FEDERAL COURT OF AUSTRALIA

Australian Building and Construction Commissioner v McCullough (No 2) [2017] FCA 295

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 546(1) of the Fair Work Act 2009 (Cth), there be a penalty imposed on each of the 1st, 2nd, 3rd, 4th, 5th, 7th, 8th, 10th, 12th, 13th, 15th, 18th, 21st, 23rd, 24th, 27th, 28th, 29th, 31st, 32nd, 33rd, 35th, 37th, 39th, 40th, 41st, 43rd, 45th, 49th, 50th, 51st, 52nd, 53rd, 54th, 59th, 60th, 61st, 62nd, 63rd, 64th, 65th, 66th, 67th, 68th, 70th, 71st, 73rd, 74th, 77th, 81st, 84th, 85th, and 86th respondents for contravening s 417(1)(a) of the Fair Work Act 2009 (Cth) in the sum of $1,300.

2.    Pursuant to s 546(3)(a) of the Fair Work Act 2009 (Cth), the penalties be paid to the Commonwealth.

3.    The application for costs on behalf of the 88th, 89th, 90th, 91st, 92nd, 93rd, 94th, 95th, 96th, 97th, 98th, 99th and 100th respondents be dismissed.

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

REASONS FOR JUDGMENT

BARKER J:

1    In Director of the Fair Work Building Industry Inspectorate v McCullough [2016] FCA 1291 (liability decision), I found that 53 of the respondents in this proceeding had contravened s 417(1)(a) of the Fair Work Act 2009 (Cth).

2    The question now is what penalty should be imposed on the relevant respondents.

3    In short, the Australian Building and Construction Commissioner (who has replaced the Director of the Fair Work Building Industry Inspectorate) submits that the Court should consider imposing a pecuniary penalty of $4,000 on the first respondent, Mr Campbell McCullough, and a pecuniary penalty of $2,000 on each of the other 52 respondents.

4    The respondents respectively submit that Mr McCullough should be treated no differently to the others and that, in all cases, there should be a penalty of $1,000 imposed on each respondent.

5    Another group of respondents were found not to have contravened s 417(1)(a) because they were not FCL Construction Pty Ltd employees. They now refer to themselves as the exonerated respondents and seek an order that the Commissioner pay their costs of the proceeding having regard to s 570(2)(a) of the Act, which enables the Court to exercise its usual costs discretion under s 43 of the Federal Court of Australia Act 1976 (Cth) if the Court is satisfied that the proceedings were instituted vexatiously or without a reasonable cause. The exonerated respondents contend that the Commissioner instituted the proceedings against them without reasonable cause.

6    There are then two issues to be dealt with in this judgment:

(1)    the appropriate penalties to be imposed on the relevant respondents who have been found to have contravened the Act; and

(2)    whether the exonerated respondents are entitled to an order that the Commissioner pay their costs of the proceeding.

What penalties should be imposed?

7    The provision which has been contravened in this case is s 417, which is a civil remedy provision.

8    The maximum penalty for the contravention is 60 penalty units for an individual. The value of a penalty unit at material times was $170. Accordingly, the maximum penalty for contravention that might be imposed on each of the relevant respondents is $10,200.

9    The Commissioner is at pains to submit that, while none of the relevant respondents at the material time had any history of prior contravention of the Act, a pecuniary penalty should be imposed that recognises the seriousness of their offending and, in particular, what might be regarded as a disregard by them of the proscriptions (whether intentional or reckless) of the Act which tends to undermine the workplace stability that is meant to apply during the life of enterprise agreements under the Act. In that regard the Commissioner relies particularly on what Tracey J said in Director of the Fair Work Building Industry Inspectorate v Ellen (The Longford Gas Plant Case) [2016] FCA 1395 at [32], in emphasising this proposition. The specific submission made by the Commissioner is that it follows that engaging in industrial action during the term of an enterprise agreement, as happened in this case, must be viewed seriously, as it has the effect of directly undermining the workplace stability intended to apply when an enterprise agreement is in force.

10    The parties are agreed as to the usual, general principles that are considered and applied by the Court in determining the appropriate penalty in a case such as the present. Without adumbrating those principles, it is necessary merely to refer to Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65, The Longford Case itself, and what the High Court said in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 326 ALR 476; [2015] HCA 46.

11    Ultimately, a process of “instinctive synthesis” is used by the Court to assess penalty taking account of all relevant factors. See Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8.

12    The parties also agree that proportionality and consistency operate as a check on the appropriate penalty. As is commonly said, the overriding principle is to ensure that the penalty imposed is proportionate to the gravity of the conduct in question. See Australian Building & Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2010] FCA 977 at [4].

13    As a result, the Court is concerned to ensure that a penalty is imposed which provides both specific deterrence to a particular contravener, as well as general deterrence to those in a like or similar position, to think twice before engaging in similar contravening conduct.

14    In this case, the Commissioner is concerned to ensure that, in effect, employees do not walk off worksites apparently out of sympathy for broadly stated industrial objectives, including in support of industrial rallies that do not have any apparent direct connection with their own employer of workplace.

15    In this case, as the liability decision emphasises, the relevant respondents, employed on the Midland Hospital project site and the Murdoch Hospital project site, who worked for different employers, absented themselves from their workplaces for a day because of an industrial rally organised by the Construction, Forestry, Mining and Energy Union (CFMEU) to highlight conduct of John Holland Pty Ltd that it considered objectionable.

16    Having regard to the usual applicable considerations that are considered in the penalty assessment process, the parties make the following submissions.

17    In relation to the question of the nature and extent of the conduct, and the circumstances in which it occurred, the Commissioner emphasises that each of the respondents engaged in industrial action on 18 July 2013 because of the rally in circumstances where, as the Court found, the rally had clear and obvious industrial objectives. That industrial action was engaged in during the nominal term of approved enterprise agreements.

18    The Commissioner says it is irrelevant that there was only positive evidence of one of the respondents – Mr McCullough – actually attending the rally. He contends each of the respondents’ action was industrial in character, whether or not they chose actually to attend the rally, because each of them withdrew their labour because of the rally that had industrial objectives, as the Court found in the liability decision.

19    The Commissioner submits that the purpose of the rally had no direct relationship between matters concerning the respondents or their respective employer and the rally did not occur at either of their workplaces. The Commissioner submits this is an aggravating factor in the determination of penalty. In short, the Commissioner submits that because the industrial action was not directly related to the terms and conditions of employment of the relevant respondents, the Court should impose a more substantial pecuniary penalty than it might otherwise impose.

20    The Commissioner points out that the respondents have provided no explanation for their non-attendance at work on 18 July 2013 and that this lack of explanation, taken together with what appears to be a coordinated stoppage by a relatively large number of employees with obvious construction delay consequences, should loom large in the Court’s determination of the appropriate penalty.

21    By contrast, the respondents submit that it is not open to the Court to penalise any of them by reference to an imputation that the industrial action was engaged in for a particular purpose, organised at all, or indeed, organised by any particular person or organisation.

22    They add that it is simply not known whether any of them attended the meeting held by Mr Joseph McDonald on 16 July 2013 at the Midland project site, nor what Mr McDonald said at that meeting and whether it had any relationship to the events on 18 July 2013 when the rally was held.

23    They also say that the conduct of Mr McCullough prior to 18 July 2013 can also have no bearing on the penalty to be imposed on his contravening conduct, being his failure to attend for work on 18 July 2013. It is said on his behalf that the Commissioner is attempting to introduce the imputation that Mr McCullough “organised” the industrial action despite that not being the pleaded case. It is said on his behalf that all that can be said is that he appeared to be aware that some workers would not attend for work on 18 July 2013, and that fact does not make his personal failure to attend for work any more serious.

24    As to the submission of the Commissioner that the lack of the direct relationship between the purpose of the rally and the respondents’ employer is an aggravating factor, the respondents submit this submission is misconceived and without authority, and in fact, this factor weighs in favour of a penalty at the lower end of the range.

25    The respondents make that submission on the basis that their conduct has not been shown to be part of an ongoing industrial disputation or bargaining issue between the respondents and their employers. The conduct did not relate to matters that were amenable to resolution through ordinary dispute resolution procedures in any of the relevant enterprise agreements. In that regard their conduct is distinguishable from that of the respondents in The Longford Case. Finally, they did not stand to gain personally in any respect from their conduct.

26    The respondents also emphasise that the Court would be led into error if it had any regard to submissions about Mr McDonald or the CFMEU, as neither were parties to the proceeding and no case was pleaded, nor findings made by the Court, that Mr McDonald either organised or was involved in the industrial action taken. They also contend that no case was pleaded, nor findings made by the Court, that Mr McCullough was acting in the scope of his actual or apparent authority as site delegate or Branch President of the CFMEU Construction and General Division at material times, including at the time he contravened the Act. They note that the Court observed that it was not proved that any of the respondents were aware of Mr McCullough’s position. They add that it was also not proved that Mr Stephen Ross McConkey or Mr Timothy O’Neill were aware that Mr McCullough was the Branch President of that Division. They also add that Mr Michael Buchan and Mr David Noonan are not parties to the proceeding and no case was pleaded against them, nor any findings made against them to the effect that they were involved in the organisation of the industrial action taken by the respondents, individually or otherwise.

27    Accordingly, the respondents contend that their conduct was limited to industrial action engaged in (not organised) on a personal basis for a single day, and was not taken to advance any particular claim or in pursuit of any personal gain. They say there is no evidence that would elevate this case above the ordinary case involving a single day of industrial action, which factor tends to favour a lower penalty.

28    Generally speaking, I am inclined to accept the characterisation of the conduct contended for on behalf of the respondents. While the evidence shows that Mr McCullough was plainly aware that the rally was being organised and the other respondents, by inference, became aware of it, and that it was no coincidence that they all left their workplaces on the day of the rally, it is difficult, in my view, to form any strong conclusions that Mr McCullough was involved in the organisation of the rally. One is left with the suspicion that he was a more influential person in relation to the events that resulted in a number of respondents taking the contravening industrial action than is suggested on his behalf, but I am not prepared to find that he should, in the result, be treated any differently to any of the other respondents who did not turn up for work on the day in question. Any detailed evidence concerning his involvement in the organisation of the rally is lacking.

29    Nor am I prepared to accept the submission that because the industrial action that the respondents took did not have anything to do with their industrial relationship with their employers at material times, that this should automatically be seen as an aggravating factor that should result in the imposition of a heavier rather than a lower penalty. In my view, in each case each set of facts constituting a contravention must be viewed on its own and an assessment must be made about the seriousness of the contravening conduct. There is no doubt that industrial action that is not directly involved with the relationship between an employee and an employer is not conducive to the maintenance and operation of effective enterprise agreements, and that if employees, during the currency of their enterprise agreements, were generally to walk off jobs they are employed in, for reasons remote to the terms of their actual employment, the system of industrial regulation in this country would be put at risk. That factor should be kept in mind in the assessment of the appropriate penalties, but in my judgement it is not a determinative factor requiring a more substantive penalty in this case.

30    The next factor addressed by the Commissioner concerns the nature and extent of loss or damage suffered as a result of the industrial action.

31    The Commissioner points out that a concrete pour had to be rescheduled at the Midland project site as a result of the industrial action and, the industrial action at the Midland project site resulted in Mr O’Neill having to lodge a notice of delay, detailing the impact of the action on a scheduled concrete pour.

32    The Commissioner accepts, however, that there is no evidence of a similar nature in relation to the Murdoch project site.

33    The Commissioner contends that the non-attendance of each of the respondents necessarily resulted in decreased productivity at each of Brookfield Multiplex’s projects on 18 July 2013, where individual respondents were required to work that day. He says the nature of the projects being constructed – two hospitals designed to deliver public health benefits – at which the respondents’ action was targeted, should also not be understated.

34    The Commissioner submits that although there is no evidence quantifying any economic loss suffered, an inference naturally arises that the consequences of the impugned conduct caused disruption and inconvenience, and the Court does not require evidence of economic loss in order to draw that inference.

35    The respondents accept that the inference can be drawn that their conduct adversely impacted productivity and caused inconvenience at the relevant workplaces.

36    They say, however, there is no evidence as to the actual economic impact, and the evidence of Mr O’Neill is vague and does not quantify any loss.

37    In those circumstances, they contend little weight should be accorded to this consideration.

38    In my view, it is plain, and not in dispute, that there will have been some economic impact both at the Midland project site and the Murdoch project site as a result of the action. Obviously, the rescheduling of a concrete pour, on the evidence before the Court, was of greater concern than any inconvenience and disruption at the Murdoch project site. Nonetheless, the whole intent of such industrial action is to cause inconvenience and disruption, in this case apparently in support of broader industrial objectives being canvassed at the rally.

39    The question of the loss or damage at this more generalised level should be taken into account in assessing the appropriate penalties, though not to be accorded excessive weight in this case.

40    The Commissioner, as noted earlier, in relation to prior relevant conduct of the respondents, says that he is not aware of any of them having previously contravened industrial laws.

41    Mr McCullough, however, the Commissioner points out, has recently been found to have contravened another provision of the Act as a result of admissions that he made concerning unlawful conduct on 22 October 2013, by taking part in a blockade at the Perth Airport. A penalty of $1,000 was imposed on him for that conduct, which occurred at a time after the material date here. See Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2016] FCA 616. That decision is apparently under appeal.

42    The Commissioner submits that the post-contravention conduct of Mr McCullough cannot count as a prior contravention, but should count against any inference of contrition or corrective conduct by him and a greater need for specific deterrence in his case.

43    By contrast, the respondents submit that they have not previously contravened any industrial laws and specific deterrence should therefore not be treated as a significant consideration in their case, and this favours a lower penalty.

44    As to Mr McCullough and his Perth Airport contravention, it is submitted that no regard should be had to this contravention because it was not prior conduct and cannot be construed as evidence of lack of contrition or corrective conduct because this present matter was not commenced until 9 April 2015, well after his conduct in the Perth Airport case. Further, in that case, the Court found that he was acting within the scope of his actual or apparent authority on behalf of the CFMEU, when that is not the finding in this case.

45    I generally accept the submissions made on behalf of the respondents concerning this factor. As to Mr McCullough, I do not place any weight on the Perth Airport contravention finding for the purposes of assessing penalty against him in this case.

46    The Commissioner then makes submissions about whether or not the contraventions were deliberate, submitting that they were.

47    The Commissioner submits that each of the respondents failed to perform any work on 18 July 2013 and none had the requisite authorisation not to work that day. He submits that there is no evidence before the Court to suggest that their conduct was not deliberate.

48    The respondents do not contest those submissions. They accept their conduct was deliberate. They submit there is no evidence of the type of concerted industrial campaign that would elevate this case above the ordinary. For that reason, they say this factor should have little or no effect on the penalty imposed.

49    I accept the submissions made on behalf of the respondents in relation to this factor.

50    The Commissioner then addresses the factor of the size of the business enterprise and involvement of senior management, which to some extent has been touched on above concerning Mr McCullough’s role in the events.

51    The Commissioner does not submit that individual employees, apart from Mr McCullough, held senior management positions in any union and that consideration is therefore not relevant to the imposition of penalty.

52    Insofar as Mr McCullough is concerned, the Commissioner submits that he held a senior role within the CFMEU at material times and the CFMEU was the union which organised the rally. It is submitted that he exerted a level of influence and was involved in the coordination of the industrial action. As to this, the Commissioner notes the Court’s finding that Mr McCullough was “in a position of authority and a representative of the construction employees on the Midland project site”. Further, that he communicated the proposed stoppage to Mr O‘Neill at the Midland project site the day prior to the rally, and then attended the rally on 18 July 2013.

53    The Commissioner therefore submits that, by reason of his senior position, and the lead role that he played in the events, Mr McCullough should receive a higher penalty than the other respondents.

54    The submission made on behalf of Mr McCullough is that relevant case law discloses that this factor was intended to be considered only in cases where penalties are being imposed on corporate respondents or individual respondents acing in their capacity as senior managers, and that it is not a relevant consideration in other circumstances, such as the present, where the contravention of s 417(1)(a) is premised on each of the respondents taking industrial action in a personal capacity as an ordinary employee. It is contended that the Court would be led into error if it had any regard to it as a factor in relation to Mr McCullough.

55    While acknowledging that the Court made the finding about Mr McCullough just mentioned, it is submitted on his behalf that being a delegate at one site does not elevate Mr McCullough to senior management or to the position of an “official”. It is submitted that the conclusion is reinforced by the observation that there is no evidence that he had any relationship to the Murdoch project site. It is also submitted that it is not possible for Mr McCullough to have taken industrial action in his capacity as a delegate; it is only possible that he took industrial action as an ordinary employee.

56    It is further submitted that the Court did not find that he was acting within the scope of his actual or apparent authority as Branch President of the Division or delegate at the Midland project site, and there was no pleading to that effect. Rather, the pleaded case against Mr McCullough is that, in the course of being an employee, he failed to attend work; and so the contravention should be viewed in that context.

57    I agree with the submissions made on behalf of the respondents and also Mr McCullough in relation to this point. I consider the evidence is insufficient to cause the Court to treat Mr McCullough’s conduct as qualitatively different from that of other relevant respondents. While Mr McCullough plainly was aware of what was happening in relation to the proposed industrial action (and the rally), the evidence is such that his actions should not be construed as those of an official, which are to be met with a special penalty compared with other employees who took industrial action.

58    The Court made the findings mentioned, and they were particularly relevant to drawing an inference that a range of relevant employees absented themselves from their workplaces on the day in question because of the rally. It was not a finding that put Mr McCullough at the front of the organisation of the industrial action that the relevant respondents took.

59    In all the circumstances, I do not think that the penalty can be imposed on the basis that Mr McCullough was acting as a senior official of the relevant Division of the CFMEU responsible for organising the industrial action in question. It does seem to me, as the respondents submit, by reference to the way the case was pleaded, that Mr McCullough was pursued as just another employee who absented himself from his place of work on the day in question.

60    The Commissioner then addresses the question of contrition, corrective action and cooperation with enforcement authorities. This has already been touched upon to some extent above.

61    The Commissioner submits that no contrition or corrective action with enforceable authorities is evident and that the respondents have demonstrated no cooperation by admissions, which resulted in the matter proceeding to a fully contested trial. The Commissioner was required to file substantial affidavit evidence and subpoena senior representatives of the employers involved to give oral evidence at trial. The Commissioner submits that this should be borne in mind in setting penalties.

62    The respondents do not contend there was any evidence of contrition, corrective action or cooperation.

63    They reject the submission of the Commissioner, however, that this factor should result in a higher penalty, for the following reasons:

    lack of cooperation is not an aggravating factor for penalty purposes;

    the Commissioner has made submissions in support of similar cases to the effect that no significant discount should be given for cooperation where full admissions had been made and penalties agreed because the Commissioner has already incurred the time and expense associated with preparing and filing liability evidence, and so it is disingenuous for the Commissioner now to submit here that a significantly higher penalty should be imposed by virtue of this factor;

    the Commissioner’s evidence was prepared prior to mediation and he had already conducted a substantial investigation prior to commencement of the proceeding in any event;

    the respondents’ obvious failure to cooperate is distinguished from other cases where the respondents had made admissions on liability, when regard is had to the critical deficiencies in the Commissioner’s case that were not rectified until trial;

    the Commissioner did not comply with the requirements of s 98(1) of the Evidence Act 1995 (Cth) in respect of coincidence evidence.

64    In my view, the question of contrition, corrective action and cooperation is not a matter of great moment in this case. The proceeding against all the respondents was highly contested. Penalty privileges were taken. In the event, the trial ran for two days instead of five days, mainly as a result of the respondents not giving evidence. They were, as counsel for the Commissioner acknowledged, entitled to take that position. The fact that a party has defended a prosecution should not automatically lead to a finding that this is an aggravating circumstance which produces a higher penalty.

65    In the result, I consider this factor to be neutral in assessing penalty.

66    The Commissioner then turns to the factors of specific and general deterrence, contending there is a need for specific deterrence against each of the respondents, although he accepts that the need is more prominent in cases involving repeat contraveners.

67    The Commissioner also submits that general deterrence is a much weightier consideration in a case such as this, referring to what was said in Director of the Fair Work Building Industry Inspectorate v Merkx [2015] FCA 316 at [28] by Besanko J, where his Honour observed that the need to deter unregulated industrial action is an important consideration, given the disruptive potential of unregulated industrial activity. Further reference is also made to what was said in The Longford Case at [36].

68    The respondents expressly accept that the penalty must be sufficient to deter each of the respondents from engaging in any further contraventions. They submit however that this factor cannot be given any significant weight as they are first time contraveners.

69    The respondents also accept that the penalty must achieve the object of general deterrence, but submit that:

    the penalty must nonetheless be proportionate to the gravity of their contravening conduct;

    whether the penalty is consistent with penalties imposed in other, similar matters commonly operates as a final check on the penalty; and

    general deterrence cannot be given any additional significance than it has been given in other, similar matters.

70    When it comes finally to assessing the question of appropriate penalties, as noted at the outset, the Commissioner submits that a penalty of $2,500 should be imposed on each of the relevant respondents, other than Mr McCullough, who should suffer a penalty of $4,000.

71    In my view, for the reasons given above, there should be a similar penalty imposed on all the relevant respondents, including Mr McCullough.

72    Insofar as the quantum of the penalty is concerned, the submissions made on behalf of the Commissioner included a survey of cases in which penalties have been imposed on respondents, very generally speaking, in circumstances approximating those here. The Longford Case was a most recent example that both counsel for the Commissioner and counsel for the respondents mentioned in their submissions. In that case, the individual respondents suffered a pecuniary penalty calculated at the sum of $1,000 each per day. The penalties were agreed and finally assented to by Tracey J, although not without some misgivings by his Honour.

73    In my view, it is useful to have regard to what penalties have been imposed in cases which seem to have some general resemblance to the case at hand, but one cannot engage in a penalty assessment process whereby one takes those penalty examples and seeks to adapt or average them in order to produce a penalty in the instant case. They do provide, however, some general indication of whether the penalty that the Court in an instant case has in mind seems to be consistent with prior, related penalty decision-making, and proportionate circumstances before the Court to the gravity of the contravening conduct.

74    In my view, the contraventions in question are not insignificant. They did not, as I found in the liability decision, occur by coincidence. It has not been made clear by the evidence exactly how the relevant respondents all came to leave their places of work at the same time. Plainly, the word got out. Plainly, Mr McCullough was more active in relation to the rally, at least at the Midland project site, than any other respondent, so far as the evidence is concerned. But as I have found, I am not prepared to find, on the evidence, that Mr McCullough should have some particular responsibility sheeted home to him, represented by an additional penalty over and above what the other respondent employees should have imposed on them.

75    The penalty, however, needs to be sufficiently large, even in the case of first time contraveners, as all the respondents are, to make it clear that industrial action outside the regulated environment of the Act, and the operation of enterprise agreements, comes at a cost. The penalty has to be sufficiently great to effect specific and general deterrence. It is, in a case such as the present, less about punishing individual contraveners and more about ensuring that employees who might be inclined to engage in industrial action for a day, part of a day or more than a day, fully appreciate that there will be a cost to doing so. That cost should not seem to be nominal.

76    Having regard to all the relevant factors mentioned above, and my consideration of them as set out above, I consider that a penalty of $1,300 should be imposed on each of the relevant respondents who have been found to have contravened the Act.

77    The penalties should be paid to the Commonwealth pursuant to s 546(3)(a) of the Act.

Should the exonerated respondents be entitled to their costs?

78    The exonerated respondents – those who were found not to be covered by the FCL agreement – seek their costs in the proceeding.

79    They note that the Court’s power to order a party to pay costs pursuant to s 43 of the Federal Court of Australia Act is constrained by s 570(1) of the Act, but that pursuant to s 570(2)(a), the Court may make such order “only if the Court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause”. They contend that the proceedings against them were instituted without reasonable cause.

80    In this regard, the parties accept that the principles referred to in Australian Workers Union v Leighton Contractors Pty Ltd (No 2) (2013) 232 FCR 428 at [7]; [2013] FCAFC 23 are relevant:

    the purpose or policy of the section is to free parties from the risk of having to pay their opponents’ costs in matters arising under the Act, while at the same time protecting those who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause;

    it follows from the protection offered by s 570(2), that a person will rarely be ordered to pay the costs of the proceeding. But it is not necessary to prove that there are exceptional circumstances warranting the making of an order;

    the relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed.

81    In Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 2) (2015) 230 FCR 337; [2015] FCAFC 97, by reference to the decision in Leighton Contractors, the Full Court observed, at [17], that although the principle had been expressed differently in earlier cases, the approach that has been adopted is that set out in Spotless Services Australia Ltd v The Honourable Senior Deputy President Jeanette Marsh [2004] FCAFC 155, where the Full Court said, at [13], that the usual position is there will be no costs, and to that extent, a costs order is an exceptional one, but there is no warrant for applying “an exceptional circumstances test”. The question is whether the proceeding was commenced without reasonable cause, and that is relevantly established “as a matter of objective fact”.

82    In this case, the exonerated respondents note the following findings of the Court in the liability decision:

    the materials attached to Mr Frederick Mason’s affidavit “tended either to contradict or place in serious doubt the statements” of Mr Mason to the effect that the exonerated respondents were FCL employees;

    unlike the steps taken in relation to the Brookfield Multiplex Australasia Pty Ltd respondents, “no further materials were filed on behalf of the Director, or further affidavit made by Mr Mason, to clarify Mr Mason’s evidence”;

    “There was an obvious issue raised by Mr Mason’s affidavit as to whether, in truth and substance, Stonemason, and not FCL, was the relevant employer at material times”;

    Mr Mason’s evidence at trial that Stonemason was the employer at materials times was clear. Mr Mason was not in any particular doubt about that;

    not only had the Commissioner failed to prove that FCL was the employer, “it is more probable than not that Stonemason was the employer”;

    the Commissioner attempted to pursue a submission in relation to the transfer of business provisions in the Act, but there was no pleaded case or evidence before the Court of any transfer of business.

83    The exonerated respondents submit that having regard to these findings, the proceedings were instituted without reasonable cause, for the following reasons:

(1)    whether they were covered by the FCL Construction Pty Ltd and CFMEU (WA) and Employees Enterprise Agreement 2011-2014 (FCL Agreement), and therefore the identity of their employer, was a fundamental element of the contravention proceeding;

(2)    the issue in relation to their employer arose obviously on the Commissioner’s own evidence. The evidence relied on by the Commissioner tended to prove that they were in fact employed by Stonemason and therefore not covered by the FCL Agreement. The exonerated respondents were not required to lead any evidence or even conduct cross-examination in order for the Court to make those findings;

(3)    Mr Mason’s affidavit was sworn on 26 June 2015 and the documents annexed to it were provided to the Commissioner on 25 June 2014. The proceedings were commenced by way of an originating application dated 9 April 2015. The deficiencies in the case were therefore known or ought to have been known at the time the proceedings were instituted; and

(4)    rather than just continuing the proceedings against them, the Commissioner pursued futile arguments about transfer of business that had no basis in the pleadings or the evidence.

84    The Commissioner, in resisting the making of a costs order, contends that the relevant test is whether, as a matter of objective fact, when the proceedings were instituted, it was done so without reasonable cause.

85    The Commissioner relies on the affidavit of Mr Ashley Paul Chapple dated 15 May 2015, which as to relevant parts were produced in evidence at the penalty hearing.

86    The Commissioner submits that having regard to that affidavit, the following factual matters become clear. Prior to the proceedings being instituted, on 11 June 2014, the Commissioner issued a notice to produce records or documents (notice to produce) to the proper officer at FCL, pursuant to s 712 of the Act. The terms of the notice to produce are to be seen at pp 179-180 of the affidavit. It sought various documents in relation to FCL and the Midland project site on 18 July 2013. Specifically, it sought a “listing of all FCL Construction Pty Ltd employees expected to work on the St John of God Midland Health Campus Project site on 18 July 2013”.

87    The Commissioner notes that the notice to produce made no reference to the provision of documents from any entity other than FCL and expressly made reference to serious consequences for non-compliance.

88    Documents were then produced on 25 June 2014 and some of those documents are annexed to the affidavit of Mr Mason.

89    The Commissioner says that following the provision of the documents pursuant to the notice to produce, Mr Chapple sent Mr Mason an email to his FCL email address on 15 August 2014 expressly noting that he was “concluding his investigation into the industrial action taken on 18 July 2013” and that “in relation to FCL Construction employees, it appears that 15 employees (over a couple of sites) took industrial action by withdrawing their labour on 18 July 2013”. The email made no reference to any company other than FCL.

90    The Commissioner points out that Mr Mason responded to the email by making handwritten notations and returning it to Mr Chapple on 19 August 2014. Mr Mason provided the employees’ addresses, noted they did not have permission to not attend work, but also noted that six of the individuals were “not employed with us now!”. No reference was made to the individuals being employed by any company other than FCL.

91    The Commissioner submits that, in the face of the very express terms of both the notice to produce and the serious consequences for non-compliance, it is reasonable for the Commissioner to have expected documents and information to be produced. He submits that it is certainly not reasonable to expect that documents and information would be produced in response to the notice to produce for an employing company that is not referred to and is of a completely different name – namely, Stonemason Pty Ltd.

92    The Commissioner submits that in the circumstances it is reasonable for the Commissioner to have concluded that FCL was the employer of the exonerated respondents and thereafter to institute proceedings on that basis.

93    He further submits that the material in Mr Chapple’s affidavit was what was available to the Commissioner at the time of instituting the proceedings, and it was only after the proceedings were instituted that Mr Mason made his affidavit, the matter went to trial and this question about the true employer was raised.

94    In particular, it is submitted that it was only during the course of Mr Mason’s oral examination in chief at trial that he gave evidence that the exonerated respondents were employed by “Stonemason”, rather than FCL. That position had not been communicated to the Commissioner when the proceedings were instituted.

95    I generally accept the submissions made on behalf of the Commissioner. While, in the result, the Court was not satisfied that the Commissioner had proved that the exonerated respondents were covered by the FCL Agreement, that is a different thing from saying that there were not reasonable grounds for instituting the proceeding on that basis. An assumption seems to have been made, not only by Mr Chapple and the Commissioner, but also by Mr Mason in responding to the notice to produce, to the effect that these employees were employees of FCL. The affidavit of Mr Mason, upon which he was examined at trial, reflected the same sort of assumption. It was only when closer attention was then paid to the attachments, which suggested that Stonemason may be the true employer, that the question was fully agitated and ultimately resulted in the exonerated respondents being exonerated.

96    While it is arguable that more attention could have been given earlier than the hearing to this issue, as it seems to have been given by counsel in the short period before the hearing commenced, I am not satisfied that the Court should conclude that there were not reasonable grounds for instituting the proceeding on the basis that FCL was the relevant employer. Everything seemed to suggest, without any further detailed legal analysis or factual analysis, that FCL was indeed the employer. Mr Mason, on behalf of FCL, was saying, clearly by inference if not actually, that the relevant employees were FCL employees. His position changed in the witness box.

97    In those circumstances there is no proper basis for the Court to exercise its discretion under s 43(1) of the Federal Court of Australia Act to award costs.

98    The application for costs on behalf of the exonerated respondents is refused.

Orders

99    For these reasons, the following orders should be made:

(1)    Pursuant to s 546(1) of the Fair Work Act 2009 (Cth), there be a penalty imposed on each of the 1st, 2nd, 3rd, 4th, 5th, 7th, 8th, 10th, 12th, 13th, 15th, 18th, 21st, 23rd, 24th, 27th, 28th, 29th, 31st, 32nd, 33rd, 35th, 37th, 39th, 40th, 41st, 43rd, 45th, 49th, 50th, 51st, 52nd, 53rd, 54th, 59th, 60th, 61st, 62nd, 63rd, 64th, 65th, 66th, 67th, 68th, 70th, 71st, 73rd, 74th, 77th, 81st, 84th, 85th, and 86th respondents for contravening s 417(1)(a) of the Fair Work Act 2009 (Cth) in the sum of $1,300.

(2)    Pursuant to s 546(3)(a) of the Fair Work Act 2009 (Cth), the penalties be paid to the Commonwealth.

(3)    The application for costs on behalf of the 88th, 89th, 90th, 91st, 92nd, 93rd, 94th, 95th, 96th, 97th, 98th, 99th and 100th respondents be dismissed.

Associate:

Dated:    22 March 2017

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