FEDERAL COURT OF AUSTRALIA

Construction, Forestry, Mining and Energy Union v Hail Creek Coal Pty Ltd (No 2) [2018] FCA 480

ORDERS

THE COURT ORDERS THAT:

1.    The respondent pay a penalty of $90 for each of its 506 contraventions of s 50 of the Fair Work Act 2009 (Cth), a total of $45,540.

2.    The respondent pay the penalties to the applicant within 28 days.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

RANGIAH J:

1    In reasons for judgment delivered on 23 February 2018, I held that the respondent had contravened s 50 of the Fair Work Act 2009 (Cth) (the FWA) by paying 20 of its employees less than the full amount of salary required to be paid each month under the Hail Creek Agreement 2011 (the Enterprise Agreement): Construction, Forestry, Mining and Energy Union v Hail Creek Coal Pty Ltd [2018] FCA 125.

2    On 26 March 2018, I heard argument as to relief. I made a declaratory order and orders for compensation of the affected employees. I reserved judgment upon the question of any penalty to be imposed upon the respondent. These are my reasons on the question of penalty.

3    The contraventions came about as a result of the respondent’s misconstruction of Item 4 of Annexure 1 of the Enterprise Agreement, dealing with Roster Allowance. The respondent took the view that when it reduced the shift lengths for the affected employees from 12.5 hours to 12 hours, it was entitled to substantially reduce the amount of Roster Allowance. As a result it paid the affected employees less than the full amount of Roster Allowance and, consequently, less than the full amount of Total Salary payable monthly under cl 7.1 and cl 7.6 of the Enterprise Agreement.

4    The respondent contravened s 50 of the FWA each time it failed to pay the full amount of Total Salary to each of the affected employees each month between October 2015 and December 2017. The contraventions ended on 3 January 2018 when the respondent reinstated the previous roster arrangements and recommenced paying the Total Salary in full to the affected employees. The parties agree that the respondent committed 506 contraventions of s 50 of the FWA in total. The maximum penalty was $54,000 for each contravention that occurred before 1 July 2017, and is $63,000 for each contravention from that date.

5    The applicant submits that a penalty of $250 for each contravention should be imposed, giving a total penalty of $126,500. The respondent submits that no penalty should be imposed, or alternatively, that the penalty should be substantially less than the maximum penalty for one contravention.

6    Under s 546(1) of the FWA, the Court has a discretion both as to whether to order a contravener to pay a pecuniary penalty and as to the amount of any penalty. In submitting that no penalty should be imposed, the respondent relies upon Australian & International Pilots Association v Qantas Airways Limited [2009] FCA 500 (AIPA v Qantas), where Gray J said at [9]:

9    ...It is apparent that there is no need for specific deterrence in the present case. There is no indication at all that the respondent has ever had an attitude of turning its back on the relevant provisions of certified agreements. There is no occasion for teaching it the lesson that it must have regard to such provisions at all times and must comply with them. Indeed, on the evidence that emerged in the course of this case, it is undoubtedly the fact that the respondent devotes a substantial amount of its resources to ensuring that it complies with certified agreements on a daily basis.

7    The respondent also relies upon Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Telstra Corporation Ltd [2007] FCA 1607 (CEPU v Telstra), where Gordon J said at [18]:

18    …[T]he breaches arose out of a disputed and disputable construction of the 2005 Enterprise Agreement and the TRA. Neither breach was flagrant, wilful or deliberate. Amendments to the WR Act increasing the penalty for breaches of industrial instruments arising out of unlawful industrial conduct indicate a legislative desire to deter and discourage such conduct. These changes in industrial law have led to general deterrence being referred to as the “most significant factor” in determining the applicable penalty: see Finance Sector Union v Commonwealth Bank of Australia (2005) 224 ALR 467 at [60], [72]. Where the unlawful conduct arises out of an arguable but erroneous construction of a relevant term, and the subsequent breach cannot be characterised as demonstrating a flagrant or wilful disregard for the agreement, this legislative purpose is not furthered by imposition of a penalty. In these circumstances, neither general nor specific deterrence is a significant factor weighing in favour of imposing a penalty…

8    The respondent submits that no penalty is warranted because it did not deliberately disregard its obligations under the Enterprise Agreement, but, rather, took an honest and reasonable, if erroneous, view of its terms. There is evidence from Elizabeth Thorby, a human relations manager, that she made the recommendation to change the shift rosters. She made that recommendation because the changes would result in financial savings to the respondent, including by reduction in the amounts of Roster Allowance paid to the affected employees. Ms Thorby deposes that she sought and obtained advice from the respondent’s external solicitors about the proposal and gave careful consideration to that advice before making the recommendation. Her recommendation was accepted at more senior levels of management.

9    I accept Ms Thorby’s evidence. The respondent’s construction of the Enterprise Agreement was certainly arguable, even though it proved to be wrong. I accept that the respondent’s interpretation of the Enterprise Agreement was both honest and reasonable. The respondent did not deliberately contravene s 50 of the FWA.

10    The respondent submits that as its conduct arose from an honest and genuine mistake, there is no need for general or specific deterrence. It submits that far from sustaining public confidence in the statutory regime, the imposition of a penalty for the sake of it may undermine confidence in the fairness of the legislative scheme, citing Carr v Higgins Coatings Pty Ltd (2005) 148 IR 201 at [17].

11    The applicant submits that pecuniary penalties should be imposed. The applicant points out that it had expressly disputed the respondent’s entitlement to reduce the Roster Allowance, and argues that in circumstances where the Enterprise Agreement did not clearly and unequivocally authorise the reduction in wages, the respondent should have proceeded with caution. It points out that Ms Thorby has not disclosed the content of the legal advice obtained from the external solicitors and does not depose that the respondent followed that advice. It submits that the proper course would have been for the respondent to seek a declaration as to the proper construction of the relevant clauses, relying upon United Firefighters Union of Australia v Country Fire Authority (No 2) [2017] FCA 1614 (UFU v CFA (No 2)) at [56]. The applicant also submits that specific deterrence is warranted as this is the third recent occasion on which the respondent has contravened s 50 of the FWA.

12    In Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission (2003) 131 FCR 529 (Universal Music v ACCC), the Full Court was concerned with the appropriate level of civil penalty in circumstances where the contravener had obtained legal advice that its conduct would not contravene the relevant legislation, and where the question of whether there was a contravention was a difficult one on which minds could differ. The Full Court said at [308]-[310]:

308    As we have said, the contravening conduct was plainly and deliberately anti-competitive in its intent. It was conduct which, at least, ran a serious risk of being in breach of the Act. If this was appreciated, then the fact that the risk came home against expectations does not entitle the perpetrator to a discount. If the existence of the risk was not appreciated, then the company concerned misunderstood the law applicable to an important area of commerce and would not be entitled to any discount.

309    The fact that legal advice was obtained by one of the parties is also of little consequence. It illustrates that risk was appreciated. However, legal advice is obtained for the benefit of the company and only for the benefit of the company. It is not a discounting factor. If legal advice is wrong, that is a matter between the company and the legal adviser.

310    In our opinion, to give a substantial discount for these factors sends the wrong signal to the commercial community. It will encourage risk-taking and pushing the boundaries of anti-competitive conduct. If, nonetheless, a proceeding is instituted, it will encourage the most vigorous possible defence, in an endeavour to demonstrate the supposed complexity and uncertainty of the law. Many cases of contravening conduct can be described as complex and uncertain as to result. As submitted for ACCC, the Court has recognised in many cases that the difficulty of detecting and proving contraventions of Pt IV of the Act requires adequate penalties to be imposed when contravening conduct is detected and established...If a company “takes the odds”, it must expect serious consequences if it miscalculates...

(Citations omitted.)

13    In Australian Competition and Consumer Commission v TPG Internet Pty Ltd (No 2) [2012] FCA 629 (ACCC v TPG (No 2)), Murphy J at [101] and [106] held that these passages from Universal Music v ACCC are not limited to only those cases involving deliberate misleading conduct with intent, but that they do require an appreciation of risk by the contravener. His Honour considered that in circumstances where the respondent did not completely follow the legal advice it received, it had an appreciation of the risk that its conduct might breach the relevant legislation. His Honour concluded that the fact that the respondent obtained and substantially relied upon legal advice did not entitle it to any significant discount upon penalty.

14    In UFU v CFA (No 2), in the course of deciding upon the appropriate penalty, Murphy J held at [56] that there was no proper basis to infer that the contravener had received and acted on unequivocal legal advice that its conduct involved no risk of contravening s 50 of the FWA. His Honour held at [57] that the appropriate course would have been to seek a judicial declaration that the relevant clause of an enterprise agreement was invalid and, absent such a declaration, the contravener was required to comply with the obligations into which it had freely entered.

15    I do not consider that AIPA v Qantas or CEPU v Telstra establish any general principle that where the unlawful conduct arises out of an arguable construction of a relevant instrument, there should be no penalty. I accept that where a contravention of a civil penalty provision has arisen from the contravener’s honest and reasonable, but erroneous, construction of a relevant instrument, that is a powerful factor favouring the exercise of the discretion to decline to impose any penalty, or to limit the amount of any penalty. However, each case must turn upon its own circumstances.

16    I respectfully agree with the view expressed by Murphy J in ACCC v TPG (No 2) that the passages from Universal Music v ACCC at [308]-[310] are not confined to where there has been a deliberate contravention of a civil penalty provision, and that their application extends to where a contravener appreciated the risk it was taking and “takes the odds”.

17    I consider that a penalty should be imposed upon the respondent in the circumstances of the case. Firstly, in circumstances where the applicant had contested the respondent’s proposed conduct and where the proper construction of the Enterprise Agreement was far from certain, the respondent can be characterised as having “taken the odds”. The respondent submits that the applicant did not specifically take the point that the case ultimately turned on: that despite the reduction in shift lengths, the roster descriptions continued to meet the description of an “Indicative 45.75 Hour Week” in the Table in Item 4 of Annexure 1. That may be so, but there is evidence that at a meeting on 11 December 2015, the applicant contended that the Roster Allowance that should be paid was the amount specified in the schedule to the Enterprise Agreement (which I understand to refer to the amounts set out in the Table), and that, by failing to pay the proper amount, the respondent was in breach of the Agreement. Therefore, the construction of the Table was always in issue. Further, the respondent’s justification for reducing the Roster Allowance always depended upon its contention that the shifts no longer met the roster descriptions in the Table. What is significant is that the respondent knew that it was taking a risk that it would be contravening the Enterprise Agreement, but did not take an obvious step to avoid that risk. That step was to apply, in the face of the dispute, for an appropriate declaration. The minimum requirements for the making of a declaration set out in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-438 would have been satisfied. The respondent elected to take the risk that its conduct would contravene s 50 of the FWA.

18    Secondly, the respondent must have had a heightened awareness of the risk it took from an erroneous construction since it had previously been found to have contravened the same Enterprise Agreement and had pecuniary penalties imposed upon it. In Construction, Forestry, Mining and Energy Union v Hail Creek Coal Pty Ltd (No 2) [2016] FCA 727, Logan J found the respondent to have failed to provide employees with access to paid sick leave in contravention of cl 13.7 of the Enterprise Agreement. The respondent was ordered to pay a penalty of $24,000. The respondent argues that the circumstances of that case were quite different because Logan J relied upon the respondent’s lack of insight in that, even after having the benefit of the Full Court’s construction of the clause, the respondent maintained its stance that there was no contravention, and continued to deny particular employees access to paid sick leave. However, that was not the only basis upon which Logan J considered it appropriate to impose a penalty. His Honour also took into account that the respondent’s contravening conduct must have had a financial, as well as emotional, impact upon affected workers. Despite the imposition of that penalty, the respondent elected to take a similar risk again. This case is one that calls for a penalty in order to deter the respondent from repeating its conduct.

19    Third, the respondent decided to reduce the roster allowance it paid for its own financial benefit, knowing that to do so would have a detrimental financial impact upon the affected employees. In circumstances where the construction was contestable, that circumstance called for the respondent to take a cautious approach.

20    For these reasons, I consider that it is appropriate to impose penalties upon the respondent for its contraventions.

21    In two recent cases, Australian Building and Construction Commissioner v Ingham (No 2) (The Enoggera Barracks Case) [2018] FCA 263 and Australian Building and Construction Commissioner v Pauls [2017] FCA 843, I summarised the principles applicable to the determination of appropriate penalties, including the “course of conduct” principle and the “totality” principle. I adopt the principles set out in those cases without reciting them here.

22    It is common ground that s 557 of the FWA, which provides that two or more contraventions of a civil remedy provision are taken to constitute a single contravention if they arose out of a single course of conduct, does not apply to this case because of the respondent’s previous contraventions. However, the common law course of conduct principle does apply. The respondent’s multiple contraventions of s 50 of the FWA arose from a single decision to reduce the rate of Roster Allowance for the affected employees stemming from its misconstruction of the Enterprise Agreement. Accordingly, it seems to me that the contraventions arose from a single course of conduct. Having reached that conclusion, the appropriate starting point is that the maximum aggregate penalty that should be imposed is the maximum penalty for a single contravention.

23    I take into account the matters I have discussed above at [17]– [19]. In particular, this is a case that calls for an appropriate penalty to specifically deter the respondent from engaging in contravening conduct in the future. The amount of the penalty imposed by Logan J for the previous similar contravention is relevant. There can be no mitigation of the penalty on account of the respondent’s size. The decision leading to the contravening conduct was made at senior levels of management.

24    It is a significant mitigating factor that the respondent’s decision was based upon the honest and reasonable, although erroneous, construction of the Enterprise Agreement that it took. On the other hand, I do not accept that it is a mitigating factor that the respondent obtained legal advice in circumstances where neither the content of the advice, nor whether the respondent acted in accordance with that advice, has been disclosed. The respondent co-operated by agreeing upon a detailed statement of agreed facts and thereby producing a saving of time and resources in the proceeding. It is also relevant that although the affected employees were denied a component of their salary over a protracted period, they will be compensated in full by the orders for compensation, which include provision for interest.

25    It is necessary to impose a penalty in respect of each contravention. I consider that the appropriate penalty is $180 for each contravention. That produces an aggregate amount of $91,080.

26    When the totality principle is applied, such an aggregate penalty would, in my opinion, be excessive. I will reduce that aggregate by 50%. The penalty that will be imposed is $90 for each contravention, producing an aggregate of $45,540.

27    In accordance with the judgment of the Full Court in Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4 at [117], [120]-[121], there should be an order that the respondent pay the penalty to the applicant.

28    There is one further matter that should be dealt with. In the course of argument, the respondent submitted that it would not be appropriate to specify the number of contraventions of s 50 of the FWA in the declaratory order I made on 26 March 2018. The respondent submitted that to specify the number of contraventions would be unconventional, but cited no authority in support of that proposition.

29    A declaration should indicate “the gist of the findings of the primary judge”: Rural Press Limited and Others v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [89]. A declaration should specifically and succinctly identify the relevant conduct and the basis upon which that conduct contravened the relevant legislation: cf BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452 at [35]; Australian Competition and Consumer Commission v Francis (2004) 142 FCR 1 at [113]. These requirements meant that the number of contraventions ought to be specified. Otherwise, the declaration would be either misleading in suggesting that there was only one contravention, or too vague in suggesting that there was more than one contravention but not how many. Accordingly, I made a declaration which specified how many contraventions of s 50 of the FWA the respondent had committed.

Associate:    

Dated:    12 April 2018