FEDERAL COURT OF AUSTRALIA

BHP STEEL (AIS) PTY LTD v CONSTRUCTION, FORESTRY, MINING & ENERGY UNION [2001] FCA 336

PENALTY - object of penalty - considerations in imposition and amount of penalty for contempt - wilfulness of conduct - attitude of respondent to compliance with Court order - consideration of costs order in imposing penalty

PRACTICE & PROCEDURE - whether an order can be set aside after entered

COSTS - indemnity costs - when application for indemnity costs order should be made

Federal Court of Australia Act (1976) (Cth) s 23

Federal Court Rules O 35 r 7(2)(f)

Cases

Degmam Pty Ltd (In Liq) v Wright (No 2) [1983] 2 NSWLR 354 Cited

State Rail Authority of New South Wales v Codelfa Construction Proprietary Limited (1982) 150 CLR 29 Dist

Westsub Discounts Pty Ltd v Idaps Australia Ltd (No 2) (1990) 94 ALR 310 Cited

Witham v Holloway (1995) 183 CLR 525 Cited

BHP STEEL (AIS) PTY LTD v CONSTRUCTION, FORESTRY, MINING & ENERGY UNION

Q9 of 2000

KIEFEL J

BRISBANE

30 MARCH 2001

THE COURT ORDERS THAT:

1.         The respondent is fined the sum of $200,000 for its contempt of Court.

2.         The order entered on 8 February 2001, so far as it concerns costs, is set aside.

3.         The order of 15 December 2000, so far as it concerns costs, is vacated.

4.         The respondent pay to the applicant its costs of the whole of the proceedings, such costs to be taxed on an indemnity basis.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

PENALTY

1                     The respondent Union determined not to comply with the requirements of the Court’s order of 8 February 2000.  My findings in relation to that conduct are set out in my earlier reasons ([2000] FCA 1853).  It did not do so because it did not suit its purposes, in its battle with the applicant, to take action to end the strike as was required.  In the process its officers characterised the order to Union members as a mere tactical advantage secured by the applicant.  The respondent’s officers acted cynically.  The encouragement to the Union members to ignore the Court’s order was not good advice and now the respondent faces a substantial penalty.

2                     It is hardly necessary to explain the reasons why, in our society, the Courts are given authority and individuals are not left free to continue what has been found to be wrongful or illegal conduct.  A Court order to that effect is not however the mere emanation of the wishes of one party to litigation.  It is an impartial, independent determination arrived at by reference to the facts and settled legal principles.  It must be obeyed if our system is to function and citizens are to have confidence in the Court’s ability to effectively determine disputes.  These observations have been restated many times by the Courts to explain why a wilful refusal to comply with an order, which is to say to hold the Court’s authority in contempt, is viewed so seriously.

3                     Penalties for contempt of Court orders necessarily recognise that the Court’s authority must be vindicated, and that there is a public interest in compliance with all orders of the Court:  Witham v Holloway (1995) 183 CLR 525, 533.  Orders for penalties recognise the need to deter not only the defaulting party, but others who might be like-minded.

4                     All cases of contempt are serious.  In describing this case as especially serious, I am in particular referring to the determination on the part of the respondent’s officers not to permit or encourage compliance with the order.  From the time they were made aware of it, there was no prospect that it would be obeyed.  Knowing full well of the seriousness of non-compliance with an order, there followed calculated and devious attempts to disguise any knowledge of the order’s existence, until it could be said to be too late for it to be able to effectively comply with it.  Even then they persisted with a deliberate disregard of the order.

5                     Officers at the highest level in the Mining and Energy Division of the respondent turned their face against the Court’s order and concentrated their efforts upon obtaining a continuation of the strike action.  At the same time they attempted to create an impression of lack of knowledge so as to later avoid detection for non-compliance with the order.  Their denial of the existence of the order was dishonest and cynical, as was the conduct of these proceedings.  The officers appear to have taken the course they did because the maintenance of the strike action was considered more important than compliance with a Court order.  This implies that the respondent, and its officers, wished to be seen as maintaining a strong position.  Necessarily they had to weigh up the likelihood that a case of contempt might be proven against the respondent.  The officers must also, in my view, have considered whether any Court sanction would be of great significance if they were caught out.  The penalty to be imposed must then make plain that these approaches are to be condemned and have sufficient impact to be effective as a deterrent in the future.

6                     It was submitted on behalf of the respondent that a number of factors should be taken into account in mitigation of penalty.  I am unable to see that there are any which would have that effect.

7                     I consider the short period within which the respondent had to comply with the Order to be largely irrelevant to the question of penalty.  There is no suggestion that anyone was in the least confused about what had to be done, and no one has come forward to give evidence about the matter.  The fact that the contempt was not protracted does reflect the short term of the order, but in that short period the respondent’s position with respect to orders of the Court was made plain.

8                     The fact that the respondent made no public statement to the press at the time concerning its non-compliance with the order, whilst not further exacerbating matters, does not operate to relieve it in any way from what must be a substantial fine.  In any event it is not accurate to say that the respondent or its officers did not engage in conduct which conveyed to others the contempt in which it held the Court’s order.  Such was conveyed at the meeting of Union members on the morning following the order, when members were incited to continue strike action despite the existence of the order.  The impression conveyed was that a party who had obtained an order of the Court was to be punished for doing so.  There is nothing to suggest any lack of understanding on the part of the respondent’s officers about the status of Court orders and what they required.  Mr Maher, who appears to have orchestrated the events, was fully aware of these matters and that is why care had to be exercised to create a good story for later. 

9                     I also consider irrelevant that which has been put forward as ‘partial compliance’. As I have said in my earlier reasons, the fact that compliance was possible in Queensland does not assist the New South Wales branches in question.  To the contrary, it shows that it could have been achieved and that Branch officers could effect it.  Relevantly, the fact that the Queensland branches and officers acted responsibly is reflected in the charges being limited to the actions of the respondent in New South Wales.

10                  Counsel for the respondent also pointed to the fact that an apology might yet be forthcoming, depending upon the outcome of the appeal which has been lodged.  In my view the appeal is irrelevant to my assessment of penalty.  There has been no apology in the face of serious findings against the respondent and its officers.  Whilst the lack of an apology is not an aggravating circumstance, such as might increase the penalty, the making of an apology can operate to reduce a penalty, at least where it can be seen to render it unlikely that the conduct will be repeated in the future.  The respondent has elected not to take that course. 

11                  I have been referred to the membership and finances of the respondent and factors relevant to the financial circumstances of the Mining and Energy Division.  It is unnecessary for me to set out the figures here.  The Mining and Energy Division has substantial assets, accumulated contributions, income and funds set aside.  It is not part of the purpose of a penalty order that it have any particular effect upon a party’s financial position.  On the other hand its financial circumstances are relevant to an assessment of what might make an impression upon it.  Any fine must be such that the respondent, and others, regard it as significant.  It must reflect the level of the Court’s concern that its authority be vindicated.

12                  I have also taken into account the order for indemnity costs which I propose to make.  These costs will be considerable.  To a large extent however the amount of these costs has been brought about by the respondent’s own actions in the conduct of these proceedings.  These proceedings have involved substantial time and expense.  It is, I consider, also relevant to quantum to take into account the fact that the respondent was prepared to pay considerable legal expenses itself in an endeavour to avoid liability.

13                  The respondent will be fined the sum of $200,000 for its contempt of Court.

COSTS

14                  On 15 December 2000, when I made the order declaring the respondent to have been guilty of contempt, I also made an order for costs.  I had not appreciated that a party, the applicant, desired to be further heard on the question of any special order for costs.  The order I made would have resulted in the applicant recovering its party and party costs only.

15                  On 10 January 2001 the solicitors for the applicant wrote to the respondent’s solicitor informing him of their client’s intention to seek an order vacating the earlier costs order and replacing it with one for indemnity costs in its favour.  On 30 January 2001 they wrote to the District Registrar of this Court asking that, in light of their client’s intention, the order for costs not be entered.  A copy of this letter was also sent to the respondent’s solicitors.  Unfortunately no application was filed and the matter was not referred to me.

16                  When the parties came before the Deputy District Registrar on 31 January to settle the index to the appeal book, town agents acted for the respondent’s solicitors.  A discussion took place between the applicant’s solicitors and the Deputy District Registrar, as a result of which the time for completing the appeal books was extended to permit the applicant to raise the question of the order for costs on the date which had been fixed for the hearing of the issue of penalty.  If, as the town agent said in evidence, she did not appreciate that this was the case, she could not have been attending to the conversation.  This may have resulted, in large part, from her lack of knowledge of the matter because her principals had not properly instructed her.  In particular they seem not to have told her anything about the possibility of an application for costs.  The town agent did not then convey anything to her principals about what had been said and arranged.

17                  On 1 February the respondent’s solicitors wrote to the applicant’s solicitors, asking whether they had had a response from the District Registrar to the letter of 30 January, and expressing the view that they were required to have the order entered.  On 5 February the order was sent to the town agent to be entered.  On 8 February it was entered, under the hand of the Deputy District Registrar.  I do not infer from this that the Deputy District Registrar appreciated that the order was being entered despite the arrangements which had been put in place.  In the meantime, on 7 February, the applicant’s solicitors advised the respondent’s solicitor’s by letter of the arrangements made with the Deputy District Registrar and that the applicant intended to ask the Court to set the order aside.  The respondent’s solicitor was not present in his office and did not receive this communication.

18                  The question whether the order entered could and should be set aside was adjourned following the taking of some further evidence at the hearing on penalty.  When the adjourned hearing commenced on 29 March 2001 Senior Counsel for the respondent informed me that instructions had been sought from the respondent in light of the facts now known.  The respondent quite properly accepted that the appropriate course was not to contest the setting aside of the order as entered, at least if the applicant was otherwise successful on its motion for indemnity costs of the proceedings leading to the declaration.  The concession was made without acceptance of any responsibility for what had taken place, even unintentionally.  It is not then necessary to make findings at this point on the issue of the respondent’s solicitors conduct.  Order 35 rule 7(2)(f) Federal Court Rules in my view permits the order to be set aside given the consent of both parties.  The question of which of them had the benefit of the order does not need determination.  Alternatively, it seems to me that the Court has an implied power to correct the misuse of its processes:  see s 23 Federal Court of Australia Act 1976 (Cth) and Westsub Discounts Pty Ltd v Idaps Australia Ltd (No 2) (1990) 94 ALR 310.  This would extend to unintentional actions having the effect that one party was mistakenly denied a right to put its case.  A substantial injustice is involved.  The Court’s powers should not logically depend only upon the wrongful and intentional conduct of a party producing that result. 

19                  The question then is whether my order for costs made on 15 December 2000 ought to be vacated.  The respondent submitted that the principle of finality forecloses the applicant an opportunity to be heard as to whether indemnity costs should be ordered.  The position here is, I think, distinguishable from cases like State Rail Authority of New South Wales v Codelfa Construction Proprietary Limited (1982) 150 CLR 29, 38 where a matter was sought to be substantially reopened and something in the nature of a re-hearing was to be involved.  Senior Counsel for the applicant is correct to observe that the basis upon which costs should be taxed, has never been raised and it has not been argued.  The order made by me was not a considered judgment on the question now raised:  Degmam Pty Ltd (In Liq) v Wright (No 2) [1983] 2 NSWLR 354.

20                  That leaves the question whether the application for such an order should have been made before the order for costs was made.  Such an order was not sought in the original notice of motion, but I do not think much turns upon that.  The applicant could have foreshadowed an application, but it would have had to await findings on the conduct of the respondent before it could make meaningful submissions on that ground for an indemnity order.  It is also correct to observe that I had not indicated to the parties that final orders, as distinct from findings, would be made at the conclusion of my reasons on the issue whether contempt had been committed.

21                  The order should in my view be vacated.  I should add that the applicant does not need such an order so that it might argue for indemnity costs on the penalty proceedings. 

22                  Parties who prosecute contempt cases are often recognised as performing a public duty and an order for indemnity costs is made so that they will not be out of pocket because they have undertaken that role.  This is such a case  And it is a case where the applicant was put to considerable expense in adducing evidence and piecing together what occurred because of the decision made by the respondent not to explain the events which took place and to call only one witness in answer to the charges.  There are strong reasons why the applicant should have its order for indemnity costs in relation to the proceedings culminating in the declaration, as well as the penalty and costs proceedings.

23                  In relation to the points raised by the respondent, I add only the following:  the applicant was almost entirely successful in its prosecution.  This is not a case for dealing separately with charges made out.  It acted properly, in my view, in putting forward the evidence relating to the conduct of the respondent in Queensland and could not have been expected to think, if it is realistic in hindsight, that the facts would have been agreed to in whole or in part.  In any event, this is a matter for the taxing officer to assess on account of reasonableness.

24                  The applicant conceded, in light of one of the respondent’s contentions, that the order for indemnity costs should carry the rider that it is not to include costs unreasonably incurred.  Such an order was made in Degmam v Wright.  I would not have thought a taxing officer needed this reminder.

25                  The applicant is entitled to its costs of the proceedings on an indemnity basis.  The respondent submits that the costs of the hearing of 29 March 2001 were brought about by the need for an adjournment to consider the future evidence relevant to the entry of the order.  That adjournment in my view was brought about by the respondent’s solicitors lack of understanding.  This should not have occurred and can hardly be visited upon the applicant.

Associate:

Dated:              30 March 2001