In the recent case of Secretary, Department of Health & Aging v Pagasa Australia Pty Limited, the Federal Court has for the first time considered the approach which should be taken in determining the civil penalties to be imposed under the Therapeutic Goods Act 1989 (Cth). The civil penalty provision was introduced into the Act in 2006 and at present the maximum civil penalty for an individual is $550,000 and for a body corporate $5,500,000. Factors which the Court will take into account include a party's co-operation once a contravention has been identified and the existence of an effective compliance program.
Civil penalties provisions can be found in a number of Acts. Their intention is to encourage compliance with statutory requirements and to provide for the imposition of penalties if that does not occur.
The civil penalties under the Therapeutic Goods 1989 (Cth) (the Act) can be imposed on a corporation which contravenes the Act and also on any officer of the corporation if the officer knew the offence would be committed, was in a position to influence the conduct of the corporation and failed to take all reasonable steps to prevent the commission of an offence.
The Act provides that there is a contravention if there is an importation to Australia of therapeutic goods for use in humans and the goods are not registered or listed, or are not exempt goods. If a contravention occurs then the maximum civil penalty for an individual is 5,000 penalty units and for a body corporate 50,000 penalty units. Currently the value of a penalty unit is $110. Therefore the potential civil penalties under the Act are substantial for both individuals and for corporations. The amount of a civil penalty is at the discretion of the Court.
Apart from imposing a civil penalty the Court can also order that the goods be forfeited. Again this is at the Court's discretion.
In Pagasa the Court was provided with a statement of agreed facts under which was agreed that as a result of the search conducted by officers of the Therapeutic Goods Administration, certain goods were seized. They were all therapeutic goods but none of them were registered, listed or exempt. It was agreed that importation of the goods was a contravention of the Act by both Pagasa and a director of Pagasa. It was also agreed, in the alternative, that the director of the Pagasa had aided and abetted Pagasa to import the goods which contravened the Act. It was also agreed that Pagasa had previously been convicted of an offence of intentionally and recklessly importing various therapeutic goods into Australia in contravention of the Act.
As Justice Flick pointed out in his judgment, in determining the quantum of any civil penalty the Court "must have regard to all relevant matters" and he commented on what they were in his judgment.
The parties had also agreed that additional "relevant matters" needed to be considered. They were:
- the object of maintaining a national system of controls relating to quality, safety, efficacy and timely availability of therapeutic goods;
- the object of creating a national register;
- the fact that the Act creates both civil and criminal offences, the latter being punishable by imprisonment;
- the particular difficulties that may be encountered in detecting a contravention of the Act; and
- the particular difficulties that may be confronted if an application was defended and the Secretary was put to proof.
His Honour considered that whether or not there had been co-operation by Pagasa and whether there had been agreement as to the relief to be granted were also relevant.
What can be concluded from His Honour's comments is that if there is no co-operation once a breach has occurred and no agreement on relief then the penalty which will be imposed on the breach being established will be substantially greater than what it might otherwise have been if there had been no co-operation. This is not an unusual approach.
In Pagasa, the parties had ultimately agreed that there should be a penalty of $130,000 as well as an order for forfeiture of the goods.
His Honour considered that the approach to be taken in respect of civil penalties under the Act should be consistent with the approach which has been taken to the civil penalty provisions in other legislation. That is, where the parties have agreed on a penalty the Court must determine whether the amount is "within the permissible range of penalties that might probably be imposed". Even if the parties agreed on the civil penalty and other orders to be made, it is still for the Court to decide whether what has been agreed is appropriate. His Honour considered that the agreed penalty of $130,000 was in the circumstances within the "permissible range". His Honour also considered that "it was neither sufficiently small so as to not act as a deterrent nor so high as to be oppressive."
His Honour considered that the agreed statement of facts established "a contumelious disregard of the requirements imposed by the 1989 Act". He also noted that it demonstrated that no compliance program had been put in place after the previous contraventions even though the director had apologised for mistakes which had been committed and asked for "one last chance". It was His Honour's presumption that the respondents had only instituted a compliance program after the commencement of the current proceedings out of "some final recognition" that some attempt to ensure compliance was necessary. Whilst he expressed these criticisms His Honour was still prepared to accept the agreed penalty.
Having decided to accept the penalty which had been agreed upon His Honour then considered at the Court's discretion whether to make an order for forfeiture. Again His Honour provided detailed consideration of the factors which the Court should take into account and he decided that an order for forfeiture should be made.
The judgment in Pagasa is a useful analysis of what the Court will take into account in determining the civil penalty to be imposed. Whilst the penalties in this case were relatively low, when regard is had to the maximum penalties which can be imposed, it is important to keep in mind that in Pagasa the parties had agreed on the facts and on the penalty to be imposed. It is clear from His Honour's comments that in cases where there is no co-operation nor agreement on penalties and relief it can be expected that the penalties imposed will be far more substantial. It is also clear that the absence of any effective compliance program can be a significant factor to be taken into account in determining the penalty to be imposed.
Whilst this is the first Court decision on the civil penalty provisions of the Act the approach taken is consistent with that which has been taken with civil penalty provisions in other legislation. Also consistently with other similar regimes it emphasises the need for the existence of an effective compliance program and ongoing diligence to ensure that the compliance program remains effective.
An external objective review of your compliance program by your lawyers can also be a valuable aid in ensuring the effectiveness of a compliance program. Deacons can provide this review.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.