FEDERAL COURT OF AUSTRALIA

Australian Building & Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2010] FCA 977

THE COURT ORDERS THAT:

1.                  There be imposed on the first respondent a pecuniary penalty of $40,000 payable in accordance with s 49(5) of the Building and Construction Industry Improvement Act 2005 (Cth).

2.                  There be imposed on the third respondent a pecuniary penalty of $8,000 payable in accordance with s 49(5) of the Building and Construction Industry Improvement Act 2005 (Cth).

3.                  The first and third respondents pay the applicant’s costs, excluding costs of the preparation and filing of submissions in relation to the liability of the second respondent, to be taxed if not agreed.

4.                  The applicant pay the second respondent’s costs of the application to be taxed if not agreed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

The questions of Penalty and costs

1                                             On 23 July 2010, in this proceeding, the Court declared that:

1.                  That the industrial action undertaken on 15 July 2009 by building employees engaged on the City Square Project conducted by Brookfield Multiplex Constructions Limited was unlawful industrial action which involved a contravention of s 38 of the BCII Act.

2.                  By his conduct on that day, the third respondent was involved in the contravention within the meaning of s 48(2)(a) and (c) of the BCII Act and by the operation thereof is treated as having himself contravened s 38 of the BCII Act.

3.                  By the operation of s 69(1)(b) of the BCII Act, the conduct of the third respondent is taken also to be the conduct of the first respondent.

And ordered that:

4.                  The application against the second respondent be dismissed.

5.                  The applicant to file and serve written submissions on the questions of costs and penalty including the second respondent’s costs by 30 July 2010.

6.                  The first and third respondents to file and serve responding submissions by 6 August 2010.

7.                  The second respondent to file and serve submissions on its application for costs by 6 August 2010.

8.                  The matter be listed for hearing on penalty and costs on 10 August 2010 at 11am.

2                                             Following the lodgement of written submissions on behalf of the parties, the parties consented to an order being made that the Court determine the questions of penalty and costs on the papers.

penalty – General Principles

3                                             The parties are in broad agreement about the general principles that apply when a court imposes a  civil penalty under the Building and Construction Industry Improvement Act 2005 (Cth) (BCII Act). 

4                                             Sentencing (which the imposition of a civil penalty is an instance of) is one of the most, if not the most difficult tasks that judicial officers perform: CFMEU v Williams [2009] FCAFC 171; (2009) 262 ALR 417 (Williams) at [28].

5                                             The overriding principle is to ensure that the sentence is proportionate to the gravity of the contravening conduct: Attorney‑General (SA) v Tichy (1982) SASR 84 at 92‑93.

6                                             The purpose to be served by the imposition of penalties is at least threefold:

(1)               Punishment, which must be proportionate to the offence and in accordance with prevailing standards;

(2)               Deterrence, both personal (assessing the risk of re-offending) and general (a deterrent to others who might be likely to offend); and

(3)               Rehabilitation.

See Ponzio v BP Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 (Ponzio), Lander J at [93]‑[94].

7                                             The task which a sentencing judge is faced with is one of “instinctive synthesis”: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560 (Australian Ophthalmic Supplies), Gray J at [27] and Graham J [55].   Such a process requires that a court take into account all relevant factors and to arrive at a single result which takes due account of them all: see Wong v The Queen [2001] HCA 64; (2001) 207 CLR 584 at [74]-[76]; Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 (Markarian), Gleeson CJ, Gummow, Hayne and Callinan JJ at [37]-[39].   The penalty must not be so great as to crush the person upon whom the penalty is imposed or reveal the person as a scapegoat: Ponzio at [93] (Lander J); McDonald v R (1994) 48 FCR 555 at 563.   The maximum penalty is reserved for only the most serious of contraventions: Markarian at [31].   Proportionality and consistency commonly operate as a final check on the penalty assessed: Australian Ophthalmic Supplies at [53].

8                                             In accordance with s 49(2) of the BCII Act, the maximum penalty for each contravention of s 38 of the BCII Act is:

(a)           For a corporate respondent (the first respondent, the CFMEU), $110,000; and

(b)          For an individual respondent (the third respondent, Mr McDonald), $22,000.

Section 38 is a Grade A civil penalty provision; the maximum penalty is 1,000 penalty units for a corporate entity and 200 penalty units for an individual. A penalty unit is $110; s 4(1) and s 4AA(1) of the Crimes Act 1914 (Cth).

9                                             Courts exercising industrial jurisdiction have identified a range of factors which may or may not be relevant to the circumstances of a particular case when assessing the appropriate penalty: See for example, CFMEU v Coal & Allied Operations Pty Ltd (No 2) [1997] FCA 1714; (1999) 94 IR 231 at [8]; CFMEU v Hamberger [2003] FCAFC 38; (2003) 127 FCR 309 at [51]; Stuart-Mahoney v CFMEU [2008] FCA 1426; (2008) 177 IR 61 (Mahoney) at [56]-[57]; Cruse v CFMEU [2007] FMCA 1873 (14 November 2007, Burchardt FM) at [71].

10                                          However, courts have warned against the use of checklists because they give rise to the risk of transforming the process of instinctive synthesis into the application of a rigid catalogue of matters for attention.  Accordingly in Australian Ophthalmic Supplies at [91], Buchanan J observed:

At the end of the day the task of the court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligation.

11                                          The courts also warn against comparing the case the subject of the assessment with any other particular case so as to derive from it the amount of penalty (or tariff) to be fixed: NW Frozen Foods Pty Ltd v Australian Consumer and Competition Commission (1996) 71 FCR 285, at 295; Australian Ophthalmic Supplies, Graham J at [56]-[57] and Buchanan J at [87].

12                                          The courts now regard far more seriously any contravention of industrial laws than has generally been the case in the past.  In Finance Sector Union of Australia v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 224 ALR 467 at [72], Merkel J said:

It may be that breaches by unions and employers of industrial legislation from time to time have been accepted as part of the give and take of industrial disputation.  However, in recent years industrial legislation has increasingly codified and prescribed what is acceptable, and what is unacceptable, industrial conduct.  The legislature has, over time, also moved to increase the penalties that may be imposed in respect of unlawful industrial conduct.  In my view, any light-handed approach that might have been taken in the past to serious, wilful and ongoing breaches of the industrial laws should no longer be applicable.  As is apparent from the penalties that I have imposed, I have not accepted that such an approach, which was urged by CBA (which contended that either no penalty or only a nominal penalty was appropriate), is applicable in the present case.

13                                          In this case the penalty imposed by Merkel J in respect of contraventions of the former s 298K of the Workplace Relations Act 1996 (Cth) (of $600,000) was overturned on appeal and substituted with a penalty of $300,000: Commonwealth Bank of Australia v Finance Sector Union of Australia [2007] FCAFC 18; (2007) 157 FCR 329.  Branson J (with whom Spender J agreed in relation to the reduction in penalty) indicated that there was no demonstrable error of principle affecting the penalty imposed by the first instance judge but rather that it was manifestly excessive.  Branson J reaffirmed the warning that it may well be that it is appropriate for penalties imposed (relevantly) under the freedom of association provisions to rise and rise appreciably: see [191]-[192].

14                                          These comments were endorsed by a Full Court in Plancor Pty Ltd v Liquor Hospitality & Miscellaneous Union [2008] FCAFC 170; (2008) 171 FCR 357at [62].

15                                          Bearing in mind the warning against the slavish application of a rigid catalogue of matters, the authorities suggest that the considerations relevant to the assessment of penalty for a contravention of the BCII Act provisions are as follows:

(1)               The nature and extent of the conduct which led to the breaches;

(2)               The circumstances in which that relevant conduct took place;

(3)               The nature and extent of any loss or damage sustained as a result of the breaches;

(4)               Whether there had been similar previous conduct by the respondent;

(5)               Whether the breaches were properly distinct or arose out of the one course of conduct;

(6)               The size of the business enterprise involved;

(7)               Whether or not the breaches were deliberate;

(8)               Whether senior management was involved in the breaches;

(9)               Whether the party committing the breach had exhibited contrition;

(10)           Whether the party committing the breach had taken corrective action;

(11)           Whether the party committing the breach had cooperated with the enforcement authorities; and

(12)           The need for specific and general deterrence.

16                                          The main object of the BCII Act is to provide an improved workplace relations framework for building work to ensure that building work is carried out fairly, efficiently and productively for the benefit of all building industry participants and for the benefit of the Australian economy as a whole (s 3(1)).  The BCII Act aims to achieve that object by the means set out in s 3(2).

17                                          The BCII Act was introduced to reform the building and construction industry, following the findings of the Royal Commission into the Building and Construction Industry that the commercial construction industry was characterised by illegal and improper payments, chronic failure to honour legally binding agreements, regular flouting of court and industrial tribunal orders and a culture of coercion and intimidation: see Building and Construction Industry Improvement Bill 2005, Second Reading Speech; Mahoney at [56]‑[57].

18                                          I will now deal with each of these considerations that is relevant in this case, bearing in mind the general principles set out above.

Nature and Extent of the Relevant Conduct

19                                          The first and third respondents (the CFMEU and Mr McDonald) note that the nature of the conduct in this case has its factual context in a short industrial dispute played out between Brookfield Multiplex and the workers on the City Square Project on 15 July 2009 over the failure of one subcontractor, Form 700, to sign a written safety commitment that all other subcontractors had signed on 14 July 2009.

20                                          These respondents say that as to the extent of conduct, the strike meant that the subcontract work programmed to be performed on 15 July was not performed, being a total of one working day.

21                                          These respondents note that Form 700 signed the safety commitment by the afternoon of 15 July and the strike ended after the workers returned to work on 16 July following a further meeting at about 7am that morning.

22                                          These respondents say that the conduct in this place was both limited in scope and effect and that it is directly relevant to the assessment of the seriousness of the conduct.  They submit this is a less serious contravention than other cases involving similar conduct.

23                                          The ABC Commissioner submits that the terms and conditions of employment of those workers scheduled to work on the City Square Project at the time of the industrial action was prescribed by the Brookfield Multiplex Limited and the CFMEU (WA) Union Collective Agreement 2008 ‑ 2011.  The respondents did not produce any evidence to show that they, or the workers  attempted to resolve the issue for which they took industrial action by following the dispute settlement procedure set out in cl 9 of that agreement.

24                                          The ABC Commissioner submits the assessment of the gravity of the conduct should have regard to the prominent role of the CFMEU as a significant industrial association in the building and construction industry, and the need for court orders

25                                          The Commissioner submits it is also relevant to note the impact of the conduct on Brookfield Multiplex Constructions Limited (BMC), namely:

(1)               BMC had planned to have work performed on the day of the action.  The eight works programmed to occur on 15 July 2009 that were not performed, were: 

·                    T3 crane jump;

·                    Level 2 slab pour;

·                    Bondex over level 2 slab pour for level 3 slab pour on Friday 17 July 2009;

·                    Stripping west core to allow jump on Thursday;

·                    Continue reo fixing on east core;

·                    Continue steel frame erection;

·                    Continue on new amenities area on B4 and B3;

·                    Lobbies and landings on Level 3.

(2)               The action caused delay and disrupted work on the City Square Project.  According to the Notice of Delay:

·                    10 hours [ie of working time per man] were lost (estimate);

·                    143 men were involved; and

·                    All trades were affected.

26                                          The submissions of the ABC Commissioner are, as a matter of fact, correct, and mean, in my view, that the unlawful industrial action should not be seen as trivial, incidental or in any way lacking in seriousness.  The respondents do not submit that it was.  They simply submit that this is a “less serious contravention” than other cases involving similar conduct.  That may be right, but there is no doubt that the unlawful industrial action taken was calculated in the end to cause Form 700 to sign the safety commitments that the other subcontractors on the project site had signed the day before.  It was understood that there would be disruption and this would cause problems on the site.  On any view, the nature and extent of the relevant conduct was serious and must be viewed as such, even though no doubt much more serious conduct can be imagined.

circumstances in which the Relevant Conduct Took place

27                                          The respondents submit that the events of 14, 15 and 16 July 2009 are all relevant to the assessment of penalty.

28                                          In this regard, on 14 July BMC convened a meeting of all the subcontractors’ leading hands to address ongoing safety concerns that had arisen on the City Square Project and led to the resignation of Peter Delaney, site safety representative.  The respondents note that the applicant agrees with this for the most part; and that Mr Delaney raised a concern that was substantially in relation to the work practices of Form 700 workers. 

29                                          The respondents submit BMC was sufficiently concerned to get Mr Delaney back on the job and see an overall safety improvement on site that they required each subcontractor’s representative to sign a commitment to safety.

30                                          The respondents say that the Court, having accepted that evidence, must accept that safety and performance of Form 700 workers was a legitimate concern of BMC and those working on the City Square Project as of 14 – 16 July 2009, and not some false issue invented by the union to cover up a union objective.

31                                          The respondents note all subcontractors sign the commitment except Form 700 and it is against this background that the meeting on 15 July at 7am came to be held. 

32                                          The respondents say that these circumstances are emphasised by the findings of the Court that:

·                    The object of securing the safety commitment of Form 700 was the only purpose that motivated the strike action.

·                    The strike action was not motivated by the purpose of disrupting the performance of the work.

·                    The strike action was about supporting or advancing a demand for Form 700 to demonstrate its commitment to safety by signing the written commitment.

33                                          The respondents submit this motivation ought to be considered the least serious of the four “industrially‑motivated purposes” because it is clear from the evidence accepted by the Court that this motivation had its basis in occupational health and safety on the site. 

34                                          The first respondent also submits it had no involvement in the meeting held on 14 July or in getting all the site subcontractors to sign the written commitment.

35                                          The third respondent submits that he:

·                    had no involvement in the meeting held on 14 July or in getting the site subcontractors to sign the written commitment;

·                    did not organise or conduct the meeting on 15 July;

·                    did not control the meeting on 15 July;

·                    did not “induce” the strike action in the sense of causing the contravention, although he was found to be involved in it;

·                    warned the workers of the consequences of the strike action when he told them that “this will be looked at”; and

·                    assisted in resolving the strike action when he specifically returned to the entrance gate to the site on 16 July at about 7.15am and told Mr O’Neil that he was there “to get the men back to work”.

36                                          The ABC Commissioner does not make any submissions directly by reference to these relevant factors.

37                                          The points made on behalf of the respondents are all valid points and are generally accepted.  They should be taken into account in the assessment of penalty.

The nature and Extent of any Loss or damage sustained as a result of the Breaches

38                                          The respondents note that according to the affidavit of Mr Flecker of 17 December 2009, BMC suffered a loss and damage from the one day strike identified as:

·                    Liquidated damages.

·                    Preliminary costs of $45,000 per day.

·                    Interest charges of an average $113,000 per day.

·                    Possible loss of early completion bonus.

39                                          The respondents submit that the loss and damage suffered by BMC directly attributable to the strike is limited to the $45,000 for lost preliminaries.

40                                          They say this is because:

·                    the City Square Project is not due for completion until 30 June 2012 and any liquidated damages can only be determined at that point.  It is highly speculative that one day on 15 July 2009 is likely or would be likely to cause the project to run even one day over time, because such projects usually have some delay built into the timetable to take account of inclement weather and unforeseen events;

·                    the interest charges on the project are clearly applicable for every day of the term of the loan of the project until it is repaid, and therefore covers days when no work is done on site for reasons of weekends and public holidays, Christmas vacation and the like.  That is not a loss suffered as a result of the strike on 15 July 2009.  BMC’s own 15 employees remained working so the interest charges were not increased by the strike action either;

·                    the loss of early completion bonus can only be determined when the project is completed.  Since completion is not due for 2 years the bonus has not been “lost”.  It is impossible to say with any degree of certainty that when the project is completed, if it is completed either on time or late, that the reason could be directly attributable to the strike on 15 July 2009.

41                                          The ABC Commissioner seeks to identify a more general monetary loss category and submits that the loss or damage suffered is that of Brookfield Multiplex Limited (BML), the parent company of BMC, which includes:

·                    loss caused by payment of salaries to professional employees of BML who, as a result of industrial action, die not perform meaningful work at the construction site affected;

·                    loss caused from the non-use of hired plant, tools and machinery during the period of industrial action, because plant, tools and machinery are hired on a daily hire rate;

·                    loss from payment of insurance premiums and bank guarantee fees on additional days to make up for days where there is non-performance of work (these three initial losses being collectively the Preliminaries Costs);

·                    potential loss of liquidated damages caused by late delivery of projects which is caused by non-performance of work; and

·                    even if final delivery is not in fact late and liquidated damages are not charged, for projects where BML or a related company is the owner or developer as well as the builder there is a loss caused from interest on loans for every day’s delay in delivering a construction site.  This loss from interest payments is incurred by BML by way of reduced profits.

42                                          The ABC Commissioner further categorises loss and damage under the heading of monetary loss, which in this case it submits includes (having regard to Mr Flecker’s affidavit) the liquidated damages, preliminary costs, interest charges and possible loss of the early completion bonus to which reference has already been made and in relation to which the respondents have made their submissions.

43                                          The ABC Commissioner says that on 15 July 2009, following the meeting at 7am, the workers left the project site and failed to perform work at the site for the remainder of that day.  As a result of one day’s industrial action, BML would have suffered approximately $158,000 in loss and damage, comprising:

·                    $45,000 in preliminaries (approximate);

·                    $113,000 in interest charges (on average).

44                                          The Commissioner says that if, as a result of one day’s industrial action, the City Square Project is completed after 30 June 2012, BML will also incur further loss and damage comprising:

·                    $70,000 per day in liquidated damages; and

·                    $45,000 in preliminaries costs.

45                                          Further, the Commissioner says that due to one day’s industrial action, this decreases the prospect of BML being entitled to the early completion bonus.

46                                          In this case, I accept the Commissioner’s estimation of actual and potential losses.  It is not possible to discount the potential losses.  It is not possible simply to say that every project has built into it some wriggle room to ensure that a project will be finished on time according to the contract, even taking into account some industrial action.  In my view, to approach the question of potential loss on this basis would be incorrect.  While one cannot say with any certainty, as the respondents submit and the Commissioner, in effect, accepts, just what losses if any flow from the disruption, the potential is real and must be borne in mind in the assessment of penalty.  It is exactly that sort of potential loss that, from an industrial point of view, brings pressure to bear on an employer.  That is why the BCII Act proscribes the act that leads to the disruption.

Similar previous conduct by the respondents

47                                          The parties agree that the applicable principles in relation to this factor are as follows:

(1)               Similar prior relevant conduct may be taken into account in assessing penalty, but it cannot be given such weight as to lead to the imposition of a penalty that is disproportionate to the gravity of the instant contravention: Veen v The Queen (No 2) [1988] HCA 14; (1988) 164 CLR 465 (Veen), Mason CJ, Brennan, Dawson and Toohey JJ at 477.

(2)               Similar previous conduct may demonstrate that a respondent has a history of engaging in the particular conduct in question, that the penalties previously imposed were insufficient to deter the respondent from re-engaging in that conduct and that the respondent has failed to take adequate steps to prevent further contraventions Veen at 477; Mahoney at [44]; Temple v Powell [2008] FCA 714; (2008) 169 FCR 169 (Temple) at [64].

(3)               A respondent is not to be punished again for the prior conduct.  Prior conduct may diminish leniency by reason of good character, having an upward affect on penalty, albeit within the proper limits indicated by the circumstances of the immediately contravening conduct: The Queen v McInerney (1986) 42 SASR 111 (McInerney), King CJ at 113.

(4)               The effect of prior contravening conduct is more cogent if it has been the subject of conviction. If not, the prior conduct is still relevant but perhaps of less weight: McInerney, King CJ at 113 and Cox J at 124; Williams v CFMEU (No 2) [2009] FCA 548 (Williams (No 2)), Jessup J at [26]-[28].

(5)               Whether previous misconduct is relevant to fixing a penalty is a question of logic: Temple at [63].

(6)               Conduct of a different character does not assist: Leighton Contractors Pty Ltd v CFMEU [2006] WASC 317; (2006) 164 IR 375 (Leighton Contractors) at [67]; Mahoney at [44].

(7)               The quality of the conduct and its relevance to the industrial behaviour which the instant legislation seeks to address is determinative, not whether the prior conduct arose under different legislation or different provisions of the instant legislation: Mahoney at [46]; Williams (No 2) at [16]-[17].

(8)               Prior relevant conduct includes prior relevant conduct of officials from other branches of the union: Williams (No 2) at [19]-[25].

48                                          The respondents submit that to these general propositions ought to be added the following:

(9)               Only conduct preceding that in question is taken into account when fixing penalties: Temple at [62].

(10)           Past conduct can not operate so as to increase the penalty beyond that which would be appropriate to the conduct in question: Templeat [63].

(11)           Contraventions within a different branch of the union are relevant, but are to be given less weight than contraventions within the branch in question: Draffin v Construction Forestry Mining Union [2009] FCAFC 120; (2009) 189 IR 145 (Draffin) at [72].

(12)           Although similar conduct which has been found to contravene other legislative provisions may have potential relevance, including contraventions of Pt 9 of the Workplace Relations Act relating to unlawful industrial act and coercion, conduct which is of a different character does not assist the penalty assessment: Mahoney at [44].

49                                          I generally accept the qualifications or refinements of the generally agreed principles, for which the respondents contend.

50                                          The ABC Commissioner provided with its written submissions a “Table A” that identifies prior relevant conduct that the Commissioner submits should be taken into account.  The entries in Table A include:

(1)               matters in which conduct occurred and contraventions have been recorded, prior to the conduct the subject of this proceeding;

(2)               matters in which the conduct occurred prior to the conduct the subject of this proceeding, but in respect of which contraventions were not recorded until after the conduct which is the subject of this proceeding;

(3)               conduct in contravention of the BCII Act; and

(4)               conduct in contravention of provisions of the former Workplace Relations Act 1996 (Cth) (WR Act) which prohibit coercive action.

51                                          The Commissioner says that a list of a prior relevant conduct in a table in similar form was submitted and considered relevant by the Court in Draffin and in Cahill v CFMEU (No. 4) [2009] FCA 1040; (2009) 189 IR 304, Kenny J at [39]-[71] (affirmed on appeal: CFMEU v Cahill [2010] FCAFC 339; (2010) 194 IR 461).

52                                          The Commissioner says that all of the entries in Table A identify prior relevant conduct of the CFMEU.

53                                          The Commissioner submits that Table A reveals that the CFMEU through its representatives at various levels around the country, has a history of engaging in coercive conduct relevantly similar to the kind in question in this case.

54                                          The Commissioner submits that the conduct in this case occurred against a background of a large number of “prior convictions”.  In the circumstances, specific deterrence looms large as a relevant consideration: see McInerney, at 113 (King CJ); Williams (No. 2) at [29] (where the issue was not dealt with on the subsequent appeal in CFMEU v Williams [2009] FCAFC 171; (2009) 191 IR 445 at [32].)

55                                          The Commissioner says the extent of the relevant prior conduct is such as to give rise to a need for the Court to provide a particularly persuasive form of deterrence against similar future misconduct on the part of the CFMEU: see Temple at [64] and Mahoney at [44].   Similarly, the Court should have regard to the need for rehabilitation in circumstances where penalties imposed in the past have seemingly failed to achieve rehabilitation.

56                                          The Commissioner makes the point that all items in Table A identify prior relevant conduct of the CFMEU, while, on the other hand, items 1 and 2 in Table A identify prior relevant conduct of Mr McDonald in particular.

57                                          The Commissioner also annexes “Table B” to its submissions, which identifies prior relevant conduct to be taken into account in the case of Mr McDonald in respect of criminal convictions and revocation of entry permits.

58                                          As to the Table A and Table B matters, the respondents in effect recommend that the Court adopts the approach outlined by Branson J in CFMEU v Coal & Allied Operations Pty Ltd (No 2) [1999] FCA 1714; (1999) 94 IR 231 at 232, which was endorsed by LeMiere J in Leighton Contractors at [67], where his Honour said:

It is not appropriate to consider all contraventions of any industrial legislation by any branch of the first respondent anywhere in Australia.  The first defendant is a very large organisation that operates throughout Australia.  Branches, Divisions, officers and representatives of the first defendant are involved with employers in relation to industrial matters every day.  It is inappropriate to take account of conduct of the first defendant through various Branches, Division, officers and representatives that is of a different character than the contravening conduct in question and are contraventions of a different legislation.

59                                          As to Table A, the first respondent, the CFMEU, does not accept that it contains an accurate summary of its prior similar conduct.  In particular, the CFMEU says contraventions under previous legislation involving coercive behaviour are relevant to s 43 BCII Act contraventions, but not to s 38 contraventions.

60                                          The CFMEU says it has two prior penalties for breaches of s 38 of the BCII Act in Western Australia, both of which relate to conduct that is now five years old, being:

·                    fines totalling $90,000 for 18 contraventions arising from 10 unauthorised meetings, 2 overtime work bans and 6 strikes (of between 1 and 3 days) occurring over one year between 9 March 2005 and February 2006: Leighton Contractors; and

·                    a fine totalling $12,000 for 2 strikes on 17 August 2005 (of 48 hours) and 25 August 2005 (for 24 hours) involving 400 and 20 workers respectively: Temple.

61                                          The CFMEU accepts the penalties imposed on other branches may have relevance in showing the prevailing range of penalties, but says that care needs to be taken to distinguish those cases from the manner in which they have been summarised by the applicant.  The CFMEU relies on Sch A to its submissions which are responsive to Table A of the Commissioner’s submissions.  In that regard, the CFMEU submits the following:

(1)               Those contraventions that occurred in the State of Victoria and listed as items 3, 4, 5, 9, 13, 17 and items 21 – 33 (being coercive conduct cases in Victoria) and items 34 and 35 (coercive conduct cases in Queensland) should all be treated as irrelevant.

(2)               The CFMEU sets out details of the fines (in each case) that it says were imposed in respect of the (relevant) breaches of s 38 of the BCII Act.  These relate to items 1 and 2 (both in Western Australia as noted above) and the Victorian enforcement proceedings referred to in items 6, 7, 8, 10, 11, 12, 14, 15, noting that item 16 repeats item 11, and items 19 and 20.

62                                          The third respondent does not accept Table B to the Commissioner’s submissions as containing any relevant prior similar conduct because:

·                    Offences of contempt and trespass under the Criminal Code (WA) contain elements distinguishable from those required for unlawful industrial action under s 38 of the BCII Act.

·                    The applications to revoke the third respondent’s federal and state rights of entry are irrelevant to the elements of unlawful industrial action under s 38 of the BCII Act.

·                    In any event, three of four cases listed in Table B are ten years old and do not show a pattern of repeated contraventions.

63                                          The third respondent acknowledges two prior penalties relevant to contraventions of s 38 of the BCII Act, namely:

(1)       A fine of $1,500 for a strike by 400 workers for two days on 17 August 2005 in contravention of s 170MN WR Act: Temple.

(2)       A fine of $30,000 for 16 contraventions of s 38 of the BCII Act arising from eight unauthorised meetings, two overtime work bans and six strikes (between one and three days) occurring over one year between 9 March 2005 and February 2006: Leighton Contractors.

64                                          I generally accept the cautionary approach to “relevant prior records” set out by Branson J in CFMEU v Coal and Allied Operations Pty Ltd (No 2) and adopted by Le Miere J in Leighton Contractors.  The question really is: what examples of prior contravening conduct are of a different character from those currently in question and what prior contraventions were contraventions under different legislation.   In the area of industrial relations, workplace relations and fair work regulation, as these different descriptors indicate, policy and legislation develop and change, sometimes radically, sometimes subtly, but relatively frequently in Australia and have done so since the Australian States federated in 1901 and the Commonwealth Parliament gained a variety of heads of power that enabled it to deal with workplace, industrial and corporations matters.  Certainly, the easy way out, when trying to assess the relevance of prior contravening conduct, is simply to accept that contravening conduct under earlier legislation will almost inevitably be subtly, if not radically, different, so far as the elements are concerned, from the contravening conduct currently in question.  On the other hand, it seems to me that where prior contravening conduct is constituted of the same primary elements, then some regard may be had to it.  But it may become a difficult, and not a terribly worthwhile exercise, to try to undertake a full analysis comparing present and past findings of contravention.  For that reason, one can understand the force of the observations of Branson J and why they should be taken into account.

65                                          Similarly, while I do not consider that it is appropriate simply to ignore the conduct of a large national organisation like the CFMEU throughout the country, because it may well, depending on the evidence, provide some indication of a concerted national strategy, this will not always be the case.  Unlawful industrial action which arises in one part of Australia may not be explained at all by reference to what has happened at another point in time in another part of this large nation.  Again, this leads one to understand and appreciate the force of the observations of Branson J.

66                                          Overall, while it seems to me that it is appropriate that I should regard the information submitted in Table A and Table B by the ABC Commissioner I should also be mindful of the cautionary words of Branson J when doing so.  Primarily, I consider the prior contraventions identified by the respondents to be the most relevant.

whether the Breaches were Properly distinct or arose out of one course of conduct

67                                          The respondents submit that the breach here arose out of a single act rather than a continuing course of conduct occurring over a period of time.

68                                          The Commissioner does not make any submissions concerning this factor.

69                                          I accept that the submission made on behalf of the respondents is in fact correct.

Whether or not the breaches were deliberate

70                                          The parties agree that this is the next relevant factor to be considered.

71                                          The ABC Commissioner submits that it is relevant to assess whether the contravening conduct was deliberate or part of a conscious act on the part of the contravener.  The Commissioner submits that circumstances where someone had undertaken a deliberate industrial strategy to attempt to avoid its statutory obligations will weigh in favour of a higher penalty than circumstances where the contravention flowed from a view of the law which was not wholly untenable, or genuinely believed to be correct.   Mere inadvertence will generally bring about a lighter penalty.

72                                          The Commissioner says that on no basis can it be said that the conduct here was inadvertent.  It was a concerted exercise aimed at achieving outcomes contrary to s 38 of the BCII Act:

·                    On 15 July 2009, Mr O’Neill told Mr McDonald that he was not allowed on site and that he should leave the site, but Mr McDonald did not do so.  

·                    Mr O’Neill did not authorise Mr McDonald to hold any meetings on 15 July.   No employee employed to perform building work was authorised or given agreement in advance and in writing by his or her employer to stop work.

·                    Mr McDonald did not organise or conduct the meeting but his presence on site was, as the Court found, significant and by his exhortation to “stand up for yourselves,” he seemingly pushed reluctant workers into the strike. 

73                                          The Commissioner therefore submits it cannot be said that Mr McDonald was unaware of the legal consequences of his conduct, given his remarks that the action proposed by the workers would be “looked at”, which the Court has inferred to mean that the action would be looked at as to its lawfulness by the ABCC.   Mr McDonald was aware that the lawfulness of the conduct was in question but proceeded anyway.

74                                          The Commissioner submits that immediately after the workers left the project at a meeting involving Mr O’Neil and Mr McDonald, Mr O’Neill told Mr McDonald he needed to leave the site and that he was not supposed to be there and that he had taken unlawful industrial action.   Mr McDonald remained on site however and engaged in a discussion and returned the next day. 

75                                          The Commissioner says that on 16 July 2009, Mr Young told Mr McDonald that he was not permitted on the site and he should leave, but Mr McDonald said that he was there “to get the workers back to work.”   A meeting then ensued.

76                                          The respondents dispute this account of events and the inference claimed that the conduct of the respondents was part of a deliberate industrial strategy.  They say this was contrary to the Court’s primary findings that Mr McDonald:

·                    had no involvement in the meeting held on 15 July or in getting the subcontractors to sign the written commitment;

·                    did not organise or conduct the meeting on 15 July;

·                    did not control the meeting on 15 July;

·                    did not “induce” the strike action;

·                    spoke only after an initial vote to strike had been taken and then did not speak for or against the motion, but rather said something to the effect of “stand up for yourselves”; and

·                    warned the workers of the consequences of a strike when he said “this will be looked at”.    

77                                          The respondents submit that Mr McDonald’s conduct should only be viewed in the specific context of workers who were about to decide a course of action for themselves at a meeting neither called, held or controlled by him.  In that regard, the contravention should be again seen at the “lowest end” of the scale of seriousness.

78                                          I generally accept the respondents’ submissions in this regard.  At the same time, I have little doubt, in light of my findings, that Mr McDonald fully appreciated that the consequences of his actions, namely, that a strike would ensue, having as its ultimate goal, encouragement for Form 700 to sign the safety commitment that other subcontractors had signed the day before.

79                                          In these circumstances, while, in one sense, it may be said that Mr McDonald appreciated the industrial strategy at this point, and did not encourage workers to undertake any other means of resolving the safety dispute, this is not the type of deliberate industrial strategy, on the evidence, that was thought out some time in advance and carefully planned and executed by Mr McDonald and the CFMEU.  It seems rather to have been opportunistic conduct.

80                                          In those circumstances, whilst I do not think it is reasonable to characterise the conduct, as the respondents suggest the Court should, as at the “lowest” end of the scale of seriousness, it certainly means that it is less serious than it might otherwise have been characterised.

Involvement of senior management

81                                          The ABC Commissioner submits Mr McDonald is and was at all material times an employee and officer of the CFMEU, holding the position of Assistant State Secretary of the Construction and General Division, Western Australian Divisional Branch of the CFMEU.   He knew that a walk off would prevent the workers from attending or performing their building work.   The walk off occurred with his knowledge and consent as Assistant State Secretary of the Branch.  This is an aggravating factor to be taken into account.   

82                                          The CFMEU disputes these assertions that the knowledge of Mr McDonald about what the walk off would mean is an “aggravating factor” against the CFMEU.

83                                          The CFMEU say there is no evidence to indicate or from which to infer that any senior management of the CFMEU apart from Mr McDonald, either had any knowledge of, or endorsed, or was involved in the contravention.

84                                          I generally agree with these submissions made on behalf of the respondents in relation to this factor.

Post contravention Conduct – cooperation

85                                          The Commissioner submits that the conduct of the contravener after the contravention found to have been committed will have relevance.  The Court will look to whether the contravener has exhibited contrition, taken corrective action and co-operated with the relevant enforcement authorities.

86                                          The Commissioner further submits that contrition may manifest itself in an expression of remorse.  Alternatively, and perhaps more significantly, it may manifest itself in the demonstration of contrition through some practical act such as an apology, or a genuine expression of regret.   Co-operation can be exhibited in a range of ways, such as agreeing on facts, or agreeing on penalty.  The timing of any such agreement, and the impact it has on the conduct of the trial and witnesses who would have been likely to be called at trial, are also relevant: Mahoney at [52]; Australian Ophthalmic Services at [15]-[17].

87                                          The Commissioner says there is no evidence of any contrition or remorse in this case, apart from the agreed statement of facts.  The agreement on a limited set of facts on liability is a factor which is relevant to the exercise of the discretion by the Court.   However, this should be weighed against the conduct of the respondents at the hearing of this matter. 

88                                          The respondents generally agree with these propositions, save for the submission that the conduct of the respondents at the hearing should be weighed against the earlier agreements achieved between the parties.

89                                          As to the claim about the respondents’ conduct at the hearing, the Commissioner submits that in the context of an appellant court considering when it will interfere with a conviction by reason of the conduct of counsel for the convicted person, the courts have observed that a client is bound by the conduct of their counsel:  

As a general rule, an accused person is bound by the way the trial is conducted by counsel, regardless of whether that was in accordance with the wishes of the client, and it is not a ground for setting aside a conviction that decisions made by counsel were made without, or contrary to, instructions or involved errors of judgment or even negligence.

See R v Birks (1990) 19 NSWLR 677, Gleeson CJ, with whom McInerney J agreed, at 685.

90                                          The Commissioner submits that on the first day of the hearing of this proceeding, counsel for the applicant informed the Court that one of the witnesses, Mr McRae, was unwell and it was unlikely that he would be fit to give evidence that day.   On 7 April 2010, the Court was further advised that Mr McRae’s condition could worsen and he might not be able to give evidence until 9 April 2010.   Mr McDonald’s counsel advised that she did not anticipate her cross-examination would last any more than 30 minutes.   As a result the hearing was adjourned to 9 April 2010. 

91                                          On 9 April 2010, Mr McRae was still unwell but attended the hearing for the purposes of cross-examination.  However, neither counsel for the respondents chose to cross-examine him.  The applicant received no notification that his attendance would not be required.  The Commissioner submits this conduct should be taken into account when penalty is assessed.

92                                          The respondents dispute any suggestion that their conduct at trial in this regard has any relevance to penalty.  They say the submissions in that regard are without authority and without foundation.  They say that the applicant always bore the burden of proof and Mr McDonald was never under any obligation to give evidence.  The time for deciding whether to give evidence, waive the penalty privilege or cross‑examine a witness remained with the respondents until the relevant time.

93                                          From the Court’s perspective, it was unfortunate in this case that an unwell witness, who remained unwell at the time he attended the Court was obliged to attend the Court in circumstances where he was not, in the end, required for cross‑examination.  It is not open to the Court, on the material before it, to draw any adverse conclusions in the matter.  This is an enforcement proceeding in relation to which the applicant is and was obliged to prove its case.  At no time were the respondents subject to any burden to prove anything.  I can understand that, so far as cross‑examination of the witness is concerned, there may be circumstances, and this perhaps is one, where the decision to cross‑examine or not cross‑examine a witness was left until the last moment.  As I say, it was unfortunate that Mr McRae needed to attend the Court when, in the end he was not required.  I am not prepared to say that the conduct of counsel, or by inference, the respondents in this course of events is a particular factor to be taken into account when assessing the contrition or cooperation of the respondents after the event of the unlawful industrial action.

94                                          So far as cooperation is concerned generally, the respondents say they cooperated with the applicant in the proceedings by preparing the statement of agreed facts that ensured savings of time and cost, and in agreeing a statement of the evidence of Mr McRae taken from the transcript of his informal interview by the applicant prior to the commencement of the proceedings.

95                                          I must say that generally speaking this is not a case in which the conduct of the contraveners after the event of the contravention suggests that there should be some particular regard had to that conduct in the course of the assessment of the penalty such that it should be reduced, for example, on this account.  But I do not consider the complaints made by the Commissioner concerning the cross‑examination – or non cross‑examination – of Mr McRae should be seen as some aggravating factor.

size of the respondents

96                                          The respondents say the CFMEU is a large national organisation divided into many branches and divisions and the conduct here only involves the WA division.  It has the capacity to pay a fine.  It acknowledges the third respondent is an employee of the first respondent.

97                                          The Commissioner submits that the size of the CFMEU is a relevant consideration: ACCC v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238, Goldberg J at 240.  Similarly where the relevant contravener is an individual relevant to the assessment of penalty will be the resources available to him or her to satisfy any penalty.  This has been a consideration which has been taken into account in relation to prior relevant conduct of the CFMEU: see Mahoney at [49]; Cahill (No 4) at [77]-[78].

98                                          The Commissioner notes that the CFMEU is a national union registered under the WR Act, with adequate resources to pay a substantial penalty.  The CFMEU Construction and General Division’s Financial Report for the year ending 31 December 2009 states that it had 62,474 financial members as of that date and that for the year ending 31 December 2009, the Division:

·                    made a loss of $213,186 against total revenues of $3,819,571 and total expenses of $4,032,757;

·                    had accumulated funds of $7,358,797 (total assets of $8,743,260 and total liabilities of $1,384,463); and

·                    had cash funds of $488,908.

99                                          The report for the previous year suggests that the financial position of the CFMEU had improved generally speaking in the 2009 year compared with the 2008 year.

100                                       The CFMEU Construction & General Division, Western Australian Branch’s Financial Report for the year ending 31 December 2007 also indicated that it was in a healthy position, with accumulated funds of in excess of $3 million and cash funds approaching $3 million.  The latest report for this branch had not been filed with the AIRC and so is not available.

101                                       The evidence before the Court shows that the CFMEU is in a position to pay any fine, for example, that is within the likely range to be imposed.  However, the financial position of Mr McDonald is unknown.

specific and general deterrence

102                                       The Commissioner submits that the penalty arrived at must reflect the need for specific and general deterrence, as indicated by the general principles stated above.   Specific deterrence is directed to ensuring that the contravener is not prepared to embark upon the risk of re-offending.  General deterrence is directed to ensuring that the penalty will act as a deterrent to others who might be likely to offend.  The penalty should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations.  If it does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the relevant provision: see for example, R v Gordon (1994) 71 A Crim R 459 at 468; ACCC v IPM Operations and Maintenance Loy Yang Pty Ltd (No. 2) [2007] FCA 11 at [66].

103                                       The Commissioner submits that in relation to the question of deterrence generally, in view of the fact that Mr McDonald occupies a senior position within the CFMEU and is thus likely to be influential in setting the standards of behaviour and conduct of others within that organisation, it is appropriate that a significant penalty be imposed to deter similar contraventions in the future.

104                                       The Commissioner submits that these matters in conjunction with the prior relevant conduct make specific deterrence an important consideration, for both respondents.

105                                       The respondents accept the specific and general deterrence will be considered by the Court.

submissions on penalty

106                                       Having regard to these various factors, the ABC Commissioner submits that, especially taking into account prior relevant conduct, the deliberateness of the conduct and the need for specific deterrence, the contravention by the CFMEU and Mr McDonald of s 38 of the BCII Act should be at the “bottom of the higher range of the scale” and that the appropriate quantum of penalty is:

(1)               $70,000 to $85,000 (64% to 77% of the maximum of $100,000) for the first respondent; and

(2)               $15,000 to $19,000 (68% to 86% of the maximum of $22,000) for the third respondent (or an individual).

107                                       The first respondent submits that the penalty proposed by the Commissioner in the case of the CFMEU is excessive and inappropriate for the following reasons:

(1)               The circumstances of the conduct is somewhat unique and it emanated from actions first taken by BMC to enforce site safety.

(2)               The strike action occurred with no warning, the circumstances having arisen the day before and about which there was no evidence of any knowledge or involvement by any senior management of the CFMEU, apart from Mr McDonald.

(3)               The strike was of short duration.

(4)               It is disproportionate to the gravity of the conduct.

(5)               It is well outside the prevailing range of penalties dispensed in similar cases.

108                                       The CFMEU says the appropriate penalty, having regard to the circumstances of the case and comparable cases is a fine “at the lower end of the scale”, with the range being between $2,500 (Pine v Multiplex Constructions (Vic) Pty Ltd [2005] FCA 1428) and $11,500 (as in John Holland v CFMEU [2009] FMCA 1248).

109                                       The third respondent submits that the penalty proposed by the Commissioner is excessive and inappropriate, because:

(1)               The circumstances of this case are distinguishable from other s 38 BCII Act cases in that the strike was of short duration and limited effect, there was no finding of deliberate orchestrated industrial strategy advocated by the third respondent and his participation in the meeting leading to the strike was minimal.

(2)               When considering Mr McDonald’s prior similar conduct, his penalties for a single breach involving a 48 hour strike were between $1,500 and $3,000, whereas this strike lasted only 24 hours.

(3)               Mr McDonald’s prior similar conduct is now five years old.

(4)               It is well outside the range of prevailing penalties imposed on other union officials around Australia for unlawful building industrial action, the case is indicating a range of $1,000 (Gregor v CFMEU [2009] FMCA 1266) to $11,000 (Cruse v CFMEU [2009] FMCA 236; (2009) 182 IR 60).

110                                       The third respondent therefore submits the appropriate penalty for Mr McDonald having regard to the circumstances of this case and comparable cases is a modest fine in the range of between $1,500 and $3,500 wholly suspended for 12 months.

finding on penalty

111                                       In finally assessing penalty I refer to the observations I have already made concerning the factors that are relevant to penalty and in particular my assessment of them in this case.

112                                       In the result I do not view the contravention of the CFMEU and Mr McDonald, the first and third respondents as being, as submitted by the Commissioner, at the bottom of the higher range of the scale.  However, nor do I accept that this is a case in which the penalty should reflect conduct which is characterised as being at “the lowest” end of the scale. 

113                                       While there is much to indicate that the unlawful industrial action in this case was not the subject of a deliberate strategy developed over a period of time by Mr McDonald or the CFMEU through him, it was nonetheless conduct that Mr McDonald, and the CFMEU, appreciated would have a real effect on the construction program on the City Square Project site.

114                                       I do accept, however, in the case of the CFMEU, that, apart from the conduct and understanding and knowledge of Mr McDonald, there is nothing to indicate that the union, through its senior management, was otherwise involved in this unlawful industrial conduct. 

115                                       I also consider that, in this case, the circumstances are a little unusual in that BMC was plainly anxious to restore industrial harmony on the project site by having the representatives of all subcontractors sign the safety commitment on 14 July 2009.  I have little doubt, as I have found in the primary judgment, that the strike action was motivated by the purpose of securing the one outstanding subcontractor’s commitment to safety, that of Form 700.

116                                       However, the strike action cannot be condoned on this basis.  As the ABC Commissioner points out, under the Union Collective Agreement 2008 – 2010 it is possible to adopt a dispute settlement procedure.  Plainly no thought was given to this way forward.  In that regard, the unlawful industrial action may be seen, at the least, as opportunistic.  It may be surmised that the workers who took that action believed there would be an early resolution of it. 

117                                       Be that as it may, Mr McDonald plainly appreciated, as I have found in the primary judgment, that by exhorting workers to “stand up for yourselves” the industrial action would be taken to achieve the desired goal.  Mr McDonald, as I have found, plainly appreciated that there were industrial risks, from an enforcement point of view, in taking that action that he exhorted.  He understood, as I have inferred, that the ABCC would indeed look into the matter.

118                                       No doubt the workers, and the respondents, genuinely held a concern for the workers’ safety, given the apparent reluctance of Form 700 to sign the safety commitment, but the blunt and immediate action taken by the workers, in which purpose I have found the first and third respondents were linked (directly and by accessorial responsibility), was a serious one nonetheless.  It inflicted real potential harm, as I have found.  As I say there were other means of resolving this sort of disputes.  The BCII Act is plainly designed to ensure that industrial disputation will be resolved by means other than unlawful industrial action.

119                                       In the circumstances of this case, ultimately I consider the contraventions of the third respondent and the first respondent fall towards the lower end of the scale of seriousness.

120                                       It is important that the Court, in imposing penalty, not only have regard to the level of seriousness of contravening behaviour in this case, but also prior examples of contravening behaviour, particularly contravening behaviour in respect of s 38 of the BCII Act in any like prior provisions.  A similar approach must be taken to the conduct of Mr McDonald.  There is not only a question of general deterrence in cases like this but also specific deterrence that has regard for the prior relevant contraventions of the respondents. 

121                                       Here, having regard to all relevant factors the prior contravening behaviour of the CFMEU I would impose a penalty which is at the higher end of the lower end of the scale.  I consider a fine of $40,000 (36 % of the maximum) is appropriate.  As to the third respondent, Mr McDonald, I would impose a fine of $8,000 (36% of the maximum).  I consider a total of $48,000 to be an appropriate general and specific deterrence in the circumstances of this case.

122                                       I am not prepared to suspend the fine in respect of Mr McDonald for 12 months (or any other period), as submitted on his behalf.  In light of the prior contraventions by Mr McDonald, the suspension of the fine would suggest the contravention was not serious when I consider it was in fact serious. 

costs

123                                       The ABC Commissioner was entirely successful in its application against the first and third respondents, however, it was not successful against the second respondent.

124                                       The first and third respondents submit that it is proper that they should pay the applicant’s costs of the proceeding to be taxed, save and except for any costs of the applicant associated with the proceedings against the second respondent.

125                                       The second respondent submits that the applicant should pay its costs to be taxed, if not agreed.

126                                       The second respondent refers to the usual rule that costs follow the event and submits that a court will ordinarily only depart from this rule if the successful party is guilty of some misconduct relating to the conduct of a litigation, including lax conduct, unnecessary protraction of proceedings and prosecuting just for costs recovery: see Mannix v Loumbos Pty Ltd [2000] NSWCA 32 at [13], [21] and [22].

127                                       The unusual point, if it be an unusual point, in the case concerning the second respondent is that the case against it was ultimately dismissed on the basis that it was not proved that the second respondent was a “building association” as defined in the BCII Act, something which was the subject of a concession so far as the first respondent was concerned.

128                                       I indicated in my primary judgment, at [234], that as strong as my hunch was that the second respondent very probably satisfies the statutory definition, I was not prepared to make that finding by inference on the materials before the Court.

129                                       In effect, the second respondent says that notwithstanding that the second respondent won on a finer point, it is nonetheless entitled to its costs.  It says that in the absence of any agreement that the second respondent was a “building association” it had fairly put the applicant on notice that they would need to adduce evidence to establish that the second respondent was such so as to attract accessorial liability. 

130                                       In relation to the first and third respondents, the Commissioner submits that the appropriate order should be:

The first and third respondents pay the applicant’s costs (excluding costs of the preparation and filing of submissions in relation to the liability of the second respondent), to be taxed if not agreed.

131                                       The difference between the costs orders proposed by the first and third respondents, on the one hand, and the Commissioner on the other, is that the respondents proposal would leave out of taxation any costs “associated with the proceedings against the second respondent” whereas on the Commissioner’s formulation only the “costs of the preparation and filing of submissions in relation to the liability of the second respondent” would be excluded from consideration.

132                                       In essence, the Commissioner submits that all of the work performed by the applicant’s representatives, both in preparation of the proceedings, and in the conduct of the proceedings is necessary and appropriate for pursuing its action against the first and third respondents.  That is, had the proceedings been commenced only against the first and third respondents, the applicants would have incurred the same (or virtually the same) costs as it in fact incurred in the proceeding.

133                                       The Commissioner notes that:

(1)               a statement of agreed facts was filed on 1 April 2010;

(2)               a joint outline of submissions was filed on behalf of all three respondents on 1 April 2010; and

(3)               a joint closing submissions were filed on behalf of all three respondents on 12 April 2010.

134                                       The Commissioner says of these materials, only [3] of the statement of agreed facts, and [49] and [56] of the closing submissions address facts and circumstances particular to the second respondent.  The Commissioner submits these materials, and the evidence and the conduct of the proceedings, necessarily focussed on other facts and circumstances, all of which were relevant to the conduct of proceedings against the first and third respondents.  The Commissioner submits it is clear that virtually all of the costs in the proceedings were necessarily incurred in the conduct of the proceedings against the first and third respondent.  These costs would have been incurred in any event, even had the applicant not commenced proceedings against the second respondent.

135                                       The texts and  legal practice services that deal with the subject of costs in legal proceedings are replete with practical examples of deviations from the ordinary rule as well as other rules of thumb to deal with particular circumstances that arise not uncommonly.  In the end, they all go to establish the point that a costs order should fairly reflect the outcome of the case and what was involved in its prosecution.

136                                       For example, where a plaintiff has succeeded against one defendant but not the other, where both defendants were represented by the same solicitors and counsel, there is said to be a rule of thumb that in the absence of any evidence as to how the defendants have retained their solicitor, the Court infers that each is liable to pay that part that they contribute to the costs, so that the successful party only obtains an order in respect of that part of the costs the unsuccessful party has contributed to. 

137                                       However in Rogers v Kabriel (No 2) [1999] NSWSC 474, Young J observed, at [16]:

That this is only a rule of thumb and not a rule that must be applied in each case, and in the appropriate case the Court will order an assessment of costs on the basis that the costs are to be split between the costs reparable to all defendants and the costs reparable to a particular defendant.  The rule of thumb will also not apply where there is evidence before the court of the exact arrangement that has been made by the defendants with their solicitor, particularly where the other side is aware of that arrangement.

138                                       In my view, the submissions made on behalf of the Commissioner should be accepted.  I cannot see anything in the way the proceedings were conducted against the three respondents that would have been materially different if the Commissioner had only been prosecuting a case against the first and third respondents.  Indeed, if the question of just what part of the proceedings related to the prosecution of the first and third respondents were left to a taxing officer, it would be an extremely difficult task to perform and would lead to inefficiencies and delays and additional unnecessary cost would in all likelihood be incurred in the process.

139                                       In these circumstances, it is appropriate to make an order in the terms that the Commissioner proposes against the first and third respondents.

140                                       In relation to the costs order proposed by the second respondent, the Commissioner submits that the appropriate order should be:

There be no order as to costs as between the applicant and second respondent.

141                                       In pressing for an order in these terms, the Commissioner says that Mr Nicholas, who appeared as counsel for the second respondent, is an employee of the first respondent and appeared also as counsel for the first respondent.  In these circumstances, the Commissioner submits there are sufficient special circumstances in this case to justify departure from the usual rule as to costs.

142                                       The Commissioner identifies these special circumstances as follows:

·                    Mr Nicholas appeared as barrister and solicitor for both the CFMEUW and the CFMEU.  He was required to prepare for, and attend, the proceedings on behalf of the CFMEU as first respondent.

·                    The applicant's application against the second respondent did not create any additional substantive issues to be decided by the Court or otherwise materially lengthen the hearing of the matter.  Virtually all of the costs in the proceedings were necessarily incurred in the conduct of the proceedings against the first and third respondents.  That is, there were no, or no substantial additional costs incurred in respect of Mr Nicholas' preparation and attendance in the proceedings on behalf of the second respondent.  Mr Nicholas's costs would have been incurred in any event whether or not the proceedings were commenced against the second respondent.  This is evidenced by the fact of the three respondents filing a joint outline of submissions and joint closing submissions in the proceedings.

·                    Mr Nicholas is an employee of the first respondent. 

·                    It is unlikely that the second respondent incurred any separate or additional costs in defending the proceedings.  At least, it is likely that the second respondent did not incur any costs that it would not have incurred in any event because of the applicant's claims made against the first respondent.

·                    In any event, the second respondent chose to defend the proceedings in the manner it did.  The applicant’s claim against the second respondent was only dismissed because the applicant did not establish that it was a “building association” in circumstances where the Court strongly suspected without ultimately inferring, that it did satisfy the statutory definition.  If the second respondent’s eligibility rules in fact did not satisfy the definition, the second respondent could have avoided incurring all of its costs by identifying this fact at an early stage.  Instead it chose to incur separate or additional costs.

143                                       The CFMEUW in response to the special circumstances submissions of the Commissioner submits they are made to justify a departure from the normal costs rule, without authority being cited, and without merit, because:

·                    The role Mr Nicholas played at trial for both respondents is only a matter affecting quantum of costs and that is properly to be determined by taxation.

·                    Whether or not the application created any additional substantive issues that materially lengthened the trial is again is a matter affecting quantum properly determined by taxation.

·                    Mr Nicholas’s employment status is irrelevant.

·                    Whether or not the second respondent incurred any separate or additional costs is a matter affecting quantum properly to be determined by taxation.

·                    The manner in which the second defendant conducted its defence was entirely appropriate and there is no submission to the contrary.

144                                       The second respondent further submits there is no ground for refusing a costs order in favour of a successful party and that the quantum of those costs may be a matter of contest in a taxation.

145                                       The second respondent says that throughout the case, the second respondent was properly represented by counsel.  Once the applicant failed to adduce the relevant evidence, the second respondent was not required to go into evidence but was entitled to make submissions for the dismissal of the case on a very specific ground.  There is no conduct on the part of the second respondent or its counsel which would disentitle it to a costs order and to suggest otherwise is entirely without foundation.

146                                       I generally agree with the submissions made on behalf of the second respondent.  The fact that the Commissioner’s case against the second respondent failed on a point of evidence concerning its status as a “building association” is in the circumstances of this case beside the point.  This was a civil penalty proceeding.  The second respondent was entitled to hear the evidence put on in its prosecution and decide, at the conclusion of evidence, whether to put on evidence or otherwise make submissions concerning the case made against it.  That the case to some extent may be said to have been lost by the Commissioner on a point not going to one of the primary conduct issues of its officer, Mr McDonald, is in the end not relevant.

147                                       In any event, in my discretion, it is appropriate that the usual rule as to costs, namely, that costs should follow the event, apply.

148                                       I accept, however, as perhaps the second respondent does in its submissions on costs, that there is much in what is said on behalf of the Commissioner concerning the extent to which the case run against the three respondents would have been any different had it been run only against the first and third respondents.  In other words, while there may be some matters in relation to which a costs assessment can reasonably be made, and while it will remain a matter for the taxing officer, the focus of the proceeding was very much the first and third respondents.  On the face of it, the second respondent was only marginally involved.  Notwithstanding those comments, they will be issues for taxation. 

149                                       I would therefore make an order in the terms proposed by the second respondent.

150                                       In those circumstances the appropriate costs orders are:

1.                  The first and third respondents pay the applicant’s costs, excluding costs of the preparation and filing of submissions in relation to the liability of the second respondent, to be taxed if not agreed.

2.                  The applicant pay the second respondent’s costs of the application to be taxed if not agreed.

Conclusion and orders

151                                       The Court orders as follows:

1.                  There be imposed on the first respondent a pecuniary penalty of $40,000 payable in accordance with s 49(5) of the Building and Construction Industry Improvement Act 2005 (Cth).

2.                  There be imposed on the third respondent a pecuniary penalty of $8,000 payable in accordance with s 49(5) of the Building and Construction Industry Improvement Act 2005 (Cth).

3.                  The first and third respondents pay the applicant’s costs, excluding costs of the preparation and filing of submissions in relation to the liability of the second respondent, to be taxed if not agreed.

4.                  The applicant pay the second respondent’s costs of the application to be taxed if not agreed.

Associate:

Dated:         3 September 2010