FEDERAL COURT OF AUSTRALIA

Wardman v Macquarie Bank Limited [2023] FCAFC 13

ORDERS

THE COURT ORDERS THAT:

1.    By 4.00pm on 3 March 2023, the practitioners for the parties are to confer and submit to the Chambers of the members of the Full Court via email proposed draft orders to give effect to these reasons.

2.    If the parties are unable to agree on draft orders, then by 4.00pm on 3 March 2023, each party is to file and serve:

(a)    proposed draft orders giving effect to these reasons; and

(b)    written submissions, not exceeding three pages, in support of their respective proposed orders.

3.    Subject to further order, the Court will consider the orders on the papers.

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

ORDERS

THE COURT ORDERS THAT:

1.    By 4.00pm on 3 March 2023, the practitioners for the parties are to confer and submit to the Chambers of the members of the Full Court via email proposed draft orders to give effect to these reasons.

2.    If the parties are unable to agree on draft orders, then by 4.00pm on 3 March 2023, each party is to file and serve:

(a)    proposed draft orders giving effect to these reasons; and

(b)    written submissions, not exceeding three pages, in support of their respective proposed orders.

3.    Subject to further order, the Court will consider the orders on the papers.

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

ORDERS

THE COURT ORDERS THAT:

1.    By 4.00pm on 3 March 2023, the practitioners for the parties are to confer and submit to the Chambers of the members of the Full Court via email proposed draft orders to give effect to these reasons.

2.    If the parties are unable to agree on draft orders, then by 4.00pm on 3 March 2023, each party is to file and serve:

(a)    proposed draft orders giving effect to these reasons; and

(b)    written submissions, not exceeding three pages, in support of their respective proposed orders.

3.    Subject to further order, the Court will consider the orders on the papers.

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

ORDERS

THE COURT ORDERS THAT:

1.    By 4.00pm on 3 March 2023, the practitioners for the parties are to confer and submit to the Chambers of the members of the Full Court via email proposed draft orders to give effect to these reasons.

2.    If the parties are unable to agree on draft orders, then by 4.00pm on 3 March 2023, each party is to file and serve:

(a)    proposed draft orders giving effect to these reasons; and

(b)    written submissions, not exceeding three pages, in support of their respective proposed orders.

3.    Subject to further order, the Court will consider the orders on the papers.

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

ORDERS

THE COURT ORDERS THAT:

1.    By 4.00pm on 3 March 2023, the practitioners for the parties are to confer and submit to the Chambers of the members of the Full Court via email proposed draft orders to give effect to these reasons.

2.    If the parties are unable to agree on draft orders, then by 4.00pm on 3 March 2023, each party is to file and serve:

(a)    proposed draft orders giving effect to these reasons; and

(b)    written submissions, not exceeding three pages, in support of their respective proposed orders.

3.    Subject to further order, the Court will consider the orders on the papers.

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

REASONS FOR JUDGMENT

BROMBERG J:

1    These reasons deal with five appeals. Two of those appeals were instituted by 48 former employees of Macquarie Bank Limited (Bank) employed as financial advisers. The other three appeals were instituted by the Bank and beyond the 48 appellant employees, involved two further former employees of the Bank as respondents (together, employees). A multitude of grounds of appeal challenged the orders made by the primary judge, a judge of the Federal Circuit Court of Australia (as it was then known). Each of those grounds and the issues raised by them have been conveniently collected in the reasons of Wheelahan J which I have read in draft. After helpfully setting out relevant background matters, legislative and award-based provisions, the evidence and a summary of the reasons of the primary judge and both the grounds of each appeal and the submissions advanced on appeal by the parties, his Honour’s reasons (at [124]) identify that the issues raised give rise to eight questions which it is convenient to set out here:

(1)    Is the remuneration that was paid by the Bank to the employees to be characterised as comprising commission only, as the employees submitted?

(2)    Did the Bank discharge its obligations under the Award and the FW Act to pay wages or salary, and to make payments on account of leave, annual leave loading, and public holidays?

(3)    Do cl 7 and cl 14 of the Award preclude the Bank from relying upon the regular monthly payments that were made to the employees under the BCR package to discharge its Award obligations to pay wages at the minimum rates fixed under cl 13.1 of the Award, and to make payments on account of leave, annual leave loading, and public holidays?

(4)    Did the terms of the various deeds of release that are in issue defeat the claims of the relevant employees?

(5)    Did the primary judge err in ordering the third and seventh applicants in the Wardman proceeding to pay the Bank’s costs of defending their claims on the ground that for the purposes of s 570 of the FW Act their proceedings had been instituted without reasonable cause?

(6)    Was the primary judge in error in not holding that Sandford and Edwards were in breach of their deeds of release thereby engaging an obligation of repayment?

(7)    Did the primary judge err in by failing to give reasons for determining that interest should be calculated from the commencement of the proceedings, rather than from when the money claims accrued?

(8)    Did the primary judge make the errors that are alleged by the Bank in his Honour’s assessment of penalties?

2    I am most grateful to Wheelahan J for comprehensively ordering and setting out those matters. I rely upon them but they need not here be repeated. I respectfully concur with the conclusions his Honour has expressed at [285] and agree that orders should now be made for the parties to provide proposed orders consistent with those conclusions.

3    In relation to the questions numbered (4) to (8), I respectfully agree with the conclusions reached by Wheelahan J and do so for the reasons his Honour has given. In relation to questions numbered (1) to (3), I agree with the conclusions reached by Wheelahan J for the reasons which now follow.

Did the Bank discharge its obligations to pay award-wages?

4    I will commence with the first question which deals with whether the obligations upon the Bank to pay to each employee for each relevant pay period the wages provided for by the Banking, Finance and Insurance Award 2010 (Award), were discharged by the monthly payments made to the employees by the Bank (monthly payments) as payments due under the “Basic Cost Responsibility” (BCR) component of the remuneration payable to the employees under their respective contracts of employment.

5    By its submission, those payments were characterised by the Bank as payments of a monthly salary owed to the employees under their contracts of employment and, as payments of salary, capable of discharging the concurrent obligations imposed upon the Bank by the Award to pay the wages owed to the employees. Conversely, those payments were characterised by the employees as an advance on commissions owed to the employees under their employment contracts with the Bank and, as payments of commissions, incapable of discharging any concurrent Award obligation to pay the employees the wages they were owed.

6    As I will explain, the dispute as to the proper characterisation of the monthly payments is to be resolved by reference to the proper construction of each of the employment agreements in question. If those agreements imposed an obligation upon the Bank to pay a salary for the hours worked by the employees, then the payments made in discharge of that obligation would also discharge the closely correlative and concurrent Award-based obligation to pay the wages also owed by the Bank. Conversely, if there was no contractual obligation upon the Bank to pay the employee a salary for hours worked, the relevant payments made by the Bank should be construed as paid in satisfaction of the Bank’s contractual obligation to pay the employees commissions earned. The payment of commissions would not, for the reasons I also explain, serve to discharge the concurrent Award-based obligation upon the Bank to pay each employee their wage in respect of each pay period in question.

7    It is not in contest that during the claim period, the employment of each of the employees was covered by the Award. The Award is in a familiar form largely consistent with the form taken by many “modern awards” made under the Fair Work Act 2009 (Cth) (FW Act). The Award imposes numerous obligations upon the Bank, each of which is enforceable by reason of the requirement made by s 45 of the FW Act that “[a] person [to whom the award applies] must not contravene a term of a modern award”. The Award provides for an employee to be engaged on a full-time, part-time or casual basis (cl 10). It provides that a full-time employee will work an average of 38 ordinary hours per week (cl 10.1) and be paid the “minimum wages” set out in cl 13. Part-time employees are to be paid on a pro-rata basis for each ordinary hour worked at the rate of no less than 1/38th of the minimum weekly rate of pay for a full-time employee (cl 10.2). The Award regulates work performed outside of ordinary hours of work (ie overtime) and provides that it be paid at specified penalty rates (cl 23). Employees must be paid “their salaries” weekly or fortnightly or monthly if mutually agreed (cl 20).

8    As will be apparent from those observations about the terms and nature of the Award, the remuneration which an employee is entitled to under the Award is time-based and not results or performance based. Employees are remunerated under the Award in exchange or in consideration for the time spent in providing their labour to their employer. Mainly the remuneration provided for by the Award is referred to as a “wage” but sometimes as a “salary”, however, the label is of no moment to the issues that here arise. It is convenient that I refer to the Award obligation to pay for the performance of ordinary hours worked as the obligation to pay “award-wages”. It is necessary to appreciate that the claims made by the employees in respect of the Bank’s failure to pay wages concerned the alleged non-payment of award-wages only, there being no claims made for unpaid overtime.

9    It is not in contest that each of the monthly payments made to each employee by the Bank were for sums in excess of the amounts due in respect of each employee’s entitlement to award-wages. Nor is it in contest that the relevant payments made to the employees by the Bank were payments made under their contracts of employment and in discharge of the contract-based remuneration owed to them. Those contracts provided for a remuneration structure which is somewhat unusual and which made no reference to the Award. However, as I will explain, the absence of any reference to the Award does not mean that the entitlements due to the employees under the Award were not capable of being satisfied or discharged by the contractual payments received by them.

10    It is well-settled in employment law that a single payment can concurrently satisfy both a contractual and an award-based or a statutory-based obligation to pay an employee the remuneration to which that person is entitled: Amalgamated Collieries of WA Ltd v True (1938) 59 CLR 417 at 431 (Dixon J). Thus, to take a simple example, if the contract provides for a weekly wage of $1,000 in exchange for 38 hours of work, the payment by the employer of $1,000 pursuant to that contractual obligation will also satisfy the employer’s concurrent obligation under an industrial award to pay $850 for the working by the employee of a 38 hour week.

11    There are, however, recognised limitations upon the circumstances in which an employer may claim that a payment made to an employee under contract was effective to discharge an outstanding award-based or statutory-based entitlement. The relevant cases are largely summarised in the reasons of North and Bromberg JJ in Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate (2015) 240 FCR 578 at [40]-[67] and further supplemented by White J in WorkPac Pty Ltd v Rossato (2020) 278 FCR 179 at [824]-[859]. For present purposes, those limitations are sufficiently recounted in the observations I made in Rossato at [221]-[222] as follows:

[221]    The legal principles relied upon by WorkPac have been the subject of numerous authorities. An extensive survey of the authorities is given in the reasons of White J and it is not necessary to undertake that exercise again here. Those authorities have largely been based on observations first made by Sheldon J in Ray v Radano [1967] AR (NSW) 471 at 478-479 and adopted and re-expressed by the Full Court (Keely, Ryan and Gray JJ) in Poletti v Ecob (No 2) (1989) 31 IR 321 at 332-333 as follows:

It is to be noted that there are two separate situations dealt with in the passage from the judgment of Sheldon J which has been quoted and in the reasoning of the Commission in Pacific Publications. The first situation is that in which the parties to a contract of employment have agreed that a sum or sums of money will be paid and received for specific purposes, over and above or extraneous to award entitlements. In that situation, the contract between the parties prevents the employer afterwards claiming that payments made pursuant to the contractual obligation can be relied on in satisfaction of award entitlements arising outside the agreed purpose of the payments. The second situation is that in which there are outstanding award entitlements, and a sum of money is paid by the employer to the employee. If that sum is designated by the employer as being for a purpose other than the satisfaction of the award entitlements, the employer cannot afterwards claim to have satisfied the award entitlements by means of the payment. The former situation is a question of contract. The latter situation is an application of the common law rules governing payments by a debtor to a creditor. In the absence of a contractual obligation to pay and apply moneys to a particular obligation, where a debtor has more than one obligation to a creditor, it is open to the debtor, either before or at the time of making a payment, to appropriate it to a particular obligation. If no such appropriation is made, then the creditor may apply the payment to whichever obligation or obligations he or she wishes. See Halsbury’s Laws of England, 4th ed, vol 9, paras 505 and 506.

[222]    The first situation expresses a limitation (“first limitation”) upon the capacity of an employer to bring into account for one purpose monies paid for a different contractual purpose. The second situation expresses a limitation (“second limitation”) upon monies appropriated to one debt being brought into account to discharge a different debt.

12    The second limitation referred to in the extract just cited (second limitation) is, as there explained, an application of the common law rules governing payments by a debtor to a creditor. To illustrate by way of a simple example, if an employer is indebted to an employee for unpaid wages but also for an unpaid clothing allowance and makes a payment which is designated as a payment made for the wages owed, the employer cannot later claim that the payment was made in discharge of the debt owed in respect of the clothing allowance. The second limitation looks to the debt the payment was intended to satisfy. However, the second limitation upon an employer’s capacity to claim that an entitlement has been paid for was not here relied upon by the employees and I need not be further detained by it.

13    In contrast, the first limitation cited above (first limitation) relies upon the contract and what the parties have agreed to be the purpose of the payment which the contract requires be made. Again to illustrate by example, if the parties have agreed that for each ordinary (ie non-overtime) hour of work performed the employee be paid $50 in circumstances where the applicable award provides for a minimum hourly rate of $30 for ordinary hours of work, an employer cannot claim the over-award payment of $20 per hour as a payment made for a different purpose, such as the satisfaction of an award obligation to pay for overtime work performed by the employee.

14    As the first limitation is a matter of contract, it follows, as I said in Rossato at [234] that:

… if a payment is made pursuant to a contract its purpose will be governed by the contract and must be objectively ascertained by reference to the common intention of the parties as understood by a reasonable person in the position of each of the parties taking into account the text of the contract as well as the surrounding circumstances known to the parties and the purpose and object of the transaction: Toll at [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

15    Secondly, the second limitation is dependent upon substance not form. It will have no application where there is a “close correlation between the nature of the contractual obligation and the nature of the award obligation” and a close correlation may exist despite those obligations being differently labelled: Australia and New Zealand Banking Group Limited v Finance Sector Union of Australia (2001) 111 IR 227 at [47], [51]-[52] (Black CJ, Wilcox and von Doussa JJ) and Linkhill at [98] (North and Bromberg JJ). As was explained in Linkhill at [98], it is the subject matter of the contractual obligation for which the payment was made which must be examined and found to closely correlate with the award obligation said to be discharged by the payment.

16    The essence of what appears to be the fundamental point made by the employees in application of the second limitation, is that the monthly payments made to them by the Bank were made in discharge of the Bank’s contractual obligation to pay each of them commissions pursuant to the remuneration structure of their contracts of employment.

17    If the employees are correct to say that the monthly payments made to them were for commissions owed by the Bank, they would also be correct to contend that the contractual purpose of the obligation imposed upon the Bank by their contracts of employment to pay a commission is not closely correlated with the purpose of the Award obligation to pay award-wages for the hours worked by an employee. A commission is ordinarily a results-based payment and not a time-based payment and for that reason there would ordinarily be insufficient correlation between the purpose of a contractual obligation to pay an employee a commission based on results or performance and an award obligation to pay a wage for the hours worked by the employee. Each case, however, will turn on its own facts. Poulos v Waltons Stores (Interstate) Ltd (1986) 10 FCR 429 provides an illustration of a particular circumstance in which the payment of a commission was held not to discharge an employee’s entitlement to award-based wages.

18    Those observations are, however, somewhat beside the point. That is so because in this case and as I understand the Bank’s submission, the Bank does not seek to avoid the application of the second limitation by relying upon a close correlation between the nature of an obligation to pay a commission and an obligation to pay a wage for hours worked. The Bank’s case is that the monthly payments were not commission payments. The Bank contended that in each month in question two separate streams of payments were made to each of the employees, each paid on different dates and on a different basis. The first stream (which I have called the monthly payments) was a “BCR payment” which comprised the salary component of the BCR. The second stream was said to be, and was not disputed to be, a commission payment. It is the payment of the salary component of the BCR which the Bank contended discharged the obligations imposed on it by the Award to pay each of the employees their award-wages for each of the pay periods in question.

19    The employees’ fundamental response to the Bank’s contention that the Award obligation to pay the award-wages was discharged by the payments made for salary was simply that there were no payments made for salary. Instead, they submitted that all the monthly payments made by the Bank were made in satisfaction of the Bank’s contractual obligation to pay the employees the commissions earned by them pursuant to the commission-based remuneration structure provided for by their contracts.

20    The employment contracts are largely in the same form but are not identical. The fifty employment agreements in question may be organised into eight groups as the reasons of Wheelahan J do at [136]-[162] and in the First Schedule to those reasons. His Honour has set out in the Second Schedule to those reasons extracts from each form of agreement sufficient to identify the terms of the contracts which are of significance to the constructional exercise here required of determining whether the contracts obliged the Bank to pay a salary beyond any obligation to pay commissions. I will first deal with what Wheelahan J has identified as the Form One contracts, which include the contract of Mr Wardman and twenty-four other employees.

21    The relevant principles for construing a contract are well known. The common intention of the parties to a contract is to be objectively ascertained which normally “requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). Further, as French CJ, Nettle and Gordon JJ said in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [51] “a commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’”.

22    Of primary significance to the constructional exercise are the terms of the clause headed “Remuneration”. The clause is not well drafted. It begins by explaining that the employee will be “remunerated under the Employer’s Commission Base Structure as part of the Employer’s Basic Cost Responsibility (BCR) system”. While those references suggest the existence of documents which detail the nature and form of what is referred to as the Basic Cost Responsibility system, the terms of that policy or arrangement are not incorporated and do not form part of the contract. Instead, what the contracts seem to do is refer to aspects of the BCR system without identifying the whole of it. It seems to me that for that and other reasons, the contracts are not clear and in particular as to whether the references therein made to “salary” are intended to refer to a notional cost to the Bank relevant only for calculating the commission payable to the employee or, on the other hand, an actual cost to the Bank providing a guaranteed base level of remuneration to the employee which is not dependent upon employee performance and the achievement of commission targets.

23    If the references to “salary” are intended to only refer to a notional cost, notional in the manner just identified, then I would agree with the employees’ characterisation of the monthly payments as commission payments paid in advance. Consequentially, I would also accept the uncontested contention of the employees that such payments were not capable of discharging the Bank’s obligation to pay the award-wages they were due.

24    If, on the other hand, the contracts intended to provide the employees with a guaranteed monthly payment payable irrespective of whether any commission targets were met and commission was thereby earned, the contracts should be construed as obliging the Bank to remunerate the employees for the time-based provision of their labour. Further, if that is the purpose of the contractual obligation to pay a salary, that purpose has a close correlation with the purpose of the Award obligation to pay employees an award-wage for the time-based provision of their labour. Accordingly, the discharge of the contractual obligation by the monthly payments would have concurrently discharged the Award-based obligation to pay the employees the award-wages due in each of the months in question.

25    The constructional exercise is not free from difficulty. Whilst I have not reached a clear view, I have been persuaded that the preferable construction of the Form One contracts is that the Bank is obliged to pay the employees a monthly sum for their time-based provision of labour irrespective of whether any commission targets are met and any commission is earned by the employee.

26    It is sufficiently clear that when, in the opening paragraph of the “Remuneration” clause, the contracts refer to the “BCR” they are referring to a dollar figure said to represent “the total cost of your employment”. In the Form One version of the contracts, unlike some of the other forms of the contracts, the second sentence of the “Remuneration” clause does not specifically refer to salary as a cost component of the BCR. Despite that, it is clear enough given the later references made to salary, that the employee’s salary cost is a component of the BCR.

27    As part of the BCR, the salary component is relevant to the function of the BCR of providing a financial benchmark which the commissions generated by the employee must satisfy before commissions which exceed the benchmark become payable. The discernible concept which underpins that function is the idea that before the employee should become entitled to commission income, the commissions generated by the employee should off-set the “costs of employment” of the employee incurred by the Bank. So much is made sufficiently clear by the Form One contracts as a whole including the following terms, the first from the “Remuneration” clause and the second from the “Payment of Commission” clause:

You will be allocated a BCR, which is a recoverable allocation against any commission earned.

…

Commission payments will be first applied against BCR allocation, including the cost of packaged items, if any, for the year to date. Once your commission payments exceed the BCR allocation and the cost of all packaged items, the remaining commission balance will be paid to you. Payroll tax and workers compensation charges on commission payable (i.e. commission earned less BCR allocation) will be borne by the Employer.

28    If that was the only function for the “salary” contemplated by the contracts, the salary would be notional and solely concerned with the calculation of commissions in the sense earlier described. However, the contracts do not limit the intended function of a salary to that of merely being a financial benchmark relevant to the calculation of commissions payable to the employees. There are two provisions which serve to demonstrate that the salary is intended as an entitlement to remuneration which the employee is entitled to be paid, irrespective of any entitlement the employee may or may not have to be paid a commission. Both provisions are in the “Remuneration” clause. The first states:

Your base net salary will be payable monthly on the 15th day of each month (being two weeks in arrears and two weeks in advance) by direct deposit to a bank account.

The second is the third paragraph of the “Remuneration” clause (emphasis added):

If your earned commission is less than your BCR allocation at the end of the month, this deficit will be rolled forward to the next month and offset against available net commission. To the extent that your earned commission is less than your base BCR allocation in a given year, you will not be required to pay the shortfall to the Employer, however, your base rate will be revised and may be reduced by the Employer in line with the Minimum Performance Clause of this Agreement. The Employer may also reduce your BCR allocation at any point throughout the Commission year if it appears to the Employer that your earned commission will be less than your base BCR allocation for the year.

29    Those provisions make it sufficiently clear that the Bank is obliged to pay a salary (or what, in employment contracts which value a capacity to earn commission, is often called a “retainer”) and that the employee is entitled to retain the salary paid. The salary is not merely a notional cost and, because the employee is entitled to retain the payment irrespective of whether sufficient commission is earned in the relevant year to allow the cost to be off-set against commission earned, the payment of the salary cannot be characterised as no more than an advance on future commission payments. The characterisation of the monthly payments as an advance on future commission earnings was critical to the construction contended for by the employees. That characterisation is not to be preferred because the employees are entitled to retain the salary payment irrespective of whether the cost can be off-set against future commission earnings. The better view is that the monthly payments are payments made for their stated purpose – a payment of the employee’s “base net salary”.

30    It is important I think to pause and consider the discernible rationale for the bolded words in the third paragraph. To my mind, the provision recognises the intent of the parties that the employee be remunerated despite the employee not achieving or sufficiently achieving commission targets which would entitle the employee to be paid a commission. There is here a recognition that the employee should be paid something for his or her time-based provision of labour irrespective of whether those efforts result in particular performance targets being met. That is the usual purpose of what is commonly referred to as a “retainer” in an employment contract which provides for remuneration to be earned by way of commissions. The idea that despite substantial effort an employee should earn nothing at all runs counter to both common employment practices and makes little commercial or industrial sense even where it is obvious, as is here the case, that the parties contemplated that incentivising forms of remuneration would very substantially account for the employee’s likely earnings. That rationale, in my view, very significantly supports the view that the monthly payments were intended to provide a minimum guaranteed level of remuneration and should not be characterised as merely an advance on future commission earnings.

31    I appreciate that the capacity given to the Bank in the third paragraph of the “Remuneration” clause to unilaterally reduce the employee’s salary runs somewhat counter to the rationale I have just identified. However, a capacity to reduce is not necessarily to be construed as a capacity to eliminate, especially where to eliminate or even to reduce the employee’s salary to a level lower than the minima acceptable to the employee would make no commercial or industrial sense. It may, in that context, be inferred that it was intended that the discretion given to the Bank would be exercised reasonably. In any event, it seems to me that the identified rationale is the only discernible rationale available to explain the intention of the parties.

32    Despite the infelicitous drafting and consequent ambiguity, I read the reference to “base BCR allocation” in the third paragraph of the “Remuneration” clause as a reference to salary. The word “salary” is used synonymously with “base BCR” in the “Payment of Commission” clause, where the expression “your salary/base BCR” is used. There are many occasions where “base BCR” seems to be utilised not interchangeably but in contrast with “BCR”. Furthermore, the adjective “base” connotes that a component rather than the whole of the BCR is being referred to and the component of the BCR being referred to in the third paragraph of the “Remuneration” clause must be the salary component of the BCR because that is the only component which could be retained by the employee, as it is the only component which the contract requires be paid to the employee. In any event, even if “base BCR” meant the whole of the BCR, the sentence in question can only be sensibly construed as providing that so much of the BCR which has been paid to the employee (which must include their “base net salary … payable monthly”) may be retained by the employee.

33    I acknowledge that there is some tension between the provision in the third paragraph of the “Remuneration” clause providing that the employee “will not be required to pay the shortfall” and the sentence which Senior Counsel for the employees described as the “critical sentence in our case”, being the sentence set out above at [27] stating that the BCR “is a recoverable allocation against any commission earned”. However the two provisions are reconcilable. The latter is a statement of the general rule that the BCR will be offset against commissions generated by the employees. The former is intended to identify an exception to the general rule specific to the salary component of the BCR. The exception must obviously have been intended to prevail.

34    The employees also pointed to the sixth paragraph of the “Remuneration” clause dealing with the packaging of remuneration. That was asserted to be an exception to the capacity of an employee to retain the salary paid in circumstances where the salary was packaged and not off-set by commission earnings earnt within the same year. It is not clear to me that the provision is an exception at all. The contracts contemplate the packaging of commission earnings, as the provision set out at [27] above confirms. It seems to me that is the more likely subject of the provision. If the packaging of “salary” was its subject then the provision would sit in conflict with the provision which permits the employee to retain his or her “salary”. Given the rationale for the latter provision as described above, it would be strange if it were intended that salary paid in money and salary paid through a salary packaging arrangement were intended to be treated differently.

35    Lastly, some assistance to the construction I prefer is provided by the “Termination of Appointment” clause, in that the clause requires the Bank to pay four weeks of “salary” to the employee in lieu of notice. Further, the “Remuneration” clause’s disallowance of any claim for overtime, supports the conclusion that at least some remuneration payable under the contracts are directed to the time-based performance of work.

36    For the purposes of the present analysis, the Form One contracts are not relevantly different to the Form Two, Three, Four, Five, Six and Seven contracts. The reasons of Wheelahan J characterise Mr Marr’s contract as the only Form Eight contract and for reasons I will explain, the terms of that contract are sufficiently different to warrant separate considerations. I note that the employees’ case was put on the basis that, relevantly, all the contracts were the same because the BCR remuneration model was said to be the same for every employee. Senior Counsel for the employees acknowledged that whilst the wording of some of the provisions amongst the various contracts differed, that “did not impact on the model”. Putting to one side Mr Marr’s contract, I agree that all of the contracts are not relevantly different. My analysis of the Form One contracts applies equally to those other contracts.

37    Turning then to Mr Marr’s contract. That contract relevantly states (emphasis added):

2.    Remuneration

2.1    Remuneration Package

You will be employed under the Bank's Commission Based Structure. This structure provides a base package (BCR), combined with structured commission payments. Employees remunerated under a Commission Based Structure are not eligible to claim overtime or other penalty rates.

2.2     Base Package (BCR)

Under this structure, a base package remunerated under the Bank's Basic Cost Responsibility Plan (BCR) will be treated as an advance on commission. The BCR represents the total cost of employment inclusive of superannuation, fringe benefits tax, payroll tax, and workers compensation insurance. BCR levels are reviewed annually, and effective 1 July. To the extent that an employee does not earn enough commission to cover their base BCR in a given year, they will not be required to repay MBL, for the given year in any subsequent years, however their BCR rate will be revised and may reduce in line with Clause 2.3 below

2.3    Minimum Performance Criteria

Individual employees' minimum performance levels will be set in consultation with the Adviser and then reviewed annually to establish levels at which an Adviser must consistently perform.

If the adviser does not meet their individual performance criteria as determined in the annual performance review and has not repaid their annual BCR advance, effective the next remuneration year the rate of BCR will reduce. In this instance where BCR was $80,000 per annum, the reduced BCR would be $60,000 per annum. Where BCR was $60,000 the reduced BCR would be $40,000 per annum. BCR would not reduce below $40,000 per annum.

Where minimum performance criteria are not achieved formal performance counselling will commence.

2.4    Commission Structure

...

2.6     Payment of Commission

Commission will be paid quarterly in arrears. All commission payments (as outlined in the Commission Structure) will be applied to the advanced BCR amount for the quarter, until the advanced balance is reduced to zero.

The commission year will be specified as the period 1 April in a given year to the following 31 March.

Once the BCR advance amount for the quarter has been reduced to zero, the remaining commission balance will be paid in full. Payroll tax and workers compensation charges on commission payable (minus BCR advance) will be borne by the business. Commission payments can not be credited to the individual's BCR entitlement to provide a surplus or rollover for the subsequent year. Commission payments can not be credited to the individual's BCR to increase the base BCR.

38    It appears to me that the terms of cl 2.1 expressly acknowledge that there are two components to Mr Marr’s remuneration – a “base package” being the BCR and secondly remuneration by way of commission payments.

39    There is no reference made to Mr Marr being paid a salary, the word salary is not found at all, but it is clear enough that the Bank is to provide the “base package” by paying to Mr Marr what clause 2.2 describes as his “base BCR”, being the sum paid to Mr Marr which is retained by him irrespective of whether any off-setting commissions are generated.

40    There is no indication as to when Mr Marr is to be paid the “base BCR”. Consistently with the unchallenged finding of the primary judge, I have assumed Mr Marr was paid pro-rata on a monthly basis as were the other employees, but the assumption makes no difference to the analysis.

41    For largely the same reasons as pertained to the other forms of contract, the payment of the base BCR should not be characterised as the payment of commission. Indeed Mr Marr’s contract may be said to more clearly identify that there are two separate components to the remuneration made available to him – a guaranteed “base package” together with commission income.

42    The first sentence in cl 2.2 providing that the “base package…will be treated as an advance on commission” is not saying that the base package payments required to be paid by the Bank are to be paid as commission. Properly construed the sentence is merely saying that for the purposes of calculating the commissions due to Mr Marr, the payments of the base package (ie the base BCR) will be deemed to be commission payments.

43    Although differently worded to contracts in Form One to Seven, there is no reason for reaching a different conclusion in relation to Mr Marr’s contract.

44    For those reasons, I have concluded in respect of each employee and each pay period in question, that the monthly payments made by the Bank discharged the Bank’s obligation to pay the award-wages due. In reaching that conclusion and for the reasons given by Wheelahan J at [163]-[191] I have not regarded the “BCR policy”, the letter of 18 June 2010 or the asserted failure of the Bank to have utilised the annual salary or flexibility provision in the Award, as of relevance to the issues I have determined.

Did the Bank discharge its statutory obligations to provide paid leave and provide payment for public holidays?    

45    I respectfully agree with the conclusions reached by Wheelahan J that the statutory obligations upon the Bank to provide paid leave and payment for public holidays were discharged by the monthly payments. The nature of paid leave generally and the nature of paid leave as provided for under ss 90, 99, 106 and 116 of the FW Act is that it has two relevant elements. It is firstly an entitlement provided to an employee to be absent from work and secondly, and despite that absence, an entitlement to be paid for the period of the absence: see Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union (AMWU) (2019) 270 FCR 513 at [148] (Bromberg and Rangiah JJ); Rossato at [226] (Bromberg J).

46    The only claim made by the employees was a claim in relation to that part of the statutory entitlements which required that the employees be paid whilst absent, each of those statutory obligations providing that the employee be paid “the employee’s base rate of pay for the employee’s ordinary hours of work in the period”. In the case of the employees here in question, that entitlement was an entitlement to be paid what I have referred to as their award-wages. For the reasons already given, the employees were paid their award-wages in respect of the entirety of the claim period (including any periods of leave or absence and during any public holiday), because they were paid the monthly payments and those payments discharged what was owed by the Bank in respect of award-wages.

Did the Bank discharge its Award obligation to pay leave loading?

47    Clause 24.3 of the Award required the Bank to pay a loading of 17.5% during a period of annual leave. For the reasons given by Wheelahan J, the obligations upon the Bank to pay leave loading were not discharged other than in respect of Mr Haslem, Mr Mackenzie and Mr Ryan.

Conclusion

48    For those reasons, orders should be made to give effect to the conclusions expressed in the reasons of Wheelahan J at [285].

Associate:

Dated:    17 February 2023

REASONS FOR JUDGMENT

WHEELAHAN J:

Introduction

49    These five appeals were heard together. The appellants in all appeals challenge decisions of the Federal Circuit Court of Australia (as it was then known) in three proceedings in the Fair Work Division of that Court that were heard by the same judge. Two of the five appeals are brought by 48 former employees of Macquarie Bank Ltd (the Bank) who were applicants in the three proceedings below. The Bank, which was the respondent in the three proceedings below is the appellant in the other three appeals. There are 50 former employees who are respondents to those appeals, who include two former employees who are not among the 48 employee appellants. It is convenient to refer to the former employees as the employees, and without intending any disrespect, to refer to them individually by their surnames.

50    The main questions on appeal concern whether payments made by the Bank to the employees pursuant to their contracts of employment were effective to discharge concurrent statutory obligations arising under the Fair Work Act 2009 (Cth) (FW Act), namely obligations to comply with a modern award, the Banking, Finance and Insurance Award 2010 (the Award), and obligations to comply with the National Employment Standards (NES). The primary judge held that in several respects the payments made to the employees were ineffective to discharge the Bank’s statutory obligations, and made declarations, orders for payment to a number of the employees, and orders imposing civil penalties upon the Bank.

51    The employees challenge the primary judge’s findings in relation to claims of non-payment of Award-based wages that the primary judge rejected. Correspondingly, the Bank challenges the primary judge’s findings of non-payment of statutory entitlements relating to leave, public holidays, and loadings that were adverse to the Bank. There are also a number of ancillary issues raised on the appeals, including whether the primary judge was in error in holding that some of the employees had released the Bank from liability, whether the judge was in error in assessing penalties, whether the judge’s reasons in relation to the calculation of interest were adequate, and whether the judge was in error in making orders for costs against some of the employees on the ground that their claims were brought without reasonable cause.

The appeals

52    I will identify the three proceedings below as follows –

(a)    SYG 2834 of 2019 (the Arundell proceeding);

(b)    SYG 1540 of 2018 (the Wardman proceeding); and

(c)    SYG 781 of 2019 (the Briody proceeding).

53    As I have mentioned, there are 48 appellants who were employees of the Bank. The 15 employees who are the appellants in appeal NSD 92 of 2021 were amongst the 21 applicants in the Arundell proceeding in the court below. The Arundell proceeding was the subject of separate consideration of contravention (including liability to pay additional amounts) and penalties: Arundell v Macquarie Bank Ltd [2020] FCCA 2720 (contravention); Arundell v Macquarie Bank Ltd (No 2) [2020] FCCA 3313 (penalties). The hearing relating to the contravention and liability issues in the Arundell proceeding took place on 28 and 30 September 2020, and judgment was given on 2 October 2020.

54    Of the 33 employees who are appellants in appeal NSD 88 of 2021 –

(a)    14 were amongst the 15 applicants in the Wardman proceeding in the court below; and

(b)    19 were amongst the 20 applicants in proceeding the Briody proceeding in the court below.

55    The Wardman proceeding and the Briody proceeding were heard together by the primary judge, with the hearing relating to contravention and liability issues taking place on 2 October 2020. On the same day, the primary judge gave combined reasons for judgment on those issues: Wardman v Macquarie Bank Ltd; Briody v Macquarie Bank Ltd [2020] FCCA 2725. After hearing further from the parties, the primary judge gave separate reasons for judgment on penalties: Wardman v Macquarie Bank Ltd (No 2) [2020] FCCA 3317; Briody v Macquarie Bank Ltd (No 2) [2020] FCCA 3318.

56    The Bank’s three appeals, NSD 89 of 2021, NSD 90 of 2021, and NSD 91 of 2021, are brought against the orders made by the primary judge in, respectively, the Wardman proceeding, the Arundell proceeding, and the Briody proceeding. In the Bank’s appeal against the orders made in the Arundell proceeding, the eighth respondent, King, has filed a submitting notice, although mistakenly referring to himself in the submitting notice as the eleventh respondent.

57    Often, the best advocacy is selective and economical: Whisprun v Dixon [2003] HCA 48; 200 ALR 447 at [18] (Gleeson CJ and McHugh J). While each of the employees was the subject of a separate employment agreement, and while the circumstances of all the employees were not identical, it is apparent that the litigation both in the Court below and in this Court took a somewhat global approach where the focus was on some significant issues that were common to the circumstances of the employees. This approach no doubt had cost and efficiency benefits, and focused on the real issues. However, in taking a global approach individual employees may have made some compromises in the way their claims were advanced.

Background

58    The employees were employed by the Bank, in the main as “advisers”, although the position titles varied. The duties of the employees included the provision of advice to private clients of the Bank, executing share transactions on behalf of the clients, seeking out new clients, and generating revenue for the Bank as a result of share transactions on behalf of clients and other fees charged to clients for financial products and financial services.

59    The employment of most of the employees began prior to the commencement on 1 January 2010 of the FW Act and the Award. It is not in issue that the employees were employed by the Bank for various periods from 1 January 2010 during which they were covered by the Award. It is also not in issue that the employees were entitled to the benefit of the National Employment Standards under the FW Act. The employees’ claims in the three proceedings were for amounts that were alleged to have accrued in the six year periods prior to the commencement of the proceedings, reflecting the limitation period in s 544 of the FW Act. The commencement dates of the three proceedings varied, and were as follows –

(a)    the Arundell proceeding – 31 October 2019;

(b)    the Wardman proceeding – 31 May 2018; and

(c)    the Briody proceeding – 29 March 2019.

60    Each of the employees was the subject of a contract of employment, the terms of which were contained in documents such as letters of offer and employment agreements. However, the written terms took several different forms. All of the contracts of employment provided for the employees to be remunerated in accordance with a remuneration package that included a commission structure, and a component that was referred to as “Basic Cost Responsibility”, or “BCR”. The Bank claimed that the BCR represented an employee’s total cost of employment, including annual remuneration, superannuation, fringe benefits tax, payroll tax, workers’ compensation insurance premiums, salary continuance insurance premiums, and goods and services tax where applicable. Employees could elect how their remuneration should be packaged. During the relevant employment period of each employee, a fixed component of the BCR package was paid to the employees by 12 equal payments in the middle of each month, with half in advance and half in arrears. The Bank referred to these monthly payments as the “salary component” of the BCR. Pay advices given to the employees identified the payments as “Salaries Normal”. That form of pay advice included a heading rate with a specified hourly amount.

61    The value of the BCR package was set at $60,000 per annum from 1 July 2010. It was increased to $65,000 per annum from 1 July 2015, and further increased to $70,000 per annum from 1 July 2020, which was after the commencement of the three proceedings, but before judgment. It is relevant to note that the annual amounts referred to above were the total value of the BCR packages, and not what the Bank claimed were the gross salary components that were included in the packages, which were lower amounts.

62    The Bank claimed that this form of remuneration structure had the result that for the relevant periods of employment, there were two streams of payments. The first stream of payments was the BCR which included the fixed salary component of the remuneration. The second stream was commission payments that were identified as being a variable component of the remuneration. The effect of this remuneration structure was contentious. The employees claimed that they were remunerated by way of commission only, and that for the relevant periods they had not been paid any wages or salary for the duties performed by them as required by the Award. The employees claimed that the monthly payments that were made to them were advances on commission, and were not to be attributed to wages or salary, or other entitlements under the Award or the NES. The employees claimed, amongst other entitlements, wages by reference to hours that they claimed they had worked that were set out in schedules to their pleadings in the proceedings below, and payments on account of leave entitlements, annual leave loadings, and accrued annual leave and loadings at the time of termination of their employment. In response, the Bank claimed that the employees had been paid amounts that were in excess of the ordinary hourly rates of pay prescribed by the Award, and that the salary component of the BCR that was paid to the employees was in satisfaction of any wages that may otherwise have been payable to them under the Award.

63    In each of the three proceedings the employees claimed payment of specified monetary amounts which they claimed were due to them under the Award. By reference to the Award, the employees claimed that the Bank was required to pay them minimum weekly rates of pay that equated to hourly rates on the basis of a 38 hour week for ordinary hours worked by the employees. For each employee, a spreadsheet was attached to the relevant statement of claim which, on a month by month basis, made claims as to hours worked for the month, and made a claim for wages by multiplying the hours claimed by an hourly rate. No claims for overtime appear to have been made. In addition, claims were made for payments on account of leave, and public holidays.

64    It was a feature of the employees’ claims that were particularised in the schedules to the statements of claim that, consistently with the cases that they advanced at trial and on appeal, the whole of their claimed award and statutory entitlements were alleged to have been unpaid. No account was taken of any monetary sums paid by the Bank to the employees by way of remuneration. The employees’ case was that any such sums were advance payments of commission, which did not discharge the Bank’s statutory and award obligations. This case was also reflected in the orders sought on appeal, namely that this Court order that the Bank pay to each of the employees sums identified in the notices of appeal that corresponded to the amounts claimed as “wages” in the spreadsheets annexed to the statements of claim.

The legislation

65    Before going further, I will refer to the material provisions of the legislation and the Award that underpinned the employees’ claims.

The Fair Work Act

66    One of the express objects of the FW Act is to ensure “a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders”: s 3(b). The National Employment Standards that are referred to in the objects that are set out in s 3 of the FW Act are contained in Part 2-2 of the Act, and provide for minimum standards that apply to the employment of employees that cannot be displaced. Section 44 of the FW Act provides that an employer must not contravene a provision of the National Employment Standards. Relevant to the current appeals are minimum standards relating to –

(a)    paid annual leave (ss 87 to 94);

(b)    personal/carer’s leave (ss 95 to 101);

(c)    compassionate leave (ss 104 to 106); and

(d)    payment for public holidays (ss 114 to 116).

67    The FW Act provides in ss 90, 99, 106, and 116 for the payment of remuneration for leave and for public holidays at the employee’s base rate of pay for the employee’s ordinary hours of work during the period of leave and for the day or part-day of the public holiday. Subsection 16(1) of the FW Act defines “base rate of pay” in the following terms –

16    Meaning of base rate of pay

General meaning

(1)    The base rate of pay of a national system employee is the rate of pay payable to the employee for his or her ordinary hours of work, but not including any of the following:

(a)    incentive-based payments and bonuses;

(b)    loadings;

(c)    monetary allowances;

(d)    overtime or penalty rates;

(e)    any other separately identifiable amounts.

68    Section 323 of the FW Act provides for the method and frequency of the amounts payable to an employee in respect of the performance of work –

323    Method and frequency of payment

(1)    An employer must pay an employee amounts payable to the employee in relation to the performance of work:

(a)    in full (except as provided by section 324); and

(b)    in money by one, or a combination, of the methods referred to in subsection (2); and

(c)    at least monthly.

Note 1:    This subsection is a civil remedy provision (see Part 4-1).

Note 2:    Amounts referred to in this subsection include the following if they become payable during a relevant period:

(a)    incentive-based payments and bonuses;

(b)    loadings;

(c)    monetary allowances;

(d)    overtime or penalty rates;

(e)    leave payments.

(2)    The methods are as follows:

(a)    cash;

(b)    cheque, money order, postal order or similar order, payable to the employee;

(c)    the use of an electronic funds transfer system to credit an account held by the employee;

(d)    a method authorised under a modern award or an enterprise agreement.

(3)    Despite paragraph (1)(b), if a modern award or an enterprise agreement specifies a particular method by which the money must be paid, then the employer must pay the money by that method.

Note:    This subsection is a civil remedy provision (see Part 4-1).

69    Section 536 of the FW Act provides that an employer must give a pay slip to each of its employees –

536    Employer obligations in relation to pay slips

(1)    An employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work.

Note 1:    This subsection is a civil remedy provision (see Part 4-1).

Note 2:    Section 80 of the Paid Parental Leave Act 2010 requires an employer to give information to an employee to whom the employer pays an instalment under that Act.

(2)    The pay slip must:

(a)    if a form is prescribed by the regulations—be in that form; and

(b)    include any information prescribed by the regulations.

Note 1:    This subsection is a civil remedy provision (see Part 4-1).

Note 2:    If an employer fails to comply with subsection (1) or (2), the employer may bear the burden of disproving allegations in proceedings relating to a contravention of certain civil remedy provisions: see section 557C.

(3)    An employer must not give a pay slip for the purposes of this section that the employer knows is false or misleading.

Note:    This subsection is a civil remedy provision (see Part 4-1).

(4)    Subsection (3) does not apply if the pay slip is not false or misleading in a material particular.

Fair Work Regulations

70    Regulations 3.45 and 3.46 of the Fair Work Regulations 2009 (Cth) (FW Regulations) prescribe the form and content of a pay slip –

3.45    Pay slips—form

For paragraph 536(2)(b) of the Act, a pay slip must be:

(a)    in electronic form; or

(b)    a hard copy.

Note:    Subsection 536(2) of the Act is a civil remedy provision. Section 558 of the Act and Division 4 of Part 4-1 deal with infringement notices relating to alleged contraventions of civil remedy provisions.

3.46    Pay slips—content

(1)    For paragraph 536(2)(b) of the Act, a pay slip must specify:

(a)    the employer’s name; and

(b)    the employee’s name; and

(c)    the period to which the pay slip relates; and

(d)    the date on which the payment to which the pay slip relates was made; and

(e)    the gross amount of the payment; and

(f)    the net amount of the payment; and

(g)    any amount paid to the employee that is a bonus, loading, allowance, penalty rate, incentive-based payment or other separately identifiable entitlement; and

(h)    on and after 1 January 2010—the Australian Business Number (if any) of the employer.

(2)    If an amount is deducted from the gross amount of the payment, the pay slip must also include the name, or the name and number, of the fund or account into which the deduction was paid.

(3)    If the employee is paid at an hourly rate of pay, the pay slip must also include:

(a)    the rate of pay for the employee’s ordinary hours (however described); and

(b)    the number of hours in that period for which the employee was employed at that rate; and

(c)    the amount of the payment made at that rate.

(4)    If the employee is paid at an annual rate of pay, the pay slip must also include the rate as at the latest date to which the payment relates.

(5)    If the employer is required to make superannuation contributions for the benefit of the employee, the pay slip must also include:

(a)    the amount of each contribution that the employer made during the period to which the pay slip relates, and the name, or the name and number, of any fund to which the contribution was made; or

(b)    the amounts of contributions that the employer is liable to make in relation to the period to which the pay slip relates, and the name, or the name and number, of any fund to which the contributions will be made.

(6)    In subregulation (5):

contributions does not include a contribution in respect of a defined benefit interest (within the meaning of the Superannuation Industry (Supervision) Regulations 1994) in a defined benefit fund (within the meaning of the Superannuation Industry (Supervision) Act 1993).

Note:    Subsection 536(2) of the Act is a civil remedy provision. Section 558 of the Act and Division 4 of Part 4-1 deal with infringement notices relating to alleged contraventions of civil remedy provisions.

The Award

71    Sections 45 and 46 of the FW Act have the effect that a person to whom a modern award applies must not contravene a term of the award.

72    Clause 2.2 of the Award provided that monetary obligations imposed on employers by the Award could be absorbed into overaward payments –

2.2    The monetary obligations imposed on employers by this award may be absorbed into overaward payments. Nothing in this award requires an employer to maintain or increase any overaward payment.

73    Clause 6 of the Award provided that –

The NES and this award contain the minimum conditions of employment for employees covered by this award.

74    Clause 7 was titled “Award flexibility”, and provided for individual agreements that might effect a variation of the application of certain terms of the Award –

7.1    Notwithstanding any other provision of this award, an employer and an individual employee may agree to vary the application of certain terms of this award to meet the genuine individual needs of the employer and the individual employee. The terms the employer and the individual employee may agree to vary the application of are those concerning:

(a)    arrangements for when work is performed;

(b)    overtime rates;

(c)    penalty rates;

(d)    allowances; and

(e)    leave loading.

…

7.3    The agreement between the employer and the individual employee must:

(a)    be confined to a variation in the application of one or more of the terms listed in clause 7.1; and

(b)    result in the employee being better off overall at the time the agreement is made than the employee would have been if no individual flexibility agreement had been agreed to.

7.4    The agreement between the employer and the individual employee must also:

(a)    be in writing, name the parties to the agreement and be signed by the employer and the individual employee and, if the employee is under 18 years of age, the employee’s parent or guardian;

(b)    state each term of this award that the employer and the individual employee have agreed to vary;

(c)    detail how the application of each term has been varied by agreement between the employer and the individual employee;

(d)    detail how the agreement results in the individual employee being better off overall in relation to the individual employee’s terms and conditions of employment; and

(e)    state the date the agreement commences to operate.

…

75    Clause 13.1 of the Award provided for minimum rates of pay for full-time adult employees within six escalating classifications. The employees who are parties to this appeal were Level 6 employees as described in the classification structure set out in Schedule B to the Award. The version of the Award that was before the Court provided –

13.1    Adult employees

(a)    A full-time adult employee must be paid a minimum rate for their classification as set out in the table below:

(b)    The classification structure and descriptors for the above classifications are contained in Schedule B—Classification Structure.

76    Clause 14 of the Award authorised the payment of an annualised salary in satisfaction of several provisions of the Award, providing that the employer must advise the employee in writing of the annual salary that is payable and which of the provisions of this award will be satisfied by payment of the annual salary –

14.    Annualised salaries

14.1    Annual salary instead of award provisions

(a)    An employer may pay an employee an annual salary in satisfaction of any or all of the following provisions of the award:

(i)    clause 13—Classifications and minimum wage rates;

(ii)    clause 18—Allowances;

(iii)    clause 23—Overtime and penalty rates; and

(iv)    clause 24.3—Annual leave loading.

(b)    Where an annual salary is paid the employer must advise the employee in writing of the annual salary that is payable and which of the provisions of this award will be satisfied by payment of the annual salary.

14.2    Annual salary not to disadvantage employees

(a)    The annual salary must be no less than the amount the employee would have received under this award for the work performed over the year for which the salary is paid (or if the employment ceases earlier over such lesser period as has been worked).

(b)    The annual salary of the employee must be reviewed by the employer at least annually to ensure that the compensation is appropriate having regard to the award provisions which are satisfied by the payment of the annual salary.

14.3    Base rate of pay for employees on annual salary arrangements

For the purposes of the NES, the base rate of pay of an employee receiving an annual salary under this clause comprises the portion of the annual salary equivalent to the relevant rate of pay in clause 13—Classifications and minimum wage rates and excludes any incentive-based payments, bonuses, loadings, monetary allowances, overtime and penalties.

77    Clause 20 of the Award addressed the manner of payment of wages –

20.    Payment of wages

20.1    Employees must be paid their salaries weekly or fortnightly as determined by the employer or monthly if mutually agreed. Where payment is made monthly it must be on the basis of two weeks in advance and two weeks in arrears.

20.2    Wages must be paid either by cash, cheque or electronic funds transfer, the method of which will be determined by the employer.

78    Clause 24.3 of the Award provided for an annual leave loading of 17.5% –

24.3    Annual leave loading

(a)    During a period of annual leave an employee will receive a loading calculated on the rate of wage prescribed in clause 13—Classifications and minimum wage rates. Annual leave loading payment is payable on leave accrued.

(b)    The loading is as follows:

(i)    Day work

Employees who would have worked on day work only had they not been on leave—17.5% or the relevant weekend penalty rates, whichever is the greater but not both.

(ii)    Shiftwork

Employees who would have worked on shiftwork had they not been on leave—17.5% or the shift loadings and relevant weekend penalty rates, whichever is the greater but not both.

79    Clauses 25 and 27 provided, respectively, that personal/carer’s leave and public holidays were provided for in the National Employment Standards.

The evidence

80    Owing to the number of claims, the written evidence at the hearings before the primary judge was extensive. In all proceedings, evidence was given by affidavit. Each employee made at least one affidavit, and most employees made two affidavits. In relation to issues other than penalty, in the Wardman proceeding 35 affidavits were read to the court below; in the Briody proceeding 43 affidavits were read to the court below; and in the Arundell proceeding 47 affidavits were read to the court below. Several other documents were received into evidence and marked as exhibits. The primary judge made rulings on objections to the affidavit evidence which were recorded in orders that his Honour made in the proceedings. Only one witness, Gamble, who was an applicant in the Arundell proceeding and who is both an appellant and a respondent in the relevant appeals, was cross-examined. Gamble was the subject of a successful cross-claim by the Bank, which established that it had mistakenly overpaid him upon the termination of his employment.

81    On appeal, the parties did not refer in their submissions to all of the affidavits, or produce all the documents that were in evidence below. Only a selection of affidavits that were before the primary judge were relied on by the parties before this Court. As to the affidavits that are before this Court in Part C of the appeal book, the parties did not mark the copy affidavits so as to identify those passages that were ruled inadmissible by the primary judge, with the consequence that it has been necessary for this Court to consider those affidavits against the primary judge’s rulings on evidence. To provide context to the primary judge’s reasons and to the arguments raised by the parties on appeal, it is sufficient to describe some of the material features of the affidavits that were before this Court, taking account of the fact that the Arundell proceeding was determined separately from, and before the Wardman and Briody proceedings, and taking account of the objections to evidence that were allowed by the primary judge.

82    The employees deposed to their periods of employment by the Bank, and annexed summaries of their employment records that had been produced to them by the Bank, which included leave records. The employees deposed to the public holidays over their periods of employment on which they were absent from work. Several of the affidavits of employees that were before this Court addressed their knowledge of features of the Bank’s BCR policy, and their knowledge of written versions of the BCR policy which were referred to and produced in evidence on behalf of the Bank and to which I will refer below. Briody, for instance, stated that he did not think that he saw the BCR policy of July 2015 that was produced by the Bank, or any versions of it, during his employment; that he no longer recalled whether he received a copy of the BCR policy when he commenced employment; and that he was unaware that it was available on the Bank’s intranet. Crone, Duong, Elliott, Mahajan, Marr, Purvis, Roberts, Ryan, Saba, Sandford, and Smrk gave similar evidence. Several of the affidavits referred to the circumstances in which the relevant employees came to execute deeds of release upon the termination of their employment.

83    Material to the issues on appeal, the evidence at trial included affidavits of Karina Petty, who was employed by the Bank, and gave her occupation as “Global HR Operations Lead”. Ms Petty had a lengthy history of employment with the Bank, commencing in October 1999 which included roles involving the administration and the supervision of employees in payroll and salary packaging functions. Ms Petty described the Bank’s BCR remuneration model in an affidavit affirmed 20 December 2019 that she made in the Arundell proceeding –

12.    An employee’s BCR package (BCR Package) represents the total cost to Macquarie of employing that person. It consists of five mandatory components some of which constitute direct benefits to the employee and others which are on-costs, payable to third parties in respect of the employee’s employment. Those five components are:

(a)    salary;

(b)    superannuation guarantee contributions;

(c)    salary continuance insurance premiums;

(d)    payroll tax; and

(e)    workers’ compensation premiums.

13.    The above five elements have not changed during my employment with Macquarie.

14.    The salary component of an employee’s BCR Package was, and is, paid to employees annually in 12 equal payments, usually on the 15th day of each month, half in advance and half in arrears. For employees who also earn commissions, such as private wealth advisers, the salary component of an employee’s BCR Package is paid regardless of the commission earnings of the employee during a particular month or whether or not an employee is at work or on some form of approved paid leave.

15.    When a person commences employment with the Macquarie Group, his or her salary is automatically set to the maximum salary available based on their BCR Package (Maximum Salary). The Maximum Salary is exclusive of the 4 other mandatory components from the total BCR Package, none of which are payable to the employee. The way in which these mandatory components are calculated can be summarised as follows:

(a)    superannuation guarantee contributions are calculated as per legislative requirements. Currently that means 9.5% of the actual salary level up to the maximum super contribution base;

(b)    salary continuance insurance premiums are calculated as a percentage of the BCR Package in accordance with Macquarie Group’s salary continuance insurance policy. Currently the premium is 0.823% plus stamp duty which differs by state;

(c)    payroll tax is calculated as per legislative requirements which differ per state. Broadly speaking they are calculated on actual salary and superannuation contributions (but it can also apply to some packaging benefits taken by an employee);

(d)    workers’ compensation premiums are calculated per the workers’ compensation scheme requirements which differ across the States. Broadly speaking they are calculated on actual salary and superannuation contributions (but it can also apply to some packaging benefits taken by an employee).

84    As to commission payments, Ms Petty stated –

19.    The commission payments are separately paid in arrears on or about the 20th day of each month. The commission payments are separately calculated and employees receive a second payslip for the month in which the payment was made.

20.    No deductions are made from commission payments on account of payroll tax or workers’ compensation premiums as these payments are made by Macquarie.

21.    In the case of the Applicants, the commission payments only became an amount payable to the Applicants after the “cost” of the BCR Package had been recovered, as per the contracts of employment of the Applicants.

85    Ms Petty gave similar evidence in an affidavit affirmed 30 August 2019 and filed in the Wardman proceeding.

86    Ms Petty also deposed to searches that had been undertaken to locate the Bank’s written BCR policy. The earliest version that was located was dated July 2015, and Ms Petty produced versions with effect from July 2015, January 2016, September 2016, December 2016, January 2017, May 2017, and November 2017.

87    The Bank also relied on affidavits of Yvette Salem, who had been employed by the Bank as Senior Employee Relations Consultant from October 2010 to October 2019. Amongst other things, Ms Salem described aspects of the Bank’s BCR remuneration model, which included the following in an affidavit affirmed 20 March 2020 and filed in the Arundell proceeding –

9.    In or about September 2010, prior to commencing employment with Macquarie, I was provided with an employment agreement which referred to Basic Cost Responsibility (BCR) remuneration which would apply to my Employment. On commencement of employment, I was referred to and reviewed Macquarie’s BCR policy which was accessible from the intranet for all employees and details Macquarie’s BCR remuneration packaging system (BCR Remuneration Model). Throughout my Employment, the BCR Remuneration Model has been underpinned by a BCR policy.

…

19.    If, in any given month, an Adviser’s earned commission was less than their BCR Package for that month, they did not receive a commission payment that month and the shortfall was rolled forward and offset against the next month’s earned commission. To the extent that the Adviser’s earned commission was less than their BCR Package between 1 April of one year and 31 March the following year (Macquarie Financial Year), any shortfall was either: (i) rolled forward into the new Macquarie Financial Year until the monthly commissions exceeded any shortfall in full; (ii) reduced to zero in accordance with the terms of Adviser’s employment agreement or by exception with appropriate approval; or (iii) offset against any annual bonus allocation to which the Adviser may have been eligible.

88    There were corresponding paragraphs in an affidavit of Ms Salem affirmed 29 August 2019 and filed in the Wardman proceeding. Ms Salem annexed to her affidavit affirmed 29 August 2019 in the Wardman proceeding an internal memorandum of the Bank dated 1 June 2010 titled “Proposal to increase BCR for commissioned advisers”. The tenor of the memorandum was that from 1 January 2010, Macquarie Private Wealth (or MPW) advisers were covered by the Award, and to recommend that the minimum BCR for such advisers be increased to $60,000 per annum from 1 July 2010 so as to meet the minimum salary obligations under the Award. The memorandum stated in part (bold in original) –

Purpose

The purpose of this paper is to provide a high level summary of the impact of the introduction of the BFI Award on minimum BCR remuneration levels for MPW commissioned employees and to outline the agreed approach to increasing the minimum BCR for commissioned advisers to $60,000 per annum effective 1 July 2010.

Summary

•    The Fair Work Act 2009 introduced the Banking, Finance and Insurance Award 2010 (BFI Award) which took effect from 1 January 2010. MPW commissioned advisers are now covered by the BFI Award and are classified as Level 6.

•    The BFI Award sets out minimum rates of pay based on an employee’s classification level. The minimum salary for a Level 6 employee is $43,846 per annum (inclusive of annual leave loading). This equates for a BCR of approximately $51,000 per annum.

•    Commission payments cannot be included in calculating an employee’s minimum rate of pay or to off-set any benefits under the BFI Award.

•    Accordingly, all commissioned advisers who have a BCR of $51,000 per annum or less are not earning a salary which meets the minimum salary obligations under the BFI Award. A breach of the BFI Award has the potential to lead to penalties as well as compensation orders and/or claims from advisers for certain award based benefits.

•    In addition to minimum salary levels being indexed on a yearly basis, it should be noted that the BFI Award also provides for the payment of overtime and other penalty rates (which can be paid via an annualised salary under the Award).

•    On this basis HR recommends increasing the minimum BCR to $60,000 per annum for commissioned advisers from 1 July 2010. This will provide a “buffer” to prevent the need for further increases in future years.

•    The number of commissioned advisers who would be impacted by this who have a BCR of less than $60,000 per annum is 215 (197 in FSB and 18 in WM). Advisers who have staggered decreases to $40,000 built into their offers of employment over the next few years will also be impacted.

…

Approach

Macquarie is required to make this change to ensure we are complying with revised legislation.

The following approach is recommended by HR:

•    notify impacted commissioned advisers that their BCR will be increasing to $60,000 per annum effective 1 July 2010;

•    rely on their implied consent to the change i.e. advising them that Macquarie is required to comply with the recent legislative change, outlining the impacts to them and addressing any concerns as they arise;

•    advisers will be responsible for funding the additional on-costs from 1 July 2010.

Advice from the BFS Communications team will be sought and communication of this change will need to be rolled out in the week of 14 June 2010 at the latest.

89    It was not alleged that any of the employees was privy to the above memorandum.

90    In addition, Ms Salem deposed in her affidavits to searches of employee files, and produced copy letters from the Bank dated 18 June 2010 to the employees Blievers, Boase, King, Potter, Richards, and Wardman, which stated, among other things –

Further to our recent communications, amendments to employment law requirements have impacted the way in which Macquarie Bank Limited (‘Macquarie’) is required to remunerate employees within Macquarie Private Wealth (‘MPW’) under the AVP Commission Based Remuneration Structure.

Remuneration and Benefits

Further to recent discussions, this letter confirms a change to the structure of your BCR. Macquarie is obliged to ensure that employees receive a guaranteed level of remuneration which is consistent with minimum wage requirements. This new requirement directly impacts on the minimum BCR remuneration level for Macquarie employees within MPW remunerated under the AVP Commission Based Remuneration Structure.

The practical effect of this is that the minimum BCR for Macquarie commissioned employees within MPW will now be set at $60,000 per annum effective from 1 July 2010. As you may be aware the minimum BCR for commissioned advisers is currently $40,000 per annum.

This change directly affects you, and from 1 July 2010 your BCR will be increased to $60,000 per annum. This amount will remain fully recoverable against commissions earned under the AVP Commission Based Remuneration Structure, in accordance with the provisions of your current employment agreement. Please note that your revised BCR will be taken into account in calculating leave benefits.

All other terms and conditions of your employment outlined in your current employment documentation remain unchanged.

91    Although these copy letters were annexed to Ms Salem’s affidavits, the Bank did not adduce any direct evidence that is before this Court to the effect that the letters were actually sent to or received by any employees.

92    As to the evidence of the employees at trial that is before this Court, Briody, Duong, Gamble, Marr, Purvis, Roberts, Saba, and Smrk stated that they did not recall receiving the 18 June 2010 letter. Crone, Sandford and Starr stated that they did not recall receiving the letter, but admitted the possibility that they did. On the other hand, Elliott and Mahajan stated that they did recall receiving such a letter.

93    The primary judge made no findings as to whether or not any of the letters of 18 June 2010 was received by any employee. The Bank did not file a notice of contention in the appeals brought by the employees, or raise any ground in its appeals directed to the absence of findings in relation to receipt of the 18 June 2010 letter. Nonetheless, in his oral submissions before this Court, senior counsel for the Bank sought to rely on the terms of the letter of 18 June 2010, and submitted that it had been sent by the Bank to the employees. In response, senior counsel for the employees pointed to the sketchy nature of the evidence concerning the receipt of the letters, and submitted that the letters had not been relied on by the Bank before the primary judge as variations to the employment agreements. I will return to consider the relevance of the 18 June 2010 letter to the issues on appeal.

94    Before the primary judge, the employees made a number of concessions that were recorded in a document that the primary judge received into evidence and treated as a statement of agreed facts. Those concessions included the following –

(1)    the employees did not pay to the Bank any amount in respect of any shortfall between the value of their BCR package in any given year and the commission that they generated in that given year;

(2)    as a matter of practice, the employees received two pay slips each month – one on which earnings were described as normal salary and another which referred to commission payable (if any);

(3)    as a matter of practice the employees received on a regular basis a package allocation report which provided information about the BCR package and its components;

(4)    during periods of paid leave, each employee continued to receive their BCR; and

(5)    on termination, any notice payments that were made to the employees were calculated with reference to the BCR.

95    Otherwise, all the employment agreements, relevant deeds of release, and associated documents such as the letters of offer, were placed before this Court in electronic bundles comprising a supplementary Part C of the appeal book.

The primary judge’s reasons for judgment

96    It is convenient to commence addressing the primary judge’s reasons for judgment by referring to the reasons for judgment in the Arundell proceeding to the extent that they concern the contested issues.

The Arundell proceeding

Liability issues: Arundell v Macquarie Bank Ltd [2020] FCCA 2720

97    The primary judge annexed a number of tables to his reasons for judgment on liability. The tables included: (1) the remuneration received by the employees for the periods relevant to their claims, with the commission, BCR, and salary components separately identified; (2) a quantification of the employees’ monetary claims for wages, and payments on account of public holidays and leave; (3) the dates of employment of the employees; (4) the identification of documents, such as letters and written employment agreements, which evidenced the terms of employment of each relevant employee; and (5) extracts of the relevant written terms of the contracts of employment.

98    The primary judge held at [10] that the salary component of the BCR package was set at $60,000 per annum from 1 July 2010, was increased to $65,000 per annum from 1 July 2015, and was increased to $70,000 per annum from 1 July 2020. It is convenient to record here that the primary judge appears to have misunderstood the evidence, and that these findings were in error. What was set at these amounts was the total BCR amount, which included provision for costs such as employer superannuation, payroll tax, fringe benefits tax, workers’ compensation, and goods and services tax where applicable.

99    The primary judge held that the Bank had not been in breach of cl 13.1(a) of the Award as claimed by the employees by failing to pay the minimum wage rates set out therein. His Honour held that the payments described as “Salaries Normal” in the pay advices issued to the employees were to be treated as payment of annual salary, and should be treated as actual payment, alternatively a “set-off” in respect of the payment obligations under cl 13.1(a) of the Award. In so finding, the primary judge rejected the argument advanced on behalf of the employees that the payments were made as an advance on commission, and therefore could not be attributed to the statutory obligation to pay wages.

100    On the other hand, the primary judge upheld the claims that there had been contraventions by the Bank of the NES and the Award on grounds that there had been non-payment of liabilities in relation to leave, annual leave loading, and public holidays. The primary judge made declarations as to the contraventions found, and orders for payment together with interest running from the date of commencement of the proceeding at the applicable pre-judgment rate as if r 39.06 of the Federal Court Rules 2011 (Cth) had applied.

101    The primary judge’s reasoning concerning the contentious issues relating to the payment of Award wages and payments on account of leave was as follows –

(1)    At [5] and [16], his Honour found that at the relevant times the method of revenue sharing and remuneration created by the Bank’s human resources department was comprised of two streams: (a) the BCR which was said to include a fixed salary component of the remuneration; and (b) commission payments, which were variable. His Honour found that the employees were remunerated monthly based upon these two components.

(2)    At [7], his Honour found that as a matter of practice during the relevant employment period of each employee, the salary component was paid by 12 equal payments in the middle of each month with half in advance and half in arrears to all the employees, and that this salary component was identified in accompanying pay advices as “Salaries Normal”.

(3)    At [9] and [10], his Honour referred to the Bank’s BCR policy, which I take to be a reference to the Bank’s written BCR policy from time to time, and which was referred to by Ms Salem in her affidavit. His Honour found that during the relevant periods the maximum salary under the BCR method of remuneration was set at a level that was in line with the minimum annual salary and minimum weekly rate wage obligations and took account of the employees’ classification under the Award. His Honour held that the BCR policy stated the maximum salary to be in satisfaction of amounts payable to employees as a consequence of employment, including amounts arising under legislation, a modern award or another industrial instrument, including but not limited to minimum hourly rates, allowances, overtime and penalty rates, and leave loading. His Honour found that each of the applicants was aware that there was a BCR policy in place which governed their remuneration during the relevant employment period, but that they gave different evidence as to whether they were provided with a copy of the same, accessed it on the Bank’s intranet, or were aware of it being on the Bank’s intranet.

(4)    As to the terms of the employment agreements, at [15] his Honour held that the remuneration clauses referred to the employees being allocated a BCR which was a recoverable allocation against commission earned, and identified the references to base monthly net salary. At [32], his Honour held that the words, “Your base net salary will be paid monthly” was a promise to pay the salary component. I pause to observe that a term in these words appeared substantially in that form in the agreements relating to the employment of Blievers, Clarke, Gamble, Harris, King, Nagel, and Smrk. A slightly different form of words was employed in the agreements relating to the employment of Arundell, Barnes, Burgess, Haslem, Potter, Pyne, Roberts, Trengove, and Turnbull, but to the same effect, namely –

Your base monthly net salary will be paid, partly in arrears and partly in advance for the calendar month, on the Employer’s monthly payroll dates (currently the 15th day of each month) by direct deposit to your nominated bank account.

(5)    At [23], his Honour held that there had been no recovery by the Bank from the employees in relation to any commission shortfall against the salaries component of the BCR remuneration package, and that any deficit was deleted.

(6)    At [25]-[29], his Honour held that the employee Gamble had been paid the sum of $16,272.08 twice upon termination in respect of his entitlements under a deed of release into which he entered, finding that Gamble knew that he had mistakenly been paid a second time and that the Bank was entitled to recover the overpayment.

(7)    At [30], the primary judge held that the structure under the BCR remuneration package was intended by the Bank to meet the NES and the Award, and the “national minimum wage”, which I take to be a reference to that prescribed by the Award in respect of the employees.

(8)    At [33], his Honour found that there had been no steps taken by the Bank to engage cl 7 of the Award, relating to individual flexibility arrangements, and no steps taken in accordance with cl 14 of the Award, which if engaged, permitted the payment under the Award of an annual salary in satisfaction of a number of provisions of the Award.

(9)    At [34], the primary judge held that the employment agreements identified a non-recoverable annual salary and monthly payment of the same under the BCR package. His Honour held that the identified salary component in the employment agreements was what identified the base rate of pay within s 16 of the FW Act, and that the salary component permitted identification of the employees’ base rate of pay for the ordinary hours of work.

(10)    Consistently with the admissions made by the employees, at [39] the primary judge held that each applicant received a monthly commission pay advice and a monthly Salaries Normal pay advice, recording payments made by the Bank under the BCR package. His Honour further held at [42] and [48] that the payments described as “Salaries Normal” in the pay advices should be treated as actual payment, or by way of “set-off” in respect of the payment obligations under cl 13.1(a) of the Award, being the minimum annual salary or weekly rates of pay. At [43], his Honour held that the overlap of the term “Salaries Normal” with the Award term “Salary” reinforced the true characterisation as being a payment obligation under cl 13.1(a) of the Award, and at [46]-[47] held that the objective purpose of the separate monthly Salaries Normal payments was not for the purposes of commission, or an advance on commission, but to meet the salary components of the BCR package. For these reasons, his Honour concluded at [49] that the Bank had paid the entitlements of the employees under cl 13.1(a) of the Award.

(11)    On the other hand, at [41] the primary judge held, consistently with concessions by the Bank, that the commission payments were not allocated by the Bank to meet any liability under the FW Act or the Award.

(12)    At [50]-[51] and [53]-[55], his Honour expressed his conclusions in a number of different ways, holding that by reference to principles of “set-off” identified in WorkPac Pty Ltd v Rossato [2020] FCAFC 84; (2020) 278 FCR 179 at [221], [234], [865] and [869]; Ray v Radano [1967] AR (NSW) 471 at 478-479; and Australia and New Zealand Banking Group Limited v Finance Sector Union of Australia [2001] FCA 1785; 111 IR 227 at [48], [51], [52] and [56], the payments by the Bank of the salary component subsumed the obligation under cl 13.1(a) of the Award, and alternatively that there was a close correlation between the contractual obligation to pay the salary component and the nature of the Award obligation under cl 13.1(a).

(13)    As to cl 14 of the Award, his Honour held at [52] that any failure of the Bank to engage its terms did not invalidate the contractual arrangements.

(14)    His Honour came to a different conclusion in relation to whether the payments of salary under the employment contracts discharged the obligations under the NES to make payments in respect of leave, and the obligation under the Award to pay an annual leave loading.

(15)    At [57], the primary judge held that the “Salaries Normal” payments did not discharge the obligation under the Award to pay annual leave loading under cl 24.3 of the Award, finding that he was not satisfied that the two obligations under clause 24.3 of the Award that were pleaded had been met. I interpret the findings at [57] to mean that his Honour was persuaded that the Bank had not paid a loading on annual leave when taken, and had not paid a loading on untaken annual leave upon the termination of the relevant employees’ employment, which were the contraventions alleged in [26]-[34] of the statement of claim.

(16)    Further, at [60]-[63] the primary judge held that the Salaries Normal payments should not be treated as having met the liability of the Bank under ss 90, 99, 106 and 116 of the FW Act, which relate to the liability to make payments on account of annual leave, personal/carer’s leave, compassionate leave, and public holidays. His Honour held at [61] that while the relevant employees had received their “Salaries Normal” payments during periods of leave, there had been no specific allocation to leave.

102    In the Arundell proceeding, the Bank relied by way of defence and cross-claim on deeds of release that had been executed by three of the employees: Gamble, Roberts, and Smrk. A cross-claim against those three employees alleged, in reliance on the deeds of release, that the proceedings had been commenced by them in breach of the deeds, vexatiously, and without reasonable cause, and sought costs on an indemnity basis. His Honour concluded that as a matter of construction the terms of the deeds of release were ineffective to release the Bank from its statutory and Award obligations to the relevant employees. There was an additional claim against Gamble for overpayment of monies upon termination to which I have already referred which at [68] the primary judge upheld.

Penalties: Arundell v Macquarie Bank Ltd (No.2) [2020] FCCA 3313

103    As to penalties, after hearing further submissions from the parties, the primary judge ordered that the Bank pay one penalty to the successful applicants in the sum of $110,000. The primary judge identified 80 separate contraventions, but by the application of the course of conduct provision in s 557 of the FW Act assessed penalty on the basis that there were six contraventions, each attracting a maximum penalty of $63,000, amounting to a total maximum of $378,000. His Honour proposed a penalty of $18,900 in relation to each of the six contraventions, and by the application of principles of totality arrived at a total penalty of $110,000.

104    Other material features of the primary judge’s assessment of penalties in the Arundell proceeding were as follows –

(1)    his Honour took account of the Bank’s failure to calculate and pay to the successful applicants the amounts found to be owing to them following the orders for payment that were made on 2 October 2020, and held at [26] that upon a proper construction of the Federal Circuit Court Rules 2001 (Cth), r 1.04, and the Federal Court Rules 2011 (Cth), r 39.02, payment had been required within 14 days of the orders;

(2)    in the alternative to a requirement to pay within 14 days which his Honour held arose under the Rules, his Honour further held at [26] that in any event there had been a failure by the Bank to pay the successful applicants promptly in circumstances where the primary judge stated that he had identified non-payment as a relevant consideration going to penalty;

(3)    his Honour held at [18]-[19] that the contraventions were the result of defective and deficient systems designed by the Bank’s human resources department for which the board of the Bank was responsible as a matter of corporate governance; and

(4)    at [58], his Honour referred as a relevant consideration to the failure of the Bank to take up an opportunity which his Honour had afforded at the penalty hearing on 22 November 2020 to adduce evidence from persons representing the Bank’s corporate mind in relation to the Bank’s belief as to systems that were in place at the time of the contraventions to ensure compliance with the FW Act and the Award, and the systems that were in place at the time of the hearing to ensure such compliance.

The Wardman and Briody proceedings

Liability issues: Wardman v Macquarie Bank Ltd; Briody v Macquarie Bank Ltd [2020] FCCA 2725

105    The primary judge delivered combined reasons for judgment on liability issues in the Wardman and Briody proceedings. The combined judgment was delivered on the same day as the hearing, and after delivery of judgment on liability issues in the Arundell proceeding. At [3] of the combined reasons in the Wardman and Briody proceedings, his Honour described the issues to be determined as being almost identical to those in the Arundell proceeding, and stated that the Court should follow the reasoning in the Arundell proceeding. For the most part, the primary judge’s path of reasoning in the combined reasons was relevantly the same as that in the Arundell proceeding, with most paragraphs of the reasons being identical to corresponding paragraphs in the reasons in the Arundell proceeding. The fact that the two sets of reasons are substantially the same is largely unremarkable, save that one consequence of the substantial identity of reasons is that there are some errors, such as those in [47] of the reasons in the combined reasons in the Wardman and Briody proceedings, which refers to the first, third, sixth, twelfth, thirteenth, fourteenth, fifteenth, sixteenth, seventeenth, eighteenth and nineteenth applicants without identifying to which proceeding the references relate, and in circumstances where there were only 15 applicants in the Wardman proceeding. It appears that [47] may have been copied from [48] of the reasons for judgment in the Arundell proceeding without full attention to the applicants to whom it was intended to refer.

106    In the Wardman proceeding, the Bank relied by way of defence and cross-claim on deeds of release that had been executed by two employees: Sandford and Edwards (who sued, and was sued, via the executors of his estate). The cross-claim sought the return of monies paid to Sandford and Edwards under their respective deeds, and costs of the proceedings on an indemnity basis. The primary judge concluded at [70]-[79] that the release of the Bank by Sandford was effective, holding at [76] that there was a bona fide dispute in connection with the employment of Sandford that was the subject of the release and the payments made thereunder. However at [78], his Honour stated that he was not persuaded that the bringing of the proceedings by Sandford was in breach of the relevant clauses of the deed that engaged an obligation to repay monies to the Bank.

107    At [80]-[81], the primary held that the release given by Edwards was effective for substantially the same reasons given in respect of Sandford. However, as with Sandford, his Honour held that the obligation to repay monies to the Bank had not been engaged.

108    At [84]-[87], his Honour held that, given the clear terms of the releases, the proceedings brought by Sandford and Edwards were brought without reasonable cause for the purposes of s 570 of the FW Act, and concluded that the Court should exercise its discretion under s 570(2) of the FW Act and order that they pay the Bank’s costs of the defence of the claims brought by them. The cross-claim was otherwise dismissed.

109    In the Briody proceeding, the Bank relied by way of defence and cross-claim on deeds of release executed by ten employees: Briody, Crone, Duong, Elliott, Mahajan, Marr, Purvis, Ryan, Saba, and Starr. By the cross-claim, the Bank sought an order that the relevant employees pay its costs of the proceeding on an indemnity basis, alleging that by reason of the releases, the proceedings had been commenced vexatiously or without reasonable cause. The primary judge held at [65]-[69] that the deeds of release of those applicants expressly carved out from the release liabilities under statutory obligations unless and until those obligations had been met. The Bank’s cross-claim in the Briody proceeding was dismissed.

Penalties: Wardman v Macquarie Bank Ltd (No 2) [2020] FCCA 3317

110    As to penalties, the primary judge’s reasons for judgment in the Wardman proceeding followed the same form as the reasons on penalties in the Arundell proceeding. The primary judge ordered that the Bank pay one penalty to the successful applicants in the sum of $110,000. The primary judge identified 64 separate contraventions, but by the application of the course of conduct provision in s 557 of the FW Act assessed penalty on the basis that there were six contraventions, attracting maximum penalties of $54,000 and $63,000, amounting to a total maximum of $360,000. His Honour proposed a penalty of $18,900 in relation to each of the six contraventions, and by the application of principles of totality arrived at a total penalty of $110,000. Informing the primary judge’s assessment of penalties in the Wardman proceeding were the features to which I referred at [104] above, which were the subject of corresponding findings.

Penalties: Briody v Macquarie Bank Ltd (No 2) [2020] FCCA 3318

111    Similarly, the primary judge’s reasons for judgment on penalties in the Briody proceeding followed the same form, making the same findings, and invoking the same considerations. The primary judge ordered that the Bank pay one penalty to the successful applicants in the sum of $110,000. The primary judge identified 100 separate contraventions, but by the application of the course of conduct provision in s 557 of the FW Act assessed penalty on the basis that there were six contraventions, attracting maximum penalties of $54,000 and $63,000, amounting to a total maximum of $369,000. As with the other proceedings, his Honour proposed a penalty of $18,900 in relation to each of the six contraventions, and by the application of principles of totality arrived at a total penalty of $110,000.

The submissions advanced on behalf of the employees

112    There were five principal issues raised on behalf of the employees on the appeals.

113    First, it was submitted that the primary judge had erred in treating the payments made by the Bank to the employees as discharging its liability to pay wages under the Award. It was submitted that the payments made were not in respect of work performed. The employees maintained the submission put to the primary judge that the payments were not wages, but payments on account of commission.

114    Secondly, it was submitted that the Bank was unable to rely upon the payments of an annualised salary in discharge of its obligation to pay wages under the Award because the Bank had not entered into an agreement with the employees to vary the terms of the Award pursuant to cl 7 of the Award (see [74] above). It was further submitted that the Bank had otherwise not complied with cl 14 of the Award (see [76] above) which, if engaged, might have authorised the payment of an annual salary to the employees.

115    Thirdly, it was submitted that the primary judge had correctly held that the payments made by the Bank to the employees did not include payments on account of leave, annual leave loading, or public holidays.

116    Fourthly, it was submitted that in relation to the terms of all of the deeds of release, that the primary judge was in error by not correctly applying the principles referred to by the Full Court in Kowalski v Trustee, Mitsubishi Motors Australia Limited Staff Superannuation Pty Ltd [2003] FCAFC 18 concerning the circumstances in which there might be an effective compromise of statutory entitlements, such as in settlement of litigation. These submissions were particularly directed to the primary judge’s findings in the Wardman proceeding that the proceedings brought on behalf of Sandford and Edwards were barred by the terms of deeds of release into which they entered, and in consequence that the proceedings had been brought by those applicants without reasonable cause for the purposes of the costs provision in s 570 of the FW Act.

117    Fifthly, it was submitted that the primary judge had erred in failing to give reasons for awarding interest to be calculated from the date of commencement of the proceedings, rather than from the dates from which the alleged underpayments had accrued, and submitted that s 547 of the FW Act supported the latter course.

The submissions advanced on behalf of the Bank

118    On behalf of the Bank, the following issues were raised on the appeals.

119    First, it was submitted that the primary judge had erred in finding that the Bank had contravened s 44 of the FW Act by failing to pay the employees at their base rate of pay for the ordinary hours that they worked during their periods of leave and for public holidays.

120    Secondly, it was submitted that the primary judge had erred in finding that the Bank had contravened s 45 of the FW Act by failing to discharge the Award obligation to pay to the employees a 17.5% annual leave loading.

121    Thirdly, it was submitted that the primary judge had erred in holding that certain of the employees were not precluded by the deeds of release into which they entered from pursuing their claims, namely –

(a)    Gamble, Roberts, and Smrk, who were applicants in the Arundell proceeding;

(b)    Briody, Crone, Duong, Elliot, Mahajan, Marr, Purvis, Ryan, Saba, and Starr, who were applicants in the Briody proceeding.

122    Fourthly, while the primary judge held that the claims of Sandford and Edwards, who were applicants in the Wardman proceeding, were barred as a result of their execution of deeds of release, the Bank claimed that the judge had erred by not also finding that they were in breach of their deeds of release with the consequence that they were liable under the terms of the deeds to repay monies that had been paid to them thereunder.

123    Fifthly, it was submitted that in assessing penalties in each of the three proceedings the primary judge had made a number of specific errors such that his discretion as to penalties had miscarried. In the alternative it was submitted that the penalties were manifestly excessive.

The questions raised by the appeal

124    The issues raised by the parties give rise to the following questions –

(1)    Is the remuneration that was paid by the Bank to the employees to be characterised as comprising commission only, as the employees submitted?

(2)    Did the Bank discharge its obligations under the Award and the FW Act to pay wages or salary, and to make payments on account of leave, annual leave loading, and public holidays?

(3)    Do cl 7 and cl 14 of the Award preclude the Bank from relying upon the regular monthly payments that were made to the employees under the BCR package to discharge its Award obligations to pay wages at the minimum rates fixed under cl 13.1 of the Award, and to make payments on account of leave, annual leave loading, and public holidays?

(4)    Did the terms of the various deeds of release that are in issue defeat the claims of the relevant employees?

(5)    Did the primary judge err in ordering the third and seventh applicants in the Wardman proceeding to pay the Bank’s costs of defending their claims on the ground that for the purposes of s 570 of the FW Act their proceedings had been instituted without reasonable cause?

(6)    Was the primary judge in error in not holding that Sandford and Edwards were in breach of their deeds of release thereby engaging an obligation of repayment?

(7)    Did the primary judge err in by failing to give reasons for determining that interest should be calculated from the commencement of the proceedings, rather than from when the money claims accrued?

(8)    Did the primary judge make the errors that are alleged by the Bank in his Honour’s assessment of penalties?

Consideration of the questions

125    Before addressing the questions individually, I will outline the essential reasons why the primary questions have arisen.

126    From the commencement of the FW Act and the Award on 1 January 2010, the employment relationship between the Bank and the relevant employees was governed by: (1) the statutory obligations under the FW Act, including the obligation under s 45 not to contravene a term of the Award; and (2) the contractual obligations arising under the individual contracts of employment. In Visscher v Giudice [2009] HCA 34; 239 CLR 361 at [13], Gummow J described the employment relationship in issue in that case as representing a compound of statutory elements and of the common law of contract, where the statutory elements predominated: see also, Heydon, Crennan, Kiefel and Bell JJ at [71]. While the employment agreements in this case created the employment relationships and supplied some of the terms of that relationship, the rights and obligations under the Award and the NES arose by force of the FW Act: see, Byrne v Australian Airlines Ltd [1995] HCA 24; 185 CLR 410 at 419 (Brennan CJ, Dawson and Toohey JJ); Amalgamated Collieries of WA Ltd v True [1938] HCA 19; 59 CLR 417 at 423 (Latham CJ). The rights and obligations that arise by force of the FW Act are independent of any contractual obligations, and while the parties to an employment agreement may agree to contractual terms more favourable than those arising by force of the FW Act, an employment agreement will be ineffective to diminish or displace the statutory obligations.

127    The question whether payments that are made by an employer to an employee pursuant to a contractual obligation also operate to discharge a concurrent statutory obligation, such as an obligation to comply with an award, has been a recurring one in Australian employment law, and the different problems that have arisen have been the subject of a number of reported decisions. Some of the difficult problems that have arisen have been the result of the purported engagement of a worker as an independent contractor, or a casual employee, when the worker was thereafter held by a court to be a full time employee for the purposes of the applicable statute or industrial instrument, and therefore entitled to benefits such as paid leave: see, for example, James Turner Roofing Pty Ltd v Peters [2003] WASCA 28; 132 IR 122 (James Turner Roofing) at [5]; Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate [2015] FCAFC 99; 240 FCR 578 (Linkhill). That is not the position here, where the employees were employed as full time employees.

128    Some of the authorities use the term “set-off” to describe a situation where payments made by an employer to an employee pursuant to a contractual obligation can be applied to discharge a concurrent award or statutory obligation. The genesis of the use of the term “set-off” in this sense appears to be the reasons for judgment of Sheldon J in Ray v Radano [1967] AR (NSW) 471, who recognised at 477 that “set-off” was not being used in this context in a technical legal sense –

The problematical question, is what can be set-off against a claim arising under an award in order to determine, as the section requires, the true balance between the parties. I am not using the word “set-off” in a technical legal sense but as a convenient way of covering payments by the employer which are material in arriving at this balance.

129    The fact that “set-off” in this context is not used in its conventional sense was also recognised in James Turner Roofing at [18] where Anderson J, presiding in the Western Australian Industrial Appeal Court, described the deployment of the term in this context as a misuse of the term. It is important not to let labels distract from the underlying principles that are to be applied. What is in issue is what obligations are discharged by payments that have been made by an employer to an employee. As the reasons of the Full Court in Poletti v Ecob (No 2) (1989) 31 IR 321 identify at 332-333, there are different situations that may have to be addressed. Those situations often invite consideration of the common law rules of attribution governing payments by a debtor to a creditor. Where by operation of those rules a payment that is made by an employer to an employee is to be attributed to the discharge of a contractual obligation, a further issue is to identify the agreed purpose of the payments under the contract: Poletti v Ecob (No 2) at 332 (Keely, Ryan and Gray JJ). That issue is to be resolved by the application of principles relating to the identification of objective contractual intent, which involves an inquiry that must look to the objective purpose of the payments under the express or implied terms of the contract of employment set against the circumstances known to both parties, and the surrounding statutory framework, which amounts to determining what a reasonable person would have understood by the terms: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39 at [15] (Kiefel CJ and Gageler J), [43], [47] and [72] (Gordon J). There may be greater scope to an inquiry relating to the terms of a contract of employment that is not in writing, or is at least partly oral, or is partly to be inferred from conduct, as was the case in James Turner Roofing at [3], where the findings of the industrial magistrate concerning the terms of the remuneration were based upon evidence of discussions between the parties: see in this regard, Byrne v Australian Airlines Ltd at 442 (McHugh and Gummow JJ), and Realestate.com.au Pty Ltd v Hardingham at [45]-[46] (Gordon J), [86], [114] and [116]-[123] (Edelman and Steward JJ).

130    In addressing the authorities, it is also important to bear in mind that each case will turn on its facts, and in particular the terms of the contract of employment, the terms of the applicable industrial statute, and the terms of any relevant instrument, such as an award: see, James Turner Roofing at [21], principle (5) (Anderson J); Linkhill at [101] (North and Bromberg JJ), [122] and [131] (White J). As I have alluded to, the cases illustrate and apply general common law principles of attribution, which may incorporate the principles relating to the identification of the terms of, and the interpretation of contracts. Speaking generally, and recognising that each case turns on its own facts, it might be observed that the more specific the purpose of a contractual obligation, the less scope there might be to find that a payment under a contractual obligation operates to discharge a differently expressed statutory or award obligation. Correspondingly, a broad contractual purpose may afford greater scope for the discharge of concurrent statutory or award obligations.

131    The seminal decision on these questions is that of the New South Wales Industrial Commission in Ray v Radano, and in particular the separate reasons for judgment of Sheldon J which have received subsequent appellate approval. Material passages in the reasons of Sheldon J were approved by the Full Court (Keely, Ryan and Gray JJ) in Poletti v Ecob (No 2), where it was held at 333 that if payments are made by an employer in discharge of a contractual obligation, the question whether concurrent statutory obligations are thereby discharged is answered by looking to the contractual purpose of the payment, objectively ascertained. Thus, if there is a coincidence of purpose, or at least a close correlation between the nature of the particular award obligation and the nature of the contractual obligation, then a payment may operate to discharge both obligations: Australia and New Zealand Banking Group Limited v Finance Sector Union of Australia [2001] FCA 1785; 111 IR 227 (ANZ v FSU) at [47], [51]-[52] (Black CJ, Wilcox and von Doussa JJ). See also, Linkhill at [98] (North and Bromberg JJ). And consistently with the observation by Sheldon J in Ray v Radano at 478 that the answer to the problem can be found by applying common sense, it is not necessary that the same label by used for the payments: ANZ v FSU at [52]. It follows from these propositions that the terms of a contract of employment need not advert to award or statutory obligations in order that payments made under the contract operate to discharge those concurrent obligations: James Turner Roofing at [29] and [44] (Anderson J, Scott J at [52] generally agreeing, and Parker J at [68] concurring).

132    On the other hand, if the contractual purpose of the payment is in respect of a matter that is outside the award or statutory obligation, then it will not discharge that obligation. A clear illustration is Poulos v Waltons Stores (Interstate) Ltd (1986) [1986] FCA 159; 10 FCR 429 where each member of the Full Court (Smithers J at 435, Keely J at 439, and Gray J at 453 (but otherwise dissenting)) dismissed the idea that payments of commission to a store representative could operate to discharge an obligation to pay wages under an award. The cases also illustrate that if under the contract of employment, or otherwise, an obligation to make a payment to an employee in an amount in excess of award obligations is specifically attributable to a particular incident of employment, such as wages on account of ordinary time, the payment cannot thereafter be allocated by the employer in discharge of some other obligation, such as an award obligation to pay an additional amount attributable to overtime, or an obligation to pay award wages arising in respect of another period: Ray v Radano at 479; Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503 at 509 (Keely J); Poletti v Ecob (No 2) at 335; James Turner Roofing at [21(2)], [34], [36], and [44]. Otherwise, the cases illustrate that the payment of remuneration pursuant to a contractual obligation may be capable of discharging all concurrent award obligations where there is no specific attribution to a particular award entitlement. In Ray v Radano at 478 Sheldon J expressed the position as follows –

If no more appears than that (a) work was done; (b) the work was covered by an award; (c) a wage was paid; then the whole of that wage can be set-off against the award entitlement for the work whether it arises as ordinary time, overtime, week-end penalty rates or any other monetary right under the award. Prima facie a weekly sum paid by an employer to his employee is an appropriation by the employer (the debtor) to the payment due for that week (Sarris v Nicholson [1925 AR 109]); and, in my opinion, there is no legal significance in the mere verbiage by which the payment is described whether it be “wages”, “remuneration” or the like.

133    In relation to the above passage, it is important that I emphasise that each case will turn on its facts, including the relevant terms of the applicable industrial instrument, the terms of the contract of employment if relevant, and the circumstances of the payment, and therefore some care must be taken in relation to hypothetical illustrations of the application of the principles that appear in some of the authorities. Otherwise, it is not controversial that the approaches of the Full Courts in Poletti v Ecob (No 2) and ANZ v FSU are the approaches to be followed.

(1)    Is the remuneration that was paid by the Bank to the employees to be characterised as comprising commission only?

134    Counsel for the employees relied on the written terms of the employment agreements to support the claims that the employees were paid only commission.

135    There was very little separate consideration by the primary judge of the different terms of the employment agreements, extracts from which his Honour set out in annexures to the reasons for judgment on liability issues. Rather, in the main, the primary judge considered all of the employment agreements on a global basis, and reasoned in a high-level way: see, Arundell v Macquarie Bank Ltd [2020] FCCA 2720 at [13]-[15] and [32]-[34], Wardman v Macquarie Bank Ltd [2020] FCCA 2725 at [17]-[19] and [30]-[33].

136    In total, there were 50 different employment agreements before this Court, 48 of which must be considered for the purpose of the appeals by the employees. I will consider the employment agreements in eight groups, reflecting that there are, broadly, eight different forms of employment agreement that are in issue. The composition of the groups, identifying the individual employees by name, is set out in the First Schedule to these reasons. I have further divided some of the groups into sub-categories to reflect small and mostly insignificant variations in language between the employment agreements within each group. These sub-variations are labelled as, for example, “Form Five A’, “Form Five B”, etc. Extracts from the employment agreements, organised by the eight forms and sub-forms, are set out in the Second Schedule to these reasons.

Form One

137    Form One includes the Wardman agreement, to which senior counsel for the employees took the Court in oral argument by way of illustration. The Wardman agreement included the following terms (my emphasis in bold) –

REMUNERATION

You are remunerated under the Employer’s Commission Based Structure as part of the Employer’s Basic Cost Responsibility (BCR) system. BCR is a remuneration package that represents the total cost of your employment including employer superannuation, fringe benefits tax, payroll tax, workers compensation insurance and goods and services tax where applicable.

138    I pause to record that senior counsel for the employees submitted that the next sentences in the clause were critical to the case –

You will be allocated a BCR, which is a recoverable allocation against any commission earned.

If your earned commission is less than your BCR allocation at the end of the month, this deficit will be rolled forward to the next month and offset against available net commission.

139    The clause continued –

To the extent that your earned commission is less than your base BCR allocation in a given year, you will not be required to pay the shortfall to the Employer, however, your base rate will be revised and may be reduced by the Employer in line with the Minimum Performance Clause of this Agreement. The Employer may also reduce your BCR allocation at any point throughout the Commission year if it appears to the Employer that your earned commission will be less than your base BCR allocation for the year.

Subject to the Employer’s rights to vary the base BCR as set out above, BCR levels are reviewed annually and any adjustment is made effective on and from 1 July.