FEDERAL COURT OF AUSTRALIA
Whelan v Cigarette & Gift Warehouse [2019] FCA 2064
ORDERS
Applicant | ||
AND: | CIGARETTE & GIFT WAREHOUSE PTY LTD ACN 055 030 567 First Respondent TRAVERS BEYNON Second Respondent | |
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. The First Respondent pay pecuniary penalties totalling $75,000.00.
2. The Second Respondent pay pecuniary penalties totalling $15,000.00.
3. The penalties referred to in paragraphs 1 and 2 of these orders be paid by the Respondents to the Applicant within 28 days of the date of these orders.
4. The Respondents pay 10% of the Applicant’s costs of the proceedings, such costs to be consolidated in accordance with Practice Note GPN-COSTS (Practice Note), and the parties to proceed in accordance with the Practice Note as per the following timetable:
(a) The Applicant file an affidavit in support of his lump sum costs claim (such affidavit to be no more than 10 pages) by 4.00pm on 20 December 2019;
(b) The Respondents file an affidavit in response (such affidavit to be no more than 10 pages), and any submissions limited to the legal questions (such submissions to be no more than 3 pages) by 4.00pm on 24 January 2020;
(c) The Applicant file any submissions limited to the legal questions (such submissions to be no more than 3 pages) by 4.00pm on 31 January 2020.
5. Any dispute between the parties concerning the costs order herein be referred to a Registrar pursuant to paragraph 4.9 of the Practice Note.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
COLLIER J:
1 On 19 December 2017, I delivered judgment in Whelan v Cigarette & Gift Warehouse Pty Ltd [2017] FCA 1534 (the primary judgment). The background facts are set out in detail in that judgment. In summary, I found that the first respondent, Cigarette & Gift Warehouse Pty Ltd, had contravened the following provisions of the Fair Work Act 2009 (Cth) (the FW Act):
• Section 340(1) of the FW Act by taking adverse action against the applicant;
• Section 44(1) of the FW Act by failing to provide payment in lieu of notice for termination in accordance with s 117(2) of the Act; and
• Section 44(1) of the FW Act by failing to pay the applicant amounts owing to him on termination with respect to unused paid annual leave in accordance with s 90(2) of the FW Act.
2 I also found that the second respondent, Mr Travers Beynon, was involved in those contraventions.
3 It follows that there are, in total, six contraventions by the respondents.
4 In the applicant’s Third Further Amended Statement of Claim dated 10 March 2017, the applicant sought both costs and the imposition of pecuniary penalties on the respondents for any breaches of the FW Act. The applicant also sought the imposition of pecuniary penalties on the respondents for contravention of Australian Consumer Law. The respondents did not contravene the ACL, therefore the issue of pecuniary penalties only arises in connection with the contraventions identified above.
5 The respondents appealed to the Full Court of the Federal Court of Australia on 12 January 2018. On 1 February 2018, I ordered that the hearing on costs and quantum of penalties be listed on a date to be fixed following the final determination of the respondents’ appeal. On 8 February 2019, the Full Court dismissed the respondents’ appeal and reserved costs.
6 On 18 March 2019, I ordered that the matter be listed for hearing on costs and quantum of penalties for half a day on 12 June 2019.
7 The parties have made both oral and written submissions in relation to penalties and costs. The respondents also rely on the affidavit of Brendan Nyst dated 9 May 2019.
Submissions of the parties
Penalties
8 In respect of penalties, the applicant submitted, in summary:
Both respondents should be penalised for their part in the contraventions of the FW Act.
In the week prior to the hearing, the respondents amended their Defence to include a list of new alleged reasons for the termination of the applicant’s employment, which were never alleged in the termination letter and were not pleaded or raised at any time before.
This was a clear example of an employer fabricating evidence to suit its own case.
The respondents’ actions were a deliberate and conscious attack on the applicant, his integrity and his credibility, accusing him of something which had no basis.
The penalties should be paid to the applicant consistent with s 546 of the FW Act and are appropriate in the circumstances where:
• The respondents summarily dismissed the applicant based on a false and fabricated event which they knew to be false at the time;
• There was a continued failure of the respondents to pay statutory entitlements owed to the applicant;
• The applicant had to prosecute these proceedings at great expense and personal cost; and
• The usual order was that payment of penalties be made to the person applying for the penalty.
In response to the submission by the respondents that if a Court awards a sum in the form of a penalty, and that sum is paid to the applicant, he would receive double compensation, s 546(5) clarifies that the Court may impose penalties in addition to any orders made under s 545, and that this may be payable to a particular person: s 546(3).
The contraventions found by the Court were aggravated by the deliberate conduct of the respondents, and that conduct and its consequences should be reflected in the quantum of penalties awarded.
9 In relation to penalties the respondents submitted, in summary, as follows:
The applicant was dismissed for a multitude of reasons, including because the second respondent considered Mr Whelan unreliable and his performance poor, exacerbated by repeated requests by Mr Whelan for more money by way of bonus payments or the development of a bonus plan.
The applicant’s claims for contravention under s 340 of the FW Act were substantially broader than those upheld in the findings of the Court.
The applicant’s submissions fail to draw any material distinction between the proven contravention of s 340 and the proven contraventions of s 44 in relation to unpaid leave and salary.
Any penalty ordered should be combined.
The applicant’s dismissal falls at the lowest end of this kind of conduct, taking into consideration the fact that the contract entitled the dismissal of the applicant at any time without reason, and noting that if he had been dismissed without adverse action, he would be in precisely the same position: see [280] and [308] of the primary judgment.
In relation to withholding unpaid leave entitlements, the payments were withheld on the basis that Mr Whelan had withheld company documents, having copied the contents of his work computer onto his personal computer and concealed this from his employer. This should be taken into consideration when having regard to any penalty to be imposed for the withholding of these benefits.
An award of penalties in the amount sought by the applicant would be tantamount to double compensation.
The applicant’s unused leave entitlements totalled $17,160.40. This amount was not significant having regard to the fact the applicant was on a salary exceeding $300,000 and there was no suggestion on the evidence, or any finding made, that the deprivation of these monies to him was some substantial impost in the circumstances. Evidence before the Court suggested that he had found employment elsewhere.
Any penalty ought to be proportionate to the sum withheld. A figure of one third of the maximum penalty was appropriate and the respondents would submit to such an order.
Any penalty should be paid into Consolidated Revenue because the applicant himself has, in respect of the proven breaches, been awarded compensation as well as interest which will be full indemnity for the consequences to him of the unlawful conduct.
CONsideration: penalties
10 Section 546 of the FW Act empowers the Court to order a person to pay a pecuniary penalty that the Court considers appropriate once satisfied that the person has contravened a civil remedy provision. The maximum penalty prescribed for a contravention of each provision is 300 penalty units for a body corporate, and 60 penalty units for an individual: see ss 539(2) and 546(2). The value of a penalty unit at the relevant time, being August 2015, was $180: see s 12 of the FW Act and s 4AA(1) of the Crimes Act 1914 (Cth). It follows that the maximum pecuniary penalty available for each contravention by the first respondent is $54,000.00 and by Mr Beynon, $10,800.00. The Court may order that any pecuniary penalty be paid to the Commonwealth or to a particular person: see s 546(3)(a).
11 The Court has a wide discretion when determining the quantum of penalty to be imposed. There are a number of factors deemed relevant for consideration when determining quantum, including those adopted by Cowdroy J in Fair Work Ombudsman v Wongtas Pty Ltd (No 2) [2012] FCA 30 as stated at [27] by Graham J in John Holland Pty Ltd v Maritime Union of Australia (No 2) [2010] FCA 110.
12 As explained by Cowdroy J at [40] in Wongtas Pty Ltd (No 2), similar tests were considered in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] FCA 1080 at [14]–[30] per Tracey J; McIver v Healey [2008] FCA 425 per Marshall J at [24]; Stuart-Mahoney v Construction, Forestry, Mining and Energy Union [2008] FCA 1426 at [40] per Tracey J.
13 Having regard to these authorities, the following principles are relevant for consideration in the present context:
The nature and extent of the conduct leading to the breaches;
The circumstances in which the conduct took place;
The nature and extent of loss and damage sustained as a result of the breach;
A prior history of conduct by the respondents (including any prior breaches);
The size of the business enterprise involved;
Whether the contraventions were distinct or arose out of the one course of conduct;
Whether the contraventions were deliberate;
Whether senior management was involved in the contraventions;
Whether contrition or remorse has been exhibited;
Whether corrective action has been taken;
Whether there was co-operation with enforcement authorities by those involved in the contraventions;
The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements;
Whether general or specific deterrence is required;
The conduct of the respondents in these proceedings;
Whether there is scope for mitigation where remorse or contrition have been offered;
Whether the penalty is proportionate to the offence;
The principle of totality; and
Whether the respondents pay compensation to those affected by the contraventions.
14 It is important to note that whilst these factors provide guidance to the Court, they are not mandatory considerations. As Buchanan J explained in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560 at [91]:
Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. …
(See also for example Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (The Bendigo Theatre Case) (No 2) [2018] FCA 1211 at [24], Director of Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 1213 at [17], National Tertiary Education Industry Union v Swinburne University of Technology [2013] FCA 1128 at [18]).
15 Nonetheless, the principles provide a useful guide and it is helpful to have regard to those which are relevant in the context of the current proceedings in determining appropriate penalties.
16 The respondents submit that, in circumstances where they have been ordered to pay the applicant compensation in the amounts of $17,625.72 in lieu of notice, $17,160.40 for untaken but accrued annual leave, $5,000 in compensation for non-economic loss, and interest, the applicant has been duly compensated. Whether or not the applicant has been compensated in respect of these losses is not to the point in any consideration of appropriate pecuniary penalty referable to the conduct of the respondents. To the extent that the Court may order that any pecuniary penalty be paid to the Commonwealth pursuant to s 546(3)(a), the value to which the applicant has been personally compensated by the respondents would appear to be irrelevant to the assessment of quantum of penalty. Further as the High Court observed in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46, (2015) 258 CLR 482 at [55] the purpose of civil penalties is protective in promoting the public interest in compliance, and placing a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the legislation. Similarly in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; (2017) 254 FCR 68, Dowsett, Greenwood and Wigney JJ said at [98]:
Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is primarily, if not wholly, protective in promoting the public interest in compliance: Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076 at 52,152 [42]; Commonwealth v Director, FWBII at [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ). The principal object of a pecuniary penalty 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; both specific and general deterrence are important: Chemeq at [90]; Ponzio at [93]. A pecuniary penalty for a contravention of the law must be fixed with a view to ensuring that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [66]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at 265 [62]-[63]. In relation to general deterrence, it is important to send a message that contraventions of the sort under consideration are serious and not acceptable: Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406 at 418 [32].
17 Any payment of entitlements to an employee which had been withheld in contravention of the FW Act, or compensation for hurt and humiliation, are not relevant to the public policy issues inherent in the civil penalty regime.
18 In this case there were in total six contraventions, namely:
A contravention of s 340 of the FW Act by the first respondent in terminating the employment of the applicant, and secondly, by the second respondent as being knowingly concerned in that contravention.
A contravention of s 44(1) of the FW Act by the first respondent in failing to pay the applicant his unpaid leave, and secondly, by the second respondent as being knowingly concerned in that contravention.
A contravention of s 44(1) of the FW Act by the first respondent in failing to pay the applicant his salary in lieu of notice, and secondly, by the second respondent as being knowingly concerned in or party to that contravention.
19 The applicant claims the three breaches committed by the respondents were distinct and relate to three separate contraventions of the FW Act, “brought about by three separate and deliberate decisions”. The applicant also submits that annual leave and notice of termination are separate standards in s 61 of the FW Act. The respondents submit that there was a single act constituting a contravention, arising from the same facts.
20 While all contraventions related to the termination of employment, I do not consider it appropriate that they be treated as one contravention for the purpose of penalties. I have formed this view in light of:
The fact that events giving rise to the relevant contraventions were temporally separated. Mr Whelan was terminated by a letter and email dated 24 August 2015. The failure of the respondents to pay Mr Whelan’s entitlements in respect of salary in lieu of notice and unpaid leave occurred after his termination, and was ongoing until the conclusion of proceedings in this case.
The fact that the contraventions occurred against different legislative and contractual backgrounds. Specifically, while the basis of termination of employment may arise from the terms of the contract of employment itself, termination does not abrogate other rights of employees, such as those rights relating to leave entitlements. The contravention by the respondents of s 340 is separate and distinct from the other contraventions of s 44 relating to withholding of his statutory entitlements.
The mindset suggested by the respondents themselves, in referring in submissions to the decision of Mr Beynon to dismiss Mr Whelan as “relatively impetuous”, compared with what appears to have been a deliberate and calculated decision by the respondents to withhold Mr Whelan’s entitlements for years following the termination of his employment.
21 Notwithstanding this, there was clearly some factual overlap in respect of the contraventions. I consider that the contraventions relating to the withholding of statutory entitlements should be considered together for the purposes of assessment of penalties.
22 I am also satisfied that issues of deterrence, proportionality and totality can be considered overall in respect of the contraventions.
Termination of employment: contravention of s 340 FW Act
The nature of the contravention and the circumstances in which the conduct took place
23 As I noted in the primary judgment, it was common ground that Mr Whelan was summarily dismissed on 24 August 2015 at the direction of Mr Beynon, and that this amounted to “adverse action” within the meaning of item 1(a) in the table set out in s 342(1) of the FW Act.
24 As I also found, there was a causal connection between the dismissal of Mr Whelan, and his complaint about non-payment of bonuses to him, such that there was a contravention of s 340 of the FW Act.
25 The respondents’ case throughout the proceedings was that the first respondent was entitled to terminate Mr Whelan’s employment summarily, because he had allegedly breached confidentiality associated with the publication of an article, which amounted to “gross misconduct” within the terms of cl 9.1 of Mr Whelan’s contract of employment. As I also noted at [94], this case expanded to claims that the “real” reasons for Mr Whelan’s dismissal were his gross misconduct in breaching confidentiality, his lack of candour, the inability of Mr Beynon to trust him, his failure to follow oral directions, and the belief of Mr Beynon that Mr Whelan was about to resign. I was satisfied that it was likely Mr Beynon’s decision to summarily dismiss Mr Whelan was at least partly due to his anger at Mr Whelan’s early departure from the office and failure to answer Mr Beynon’s phone calls (see [130] of the primary judgment), however this did not mean that Mr Beynon’s views of Mr Whelan repeatedly inquiring about a bonus was not a substantive or operative factor in his decision. I rejected the proposition that there were grounds to summarily dismiss Mr Whelan for gross misconduct, as alleged by the respondents.
26 I note that the terms of Mr Whelan’s contract entitled him to be dismissed without reason at any time during his employment. This contractual provision does not, however, subvert the effect of the FW Act, which specifically prohibits adverse action for reasons proscribed by that legislation, as occurred in this case.
27 It is uncontroversial that the summary dismissal of Mr Whelan was effected by letter attached to an email from Ms Ozioko, received by Mr Whelan around 4.30pm on 24 August 2015. This letter was signed by Mr Beynon, and read as follows:
To: Andrew Whelan, General Manager
From: Travers Beynon, Managing Director
CC: Suzanne Ozioko, National Human Resources Manager
Personnel File
Date: August 24, 2015
Re: Termination of Employment
This letter is to formally advise you that we are terminating your Employment in accordance with Section 1.5 of your Employment Agreement with Cigarette & Gift Warehouse (Franchising) Pty, Ltd.
Due to recent events, you are being dismissed immediately due to gross misconduct; specifically breach of confidentiality.
This termination is to take effect immediately. All company property that you have been provided with during the course of your employment must be returned. This includes but is not limited to office keys, entry swipe card, mobile phone, laptop, and any other tools of the trade or equipment that you have required in order to competently operate in your role. The Company is entitled to deduct from any termination payment or accrued entitlement, the value of any Company property not returned by you. It is expected that all Company Property be returned to me immediately.
We take this time to remind you of your signed employment agreement; that any confidential information acquired by you while with the company are to remain strictly confidential and must not be discussed with anyone. We reserve our rights to take legal action for any and all breach of confidentiality occurrences.
Please sign the acknowledgement section below accepting the terms as final between yourself and Cigarette & Gift Warehouse (Franchising) Pty Ltd.
28 The circumstances attendant on the termination of Mr Whelan’s employment on 24 September 2015 are set out in the primary judgment at [287] et seq. In relation to the termination of Mr Whelan, I also note intimidatory conduct employed by Mr Beynon in respect of Mr Whelan, although I also noted that this was to some extent explained by the desire of the respondents to attempt retrieval of company property. In the primary judgment I noted evidence that:
Mr Beynon and Ms Ozioko went to Mr Whelan’s house on the afternoon of Mr Whelan’s dismissal to recover Mr Whelan’s laptop and other property of the first respondent, and spoke to Mr Whelan’s wife such that there was evidence that she was distressed when Mr Whelan returned home;
After he received the email and letter from Ms Ozioko, Mr Whelan noticed that Mr Beynon was following Mr Whelan home, and that Mr Beynon had parked his car outside Mr Whelan’s home in company with staff members of the first respondent; and
The first respondent posted a security guard outside Mr Whelan’s house on the afternoon of his termination, with a view to recovering property of the first respondent, and the security guard informed Mr Whelan that he had been hired by Mr Beynon to retrieve the company’s laptop and phone (see [306] of the primary judgment).
29 The applicant submits that the nature of the contravention “could not be more egregious”. I do not accept this proposition.
30 I was satisfied that the letter of dismissal erroneously stated the reasons for Mr Whelan’s summary dismissal. This in itself was unjust to Mr Whelan. However the letter was delivered personally to Mr Whelan’s email address, and copied to the human resources department of the first respondent. It was not egregious in the sense, for example, of a public denunciation of Mr Whelan.
31 I note further that Mr Whelan was a senior executive of the first respondent on a high salary, whose contract of employment permitted the first respondent to terminate his employment at any time, for any reason, on the provision of the notice period prescribed by cl 9.0 of his contract of employment. To that extent while termination of his employment may have caused Mr Whelan financial hardship as he submitted, this did not prevent the first respondent terminating his employment at any time it chose in accordance with that contract.
32 Further, as I found in the primary judgment, by the time of the termination of Mr Whelan’s employment the working relationship between Mr Whelan and Mr Beynon had deteriorated to the point where Mr Whelan was referring to Mr Beynon in highly disparaging language (see [280] of the primary judgment) and it was likely that Mr Beynon would have terminated Mr Whelan’s employment in the immediate future in any event, given the state of their relationship (at [281]). As the evidence before the Court indicated, Mr Whelan was highly desirous himself of leaving the employment of the first respondent but had remained for personal financial reasons.
The nature and extent of loss or damage
33 In his affidavit of 1 July 2016 Mr Whelan deposed that he was summarily dismissed and remained unemployed for 6 months, and further claimed that without the financial support of his unpaid leave or salary in lieu of notice, he was forced to sell his home, car and boat, and his family endured considerable hardship.
34 The respondents reject the applicant’s allegations outright: see [29] of their submissions dated 9 May 2019. The respondents submitted the extent of damage or loss meant that the applicant was only entitled to a modest sum, noting:
“Almost all of the matters that Mr Whelan relied upon as justifying a claim for hurt and humiliation and for compensation associated with it were dismissed, and not regarded as attracting a compensatory order…”
35 I will return to issues relating to the failure of the first respondent to pay Mr Whelan his entitlements later in this judgment. In relation to the nature and extent of loss or damage arising from his termination, I do not consider this to be a significant factor in circumstances where Mr Whelan could be terminated for any reason on the provision of prescribed notice, such that the risk of financial hardship from termination was ever-present.
Previous conduct
36 The applicant does not advance any earlier proven contraventions of the FW Act, but rather submits that the “angry and vengeful approach” taken by the second respondent when dealing with the applicant may influence other ex-employees in deciding whether to complain or not: see [168] of the primary judgment.
37 The respondents submit there was no evidence of any similar conduct by the respondents, and object to the scandalous assertions of the applicant which were unsupported by evidence or findings by this Court.
38 I am satisfied that is no evidence of previous conduct of the respondents relevant to these proceedings, and reject the inference the applicant invites me to make about the possible deterrence of other employees complaining about their employment.
The size of the business enterprise involved
39 Although the applicant argues that the first respondent’s business is significant in size, such evidence as is before the Court indicates that the first respondent is a relatively modest business enterprise, and is essentially an alter ego of the second respondent, Mr Beynon. Further, while the exact figure is disputed, it appears that the net profits of the first respondent for the financial year ending 30 June 2015 were less than $11 million. Nonetheless as Tracy J observed in Kelly v Fitzpatrick [2007] FCA 1080 at [28]:
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction "must be imposed at a meaningful level": see Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd [2001] FCA 383; [2001] ATPR 41-815 at [13].
Whether or not the contraventions were deliberate
40 Although the respondents claim that, in terminating the applicant, they did not realise they were contravening any law, I consider this of minimal relevance. This is particularly so in circumstances where, as I have found, the respondents deliberately summarily terminated Mr Whelan’s employment on a false premise.
Whether senior management was involved in the contraventions
41 The applicant further puts that the second respondent, as the director and shareholder of the first respondent, was knowingly concerned with each of the 3 contraventions. The applicant submits that the second respondent made the relevant decision personally, despite having previously authorised the release of the ‘confidential information’ relied on in forming the allegation of gross misconduct.
42 In my view this submission is not controversial, particularly in circumstances where I have found that Mr Beynon was knowingly involved in the first respondent’s contravention.
Whether the Respondents have exhibited any contrition
43 The applicant submits the respondents have pressed a sham reason for dismissal throughout the proceedings, refused to pay the applicant his leave and salary in lieu of notice entitlements and only conceded they were not entitled to withhold the leave payment until after the hearing on 25 May 2017. On this basis, the applicant notes the respondents have displayed a “vengeful approach to the treatment of the applicant and no regard for their obligations” under the FW Act.
44 The respondents have indicated in submissions that they did not realise their conduct contravened the law.
45 As the Full Court observed in WorkPac Pty Ltd v Skene (2018) 264 FCR 536 at [237], although an unknowing contravention will diminish the objective seriousness of a contravention, ignorance of the law is not ordinarily excusatory. Further, any deliberateness must be viewed through the prism of the intentional allegation in the letter of dismissal of gross misconduct on the part of Mr Whelan, which as I found was not substantiated.
46 I note particularly that there was no evidence of any contrition displayed by the respondents for their conduct, nor were there any relevant admissions made. Rather, the respondents maintained a reason for summary dismissal of Mr Whelan which I found to be unsubstantiated by the evidence.
Whether the Respondents have taken corrective action
47 No corrective action was taken by the respondents to address the relevant contraventions.
Conclusion
48 In my view, in light of these considerations, the culpability of the first respondent in respect of the contravention of s 340 of the FW Act, and Mr Beynon as being knowingly concerned in the contravention, is mid-range.
Refusal to pay entitlements
49 Conduct of the first respondent constituted contravention of s 44(1) of the FW Act in two respects, namely by the first respondent failing to pay the applicant his unpaid leave and failing to pay him his salary in lieu of notice. The second respondent was knowingly concerned in those contraventions.
The nature and extent of the conduct leading to the breaches
50 I accepted evidence of Ms Parnia Marshall that, after the applicant had been dismissed, Mr Beynon had told Ms Ozioko not to pay Mr Whelan “a fucking cent” (see primary judgment at [100], [118], [167]-[168]). I am satisfied that this was indicative of an angry and vengeful approach to Mr Whelan by Mr Beynon (at [168]). I also found that it was clear that the first respondent had no right to withhold these entitlements from Mr Whelan, under the Fair Work legislation or by right of set off.
51 I further note that the respondents persisted in refusing to pay Mr Whelan his entitlements, even when they were patently aware that they had no right to withhold them (see in particular [157]-[159] of the primary judgment).
The circumstances in which the conduct took place
52 The withholding of entitlements by the respondents occurred against a background of summary dismissal of Mr Whelan for alleged reasons which were false. I also note that the respondents persisted in asserting that they were entitled to retain these entitlements by way of set off, but ceased to press this claim on 25 May 2017 after judgment had been reserved (see [159] of primary judgment).
53 In my view these decisions were further indicative of a deliberate and vengeful attitude of the respondents to Mr Whelan, which included the intentional denial of his lawful statutory entitlements.
Nature and extent of loss and damage sustained as a result of the contraventions
54 In his affidavit of 1 July 2016 Mr Whelan gave detailed evidence of the hardship he had suffered as a result of his employment being terminated by the first respondent. I have already made observations relating to the extent to which those claimed losses and damage could be attributed to the termination of his employment, and more particularly the contravention of the respondents in respect of that termination. However, I accept that the refusal of the first respondent to pay Mr Whelan his entitlements contributed to the hardship to which Mr Whelan deposes at [135]-[144] of his affidavit.
55 I also note that this evidence of Mr Whelan concerning his claimed loss and damage was not contradicted.
Whether the contraventions were distinct or arose out of the one course of conduct
56 While the contraventions relating to the withholding of entitlements (that is, salary in lieu of notice of termination and unpaid leave) were referable to different provisions of the FW Act, I am nonetheless satisfied that they arose from the one course of conduct, namely a decision of Mr Beynon and the first respondent after the termination of Mr Whelan’s employment to withhold from Mr Whelan any money including his entitlements.
Other relevant factors
57 I have already noted the size of the first respondent’s business enterprise, and the fact that any penalty ordered to be paid by the first respondent would need to be meaningful.
58 I also note that there was no evidence of any prior conduct by the respondents of withholding of entitlements of any employee.
59 Finally, I also note that there was no sign of any contrition by the respondents in respect of these contraventions – on the contrary the respondents continued to press their right to withhold the relevant entitlements until after completion of the trial. To the extent that any corrective action was taken by the respondents, I understand that Mr Whelan only received his entitlements following relevant orders of the Court.
Conclusion
60 In my view, in light of these considerations, the culpability of the first respondent in respect of the contraventions of s 44(1) of the FW Act, and Mr Beynon as being knowingly concerned in the contraventions, is in the high range.
Whether there is a need for general or specific deterrence
61 It is well established that the guiding principle of civil penalty provisions is deterrence, both specific and general: see Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482. At [55] of their joint judgment, French CJ, Kiefel, Bell, Nettle and Gordon JJ opined:
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.)
62 More recently in Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Non-Indemnification Personal Payment Case) [2018] FCAFC 97 the Full Court observed:
21. The seriousness of the contravention and other features of the conduct which may be seen as relevant to it (here, the seriousness of interruption of a concrete pour, the seriousness of the threats of repetition, the deliberateness of the contravening of the Act, and the exhibited apparent sense of impunity in undertaking contravening conduct) find their place in understanding the degree of deterrence that is necessary to be reflected in the size of the penalty: Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53 at [71].
22. The overwhelming importance of deterrence as the protective purpose of the penalty does not exclude the need to determine a penalty which is proportionate to the contravening conduct. The history of contravention is to be taken into account in fixing the proper level of penalty for the proportionate response to the contravention in question. Proportionality has within it the need to characterise the seriousness of the contravention. Proportionality of penal response to a contravention assessed by reference to its seriousness and gravity is an essential characteristic of the application of the statute. The penal response is for that contravention, not earlier contraventions: Veen v The Queen [No 2] [1988] HCA 14; 164 CLR 465 at 477-478. Prior contraventions may reveal an apparent disregard for the Act and the need for deterrence by a penalty at a level appropriate to achieve that objective. It is to be borne in mind, however, that it is for the conduct in question that the penalty is imposed, not for prior conduct.
63 These principles were further cited by Tracey J in Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Broadway on Ann Case) [2018] FCAFC 126, where his Honour continued:
14. A distinction is to be drawn between the need to ensure that a contravenor is not doubly penalised for past and present misconduct and the consideration of historic misconduct for the purpose of assessing the need for specific deterrence of a recidivist organisation. As Jessup J observed in Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (No 2) [2015] FCA 1462 at [8]:
8. In giving weight to the Union’s record of contravention, as I shall do, the court is not using the present occasion to supplement the penalties imposed for different conduct on previous occasions. Rather, the court is giving appropriate recognition to what is, on any view, an important purpose of the regime of penalties for which the legislation provides: deterrence. Of all purposes, that is the most strongly linked to the public interest in compliance with the law. If contravention of a law is visited with penal outcomes which are demonstrably inadequate to achieve the purpose of the law, it might as well not be a law at all. It is in this sense, in my view, that the principle of proportionality is amply reflected in the imposition of a penalty which takes due account of the importance of specific deterrence.
64 Historically, the High Court in Veen v The Queen [No 2] [1988] HCA 14; (1988) 164 CLR 465 considered the relevance of prior contraventions in the context of deterrence. In Broadway on Ann Logan J at [104] helpfully adverted to the High Court’s seminal statement on this topic, although adapted his Honour in a form that stripped away irrelevant criminal law considerations, such that it reads as follows:
... the antecedent [contravening] history of [a contravener] is a factor which may be taken into account in determining the [ penalty ] to be imposed, but it cannot be given such weight as to lead to the imposition of a penalty which is disproportionate to the gravity of the instant [contravention]. To do so would be to impose a fresh penalty for past [contraventions].... The antecedent [contravening] history is relevant, however, to show whether the instant [contravention] is an uncharacteristic aberration or whether the [contravener] has manifested in his commission of the instant [contravention] a continuing attitude of disobedience of the law. In the latter case,... deterrence .. may ... indicate that a more severe penalty is warranted. It is legitimate to take account of the antecedent [contravening] history when it ... shows a need to impose [a] condign [civil penalty] to deter the [contravener] and other [contraveners] from committing further [contraventions] of a like kind.
65 In these circumstances, there is no evidence of past misconduct by the respondents such that it could be said that a more severe penalty was warranted to specifically deter the respondents. However, I consider that it is appropriate for the level of penalties in this case to take into account a need for general deterrence, to the extent that the necessity of employers complying with their relevant statutory obligations under the FW Act referable to the payment of entitlements is reinforced (cf comments of the Full Court in Comcare v Post Logistics Australasia Pty Limited [2012] FCAFC 168 at [109]).
Proportionality and totality
66 Turning now to appropriate penalties, I consider that the contraventions in this case warrant the following penalties:
In respect of the contravention of s 340(1) concerning the dismissal of Mr Whelan, for which I consider there is mid-range culpability:
(a) In respect of the first respondent: $30,000.00
(b) In respect of Mr Beynon: $6,000.00
In respect of the multiple contraventions of s 44(1) relating to the withholding of entitlements as required by ss 90(2) and 117(2) of the FW Act:
(a) In respect of the first respondent: $45,000.00 in total for both contraventions
(b) In respect of Mr Beynon: $9,000.00 in total for both contraventions
67 The punishment must be proportionate to the contravention: Lander J in Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543. In this case the amounts withheld from Mr Whelan totalled less than $35,000, and the non-economic loss sustained by Mr Whelan was in the amount of $5,000. However:
The respondents fabricated a reason to dismiss Mr Whelan summarily, which they otherwise were not entitled to do;
The respondents subsequently deliberately relied on this fabricated basis for summary determination as a justification for refusing to pay Mr Whelan his statutory entitlements;
The refusal of the respondents to pay Mr Whelan his statutory entitlements was contrary to their obligations under the FW Act,
The refusal of the respondents to pay Mr Whelan his statutory entitlements was a vengeful act on the part of the respondents; and
The respondents persisted in an attitude of denying Mr Whelan’s right to recover his entitlements to the point that Mr Whelan was required to institute proceedings in this Court to recover them.
68 While the pecuniary penalties under the FW Act must be proportionate to the contravention, they must also be assessed at a level which is meaningful. I consider that the pecuniary penalties at the level I have assessed are proportionate to the contraventions in this case.
69 Further, I note that the penalties assessed in respect of each respondent are substantial, being a total of $75,000.00 in respect of the first respondent, and $15,000.00 in respect of the second respondent. However the relevant contravening conduct in this case was, on the part of the respondents, based on fabricated reasons, deliberate, vengeful and – in respect of the withholding of entitlements – sustained notwithstanding an apparent recognition by the respondents of the absence of justification. I am satisfied that the totality of the penalties constitutes a proportionate response to the wrongdoing of the respondents in this case.
To whom the penalties should be paid
70 In Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4 the Full Court gave detailed consideration to the power of the Court to direct payment of a penalty under s 546(3) of the FW Act, including the history of that provision which their Honours identified as “common informer” legislation. At [72] the Full Court observed:
72. One may begin to understand, therefore, why it is that s 546(3), in Pt 4.1, Div 2, Subdiv B, empowers the Court to order that a pecuniary penalty, or a part of the penalty, be paid to the Commonwealth, a particular organisation, or a particular person. If a proceeding for contravention of s 351(1) is brought by the inspector, the inspector being a public official of the Commonwealth, it may be expected that ordinarily the pecuniary penalty would be paid to the Commonwealth. If a union were to bring the proceeding successfully, for the benefit of its members, it may be expected that the penalty would be paid to the union. If the union brought the proceeding for the benefit of a particular member, there might be payment of the penalty to that member, on the basis he or she is a particular person to whom it should be paid; or part payment to that member and the balance to the union. If a person individually affected by a contravention brought the proceeding, then the penalty may be paid to him or her as a particular person. There is a certain symmetry between the person or entity authorised to prosecute an enforcement proceeding and the person or entity to whom the penalty, if imposed, might be paid. This symmetry is recognised by the Explanatory Memorandum and authority.
(Emphasis added.)
71 Their Honours later continued:
101. Given the legislative history of ss 539(2) and 546(3) of the FW Act, since the enactment of ss 44 and 45 in the pioneering 1904 Act, and the manner in which the “usual order” was articulated in such early cases as the Vehicle Builders’ Employees’ Federation case and Seymour, which is reflected in the Explanatory Memorandum, we consider that the power conveyed by s 546(3) is ordinarily to be exercised by awarding any penalty to the successful applicant. We accept that there may be cases (of which this is not one) where the penalty, or a part of the penalty, should be paid to another person in the circumstances described by Gray J in Plancor at [44] (as set out at [96] above).
72 They further observed:
104. In our view, the legislative history of s 546(3), older authority and the terms of the Explanatory Memorandum show that no immediate or obvious connection was intended to be drawn between the exercise of the s 546(3) power and the exercise of the power under s 545 of the FW Act to order compensation.
105. Moreover, s 546(5) makes it plain the Court may make a pecuniary penalty order in addition to a s 545 order. The fact that a compensation order has also been made should not control the exercise of the s 546(3) power with respect to the payment of the penalty.
106. There is no necessary tension, as the primary judge put it, between the application of the “usual order”, where a person affected by the contravention succeeds in a court proceeding and a penalty is imposed, and the separate entitlement of that person to be compensated under s 545. Nor is there any necessary relationship between the s 570 limitation on the recovery of legal costs in proceedings under the FW Act, except in prescribed circumstances, and the application of the “usual order”.
107. Rather, s 546(3) has a long and well-understood operation. The FW Act enables, amongst others, a person affected by a contravention to initiate an enforcement proceeding and to receive the penalty, where one is imposed.
73 Relevantly, at [119] of that case their Honours said:
119. In our view, it is not at all clear on the evidence in this case that, if the primary judge had chosen to direct payment of the penalties to him Mr Sayed would have received a windfall in the sense described by Branson and Lander JJ. We say this because, although Mr Sayed did not lead evidence himself about the extent of costs he had incurred in maintaining his prosecution of the CFMEU, it was obvious, on the face of the proceeding, that he had significant personal involvement in the maintenance of the proceeding where he was represented over a three day hearing by senior and junior counsel, instructed by solicitors he had retained, who also prepared the submissions as to penalty. Accepting that legal expenses should not be taken into account in considering “the true cost” of bringing such a prosecution because of the stipulation in s 570 that a party’s legal costs are not recoverable except in circumstances not applicable here, there can be no doubt that Mr Sayed, in bringing and maintaining the prosecution of the union, and in dealing with the solicitors he instructed and the counsel they briefed, must have incurred considerable time, trouble and lost opportunity, not to mention the real risk to his career that Mr Sayed assumed in running the proceeding.
74 In this case it was similarly obvious that Mr Whelan had instigated the proceedings, that he had significant personal involvement in the proceedings, that he invested significant time in the proceedings, and that almost certainly significant costs were incurred by him in the course of the primary proceedings. No reason has been demonstrated why Mr Whelan should not be paid the penalties that the Court has ordered against the respondents.
75 The appropriate order is that the pecuniary penalties in this case ordered to be paid by the respondents, be paid directly to Mr Whelan.
Costs
76 Both parties made extensive submissions supporting their claimed entitlement to costs.
77 The applicant sought 40 per cent of his costs (discounted by 10 per cent based on the causes of action which were not successful) for reasons including the following:
The alleged reason for dismissing the applicant, namely the disclosure of the Zoo Magazine article to a third party, was a sham, and was concocted by the second respondent (who authorised the original disclosure) and Ms Ozioko after Mr Whelan’s dismissal.
Costs were wasted and thrown away as a result of the respondents taking the decision not to rely upon the affidavit of the second respondent on the morning of the adjourned specially fixed hearing date to cross examine the second respondent.
The respondents grossly failed in their obligation to properly discover documents in circumstances where all the relevant documents were held by the respondents and the applicant pressed, on more than one occasion, for full discovery with no result.
Following receipt of the Parnia Marshall evidence, the respondents amended their amended defence a few days before the hearing, to include a ‘grab bag’ of reasons to dismiss the applicant.
Before the reverse onus can be triggered, the employee must provide plausible evidence that the employer took adverse action against him as a result of his exercising a workplace right. The applicant would not have triggered the reverse onus if he could not have proved that the allegation of ‘gross misconduct’ was false, and therefore was required to incur costs in so disproving that allegation.
78 In respect of costs the respondents submitted, in summary:
Only a small proportion of the total time spent at trial involved the issues upon which the applicant succeeded.
The grounds advanced by the applicant in respect of costs are not made out on the evidence, misdescribe the true position factually, and do not satisfy or are even arguably capable of satisfying the requirements of s 570(2)(b).
With respect to the claim of the applicant of an alleged “sham” reason for his dismissal, no such finding was made. Even were it true that alleged reason for dismissing the applicant, namely the disclosure of the Zoo Magazine article to a third party, was a sham, it did not cause the costs of the action or any significant or identified part of them to be incurred.
In respect of the decision of the respondents not to rely upon the affidavit of the second respondent, the applicant elected not to call certain witnesses for cross-examination or not rely on their affidavits in the trial.
In respect of the applicant’s claim that the respondents grossly failed in their obligation to properly discover documents in circumstances where all relevant documents were held by the respondents and the applicant pressed, on more than one occasion, for full discovery with no result, this claim was based on an unsubstantiated assertion and repeats arguments raised but not upheld at the trial. The Court was satisfied there was no such failure to disclose relevant documents. Counsel for Mr Whelan did not make a responsive submission to suggest that anything had been said to describe the discovery process as inaccurate, make any application for further discovery, or identify what documents he alleged existed but were not discovered.
Ultimately, the applicant’s submissions do not address the requirements of s 570.
The respondents seek an order under s 570 that the applicant pay their costs of the failed claims, and conduct including:
• The filing of objectionable and inadmissible material;
• The unreasonable issuance of a Notice to Produce;
• Failure to abandon unsustainable allegations;
• Requiring unnecessary disclosure on issues upon which he failed; and
• Making fanciful claims in relation to entitlement to be paid bonuses.
The respondents submit that the applicant was entirely unsuccessful in relation to the following claims, which took up significant time in pre-trial proceedings:
• The contractual and misleading and deceptive conduct case in inducing the contract;
• The contractual and misleading conduct case in relation to conduct post-contractually;
• The claimed contractual right to receive a bonus;
• The alleged breach of the implied term of good faith and reasonableness in relation to the bonus;
• Other claims for breach of contract;
• Other elements of the adverse action claim other than that upon which he succeeded; and
• Various claims for compensation other than those upon which the Applicant succeeded, including VAT wages and bonuses, other economic loss, other non-special loss, and general damages, as well as compensation under the Australian Consumer Law.
The respondent had prepared and filed an application earlier in proceedings to strike out parts of the Statement of Claim, and ultimately the applicant consented to striking out parts of the pleading and was required to re-plead. The costs of that application were reserved and ought to be recovered by the respondents.
Disclosure was a significant and costly exercise, and with regard to the extent of the failed claims, wasteful due to the limited resources of the respondents and the scope of the applicant’s request for disclosure. A number of the categories of disclosure related solely to the claim for bonuses, namely 133 of the 209 disclosed documents. In order to defend Mr Whelan’s claims, the respondents were forced to disclose material relating to its finances, internal workings, company performance results and confidential trade secrets which are now known to its competitors.
The costs associated with complying with disclosure amounted to approximately $13,000.00 (including GST).
There were significant costs unnecessarily incurred by the respondents in obtaining instructions to respond to the matters set out in the affidavits of Tracey Whelan, Connor Summers, Masimba Wagoneka and Greg Bull, noting that none of the witnesses were made available for cross-examination and none of their affidavits were relied upon in the trial. The applicant’s argument about resources wasted in the decision not to call Mr Beynon can be balanced with the lateness of the decision not to call the applicant’s witnesses.
The respondents also seek costs on the basis that the applicant unreasonably attempted to include in affidavit material evidence which was clearly demonstrably objectionable.
Leaving aside objections conceded by the applicant’s Counsel in the course of argument, the respondents successfully argued 86 objections to Mr Whelan’s two affidavits and succeeded in respect of 19. On this basis, most of the first day of the trial was unreasonably wasted in unnecessary argument concerning the inadmissibility of Mr Whelan’s affidavits.
The applicant’s affidavit material raised various allegations which were not raised in the pleadings, causing significant costs in relation to taking instructions and undertaking additional disclosure following the service of Mr Whelan’s affidavit material in July 2016. Correspondence was sent to the applicant’s solicitors on 14 August 2016 and 4 October 2016 requesting the applicant to amend their pleadings.
Costs were incurred by the respondents associated with re-taking instructions and undertaking additional disclosure following the service of Mr Whelan’s affidavit material in July 2016.
With respect to the strike out application involving the filing of a Further Amended Statement of Claim, the respondents’ costs in respect of that application thrown away were approximately $7,844.10 (including GST).
The applicant issued a notice to produce documents on the 5th hearing date, which required “a very substantial amount of legal work” to obtain documents and organise them, with copies made for the Court. Compliance with this notice required work by a solicitor of over one day. When the matter came before the Court, no call was made requiring the documents and these costs were completely wasted. None of the material required was of any relevance, or had already been disclosed. The costs associated with complying with the notice to produce came to approximately $2,000.00 (including GST).
79 With respect to the issue of costs sought by the respondents, the applicant responded in their submissions filed on 6 June 2019. The submissions can be summarised as follows:
With respect to the application made by the respondents in March 2016, the matter was settled by consent. The parties were reasonably cooperative to move proceedings along without incurring additional Court costs.
The applicant amended his claim with the respondents’ consent. This cannot be said to be unreasonable conduct triggering s 570 of the FW Act.
An applicant ought not to be penalised with a costs order for pursuing those causes of action that ultimately prove unsuccessful.
With respect to amendments to the counter claim required by the respondents and their suggested amendments for the applicant to make to its amended statement of claim, the parties agreed to make amendments to their pleadings by consent and the matter moved forward. The conditions in s 570 do not apply.
The only item listed in the Notice was a request for an earlier version of the Vincent Forensic Report that was referred to by Haines and Ozioko in cross examination. As the second respondent failed to give evidence, any forensic advantage that might have existed fell away.
The respondents acted unreasonably in the manner of the termination of the applicant’s employment, the intentional withholding of the applicant’s statutory entitlements and in the manner in which the respondents manage their case, and on that basis the applicant should be entitled to his costs.
Costs: Consideration
80 Ultimately, I found that the respondents had breached s 340(1) of the FW Act by taking adverse action against the applicant (namely dismissing him) as a result of his inquiries about payment of a bonus or establishment of a bonus plan, and s 44(1) of the FW Act by their failure to pay him his statutory entitlements.
81 As a general rule the Fair Work jurisdiction is no costs. An order for costs in Fair Work matters is unusual and limited to circumstances contemplated by s 570 of the FW Act. Relevantly, s 570 of the FW Act provides:
Costs only if proceedings instituted vexatiously etc.
(1) A party to proceedings (including an appeal) in a court (including a court of a state or territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) of section 569 or 569A.
Note: The Commonwealth might be ordered to pay costs under section 569.
A State or Territory might be ordered to pay costs under section 569A.
(2) The party may be ordered to pay the costs only if:
(a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c) the court is satisfied of both of the following:
(i) the party unreasonably refused to participate in a matter before the FWC;
(ii) the matter arose from the same facts as the proceedings.
82 In Australian Workers Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23; (2013) 232 FCR 428, the Full Court explained at [7]:
In our view the authorities establish the following principles:
(1) The purpose or policy of the section is to free parties from the risk of having to pay their opponents’ costs in matters arising under the Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause.
(2) It follows from the protection offered by s 570(2) that a person will rarely be ordered to pay the costs of a proceeding. But it is not necessary to prove that there are exceptional circumstances warranting the making of an order: Spotless Services Australia Ltd v Senior Deputy President Jeanette Marsh [2004] FCAFC 155 (Spotless) at [12]–[13] (to the extent that the Full Court in Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 (Kangan) held otherwise, we would respectfully disagree).
(3) The relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed: R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 at 473 per Gibbs J; Kangan at [60]. In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 at 264-5 (approved in Kangan) Wilcox J said:
If success depends on the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding, as being “without reasonable cause”. But where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.
83 More recently the Full Court explained in Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8]:
Section 570 of the FW Act confers discretion on the Court to order costs in Fair Work matters where proceedings were instituted vexatiously or without reasonable cause. Not only must this discretion be exercised judicially according to the terms defining it, it must be exercised with caution because of the exceptional nature of the power in an otherwise no-costs jurisdiction. The case for its exercise should be clearly demonstrated: Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6]. As Mortimer J observed (correctly, in our opinion) in Ryan v Primesafe [2015] FCA 8 at [64]:
The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them.
(cf Barker J in Pettit v Evolution Mining Ltd [2016] FCA 1304 at [62].)
84 Further, earlier this year in Macushla Pty Ltd (Trading as Sunnytop Bakery Ciabatta Della Nonna) v El Souki [2019] FCA 643 Snaden J observed:
[15] In Baker v Patrick Projects Pty Ltd (No 2) (2014) 145 ALD 548 (Dowsett, Tracey and Katzmann JJ), a Full Court of this Court endorsed (at [9]) what was said about the application of s 570(2)(a) of the FW Act in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351 (Pagone J). There, Pagone J, at [8], said that:
…[t]o exercise the discretion conferred by [s 570(2)(a) of the FW Act] the Court must be satisfied that the claims were, relevantly, instituted without reasonable cause. That is not established merely because a party fails in the claims: R v Moore; ex parte Federated Miscellaneous Workers Union of Australia (1978) 140 CLR 470, 473. The relevant provisions reflect ‘a policy of protecting a party instituting proceedings from liability for costs’ and costs will rarely be awarded unless justified by exceptional circumstances: see Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 at [60]. In Kangan Batman Institute it was said by the Full Court at [60] that ‘a proceeding will be instituted without reasonable cause if it has no real prospects of success, or was doomed to failure’. In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 Wilcox J indicated at 264 that one way of testing whether a proceeding was instituted ‘without reasonable cause’ was to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no ‘substantial prospect of success’. His Honour went on to say that a proceeding lacks a reasonable cause where it is clear that it must fail on the applicant’s own version of the facts.
[16] The Full Court in Baker identified some “minor modification[s]” of the test when applied to appeals and judicial review proceedings. At [10], the Court observed that:
…[i]n such proceedings the focus changes to whether, having regard to the facts apparent to the appellant at the time of instituting the appeal or the application for judicial review, there were no reasonable prospects of success. In evaluating these prospects regard may be had to the reasons for judgment or decision under appeal or review, as the case may be, and the grounds relied on to challenge the judgment or decision: see Imogen Pty Ltd v Sangwin (1996) 70 IR 254 at 257 (Wilcox CJ).
85 In this case in the appeal the Full Court noted the proposition that litigation is not a “free for all”. The submissions of both parties in claiming and counter-claiming detailed costs, to the point of identifying and quantifying individual cost items in taxable form, come perilously close in my view to being a “free for all”.
86 The primary litigation in this case was hard-fought and bitter. There was considerable variance between Mr Whelan’s claims, and those which were substantiated in the trial. Similarly, the respondents failed in their cross-claim for an advance they had allegedly made to Mr Whelan.
87 However the relevant question is whether a proceeding was instituted vexatiously or without reasonable cause, not whether it ultimately failed. Mr Whelan was successful in his claims of contravention of the FW Act by the respondents, but unsuccessful in recovering bonuses he claimed were owed to him and in respect of his contract claims. I do not, however, consider his claims referable to bonuses either vexatious or unreasonable – indeed the issue of bonuses was ultimately decisive in the proceedings to the extent that the adverse action taken against him was referable to his bonus inquiries. Further, while Mr Whelan was unsuccessful in his contract claims, the nature of the relationship between the parties (in particular his personal relationship with Mr Beynon as the apparent face of the first respondent) was such that Mr Whelan’s claims could not be described as futile from the outset.
88 On the other hand, to the extent that the respondents resisted Mr Whelan’s application, I do consider this to be unreasonable. That the respondents relied on a premise for Mr Whelan’s dismissal which the Court did not accept, and that they continued to maintain this reliance, was an issue which has been addressed in penalties. However the respondents’ position was also referable to the fact that Mr Whelan could be dismissed with a mere two weeks’ notice at any time, for any reason; to the very poor relationship between the parties at the time of the dismissal; to the importance the respondents placed on publicity by reference to the Zoo Magazine article; and to their (as I found, warranted) concern that Mr Whelan could or would do harm to their business. I do not see the respondents’ conduct as falling within the parameters of s 570 of the FW Act.
89 Further, while the respondents were not successful in respect of their cross-claim, I am satisfied that the premise of the cross-claim was plausible on the evidence before the Court, and that it cannot be said they instituted the cross-claim vexatiously or without reasonable cause.
90 I take a different view however in relation to the respondents withholding Mr Whelan’s statutory entitlements, particularly their refusal to pay Mr Whelan his unused leave entitlements in accordance with s 90(2) of the FW Act. I understand that this was a position the respondents maintained until judgment was given. Even if I had been persuaded that Mr Whelan was dismissed for gross misconduct, that the respondents were entitled to dismiss him without giving him notice or payments in lieu of notice, and that therefore adverse action had not been taken against him in relation to his dismissal, Mr Whelan’s statutory entitlement to unused paid leave in accordance with s 90(2) remained undisturbed. In the course of the primary judgment I noted that any right to withhold Mr Whelan’s unused paid leave entitlements required satisfaction of conditions prescribed by s 324(1) of the FW Act, and that the respondents claimed the right to withhold the payments because of a right under the general law to set-off. As I further noted at [159]-[160] of the primary judgment, a claimed right of set-off in this case in no way satisfied the terms of s 324(1) of the FW Act.
91 This conduct of the respondents was a deliberate denial of Mr Whelan’s right to receive those entitlements, to the point that he was obliged to institute Court action to recover them. I am satisfied that the respondents’ resistance of this aspect of Mr Whelan’s claim was at all times unreasonable, and motivated by Mr Beynon’s determination not to “pay (Mr Whelan) a fucking cent”. I am satisfied that this conduct constituted an unreasonable act or omission which caused Mr Whelan to incur costs within the meaning of s 570(2)(b) of the FW Act.
92 The parties have also made extensive submissions concerning each other’s conduct in the course of the trial, which they each say caused them to unnecessarily incur costs. This includes:
The respondents adding to their alleged reasons for the dismissal of Mr Whelan, particularly following the evidence of Ms Parnia Marshall;
The decision of Mr Whelan not to call certain witnesses at the hearing or rely on their evidence (namely Tracey Whelan, Connor Summers, Masimba Wagoneka and Greg Bull);
The decision of the respondents not to call Mr Beynon as a witness or rely on his evidence;
The applications by the applicant for discovery and/or production of documents;
The amendments of the pleadings, including the counterclaim, and a vacated application hearing on 2 March 2016; and
Objections by the respondents to evidence of the applicant, which were conceded.
93 Developments during the course of the proceedings which resulted in amendments to the pleadings, as well as case management developments referable to discovery, objections to evidence, and production of documents, are not uncommon features of litigation in the ordinary course.
94 Amendment to pleadings is unremarkable in circumstances where the nature of a case changes referable to emerging evidence: see for example Federal Court Rules 15.15, 16.53, 16.55 and 16.56 and Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 193. I also note, for example, that orders were made by the Court by consent of the parties on 29 February 2016 to amend the pleadings, and that a hearing listed for 2 March 2016 was vacated as a result of this agreement between the parties.
95 Both parties elected not to call witnesses in respect of whom affidavits had been sworn, however the decisions not to call those witnesses were forensic choices of the parties, and in my view there was nothing sinister or untoward about those decisions. In particular:
Insofar as concerns the decision of the applicant not to call his four witnesses, I note the submission of the applicant that this decision was made against a background of anxiety of the applicant to complete the trial within the listed period. This is an unremarkable proposition, and in my view, a reasonable forensic approach.
The fact that Mr Beynon did not give evidence was a forensic choice of the respondents in respect of the burden of proof which fell on them pursuant to the provisions of the FW Act, and was their decision in the context of the litigation as it developed. I note the affidavit of Mr Brendan Nyst, solicitor for the respondents, dated 9 May 2019 in which Mr Nyst deposes that the respondents decided not to call Mr Beynon for reasons including their evaluation of the strength of the applicant’s case and because of costs implications. In my view these justifications are not unreasonable. The applicant complains about the wastage of legal costs on his part in preparation for cross-examination of Mr Beynon, however it is rather likely that the failure of Mr Beynon to give evidence would have actually aided the applicant in his case in circumstances where the burden of proof had shifted to the respondents.
96 To the extent that the respondents complain that they had extensive objections to evidence of the applicant and that the applicant conceded those objections, I note the submission of the applicant that these concessions were a forensic choice, in the interests of progressing the trial. In my view, this is not an unreasonable approach. However even to the extent that time was taken up on the first day of the trial by argument over the admissibility of Mr Whelan’s evidence, I do not consider this unreasonable conduct on the part of the applicant as alleged by the respondents. Again, time spent resolving objections to evidence is unfortunately unremarkable in the context of litigation, and does not, in my view, fall within the parameters of s 570 of the FW Act.
97 Finally, to the extent that the parties engaged in extensive discovery exercises, including a notice to produce issued by the applicant to the respondents during the course of the hearing, I again note that this unfortunately is not an uncommon feature of litigation where parties choose to minimise their level of professional co-operation in progressing the litigation (notwithstanding the provisions of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth)), where emotions are running at a high level between the parties, and where one party – in this case the respondent – had an advantage at all times over the other in relation to relevant evidentiary material. The breadth of discovery sought by the applicant was not the subject of objection or application by the respondents, and I do not understand that the applicants pressed allegations of failure by the respondents to discover purported documents which otherwise existed.
98 Further, notwithstanding the respondents’ complaints concerning the notice to produce served by the applicant on the respondents on the fifth day of the hearing, and the extent of work apparently required of the respondents to comply with it, the applicant submits that the notice sought only one document – namely a report consisting of about 50 pages referred to by Ms Ozioko in her cross examination. The applicant submits that any forensic advantage that might have existed by way of putting the content of the document to the second respondent in cross examination fell away, as the second respondent failed to give evidence. Again, developments of this nature are unremarkable in litigation, particularly when parties elect not to call witnesses late in the proceedings.
99 Other than in relation to the deliberate decision of the respondents to resist the applicant’s statutory entitlement to unpaid leave, in my view it cannot be said that proceedings were instituted by either the applicant or the respondents vexatiously or without reasonable cause, or that there were unreasonable acts or omissions which caused the other party to incur costs, within the meaning of s 570 of the FW Act.
100 I consider it would be fair for the respondents to pay the applicant 10% of his costs, referable to that aspect of their conduct which was unreasonable.
101 Otherwise, I consider that the standard rule as applies in Fair Work proceedings is applicable, and there should be no order as to costs.
I certify that the preceding one-hundred-and-one (101) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. |
Associate:
