A recent decision of the Federal Court of Australia in the case
of Secretary, Department of Health & Ageing v Pagasa
Australia Pty Ltd  FCA 1545 (Pagasa Case) confirms that
the existence of a compliance program can reduce the risk of
penalties being imposed pursuant to the Therapeutic Goods Act
1989 (Cth) (Act).
CIVIL PENALTY PROVISIONS
Civil penalties under the Act include a maximum penalty for
individuals of $550,000 and $5.5 million for corporations.
The civil penalties are enforceable in the absence of proven
fault and are directed towards regulating commercial activities
relating to therapeutic products of corporate entities and
deterring breaches of the Act. However, it is important to remember
that the liability regime for civil contraventions also extends to
executive officers (quite broadly defined in the Act and not just
limited to directors).
The Pagasa Case was the first case to consider the application
of the Therapeutic Goods Administration (TGA) civil penalty
The case related to goods which were seized from the Pagasa
premises in Matraville in Sydney. None of the goods were registered
or listed goods, exempt goods or the subject of approval or
authority under the relevant sections of the Act. The parties
agreed (by way of a Statement of Agreed Facts) that the importation
of those goods constituted a breach of the Act by Pagasa and a
director of Pagasa.
In determining the amount of the civil penalties to be imposed,
Justice Flick had regard to 'all relevant matters'
including, by agreement between the parties, the object and
purposes of the Act.
In addition, Justice Flick considered relevant the fact that
there had been co-operation by Pagasa (including agreement in
relation to the facts) and, as the matter progressed through the
hearing, substantial agreement as to the relief to be granted.
Adopting the principles applied by the Courts in previous cases
relating to the civil penalty regime in the Trade Practices Act
1974, the Court determined that the parties had fixed an
appropriate amount for the civil penalty 'within the
permissible range of penalties that might properly be imposed'.
The $130,000 penalty was noted by Justice Flick to be 'neither
sufficiently small so as not to act as a deterrence nor so high as
to be oppressive'.
Justice Flick also found that Pagasa did not have a compliance
program in place at the relevant time after previous contraventions
and an attempt to put a program in place was only undertaken after
the current proceedings were instituted.
WHAT IT MEANS
Co-operation and agreement in relation to civil penalties to be
imposed are relevant in determining the final penalties to be
imposed by the court.
Provided the court considers the quantum of the penalty to be
appropriate within the permissive range, the necessity for
prolonged, complex and often lengthy litigation will be
As with other statutory regimes, it is clear that the absence of
an effective compliance program is a critical aspect which the
court will take into account in determining any penalty to be
imposed. The compliance program must be effective, current and
administered with the appropriate diligence.
In order to assist in minimising the risk of the imposition of a
significant penalty, we recommend preparing (or updating, if
appropriate) a well and clearly documented compliance program.
The compliance program must be tailored for each organisation
and may include:
Briefing notes and training for executive officers (who now
fall within the ambit of the civil penalty provisions of the
Development of a compliance policy and procedures including a
reporting and audit system.
Compliance risk assessments.
Staff roles and responsibilities relating to compliance.
Active and ongoing training, improvement and review of
DLA Phillips Fox has experience in advising on regulatory
compliance programs for pharmaceutical and biotechnology
Phillips Fox has changed its name to DLA Phillips Fox
because the firm entered into an exclusive alliance with DLA Piper,
one of the largest legal services organisations in the world. We
will retain our offices in every major commercial centre in
Australia and New Zealand, with no operational change to your
relationship with the firm. DLA Phillips Fox can now take your
business one step further − by connecting you to a global
network of legal experience, talent and knowledge.
This publication is intended as a first point of reference
and should not be relied on as a substitute for professional
advice. Specialist legal advice should always be sought in relation
to any particular circumstances and no liability will be accepted
for any losses incurred by those relying solely on this
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