FEDERAL COURT OF AUSTRALIA

Maranoa Close (Management) Pty Ltd v Gould [2011] FCA 234

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The monies held in an interest bearing account, being $117,312.22 together with any interest accrued thereon, invested pursuant to the orders of 23 July 2010 and 20 August 2010 be released as soon as reasonably practicable to the solicitor for the respondents.

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

1    This appeal concerns the entitlement of two employees to the benefit of provisions contained in an industrial award, which they say applied to their employment with their former employer. That employer contests the applicability of the award to those employees. A Magistrate sitting in the Magistrates Court of Victoria found that the award applied to the employees and that the employer had breached three terms of the award. His Honour ordered back payments be made to the employees for the breach of the terms of the award. His Honour also imposed a penalty on the employer. Whether his Honour was correct in finding that the award applied to the employment of the employees is the first issue which requires examination. The second is whether his Honour erred in the exercise of his discretion in imposing a penalty of $45,000 on the employer.

The Parties

2    The appellant, Maranoa Close (Management) Pty Ltd (“Maranoa”) is the manager of a retirement village located in Balwyn, an eastern suburb of Melbourne. The retirement village is called Maranoa Close Retirement Village (“the retirement village”). The village is divided into 44 strata titled residential units, a manager’s residence and some communal facilities. The units are occupied by retired persons usually aged at least 60 years and more commonly in their 70s and 80s. The residents purchase the units. They also enter into a management agreement with Maranoa, which sets out the rights and obligations of Maranoa and the residents. Under the management agreement, Maranoa is obliged to employ a manager to administer the communal facilities at the retirement village. The occupiers of the units pay a service fee to Maranoa which includes the cost of employing a manager, providing care-taking facilities, maintaining the security of communal facilities and common property.

3    The respondents, Mr and Mrs Gould, (“the Goulds”) were employed by Maranoa as resident managers of the retirement village from July 1995 until October 2007. The period of alleged underpayments by Maranoa of certain award obligations to the Goulds commenced in July 2003 and continued until October 2007. The Goulds undertook the resident manager’s role jointly and shared the duties and responsibilities of the position, resident manager. They were the only employees of the retirement village.

4    Maranoa provided the Goulds with a “schedule of duties” in a document attached to a letter sent to them in June 2005. The document refers to 14 specific duties to be carried out in addition to the general requirement to perform the function of resident manager, in accordance with a management agreement entered into between Maranoa and the owners of the units.

5    The specific duties included the following low skilled functions:

●    Collect pedal bin bags from each unit on a daily basis;

●    Keep community centre in clean and tidy condition. Open fire to be maintained in winter. Keep up a supply of coffee, tea, milk etc;

●    Supervise regular maintenance, e.g.: gardening, window cleaning, spouts cleaning etc;

●    Keep grounds tidy between visits of gardening contractor;

●    Carry out minor maintenance within units, e.g.: change light globes, tap washers etc;

●    Maintain public lighting, call in electrician or nominated contractor where necessary;

●    Receive bank monthly contributions of residents and report any arrears to Management Company. Follow up arrears as directed by Management Company;

●    Attend to queries of residents and give Management Company’s permission as required by Management Agreement within guidelines to be advised or refer to directors;

●    Arrange activities within the community centre as need, is indicated, or desired, e.g.: Bingo, video hire, guest speakers at afternoon/morning teas, etc;

●    Arrange theatre and other outings as desired by residents;

●    Generally to provide a friendly informal atmosphere within the project in accordance with the objects and statements in the sales literature. Be available to lend a friendly ear where necessary.

6    Whilst still being capable of being described as low skilled functions, the position description also referred to the following significant functions, given that the retirement village was populated by elderly people:

●    … to be on site at all times to answer emergency calls from residents and take all necessary action including calling medical assistance and or relatives as recorded for each resident … ;

●    maintain a card record system for each resident advising who to contact in emergencies, i.e.: doctor, relatives etc and necessary medical details as considered necessary;

●    when minor illness develops render assistance, as perhaps, a daughter or friend would but not get involved in nursing care. District nurse can be arranged as is normal for persons living in self-contained dwellings. Encourage residents to assist each other in times of illness etc.

The Award

7    On 1 July 1998, the Health and Allied Services – Private Sector Victoria Consolidated Award 1998 (“the Award”) commenced to operate, having been made by the Australian Industrial Relations Commission (“the Commission”) on 30 June 1998. Clause 5 of the award is headed “Incidence of Award”. That clause makes the award binding on:

    the Health Services Union of Australia in respect of its officers and each and every person employed who is a member or is eligible to be a member of the Union;

    employers listed in a schedule of respondents.

Maranoa is listed in that schedule of respondents found at Appendix B to the award.

8    Clause 5.2, insofar as is material provides that:

5.2    This award applies to the whole of Victoria in relation to the process, trade, business or occupation of:

5.2.1     A person or persons or class of persons employed in or in connection with the doing of any kind of work associated with the carrying on of:

…

5.2.1(c) a hostel giving residential care, a nursing home, a geriatric home or centre, a day centre, a special accommodation house, a convalescent home, a retirement home, lodge or village, an orphanage, a babies' home and a children's home;

(emphasis added).

9    Clause 5.2.3 limits the incidence of the award in establishments referred to in cl. 5.2.1(c) (including retirement villages) to employees whose work falls within “the Administrative and Clerical, Food Services and General Services streams as prescribed in cl. 19 “Rates of Pay” of [the] Award”.

10    Clause 19 is headed “Rates of Pay”. It sets out a list of classifications and provides a rate for employees not covered by any precise classification but otherwise within the jurisdiction or incidence of the award. Clause 19.2 is headed “Extended Care”. At clause 19.2, prior to setting out the various streams, classifications and pay rates the following is provided:

This section includes all…retirement villages and other aged/extended care services within the jurisdiction of this award.

11    Under the heading “General Services Stream”, subheading “General Services 1 (wage/skill group 1)” the following classifications among others are set out:

    Laundry hand;

    Sorter/packer of linen;

    Orderly or cleaner;

    Assistant gardener;

    Maintenance/handyperson (unqualified);

    All other employees not elsewhere provided.

12    A note is provided to the all others classification in the following terms:

Includes all other employees not elsewhere provided for within the jurisdiction of this award.

The Common Rule Declaration

13    On 18 November 2004, pursuant to ss 141 and 493A of the Workplace Relations Act 1996 (Cth) (“the WR Act”), the Commission declared the award to be a common rule award, on and from 1 January 2005. Sub-section (2) of s 493A of the WR Act then provided:

Without affecting its operation apart from this section, this Act also has effect, subject to this section, as if a reference in section 141 or 142 to a Territory were a reference to Victoria.

14    Section 141(1) gave the Commission power to “declare that any term of an award shall, subject to such conditions, exceptions and limitations as are specified in the declaration, be a common rule in a Territory for an industry in relation to which the industrial dispute arose”.

15    Just as the “territories power” in s 122 of the Commonwealth Constitution authorised the making of a common rule in a territory, the referral by Victoria of its industrial powers to the Commonwealth authorised the making of a common rule in Victoria. Victoria made the referral pursuant to the Commonwealth Powers (Industrial Relations) Act 1996 (Vic). Section 4 (2) of the Act provided as follows:

The matter of conciliation and arbitration for the prevention and settlement of industrial disputes within the limits of the State, to the extent that it is not otherwise included in the legislative powers of the Commonwealth, is referred to the Parliament of the Commonwealth…

16    The declaration set out the industry to which it applied. So far as is material it proved that:

1.4    the industry means the process, trade, business or occupation of:

1.4.1 a person or persons or class of persons employed in or in connection with the doing of any kind of work associated with the carrying on of:

…

1.4.1(c) …a retirement home, lodge or village… .

(emphasis reproduced).

17    Under clause 2 of the declaration, the common rule award is binding on all employers in respect of the employment by them of employees. It is also binding on all employees coming within its coverage. The Union and other registered organisations respondent to the award are also bound by the common rule declaration.

18    As a consequence of the terms of the new common rule award produced by the declaration certain provisions in the award became unnecessary. Clause 3 of the declaration provided that cl. 4 of the award was not included in the common rule declaration. The reason why that is so is because it was not required given the terms of cl. 11 of the declaration which said:

This declaration shall be an award of the Commission, shall come into force on 1 January 2005 and shall remain in force for a period of three months and thereafter in accordance with the Act.

19    Similarly cl. 3.2 of the declaration made cls. 5.1.2 and 5.2 inapplicable to the new common rule award. Sub-cl 5.1.2 dealt with employer respondents, an unnecessary concept in a common rule award. Sub-cl 5.2 set out the incidence of the award. This became an unnecessary provision in light of cl. 1.4 of the declaration, which replicated cl. 5.2 of the award, and replaced it as the provision setting out the extent of operation of the award to employees employed in or in connection with, or doing any kind of work, associated with the carrying on of the named establishments. Importantly, the declaration did not tie the incidence or extent of operation of the award to named classifications.

The Consequence of Making the Declaration

20    As a result of the making of the declaration any employee employed in Victoria, in connection with, the doing of any kind of work, associated with the carrying on of a retirement village was covered by the award. If the award did not provide a classification for a particular type of employment a provision of a pay rate may be discovered by reference to cl. 19 of the award having regard to the nature and scope of the work performed. His Honour performed that exercise and decided, on the facts before him, that the work of the Goulds fell within the General Services (wage/skill group 1) of the General Services stream of work performed in what is known as the “extended care” industry, as referred to in cl. 19.2.

21    On appeal that finding was challenged. The challenge is misconceived. Having regard to the low skilled nature of the vast majority of the duties of a resident manager at Maranoa, it was appropriate to consider the Goulds as falling within wage/skill group 1. Although the position of resident manager is not referred to in the list of classifications, the provision for “all other employees not elsewhere provided within the jurisdiction of the award” fills this gap. The work of a resident manager at a retirement village is unquestionably covered by the common rule declaration. Without doubt, as at 1 January 2005, the common rule declaration applied so that the Goulds were entitled to the benefit of the award. As the failure to comply with the award commenced in July 2003, it is now necessary to consider the applicability of the award from that time until 1 January 2005.

The Period before the Common Rule Declaration

22    For the award to apply to the period of employment of the Goulds, from July 2003 to 31 December 2004, the Court must be satisfied that the Goulds were employed in a classification covered by the award. That is the practical effect of cl. 5.2.3 of the award.

23    For the reasons expressed at [20] and [21] above in determining whether his Honour assessed the employment of the Goulds as coming within the General Services Streams (wages/skill group 1), I consider the Goulds were appropriately classified under the heading of “all other employees not elsewhere provided within the jurisdiction of the award”.

24    “All others” classifications are frequently used in industrial awards and have been so used for decades. Many examples are set out in my judgment in Spalding v Can’t Tear ‘Em Pty Ltd [1999] FCA 1222. I adhere to the views expressed there, especially at [25] to [34], despite the contrary view of Dowsett J. Justice Wilcox considered that the relevant employee was employed in the relevant industry and together with my judgment, supported the majority order. Consistently with the approach of Wilcox J, I have already found at [19] that the Goulds were employed in the industry covered by cl. 1 of the declaration. That is the materially identical industry as referred to in cl. 5 of the award.

The Eligibility Rule

25    However, as counsel for Maranoa points out, the award cannot validly extend to the Goulds if they are not eligible for membership of the Union. The award is binding (as set out at cl. 5.1.1) on the Union, its members and those eligible to be members. It is not binding (in its pre-common rule form) on people who are ineligible to be members of the Union.

26    The relevant portion of the eligibility rule of the Union is rule 3A (e). That rule, so far as is material provides:

In the [State] of Victoria…in or in connection with the provision of medical, paramedical and/or nursing care for aged persons in…homes (including dwellings) and work ancillary thereto.

27    The work performed by the Goulds was performed in homes which were dwellings or at the very least the work was performed in connection with dwellings. The Goulds did not provide medical, paramedical or nursing services but, as required, they enabled residents at the retirement village to access such services. In so doing, they performed work in connection with and/or ancillary to the provision of such services. They were eligible to join the Union and become members.

28    In finding that the Goulds were eligible to join the Union, I have had regard to the uncontroversial proposition that eligibility rules should be liberally construed; see Re Grimshaw; ex parte Australian Telephone and Phonogram Officers Association (1986) 60 ALJR 588 at 592 (per Mason, Brennan and Dawson JJ).

29    Also, the use of the words “in connection with”, as Gibbs CJ said in R v Isaac; ex parte Transport Workers Union of Australia (1985) 159 CLR 323 at 335; “considerably widens the scope of the rule”. So much is even more applicable in the current circumstances, where “in or in connection with” is used in conjunction with the expression, “ancillary to”.

30    The contention of counsel for Maranoa that the Goulds must be actually employed in the industry of providing medical services and the like, or be employed by an entity that provides such services, does not give adequate consideration to the expressions “in connection with” or “ancillary to” in the relevant portion of the eligibility rule. That submission is not accepted.

31    Accordingly, in the period from the commencement of the award breaches until the declaration of the common rule the Goulds were also entitled to the benefit of the award. Consequently, the Court affirms the findings of his Honour that the award applied to the employment of the Goulds throughout the relevant period of the breaches. That being so, there is no issue as to the characterisation of the breaches found by his Honour or the back pay owing to the Goulds. The only issue remaining to be dealt with is the ground of appeal dealing with the imposition on Maranoa by his Honour of a penalty of $45,000 for the award breaches.

Maranoa’s Submissions on Penalty

32    Maranoa has raised no issue on appeal as to the occurrence of the award breaches in the event that the award is found to be applicable to the Goulds. The relevant breaches concerned:

    Failure to pay on-call allowance;

    Failure to pay public holiday rates;

    Failure to pay annual leave loading.

33    Maranoa also takes no issue with his Honour’s general approach to the determination of penalty and his application of the totality principle. In that regard, see QR Limited v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2010] FCAFC 150 at (62), where Keane CJ and Marshall J said:

Once the appropriate level for each of the contraventions has been assessed, it is necessary to consider the aggregate of those to form a view as to whether that aggregate is so out of proportion to the overall misconduct of the appellants as to constitute an unjust result: see Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [23]; McIver v Healey [2008] FCA 425 at [30]-[31].

34    Maranoa says that his Honour erred in his approach to penalty by not taking into account certain submissions made by it regarding penalty. It also says that when regard is had to those matters the $45,000 penalty is unreasonable or plainly unjust. Those submissions are rejected for the reasons set out below.

35    Each of the matters contended by Maranoa not to have been taken into account by his Honour were contained in written submissions before his Honour. His Honour specifically said in his penalty judgment that he had regard to those written submissions, but still considered a mid-range penalty to be appropriate. It is surprising, that in the circumstances it is submitted that his Honour did not have regard to those submissions. Nonetheless, below I set out the aspects of Maranoa’s grounds of appeal about penalty, which still remained pressed on the hearing of the appeal.

(i)    The period where the maximum penalty was $10,000 not $33,000

36    Between 17 July 2003 (the start of the breaches) and 10 August 2004, the maximum penalty which could be imposed in respect of an award breach was $10,000, not $33,000 as it became after 10 August 2004. It is contended that his Honour ignored this fact. However, when one considers that the breaches continued for 167.6 weeks occurring after 10 August 2004, his Honour would have been justified in imposing a penalty for breaches after 10 August 2004 alone, to come to the view he came to about applying a mid-range penalty based on a maximum figure of $33,000. As such, this attack on the penalty judgment below is devoid of merit.

(ii)    The failure of the Goulds to raise with Maranoa the application of the award until shortly before their employment concluded

37    This was not a factor worthy of his Honour’s consideration when contemplating issues going to amelioration of penalty. Maranoa was obliged to accord award entitlements to the Goulds. Had it taken appropriate legal advice about its obligations, especially after the making of the common rule declaration, it would not have been in its current situation. The Goulds should not be assumed to have been aware of their rights under the award or to be obliged to communicate them to Maranoa prior to their termination. His Honour did not err by failing to specifically say anything in his judgment about what, in reality, is a false issue.

(iii)    Incorrect advice from the Workplace Ombudsman

38    His Honour expressly referred to this issue in his ex-tempore reasons for judgment on penalty. He said the position taken by the Workplace Ombudsman, “was not one supported by the evidence” and doubted whether Maranoa had cooperated with the Ombudsman. There is no merit in this complaint about the penalty judgment.

(iv)    The fact that the breaches were not deliberate or wilful

39    The submission that the breaches were not deliberate or wilful cannot be assumed to have been ignored below. Rather, his Honour appeared to give greater weight to the fact that Maranoa should have been aware of its award obligations and ensured that it complied with them.

(v)    That Maranoa only employs two employees

40    The fact that Maranoa only employed two employees was plain and obvious. It is a fact which could not have escaped the attention of any rational decision maker. Whilst it might be said that Maranoa only breached its obligations concerning two employees it would equally be correct to say that it breached those obligations in respect of its entire workforce.

41    As referred to at [38] above, his Honour had some obvious reservations about Maranoa’s conduct. In any event, the tenor of each of his Honour’s judgments was that Maranoa failed to properly investigate the extent of its obligations to its employees, the Goulds, and failed to comply with its obligations to them for a considerable period. Having so found, it was not necessary for his Honour to specifically advert to a submission about a genuine and reasonable belief held by Maranoa when his Honour had specifically cast doubt on the genuineness and reasonableness of that belief.

Conclusion on penalty

42    His Honour did not fail to advert to any specific matter which he was obliged to refer to in considering his assessment of the appropriate penalty. Having regard to the long period of the breaches involved, his Honour’s penalty was well within the permissible range of possible penalties. The $45,000 penalty was not unreasonable. It was far from unjust. Counsel for Maranoa did not otherwise cavil with the general approach adopted by his Honour in determining the quantum of the penalty.

Order

43    Having regard to the foregoing it follows that the appeal must be dismissed. Justice Middleton ordered on 23 July 2010 that the appellant pay into the Court the amount of $117,312.22 by 30 July 2010. On 20 August 2010, the Court ordered by consent that the monies paid into Court by the appellant on 29 July 2010 be held in an interest bearing account until further order. As a consequence of the appeal being dismissed, the monies paid into the interest bearing account must be released as soon as reasonably practicable to the solicitor for the respondents.

Associate:

Dated:    17 March 2011