The Defence Department has been fined $1 million for failures that led to a young soldier being fatally shot during an urban warfare exercise in the Northern Territory.

Private Jason Challis, 25, from Victoria was shot in the head and knee at the Mount Bundey military training area in 2017.

The Defence Department was sentenced on Wednesday in the NT Local Court after previously pleading guilty to failing to comply with its health and safety duty.

The court was told safety procedures should have protected the rifleman, who had joined the army 10 months earlier.

But no one had noticed he wasn’t with his team in a mock town made of plywood and hessian, and was instead crouching behind a target when two soldiers fired on it.

The exercise had been stopped two minutes earlier when a supervisor noticed Private Challis’s group had entered a danger zone incorrectly.

The soldiers were ordered to reset but safety supervisors didn’t notice that Private Challis was in the same position.

The court heard there had been a “deliberate disregard” for and a “momentary lapse” from procedures.

But the primary failures were that a corporal hadn’t ordered the group to do a practice run before the exercise and this wasn’t picked up by commanders.

The danger zone or possible angles of fire where Private Challis was positioned were also not properly marked.

Prosecutor Jennifer Single SC said it was a systemic failure.

“What this prosecution is about is that the policies existed … but there were no mechanisms to ensure that those policies were actually complied with,” she said.

Judge Elisabeth Armitage said the breach had put every soldier involved in the exercise at risk.

“With all of these mechanisms in place and a failure for any of them to work, it seems to point to a catastrophic failure to comply with the work health and safety duties,” she said.

Major General Matthew Pearse said Private Challis had a right to expect a safe working environment.

“On behalf of Defence, I apologise unreservedly for our failure. This is not something we ever want to repeat,” he said.

Four investigations by the NT coroner, NSW police forensics unit and the Australian Defence Force have not found why Pte Challis became separated from his group.

The ADF investigated nine serving members closely linked to the incident. One was sacked and six others were reprimanded.