FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Lohr [2018] FCA 5

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    Orders 1, 5(a) and 6 of the Federal Circuit Court of Australia made on 28 February 2017 be set aside.

3.    The proceeding be remitted to the primary judge for rehearing in accordance with the reasons of this Court.

4.    There be no order as to costs.

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

REASONS FOR JUDGMENT

BROMWICH J:

1    This is an appeal from orders made on 28 February 2017 by a judge sitting in the Fair Work Division of the Federal Circuit Court of Australia. The primary judge had before him an application and statement of claim filed by the appellant, the Fair Work Ombudsman (FWO), concerning alleged contraventions of civil penalty provisions of the Fair Work Act 2009 (Cth) (FW Act). The live issues in this appeal concern whether the primary judge erred in:

(1)    treating declarations made in the proceedings as a consequence of default by a respondent by non-compliance with orders, as not being binding on a non-defaulting respondent, by reason of the terms of rr 13.03A(2) and 13.03B(2)(c) of the Federal Circuit Court Rules 2001 (Cth);

(2)    treating 12 (or, alternatively, nine) classes of contraventions, which had already been “grouped” by the operation of s 557 of the FW Act by reference to separate award requirements, as a single contravention with a single maximum penalty.

Overview

2    The respondents before the primary judge were, first, a company and, second, Mr John Lohr, who was the sole respondent in this appeal. It was not in dispute that Mr Lohr was the guiding mind of that company and of a prior company, with principal responsibility for the direction, management and supervision of both companies in relation to employment arrangements, including, in particular, pay rates, wages and other conditions, and the rostering, supervision and payment of employees.

3    The two companies conducted business and employed workers in the security industry during the following consecutive periods:

(1)    the first company, Safecorp Security Pty Ltd (ACN 212 537 746) (Old SSG), between 19 November 2010 and 31 August 2012, going into external administration on 31 August 2012; and

(2)    the second company, Safecorp Security Group Pty Ltd (ACN 212 537 746) (New SSG), between about 1 September 2012 and 29 January 2013.

4    The case brought by the FWO alleged that both Old SSG and New SSG had paid employees at a flat rate of pay, without regard to their entitlements under the Security Services Industry Award 2010 (Cth), being a modern award under Part 2-3 of the FW Act. As a result, it was alleged that Old SSG had underpaid 25 employees and New SSG had underpaid 42 employees (including 19 former Old SSG employees), contrary to 12 different award terms and over multiple days, amounting to hundreds of individual underpayments. The alleged underpayments mostly concerned casual loadings, allowances, penalty rates and overtime. The underpayments were alleged to constitute contraventions of the civil penalty provisions in the FW Act requiring compliance with those award terms. Mr Lohr was alleged to be involved in, and thereby to have committed, the same contraventions.

5    The FWO commenced proceedings on 3 October 2013 against only New SSG and Mr Lohr, with Old SSG having been deregistered by then. Procedural orders were made, inter alia, for the filing of defences. Mr Lohr complied, filing a mostly regular defence in which he admitted that the payments had been made, but pleaded that he could not admit that this constituted any underpayment because he did not have access to the company records. A pleading that does not admit by reason of not knowing is deemed to be a denial: see r 16.07(3) and (4) of the Federal Court Rules 2011 (Cth), as applied to the Federal Circuit Court by r 1.05(3)(b) and Schedule 3, Part 2, item 10 of the Federal Circuit Court Rules.

6    New SSG did not file a defence as ordered. The FWO therefore brought an application in a case for summary judgment. It was not in dispute before the primary judge that the application was served on both New SSG and Mr Lohr. Neither New SSG nor Mr Lohr appeared at the hearing of the application. On 7 November 2014, his Honour made declarations in the proceedings of contraventions by New SSG and ordered New SSG to pay outstanding wages, interest and related orders. The declarations were as follows:

1.    The first respondent [New SSG] contravened the following provisions of the Fair Work Act 2009 (Cth) (FW Act):

a.    Section 45 of the FW Act by failing to pay a casual loading pursuant to clause A.5.4 of Schedule A of the Modern Award to the nine Safecorp Security Group Pty Ltd (SSG) Casual Loading Employees;

b.    Section 45 of the FW Act by failing to pay a broken shift allowance pursuant to clause 15.6 and subclause 15.1(a) of the Modern Award to the four SSG Broken Shift Employees;

c.    Section 45 of the FW Act by failing to pay the Night Shift Penalty for night shift work pursuant to clause 22.3 of the Modern Award to the nineteen SSG Night Shift Employees;

d.    Section 45 of the FW Act by failing to pay the Permanent Night Shift Penalty for permanent night shift work pursuant to clause 22.3 of the Modern Award to the twenty-nine SSG Permanent Night Shift Employees;

e.    Section 45 of the FW Act by failing to pay the Saturday Penalty for hours worked on a Saturday pursuant to clause 22.3 of the Modern Award to thirty-seven SSG Saturday Employees;

f.    Section 45 of the FW Act by failing to pay the Sunday Penalty for hours worked on a Sunday pursuant to clause 22.3 of the Modern Award to the thirty-four SSG Sunday Employees;

g.    Section 45 of the FW Act by failing to pay the Public Holiday Penalty for hours worked on a public holiday pursuant to clause 22.3 of the Modern Award to the fourteen SSG Public Holiday Employees;

h.    Section 45 of the FW Act by failing to pay overtime rates of pay for overtime hours of work pursuant to clause 23.3 of the Modern Award to:

i.    the seven SSG Monday to Friday Overtime Employees;

ii.    the four SSG Saturday Overtime Employees;

iii.    the seven SSG Sunday Overtime Employees; and

iv.    the two SSG Public Holiday Overtime employees;

i.    Section 536(1) of the FW Act by failing to issue pay slips to Mr Mark Allen Garland and Mr Mark Alexander Wellstead within one working day of paying an amount to them in relation to the performance of work.

7    The proceedings were listed for the hearing of the outstanding part of the FWO’s claim, which sought to have civil penalties imposed on both New SSG and Mr Lohr. That hearing took place on 14 May 2015. By that time, New SSG had also been deregistered, making Mr Lohr the only active respondent. Page 3 of the transcript of that hearing records an exchange between the primary judge and counsel then appearing for the FWO (who was junior counsel being led in this appeal) which, on its face, appears to entail his Honour at least raising a doubt as to whether the declarations could be relied upon in the case against Mr Lohr. His Honour’s reasons reproduce the material parts of the exchange at [92].

8    It appears that counsel did not understand the primary judge to be effectively imposing a requirement on the FWO to adduce evidence of the contraventions by New SSG (as was done in respect of Old SSG), rather than simply relying on the declarations reproduced above. The primary judge also appeared to be less than certain as to what had taken place at the 14 May 2015 hearing, because the reasons for judgment record that it was only after reserving judgment that it became apparent to his Honour that the FWO had proceeded upon the assumption that the declarations bound Mr Lohr. The matter was relisted and the parties were told of his Honour’s view, as recorded in the subsequent reasons at [7], that “a default judgment entered against one or more respondents is not binding on the respondent who is not in default”. The FWO was directed to file an application in a case seeking leave to reopen so as to adduce evidence of the alleged contravention by New SSG.

9    The FWO’s application to reopen was heard on 31 August 2015. In the final orders disposing of the matter, leave to reopen was refused, with reasons given as considered further below. During the course of the hearing of the application to reopen, a detailed exchange took place between the primary judge and counsel for the FWO, the substance of which was an assertion by the FWO that the declarations made against New SSG were binding upon Mr Lohr. Counsel for the FWO submitted that Mr Lohr’s remedy was to appear at the hearing of the application for default judgment and oppose the declarations being made, upon the ground that they would be binding upon him and, accordingly, that the issue of declaration of the contraventions should await the outcome of his trial. It does not appear that the option of setting aside the declarations was raised.

Grounds of appeal

10    The FWO’s notice of appeal contains the following grounds:

Order 1 — Applicant’s application for leave to reopen its case

1.    In determining at [100] not to allow the Appellant to reopen its case, his Honour erred in failing to have regard to a relevant fact, namely that until otherwise determined by the Court, it was open to the Appellant to rely on the declarations made by the Court on 7 December 2014.

The following grounds of appeal are made further or in the alternative to Ground 1:

Order 5(a) — penalties payable by Mr Lohr for his involvement in 12 contraventions of s 45

2.    Having determined at [132] to treat the multiple contraventions of Safecorp Security Pty Limited (in liq) ACN 121 537 746 (old SSG) as 12 contraventions, by application of subsection 557(1) of the Fair Work Act 2009 (Cth), his Honour erred at [139] in determining that those 12 contraventions should be treated as one contravention.

3.    Further to Ground 2, his Honour erred at [139] by determining to assess the penalty for Mr Lohr’s involvement in old SSG’s contraventions of section 45 of the FW Act as if they constituted a single contravention.

4.    In the alternative to Grounds 2 and 3, his Honour erred at [155] in determining that a penalty of $5500 be imposed on Mr Lohr as a consequence of his involvement in old SSG’s contraventions of section 45 of the FW Act, as that penalty was, in all the circumstances, manifestly inadequate.

Order 6— penalties payable to the Commonwealth

5.    Consequential to Grounds 2 and 3 or in the alternative to Ground 4, his Honour erred in determining at [156] that Mr Lohr should pay the pecuniary penalties to the Commonwealth rather than to the old SSG employees.

11    Ground 5 had no independent life. It was only if one or more of the other grounds succeeded, and the matter was remitted, that this could change. The primary judge’s reasons for ordering Mr Lohr to make payment of the civil penalties to the Commonwealth, instead of to the underpaid employees, was that the amounts involved would be too low to warrant individual payments. That would require a redetermination in the event of remittal, because the final amounts could be much larger after a rehearing, removing that as an impediment to individual payments being ordered to be made.

Ground 1 – leave to reopen the FWO case

12    This ground of appeal, as stated, is apt to mislead as to the real issue raised and requiring determination. Appeals must be from orders (and/or declarations) and not just from reasons: Qube Ports Pty Ltd v McMaster [2016] FCA 59 at [18]-[19], citing Maughan Thiem Auto Sales Pty Ltd v Cooper [2013] FCAFC 145; 216 FCR 197 at [1], [46]. The primary judge made no order or declaration that the FWO could not rely upon the declarations in its case against Mr Lohr. However, the FWO asserted that the order refusing her leave to reopen, and his Honour’s requirement that she obtain leave in the first place, was infected by error because of the binding effect of the declarations on Mr Lohr, contrary to his Honour’s antecedent finding. I am satisfied that if the FWO’s argument as to the binding nature of the declarations is successful, that does sufficiently infect the order appealed from, as it was an indispensable part of the reasons for both requiring leave and ordering that leave be refused. Ground 1 was, in substance, an appeal against the order that the application by the FWO to reopen her case be dismissed, albeit with a complaint that not only should the application not have been refused, but no obligation to apply for leave to reopen should have been imposed in the first place.

13    It is convenient to reproduce in full the primary judge’s reasons grounding the conclusion that the declarations were not binding on Mr Lohr as follows:

Are the Declarations binding on Mr Lohr?

70.    Counsel for the FWO submitted Mr Lohr is bound by the Declarations. Counsel relied on the following matters:

a)    Mr Lohr was given notice of the application for default judgment, but he elected not to appear and oppose that application;

b)    the Declarations are final, binding and conclusive as to SSG’s contraventions of the FW Act;

c)    Mr Lohr was properly joined as a party and is bound by the Declarations.

71.    Counsel also relied on what undoubtedly are correct propositions of law. At least where default judgment has been entered for a defendant’s failure to plead to a statement of claim, the defendant in default, by failing to plead, is deemed to have admitted each allegation made in the statement of claim; a positive declaration gives rise to a res judicata and to issue estoppel; and a default judgment gives rise to an issue estoppel to the same extent as a judgment entered after a contested hearing. These principles, however, say nothing about whether a default judgment entered against one of two respondents in circumstances where the other respondent has filed a defence is binding on the party who filed a defence.

72.    The starting point in determining whether the Declarations are binding on Mr Lohr is the text of r.13.03B(2)(c) of the FCC Rules, being the rule pursuant to which I made the Declarations. The text is as follows (emphasis added):

If a respondent is in default, the Court may:

. . . .

(c)    if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings – give judgment against the respondent for the relief that:

(i)    the applicant appears entitled to on the statement of claim; and

(ii)    the Court is satisfied it has power to grant; . . . .

73.    Rule 13.03A(2) of the FCC Rules defines when “a respondent is in default”; and that consists of seven things “the respondent” may fail to do (at least where the respondent has not satisfied the applicant’s claim).

74.    It will be seen that the power to give judgment that is conferred by r.13.03B(2)(c) of the FCC Rules is engaged when “a respondent” is in default; and the power, when engaged, is to give judgment against “the respondent”, that is, the respondent who is in default. The rule does not authorise the Court to give judgment against a respondent who is not in default. In those circumstances, the deemed admissions by the defaulting respondent that arises on the giving of default judgment against that respondent cannot operate as a deemed admission by the respondent who has not defaulted.

75.    There are at least two considerations that support the plain meaning of the text of r.13.03B(2)(c) of the FCC Rules. First, where the non-defaulting respondent has filed a defence that has put in issue one or more of the allegations made in the statement of claim, there would be no room for any deemed admission to operate in relation to the allegations made in the statement of claim the non-defaulting respondent has not admitted or denied. That is because the non-defaulting respondent will have expressly identified the allegations the respondent does not admit. Second, if, as the FWO submits, the non-defaulting respondent who has been notified of an application for default judgment against the defaulting respondent should oppose the giving of a default judgment if he or she wishes to avoid being deemed to admit allegations made against the defaulting respondent, it must follow that where such respondent has an arguable defence the Court will be bound not to grant default judgment against the defaulting respondent until after the claims against the non-defaulting respondent has been heard and decided. That is not a result that could reasonably be imputed to the framers of the FCC Rules.

76.    Thus, to the extent the FWO did not adduce evidence of SSG’s contraventions of s.45 of the FW Act, it will be necessary for her to apply for leave to reopen her case.

14    Senior counsel for the FWO submitted that the primary judge erred in failing to appreciate that the FWO had been entitled to rely on the declarations in her case against Mr Lohr at least until they were set aside. The reason for this is that the declarations were final orders, operating as a res judicata or issue estoppel against all parties to the proceedings. It was submitted that Mr Lohr was a party to the proceedings in which the declarations were made, even if he chose not to appear on the application for those declarations, and that, as such, they were binding upon him, citing Australasian Oil Exploration Ltd v Lachberg (1958) 101 CLR 119 at 113-114, the Full Court decision in Martin v Taylor [2000] FCA 1002 at [32] and the decision of Edelman J in Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825; 329 ALR 1 at [942]-[944].

15    The passages in Mineralogy upon which the FWO relied were specifically affirmed by the Full Court in Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55 at [433]. In reaching that conclusion, the Full Court at [427] also quoted the following pertinent passage from the Full Court decision in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 525, dealing with the collateral impact of orders made on both parties and non-parties to litigation:

Where, before trial, a question arises whether a necessary party has been joined, attention should be directed to the orders sought in the proceedings. It is the effect of the orders upon the third party that must be determined. The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between those parties. Where the question arises after final orders have been made in the proceedings, the enquiry must be directed to orders actually made, or which, on appeal it is contended should be made …

16    Senior counsel for the FWO further submitted that, even though there was no appeal from the decision to make the declarations, if the primary judge formed the view that, in the circumstances, the declarations should not have been made because they prejudiced Mr Lohr, his Honour could have set them aside under r 16.05(2) of the Federal Circuit Court Rules, especially paragraph (e). In those circumstances, it was submitted that the FWO was entitled to rely on the declarations and, further, to proceed upon the basis that she did not need to tender evidence to prove the contraventions by New SSG as against Mr Lohr, but rather only such evidence as was necessary, beyond the admissions in the pleadings, to prove that Mr Lohr was “involved in” those contraventions.

17    It was also submitted on behalf of the FWO that, upon the primary judge taking a different view, his Honour ought to have permitted her to reopen her case to allow her to tender evidence that would prove the contraventions. The applicable test for the FWO’s application for leave to reopen was whether it was in the interests of justice to grant that leave, citing the decision of the New South Wales Court of Appeal in Urban Transport Authority (NSW) v Nweiser (1992) 28 NSWLR 471 at 478 and the decision of Edelman J in Mbuzi v AGL Retail Energy Ltd [2016] FCA 590 at [27]. It was submitted that the primary judge erred in failing to find that it was in the interests of justice to allow the FWO to reopen its case, because of the antecedent error of the declarations being held not to be binding on Mr Lohr. It was further submitted that granting leave was, in any event, in the interests of justice because:

(1)    the evidence that the FWO sought to tender was limited to source documents that had been relied upon to calculate the underpayments giving rise to the contraventions committed by New SSG, and was not initially tendered because the declarations had been made;

(2)    Mr Lohr ultimately did not object to the application to tender the evidence and did not identify any relevant prejudice or detriment if the application for leave to reopen was granted;

(3)    at the time that the primary judge heard the application for leave to reopen, New SSG had been deregistered without complying with orders 2 and 3 made on 7 November 2014, and a number of persons therefore missed out on the benefit of the Court’s orders that were essentially in their favour; and

(4)    there was, in all the circumstances, a significant risk that a contravention of the FW Act involving the protection of minimum entitlements of employees would escape any effective sanction.

18    Finally, it was submitted on behalf of the FWO that the primary judge’s erroneous understanding of the consequences of making the declarations meant that the exercise of the discretion in relation to the grant of leave miscarried. It was submitted that the FWO should have been granted leave to reopen its case to tender evidence of contraventions by New SSG.

Consideration of ground 1

19    It is convenient to reproduce my prior summary of the law in relation to declarations in the specific context of a default judgment application in Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd (No 4) [2016] FCA 867; 120 IPR 133 as follows:

76    The traditional reluctance to grant declaratory relief other than on the basis of evidence, largely because of the concern of giving an impression of adjudication by a court, is not reflected in the terms of r 5.23(2)(c) [of the Federal Court Rules 2011 (Cth), relevantly equivalent to r 13.03B of the Federal Circuit Court Rules 2001 (Cth)]. That restriction and thereby refusal by courts in the past to make declarations in cases of default and resultant deemed admissions was based on a practice rather than a rule of law: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (ACN 075 400 529) [2006] FCA 1427; 236 ALR 665 at 679-681 [52]–[59], especially [58]; endorsed in Bank of Kuwait and the Middle East v Ship MV “Mawashi Al Gasseem” (No 2) [2007] FCA 815; (2007) 240 ALR 120 at 123 [15] and in Yeo v Damos Earthmoving Pty Ltd, Re Beachwood Developments Pty Ltd (in liq) [2011] FCA 1129 at [16].

77    It nonetheless remains the case that declaratory relief must focus on the determination of legal controversies, not abstract or hypothetical questions. Declaratory relief is not appropriate for circumstances that have not occurred and might never happen, or if a declaration will produce no foreseeable consequences for the parties: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582.2.

78    Care needs to be taken in granting declaratory relief which affects other parties because it may be incorrectly taken to have been made following adjudication by the Court on the merits, rather than being as a result of a default judgment. It follows that declaratory relief should be confined to the proceedings and the parties at hand: see Bank of Kuwait at 126 [25].

79    It appears to have been established that a declaration usually cannot be made in the absence of a contradictor. This long-standing position was considered by the High Court in Forster v Jododex Australia Pty Limited (1972) 127 CLR 421 at 437-8, in which it was found “in general” to be a requirement to be satisfied before the discretion is exercised. However, this is not as onerous as it first appears when regard is had to what is meant by the presence of a contradictor. For the reasons that follow, it does not even mean that a contradictor appears at the hearing of the application, let alone that such a party opposes the making of declarations. Consent is no barrier to relief being granted.

80    The Full Court considered the requirement of a contradictor in Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56; (2012) 201 FCR 378 in the context of the grant of power in s 21 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act). Their Honours noted at 382 [14] that “[t]here is a difference between having an interest to oppose the granting of declaratory relief and, having that interest, choosing whether or not to oppose the granting of that relief”.

81    The Full Court in MSY Technology held at 387 [30] that the requirement for a contradictor was met if there is a party who had an interest to oppose the declaratory relief sought. This was necessary as well because it went to the existence of federal jurisdiction to exercise the power under s 21 of the Federal Court Act, due to the jurisdictional need for a controversy between the parties, even if resolved after commencement of proceedings: MSY Technology at 385 [20].

82    I interpret the requirement for no more than a joined party having an interest to oppose declaratory relief as encompassing a range of responses from a respondent, from outright opposition, to not turning up despite knowing that a declaration was to be sought, especially if there was precise knowledge of the date of the hearing of the application. It cannot be that a choice made not to participate puts a respondent in a better position than one who attends and presents arguments against relief being granted. Fortunately, that was not a question that I had to resolve as both parties were represented at the hearing of the application for default judgment by solicitors and counsel.

20    The paragraphs of the Full Court decision in MSY Technology cited and partly quoted above warrant reproduction as follows:

14    In the passage from the speech of Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd, set out above in the quote from the judgment of Gibbs J in Forster v Jododex, His Lordship explained that a proper contradictor was “someone presently existing who has a true interest to oppose the declaration sought”. There is a difference between having an interest to oppose the granting of declaratory relief and, having that interest, choosing whether or not to oppose the granting of that relief. The ACCC submitted that only the former, not the existence of actual opposition by a person having an interest to oppose, is a necessary prerequisite for the granting of declaratory relief.

…

30    Subject to one qualification, we agree with the observation made by the primary judge. The qualification is that we would not, with respect, describe the joint judgment of Keely and Beaumont JJ in B.M.I. as “analytically opaque”. Nonetheless, to the extent that the statement in the joint judgment of Keely and Beaumont JJ suggests that the absence of opposition by an interested party to the declaratory relief sought means that there is no proper contradictor and that this disentitles an applicant to a grant of declaratory relief, it evidences a misunderstanding of the explanation given by Lord Dunedin in his speech in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd, adopted by Gibbs J in Forster v Jododex. The correct position is as opined by Dawson J in Oil Basins and by French J in IMF (Australia) Ltd v Sons Of Gwalia in the passages quoted above. In this case, the MSY parties had an interest to oppose the declaratory relief sought. That was sufficient to make them a proper contradictor. There was no want of power to grant declaratory relief. Rather, the question was whether, in light of the events which had transpired, which relevantly included a lack of any continued opposition to the declaratory relief sought, that relief ought still to be granted as a matter of discretion. B.M.I. should be understood as a case where, because the question of the invalidity had become academic, that discretion had been exercised so as to refuse the declaratory relief sought. As the passage from their Honours’ joint judgment reveals, that was an additional basis upon which Keely and Beaumont JJ refused the application for declaratory relief.

…

35    As has been rightly said, “The remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment”: Warramunda Village Inc v Pryde (2001) 105 FCR 437 at [8]. There must be some utility in the granting of declaratory relief. In Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [95] (Rural Press) Gummow, Hayne and Heydon JJ saw that utility in the setting out of the basis of the liability found and, in turn, in the basis for the penalties imposed. There is a similar utility here. Further, the declarations which the parties proposed do not, in contrast with those remarked upon in Rural Press, possess the vice of imprecision as to the way in which the statute was contravened.

21    As both the transcript of the hearing of the application for leave to reopen the FWO’s case and [70] of the primary judge’s reasons above make clear, there was no issue of Mr Lohr not being served with the default judgment application, which made it clear that the making of the declaration was sought. It was plain that the declarations were directly against his interests, because they were the very contraventions by New SSG that he was alleged to have been involved in. Notably, Mr Lohr was not legally represented by the time the application for the default judgment was served upon him, and he indicated at the hearing of the appeal the personal difficulties he was experiencing at the time (although this was not the subject of evidence, nor was there any dispute that this was so). However, that cannot stand in the way of the lawful advancement of legal interests, especially when there are important public interests involved when it comes to enforcement of minimum workplace legal requirements. Mr Lohr was given the opportunity to appear and oppose the making of declarations that were plainly against his interests. He was therefore a contradictor in the sense necessary for the lawful making of the declarations. No suggestion was made to the contrary.

22    Given the weight of the authority that suggests that declarations are binding on all parties to a proceeding provided that they have been given an opportunity to be heard, the only barrier to that legal position applying in this case was the reasoning of the primary judge as to the effect of rr 13.03A(2) and 13.03B(2)(c) of the Federal Circuit Court Rules. With the utmost respect to his Honour, proper inquiry was not directed to the operation of the rules of Court in relation to how a default judgment can be entered, including as to orders and declarations, but, rather, was directed to the legal effect of a declaration once made, relying upon the terms of those rules. The trigger mechanism for making such declarations does not and cannot operate to confine their legal effect and impact. That will always turn on the face of the order or declaration that has been made, and is sometimes a reason for varying or setting aside such an order or declaration because of a failure to properly reflect the intention of the Court. To operate otherwise would be to introduce uncertainty as to the meaning of an order or declaration once made.

23    The scope for error or injustice is an important part of the reason why rules of procedural fairness, and other rules relating to the process leading to the making of declarations, must be carefully observed. A problem of the kind that arose in this case may be a potent reason for declining to make such declarations, or for setting them aside once made. However, the rules of Court relied upon by the primary judge are incapable of limiting the scope of such declarations once made. Very clear language would be required to change, in such a fundamental way, the law relating to declarations. The rules of Court relied upon by his Honour to imply a limitation foreign to the law of declarations do not meet that description.

24    For completeness, the error of denying reliance on the declaration infected the decision to refuse leave to reopen. If, contrary to the primary conclusion, the declarations were not binding on Mr Lohr, there was at least a sound basis for forming a different view, making it in the interests of justice that the FWO be given an opportunity to prove the contraventions in lieu of relying upon the declarations. In those circumstances, the appeal on this ground should be upheld and the decision to refuse leave to reopen should be set aside.

Grounds 2 and 3 – error in treating multiple groups of contraventions as a single contravention and assessing the applicable penalty on that basis

25    These grounds can conveniently be dealt with together. The FWO did not take issue with the way in which the primary judge applied s 557 of the FW Act to group the contraventions in relation to multiple employees over time by reference to the different types of award entitlement, albeit that below and on appeal, it was submitted that the four types of overtime entitlement gave rise to a single contravention, rather than four separate contraventions. This produced nine groups of contraventions, rather than the 12 referred to by the primary judge. It is not necessary to consider that difference further beyond noting it and proceeding upon the basis of the smaller number of nine grouped contraventions asserted by the FWO, as that is the approach most favourable to Mr Lohr.

26    The critical error asserted by the FWO was that the primary judge, after the correct application of s 557 by reference to classes of entitlement, erred by further aggregating those nine groups of contraventions (his Honour referred to 12) and treating them as a single accessorial contravention by Mr Lohr, with a single maximum penalty of $6,600, instead of continuing to treat them as nine contraventions with nine times that maximum, which would produce an overall maximum penalty of $59,400. The FWO contended that, once individual penalties for the nine groups of contraventions were arrived at, the final overall penalty could then be adjusted by the application of the totality principle: see Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113 at [116]-[121].

27    The primary judge’s rationale for treating the nine groups of contraventions as a single contravention was as follows (emphasis in original; footnotes omitted):

136.    As I have noted elsewhere, even where s.557(1) of the FW Act does not apply, it may be permissible when assessing a pecuniary penalty to consider whether a person’s multiple contraventions occurred as part of a single course of conduct. It may be permissible under a sentencing principle that is referred to as the “one transaction principle”. Owen JA stated that principle in Royer v Western Australia as follows:

At its heart, the one transaction principle recognises that, where there is an interrelationship between the legal and factual elements of two or more offences with which an offender has been charged, care needs to be taken so that the offender is not punished twice (or more often) for what is essentially the same criminality. The interrelationship may be legal, in the sense that it arises from the elements of the crimes. It may also be factual, because of a temporal or geographical link or the presence of other circumstances compelling the conclusion that the crimes arise out of substantially the same act, omission or occurrences.

137.    The principle was stated by Lockhart J in the context of the imposition of penalties for contraventions of provisions of the Trade Practices Act 1974 (Cth) in Trade Practices Commission v Bata Shoe Company of Australia Pty Ltd:

Guidance is given in the field of sentencing for criminal offences by the well-known principle that where several offences are heard together and arise out of the same transaction it is a sound working rule that the sentences imposed for those offences should be made concurrent; it is inappropriate to sentence consecutively when the offences were all really involved in the same episode…

138.    The one transaction principle was held to be relevant to the assessment of penalties under the Building and Construction Industry Improvement Act 2005 (Cth) which did not contain an equivalent provision to s.557(1) of the FW Act; and in Sayed v Construction, Forestry, Mining and Energy Union, Mortimer J held the principle applied to the assessment of penalties for contraventions of civil remedy provisions to which s.557(1) of the FW Act does not apply. After setting out a passage from the judgment of Wells J in Attorney-General (SA) v Tichy, Mortimer J said:

In fixing a penalty, just as imposing a sentence, the aim is, as Wells J observed, to “mould a just sentence for the conduct” found to have occurred, and where there are “truly two or more incursions into criminal conduct” to punish these incursions separately.

139.    As I have already found, the application of s.557(1) of the FW Act results in old SSG having engaged in 12 contraventions of s.45 and Mr Lohr’s being involved in those contraventions. The source of the contraventions, however, is the same. It consists in Mr Lohr concluding that paying employees a flat rate of $25 an hour would be sufficient to discharge old SSG’s obligations under whatever award applied to its employees. The acts constituting each of the 12 contraventions were also the same, namely, paying amounts calculated solely by reference to the $25 per hour rate without Mr Lohr making any attempt to calculate the precise amounts for which each old SSG Employee became entitled, depending on the day and time of day that employee performed work. For these reasons, I am of the opinion that old SSG’s 12 contraventions should be treated as one contravention; and I propose, therefore, to assess the penalty for Mr Lohr’s involvement in old SSG’s 12 contraventions of s.45 of the FW Act as if they constituted one contravention.

28    In challenging the above reasoning, and, in particular, the conclusion reached by the primary judge at [139], which resulted in further consolidation to a single contravention by Mr Lohr, senior counsel for the FWO placed reliance on Rocky Holdings Pty Ltd v Fair Work Ombudsman [2014] FCAFC 62; 221 FCR 153 at [10]-[18]. The net effect of those paragraphs relied upon was to reject a submission that where there were two or more contraventions of s 44(1) or (as in this case) s 45 of the FW Act by a respondent, s 557(1) operated so that each contravention of each provision was taken to constitute a single contravention. Section 557(1) did not operate at the level of those sections, but rather at the level of the discrete obligations required to be observed.

29    The Full Court in Rocky Holdings accepted a submission made by the FWO that one of the key objects of the FW Act was to ensure, through an effective penalty regime, compliance with minimum terms and conditions through the NES and modern awards. The purpose of s 557 was not simply to reduce the number of contraventions of a civil penalty provision to one where they arise from a course of conduct. If this was the purpose then it could very easily have been stated. Such an interpretation would undermine the purpose and deterrent effect of the enforcement regime under the FW Act, because the maximum amount of penalties available for multiple breaches of a diverse range of terms or provisions in industrial instruments and industrial legislation would be substantially reduced. Such a construction was not supported by the text of the FW Act. Rather, as their Honours pointed out at [13]:

The reference in s 557(1) to “a civil remedy provision referred to in subsection (2)” discloses that it is the provision which is relevant. Section 557(2) identifies each of ss 44(1) and 45 as a civil remedy provision. It is the substance of those provisions which create the proscriptions. … Section 45 proscribes contravention of a term of a modern award. … Section 557(2) should be recognised to be a form of definitions provision. It defines civil remedy provisions for the purposes of s 557(1). The function of s 557(2) is to indicate that when a provision is identified, it is the substance of the provision found elsewhere in the Act (in this case, in ss 44(1) and 45) which is the civil penalty provision. As the FWO put it in written submissions:

However, section 557 also operates on contraventions which relevantly occur when a term of an award or a provision of an NES is contravened. This now occurs indirectly through the operation of sections 44 and 45. In the case of s. 45 (for example), the contravention occurs when a term of a modern award is contravened. Thus the effect of subsection 557(1) in relation to contraventions of s. 45 is that:

… 2 or more contraventions of (a term of an award) are, subject to subsection 3, taken to constitute a single contravention …

The appellants [wrongly] construe s. 556 as if it said that 2 or more contraventions of an award or 2 or more contraventions of an NES are taken to constitute a single contravention.

30    The Full Court in Rocky Holdings at [14] embraced the following example from the Explanatory Memorandum for the Fair Work Bill 2008 (Cth), aided by the operation of s 15AB(1)(b) of the Acts Interpretation Act 1901 (Cth), as reflecting the true operation of s 557(1) of the FW Act:

For example, if a company contravenes a single term of a modern award in respect of ten employees, these ten contraventions are taken to be a single contravention. This means that the maximum penalty that the Court can impose for the contravention is 300 penalty units.

Similarly, if a company contravenes five separate terms of a modern award in respect of ten employees, these 50 contraventions are taken to be five contraventions. This means that the maximum penalty that the Court can impose is five times a maximum penalty of 300 penalty units.

31    The Full Court in Rocky Holdings also applied the reasoning in prior cases about the operation of historic provisions, to the same or similar effect as s 557(1) of the FW Act, as follows:

17    ... In Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 at 223 Gray J focussed attention on whether an offender has in substance committed a series of breaches which should not be punished separately as opposed to breaches of several different obligations and said:

The object of s 178(2) appears to be that a party bound by an award and pursuing a course of conduct involving repeated acts or omissions, which would ordinarily be regarded as giving rise to a series of separate breaches, should not be punished separately for each of those breaches. If such a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another. This reasoning leads to the conclusion that each separate obligation found in an award is to be regarded as a “term”, for the purposes of s 178 of the Act. The ascertainment of what is a term should depend not on matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out. For these reasons, I incline to the view that each separate obligation imposed by an award is to be regarded as a “term”, for the purposes of s 178 of the Act.

18    Buchanan J said something not dissimilar in Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No 2) [2012] FCA 408 as follows:

[2]    … However, s 719(2) of the WR Act provides that where two or more breaches of an “applicable provision” under the WR Act, which includes a term of an award, arise out of the same course of conduct, they are to be treated as a single breach. On one view, the failure to make any of the required payments arose from a single course of conduct. They all arose from a determination by the respondents that no payment would be made upon the termination of employment of any of the employees, or the employees as a group. However, this approach gives insufficient attention to the separate legal character of the three forms of obligation earlier identified. I am satisfied that each of those forms of obligation requires separate recognition. I am not, however, satisfied that each individual example of defiance of an obligation is permitted separate recognition. In my view the individual examples, constituted by the failure to make payments to particular individual employees, arise out of a course of conduct in each of the three instances. Any penalty must be assessed taking that into account.

[3]    This approach to the legislative scheme appears to me to be consistent with the approach taken in Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 and QR Limited v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (2010) 204 IR 142; [2010] FCAFC 150 on which both parties relied (see also Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v QR Limited (No 2) [2010] FCA 652 at [16]-[28]).

The object and purpose of provisions such as s 557 and its predecessor provisions is to ensure that an “offender is not punished twice for what is essentially the same criminality”. When considering the principles to be applied when imposing a penalty for contraventions of the Building and Construction Industry Improvement Act 2005 (Cth) Middleton and Gordon JJ in Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39, (2010) 269 ALR 1 stated the issue to be resolved in that appeal as follows:

[35]    The appellants submitted that the sentencing discretion miscarried because her Honour failed to consider a relevant matter (whether the three contraventions ought properly be seen as arising out of the one course of conduct) or because her Honour misdirected herself in the application of the “one course of conduct” or the “one transaction” principle…

In resolving that argument, their Honours concluded:

[39]    As the passages in Construction, Forestry, Mining and Energy Union v Williams (2009) 191 IR 445 explain, a “course of conduct” or the “one transaction principle” is not a concept peculiar to the industrial context. It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. 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. That requires careful identification of what is “the same criminality”, and that is necessarily a factually specific enquiry. Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions. …

32    Reliance was further placed by the FWO on a subsequent Federal Circuit Court decision in which the judge declined to follow the primary judge in this case, instead following Rocky Holdings: Fair Work Ombudsman v Mhoney Pty Ltd & Anor [2017] FCCA 811 at [17]-[28].

33    The written submissions for the FWO on these grounds summarised the error asserted to have been made by the primary judge as follows (emphasis in original; footnotes omitted):

24.    First, properly understood, the “one transaction” or “course of conduct” principle does not permit a sentencing judge to impose a single sentence for multiple contraventions on the basis that they formed part of a course of conduct, except where that is a course agreed or accepted by the parties. Absent a statutory provision that provides otherwise, a sentencing judge is required to impose a separate penalty for each contravention, having considered whether the penalties need to be adjusted to avoid the aggregate penalty being excessive. The Primary Judge did not do that.

25.    Second, s.557 of the Act is the express statutory manifestation of the one transaction or course of conduct principle. By enacting s.557 Parliament has determined how multiple contraventions arising from a course of conduct are to be treated. Having applied s.557 of the Act it was not open for the Primary Judge to further consolidate the 12 contraventions into one contravention by applying that principle, in effect, again.

34    Those submissions for the FWO should be accepted. Despite important factual differences between this case and Rocky Holdings, the Full Court’s decision in that case compels this outcome. Even if s 557 allows for the continued application of the course of conduct principle, which may be doubted, the application of s 557 to the facts of this case meant that there was no remaining work for the course of conduct principle to do. The fact of flat rates of pay cannot operate to deny the multiplicity of contraventions that this approach was found by his Honour to have produced. His Honour therefore erred in further consolidating the number of contraventions from 12 to one, noting, as already observed, that the FWO was content to proceed upon the basis of nine contraventions. These grounds of appeal must therefore succeed. Order 5(a) made by his Honour must accordingly be set aside.

Ground 4 – error in determining to impose penalty that was manifestly inadequate

35    As this ground was in the alternative to grounds 2 and 3, which have succeeded, this ground does not need to be adjudicated upon. The appropriate penalty upon remittal is a matter for the primary judge.

Ground 5 – error in ordering payment of penalties to the Commonwealth instead of the employees

36    As noted above, if one or more of grounds 1 to 4 succeeded, the factual substratum of order 6, on which ground 5 is based, would be swept aside. In light of grounds 1 to 3 having succeeded, the issue of order 6 should be re-determined at the rehearing that must now take place. This ground of appeal must therefore succeed and order 6 must be set aside.

Conclusion

37    The FWO’s appeal succeeds on grounds 1, 2, 3 and 5. Orders 1, 5(a) and 6 made by the primary judge on 28 February 2017 must be set aside and the matter must be remitted to his Honour for hearing and determination in accordance with these reasons. There should be no order as to costs.

Associate:

Dated:    12 January 2018