Federal Court of Australia

White v UGL Operations and Maintenance Pty Ltd (No 2) [2023] FCA 901

ORDERS

THE COURT ORDERS THAT:

1.    Subject to order 2, pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth), the settlement terms set out in the Deed of Settlement and Release and the Settlement Distribution Scheme (found at annexures DJR-6 and DJR-7 to the confidential affidavit of Dustin John Rafferty affirmed on 3 February 2023) are approved.

2.    The terms of the settlement distribution scheme are approved subject to the following amendments:

(a)    the addition of the words 'a proportionate share of' before the words 'unpaid costs' in the definition of distribution; and

(b)    the addition of the words 'up to an aggregate amount not exceeding $110,000 inclusive of GST' at the end of the definition of unpaid costs.

3.    Pursuant to s 33ZB(a) of the Act, the persons affected and bound by these orders are the lead applicant and all group members described in the Amended Originating Application and identified by name in its Schedule, other than Kent Lidgard pursuant to his opt out notice filed on 12 April 2022, and the respondent.

4.    Until 31 December 2028, pursuant to s 37AF and s 37AG(1)(a), in order to prevent prejudice to the proper administration of justice, the unredacted:

(a)    affidavit of Dustin John Rafferty affirmed on 3 February 2023 and annexures DJR-4, DJR-5, DJR-6 and DJR-7 to that affidavit;

(b)    affidavit of Dustin John Rafferty affirmed on 6 April 2023 and annexure DJR-8 to that affidavit;

(c)    paragraph 28 of the submissions of the applicant filed on 11 April 2023; and

(d)    paragraph 25 of the submissions of the respondent filed on 21 April 2023,

are to be treated as confidential and placed in an envelope marked 'Confidential - not to be opened without the permission of a Judge of this Court', on the ground that their contents are subject to the applicant's right to legal professional privilege or otherwise record the details of a settlement scheme reached on the basis of confidentiality.

5.    The applicant is to file and serve copies of:

(a)    the applicant's submissions filed on 11 April 2023 redacting paragraph 28; and

(b)    the respondent's submissions filed on 21 April 2023 redacting paragraph 25, within seven days of this order.

6.    Eureka Lawyers has liberty to apply in relation to any matter arising under the settlement distribution scheme.

7.    The proceedings are otherwise dismissed.

8.    There is to be no order as to costs.

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

REASONS FOR JUDGMENT

COLVIN J:

1    Mr White was employed by UGL Operations and Maintenance Pty Ltd as a welder. His terms of employment were covered by an enterprise agreement. He was paid as a casual employee. His rate of pay for ordinary hours was calculated based upon a rate specified in the enterprise agreement (specified rate) plus a 25% casual loading (loaded rate).

2    Mr White was also paid for shift work and overtime. Up until August 2016, Mr White was paid for shift work and overtime by applying the agreed penalties to his loaded rate.

3    In about August 2016, UGL ceased using the loaded rate as the basis for calculating payments for shift work and overtime to casual employees. Instead, it began paying Mr White (and other causal employees covered by the enterprise agreement) for shift work and overtime by applying the agreed penalties to the specified rate, thereby excluding the casual loading from the calculation.

4    In March 2021, Mr White commenced representative proceedings on his own behalf and on behalf of group members each of whom had signed a conditional funding agreement with Eureka Lawyers. The proceedings alleged that UGL had contravened the Fair Work Act 2009 (Cth) by failing to pay the group members in accordance with the enterprise agreement and by failing to separately identify the specified rate and the penalty rates that been applied on the pay slips provided to group members where payments were made for over time and shift work. As to the latter claim, it appears that the provision of pay slips which did not separately identify the rate used meant that the change in rates that occurred in August 2016 was not apparent to workers like Mr White.

5    The deadline for opting out of the proceedings was 6 May 2022.

6    Following a mediation, Mr White and UGL agreed upon the terms of a proposed settlement. The proposed terms involved UGL paying $438,000 into a fund to be administered by Eureka Lawyers for proportional distribution to Mr White and other group members who had not opted out.

7    In accordance with orders made by the Court the proposed settlement terms were notified to group members pursuant to s 33Y of the Federal Court of Australia Act 1976 (Cth). Amongst other things it informed group members that:

(1)    a proposed settlement had been reached;

(2)    any group member could obtain details of the portion of the settlement that the member would be entitled to receive by contacting Eureka Lawyers;

(3)    the settlement amount did not include any provision for costs which would have to be paid out of the amount to which a group member would be entitled and an estimate of that liability could be obtained by contacting Eureka Lawyers; and

(4)    objections to the settlement could be communicated to the Court.

8    The proposed settlement terms included a schedule of proposed proportionate distributions based upon a calculation of the claimed amount for each member.

9    There were 16 objections to the settlement. Of those, seven stated no basis for the objection. The remainder objected on the basis that they should receive 100% of their entitlements plus costs and interest. Beyond that, none of the objections sought to explain why a settlement at less than the full amount claimed was required in order for the settlement to be fair and reasonable.

10    At the subsequent hearing of the application to approve the settlement, submissions were advanced for Mr White and UGL to the effect that the settlement was fair and reasonable and should be approved. A confidential opinion from experienced counsel was provided to support the submission for the applicant that the settlement was reasonable.

11    The Court has provided guidance as to the matters which the Court considers it will be appropriate for parties to address in seeking approval of a settlement. It is designed to focus upon all matters which may bear upon an assessment as to the fairness and reasonableness of the proposed settlement having regard to the interests of group members: Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925 at [19] (Goldberg J); and Fisher (trustee for the Tramik Super Fund Trust) v Vocus Group Limited (No 2) [2020] FCA 579 at [17] (Moshinsky J). There is no definitive list. The question is whether the settlement falls within the range of reasonableness. In undertaking that assessment 'it is not the task of the Court to second-guess or go behind the tactical or other decisions made by the applicant's legal representatives': Fowkes v Boston Scientific Corporation [2023] FCA 230 at [41(3)] (Lee J).

Proposed settlement fair and reasonable

12    For the following reasons I was satisfied that the proposed settlement was within the range of settlements that may be described as fair and reasonable and should be approved with two changes to the proposed settlement distribution scheme. First, a change to make clear that the legal costs were not to exceed $110,000 inclusive of GST. Second, a change to make clear that the costs were to be allocated on a proportionate basis as between group members.

13    As has been indicated, in broad terms there were two claims advanced in the proceedings, a claim concerning the use of the loaded rate and a claim concerning what was required to be included in pay slips.

14    As to the issue as to whether the loaded rate should be used to calculate rates for overtime and shift work, the enterprise agreement used the terms 'ordinary prescribed hourly rate' and 'ordinary hourly wage' to describe the rate to which the penalties should be applied. The question was whether, in the case of casual workers, these terms referred to the specified rate or the loaded rate.

15    One contention for UGL was that the compensation for the casual nature of employment that was included in the loaded rate was principally to cover the lack of access to paid leave and that was compensated for by paying the loaded rate for ordinary hours worked. This was a contention with arguable merit as to overtime, but not as to shift work. Another contention was that the wording of the agreement focussed upon ordinary payments and not casual payments when it came to calculating rates for shift work and overtime. A further contention was that the Court would approach the interpretation of industrial instruments on the basis that there was a presumption against the payment of penalties on penalties.

16    The parties had competing positions as to the significance of the manner in which payments had been made prior to the change in August 2016.

17    As to the pay slips, it was accepted that the relevant regulations with which UGL was required to comply by the terms of s 536(2)(b) of the Fair Work Act required any pay slip for an employee paid at an hourly rate of pay to include the rate of pay for the employee's ordinary hours (however described).

18    UGL claimed to have separately identified the shift loading when it applied. As to the rate of pay for ordinary hours, it claimed that the rate for the purposes of the regulations was properly specified because they specified the loaded rate which was the rate applied to ordinary hours.

19    Therefore, as to the claims made by Mr White, there were arguable contentions that were proposed to be advanced by UGL in answer to the claims. This was not an instance where there had been oversight or unexplained error and it was accepted that there had been underpayment. Nor could it be said that the position of UGL lacked any real merit. This was a case where UGL maintained on the basis of arguable contentions that it had properly paid the group members. Indeed, its position was that prior to August 2016, there had been overpayments.

20    UGL also maintained that it was entitled to claim a set-off.

21    If contraventions were established there was the possibility of pecuniary penalties. However, in that event, in all likelihood the Court would be invited to take into account a contention that UGL acted upon a bona fide view as to what the enterprise agreement required in making payments and in completing the pay slips.

22    In all the circumstances, there was a real risk that Mr White would not succeed in his claim. Further, as the usual position in relation to legal costs of proceedings in which claims are brought under the Fair Work Act is that each party must bear its own costs, there was a risk that any further amount that might be recovered would be subsumed in the substantial legal fees to be incurred in the conduct of a contested hearing. As was observed by Charlesworth J, there was a risk in such cases that continuing with the litigation may become an exercise in diminishing returns: Schoneweiss v The Fourth Force Pty Ltd [2022] FCA 1236 at [14].

23    As to legal costs, Eureka Lawyers were willing to accept variations to the settlement distribution scheme to limit their costs to $110,000 inclusive of GST. It was also relevant that this was a case where each group member had entered into a conditional costs agreement.

24    Finally, there was no disparity between group members because the share of each group member had been calculated based upon the value of each individual claim.

Associate:

Dated:    2 August 2023