FEDERAL COURT OF AUSTRALIA

United Firefighters Union of Australia v Country Fire Authority (No 2) [2017] FCA 1614

ORDERS

THE COURT ORDERS AND DECLARES THAT:

1.    The Respondent contravened s 50 of the Fair Work Act 2009 (Cth) (the FW Act) by contravening cl 27.4.4 of the Country Fire Authority/United Firefighters’ Union of Australia Operational Staff Enterprise Agreement 2010 (the Agreement) by failing to train a minimum of 90 recruits in 2012.

2.    The Respondent contravened s 50 of the FW Act by contravening cl 27.4.7 of the Agreement by failing, before 1 September 2012, to request its employees to approve a variation to Schedule 1 of the Agreement to record all deployments under cl 27.4 in the preceding year.

3.    The Respondent contravened s 50 of the FW Act by contravening cl 27.4.3 of the Agreement by failing to conduct at least three recruit training courses in 2013.

4.    The Respondent contravened s 50 of the FW Act by contravening cl 27.4.4 of the Agreement by failing to train a minimum of 90 recruits in 2013.

The Court orders that:

5.    Pursuant to s 546 of the FW Act, for the contraventions of s 50 of the FW Act referred to in declarations 1 to 4, the Respondent pay a pecuniary penalty of $50,000.

6.    Pursuant to s 546(2) of the FW Act the penalty imposed on the Respondent be paid to the Applicant.

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

REASONS FOR JUDGMENT

MURPHY J:

INTRODUCTION

1    In this application the United Firefighters’ Union of Australia (UFU) seeks declarations and penalties against the Country Fire Authority (CFA) in relation to alleged breaches of cl 27.4 of the Country Fire Authority/United Firefighters’ Union of Australia Operational Staff Enterprise Agreement 2010 (the Agreement) by the CFA. Pursuant to cl 27.4 of the Agreement the CFA was required to employ 342 career firefighters over a six-year period from the commencement of the Agreement on 28 October 2010 and to conduct a minimum of three recruitment courses in each year, training at least 30 recruits in each course (the agreed recruitment regime). I am satisfied that the CFA failed to comply with the terms of cl 27.4 of the Agreement and thereby contravened s 50 of the Fair Work Act 2009 (Cth) (the FW Act).

2    For the reasons I explain it is appropriate to make the declarations of contravention sought by the UFU and to order the CFA to pay a pecuniary penalty of $50,000 for the contraventions found.

THE EVIDENCE

3    The UFU relies upon:

(a)    an affidavit of Michael McGuinness sworn 21 April 2016;

(b)    factual findings in United Firefighters Union of Australia v Country Fire Authority (2014) 218 FCR 210; [2014] FCA 17 (the primary judgment); and

(c)    the decision of Fair Work Australia (FWA) in United Firefighters’ Union of Australia v Country Fire Authority [2012] FWA 7155 (Roe C).

4    The CFA relies upon:

(a)    an affidavit of Louise Anne Salter affirmed 23 May 2016 and the annexures thereto; and

(b)    factual findings in the primary judgment.

THE FACTS AND PROCEDURAL HISTORY

5    The Agreement was approved by FWA on 21 October 2010, and it commenced operation on 28 October 2010. The agreed recruitment regime set out the number of recruit training courses that the CFA was required to conduct in each year over the ensuing six years, the number of recruits in each course, and the total number of firefighters to be employed through that recruit training process.

6    Under the heading “Safe Staffing Levels” cl 27 of the Agreement set out the agreed recruitment regime in the following terms:

27.4.2    The CFA will employ an additional 342 career firefighters over the next 6 years.

27.4.3    The CFA will conduct a minimum of 3 recruit training courses per year, or a greater number of recruit training courses to be agreed between the UFU and the CFA to train the new recruits to give effect to clause 27.4.2. Neither party will unreasonably withhold agreement for a greater number of recruit training courses per year.

27.4.4    Each recruit training course will train a minimum of 30 recruits, or a greater number to be agreed between the UFU and the CFA. Neither party will unreasonably withhold agreement to a greater number of recruits per course.

…

27.4.7    On or before September 1 of each year, the CFA will request that its employees approve a proposed variation to Schedule 1 of the agreement to record all deployments in the preceding year. For the avoidance of doubt, each variation will insert into Schedule 1 the deployments undertaken in the preceding year. Following each approval by the CFA’s employees, the CFA and the UFU will take all necessary steps to cause Fair Work Australia to the variation to the agreement.

7    In 2011 the CFA conducted three recruit training courses with a total of 75 recruits, with 25 recruits in each course, which was less than the number of recruits per course and less than the total recruits per year specified in the Agreement.

8    In about late February 2011 or early March 2011 a dispute arose as to the operation of the agreed recruitment regime. On or about 7 March 2011 the UFU applied to FWA to deal with the dispute. The dispute was resolved and on 20 June 2011 FWA published a statement which attached a document entitled “Agreement concerning the implementation of clause 27.4.3 of the [Agreement]” (the Agreed Resolution).

9    The Agreed Resolution set out the terms on which the CFA and UFU had agreed to resolve the dispute. It provided that:

(a)    in the calendar year 2012 the CFA would conduct four recruitment courses and train a total of 100 recruits. The recruit training courses would be held on the following dates;

(i)    20 February 2012 to 8 June 2012;

(ii)    16 April 2012 to 3 August 2012;

(iii)    25 June 2012 to 12 October 2012; and

(iv)    20 August 2012 to 7 December 2012;

with each recruit course enrolling 25 recruits for training;

(b)    in the calendar year 2013 the CFA would conduct four recruitment courses and train a total of 100 recruits. The recruit training courses would be held between the following months:

(i)    February 2013 to June 2013;

(ii)    April 2013 to August 2013;

(iii)    June 2013 to October 2013; and

(iv)    August 2013 to December 2013;

with each recruit course enrolling 25 recruits for training.

(c)    any variation to the agreement regarding the number of recruit training courses per year, their timing and the number of recruit firefighters in each course would be by the consent of both parties; and

(d)    that FWA would not have the power to arbitrate on the reduction in the number of recruit training courses held in any one year or the total number of recruits to be involved in any one year.

10    The CFA did not comply with the Agreement or the Agreed Resolution. The Agreement required the CFA to conduct three recruit training courses each year with a minimum of 30 recruits in each course, being a total of 90 recruits. The Agreed Resolution required the CFA to conduct four training courses each year with a minimum of 100 recruits in total. The evidence shows that the CFA only conducted:

(a)    three recruit training courses in 2012 with a total of 75 recruits, being 25 recruits in each course; and

(b)    two recruit training courses in 2013, with a total of 41 recruits, being 16 recruits in the first course and 25 recruits in the second course.

11    There are some small differences in the evidence of Mr McGuinness and Ms Salter as to the number of recruits trained in 2012 and 2013 and in later years. Ms Salter had access to the CFA’s records and checked Mr McGuinness’ calculations. I prefer her evidence as to the number of recruits in each year but nothing turns on this.

The procedural history

12    In June 2012 the UFU commenced this proceeding, seeking a declaration that the CFA had contravened s 50 of the FW Act by breaching cl 27.4 of the Agreement, an injunction requiring the CFA to conduct the recruit training courses in 2013 required by cl 27.4 of the Agreement, and the imposition of penalties pursuant to s 546 of the FW Act.

13    The CFA filed a cross-claim in which it sought, amongst other things, a declaration that cll 26, 27 and 28 of the Agreement were invalid and unenforceable by reason of the implied limitation on Commonwealth legislative power described in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 (Melbourne Corporation) (Latham CJ, Rich, Starke, Dixon, McTiernan and Williams JJ) and Re Australian Education Union, Ex parte Victoria (1995) 184 CLR 188; [1995] HCA 71 (Re AEU) (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ). It also sought declarations of invalidity in respect of various other clauses of the Agreement on various other grounds.

14    On 31 January 2014 I handed down the primary judgment. Although I considered there were difficulties in treating the implied constitutional limitation as applicable to industrial agreements that are bona fide voluntarily entered into by a State party (see the primary judgment at [133]), I concluded that cll 26, 27 and 28 of the Agreement were invalid and unenforceable by reason of the principles described in Melbourne Corporation and Re AEU. I dismissed the UFU’s application to enforce cl 27.4 and dismissed the CFA’s cross-claim for declarations of invalidity in relation to other clauses of the Agreement.

15    Both parties appealed. On 8 January 2015 a Full Court allowed the UFU’s appeal and dismissed the CFA’s cross-appeal and notice of contention: see United Firefighters’ Union of Australia v Country Fire Authority (2015) 228 FCR 497; [2015] FCAFC 1 (Perram, Robertson and Griffiths JJ). The Full Court remitted the matter for determination on the questions of relief and penalties.

The later recruit training courses

16    In 2014 the CFA conducted five recruit training courses with a total of 103 recruits, with 25 recruits in two of the courses, and 23, 12 and 18 recruits in the other courses.

17    In 2015 the CFA conducted four recruit training courses with a total of 120 recruits, with 30 recruits in each of the courses.

18    In 2016, as at the dates Mr McGuinness and Ms Salter made their affidavits, the CFA was conducting two recruit training courses with a total of 60 recruits, with 30 recruits in each course.

The total number of recruits trained

19    By the end of the second recruit training course in 2016 the CFA had trained 474 new recruits through 19 recruit training courses over six years. Senior Counsel for the CFA informed the Court that since the commencement of the Agreement the CFA had created 342 new firefighter positions in accordance with cl 27.4.2. The UFU did not seek to controvert that statement.

Variation to Schedule 1 of the Agreement pursuant to cl 27.4.7

20    In each of 2012, 2013 and 2014 new firefighter positions were created, advertised and had a CFA employee deployed into the position prior to 1 September in that year.

21    Pursuant to cl 27.4.7 the CFA should have sought approval from its employees for variations to Schedule 1 of the Agreement to reflect the positions created, before 1 September each year. However, from the commencement of this proceeding in June 2012 the CFA did not seek this approval until 19 June 2015, and the Fair Work Commission approved that variation on 14 July 2015.

THE ALLEGED CONTRAVENTIONS

22    At trial the UFU’s case was advanced on two alternate bases, namely:

(a)    that cl 27 of the Agreement required the CFA to conduct three recruit training courses in each year of the Agreement, with a minimum of 30 recruits in each course, and it failed to do so;

(b)    alternatively, that the Agreed Resolution required the CFA to conduct four recruit training courses in each calendar year, with 25 recruits in each course, and it failed to do so.

The UFU did not make an election as between those alternative claims. In this hearing, however, the UFU only relies on the first basis.

23    In its written submissions UFU sought declarations and penalties in relation to contraventions that it alleged had occurred after the trial in April 2013. It did not, however, press those claims and restricted the application to the contraventions alleged in the Statement of Claim.

24    The CFA does not admit the alleged contraventions but it accepts that it has admitted facts sufficient to allow findings that it contravened the Agreement as alleged by the UFU.

25    Having regard to the CFA’s admissions, the agreed facts and the evidence of Ms Salter and Mr McGuinness I am satisfied that the CFA breached the following terms of the Agreement:

(a)    clause 27.4.3, by its failure to conduct at least three recruit training courses in 2013;

(b)    clause 27.4.4, by its failure to train a minimum of 90 recruits in 2012;

(c)    clause 27.4.4, by its failure to train a minimum of 90 recruits in 2013; and

(d)    clause 27.4.7, by its failure, before 1 September 2012, to request its employees to approve a variation to Schedule 1 of the Agreement to record all deployments under cl 27.4 in the preceding year.

26    Section 50 of the FW Act provides that “a person must not contravene a term of an enterprise agreement.” I am satisfied that the CFA contravened s 50 by contravening the Agreement as outlined.

DECLARATORY RELIEF

27    The UFU seeks declarations to reflect the contraventions found. The Court has a wide discretionary power to order declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth) and s 545 of the FW Act: Forster v Jododex Australia Pty Limited (1972) 127 CLR 421; [1972] HCA 61 at 437-438 (Gibbs J, citing Russian Commercial and Industrial Bank v British Bank for Foreign Trade Limited [1921] 2 AC 438 at 448); Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 (Tobacco Institute) at 99 (Sheppard J).

28    It is appropriate to make declarations to reflect the contraventions outlined above. The declarations are directed to the determination of the legal controversy between the parties and not to answering abstract or hypothetical questions: see Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; [1992] HCA 10 at 582 (Mason CJ, Dawson, Toohey and Gaudron JJ). They have utility as they serve to record the Court’s disapproval of the contravening conduct, they vindicate the UFU in bringing the application, they do justice between the parties, and they operate to deter others from engaging in similar conduct: see Tobacco Institute at 100; Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2006] FCA 1730 at [6] (Nicholson J); Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113 (ABCC v CFMEU) at [93] (Dowsett, Greenwood and Wigney JJ).

PECUNIARY PENALTY

29    Section 546 of the FW Act confers a broad discretion on the Court to impose such pecuniary penalties as it considers appropriate in the circumstances for contravention of civil remedy provisions such as s 50. The discretion must, of course, be exercised judicially and not arbitrarily.

30    I am satisfied that a pecuniary penalty should be imposed given the contraventions I have found. I now turn to assess the appropriate penalty.

The number of contraventions

31    Section 557 of the FW Act provides, subject to an exception which is not presently relevant, that where two or more contraventions of a civil remedy provision arise out of a course of conduct by a person they are to be taken to constitute a single contravention. This recognises that where there is sufficient interrelationship in the legal and factual elements of the acts or omissions that constitute a contravention, the Court may in its discretion penalise them as a single course of conduct.

32    The course of conduct principle was explained in Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1; [2010] FCAFC 39 (CFMEU v Cahill) at [39] and [41] (Middleton and Gordon JJ) as follows:

The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality.

…

In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a Court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion. It is a tool of analysis which a Court is not compelled to utilise.

(Citations omitted.)

33    The UFU argues that the Court should approach the question of penalty on the basis that there are three contraventions, being:

(a)    one contravention of cl 27.4.3 in 2013, by the CFA’s failure to conduct at least three recruit training courses in that year;

(b)    two breaches of cl 27.4.4 which arise from a single course of conduct and therefore constitute one contravention, by the CFA’s failure to train a minimum of 90 recruits in each of 2012 and 2013; and

(c)    one contravention of cl 27.4.7, by the CFA’s failure, prior to 1 September 2012, to request its employees to approve a variation to Schedule 1 of the Agreement to record all deployments in the preceding year.

The CFA accepts it is open on the evidence for the Court to find the contraventions outlined above. It argues that if it is found to have committed the contraventions alleged, the contraventions of cll 27.4.3 and 27.4.4 should be treated as a single contravention arising from a single course of conduct. On its submissions any penalty should be assessed on the basis of two contraventions of the Agreement.

34    It is uncontentious that the legal and factual elements of the alleged contraventions of cl 27.4.4 in 2012 and 2013 are sufficiently interrelated to form a single course of conduct. I take the same view in relation to the CFA’s contravention of cl 27.4.3. Clauses 27.4.3 and 27.4.4 operate together to require the CFA to train a minimum of 90 recruits each year. Clause 27.4.3 deals with the minimum number of recruit training courses per year and cl 27.4.4 deals with the minimum number of recruits per course. They are both elements of the same recruitment regime which is aimed at training and employing 342 additional career firefighters over the six years of the Agreement. I infer that the CFA did not make separate decisions to refuse to comply with cll 27.4.3 and 27.4.4 and I consider it to be a single course of conduct. To separately penalise the CFA for contravening cll 27.4.3 and 27.4.4 would punish it twice for a single course of conduct.

35    I therefore assess the penalty on the basis of two contraventions:

(a)    a contravention of cl 27.4.7 by the CFA’s failure to request its employees, prior to 1 September 2012, to approve a variation to Schedule 1 of the Agreement to record all deployments in the preceding year; and

(b)    a single course of conduct in contravening cll 27.4.3 and 27.4.4 by the CFA’s failure to conduct at least three recruit training courses in 2013 and its failure to train a minimum of 90 recruits in 2012 and 2013.

The maximum penalty

36    Pursuant to s 546(2) of the FW Act the maximum penalty for each contravention is 300 penalty units. Until 1 July 2015 a penalty unit was $170. The maximum penalty for each contravention is therefore $51,000, which means the maximum aggregate penalty is $102,000.

The assessment of the appropriate penalty

37    The principles for assessment of an appropriate penalty in a case such as the present are well-established. The Court has a broad discretion which is unaided by any mandatory statutory criteria but informed by the objects of the FW Act and the particular circumstances of the contravention: John Holland Pty Ltd v CFMEU (No 2) [2009] FCA 865 at [16] and [17] (Greenwood J).

38    The methodology for fixing a pecuniary penalty in a civil proceeding is not cast in stone and is not an exact science: CFMEU v Cahill at [47]; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (NW Frozen Foods) at 290-291 (Burchett and Kiefel JJ). The Court must consider all the relevant facts and circumstances and use a process of “instinctive synthesis” to arrive at the appropriate penalty. In Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25, which concerned criminal sentencing, McHugh J described this process (at [51]) as:

…the method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case.

39    The fundamental principle underpinning imposition of a civil penalty is deterrence, both specific to the contravener and in general to other potential contraveners. In Commonwealth v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; [2015] HCA 46 (Commonwealth v Director, Fair Work Building Industry Inspectorate) at [55] French CJ, Kiefel, Bell, Nettle and Gordon JJ explained:

No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:

“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”

(Citations omitted.)

See also at [68] (Gageler J) and [79] (Keane J); Construction, Forestry, Mining and Energy Union v Australian Building and Construction Commissioner (2016) 247 FCR 339; [2016] FCAFC 184 at [6] (Allsop CJ with North J agreeing); Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 53 at [90] (Dowsett and Rares JJ); ABCC v CFMEU at [98].

40    In Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [66] French CJ, Crennan, Bell and Keane JJ approved the Full Court’s statement in Singtel Optus v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 at [62] (Keane CJ, Finn and Gilmour JJ) that a civil penalty:

…must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business.

Keane J also cited the Full Court’s statement with approval in Commonwealth v Director, Fair Work Building Industry Inspectorate at [110].

41    In Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 171 FCR 357; [2008] FCAFC 170 at [57]-[58] Branson and Lander JJ usefully set out many of the relevant considerations, although they should not be treated as a rigid checklist. The Court must fix a penalty which pays appropriate regard to the circumstances in which the contraventions occurred and the need to sustain public confidence in the statutory regime which imposes the obligation: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 at [89]-[91] (Buchanan J).

42    I now turn to the factors relevant in this case.

The nature and extent and seriousness of the contravening conduct

43    Clause 27 appears under the heading “Safe Staffing Levels” and it has four principal subclauses:

(a)    cl 27.1 deals with the maintenance of current staffing ratios, locations and levels;

(b)    cl 27.2 contains a promise by the CFA not to make any employee redundant;

(c)    cl 27.3 is an acknowledgement by the parties of the need to increase firefighting resources; and

(d)    cl 27.4 deals with the subject matter of “Additional Staffing”.

44    Clause 27.4 is plainly aimed at increasing the number of firefighters employed by the CFA. Clause 27.4.1 provides:

The parties are committed to protecting employee health, safety and welfare. During the life of this agreement, the current staffing ratios, locations and levels will be increased. Having reviewed the number and frequency of firefighter attendance at emergency calls throughout several locations in Victoria, and having regard to other relevant factors including population growth and increased risk factors, and to ensure the appropriate level of fire cover for the community, the Chief Officer has determined that additional employees are required as specified in clause 27.4.2.

(Emphasis added.)

45    The principal obligations imposed upon the CFA by cl 27.4 to address the subject matter of “safe staffing levels” were to:

(a)    employ an additional 342 firefighters over a six-year period (cl 27.4.2); and

(b)    deploy those firefighters who successfully complete the recruit training courses into firefighter positions (cl 27.4.6).

46    The UFU argues that the CFA’s obligation to conduct a minimum number of training courses per year (cl 27.4.3) with a minimum number of recruits attending each training course (cl 27.4.4) are more than just machinery provisions. I take a different view. The CFA’s principal obligation under cl 27.4 is for the CFA to train and deploy an additional 342 firefighters over a six-year period. Clauses 27.4.3 and 27.4.4 are facilitative in that they provide that the principal obligation is to be met by training and deploying 90 firefighters a year (through a minimum of three recruit training courses per annum with a minimum of 30 recruits in each course). They provide a timetable for the achievement of the principal obligations. If the CFA had complied with cll 27.4.3 and 27.4.4 it would have trained and deployed an additional 342 firefighters in just under four years.

47    The CFA submits that its obligation to seek its employees’ approval for variations to Schedule 1 to record deployments of firefighters in the preceding year (cl 27.4.7) is merely facilitative because it simply records that the deployments have taken place. In my view the purpose of cl 27.4.7 extends beyond merely creating an administrative record. At least from the UFU’s perspective, the purpose of the clause includes recording the deployments of firefighters by way of variation of the Agreement, so that an enforceable obligation is created to maintain those positions into the future. It appears, although I do not purport to decide this question, that the number of positions in Schedule 1 cannot be varied or reduced without an agreed variation to the Agreement.

48    The UFU submits that the contravening conduct strikes at the heart of enterprise bargaining under the FW Act. It argues that when the Agreement was made the parties formally recorded their acknowledgement of the importance of the additional staffing and the relevance of additional firefighters in protecting employee health, safety and welfare. It says that the importance of cl 27.4 is underlined by the requirement under cl 27.4.7 that the deployment of firefighters be recorded by variation of the Agreement. It argues that notwithstanding the plain terms of cl 27.4 the CFA breached the Agreement and then breached the Agreed Resolution of the dispute in that regard.

49    There is force in the UFU’s submissions. Achieving productivity and workplace fairness through enterprise collective bargaining is one of the objects of the FW Act (s 3(f)), and it is a recipe for industrial disharmony if a party is permitted to simply walk away from a binding industrial agreement into which it has freely entered.

50    It is noteworthy that, other than stating that it reached the view that cl 27.4 was invalid and unenforceable, the CFA did not offer any explanation for its failure to conduct the recruitment courses or train the number of recruit firefighters as it had agreed. It offered no explanation for having entered into the agreed recruitment regime if its staffing requirements were other than as indicated in the Agreement. Nor did it offer any explanation for its failure to comply with the recruitment regime it accepted as part of the Agreed Resolution of the industrial dispute which arose from its refusal to comply with the Agreement.

51    This is not a case where the parties disagreed as to what had been agreed, or where the CFA did not comply with the Agreement because of a different understanding as to what it entailed. The CFA well understood its obligations under the Agreement (and the Agreed Resolution), but considered that it had a legal argument that the Agreement was unenforceable based on the principles in Melbourne Corporation and Re AEU.

52    The CFA submits that the contraventions should not be treated as serious because it had every reason to believe that the implied constitutional limitation on interference with the power of a State, including by reference to the decisions in Re AEU and Melbourne Corporation, meant that cl 27.4 was invalid and unenforceable. It submits that its legal position was not speculative, it was found to be correct at first instance, and that the issues decided by the Full Court had not previously been the subject of judicial consideration.

53    I do not accept this submission. I say this, first, because the breach of the Agreement was deliberate and considered and the CFA put on no evidence to explain the reasons underpinning its decision to refuse to comply with an industrial agreement it had freely entered into. I do not accept the CFA’s submission that it cannot explain its decision because the relevant managers are no longer employed by it. I doubt that those witnesses are unavailable to the CFA and, in any event, it is likely that the reasons are recorded in the CFA’s files and it has chosen not to provide them to the Court.

54    Second, as the CFA sought, I infer that its decision not to comply with the Agreement was a considered one that was informed by legal advice. It is likely that such advice is recorded in correspondence and internal memos and held in the CFA’s records. The CFA did not put on evidence as to the legal advice.

55    In Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission (2003) 131 FCR 529; [2003] FCAFC 193 Wilcox, French and Gyles JJ considered whether it is appropriate to discount a penalty on the basis that the contravener had obtained legal advice that it would not be a contravention for it to act as it then did. Their Honours considered such advice should be given minimal weight and explained (at [308]-[310]):

…the contravening conduct was plainly and deliberately anti-competitive in its intent. It was conduct which, at least, ran a serious risk of being in breach of the Act. If this was appreciated, then the fact that the risk came home against expectations does not entitle the perpetrator to a discount. If the existence of the risk was not appreciated, then the company concerned misunderstood the law applicable to an important area of commerce and would not be entitled to any discount.

The fact that legal advice was obtained by one of the parties is also of little consequence. It illustrates that risk was appreciated. However, legal advice is obtained for the benefit of the company and only for the benefit of the company. It is not a discounting factor. If legal advice is wrong, that is a matter between the company and the legal adviser.

In our opinion, to give a substantial discount for these factors sends the wrong signal to the commercial community. It will encourage risk-taking and pushing the boundaries of anti-competitive conduct. If, nonetheless, a proceeding is instituted, it will encourage the most vigorous possible defence, in an endeavour to demonstrate the supposed complexity and uncertainty of the law… If a company ‘takes the odds’, it must expect serious consequences if it miscalculates.

(Emphasis added.)

See also Australian Competition and Consumer Commission v Anglo Estates Pty Ltd [2005] FCA 20 at [59] (French J as his Honour then was); Australian Competition and Consumer Commission v Cabcharge Australia Ltd [2010] FCA 1261 at [51] (Finkelstein J); Australian Competition and Consumer Commission v TPG Internet Pty Ltd (No 2) [2012] FCA 629 at [106] (Murphy J).

56    There is no proper basis to infer that the CFA received and acted on unequivocal legal advice that failing to comply with cl 27.4 involved no risk of contravening s 50 of the FW Act. In the circumstances it is more likely than not that the CFA took the odds in that regard. The correctness of its legal position revolved around complex constitutional and jurisdictional issues which it could not reasonably have seen as straightforward. It is axiomatic that the proper course was for it to seek a declaration of invalidity in relation to cl 27.4. Indeed, that is the course it took in relation to the other clauses of the Agreement which it challenged. Instead the CFA took the law into its own hands and it must have known that doing so involved a risk of contravention of s 50.

57    Third, it was wrong for the CFA to simply refuse to comply with the binding obligations under the Agreement. The appropriate course was for it to seek a judicial declaration that cl 27.4 is invalid. Absent such a declaration it was required to comply with the obligations into which it had freely entered.

58    In my view the CFA’s contravening conduct is serious, but the seriousness of the contraventions is reduced because it eventually met and exceeded its principal obligation under the agreed recruitment regime. It met and exceeded that obligation by training and deploying a total of 474 firefighters between 2011 and 2016, albeit doing so too slowly. The contraventions of cll 27.4.3 and 27.4.4 arise from the CFA’s failure to comply with the means of achieving its principal obligations. While the CFA was too slow in training recruits in the first, second and third years of the Agreement, it caught up in the fourth, fifth and sixth years. In the first three years it partially complied with its obligations rather than completely failing to meet them.

Whether the conduct was deliberate

59    The CFA submits that its conduct was deliberate in the sense that it chose to adopt a legal position which it believed was correct, but argues that it did not consciously choose to ignore the Agreement in the knowledge that its conduct was unlawful.

60    I do not accept the thrust of this submission. I infer that the CFA acted pursuant to legal advice but, as I have said, there is no proper basis to infer that it was unequivocally advised that refusal to comply with cl 27.4 would not constitute a breach of s 50. Further, its submission ignores the fundamental point that the course it took involved refusing to comply with obligations that have legislative effect into which it had freely entered. As I have said, if the CFA considered cl 27.4 to be invalid the appropriate course was to seek a declaration in that regard (as it did in relation to the other clauses in the Agreement which it challenged). By ignoring the Agreement and taking the law into its own hands it courted the risk of contravention.

The nature and extent of loss or damage sustained as a result of the breaches

61    No direct pecuniary loss or damage was suffered as a result of the contraventions. The UFU submits that there has been an erosion of confidence in the CFA’s willingness to comply with its voluntarily assumed obligations. The CFA argues that there is no evidence of an erosion of confidence, and no basis for this because any contravention of cl 27.4 was a manifestation of the legal position it adopted and it did not otherwise seek to avoid the binding obligations under the Agreement.

62    I doubt that the UFU and its members would have appreciated the legal niceties of the CFA’s position. Their understanding is likely to be at a more basal level having seen the CFA voluntarily enter into the Agreement, and then the Agreed Resolution, and then refuse to comply with either agreement. It is likely that the CFA’s conduct will have eroded the confidence of the UFU and its members in relation to the CFA’s willingness to comply with the Agreement and future industrial agreements.

63    The UFU also contends that the CFA’s failure, prior to 1 September 2015, to seek its employees’ consent to vary Schedule 1 of the Agreement to record deployments in the preceding year shows a lack of willingness to comply with the Agreement. I am not, however, persuaded that that has the significance for which the UFU contends. The CFA sought its employees’ consent to vary Schedule 1 on 19 June 2015 and while it did not do so again before 1 September 2015 that failure can only relate to any deployments in the two and a half month period between 19 June and 1 September2015. There is no evidence that there were further deployments of firefighters in that period.

Whether the conduct persisted over a period of time

64    The CFA’s conduct in breach of cl 27.4.7 persisted from early 2012 until after the Full Court decision in January 2015. The CFA did not explain why it then waited from January 2015 until June 2015 to seek the approval of its employees to vary Schedule 1 of the Agreement. The CFA’s conduct in breach of cll 27.4.3 and 27.4.4 did not continue after 2013.

Whether senior management were involved in the breaches

65    I infer that the decisions which led to the contraventions were made at a senior level. They are likely to have involved the Chief Fire Officer.

Prior relevant conduct

66    There is no suggestion that the CFA has previously contravened workplace laws.

The size and financial position of the contravener

67    The evidence shows that the CFA is a large corporation with substantial financial resources. In 2010-11 the CFA had total annual revenue of approximately $466.5 million: see the primary judgment at [83].

The requirement for deterrence

68    The CFA submits that there is no need for specific deterrence in the “unique circumstances” of the case. It says that the circumstances of this case are unlikely to be repeated and that it has accepted the Full Court’s decision. It notes that it has met and exceeded its principal obligation to recruit and train 342 new firefighters in the six year period required by the Agreement.

69    Viewed broadly, the circumstances of the case are not unique. It is, unfortunately, not unusual for a party to an industrial agreement to reach the view that parts of an agreement are, for one reason or another, invalid or unenforceable. The options for such a party include to accept that it freely entered into that obligation and stick with the agreement it had made, to apply for a declaration to the effect that the agreement is invalid, or to refuse to comply with the agreement thereby forcing the other party to litigate to vindicate its rights under the agreement. In my view the CFA made a considered decision to refuse to comply with the Agreement and took the law into its own hands. There is no love lost between the CFA and the UFU and it is appropriate to set a penalty at a level that deters it from again using its position of power to ignore its obligations in this way.

70    The CFA also submits that the requirement for general deterrence does not necessitate a heavy sanction. It argues that the decision of the Full Court corrects the legal position it adopted and is an appropriate admonition for its conduct. It also says that its contraventions were premised on a legal position which has little or no application beyond State entities of its type, and that the Full Court decision will achieve everything the Court could hope to achieve in terms of discouraging conduct of this type.

71    I accept that the Full Court decision is likely to discourage State entities from taking the same position as the CFA, but it is incorrect to describe the requirement for general deterrence in such limited terms. There is a need to discourage parties, not just State entities, to industrial agreements approved under the FW Act from refusing to comply with their obligations because they consider they have an argument that the obligation is invalid or unenforceable. There is a need to discourage parties from taking the law into their own hands rather than applying for a declaration of invalidity.

The appropriate penalty

72    The CFA is liable for two contraventions. It submits that the appropriate penalty is in the range of:

(a)    $10,000-$15,000 in respect of the alleged contraventions of cll 27.4.3 and 27.4.4; and

(b)    $1000-$5000 in respect of the alleged contravention of cl 27.4.7.

This would lead to a total penalty of $11,000-$20,000.

73    The UFU submits that each contravention should be assessed at 80% of the maximum, which would mean a penalty of $40,800 for each contravention. It seeks penalties based upon three contraventions which would provide a total penalty of $122,400. As I have said I consider it appropriate to assess the penalty on the basis of two contraventions. On this basis the UFU’s approach would lead to a total penalty of about $81,600.

74    By a process of instinctive synthesis, having regard to the entirety of the CFA’s contravening conduct and the considerations I have set out, I consider it appropriate to impose a penalty of $35,000 for the CFA’s course of conduct in contravening cll 27.4.3 and 27.4.4 of the Agreement and $15,000 for contravening cl 27.4.7, for a total penalty of $50,000.

75    This penalty is sufficient to meet the principal objectives of deterrence, both general and specific. This is the CFA’s first contravention of workplace laws but it is large and financially strong and the penalty should be set at a level which will deter it from again taking matters into its own hands. Considering the CFA’s size and financial strength I am of the view that imposing a lesser penalty would not have a sufficient deterrent effect upon it. It is also important that the penalty is not such that other parties to industrial agreements might consider contraventions of this nature to be just a cost of doing business or of industrial disputes. A penalty of this magnitude will deter others from similar contraventions.

76    Such a penalty reflects the Court’s condemnation of the CFA’s conduct in taking matters into its own hands rather than applying to the Court for a declaration of invalidity, but also recognises that it ultimately met its principal obligation to train and deploy 342 firefighters over six years. Stepping back from the penalty I am satisfied that it is just and appropriate having regard to the totality principle.

Payment of the penalty to the UFU

77    The Court has power pursuant to s 546(3) of the FW Act to order that the penalty be paid to the UFU, and the CFA does not oppose such an order. In my view such an order is appropriate in circumstances where the UFU brought the proceeding to protect the interests of its members: see Finance Sector Union v Commonwealth Bank of Australia (2005) 224 ALR 467; [2005] FCA 1847 at [63]-[71] (Merkel J); Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v QR Limited (No 2) [2010] FCA 652 at [81]-[85] (Logan J).

Associate:

Dated:    22 December 2017