Consumer law and civil penalties – appeal from primary judge rejecting agreed penalty and imposing substantially higher penalty

Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49 (9 April 2021) concerned the pecuniary penalty imposed on Volkswagen for its admitted contraventions of s29(1)(a) of the Australian Consumer Law (ACL).

This was in relation to its deception of the Australian Government and Australian consumers about the exhaust emissions of certain Volkswagen-branded motor vehicles which were imported into Australia for sale for about five years from January 2011 to October 2015.

Volkswagen and the ACCC jointly submitted to the court that a penalty of $75 million was an appropriate penalty for the contraventions. The primary judge found that the proposed penalty was manifestly inadequate and instead imposed a penalty of $125 million. The central issue raised by the appeal was whether the primary judge erred in rejecting the jointly proposed penalty and imposing instead the significantly higher penalty.

The Full Court made observations about the nature of the primary judge’s decision (at [119]-[133]). Wigney, Beach and O’Bryan JJ rejected the ACCC’s submission that the primary judge’s decision was not discretionary and concluded (at [131]): “…The Court’s task in such cases is not limited to simply determining whether the jointly proposed penalty is within the permissible range, though that might be expected to be a highly relevant and perhaps determinative consideration. Nor is the Court necessarily compelled to accept and impose the proposed penalty if it is found to be within the acceptable range, though the public policy consideration of predictability of outcome would generally provide a compelling reason for the Court to accept the proposed penalty in those circumstances. The overriding statutory directive is for the Court to impose a penalty which is determined to be appropriate having regard to all relevant matters. The fact that the regulator and the contravener have agreed and jointly proposed a penalty is plainly a relevant and important matter which the Court must have regard to in determining an appropriate penalty. It does not follow, however, that the determination is not discretionary in nature.”

However, the Full Court rejected Volkswagen’s various appeal grounds which in the main were supported by the ACCC.

• The Full Court accepted that the primary judge erred in adopting an overly narrow interpretation of s224(2)(c) of the ACL and in not considering whether the absence of prior contraventions on the part of Volkswagen was capable of constituting a mitigating circumstance (at [137]). However, in the circumstances of this case this could not have had any material effect on the ultimate penalty imposed (at [138]-[146]).
• There was no error by the primary judge in finding that the agreed penalty of $75 million was not sufficient to achieve deterrence (at [147]-[167]). In determining this ground, the Full Court examined the circumstances where there may be a relationship between the penalty imposed and the profit derived from the contravening conduct (at [148]-[149]).
• It did not follow that, in not accepting that the agreed penalty was an appropriate penalty and instead fixing a significantly higher penalty, the primary judge gave no, or insufficient, weight to the agreement or settlement that had been reached between Volkswagen and the ACCC, or to the important public policy consideration concerning the promotion of the predictability of outcome in civil penalty proceedings (at [168]-[173]).
• There was no error in the way that the primary judge dealt with the penalties imposed on Volkswagen in overseas jurisdictions (at [174]-[184]).
• The findings that were made by the primary judge in relation to harm to consumers were findings based on inferences that were open to be drawn, irrespective of the joint submission of the parties (at [185]-[192]).
• Nor was there error in relation to certain matters that Volkswagen contended that the primary judge had regard but were extraneous or irrelevant matters (at [193]-[201]).
• The penalty of $125 million imposed by the primary judge was not manifestly excessive (at [202]-[213]).

Dan Star QC is a Senior Counsel at the Victorian Bar, 03 9225 8757 or email danstar@vicbar.com.au. The full version of these judgments can be found at austlii.edu.au.

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