Federal Court of Australia

Australian Education Union v Yooralla Society of Victoria [2021] FCA 954

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

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

REASONS FOR JUDGMENT

WHEELAHAN J:

Introduction

1    This is an appeal from a decision of a judge of the Federal Circuit Court of Australia. The primary judge ordered the respondent (Yooralla) to pay pecuniary penalties to the appellant (AEU) in the total sum of $14,850 pursuant to s 546(1) of the Fair Work Act 2009 (Cth). The penalties were imposed in respect of four contraventions of the Fair Work Act involving underpayments on account of ordinary hours of work, annual leave, annual leave loading, and personal leave that were payable to an employee of Yooralla and member of the AEU, Erin Stanios (née Legg) (the employee).

2    This appeal concerns the primary judge’s assessment of penalty, and does not concern questions of liability. Initially, the AEU’s claim was dismissed on the question of liability by a different judge of the Federal Circuit Court: Australian Education Union v Yooralla [2018] FCCA 2758. An appeal from that decision was allowed in part by Steward J, who made findings that the employee had not been paid in accordance with the applicable industrial instruments: Australian Education Union v Yooralla [2019] FCA 1511. Subsequently, Steward J made declarations of contravention of the Fair Work Act, made orders for the payment to the employee of $11,758.50 and interest in the sum of $2,087.65, made an order for a corresponding superannuation contribution, and remitted the question of penalty to the Federal Circuit Court: Australian Education Union v Yooralla (No 2) [2019] FCA 1749.

Background

3    The employee worked at Yooralla’s Naroo Day Service at Naroo Street, Balwyn from about 3 December 2013. Her rate of pay was set by the Social, Community and Disability Services Industry Equal Remuneration Order 2012, and consisted of two parts: (1) a Transitional Minimum Wage pursuant to clause 5.3 of the Order; and (2) an Equal Remuneration Payment pursuant to clause 5.5 of the Order. The amount of the Transitional Minimum Wage depended upon whether under the terms of two pre-modern awards the employee was an “instructor” under the Disability Services Award (Victoria) 1999 (Disability Award), or an “attendant carer” under the Attendant Care – Victoria Award 2004 (Carer Award). The entitlement to, and the amount of the Equal Remuneration Payment turned on whether the employee should be characterised as a “Social and community services employee level 2”, or a “Social and community services employee level 3” under the applicable modern award, the Social, Community, Home Care and Disability Services Industry Award 2010 (Modern Award).

4    On appeal, Steward J held that the employee was an “instructor” for the purposes of the Disability Award, but rejected the AEU’s submission that the employee was a level 3 employee for the purposes of the Modern Award, holding that she was a level 2 employee. In reaching the conclusion that the employee’s remuneration was subject to the Disability Award, and not the Carer Award, Steward J stated at [45] that the matter was “finely balanced”, observing that there was a potential for overlap between the two awards, and that how the two awards were to be read together remained unclear. When considering the employee’s classification level under the Modern Award, Steward J referred at [51] to the case as “a somewhat complex case”.

5    The findings of Steward J resulted in declarations that there had been contraventions by Yooralla of ss 44, 45, and 305 of the Fair Work Act. It was accepted that each instance of underpayment should be aggregated pursuant to s 557 of the Fair Work Act, with the result that there were four contraventions that were the subject of declarations by Steward J –

The Respondent contravened the following civil remedy provisions:

(a)    section 305 of the Fair Work Act 2009 (Cth) (the “FW Act”) by failing to pay Erin Legg the minimum hourly rates for ordinary hours worked in contravention of clause 5.5 of the Equal Remuneration Order;

(b)    section 44 of the FW Act by failing to pay Ms Legg the minimum hourly rates for annual leave taken in contravention of s 90(1) of the FW Act;

(c)    section 45 of the FW Act by failing to pay Ms Legg the minimum hourly rates for annual leave loading in contravention of clause 31.3(a) of the Social, Community, Home Care and Disability Services Award 2010;

(d)    section 44 of the FW Act by failing to pay Ms Legg the minimum hourly rates for personal leave taken in contravention of s 99 of the FW Act.

The decision of the primary judge

6    In respect of the four contraventions found by Steward J on appeal, the primary judge imposed the following penalties –

(a)    $4,050 in respect of his contravention of section 305 of the Act for failing to pay minimum hourly rates for ordinary hours worked;

(b)    $4,050 in respect of its contravention of section 44 of the Act as a result of failing to pay minimum hourly rates for annual leave taken;

(c)    $2,700 in respect of its contravention of section 45 of the Act for failing to pay the minimum hourly rates for annual leave loading; and

(d)    $4,050 in respect of its contravention of section 44 of the Act for failing to pay the minimum hourly rates of personal leave taken.

7    In his reasons for judgment, the primary judge set out the background to the matter, including the fact that Yooralla had originally been successful at first instance, but that the AEU had been successful on appeal. The primary judge referred to Steward J’s observations about the matter being “finely balanced”, and “somewhat complex”. The primary judge further stated that the complexity stemming from the awards was evident from the different views of the matter taken by the original judge at first instance and by Steward J, and the fact that Yooralla had obtained legal advice once the proceeding had been commenced from specialist industrial lawyers. That advice had stated that Yooralla’s approach was to be preferred. The primary judge rejected a submission by the AEU that the issues were not complex when one had regard to the work performed by the employee. The primary judge stated at [19] that when all matters were considered, it became abundantly clear that the issues before the court were not straight-forward. His Honour held that, given the complexity, it was understandable that Yooralla may have made an error when it applied the applicable award to the work performed by the employee. However, his Honour was careful to state that this did not in any way excuse the error, or the seriousness of it, stating at [19] –

… [w]hen the circumstances are considered, this is a case that is far removed from cases where an employer has deliberately underpaid an employee, or has been reckless as to the correct rate of pay, or has conducted or adopted a business model which produces an outcome where there is a strong prospect that employees will be underpaid.

8    At [22], the primary judge gave further consideration to the fact and content of the legal advice which Yooralla had received. This was relevant to evaluating the competing submissions that had been made concerning the fact that the employee, either directly or through the AEU, had attempted to resolve the matter without going to court. On one hand, the primary judge stated that in seeking legal advice Yooralla had displayed a degree of diligence on its part in taking the employee’s complaints seriously, and had demonstrated a desire to reach the correct position, which his Honour accepted and took into account. On the other hand, his Honour also took account of the fact that the steps taken by Yooralla to clarify its position proceeded on the basis of an incorrect appreciation of the actual tasks performed by the employee, which his Honour stated suggested that there was an insufficiently rigorous approach taken by Yooralla in determining whether the employee had been correctly paid in the face of serious allegations made by her.

9    The primary judge then addressed a submission made on behalf of Yooralla that the double jeopardy provision in s 556 of the Fair Work Act was engaged on the basis that the same conduct gave rise to the four contraventions, with the result that Yooralla was not liable to more than one pecuniary penalty. His Honour rejected that submission, citing the decision of the Full Court in Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner [2019] FCAFC 201; 272 FCR 290, and its approval of the construction of s 556 of the Fair Work Act applied by Jessup J in Australian Building and Construction Commissioner v Automotive, Foods, Metals, Engineering, Printing and Kindred Industries Union (the Australian Paper Case) (No 2) [2017] FCA 367. The primary judge held that the “particular conduct” of Yooralla that gave rise to the contraventions was the failure to pay the four categories of entitlements that were the subject of the findings by Steward J, and that therefore s 556 of the Fair Work Act was not engaged. A decision to apply the wrong award was not the “particular conduct” for the purposes of s 556 of the Act. At [50], his Honour stated that the appropriate place to have regard to the circumstances or explanation that Yooralla had applied the wrong award was when the court came to consider the application of the totality principle.

10    His Honour then turned to the circumstances of Yooralla. At the time of the relevant contravening conduct, Yooralla employed 1,963 employees and served 26,000 customers, or clients. It was accepted that Yooralla’s operations are substantial in the sector in which it operates. There was no evidence before the primary judge to indicate that Yooralla would have been unable to bear the imposition of a financial penalty.

11    The primary judge then considered the subjects of contrition and corrective action. His Honour accepted a submission by the AEU that no apology had been given by Yooralla, but noted a submission on behalf of Yooralla that its actions, which his Honour detailed, spoke louder than words. At [54], his Honour found that Yooralla had remedied the underpayments to the employee as ordered by Steward J, and had also made further payments to the employee in respect of the entire period of her employment, including that period not covered by the AEU’s claim. However, his Honour stated that the making of payments to a person in the employee’s position pursuant to a court order was not conduct that he would regard as contrition. Nor did his Honour place significant weight on the fact that Yooralla had also rectified underpayments to the employee for the duration of her employment, notwithstanding it extended beyond the claim made in the proceeding. His Honour stated that these payments were simply rectifying what should have been the case had Yooralla paid the employee correctly in the first place.

12    The primary judge accepted that Yooralla was undertaking an audit for the previous six years, and that it had engaged independent third party accountants to undertake the audit to verify the results. There was no evidence as to when the audit was to be completed, but his Honour held that it was understandable that the audit had not yet been completed, given the period of time to be covered by the audit. His Honour held that these actions undertaken by Yooralla were appropriate, and he took them into account in assessing the appropriate penalties.

13    On the question of co-operation, the primary judge did not place any weight one way or the other on the decision of Yooralla to contest the proceeding, holding that the question of what industrial instrument governed the employee’s employment was not a straight-forward one, as his Honour had already noted. His Honour stated that the question whether a penalty should be imposed, and the extent of any penalty should not be influenced by the fact that Yooralla had exercised its right to contest matters which Steward J had characterised as “finely balanced”.

14    The primary judge then addressed the consideration of deterrence, stating that the primary purpose of imposing civil penalties was to promote the public interest in compliance by putting a price on contravention that is sufficiently high so as to act as a deterrent both to the contravener and to others, citing Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (Agreed Penalties case). His Honour accepted that there was a need to send a message to the public at large that the underpayment of wages to any employee, but particularly low income employees, was completely unacceptable in the modern age.

15    Having regard to the matters to which the primary judge referred, his Honour considered that it was appropriate to impose pecuniary penalties. His Honour referred to submissions made on behalf of the AEU that the penalties should be in the range of 60% to 70% of the maximum. I pause to observe that this submission was made in relation to Yooralla’s contravention of s 305 of the Fair Work Act, but the AEU’s submissions in relation to the other contraventions proposed a range for penalties at lower levels. In circumstances where the maximum penalties for the four contraventions totalled $216,000, the AEU had submitted to the primary judge that the appropriate range, in total, was $108,000 to $129,600. On the other hand, Yooralla had submitted to the primary judge that no penalty should be imposed, or alternatively that a single penalty in the very low range of 5% to 10% of the maximum should be imposed.

16    The primary judge concluded that a penalty should be imposed at the low end of the scale for each contravention, although not as low as had been submitted on behalf of Yooralla. His Honour’s assessment of penalties proceeded in two stages. First, his Honour assessed penalties for each contravention prior to consideration of the totality principle, and then at the second stage his Honour reduced those penalties by 50%. His Honour’s consideration of the totality principle was as follows –

68.    Finally, it is necessary to consider the totality principle to the imposition of penalties. That principle was described by the High Court of Australia in Mill v R (1988) 83 ALR 1 at [62] - [63], and has been applied in this jurisdiction: Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70. The application of the principle does not necessarily require a discount.

69.    As I have indicated above, the relevant breaches arose because the Respondent applied the wrong award. That act explains how the Respondent came to find itself in breach of its obligations towards Ms Stanios. The Respondent sought professional advice on the issue. It is a matter that warrants an adjustment to the ultimate penalties to be imposed. I am of the view that the adjustment in the circumstances of this matter should be in the order of a 50% reduction on the total penalties payable.

17    The primary judge concluded by setting out in a table a summary of his Honour’s conclusions in relation to the penalty for each of the four contraventions –

The grounds of appeal

18    The AEU pressed five grounds of appeal. A sixth ground was abandoned. The five grounds that were pressed are summarised as follows –

(1)    the penalties imposed by the primary judge were manifestly inadequate and not of appropriate deterrent value;

(2)    the primary judge misunderstood, or misapplied the totality principle;

(3)    the reduction of 50% on account of the application of the totality principle was manifestly excessive;

(4)    the primary judge gave “undue weight” to the fact that Yooralla had sought professional advice; and

(5)    the primary judge erred by failing to have adequate regard to Yooralla’s lack of apology.

Consideration

19    I will consider the five grounds of appeal in turn. Before doing so, I will make some general observations. The court’s powers on appeal are enlivened if the appellant demonstrates some legal, factual, or discretionary error in the decision below: Allesch v Maunz [2000] HCA 40; 203 CLR 172 at [23] (Gaudron, McHugh, Gummow and Hayne JJ). As the primary judge’s decision on penalty was discretionary, the principles essayed in House v The King (1936) 55 CLR 499 at 505 (Dixon, Evatt and McTiernan JJ) are applicable to determining whether there was any appealable error. Within the principles essayed in House v The King are factual errors and errors of principle committed in the course of making a discretionary decision. As to any factual errors that are alleged, the principles referred to by the majority in Warren v Coombes [1979] HCA 9; 142 CLR 531 at 551 apply. Otherwise, if the result of the exercise of a discretion is unreasonable or plainly unjust, an appellate court may infer some error, and review the decision on the ground that a substantial wrong has in fact occurred.

(1)    Were the penalties manifestly inadequate?

The submissions of the AEU

20    In submitting that the penalties imposed by the primary judge were manifestly inadequate, and were not of an appropriate deterrent value, the AEU sought to invoke the last limb in House v The King. Counsel for the AEU submitted that the total penalties, in the sum of $14,850 after the application of the 50% reduction on account of totality, was a modest sum. In respect of general deterrence, counsel submitted this sum had insufficient sting or burden to achieve an appropriate deterrent effect on potential contraveners, and that penalties in these amounts could be regarded as an “acceptable cost of doing business”. Counsel submitted that there was a high need for general deterrence in the disability sector in circumstances where Yooralla’s evidence was that it was industry practice for disability service providers to classify their instructors as attendant carers. Counsel submitted also that the penalties were an insufficient specific deterrent. In this regard, counsel submitted that Yooralla’s defence of the proceedings was based upon an incorrect appreciation of the actual tasks performed by the employee. This submission relied on the primary judge’s statement, which I identified at [8] above, that Yooralla took an insufficiently rigorous approach in determining whether the employee was being paid correctly in the face of serious allegations made by her. The submission on specific deterrence emphasised that there was no evidence that Yooralla would be unable to bear the imposition of a financial penalty, and also referred to the substance of grounds 4 and 5 of the appeal, addressed fully below.

21    Counsel for the AEU submitted that taking into account the fact that the primary objective of civil penalties was deterrence, and that the maximum available penalties total $216,000, the penalties imposed were manifestly inadequate. In advancing this ground of appeal, counsel submitted, conformably with the last limb in House v The King, that it was not necessary to identify any particular error in the primary judge’s reasoning process. Counsel submitted that the penalties were so devoid of sting or burden that they were not of appropriate deterrent value, and that the primary judge’s discretion therefore miscarried.

Consideration

22    I do not accept the AEU’s claim that the penalty imposed was manifestly inadequate. All of the main points advanced by the AEU on appeal were taken into account by the primary judge. His Honour appreciated that the primary purpose of imposing civil penalties was to promote the public interest in compliance by putting a price on contraventions that were sufficiently high to act as a deterrent both to the contravener and to others, because his Honour stated so at [61], citing the Agreed Penalties case. It was for this reason that his Honour decided that a penalty should be imposed, and rejected the submissions put on behalf of Yooralla that a penalty was not appropriate in the circumstances.

23    His Honour recognised that the penalties imposed were towards the low end of the range. That is undoubtedly so. If I were assessing penalties myself, I might have imposed higher penalties having regard to the size of Yooralla’s total payroll, the sources of its funding, and the need to induce compliance with Awards in the disability and non-profit sectors of the economy. However, I am not persuaded that the penalties imposed by the primary judge were outside the permissible range. In this case, it is particularly difficult to sustain a submission that the penalties were outside an appropriate range when, on appeal, Steward J made findings that the questions in issue were “finely balanced” and “somewhat complex”. There was no suggestion on behalf of the AEU that Yooralla’s defence of the proceeding was not bona fide. That proposition would not have been open. In other circumstances where there has been a bona fide defence of a penalty proceeding, and where, for instance, questions of construction of Awards have arisen that were not of easy resolution, courts have held that the imposition of a penalty is not always required because in those circumstances there was no need for specific or general deterrence: see, for example, Australian and International Pilots’ Association v Qantas Airways Ltd [2009] FCA 500 at [9]-[10] (Gray J); Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Telstra Corporation Ltd [2007] FCA 1607; 168 IR 368 at [18] (Gordon J); and Australian Rail, Tram and Bus Industry Union v Qube Logistics (Rail) Pty Ltd [2020] FCA 1520; 300 IR 198 at [50] (Flick J) (appeal dismissed: [2021] FCAFC 83). This case is not in that category, because the primary judge considered that some penalty should be imposed. However, those authorities illustrate that the circumstances in which a dispute might arise, and whether there was a bona fide basis for the contravener to defend its position, may bear upon the extent to which there is a need for either general or specific deterrence.

24    The evaluation of the competing considerations in arriving at appropriate penalties was for the primary judge. I conclude that while the penalties were low, which his Honour acknowledged, they were not so low as to be manifestly inadequate.

(2)    Did the primary judge misunderstand, or misapply the totality principle?

The submissions of the AEU

25    As set out under paragraph [16], in addressing the totality principle, the primary judge cited Mill v The Queen [1988] HCA 70; 166 CLR 59, which his Honour stated had been applied to civil penalties in industrial cases, citing Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383. Counsel for the AEU submitted that Mill v The Queen was a criminal proceeding, and that the totality principle was a recognised principle of sentencing formulated to assist a court when sentencing an offender for a number of offences. Counsel submitted that in the criminal context the court must consider whether the aggregate sentence is “just and appropriate” and look at the totality of the criminal behaviour and ask itself what is the appropriate sentence for all of the offences. Counsel further submitted that the court in Mill v The Queen had cited R v Knight (1981) 26 SASR 573 at 576, for the proposition that whether “a cumulative sentence was incommensurate with the gravity of the whole of [the respondent’s] proven criminal conduct or with his due deserts”, thereby underlining that the references in Mill v The Queen to totality were in the context of punishment rather than deterrence.

26    Counsel for the AEU submitted that the question of what an offender deserves by way of punishment is imbued with a moral judgment of what an offender deserves and with retribution or a notion of proportionality “according to merits or deserts”, citing Pattinson v Australian Building and Construction Commissioner [2020] FCAFC 177; 299 IR 404 (Pattinson) at [42] (Allsop CJ, White and Wigney JJ). Counsel submitted that the High Court had made clear in the Agreed Penalties case that while criminal penalties import notions of retribution and rehabilitation, the primary purpose of a civil penalty is deterrence. Counsel submitted that the task under s 546 of the Fair Work Act is to fix an appropriate penalty to deter contraventions, guided by the statutory maximum penalty, but not at a level that exceeds that purpose and which would be oppressive. The principle of proportionality, being derived from notions of retribution, therefore was submitted to be irrelevant in the question of what penalty is appropriate to deter future contraventions. Counsel submitted that the totality principle is designed to ensure that the penalties imposed are not such as to be oppressive or crushing, citing Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30] (Tracey J), and Construction, Forestry, Mining, Maritime and Energy Union v Australian Building and Construction Commissioner (The Broadway on Ann Case) [2018] FCAFC 126; 265 FCR 208 at [7] (Tracey J). It was submitted that the question whether a penalty is oppressive should also be seen through the lens of deterrence, that is, whether the imposition of the penalties would be more than what is appropriate to deter contraventions of the kind that are before the court, citing Pattinson at [100] (Allsop CJ, White and Wigney JJ). Counsel submitted that the proper question in applying the totality principle was whether the total penalties exceeded that which were necessary to achieve the primary object of deterrence and so were oppressive, and submitted that penalties may be reduced if they are excessive in this regard.

27    Counsel for the AEU submitted that the primary judge misapplied the totality principle by erroneously looking at the explanation for Yooralla’s conduct and its moral culpability, and that his Honour appeared to have held that the penalties would be retributively disproportionate to Yooralla’s conduct, requiring a reduction of the penalties. It was submitted that this was borne out by the fact that the primary judge had made an adjustment to the penalties on the ground that Yooralla had found itself in breach of its obligations by applying the wrong Award to the employee, which was a matter on which it had sought professional advice. The AEU submitted that the primary judge had looked to the past to determine whether the penalties he had fixed as appropriate were a retributively proportionate response to what Yooralla had done, instead of asking whether the total penalties were excessive having regard to the primary objective of deterrence. Counsel submitted that the initial total penalties of $29,700 which the primary judge proposed before reduction did not go further than was required to achieve deterrence, and were not oppressive or crushing, particularly when the primary judge had accepted that Yooralla’s operations were substantial in the sector, and there was no evidence to indicate that Yooralla would be unable to bear the imposition of a financial penalty. The AEU submitted that the primary judge’s misunderstanding and misapplication of the totality principle were errors of law.

Consideration

28    As counsel for the AEU correctly submitted, the totality principle is derived from criminal law sentencing considerations. Where an offender is to be sentenced for a number of offences, the court must ensure that “the aggregation of the sentences appropriate for each offence is a just and appropriate measure of the total criminality involved”: Postiglione v The Queen [1997] HCA 26; 189 CLR 295 at 307-308 (McHugh J). In sentencing, the application of the totality principle directs attention to the overall criminality involved in all of the offences, and where necessary, the court must adjust the prima facie length of the sentences downwards in order to achieve an appropriate relativity between the totality of the criminality, and the totality of the sentences, so as to avoid an aggregate of sentences that would be “crushing”: Postiglione at 308, citing R v Rossi (1988) 142 LSJS 451 (King CJ). However, as Finkelstein J observed in CPSU, The Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 1364; 108 IR 228 (CPSU v Telstra) at [7], where a sentencing court is proposing terms of imprisonment for multiple offences, one appropriate way of avoiding a total sentence that is too high or crushing may be to order that terms of imprisonment be served concurrently. That is not a course that is open where the only remedy is to order the payment of pecuniary penalties.

29    The express criteria in s 546 of the Fair Work Act attaching to the power of the court to order payment of a penalty in respect of a contravention of a civil remedy provision are that: (1) the penalty should be one that the court considers appropriate; and (2) that it must not be more than the relevant maximum referred to in the table in s 539(2). The consideration of what is appropriate must have regard to the primary, if not the sole purpose for the imposition of a civil penalty, namely deterrence. That purpose may be compared to the multifaceted purposes of sentencing under the criminal law, as identified by French J in Trade Practices Commission v CSR Ltd [1991] ATPR ⁋41-076 in the passage cited with approval in the joint judgment in the Agreed Penalties case at [55]. In determining what is an appropriate penalty having regard to the object of deterrence, it is relevant to have regard to the circumstances of the contravening conduct, and its gravity and seriousness: Pattinson at [171].

30    In conferring on the court a broad general discretion to determine what is an appropriate civil penalty, the Fair Work Act must be taken to contemplate that appellate courts will develop guidance as to the manner in which the discretion is to be exercised: see, Norbis v Norbis (1986) 161 CLR 513 at 519 (Mason and Deane JJ). The principles that have developed through the authorities in relation to the imposition of civil penalties are not rules, but are tools to assist the court in arriving at an appropriate penalty: Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; 262 FCR 243 (ACCC v Yazaki) at [226] (Allsop CJ, Middleton and Robertson JJ). The principles that have developed include that where multiple penalties are to be imposed for a number of contraventions that are related, care must be taken to ensure that the penalties in their aggregate are not more than what is appropriate. Statements in some authorities relating to the imposition of civil penalties have taken the language of criminal law sentencing cases to describe this principle including, as relied on by the AEU, that an aggregate of penalties imposed should not be “oppressive or crushing”: see, for example, Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30] (Tracey J). The words “oppressive or crushing” are especially apt to describe the effect of an accumulation of sentences of imprisonment that exceed what is appropriate: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [99] (Buchanan J). But even in criminal cases, care must be taken in using the concept of a “crushing” sentence: see, R v E, AD [2005] SASC 332; 93 SASR 20 at [38] (Doyle CJ, Debelle J and Besanko J agreeing).

31    However, in the context of the imposition of civil penalties, statements in other authorities use the language of the relevant statute, by posing the question whether in their aggregate the penalties are “appropriate”: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53 (Goldberg J); CPSU v Telstra at [7] (Finkelstein J); Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [71], [73] (Graham J); Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; 254 FCR 68 at [117] (Dowsett, Greenwood and Wigney JJ); Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2017] FCAFC 159; 258 FCR 312 at [630] (Middleton, Beach and Moshinsky JJ); ACCC v Yazaki at [226] (Allsop CJ, Middleton and Robertson JJ). The penalties in their aggregate may not be appropriate if they are excessive, or unjust, or disproportionate having regard to the contravener’s overall conduct: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith at [23] (Gray J), [102] (Buchanan J); Maritime Union of Australia v Fair Work Ombudsman [2016] FCAFC 102; 247 FCR 154 at [39] (Tracey and Buchanan JJ).

32    I do not consider that the primary judge misunderstood or misapplied the totality principle in the way submitted by the AEU. While at [68] of the reasons his Honour cited Mill v The Queen at [62]-[63] as describing the totality principle, his Honour also noted that the principle had been applied to civil penalties, citing Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383. In that case the majority, Stone and Buchanan JJ, described the totality principle at [42] as, “a final check to be applied to ensure that a final, total or aggregate, penalty is not unjust or out of proportion to the circumstances of the case”, before citing Mill v The Queen at [43]. Later, at [91], Stone and Buchanan JJ cited Mill v The Queen again for the need, in accordance with the totality principle, to take “a last look at the total just to see whether it looks wrong”.

33    The primary judge’s citation of Mill v The Queen, which has been cited in many leading authorities of this court concerning the imposition of civil penalties, did not carry with it the errors that the AEU attributed to his Honour, including that his Honour viewed the totality principle through the lens of what was appropriate having regard to the object of retribution rather than deterrence. Not only did his Honour not say that he was invoking principles involving retribution, his Honour’s citation of Mornington Inn, and his Honour’s recognition at [61] that the primary purpose of the imposition of civil penalties was deterrence, indicate otherwise. What I understand his Honour to have done in arriving at appropriate penalties is first to identify what penalties his Honour considered appropriate prior to considering the whole of the conduct underlying the contraventions and applying considerations of totality. His Honour then stood back and reduced the penalties having regard to the fact that all of the contraventions arose from the same underlying conduct, being that Yooralla applied the wrong Award, upon which it had taken advice. In other words, the circumstances showed that there was a relationship between the contraventions of which his Honour took account.

34    The primary judge did not err in assessing appropriate penalties by taking account of the circumstances of the contraventions, and in particular of the fact that there appeared to be one cause of all of the contraventions. It was permissible for his Honour to have regard to the circumstances of the contraventions in assessing appropriate penalties: Pattinson at [171]. While his Honour had rejected a submission by Yooralla that the contraventions should be aggregated under s 556 of the Fair Work Act on the ground that the contraventions arose out of particular conduct, it did not follow that the factual relationship between the contraventions was not otherwise relevant. This case is an example of the Full Court’s observation in ACCC v Yazaki at [236], that the course of conduct principle when used as a tool in the penalty-fixing process, has some overlap with the totality principle, at least to the extent that the aim is to avoid a penalty being imposed which is not proportionate to the contravening conduct. The primary judge was not required to apply the totality principle in a particular way, and nor was its application limited to circumstances where a proposed penalty would be oppressive or crushing. As I have mentioned, the totality principle is a tool of analysis, and not a binding rule of law. Ultimately, what was required were penalties that the primary judge considered to be appropriate to deter the conduct that was the cause of the contraventions. I am not persuaded that his Honour did otherwise than to arrive at such penalties. The AEU’s submission that the penalties identified by the primary judge prior to application of the totality principle did not go further than required to achieve deterrence, so as to suggest his Honour’s misapplication of the totality principle, appears only to cavil with his Honour’s appraisal of what an appropriate overall penalty was. To that, I would refer to my conclusion on ground 1 of the appeal.

(3)    Was the reduction of 50% on account of the application of the totality principle manifestly excessive?

The submissions of the AEU

35    Counsel for the AEU submitted that in all the circumstances, a reduction of 50% of the penalties otherwise payable by reference to considerations of totality was manifestly excessive with the consequence that the primary judge’s discretion miscarried. Counsel submitted that in terms of general deterrence, it sent the wrong signal to employers that they might receive a substantial discount on penalty in these circumstances, and that the reduction did not serve the object of general deterrence. In terms of specific deterrence, counsel submitted that Yooralla had been substantially rewarded for the mere obtaining of professional advice despite not taking a sufficiently rigorous approach. It was submitted that the reduction did not provide an incentive for Yooralla to be more diligent in the future, and so did not serve the object of specific deterrence. As to the primary judge’s reference to the fact that Yooralla had obtained legal advice, counsel for the AEU submitted that Yooralla’s incorrect perception about the duties that the employee had performed informed the instructions that it gave to its lawyers, which resulted in incorrect legal advice.

Consideration

36    I do not accept the submission that the reduction by 50% of penalties that were otherwise payable was manifestly excessive such as to amount to appealable error. There are three main reasons for my rejection of the submissions. First, when the primary judge at [67] proposed penalties that should be imposed “prior to the application of the totality principle”, it is clear that those penalties were not, at that point in the path of reasoning, considered to be appropriate penalties, because his Honour had not had regard to the common explanation for the contraventions, being the application of the incorrect Award. Second, as to the relevance of the legal advice, his Honour had accepted at [22] that by seeking legal advice Yooralla had displayed a degree of diligence, but also accepted and took account of the fact that the steps taken by Yooralla to clarify its position proceeded upon an incorrect appreciation of the facts. His Honour accepted that the failure by the relevant person at Yooralla to observe the work being performed by the employee and to visit her place of work suggested that there was an insufficiently rigorous approach taken by Yooralla in the face of the serious allegations that were made. I do not think that his Honour’s later reference at [69] to the fact that Yooralla obtained legal advice when considering the penalties in their totality should be understood as disregarding or undermining these earlier findings: the primary judge’s reasons have to be read as a whole. Rather, the judge’s reference to the fact that Yooralla obtained legal advice was part of the explanation as to why all the relevant breaches occurred, being that Yooralla applied the wrong Award. Third, as I am of the view that the penalties, although low, were not outside the appropriate range, I am unable to conclude that, as a step in the reasoning process, the reduction of 50% from the notional penalties that did not have regard to the common cause of the contraventions, was manifestly excessive.

(4)    Did the primary judge give “undue weight” to the fact that Yooralla had sought professional advice?

The submissions of the AEU

37    Counsel for the AEU submitted that the primary Judge gave “undue weight” to Yooralla’s obtaining of professional advice in assessing penalties at the low end, and therefore his discretion miscarried. Counsel submitted that because his Honour had placed weight upon Yooralla’s seeking of professional advice in his assessment of the nature and extent of the breaches, it was double counting for his Honour then to take account of Yooralla’s obtaining of legal advice when reducing the assessed penalties by 50% on totality.

Consideration

38    I do not construe his Honour’s reasons as involving a double reduction in appropriate penalties on account of the fact that Yooralla obtained legal advice about the employee’s claims of underpayment. The reason for the primary judge’s assessment that there should be a reduction was the fact that all the contraventions had a common cause, namely that Yooralla had applied the wrong Award. This had occurred in all the circumstances to which his Honour referred in other parts of the reasons. As I have concluded at [36] above, the primary judge’s reference at [69] of his Honour’s reasons to the fact that Yooralla had sought advice was part of the explanation as to why there was a common cause of the breaches. Otherwise, absent some specific error, or a manifestly unjust outcome, a claim that too much weight was given to a particular factor in the exercise of a discretion is not the kind of appealable error identified in House v The King: Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 194 IR 461 at [46] (Middleton and Gordon JJ).

(5)    Did the primary judge err by failing to have adequate regard to Yooralla’s lack of apology?

The submissions of the AEU

39    Counsel for the AEU submitted that the primary judge failed to have adequate regard to Yooralla’s lack of apology in assessing penalties at the low end of the range, and that therefore his Honour’s discretion miscarried. Counsel submitted that whether a party that has committed a contravention has exhibited contrition or remorse is a relevant consideration in assessing appropriate penalties. Counsel submitted that a genuine apology given by a person in authority in an organisation bears upon the need for specific deterrence, in that if a contravener is genuinely remorseful and insightful about its contraventions, it is less likely to contravene again.

Consideration

40    I do not accept the submission that the primary judge’s discretion miscarried in this way. At [54] of the primary judge’s reasons, his Honour accepted that no apology had been given by Yooralla. It is reasonably clear that his Honour took into account the absence of any expression of remorse in his overall assessment of appropriate penalties. That is because his Honour accepted that the making of payments to the employee pursuant to a court order was not conduct that his Honour regarded as contrition, and nor did his Honour place weight on the fact that Yooralla had rectified other underpayments to the employee for the duration of her employment. The weight to be given to an absence of contrition was part of the overall appraisal of the position, in which other considerations pulled in different directions. The submission of the AEU really amounted to saying that the primary judge was bound to give more weight to the absence of contrition than his Honour apparently did. That does not involve any error of fact or principle for the purposes of the principles essayed in House v The King. Moreover, the weight to be given to the absence of contrition will vary according to the circumstances of the case. The absence of contrition may carry less weight in a case like the present, where Yooralla was initially successful on liability, and where the issues in dispute were described by Steward J on appeal, as “finely balanced” and “somewhat complex”. An “apology” in those circumstances might sound a little hollow, and may not be called for.

Conclusion

41    The appeal will be dismissed.

Associate:

Dated:    13 August 2021