The Federal Court yesterday ordered that Australian Clinical Labs (ACL) pay $5.8 million in civil penalties in relation to a data breach by its Medlab Pathology business in February 2022. The breach resulted in the unauthorised access and exfiltration of the personal information of over 223,000 individuals.
These are the first civil penalties ordered under the Privacy Act 1988 (Cth).
Australian Information Commissioner Elizabeth Tydd welcomed the Court's orders, stating that they “provide an important reminder to all APP entities that they must remain vigilant in securing and responsibly managing the personal information they hold.
“These orders also represent a notable deterrent and signal to organisations to ensure they undertake reasonable and expeditious investigations of potential data breaches and report them to the Office of the Australian Information Commissioner appropriately.
“Entities holding sensitive data need to be responsive to the heightened requirements for securing this information as future action will be subject to higher penalty provisions now available under the Privacy Act".
The Federal Court has made orders imposing the following penalties:
- a penalty of $4.2 million for ACL's failure to take reasonable steps to protect the personal information held by ACL on Medlab Pathology’s IT systems under Australian Privacy Principle 11.1, which amounted to more than to 223,000 contraventions of s 13G(a) of the Privacy Act;
- a penalty of $800,000 for ACL’s failure to carry out a reasonable and expeditious assessment of whether an eligible data breach had occurred following the cyberattack on the Medlab Pathology IT systems in February 2022, in contravention of s 26WH(2) of the Privacy Act; and
- a penalty of $800,000 for ACL’s failures to prepare and give to the Australian Information Commissioner, as soon as practicable, a statement concerning the eligible data breach, in contravention of s 26WK(2) of the Privacy Act.
Justice Halley said in his judgment that the contraventions were “extensive and significant.” His Honour also found that:
- ‘ACL’s most senior management were involved in the decision making around the integration of Medlab’s IT Systems into ACL’s core environment and ACL’s response to the Medlab Cyberattack, including whether it amounted to an eligible data breach.’
- ‘ACL’s contraventions … resulted from its failure to act with sufficient care and diligence in managing the risk of a cyberattack on the Medlab IT Systems’
- ‘ACL’s contravening conduct … had at least the potential to cause significant harm to individuals whose information had been exfiltrated, including financial harm, distress or psychological harms, and material inconvenience.’
- ‘the contraventions had the potential to have a broader impact on public trust in entities holding private and sensitive information of individuals.’
His Honour identified several factors that reduced the penalty that was imposed. These included that that ‘ACL ... cooperated with the investigation undertaken by the office of the Commissioner', and that it had commenced ‘a program of works to uplift the company’s cybersecurity capabilities’ which ‘satisfied [his Honour] that these actions demonstrate that ACL has sought, and continues to seek, to take meaningful steps to develop a satisfactory culture of compliance.’ His Honour also took into account the apologies made by ACL and the fact that it had admitted liability.
ACL admitted the contraventions, consented to orders being made and the parties made joint submissions on liability and penalty.
The penalties were imposed under the penalty regime which was in force at the time of the contraventions, with a maximum penalty of $2.22 million per contravention. The new penalty regime that came into force on 13 December 2022 allows the Court to impose much higher penalties for serious interferences with privacy. Under the new regime, maximum penalties per contravention can be as much as $50 million, three times the benefit derived from the conduct or up to the 30% of a business’s annual turnover per contravention.
Privacy Commissioner Carly Kind said, “This outcome represents an important turning point in the enforcement of privacy law in Australia. For the first time, a regulated entity has been subject to civil penalties under the Privacy Act, in line with the expectations of the public and the powers given to the OAIC by parliament. This should serve as a vivid reminder to entities, particularly providers operating within Australia’s healthcare system, that there will be consequences of serious failures to protect the privacy of those individuals whose healthcare and information they hold.”
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Background
The Privacy Act includes 13 legally binding Australian Privacy Principles (APPs). The APPs apply to organisations and government agencies covered by the Privacy Act (APP entities).
At the time of the contraventions in issue in this proceeding, under section 13G(a) of the Privacy Act, an APP entity will be liable for a civil penalty if it does an act, or engages in a practice, that is a serious interference with the privacy of an individual.
The Federal Court can impose a civil penalty of up to $2.22 million for each contravention of section 13G (as per the penalty rate applicable from May 2021 to September 2022). Whether a civil penalty order is made, and the amount, is up to the Court.
Since this matter was filed, the maximum civil penalties for serious interferences with privacy for a body incorporate have increased considerably to not more than the greater of:
- $50 million;
- if a Court can determine the value of the benefit that the body corporate (and its related bodies corporate) directly or indirectly obtained from the contravention – three times the value of that benefit; and
- if a Court cannot determine the value of that benefit – 30% of the adjusted turnover of the body corporate during the breach turnover period (minimum 12 months) for the contravention.
These new penalties were not applicable to the Australian Information Commissioner’s proceedings against ACL given the conduct in issue occurred before the commencement of the updated penalty provisions.
The OAIC commenced a Commissioner-initiated investigation into ACL in relation to its data breach in December 2022.
