FEDERAL COURT OF AUSTRALIA

Rocky Holdings Pty Limited v Fair Work Ombudsman [2014] FCAFC 62

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

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

REASONS FOR JUDGMENT

THE COURT:

The appeal

1    This appeal concerns the construction of s 557 of the Fair Work Act 2009 (Cth) (the Act) from a single Judge of the Federal Circuit Court of Australia: Fair Work Ombudsman v Rocky Holdings Pty Ltd & Ors [2013] FCCA 1549.

2    Section 557 identifies when multiple contraventions of the civil penalty provisions created by s 539(1) of the Act are to be treated as a single contravention. Section 557 is in these terms:

(1)    For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:

(a)    the contraventions are committed by the same person; and

(b)    the contraventions arose out of a course of conduct by the person.

(2)    The civil remedy provisions are the following:

(a)    subsection 44(1) (which deals with contraventions of the National Employment Standards);

(b)    section 45 (which deals with contraventions of modern awards);

…

(3)    Subsection (1) does not apply to a contravention of a civil remedy provision that is committed by a person after a court has imposed a pecuniary penalty on the person for an earlier contravention of the provision.

3    Section 44(1) provides that:

An employer must not contravene a provision of the National Employment Standards.

4    Section 45 provides that:

A person must not contravene a term of a modern award.

5    In the present case, the relevant issue before the primary Judge was that of the penalty or penalties that should be imposed in relation to a number of admitted contraventions of civil penalty provisions. The statement of agreed facts before the primary Judge identified that the respondents (the first and second of which are the appellants in this appeal) contravened three different terms of the National Employment Standard (NES) on multiple occasions and contravened six different terms of a modern award also on multiple occasions. As each contravention of a provision of the NES and each contravention of a term of the modern award constituted a contravention of, respectively, ss 44 and 45 of the Act, the statement of agreed facts identified hundreds of contraventions of a civil remedy provision. The contraventions of s 44(1) included: – (i) contravention of the Annual Leave standard, and multiple contraventions of (ii) the paid personal/carer’s leave entitlement, and (iii) the payment for absence on a public holiday. The contraventions of s 45 included multiple contraventions of (i) the minimum rate of pay requirement, (ii) the payment of overtime rates for work performed on a Sunday requirement, (iii) the payment of Saturday loadings for Saturday work requirement, (iv) the payment of public holiday rates for work performed on a public holiday requirement, (v) the payment of ordinary wages for hours spent attending training and assessment associated with the training contract requirement, and (vi) the payment of annual leave loading requirement.

6    The primary Judge determined the penalties for the contraventions of ss 44(1) and 45 of the Act as follows (at [92] of Fair Work Ombudsman v Rocky Holdings Pty Ltd & Ors [2013] FCCA 1549):

7    The appellants contend that her Honour erred in two respects. They contend that the primary Judge misconstrued s 557(1) of the Act in that the section required only one penalty to be imposed on each of them in respect of the three contraventions of s 44(1) and another penalty imposed on each of them in respect of the six contraventions of s 45. They initially contended also that the primary Judge did not did not consider or give adequate reasons for not adopting this construction of s 557(1), described as the “appellants’ alternative contention”. This description is necessary because, before the primary Judge, the appellants’ main argument was that s 557 required the primary Judge to impose only a single penalty on each of them. The appellants do not pursue this argument of inadequate reasons in the appeal.

8    The way in which the case was run before the primary Judge, with the focus very much on the main argument that s 557 required only one penalty to be imposed on each of them in respect of the three contraventions of s 44(1) and another penalty imposed on each of them in respect of the six contraventions of s 45 meant that identification of the relevant course of conduct within the meaning of s 557(1), as opposed to generally, did not feature prominently. For the purposes of this appeal the parties agreed that the appeal should be determined on the basis that the contraventions arose from the same course of conduct. However, this agreement obscures more than it discloses. For the purposes of s 557(1) a relevant “course of conduct” can relate only to contraventions of a civil penalty provision. The construction issue in the appeal is whether “a civil penalty provision” means ss 44(1) and 45 of the Act or “a provision” of the NES and “a term” of a modern award.

9    It was (and is) also common ground that s 557(3) has no application.

Construction of s 557

10    The appellants’ argument is simple. Section 557(1) refers to “a civil remedy provision referred to in subsection (2)”. One civil remedy provision referred to in s 557(2) is s 44(1). Another is s 45. In the present case, where there were two or more contraventions of s 44(1) and two or more contraventions of s 45 by each respondent, s 557(1) operated so that each contravention of s 44(1) by each respondent was taken to constitute a single contravention and each contravention of s 45 by each respondent was taken to constitute a single contravention. In support of this argument the appellants said:

(1)    The purpose of s 557 is to reduce two or more contraventions of a civil penalty provision to a single contravention when those contraventions arise out of a course of conduct by a person. This purpose is achieved by the appellants’ construction.

(2)    Section 557 is different from its predecessor provisions which referred to applicable provisions of relevant industrial instruments. The different language is significant. If the legislature intended that s 557(1) should be interpreted in the same manner as the predecessor provisions then the sections would have referred to two or more contraventions of a provision of the NES or two or more contraventions of a modern award. The appellants’ construction gives effect to the different language. Authorities concerning the predecessor provisions are also immaterial for this reason.

(3)    Authorities which might be thought to be against the appellants’ construction, Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v QR Limited (No 2) [2010] FCA 652 (QR Limited FCA), QR Limited v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (2010) 204 IR 142; [2010] FCAFC 150 (QR Limited FCAFC) and Murrihy v Betezy.com.au Pty Ltd (No 2) [2013] FCA 1146 (Murrihy) are either distinguishable or do not address the issue.

(4)    If the appellants’ alternative contention is not accepted, the effect would be to elevate the particulars of a contravention of ss 44(1) and 45 of the Act to the level of contraventions themselves. This is counter-intuitive and contrary to the language of s 557(1).

(5)    In R v Pearce (1998) 194 CLR 610 (Pearce) at 621 to 624 the High Court warned against this type of multiplicity of offenders and the punishment of offenders by reference to legislative history rather than their just desserts.

11    We are not persuaded by these arguments.

12    First, calling in aid a legislative purpose, divorced from the text and context of the Act, is unhelpful. The appellants’ legislative purpose is nothing more than a re-statement of their preferred construction. As such, the claim that their construction satisfies the legislative purpose is a mere self-fulfilling prophecy. The Fair Work Ombudsman’s (FWO) approach to legislative purpose, in contrast, is orthodox. The FWO submitted:

The relevant purposes of the FW Act itself are also important, one of the key objects being to ensure, through an effective penalty regime, compliance with minimum terms and conditions through the NES and modern awards [section 3(b) of the FW Act]. The purpose of section 557 is not, as the appellants contend at [36] of their submissions, simply to reduce the number of contraventions of a civil penalty provision to one where they arise from a course of conduct. If this was the purpose then it could very easily have been stated.

…

The appellants’ approach would undermine the purpose and deterrent effect of the enforcement regime under the FW Act. If the appellants’ submissions are accepted, the maximum amount of penalties available for multiple breaches of a diverse range of terms or provisions in industrial instruments and industrial legislation would be substantially reduced.

13    Second, the construction is not supported by the text of the Act. The reference in s 557(1) to “a civil remedy provision referred to in subsection (2)” discloses that it is the provision which is relevant. Section 557(2) identifies each of ss 44(1) and 45 as a civil remedy provision. It is the substance of those provisions which create the proscriptions. Section 44(1) proscribes contraventions of a provision of the NES. Section 45 proscribes contravention of a term of a modern award. The appellants’ alternative contention treats the references to ss 44(1) and 45 (and every provision listed in s 557(2)) as a reference not to the substance but to the mere existence of the provision irrespective of the nature of the contravention the provision creates. Section 557(2) should be recognised to be a form of definitions provision. It defines civil remedy provisions for the purposes of s 557(1). The function of s 557(2) is to indicate that when a provision is identified, it is the substance of the provision found elsewhere in the Act (in this case, in ss 44(1) and 45) which is the civil penalty provision. As the FWO put it in written submissions:

However, section 557 also operates on contraventions which relevantly occur when a term of an award or a provision of an NES is contravened. This now occurs indirectly through the operation of sections 44 and 45. In the case of s. 45 (for example), the contravention occurs when a term of a modern award is contravened. Thus the effect of subsection 557(1) in relation to contraventions of s. 45 is that:

…2 or more contraventions of (a term of an award) are, subject to subsection 3, taken to constitute a single contravention…

The appellants construe s. 556 as if it said that 2 or more contraventions of an award or 2 or more contraventions of an NES are taken to constitute a single contravention.

14    Third, and contrary to the appellants’ case, sub-ss 557(1) and (2) are ambiguous. They are capable of being read as referring to the existence of the identified provision (the appellants’ case) or the substance of the identified provision (the case for the FWO). Accordingly, regard may be had to the Explanatory Memorandum for the Fair Work Bill 2008 (Cth) (s 15AB(1)(b) of the Acts Interpretation Act 1901 (Cth)). The Explanatory Memorandum at [2189] and [2190] gives two examples of the operation of s 557(1) as follows:

For example, if a company contravenes a single term of a modern award in respect of ten employees, these ten contraventions are taken to be a single contravention. This means that the maximum penalty that the Court can impose for the contravention is 300 penalty units.

Similarly, if a company contravenes five separate terms of a modern award in respect of ten employees, these 50 contraventions are taken to be five contraventions. This means that the maximum penalty that the Court can impose is five times a maximum penalty of 300 penalty units.

15    Each example is consistent with the construction the FWO advances. In contrast, no example equivalent to the present case is provided. More importantly, [2189] and [2190] refer to “a term of a modern award”, which is the substance of s 44 of the Act. In so doing, the Explanatory Memorandum implicitly assumes a position contrary to the appellants’ argument.

16    Fourth, the difference in language between s 557 and its predecessor provisions (the predecessor provisions are s 719 of the Workplace Relations Act 1996 (Cth) and s 178 of the Industrial Relations Act 1988 (Cth)) are differences in form rather than substance. Section 178(2) relevantly provided that:

… where:

(a)    2 or more breaches of a term of an award or order are committed by the same organisation or person; and

(b)    the breaches arose out of a course of conduct by the organisation or person

the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term.

Section 719 (2) similarly provided that:

… where:

(a)    2 or more breaches of an applicable provision are committed by the same person; and

(b)    the breaches arose out of a course of conduct by the person;

the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term.

17    The difference in language which is said to assume importance is that ss 178(2) and 719(2) both referred to a “breach of a term of an award” or a breach of an “applicable provision” whereas, and by way of contrast, s 557(1) now refers to “contraventions of a civil remedy provision…”. The difference in substance to which the appellants point assumes the appellants’ construction is correct. Thus, it assumes that when referring to the identified provisions in s 557(2) it was the existence rather than the substance of those provisions which is engaged. This is the difference in language. If, however, an orthodox approach is taken so that, when a provision is identified, it is the substance of the provision which is engaged (which is the effect of s 12 of the Acts Interpretation Act 1901 (Cth) requiring every section of an Act to be treated as a substantive enactment), then there is a difference in form only between s 557 and its predecessors. To use the appellants’ language, it seems counter-intuitive for the legislature to have made such a fundamental change by such a side wind. In further support of this conclusion there is nothing apparent in the legislative scheme or otherwise which indicates that there was intended to be any change in the object and purpose of s 557 of the Act compared to its predecessor provisions. In Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 at 223 Gray J focussed attention on whether an offender has in substance committed a series of breaches which should not be punished separately as opposed to breaches of several different obligations and said:

The object of s 178(2) appears to be that a party bound by an award and pursuing a course of conduct involving repeated acts or omissions, which would ordinarily be regarded as giving rise to a series of separate breaches, should not be punished separately for each of those breaches. If such a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another. This reasoning leads to the conclusion that each separate obligation found in an award is to be regarded as a “term”, for the purposes of s 178 of the Act. The ascertainment of what is a term should depend not on matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out. For these reasons, I incline to the view that each separate obligation imposed by an award is to be regarded as a “term”, for the purposes of s 178 of the Act.

18    Buchanan J said something not dissimilar in Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No 2) [2012] FCA 408 as follows:

[2]    … However, s 719(2) of the WR Act provides that where two or more breaches of an “applicable provision” under the WR Act, which includes a term of an award, arise out of the same course of conduct, they are to be treated as a single breach. On one view, the failure to make any of the required payments arose from a single course of conduct. They all arose from a determination by the respondents that no payment would be made upon the termination of employment of any of the employees, or the employees as a group. However, this approach gives insufficient attention to the separate legal character of the three forms of obligation earlier identified. I am satisfied that each of those forms of obligation requires separate recognition. I am not, however, satisfied that each individual example of defiance of an obligation is permitted separate recognition. In my view the individual examples, constituted by the failure to make payments to particular individual employees, arise out of a course of conduct in each of the three instances. Any penalty must be assessed taking that into account.

[3]    This approach to the legislative scheme appears to me to be consistent with the approach taken in Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 and QR Limited v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (2010) 204 IR 142; [2010] FCAFC 150 on which both parties relied (see also Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v QR Limited (No 2) [2010] FCA 652 at [16]-[28]).

The object and purpose of provisions such as s 557 and its predecessor provisions is to ensure that an “offender is not punished twice for what is essentially the same criminality”. When considering the principles to be applied when imposing a penalty for contraventions of the Building and Construction Industry Improvement Act 2005 (Cth) Middleton and Gordon JJ in Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39, (2010) 269 ALR 1 stated the issue to be resolved in that appeal as follows:

[35]    The appellants submitted that the sentencing discretion miscarried because her Honour failed to consider a relevant matter (whether the three contraventions ought properly be seen as arising out of the one course of conduct) or because her Honour misdirected herself in the application of the “one course of conduct” or the “one transaction” principle…

In resolving that argument, their Honours concluded:

[39]    As the passages in Construction, Forestry, Mining and Energy Union v Williams (2009) 191 IR 445 explain, a “course of conduct” or the “one transaction principle” is not a concept peculiar to the industrial context. It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry. Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions.

These observations, it may be noted, have been applied when considering the operation of s 557 of the Fair Work Act: Construction Forestry Mining and Energy Union v North Goonyella Coal Mine Pty Ltd [2013] FCA 1444 at [60] per Logan J; Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 at [65] to [66] per Gilmour J; BHP Coal Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2014] FCA 193 at [13] per Collier J. If the Appellant’s construction of s 557 be accepted, it could follow that an offender could engage in different “criminality” and be punished once.

19    Fifth, there are contrary decisions. The reasoning of Logan J in QR Limited FCA at [16] to [19] is against the appellants. Logan J said:

16    In my view, the course of conduct must be associated with the particularised term of the particularised instrument. That is the contravention of the term of the transitional instrument. One does not look at course of conduct for the purposes of s 557 at a level of abstraction divorced from the contravened provision as particularised (ie the term in question and the transitional instrument in question).

17    Were s 557 to be read at the level of abstraction for which the QR respondents contend (in other words, the same provision, just looking at item 2(2) in its generality, a provision which is applicable to different terms in different instruments in particular cases) the result would be that different terms in different instruments, or different terms in the same instrument perhaps embracing quite different forms of conduct would all be assimilated as one. Each would just be a civil remedy provision. If the overall conduct gave rise to breaches of different terms, they would be treated as but one contravention.

18    That seems an odd result to me.

19    Especially that is so in light of s 557(3). That renders the otherwise beneficial effects of s 557 inapplicable if a penalty has already been imposed for a breach of a civil remedy provision. On the construction for which the QR respondents contend, if a person had contravened item 2(2) in respect of a term quite unrelated to consultation and in but one of the applicable transitional instruments, that person would be denied the beneficial effects of s 557(1). That seems to me to be a result contrary to the intendment of the provision concerned.

20    We agree with this reasoning. The appellants’ argument to the contrary, that the controlling mechanism is that the contraventions arise from a course of conduct, is not a persuasive answer, particularly in light of his Honour’s observations about the operation of s 557(3).

21    In QR Limited FCAFC Keane CJ, Marshall and Gray JJ said at [48]:

There may be one course of conduct in respect of each agreement associated with the relevant term of each of many agreements. There are, for the purposes of s 557(1), contraventions of multiple terms of multiple agreements. Accordingly, s 557(1) does not avail the appellants.

It is true that the present case does not involve multiple agreements. Accordingly, the decisions in QR Limited are not directly on point. Nevertheless, the Full Court made no criticism of Logan J’s reasoning which is inconsistent with the appellants’ argument.

22    Similarly, although Murrihy is not directly on point, the observation of Jessup J at [33] is material. His Honour said:

Section 557(1) refers to “2 or more contraventions of a civil remedy provision” [emphasis added]. This is in my view, an instance where a statutory intention to the contrary of the primary operation of s 23 of the Interpretation Act appears, whether by the terms of that section itself with respect to the period before 27 December 2011 or by s 2(2) of that Act with respect to the period since that date: see items 2 and 49 of Sched 1 to the Acts Interpretation Amendment Act 2011 (Cth). The contrary intention appears from the subject-matter of s 557, namely, the circumstances under which multiple contraventions are collapsed into a single contravention. In this context, I take the view that the reference to a civil remedy provision in the singular was a conscious, specific, one. The section should not, in my view, be given a broader operation than that for which the legislature expressly provided.

23    We agree with this analysis. It may be accepted that it does not answer the question in the present case which depends on the meaning of “a civil penalty provision” in s 557(1). For the reasons given above, we consider that this must mean the substance, not the mere existence, of the identified civil penalty provisions. Consistent with the reasoning of Jessup J in Murrihy, to conclude otherwise, would be to give s 557 a broader operation than that for which the legislature expressly provided.

24    Sixth, it is wrong to characterise the provision of the NES and the term of the modern award alleged to be contravened as a mere particular of the contravention of ss 44(1) and 45 and then to seek to apply that to the construction question. Whether the provision of the NES or the term of the modern award is a particular or an element of the offence is not the question. Accordingly, the concept of elevating a particular to an element of the contravention is inapt and liable to confuse the proper inquiry.

25    Seventh, Pearce has nothing to do with s 557 of the Act. Pearce concerned charging and sentencing for conduct giving rise to more than one offence. It is not relevant to the issues in this case.

26    Eighth, the FWO’s construction is not counter-intuitive. To the contrary, the appellants’ argument would lead to arbitrary and capricious outcomes. Adopting the FWO’s submissions in this regard:

For example, an employer who has contravened a range of provisions under a modern award resulting in large widespread underpayments to a number of employees would be subject to the same maximum penalty of $33,000 as an employer who has contravened one award provision for one employee on one occasion.

Similarly, an employee’s employment may be governed exclusively by a modern award, an enterprise agreement, or an NES, or it may be governed by a combination of all three. If all the terms or provisions contravened appear in a single instrument, there would be but a single contravention and single penalty. If, however, there was more than one source of the terms or provisions, even though the contraventions were in substance identical, the maximum available penalties could be doubled or tripled, depending upon the number of applicable instruments.

Further, the appellants’ construction would have the effect that multiple breaches of different modern awards would be treated as a single contravention so long as they arose from a single course of conduct…

These arbitrary and capricious results are avoided if it be accepted that s. 557 operates to group together contraventions of the same provision or term.

27    For these reasons, the appellants’ alternative contention as to the construction of s 557 cannot be accepted. The primary Judge thus sentenced the appellants on the basis of a correct interpretation of s 557. No challenge is made to that sentence if the issue of construction is determined adversely to the appellants.

conclusions

28    For the reasons set out above, the appeal should be dismissed.

Associate:

Dated:    27 May 2014