While much is made of the “record penalties of $438m” penalties imposed on the Phoenix Institute and related companies for egregious conduct in relation to the sale of training programs – see Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (Subject to Deed of Company Arrangement) (No 3) [2023] FCA 859 – four elements should not be overlooked.
One, mentioned only in passing in the judgment, and by the ACCC – Record penalties of $438m ordered against Phoenix Institute and CTI for acting unconscionably and misleading students | ACCC, is that the companies are in liquidation and the penalties are not provable debts and are not payable, by anyone. This doesn’t diminish the findings of serious illegality, but it puts the outcome in some perspective. It may explain the very high penalties.
The second point is that no individuals were sued, those that caused the inanimate companies to act unconscionably. In an earlier comparable decision, where the company was also in liquidation, Justice Bromwich expressed regret that no individual associated with the corporate misconduct was being made accountable, in one case, despite adverse findings being made. Unconscionable and immoral corporate conduct – nothing personal – Murrays Legal
Three, the penalties are so high as, arguably, to lessen their deterrent value because few solvent companies could pay those amounts anyway. When dealing with a company in liquidation, it’s easy to impose dramatic penalties for deterrent effect. If the companies had not been in liquidation, and some worth were to have been put on their continued operations, the penalties would have been much lower: Regulatory penalties – Murrays Legal
A fourth point is that the conduct occurred in 2015, when proceedings were commenced, with findings made in 2021, and penalties imposed in 2023. Deterrence must be diminished by delay in findings of misconduct and a penalty being imposed. It is hoped that no other such conduct has been occurring in the training sector in the meantime.
Generally, see Kicking a company when it’s down — a regulatory approach to penalising a company in liquidation (2008) 8(5) INSLB 69, M Murray
