and April 2018, ANZ commenced determining the scope of the remediation program, and commenced remediation to the first cohort of customers in November that year. On 29 July 2020, ANZ completed its remediation for affected customers within the scope of the program. 151 ANZ has remediated all customers identified in a rejected transactions report produced by CAP. It has remediated customers affected by the rejected transactions issue in the seven years prior to the effective date of the two system changes, being the period it identified having regard to its record-keeping obligations under the Corporations Act and ASIC's Regulatory Guide 256 – Client review and remediation conducted by advice licensees. Based on this scope, ANZ has remediated customer accounts adversely affected between 1 May 2008 and 8 May 2015 for the transaction amount invalid scenario, and between 1 August 2008 and 18 August 2015 for the loan balance is zero scenario. It has made payments totalling $5,121,588.11 to 32,999 customer accounts adversely affected. 152 ANZ has not identified data that can be used to identify customers adversely impacted by the rejected transactions issue prior to 19 September 2003. As a result, ANZ is unable to estimate the loss to impacted customers from the mid-1990s to 19 September 2003. 153 As at 26 August 2021, ANZ has paid $91,731.36 to charity in respect of 4,330 accounts, including for former customer accounts where ANZ was unable to locate an address of the customer, executor or administrator to which a cheque could be sent based on ANZ's records and/or inquiries of an external address validation agency, where the customer no longer had an open, eligible ANZ account and the remediation amount was less than $5, or where a cheque sent by ANZ had been unpresented after at least 15 months and the remediation amount was less than $500. It has also paid, or will pay, $164,957.55 to ASIC's unclaimed money in respect of 146 accounts for deregistered companies and accounts where cheques sent by ANZ have been unpresented after at least 15 months and the remediation amount is at least $500. Accrued offset benefit issue 154 The 2015 system changes meant that offset benefits were no longer entirely rejected in the backdated transaction and loan balance is zero scenarios, and were no longer reported in ANZ's report on the rejected transactions issue. However, customers still did not receive all or part of their offset benefits in specific scenarios where interest was capitalised to a loan out of the ordinary interest cycle for the account. The scenarios were where: (1) a customer made a payment that was sufficient to pay down the loan and accrued interest mid-cycle in part (in which case interest was capitalised out of cycle to the extent of the part payment); and (2) the payment was sufficient to pay down the loan and all the accrued interest. 155 In those scenarios, the CAP system did not apply the offset benefit when interest was capitalised to the loan out of cycle. At the end of the interest cycle, the offset benefit was only applied to any accrued interest that remained unpaid. The customer therefore did not receive some (for scenario (1)) or all (for scenario (2)) of the offset benefit. The balance of the accrued offset benefit was not applied or otherwise credited back to customers, even though they would have received an offset benefit equal to the full accrued offset benefit (up to the amount of accrued interest prior to partial payment) had no payment been made mid-cycle. These scenarios principally arose where customers made the payment without the assistance of staff. 156 Some customers also did not receive offset benefits as a result of errors when staff manually processed loan renewals, payouts, and other processes using the same CAP systems. Some customers who contacted ANZ to arrange the payout or renewal of their loan did not receive their full offset benefit if a staff member did not follow the correct steps when renewing a loan or assisting a customer to pay out a loan. In these circumstances, ANZ's systems and processes either did not automatically apply, or did not prevent or correct a staff member's failure to apply, the correct accrued offset benefit. 157 Following the first system change (see [147(1)] above), from 8 May 2015 to 18 August 2015 the accrued offset benefit issue only arose where the customer's loan account had a non-zero balance at the end of the interest cycle. Where the account had a zero balance, the entire offset benefit was rejected (by reason of the loan balance is zero scenario). 158 Following the second system change (see [147(2)] above), from 18 August 2015, the accrued offset benefit issue also arose where the customer's loan account had a zero balance at the end of the interest cycle, so that instead of the entire offset benefit being rejected by reason of the zero balance, the offset benefit would not be applied to the extent the accrued interest had been paid by the customer mid-cycle (as part of a payment that paid the loan balance down to zero). 159 ANZ's system testing in relation to the changes to CAP in May and August 2015 did not identify the accrued offset benefit issue. 160 Between June 2016 and October 2019, ANZ received six customer complaints in relation to the incorrect application of offset benefits. ANZ did not conduct further investigations to determine if the issue was systemic or whether other accounts had been adversely affected. 161 In about 2018, ANZ undertook an investigation to confirm the effectiveness of the 2015 system changes, but this was not designed to, and did not, identify the accrued offset benefit issue. 162 ANZ identified the accrued offset benefit issue following an increase in the number of imbalances in CAP's general ledger, which was first observed on about 19 February 2019 during routine general ledger checks. The increase was caused by a change in system parameters, unrelated to offset benefits, before which the occurrence of the accrued offset benefit issue would not have been expected to cause a ledger imbalance. 163 Between February and April 2019, ANZ undertook work to understand the cause of the imbalances and develop a solution. Between April and November 2019, ANZ undertook further investigations into the accrued offset benefit issue to understand its cause and potential customer impact. 164 ANZ notified ASIC of the accrued offset benefit issue in writing on 15 November 2019 as a breach required to be reported under s 912D of the Corporations Act. 165 Between November 2019 and February 2020, ANZ designed an exception report to be used as part of an "interim solution" for the accrued offset benefit issue, which it implemented on 23 September 2020. It initially ran the report weekly to detect new instances of the accrued offset benefit issue and enable the manual processing of a reimbursement. The exception report is now run fortnightly as a check that no further accrued offset benefit issues have occurred. 166 ANZ has also implemented changes to the coding of CAP so that the offset benefit will be applied to accrued interest in both renewal and loan payout scenarios. This system solution was implemented for loan renewals on 30 October 2020 and 4 December 2020. 167 The system solution implemented on 30 October 2020 enhanced CAP so that it automatically applied the offset benefit where a loan was renewed and given a new account number, which had the effect of reducing occurrences of the accrued offset benefit issue where staff failed to apply some or all of the offset benefit in this scenario. 168 The system solution implemented on 4 December 2020 fixed an issue that arose from the implementation of the system change to address the backdated transactions issue. This system solution also addressed the remaining occurrences of the accrued offset benefit issue, which arose when ANZ staff failed to apply some or all of the offset benefits to accrued interest on a loan prior to renewing the loan. 169 The system solution was implemented for loan payout scenarios on 18 June 2021 and took effect on 19 June 2021. This fix addressed the manual errors described at [156] above by automating the application of offset benefits through CAP in certain circumstances and by preventing ANZ staff from completing manual processes in CAP until an offset benefit had been fully applied. 170 Since the implementation of the June 2021 system change, the exception report has detected seven instances where a customer has not received the correct offset benefit in an infrequent scenario where the customer pays out their loan on a non-business day, and the customer's offset account needs to be de-linked from their loan and the offset benefit is manually applied the next business day as part of this process. In this scenario, the offset benefit is manually applied after interest has already capitalised to the loan such that interest is not reduced by the applicable offset benefit. Customers affected by this scenario are identified via the exception report and refunded within a short time. As at 16 November 2021, seven customers have been affected by this scenario and refunded a total of $806.25 via the interim solution. ANZ has informed ASIC that it will continue to use the interim solution to monitor the system changes and verify that they are working. ANZ intends to remediate all adversely impacted customers identified through the interim solution, regardless of the cause of the overcharging. 171 In around March 2020, ANZ commenced determining the scope of the remediation program. In September 2020, ANZ paid remediation to the first cohort of adversely affected customers. ANZ completed the final remediation payment run on 30 July 2021. 172 Overall, ANZ has made payments totalling $2,593,130.07, including compensation reflecting the time value of money, to 16,058 customer accounts not including amounts paid into customer accounts as reimbursements under the interim solution. Through the interim solution, as at 24 August 2021, ANZ has refunded $266,938.49 to 3,546 customer accounts impacted prior to the implementation of the final system change on 18 June 2021. 173 ANZ has also paid $85,064.39 to charity in respect of 1,128 accounts, including for former customer accounts where ANZ was unable to locate an address of the customer, executor or administrator to which a cheque could be sent based on ANZ's records and/or inquiries of an external address validation agency, or where the customer no longer had an open, eligible ANZ account and the remediation amount was less than $5. It has also paid $11,887.29 to ASIC's unclaimed money in respect of 14 accounts. Detriment and remediation 174 As a result of the matters referred to above, offset customers holding 183,728 accounts were detrimentally affected in that they were charged interest on loans in circumstances where they should not have been because of their entitlement to offset benefits. ANZ charged $9,017,326 in interest in error to a total of 183,728 accounts, and has remediated these customers a total of $11,873,038.61, inclusive of interest and compensation reflecting the time value of money, as described above (although some adversely affected customers were not remediated because ANZ was unable to source contact details). 175 During the offset penalty period, offset customers holding 82,178 accounts were detrimentally affected in that they were charged a total of $3,125,524.08 in interest that they should not have been charged because of their entitlement to offset benefits. 176 The parties agreed that offset customers incurred financial loss (up until the date they were remediated) as a result of the contravening conduct because they did not have the benefit of the funds for which they were incorrectly charged. Admissions 177 The parties agreed that the errors in administering the offset benefits arose out of ANZ's failure over the offset relevant period to: (1) maintain adequate systems and processes to apply offset benefits to adversely impacted offset customers; and (2) conduct adequate monitoring or analysis of its systems and processes to identify in a timely way instances of adversely impacted offset customers not receiving offset benefits. 178 In particular, in relation to: (1) the backdated transactions issue: (a) from at least 2010, ANZ knew that backdated transactions were not automatically processed and that a backdated transactions exception report existed but was not being used to adjust a customer's offset benefit to reflect the effective date of transactions; (b) ANZ did not take action to refund adversely impacted customers based on the information generated by its backdated transactions exception report or, after identifying that ANZ staff were not acting on the report, implement any other process to identify and address backdated transactions that resulted in customers not receiving the full extent of their offset benefits; (c) ANZ did not identify the issue until May 2016; and (d) ANZ did not introduce a change to the offset terms and conditions to address the backdated transactions issue until July 2019 for new customers and September 2019 for existing customers, and did not implement a system change to prevent the recurrence of the backdated transactions issue until June 2020; (2) the rejected transactions issue: (a) in approximately 13% of cases from 2008 onwards, ANZ did not have a fully effective process for identifying and refunding offset customers who were affected by the transaction amount invalid scenario; (b) ANZ did not have any process to identify instances where offset customers were affected by the loan balance is zero scenario; (c) ANZ's system changes in May 2015 and August 2015 that had the effect of resolving the rejected transactions issue also resulted in a proportion of offset customers continuing not to receive offset benefits as a result of the accrued offset benefit issue; and (d) ANZ did not identify the issue until May 2016; (3) both the backdated transactions and rejected transactions issues: (a) since the mid-1990s, ANZ's systems did not always correctly administer offset benefits; (b) in the period between July 2009 and 2014, ANZ did not undertake any audits or reviews to identify whether ANZ's sub-systems were operating together properly to apply offset benefits to offset customers in accordance with the offset terms and conditions; and (c) it would have been difficult for customers to identify that they had been overcharged interest in circumstances where the calculation of offset benefits is technical and customers typically rely on their institutions to correctly calculate and apply the benefit each month; (4) the accrued offset benefit issue: (a) ANZ did not undertake any testing of the system changes implemented in May 2015 and August 2015 that could have identified the accrued offset benefit issue at the time it arose in May 2015, or shortly thereafter; and (b) ANZ did not identify the issue until 2019. 179 The parties agreed that, during the offset relevant period: (1) on each occasion that ANZ issued the offset contractual documents to a customer who opened an offset account and who subsequently did not receive offset benefits to which the customer was entitled under the offset contractual documents; and (2) on the first occasion during the offset penalty period that ANZ sent an updated version of the offset contractual documents to an offset customer who was an existing offset customer at the start of the offset penalty period and who subsequently did not receive offset benefits, ANZ made implied representations that it had, and would continue to have, adequate systems and processes to administer offset benefits on relevant offset products (as applicable) in accordance with the offset contractual documents (collectively, the offset representations), being 183,728 occasions during the offset relevant period and 84,407 occasions during the offset penalty period. 180 ANZ makes the following admissions: (1) The relevant offset products were each a financial product within the meaning of s 12BAA of the ASIC Act and the offset benefits were each a financial service within the meaning of s 12BAB(1)(g) of the ASIC Act. (2) The offset representations were made in trade or commerce in connection with the supply of financial services, within the meaning of s 12DB(1) of the ASIC Act and s 12DA(1) of the ASIC Act. (3) The offset representations each made implied representations that the services had benefits within the meaning of s 12DB(1)(e) of the ASIC Act. (4) Further to the matters referred to in [177]-[178] above, the offset representations were false or misleading within the meaning of s 12DB(1)(e) of the ASIC Act and misleading or deceptive within the meaning of s 12DA(1) of the ASIC Act. (5) The offset representations each made implied representations with respect to a future matter within the meaning of s 12BB(1) of the ASIC Act. They were misleading, within the meaning of s 12BB(1) of the ASIC Act, in that, by no later than the commencement of the offset penalty period, and further to the matters referred to in [177]-[178] above, ANZ did not have reasonable grounds for making the representations. (6) By making each offset representation, ANZ: (a) made a false and/or misleading representation in contravention of s 12DB(1)(e) of the ASIC Act; and (b) engaged in misleading or deceptive conduct, or conduct that was likely to mislead or deceive, in contravention of s 12DA(1) of the ASIC Act. (7) On each occasion that ANZ contravened s 12DA(1) of the ASIC Act and on each occasion that ANZ contravened s 12DB(1)(e) of the ASIC Act, as set out above at (6), ANZ breached its general obligation to comply with financial services laws in contravention of s 912A(1)(c) of the Corporations Act. (8) On each occasion that ANZ contravened s 12DA(1) of the ASIC Act and on each occasion that ANZ contravened s 12DB(1)(e) of the ASIC Act, as set out above at (6), ANZ breached its general obligation to comply with credit legislation in contravention of s 47(1)(d) of the NCCP Act. (9) By its conduct in: (a) failing to maintain adequate systems and processes to apply offset benefits to adversely impacted offset customer accounts; and (b) failing to conduct adequate monitoring or analysis of its systems and processes and therefore not identifying in a timely way instances of adversely impacted offset customers not receiving offset benefits, ANZ breached: (c) its obligation to do all things necessary to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly, and thereby contravened s 912A(1)(a) of the Corporations Act; and (d) its obligation to do all things necessary to ensure that the credit activities authorised by its Australian credit licence were engaged in efficiently, honestly and fairly, and thereby contravened s 47(1)(a) of the NCCP Act. DECLARATIONS 181 By its originating application, ASIC sought, and ANZ consented to, declarations under s 21 of the Federal Court of Australia Act 1976 (Cth), which are broadly speaking, declarations that ANZ contravened: (1) ss 12DA(1) and 12DB(1)(e) of the ASIC Act during the penalty period in respect of present and future matters; (2) s 912A(1)(c) of the Corporations Act and s 47(1)(d) of the NCCP Act on each occasion that ANZ contravened ss 12DA(1) and 12DB(1)(e) of the ASIC Act; and (3) s 912A(1)(a) of the Corporations Act and s 47(1)(a) of the NCCP Act during the penalty period by failing to maintain adequate systems and processes to apply the Breakfree benefits, Breakfree ancillary benefits and offset benefits to customer accounts, and by failing to conduct adequate monitoring or analysis of its systems and processes and therefore not identifying in a timely way instances of customers not receiving Breakfree benefits, Breakfree ancillary benefits and offset benefits. 182 The declarations are limited to the period falling within the respective penalty periods, being any conduct that occurred 6 years before the commencement of the proceeding. 183 Section 21 of the Federal Court Act confers a broad power on this court to make declarations. 184 While the power is discretionary, it should, in general, only be exercised where: (1) the question is real and not theoretical; (2) the person raising it has a real interest to raise it; and (3) there is a proper contradictor, being someone who has a true interest to oppose the declaration. See Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-438 (Gibbs J, as his Honour then was), citing Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448. 185 As the parties submitted, those requirements are all satisfied in the current case. The questions in issue – whether ANZ contravened particular statutory provisions – are real and not theoretical. ASIC has a real interest in raising these issues in the performance of its statutory powers and functions, and in pursuance of its statutory obligations. See s 1(2)(g) of the ASIC Act. And ANZ is a proper contradictor, despite the fact that it consents to the making of the declarations, as it has a true interest in opposing the making of the declarations. See Australian Securities and Investments Commission v Westpac Banking Corporation (The Consumer Credit Insurance Case) [2022] FCA 359; (2022) 158 ACSR 647 at 657 [65] (Katzmann J) and the cases cited therein. 186 The making of declarations should also have some utility. See Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at 92 [95] (Gummow, Hayne and Heydon JJ). The parties submitted, and I accept, that the declarations have utility because they will: (1) set out the basis on which the court determined ANZ's liability and the penalties imposed; (2) record the court's disapproval of the contravening conduct; (3) vindicate ASIC's claim that a party contravened the provisions; (4) assist ASIC in carrying out the duties conferred on it under the ASIC Act, Corporations Act, and NCCP Act; and (5) deter others from contravening the provisions. 187 For those reasons, in my view, it is appropriate in the circumstances of this case to make the declarations in the terms sought by ASIC, and to which ANZ consented. PENALTY Relevant principles 188 ASIC sought, and ANZ consented to, an order that ANZ pay a pecuniary penalty of $25 million for the admitted contraventions of s 12DB(1)(e) of the ASIC Act during the penalty period. 189 The maximum penalty available is relevant to a consideration of pecuniary penalties. As set out above, s 12GBA(3) provided that the pecuniary penalty payable for a breach of s 12DB must not exceed, relevantly, 10,000 penalty units. The value of a penalty unit, as fixed under s 4AA(1) of the Crimes Act 1914 (Cth) and subject to indexation under s 4AA(3), was relevantly as follows: (1) $180 for the period 1 December 2015 to 30 June 2018; (2) $210 for the period 1 July 2018 to 30 June 2020; and (3) $222.96 for the period 1 July 2020 to 30 September 2021. 190 Applying s 12GBA and the penalty unit amount in s 4AA(1) to the number of admitted contraventions during the penalty period (a total of 155,868 – see [110] and [179] above) on the basis of s 12GBA(3) as in force before 13 March 2019, the maximum value of each contravention is $1.8 million to approximately $2.2 million (depending on when the contravention occurred). Therefore the maximum penalty for 155,868 contraventions is between approximately $280 billion and $347 billion. However, the maximum penalty simply provides a "yardstick" to be taken into account with all other relevant factors, particularly where, as in this case, there are a large number of contraventions over a lengthy period of time. See Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 at 63 [154]-[157] (Jagot, Yates and Bromwich JJ). 191 As I say, ASIC did not seek any civil penalty in relation to the breaches of s 912A(1)(a) of the Corporations Act or s 47(1)(a) of the NCCP Act (which are now civil penalty provisions). However, as the parties submitted and I accept, the facts that gave rise to the contraventions of ss 912A(1)(a) and 47(1)(a) may be taken into account when considering the penalty for the contraventions of s 12DB insofar as they are a feature of that contravening conduct and inform the nature and seriousness of the contraventions. See Australian Securities and Investments Commission v National Australia Bank Ltd [2021] FCA 1013 at [84] (Davies J). 192 The parties agreed that a penalty of $25 million is appropriate in the circumstances of the case, having regard to: (1) the length of time over which the conduct occurred, the number of customers affected, the extent of the impact on customers in terms of benefits not received, ANZ's size, and the benefit it obtained from the conduct at the time; and (2) ANZ's remediation program, the steps ANZ has taken to improve its systems, the lack of deliberate conduct, and ANZ's constructive engagement with ASIC. 193 There is a public interest in the courts giving effect to consent orders in civil penalty proceedings and promoting their negotiated resolution. And as the High Court said in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at 496 [28] (French CJ, Kiefel, Bell, Nettle and Gordon JJ), the question in setting an appropriate penalty is not whether the court itself would have come to the precise amount agreed by the parties, but rather, whether the agreed penalty can be accepted as fixing an appropriate penalty. The court is not bound by the figure that has been agreed by the parties, but should ask itself whether it will fall in the permissible range of penalties within which no particular figure can necessarily be said to be more appropriate than another, having considered all the relevant facts and consequences of the contravention and the contravener's circumstances. Where the parties have reached an agreement and the court is persuaded that the agreed penalty is appropriate, it is highly desirable for the court to impose the proposed penalty to promote predictability in civil penalty proceedings, which assists in avoiding complex and lengthy litigation. See Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission (2021) 284 FCR 24 at 44-45 [126]-[127] (Wigney, Beach and O'Bryan JJ). 194 Section 12GBA(2) of the ASIC Act requires the court, in determining the appropriate penalty for a contravention of s 12DB, to have regard to all relevant matters including: (a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and (b) the circumstances in which the act or omission took place; and (c) whether the person has previously been found by the Court in proceedings under this Subdivision to have engaged in any similar conduct. 195 The authorities establish a range of other matters relevant to determining the appropriate penalty for a contravention. The factors discussed in the authorities are not exhaustive, nor are they necessarily relevant or important in every case. It is for the court in each proceeding to consider all relevant circumstances in arriving at an appropriate penalty. See, by way of example only, Australian Securities and Investments Commission v Westpac Banking Corporation [2019] FCA 2147 at [256]-[260] (Wigney J) and the cases cited therein. 196 The parties submitted, and I accept, that the following considerations are relevant in this case in addition to those set out in s 12GBA(2): (1) the size and financial position of the contravening company; (2) the deliberateness of the contravention and the period over which it extended; (3) whether the contravention arose out of the conduct of senior management or at a lower level; (4) whether the contravener 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; (5) whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention and taken steps to remediate; (6) the extent of any profit or benefit derived as a result of the contravention; and (7) whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time. See, by way of example only, Australian Securities and Investments Commission v Westpac Banking Corporation [2019] FCA 2147 at [256]-[260] (Wigney J) and the cases cited therein. 197 In weighing the above considerations, the court must have regard to the primary purpose of civil penalties, which is deterrence. As the High Court said in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 96 ALJR 426 at 431 [9] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ): … Under the civil penalty regime provided by the [Fair Work Act 2009 (Cth)], the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act. In that context, the penalties fixed by the primary judge were appropriate because they were no more than might be considered to be reasonably necessary to deter further contraventions of a like kind by Mr Pattinson, the CFMMEU or others. They represented a reasonable assessment of what was necessary to make the continuation of the CFMMEU's non-compliance with the law, amply demonstrated by the history of its contraventions, too expensive to maintain. 198 The High Court's findings in relation to the Fair Work Act 2009 (Cth) are similarly applicable to the civil penalties under the ASIC Act. See, by way of example only, The Consumer Credit Insurance Case [2022] FCA 359; (2022) 158 ACSR 647 at 659-660 [78] (Katzmann J). Both general and specific deterrence "must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct". See Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [65] (French CJ, Crennan, Bell and Keane JJ). 199 Finally, as the parties correctly submitted, the court should have regard to the "course of conduct" and "totality" principles, which I shall discuss further below. 200 I should also add one point that was raised during the course of oral submissions at the hearing on 4 May 2022 regarding the relevance of conduct which occurred before the penalty period in determining the question of penalty. It was submitted by Mr S Couper QC, who appeared with Ms J Fumberger for ASIC, that this was relevant because, on the one hand, it indicated that "there was a failure to take steps before the penalty period commenced … and that failure continued" and, on the other, ANZ had not confined its remediation to the penalty period which "might be described as neutralising the view one might take of the duration of the conduct". 201 I accept that submission. If such conduct were not relevant to the consideration of penalty, then a contravener could theoretically limit remediation to the six year penalty period with no adverse consequences, even where, as is the case here, the contravening conduct continued for decades. And previous authorities have treated the facts and circumstances surrounding contravening conduct prior to the penalty period as relevant. See, by way of example only, Australian Securities and Investments Commission v Commonwealth Bank of Australia [2020] FCA 790 (Beach J). Accordingly, I have had regard to all the facts and circumstances during the relevant period in considering the question of penalty below. Application 202 I will take each matter I have referred to above in turn. The nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, and the circumstances in which the act or omission took place – ss 12GBA(2)(a)-(b) 203 As the parties submitted, and as is clear from the facts set out above, the nature and extent of the contraventions was such that they occurred over a substantial period of time and affected a large number of customers, leading to a significant amount of money needing to be remediated. There was also significant delay in identifying impacted customers, and therefore remediating them. Although the nature of the acts or omissions comprising the contraventions was that of inadvertence, the conduct continued as long as it did because of inadequacies within ANZ's systems, which were compounded by inaction or ineffective action. 204 In relation to the Breakfree benefits, the parties submitted that the following circumstances are relevant: (1) ANZ's systems for Breakfree benefits were substantially reliant on manual inputs that were susceptible to human error and subject to controls that were incompletely understood and inconsistently applied; (2) although ANZ made enhancements to its systems, these did not identify or fix all the underlying issues leading to incorrect application of benefits; (3) between 2013 and 2017, ANZ did not establish periodic reviews or audits to evaluate or assess the administration of the Breakfree Package; (4) in 2010 and 2011, after it became aware of issues with the Breakfree Package, ANZ considered whether to invest in an automated solution, but did not do so because it did not consider it necessary; and (5) between 2012 and 2013, ANZ implemented a number of changes, but these were ineffective and issues continued until 2021. 205 For the offset benefits, the parties submitted that the following circumstances are relevant: (1) ANZ's differing systems for calculating interest on loans, processing transactions, and calculating offset benefits did not interact in a way such that the offset benefits were consistently applied, and ANZ had no adequate process for effectively identifying and addressing these instances; (2) ANZ did not identify the issues until May 2016, by which time some errors had been ongoing for about 20 years; (3) between July 2009 and 2014, ANZ did not undertake any audits or reviews to identify whether its systems were operating together correctly to apply offset benefits; and (4) it would have been difficult for customers to identify that they had been overcharged interest, as customers typically rely on their institutions to correctly calculate and apply the benefit. 206 As for the amount of loss or damage suffered, the parties agreed that during the relevant period, ANZ's conduct affected: (1) for Breakfree customers, approximately 505,371 accounts with approximately $199,639,901.19 paid or to be paid in remediation; and (2) for offset customers, approximately 183,728 accounts, with ANZ having paid $11,873,038.61 in remediation. 207 For the penalty period, ANZ's conduct affected: (1) 98,781 Breakfree customer accounts with remediation of $30,207,581.31 (inclusive of interest and compensation reflecting the time value of money), causing 71,461 contraventions of ss 12DA(1) and 12DB(1)(e) of the ASIC Act. When including the Breakfree ancillary benefits issues (which, though not the subject of separate contraventions of ss 12DA(1) or 12DB(1)(e), the parties submitted are relevant to penalty), the Breakfree benefits issues are estimated to have affected approximately 109,581 to 122,381 customer accounts with a corresponding estimated remediation amount of approximately $37.2 million to $44.2 million. (2) 82,178 offset customer accounts with remediation of $3,606,027.16 (inclusive of interest and compensation reflecting the time value of money) causing 84,407 contraventions of ss 12DA(1) and 12DB(1)(e) of the ASIC Act. (3) 180,959 customer accounts in total, with remediation of $33,813,608.47 (inclusive of interest and compensation reflecting the time value of money), causing 155,868 contraventions of ss 12DA(1) and 12DB(1)(e) of the ASIC Act. When the Breakfree ancillary benefits issues are included, the conduct affected, in total, approximately 191,759 to 204,559 customer accounts corresponding to a remediation amount of $40.8 million to $47.8 million. 208 I accept that the nature of ANZ's conduct was not deliberate, but inadvertent, and a result of inadequate systems and processes. At times, the contravening conduct was also a result of inaction on the part of ANZ in failing to consider or investigate more effective checks and controls. However, even inadvertent errors can be serious, and the deterrent nature of civil penalties must be borne in mind. As Wheelahan J observed in Australian Securities and Investments Commission v BT Funds Management Ltd [2021] FCA 844 at [43]: Inadvertent system errors which have the capacity to cause undetected losses of the kind that occurred here are serious. That is particularly so when during the period relevant to this proceeding the errors went undetected for a period of over two years until one customer challenged the charging of an adviser fee. Financial services providers in the position of the defendants should not be able to take the benefits which arise from automated and offshore processes and systems, which it may be inferred contribute to substantial profits, without also undertaking the burden of ensuring that those systems work, and that they promptly identify occasions where they do not. An appropriate penalty should have the effect of deterring the defendants, and financial services providers generally, from maintaining defective systems, and conversely, providing an incentive to establish and maintain systems that are reliable. 209 While inadvertent, the nature of ANZ's conduct was vast, with hundreds of thousands of accounts affected. Further, the nature of the contraventions was difficult for customers to detect, which only heightens the need for general deterrence. See Australian Securities and Investments Commission v Commonwealth Bank of Australia [2018] FCA 941; (2018) 128 ACSR 289 at 299 [62] (Beach J). Whether the person has previously been found by the court in proceedings under Subdivision G to have engaged in any similar conduct – s 12GBA(2)(c) 210 Section 12GBA is contained within Subdivision G "Enforcement and remedies" in Part 2, Division 2 of the ASIC Act. While the parties' submissions included reference to this mandatory consideration under s 12GBA(2)(c), and contended that the question of whether the contravener "has engaged in similar conduct in the past" was "potentially relevant", they did not identify any previous proceedings under Subdivision G which were said to be relevant to this factor. The size and financial position of ANZ 211 As the parties submitted, the size of a corporation does not itself justify a higher penalty than might otherwise be imposed, but it may be relevant in determining the size of the penalty necessary to achieve deterrence. See Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 at 560 [92] (Allsop CJ). 212 ANZ is a major bank and is one of the six largest listed companies by market capitalisation in Australia. It reported a net profit of $6.16 billion (after tax) for the financial year ending 30 September 2021, and as at 30 September 2021, its market capitalisation was approximately $79.5 billion, with total assets of approximately $978.9 billion. 213 The parties submitted that, as a major bank, ANZ plays an important role in Australian society and that customers rely on it to operate with integrity and in good faith, in that ANZ should be able to maintain systems that provide the benefits it says it will provide under contractual arrangements. The deliberateness of the contravention and the period over which it extended 214 ASIC accepted that ANZ's conduct constituting the contraventions was not dishonest, deliberate or intentional. Whether the contravention arose out of the conduct of senior management 215 The parties agreed that none of the personnel who had relevant knowledge or made relevant decisions were "senior managers" within the meaning of s 9 of the Corporations Act. But ANZ accepted that the penalty should not be discounted for this factor, having regard to the seniority of the relevant personnel. 216 Accordingly, in assessing the appropriate penalty, I will apply no discount for the seniority of the personnel involved. Whether the contravener has a corporate culture conducive to compliance 217 The parties submitted that "ANZ's failures in relation to identifying and comprehensively resolving the errors over the relevant period are more indicative of a specific systems deficiency rather than a broader corporate culture problem" (citing Australian Securities and Investments Commission v Commonwealth Bank of Australia [2020] FCA 790 at [121]-[130] (Beach J)). They submitted it was therefore relevant that the errors continued to occur even though ANZ took steps to undertake reviews of and enhance its systems and processes. However, the parties submitted that this was not indicative of a corporate culture not conducive to compliance. 218 I accept that submission. While it is relevant that errors continued despite ANZ's efforts to correct them, its conduct was inadvertent and the result of poor processes, and its failures effectively to address issues within its systems do not indicate that it had a culture which "condone[d] or positively support[ed] non-compliance with statutory obligations". See Australian Securities and Investments Commission v Commonwealth Bank of Australia [2020] FCA 790 at [129]. Whether the company has shown a disposition to co-operate and taken steps to remediate 219 The parties submitted that there were three relevant mitigating factors in this regard. 220 First, ANZ has engaged constructively with ASIC, including by making early admissions. 221 Second, ANZ is undertaking the remediation programs described above. 222 Third, ANZ undertook a number of reviews and took steps to enhance its systems from the time it first identified the errors. ANZ is also in the process of decommissioning the Breakfree Package and is no longer offering it to new customers. Although these steps were not ultimately effective at comprehensively identifying and addressing the underlying errors, they have improved ANZ's systems and assisted in ensuring ANZ's compliance with its obligations under financial services laws. The extent of any profit or benefit derived from the contravention 223 The parties submitted that the following considerations were relevant. 224 First, it was submitted, in exchange for the annual package fees that ANZ charged to Breakfree customers under the Breakfree Package, including approximately $118 million charged to Breakfree customers affected by ANZ's conduct that are the subject of agreed contraventions in these proceedings, ANZ was required to provide the Breakfree benefits and the Breakfree ancillary benefits in accordance with the applicable terms and conditions. 225 Second, although affected customers may have still received some Breakfree benefits and Breakfree ancillary benefits in exchange for the package fees, and have been or are being remediated for benefits which they did not receive (including interest and the time value of money), the fact of the retention of the package fee is relevant to the context and background within which the conduct occurred. Relevantly, ANZ benefitted from its false or misleading representations because, prior to remediation, ANZ retained the package fee without having provided the full Breakfree benefits and Breakfree ancillary benefits to affected customers. The amounts collected by ANZ in package fees do not form part of any remediation to customers because, upon remediation, customers will have received the benefits for which the fee was paid. As a result, ANZ has retained these amounts. 226 Further, in this respect, the parties submitted that the courts have acknowledged that corporations should not be allowed to "take the benefits which arise from … processes and systems, which it may be inferred contribute to substantial profits, without also undertaking the burden of ensuring that those systems work, and that they promptly identify occasions where they do not". In this respect, the appropriate penalty to be imposed where conduct such as this occurs "should have the effect of deterring the defendants, and financial services providers generally, from maintaining defective systems, and conversely, providing an incentive to establish and maintain systems that are reliable" (citing Australian Securities and Investments Commission v BT Funds Management Ltd [2021] FCA 844 at [43] (Wheelahan J)). 227 Accordingly, the parties submitted, and I agree, the penalty to be imposed should account for ANZ maintaining an unreliable system over a significant period of time, and benefitting from that system, and should provide an incentive to establish and maintain a reliable system. Whether the contravention comprised isolated conduct or was systematic or occurred over a period of time 228 Although the parties identified this as a factor which might be "potentially relevant", they did not make separate submissions in relation to this consideration. However, it is self-evident (and acknowledged by the parties in the statement of agreed facts and their submissions) that the contraventions were not isolated incidents, and resulted from systematic issues, with thousands of contraventions affecting thousands of accounts and customers over many years. The course of conduct and totality principles 229 The parties submitted that the course of conduct principle should be applied in respect of two distinct and separate courses of conduct, namely, the conduct in relation to the Breakfree benefits issues and the offset benefits issues respectively. (As I have explained above, the parties agreed that the Breakfree ancillary benefits issues were not the subject of separate contraventions of the civil penalty provisions.) 230 The course of conduct and totality principles are helpfully summarised in The Consumer Credit Insurance Case [2022] FCA 359; (2022) 158 ACSR 647 at 660 [80]-[81] (Katzmann J): It is neither appropriate nor permissible to treat multiple contraventions as one contravention for the purposes of determining the statutory limit: Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243; 357 ALR 55; [2018] FCAFC 73 (Yazaki) at [227] (Allsop CJ, Middleton and Robertson JJ). But in an appropriate case a single penalty may be imposed for multiple contraventions where that course is agreed or accepted by the parties as appropriate: [Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 (ABCC v CFMEU)] at [149] (Dowsett, Greenwood and Wigney JJ). One such case is where there is an interrelationship between the legal and factual elements of a number of contraventions, it is necessary to take care to ensure that the contravenor is not penalised twice for what amounts to the same wrongdoing. This principle, originally developed in the context of the sentencing discretion, is commonly known as the "course of conduct" or "one transaction" principle. See, for example, Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1; 194 IR 461; [2010] FCAFC 39 (Cahill) at [39] (Middleton and Gordon JJ). The principle requires that in such a case consideration should be given to whether the contraventions arise out of the same course of conduct or the one transaction in order to determine whether it is appropriate that a "concurrent" or single penalty should be impose for the multiple contraventions: Yazaki at [234]. Even if the course of conduct principle is applicable, however, a judge is not obliged to apply the principle if the resulting penalty does not reflect the seriousness of the contraventions: Cahill at [39]; Yazaki at [235]. It may also be appropriate for the Court to fix a single penalty where the precise number of contraventions cannot be ascertained; where the number is so large that the fixing of separate penalties is not feasible; or where there is such a large number of relatively minor related contraventions such that the contraventions "are most sensibly considered compendiously": ABCC v CFMEU at [149]. Finally, where multiple contraventions are imposed, the Court is required to aggregate the total sums and review the aggregate amount in order to consider whether it reflects what is "just and appropriate" and if not to adjust the penalties accordingly. This is known as the "totality principle" and was also developed in the context of criminal sentencing. See, for example, ABCC v CFMEU at [116]–[120], [140]. 231 While the plurality in Pattinson [2022] HCA 13; (2022) 96 ALJR 426 found (at 431 [10]) that civil penalty regimes are "not subject to constraints drawn from the criminal law and there is no place for a 'notion of proportionality'", their Honours recognised that the course of conduct and totality principles may still assist (at 438-439 [45]): It may be recognised that some concepts familiar from criminal sentencing may usefully be deployed in the enforcement of the civil penalty regime. In this regard, concepts such as totality, parity and course of conduct may assist in the assessment of what may be considered reasonably necessary to deter further contraventions of the [Fair Work Act 2009 (Cth)]. On behalf of the CFMMEU, the rhetorical question was asked, on several occasions, how it was that proportionality as a principle of sentencing did not translate to the civil penalty regime when other concepts familiar in criminal sentencing such as totality, parity and course of conduct have been accepted as relevant. A compelling answer to that rhetorical question was provided by the Commissioner's counsel. Proportionality in this context has a normative character foreign to the purpose of the power, whereas concepts such as totality, parity and course of conduct are analytical tools [citing Australian Competition and Consumer Commission v Cement Australia Pty Ltd (2017) 258 FCR 312 at [421]–[424] and Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243 at [226]] which assist in the determination of a reasonable application of the law. Although these analytical concepts have been developed in the context of the punishment of crime, unlike proportionality, they are not so closely tied to retribution as to be incompatible with a civil penalty regime focussed on deterrence. (Footnotes omitted.) 232 I accept the parties' submissions that the contravening conduct should be treated as two separate and distinct courses of conduct, and that "there is an interrelationship between the legal and factual elements of a number of contraventions", that is, the conduct that gave rise to the Breakfree benefits issues and the offset benefits issues, respectively. However, where there have been a large number of instances of contravening conduct over a long period of time, the Full Court (Jagot, Yates and Bromwich JJ) in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 at 63 [156]-[157] has cautioned against placing too great a weight on the theoretical maximum penalty to be applied to each course of conduct: Care must be taken to ensure that the maximum penalty is not applied mechanically, instead of it being treated as one of a number of relevant factors, albeit an important one. Put another way, a contravention that is objectively in the mid-range of objective seriousness may not, for that reason alone, transpose into a penalty range somewhere in the middle between zero and the maximum penalty. Similarly, just because a contravention is towards either end of the spectrum of contraventions of its kind does not mean that the penalty must be towards the bottom or top of the range respectively. However, ordinarily there must be some reasonable relationship between the theoretical maximum and the final penalty imposed. In this case, the theoretical maximum was in the trillions of dollars (some 5.9 million contraventions at $1.1 million per contravention). By way of example only, even if the appropriate penalty per contravention for each sale was $1, the penalty would approach $6 million. It follows that the assessment of the appropriate range for penalty in the circumstances of this case is best assessed by reference to other factors, as there is no meaningful overall maximum penalty given the very large number of contraventions over such a long period of time. Given this, we consider that, to the extent that the course of conduct principle had any meaningful work to do, the better way to look at it was in terms of each of the four "types" of packaging, each with its own consumer target audience. This proceeding really involves four types of contravention, with many individual contraventions each over the five years. The webpage contraventions can be viewed as one or two serious courses of conduct. But ultimately this discussion itself serves to demonstrate the limited utility of the course of conduct principle in the circumstances of a case such as the present, and why any such characterisation could not properly have the significance which the primary judge gave to it … 233 This is relevant here, where the "theoretical maximum" penalty is in the range of the hundreds of billions of dollars due to the sheer volume of the contraventions and the period of time over which they occurred. I accept the parties' submissions that, accordingly, the maximum penalty should be afforded little weight in determining the appropriate penalty in all the circumstances. Orders 234 I accept each of the parties' submissions set out above. Weighing all the above factors in the balance, in my view, it is appropriate in the circumstances of this case to order that ANZ pay the agreed penalty of $25 million. Having regard to the "totality" principle, I am also satisfied that this total penalty is just and proportionate to the contravening conduct and the surrounding circumstances. THE ADVERSE PUBLICITY ORDER 235 ASIC also sought an adverse publicity order pursuant to s 12GLB(1)(a) of the ASIC Act in the following terms: Within 30 days, ANZ take all reasonable steps to cause to be published, at its own expense, a notice in the terms set out in the Annexure to this Order in Arial font no less than 10 point (Written Notice), by: (a) for a period of no less than 180 days, maintaining a link to a pdf and/or webpage copy of the Written Notice in a visible area of ANZ's website home page (https://www.anz.com.au/personal/) and news room (https://www.media.anz.com/), ensuring that the link to the notice is identified by text as follows: "Notice ordered by Federal Court in ASIC case against ANZ about Breakfree Packages and Offset Accounts"; (b) for a period of no less than 180 days, maintaining a link to a pdf copy of the Written Notice in a visible area of ANZ's secure online banking login page (https://login.anz.com/internetbanking), ensuring that the link to the notice is identified by text as follows: "Notice ordered by Federal Court in ASIC case against ANZ about Breakfree Packages and Offset Accounts"; to be visible to current customers the next five times they visit the page. 236 As I say, the relevant provision is s 12GLB of the ASIC Act as in force prior to 13 March 2019, which relevantly provided: 12GLB Punitive orders requiring adverse publicity (1) The Court may, on application by ASIC, make an adverse publicity order in relation to a person who: (a) has been ordered to pay a pecuniary penalty under section 12GBA; or (b) … (2) In this section, an adverse publicity order, in relation to a person, means an order that: (a) requires the person to disclose, in the way and to third parties specified in the order, such information as is so specified, being information that the person has possession of or access to; and (b) requires the person to publish, at the person's expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order. (3) … 237 As s 12GLB(1)(a) is satisfied here for the reasons I have set out above, the court's discretion to make such an order in this proceeding is enlivened. 238 In Australian Securities and Investments Commission v Colonial First State Investments Ltd [2021] FCA 1268, Murphy J explained (at [84]) that the purpose of such adverse publicity orders was as follows: (1) to alert affected persons to the fact that there has been misleading conduct; (2) to protect the public interest by dispelling the incorrect or false impressions that were created; and (3) to support the primary orders and assist in preventing repetition of the contravening conduct. 239 The parties submitted that making the orders sought will achieve each of these three purposes, as follows. 240 First, the publication of the court's findings in relation to the admitted contraventions and penalty on ANZ's website and secure online banking login page, coupled with the anticipated media coverage of the court's decision, will alert a significant number of ANZ's customers and the general public to the fact ANZ has engaged in misleading conduct and to the regulatory action taken since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 241 Second, it will serve to protect the public interest by dispelling the incorrect or false impressions that were created by ANZ's conduct comprising the admitted contraventions. 242 Third, the publication of the corrective notice in the form in the annexure to the orders will support the primary orders and assist in preventing repetition of the contravening conduct. 243 The parties submitted that in the circumstances, and in particular considering the number of customers affected by the Breakfree benefits issues, Breakfree ancillary benefits issues, and offset benefits issues, and the lengthy period of time over which these issues occurred, it is appropriate that ANZ cause the corrective notice to be published on its website and secure online banking login page. ANZ consented to the form of order sought by ASIC. 244 I accept each of the parties' submissions in relation to the adverse publicity order, and I am satisfied that this is an appropriate case in which to exercise the discretion in s 12GLB. Accordingly, I will make the orders in the form sought. DISPOSITION 245 For the above reasons, I will make the declarations sought and the adverse publicity order, and order that ANZ pay a pecuniary penalty of $25 million to the Commonwealth of Australia within 30 days. 246 ANZ also consented to an order that it pay ASIC's costs of and incidental to the proceedings, so I will also make that order. I certify that the preceding two hundred and forty-six (246) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan. Associate: Dated: 26 October 2022