FEDERAL COURT OF AUSTRALIA

Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (No 2) [2019] FCA 938

ORDERS

THE COURT ORDERS THAT:

1.    The requirement of r 8.03(2) of the Federal Court Rules 2011 (Cth) be dispensed with, so that the applicant may rely upon the proposed relief set out in Attachment A to the applicant’s submissions filed 31 May 2019.

THE COURT DECLARES THAT:

2.    The fifth respondent (Prolac) contravened s 346 of the Fair Work Act 2009 (Cth) when on 16 February 2017, it terminated a contract for services it had with John Patsalas, because of or for reasons that included that, Mr Patsalas had not paid a fee to the first respondent (the CFMMEU) before 15 February 2017, and thereby engaged in industrial activity within the meaning of s 347(b)(vi) of the Fair Work Act (Prolac’s Contravention).

3.    The fourth respondent, an officer of Prolac acting within the scope of his authority as such within the meaning of s 793(1)(a) of the Fair Work Act, contravened s 346 of the Fair Work Act when on 16 February 2017, he became knowingly concerned in or party to Prolac’s contravention by effecting the decision to terminate the contract for services with Mr Patsalas because of or for reasons that included that, Mr Patsalas had not paid a fee to the CFMMEU before 15 February 2017, and thereby engaged in industrial activity within the meaning of s 347(b)(vi) of the FW Act.

THE COURT ORDERS THAT:

4.    The fourth respondent pay a pecuniary penalty of $2,700 in respect of his contravention of s 346 of the FW Act as declared in paragraph 2 above.

5.    The fifth respondent pay a pecuniary penalty of $13,500 in respect of his contravention of s 346 of the FW Act as declared in paragraph 3 above.

6.    The pecuniary penalties referred to in orders 4 and 5 above be paid to the Commonwealth of Australia within 28 days.

7.    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

(Ex tempore, revised)

WHEELAHAN J:

Introduction

1    By a further amended originating application dated 22 May 2019 the applicant seeks declarations that the fourth and fifth respondents (the respondents) contravened s 346 of the Fair Work Act 2009 (Cth) (Act) on 16 February 2017 by the fifth respondent (Prolac) taking adverse action against a Mr John Patsalas (Patsalas) because he did not pay a fee to the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU), and that the fourth respondent (Mr Petrusic) was involved in Prolac’s contravention. In addition, the applicant seeks orders that Prolac and Mr Petrusic pay penalties to the Commonwealth in respect of the contraventions. By their defences to the applicant’s further amended statement of claim Prolac and Mr Petrusic admit the contraventions alleged against them.

Background

2    Prolac is the proprietor of a business engaged in construction work on multi-storey projects within and around the Melbourne central business district. Mr Petrusic was, at all relevant times, a director and officer of Prolac.

3    Throughout the period from 6 October 2016 to 16 February 2017 Prolac was engaged by principal contractors to perform painting works at construction sites in Melbourne, including by Brookfield Multiplex Constructions Pty Ltd (Multiplex) at the EQ Tower Apartments Project, located at 127-141 A’Beckett Street, Melbourne (EQ Project). In order to perform this painting work, Prolac engaged the painting services of Mr Patsalas, amongst others, as an independent contractor pursuant to a contract for services under which he agreed to perform painting work as directed from time to time.

4    As at 6 October 2016, Mr Patsalas was a non-financial member of the CFMMEU. Late on 6 October 2016, Mr Patsalas attended the offices of the CFMMEU at 500 Swanston Street, Carlton and entered into a payment plan to pay membership fees to the Union. On that occasion, he was advised by the Union that he was required to pay $1,100 to reinstate his membership, and he was advised by a Union organiser that he could pay $380 to the Union immediately, and enter into a payment plan for the remainder of the arrears. Mr Patsalas then paid $380 to the Union, and entered into a direct debit arrangement of $55.00 per fortnight in payment of the outstanding amount.

5    On or about 14 February 2017 Prolac directed Mr Patsalas to perform painting work at the EQ Project site from 15 February 2017. Although Mr Patsalas had entered into the payment plan with the CFMMEU referred to above with respect to his outstanding membership fees, he remained in arrears as at 15 February 2017. On that day, a Mr Caratozzolo, a CFMMEU shop steward for the EQ Project site, told Mr Patsalas that he was required to pay all of his outstanding membership fees before he could commence work at the site. Mr Patsalas went and did so, and was permitted to continue working at the site for the remainder of the day. However, on the following day, 16 February 2017, at about 8.00am, Mr Patsalas met with Mr Petrusic and another officer of Prolac, Mr Pozvek. During that meeting Mr Petrusic said words to the following effect –

(a)    “When I first engaged you, you know that you need to be a member of the union”;

(b)    “You knew what the situation was with the union, yeah?... You knew you needed to be a member of it to get onto our sites, yeah?... Whether I believe it or not, whether I give a fuck about it or not, I don’t care, but that’s rules that I’ve got to play by, in turn you’ve got to play by, you knew that”;

(c)    “I’ve got a business to run. I’ve got other people that work for this organisation that I’ve got to keep moving, yeah? Sitting in the sheds because of one guy? It ain’t gonna happen. So that’s why you’re not going back to site. A, because he doesn’t want you”; and

(d)    “That firestorm yesterday was a catalyst as well. John, you told me it was sorted out. I moved you over there thinking you’re clean, and you weren’t. So these guys fucken just went hell to leather and saying, ‘he will not come back on this fucken site, Tim”.

6    At the conclusion of the meeting, Prolac terminated Mr Patsalas’ contract for services. The respondents admit that Mr Petrusic terminated Mr Patsalas’ contract, because, or for reasons that included that, Mr Patsalas did not pay or had not paid a fee to the CFMMEU before 15 February 2017, or so much of it as remained outstanding at that time. The respondents admit that Prolac’s termination of Mr Patsalas’ contract was “adverse action” within the meaning attributed to that phrase by item 3(a) s 342(1) of the Act, and that Prolac’s decision to take the adverse action was made and given effect to on its behalf by Mr Petrusic. Prolac admits that it thereby contravened s 346 of the Act. Further, Mr Petrusic admits that he was involved, for the purposes of s 550 of the Act, in the contravention by Prolac, and that therefore he too contravened s 346 of the Act.

7    Prolac tendered an affidavit of its office manager, Fiona Mison affirmed 11 June 2019. Ms Mison stated that Prolac is a medium-sized business which provides commercial and domestic painting services and has 30 employees. In addition, Prolac engages sub-contractors like Mr Patsalas, to assist with commercial painting jobs from time to time. Ms Mison stated that Prolac has arranged for legal advisers with employment law and industrial relations expertise to present a seminar on the provisions of the Fair Work Act on an annual basis to its senior staff, including its directors, employees and any subcontractors. Those presentations are to commence from 22 July 2019. Ms Mison also stated that Prolac has directed its senior staff, including its directors, to complete on an annual basis the online training courses with respect to difficult conversations, hiring employees, managing performance, managing employees, diversity and discrimination, and workplace flexibility that are available from the Fair Work Ombudsman Online Learning Centre.

Declaratory relief

8    The respondents did not oppose the applicant relying on the form of declarations annexed as Annexure A to the applicant’s written submissions filed 31 May 2019. The applicant sought declarations in the following terms –

1.    The fifth respondent (Prolac) contravened s 346 of the Fair Work Act 2009 (Cth) (FW Act) when on 16 February 2017, it terminated a contract for services it had with John Patsalas, because of or for reasons that included that, Mr Patsalas had not paid a fee to the first respondent (the CFMMEU) before 15 February 2017, and thereby engaged in industrial activity within the meaning of s 347(b)(vi) of the FW Act (Prolac’s Contravention).

2.    The fourth respondent, an officer of Prolac acting within the scope of his authority as such within the meaning of s 793(1)(a) of the FW Act, contravened s 346 of the FW Act when on 16 February 2017, he became knowingly concerned in or party to Prolac’s contravention by effecting the decision to terminate the contract for services with Mr Patsalas because of or for reasons that included that, Mr Patsalas had not paid a fee to the CFMMEU before 15 February 2017, and thereby engaged in industrial activity within the meaning of s 347(b)(vi) of the FW Act.

9    The respondents accepted that declarations will be of utility, as amongst other things, they will serve the purposes of general deterrence. In this case, an additional reason for making the declarations is that the material facts and the contraventions were the subject of admissions by the respondents in their pleadings, and it is appropriate that the Court record these matters by way of the declarations that were sought. Declarations will be made substantially in the terms sought by the applicant.

Penalties

10    The applicant sought orders pursuant to s 546(1) of the Fair Work Act imposing an appropriate penalty on each of Mr Petrusic and Prolac for their admitted contraventions of the Act. The applicant sought an order that the penalties be paid to the Commonwealth of Australia within 28 days.

11    The maximum penalties for contravention of s 346 of the Act are 60 penalty units for an individual, and 300 penalty units for a body corporate. At the time of the contraventions in February 2017, the value of a penalty unit was $180. Accordingly, the maximum penalties that the Court might impose are –

(1)    $10,800 in the case of Mr Petrusic; and

(2)    $54,000 in the case of Prolac.

12    The applicant submitted that penalties should be imposed on each of Prolac and Mr Petrusic in the low to mid-range. The respondents submitted that no penalties should be imposed, but in the alternative that if any penalties are to be imposed, they should be in the low range.

Submissions as to penalty by the applicant

13    The applicant submitted that the conduct engaged in by Prolac and Mr Petrusic was self-evidently deliberate and struck at the heart of freedom of association entrenched in the Fair Work Act, and in particular the object of part 3 – 1 of the Act to “protect freedom of association by ensuring that persons are free to become, or not become, members of industrial associations”: Fair Work Act, s 336(1)(b)(i). The applicant submitted that a pecuniary penalty should reflect the importance of the maintenance of that objective.

14    The applicant submitted that the termination of Mr Patsalas’ contract because he had not paid all of his membership fees to the CFMMEU was “no mistake or accident” but was a serious contravention that amounted to an intentional disregard of workplace rights and the protections provided to employees and contractors under the Act, and that the deliberate nature of the contravention of s 346 should be treated as an aggravating factor. The applicant relied on the fact that Prolac had been operating a business in the building and construction industry, and had done since 8 February 2002, and that Mr Petrusic had been a director of Prolac since 13 August 2004, to support the submission that the contraventions were deliberate.

15    The applicant submitted that it is to be inferred that Prolac carries on a relatively large commercial painting business, and there is no evidence that it could not pay reasonable penalties.

16    The applicant submitted that Mr Patsalas had worked regular, considerable hours for Prolac and was reasonably well remunerated for that work. On this topic, the applicant relied upon the following admissions by the fifth respondent on whom the applicant served a notice to admit –

1.    For the majority of the period 7 October 2016 to 16 February 2017, [Mr Patsalas] worked between 7.5 hours and 8 hours per day on each day that he worked for the Fifth Respondent.

2.    On some occasions in the period 7 October 2016 to 16 February 2017, Mr Patsalas worked 9 hours or more per day on each day that he worked for the Fifth Respondent.

3.    For the majority of the period 7 October 2016 to 16 February 2017, Mr Patsalas worked in excess of 38 hours per week for the Fifth Respondent.

4.    Throughout the period 7 October 2016 to 16 February 2017, the Fifth Respondent paid to Mr Patsalas at least $40.00 per hour for each hour that he worked for the Fifth Respondent.

5.    In the period 7 October 2016 to 13 December 2016, the Fifth Respondent paid to Mr Patsalas a total of $16,740.

17    The applicant submitted that both specific and general deterrence were relevant features of this case. Specific deterrence was needed to ensure that Prolac and Mr Petrusic do not repeat their contravening conduct. The applicant submitted that general deterrence had a significant role to play in this case so that employers and builders generally are deterred from yielding to pressure from unions to require workers to join and remain financial with a union. These policies are known as “no ticket, no start” on Melbourne construction projects: see Australian Building and Construction Commissioner v CFMEU (Werribee Shopping Centre Case) [2017] FCA 1235 at [23], [27], [32] and [34].

18    The applicant accepted that both Prolac and Mr Petrusic have not, to the applicant’s knowledge, engaged in any previous contraventions of industrial legislation.

19    The applicant accepted that the admissions made by the respondents should be taken into account in determining penalty, at least to the extent that the admissions had utility in saving some court time and expense.

Submissions by the respondents

20    A principal point of difference between the applicant and the respondents was that the respondents did not accept that their contravening conduct was deliberate in the way submitted by applicant. The respondents submitted that while Mr Petrusic and Prolac have admitted the material facts necessary to determine the contraventions against them, their admitted contraventions were not to be elevated to the level of deliberateness and seriousness submitted by the applicant. In particular, the respondents submitted that the fact that Mr Petrusic had been a director of Prolac since 13 August 2004 did not permit an inference that the contravention was not a mistake or accident, particularly when there was no history of any contraventions of industrial laws by Mr Petrusic or Prolac.

21    The respondents further submitted that while the admitted contraventions involved the termination of Mr Patsalas’ sub-contract with Prolac, there was no evidence about the loss, if any, that Mr Patsalas might have sustained.

22    The respondents pointed to and relied upon the fact that they have not previously been found to have contravened industrial laws, and submitted that this was a matter that stood to their credit. The respondents submitted that the contravening conduct appeared to be an aberration, and submitted that there was no suggestion of any like conduct that has been engaged in by Mr Petrusic or Prolac since. The respondents relied upon their admissions as their acceptance of wrongdoing, and relied upon the steps identified in the affidavit of Fiona Mison to which I have referred at [7] above, as being appropriate arrangements that have been made to militate against any similar contraventions in the future.

Consideration

23    The principal, if not the only, object of the imposition of a civil penalty for contravention of a civil penalty provision of the Fair Work Act is deterrence. That is to say, the penalties imposed are an attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener, and also by others who might be tempted to contravene the Act: Trade Practices Commission v CSR Limited [1990] FCA 762; (1991) ATPR 41-076 at 52, 152 (French J), cited in Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 at [55]. Relevant factors in the overall assessment of penalty may include: the nature, character and seriousness of the conduct; any loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and any co-operation with the regulator and contrition. In making its assessment, the Court must determine a penalty that is proportionate to the contravening conduct: Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (the Non-Indemnification Personal Payment Case) (2018) FCAFC 97; 280 IR 28 at [20], [22] (Allsop CJ, White and O’Callaghan JJ).

24    I consider that the contraventions by the respondents were serious. I infer from the words spoken by Mr Petrusic to Mr Patsalas on 16 February 2017 that are set out at [9] above, that the respondents had a policy that workers engaged by it, at least on the EQ Project site, were required to be members of the CFMMEU as a condition of their engagement and continuing employment at the site. Mr Patsalas, as an individual independent sub-contractor, was in a position of comparative vulnerability.

25    It is an admitted fact that for the majority of the period 7 October 2016 to 16 February 2017 Mr Patsalas worked in excess of 38 hours per week for Prolac, and that he was paid at least $40 per hour for each hour that he worked. Mr Patsalas’s contract was summarily terminated at the meeting at 8.00am on 16 February 2017. I infer that, as a consequence of the summary termination of his services, Mr Patsalas was likely to have suffered some loss, at least to the extent of some lost hours of remunerative work that day. However, the evidence does not permit me to infer any further losses.

26    I do not accept the submissions advanced on behalf of the respondents that their conduct was not deliberate. In my view, there was nothing inadvertent or accidental about what occurred. Both respondents have significant experience in the construction industry in Melbourne, and it is reasonable to expect that they should have had some understanding of the protections under the Fair Work Act which relate to freedom of association. However, I do not consider that the evidence permits me to draw an inference that the respondents contravened s 346 knowing that the termination of Mr Patsalas’ contract was unlawful, thereby placing the contravention at the more extreme end of seriousness. To entertain such a finding would attract s 140(2) of the Evidence Act 1995 (Cth), and require a degree of confidence in the conclusion which the evidence in this case does not permit.

27    I do not accept the submission advanced on behalf of the respondents that the conduct involved in the termination of Mr Patsalas’ contract was an aberration. The content of the words used by Mr Petrusic tell against such a finding, because they evidence a preparedness to assist the CFMMEU in furthering its “closed shop” policy at the EQ Project site. Further, I decline to make such an affirmative finding in the absence of any evidence adduced by the respondents addressing the circumstances of their contraventions. On the other hand, neither respondent has any known history of contraventions of industrial legislation, and this counts in their favour, because there is no special element of specific deterrence that needs to be addressed in this case.

28    The respondents’ admissions have been of some utility and have resulted in a narrowing of the issues, and the saving of expense and Court time. However, this alone may not be sufficient to justify a reduction in penalty if there is no inference of contrition or remorse: Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383 at [73]-[78] (Stone and Buchanan JJ). The applicant submitted that the admissions were made by the respondents at a reasonably late stage in the proceeding. It is apparent that by its further amended statement of claim filed 22 May 2019 the applicant narrowed the case pleaded against the respondents by reducing the number of alleged contraventions from two to one in respect of each of the respondents, and it is to this pleading that the respondents made their admissions of contravention. I will not speculate on the process that led to the parties’ cases being re-pleaded, but it is to all parties’ credit that the issues have been narrowed to the extent that they have.

29    The applicant accepted that some allowance should be made to the respondents for their admissions. I consider that it is appropriate to take some account of the respondents’ admissions and co-operation in a way favourable to the respondents, in assessing an appropriate penalty. I do so on the basis that I infer some acceptance of responsibility by the respondents, and in the case of Prolac, this has been coupled with its proposal that seminars be given, to which I have earlier referred.

30    Considerations of general deterrence are significant in this case. I do not accept the respondents’ submissions that declarations alone are sufficient to achieve this end. The following observations of Tracey J in Director of the Fair Work Building Industry Inspectorate v Construction Forestry, Mining and Energy Union (Quest Apartments and Greek Community Centre) [2016] FCA 1262 at [37], are equally applicable to the present case –

There are thousands of small contractors involved in the construction industry. Many are, potentially, susceptible to pressure to require employees to join a union, fearing that if they do not do so they will not be engaged to work on commercial construction sites. Any penalties must, therefore, be fixed at a level which may operate to deter other contractors from succumbing to such pressure.

31    In determining the sufficiency of a proposed civil penalty, regard should be had to the maximum penalty: The Non-Indemnification Personal Payment Case at [26], citing Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 at [154] – [156]. Taking into account all the considerations, including the maximum penalties to which I referred at [11] above, I consider that appropriate penalties should be assessed at around one quarter of the maximum. In the case of Mr Petrusic, and having regard to the fact that the maximum penalty for him is $10,800, I impose a pecuniary penalty of $2,700. In the case of Prolac, and taking account that the maximum penalty that might be imposed upon it is $54,000, I impose a penalty of $13,500.

32    There will be no order as to costs: Fair Work Act, s 570.

Associate:

Dated:    17 June 2019

SCHEDULE OF PARTIES