Australian Building and Construction Commissioner v Pattinson & Anor

[2021] HCATrans 211

[2021] HCATrans 211

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M34 of 2021

B e t w e e n -

AUSTRALIAN BUILDING AND CONSTRUCTION COMMISSIONER

Appellant

and

KEVIN PATTINSON

First Respondent

CONSTRUCTION, FORESTRY, MARITIME, MINING AND ENERGY UNION

Second Respondent

KIEFEL CJ
GAGELER J
KEANE J
GORDON J
EDELMAN J
STEWARD J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO LINK TO BRISBANE, SYDNEY AND MELBOURNE ON TUESDAY, 7 DECEMBER 2021, AT 10.00 AM

Copyright in the High Court of Australia

KIEFEL CJ:   In accordance with the protocol for remote hearings, I will announce the appearances of the parties.

MR S.P. DONAGHUE, QC, Solicitor‑General of the Commonwealth of Australia appears with MR T.M. BEGBIE, QC and MS J.D. WATSON for the appellant.  (instructed by MinterEllison) 

MS R.M. DOYLE, SC appears with MR P.A. BONCARDO and MR B. BROMBERG for the respondents.  (instructed by CFMMEU) 

KIEFEL CJ:   Yes, Mr Solicitor.

MR DONAGHUE: Thank you, your Honour. Your Honours, the question raised by this appeal is whether, having regard to this Court’s repeated statements that the principal, if not the only, purpose of civil penalties is to secure deterrence, the imposition of what the statute called the appropriate penalty under section 546(1) of the Fair Work Act requires adherence to what the Full Federal Court called a notion of proportionality, which it derived exclusively from criminal sentencing principles.

In holding that it does, the Full Court said that the maximum penalty must be reserved for cases where the circumstances of what it called the instant contravention, as distinct from the characteristics of the contravener, placed the contravention in what it called the worst category.  The court expressly held that a history of defiance of the law of repeated contraventions cannot in itself place a contravention into that worst category.

The effect of that analysis, on our submission, is that unless the circumstances of the instant contravention are objectively – again, to borrow a word from the Full Court – in the worst category, the court cannot impose the maximum penalty even if it is satisfied that that penalty is necessary in order to deter further contraventions of the kind that are before the court. 

That, in our submission, cannot be right.  It cannot be reconciled with what this Court explained as to the purpose of civil penalties in the Agreed Penalties Case.  It would be a rule that would have the effect – as it did have in this case – that the penalties to be imposed will fail to achieve the only purpose for which they can properly be imposed – particularly in the context of recidivist contraveners.

EDELMAN J:   Mr Solicitor, at the heart of that submission seems to be the assumption that deterrence is a binary concept – either it will be achieved, or it will not be achieved.  But we know from experiences – hundreds of years of experience in the law – that things like a potential penalty of losing a hand or losing one’s life for theft will deter some people but it will not deter everyone.  Deterrence is not a concept that is absolute or nothing. 

MR DONAGHUE:   Your Honour, I accept that, and, in my submission, it does not need to be – for the submission that I propose to develop – made good.  Essentially, at the heart of the controversy here is that whether, looking at all of the circumstances of the instant contravention, including the history of the contravener, if a court thinks that what is appropriate to deter conduct of what has occurred – and I accept that that is not binary but the court ultimately has to make a judgment in pursuit of that objective as to what penalty is appropriate to that end – there is then some further limiting principle that says but, notwithstanding the fact that that is what you think is appropriate for deterrence, you cannot do more than is appropriate to the gravity of the instant contravention.  So, it is that overlaid limit on the imposition of an appropriate penalty that we submit involves error.

EDELMAN J:   I suppose what I am really asking is - and you can get to it whenever is suitable for you - if deterrence is the only criterion, it will still be necessary to answer a question of how much deterrence.  Deterrence not being binary could be as much as possible with capital punishment, for example, or a small amount of deterrence, but when one has to decide how much deterrence is going to be required there must be another factor that the court is considering because otherwise the question simply just cannot be answered.

MR DONAGHUE:   Your Honour, I will develop this if I may, but our short answer really is that what the court is doing in a conventional imposition of civil penalties is looking at all of the circumstances including those of the particular contravener before it and assessing what penalty will be appropriate to change the behaviour of this contravener.

So that you are looking to situate the penalty at a point that will modify behaviour for this contravener and contraveners of the same kind, which is why one can have two contraventions that are in substance manifest through very similar physical acts, but where one of those contraveners is extremely asset rich it may be that you need a greater penalty to be applied there because that is necessary to modify the behaviour of contraveners of that kind than would be the case for a small business where you could say, “I can get a modification of behaviour by a much lower penalty in that kind of situation”.

So, the objective - now, obviously there is a cap there, so one is not cutting off hands or engaging in – because Parliament is saying in this regime you may pursue deterrence by the imposition of penalties only up to a statutory limit that Parliament has determined is appropriate in the pursuit of compliance with the regime.  But our submission is that within that limit the objective of the penalty imposer is to actually achieve behavioural modifications so as to bring about compliance with the regime.

GLEESON J:   Mr Solicitor, this raises another question, again to be dealt with in due course, but what happens if the offender is identified as being impervious to deterrence?  Does that mean that it is not appropriate to issue or to determine a penalty at all because it is clear that the penalty will have in fact no deterrent value?

MR DONAGHUE:   No, your Honour.  That means that one does everything that one can to achieve deterrence up to the limit, except that if Parliament wants more then that is a matter for Parliament.  It is no part of our case to complain about the availability of the maximum.  Our submission is about what is properly to be done within the constraints imposed by the maximum and your Honour’s question is apt to the situation in which we find ourselves because it may well be the case that the maximum penalty will often not be sufficient to deter the CFMMEU but that does not mean that ‑ ‑ ‑

EDELMAN J:   Mr Solicitor, what about the reverse scenario from that which Justice Gleeson raises, where the court is satisfied that, although a contravention is extremely serious, the particular contravener is very unlikely, maybe certain never to do it again, and others are very unlikely never to do it again perhaps because of the publicity that has been given to the seriousness of the contravention?  Is it your submission that deterrence would then say, well just give a very, very small penalty for this very, very serious contravention?

MR DONAGHUE:   Your Honour, I think the short answer to that is on those factual findings, both as to the particular contravener and as to general deterrence – so, accepting the whole of your Honour’s example – logically the answer must be yes because as - - -

EDELMAN J:   That was not the submission that was made very recently on a special leave application in the Volkswagen litigation.  It is exactly the opposite.

MR DONAGHUE:   Your Honour, I am not familiar with the details of what was submitted to your Honours in the special leave application in that case, but there one had a contravener found by the Full Federal Court at least to have engaged in wilful contraventions that had been deliberately concealed over a period of time, as I understand the facts of that case.  In those circumstances, in my submission, general deterrence is unlikely to be reduced to a nothingness – it is probable that one would need to be able to say that when people are found having engaged in concealed behaviour of a serious wrongful kind, then there is a serious penalty, because the absence of a penalty there might well undermine general deterrence, even if Volkswagen had learnt its lesson.

Your Honours, in developing the submission that I have just outlined, I propose to take the submission in five parts corresponding to the headings in our oral outline.  I will start with the facts in the first instance judgment.  Second, I will take your Honours to the relevant parts of the statutory setting.  Third, I will take your Honours briefly to the two leading authorities in this Court - the purpose of civil penalties.  Fourth – and this is the main part of our oral submissions – I will take your Honours to the Full Court’s judgment, both to identify the way that it derives its notion of proportionality and the way that we submit that that resulted in error.  Finally, I will briefly address what we submit is the correct approach to the setting of an appropriate penalty.

If I could start with the facts and invite your Honours to turn to the core appeal book at tab 1, where you will find the primary judge’s judgment.  The facts of the contraventions, as your Honours well appreciate, were all admitted.  They are summarised by his Honour starting on page 14 of the core appeal book at paragraph 11. 

The essence of the facts are as follows.  Mr Pattinson was a delegate of the CFMMEU, which I will call the Union, and also an employee of Multiplex Constructions working on a project at Monash University’s “Peninsula” campus in Frankston, Victoria.  In September 2018, two employees of…..had been engaged to install solar panels at that site:

arrived . . . they attended an induction session overseen by Mr Pattinson (in his capacity as a delegate of the Union’s at the Site).  During the course of that session –

and your Honours see this at paragraph 15 – Mr Pattinson asked one of the employees whether he was a member of the Union and whether he had a ticket for his fees and the employee said that his company was not union based and that he did not have a ticket.  That resulted in Mr Pattinson representing to each of the two employees that in order to work they would have to become members of the Union – that representation being made to give effect to the Union’s long‑held “no ticket, no start” policy.

Those facts – and we see that at paragraph 19 – were admitted to involve two contraventions to section 349(1) of the Fair Work Act by each of Mr Pattinson and the Union – so four contraventions in total.  The contraventions having been admitted, the issue in contest before the primary judge was what penalty was appropriate in response to them.  Your Honours will see on page 20 of the book at paragraph 32 his Honour recording that:

What divides the parties is the extent to which the nature of the Agreed Contraventions, insofar as they are attributable to the Union, should be informed by the Union’s history of contravening the FW Act and its predecessors.

So that was the dispute.  In referring there to the history of contravening, his Honour was foreshadowing the section of the reasons that appears immediately below recording a history of some notoriety which your Honours are familiar with, to some extent, a somewhat similar history having been recounted in the non‑indemnification judgment in this Court a few years ago.  You will see that, having described the Union as a:

“serial offender” that has, over a longer period, exhibited a willingness to contravene workplace laws in the service of its industrial objectives –

his Honour quoted from Justice Tracey’s observations in the Werribee Shopping Centre case explaining some of that history.  

GORDON J:   Mr Solicitor, may I ask one question about that?

MR DONAGHUE:   Yes, your Honour.

GORDON J:   May I ask just one question of fact about that?  Since at least CSR, one of the factors relevant to the imposition of the penalty has been the financial position of the contravener.  One of the things which was recognised by this Court in ACCC v TPG was that it was not to be – the penalty to be imposed was not to be regarded as an acceptable cost of doing business. 

MR DONAGHUE:   Yes, your Honour.

GORDON J:   What was the evidence before the trial judge about the financial position of the CFMMEU, other than that set out in 34?

MR DONAGHUE:   Your Honour, I will have to take that on notice.  There were multiple references in some of the other judgments to the asset and cash rich position of the CFMMEU but, as to what was actually put in evidence before the trial judge, I will have to check, and I will come back to your Honour.

At paragraph 35, your Honours will have seen a reference to the court having had evidence put before it of a similar kind that had caused Justice Tracey to refer, in the Werribee Shopping Centre case, to 120 contraventions by the Union since 2000.  The evidence in this case was that what had been 120 was:

now in the vicinity of 150 –

including contraventions of section 349 of the Fair Work Act of the kind that had occurred here.  There was a very detailed table that summarised that history – which I do not need to take your Honours to but so your Honours know that you have it – in the appellant’s book of further materials, there is, behind tab 3, at page 25 the appellant’s submissions on relief that were advanced before his Honour.  

In partial answer actually, to your Honour Justice Gordon’s question – so, perhaps, I should take your Honours to this – if you have the book of further materials, tab 3, page 31, there is a heading “The size and status of the CFMMEU” and it refers to the Union being:

both cash and asset rich –

and it includes some figures with footnotes to affidavit evidence.  Your Honours, I think, do not have the Lee affidavit referred to in those footnotes but you do have the figures that were before the court.  While your Honours are on that page, further down in paragraph 22, the submissions record:

The CFMMEU’s penal record is well‑established.  Prior contravening conduct of the CFMMEU is set out in a table at Attachment B –

That table appears in the supplementary book, from pages 39 right through to 114.  So, it is the balance of the book…..detailed table. 

The conclusions that the primary judge drew from that history of contravening resulted in findings that you will see at paragraph 84 of the judgment at page 37 of the core appeal book, commencing with his Honour stating that viewing the agreed contraventions:

against the backdrop its sorry record . . . as very much of the gravest, most serious kind . . . yet again, in deliberate defiance of the law that it has been told time and time again that it must obey. Its behaviour . . . admits only of the following conclusions.

Then his Honour makes the three findings set out at (1), (2) and (3):

(1)it favours a policy “no ticket, no start” and holds that philosophy (if not the achievement of its industrial objectives more broadly) as preferable to the law . . . 

(2)it appears to be wholly unmoved by the prospect that it might be forced yet again to dig into its members’ “big pots of gold” in the name of “fight[ing] the good fight” –

picking up language from a prior case, and perhaps most importantly:

(3)it regards doing so as an acceptable cost of the way that it conducts its affairs—the misconduct in this case is but the latest example of the Union’s strategy “…to engage in whatever action, and make whatever threats, it wishes, without regard to the law, and then, once a prosecution is brought, to seek to negotiate its way into a position in which the penalties for its actions can be tolerated -

The Full Court recorded at paragraph 20 of its reasons on page 76 of the book that there was no appeal by the Union against any of those findings.  So not only were those findings not disturbed on appeal, they were not even challenged on appeal.

GLEESON J:   Mr Solicitor, can I ask you in relation to the third of those findings, do you accept that what that finding indicates is that the Union is highly unlikely to be deterred by penalties no matter what penalties are imposed upon it?

MR DONAGHUE:   Yes, your Honour.  That seems to be the current position, given that this policy has been, as Justice Snaden explained - conduct of the kind that occurred here has been unlawful for about a quarter of a century, and yet in the construction industry in certain areas it has persisted notwithstanding the imposition of progressively increasing penalties.

GLEESON J: My difficulty then is that if they are highly unlikely to be deterred by the penalty, how can a further penalty serve the purpose of deterrence?

MR DONAGHUE:   It seeks to achieve deterrence with the law to the greatest extent that Parliament has authorised.  The only alternative, your Honour, would be to throw up one’s hands and say if you are lawless enough, then you are free to disregard the law of the land, and in our submission that cannot be right.

GLEESON J:   Another alternative might be to recognise that a civil penalty serves some legitimate purposes other than deterrence, albeit in most cases deterrence will be the most important factor – for example, denunciation.

MR DONAGHUE:   Your Honour, it would certainly service to denounce the contravening conduct.  I do not deny that.  But, in my submission, as the Court has explained in the cases that I am going to come to shortly and which your Honours are all familiar with, the phrase usually used is “solely if not exclusively” or a phrase of that kind for the purposes of deterrence, so perhaps denunciation might be embraced within the allowance that there might be some specific considerations in play. 

But if the Union continues to behave unlawfully and those contraventions are met by the maximum penalty that Parliament has authorised to try to bring about compliance, there may come a point where it becomes untenable to regard…..as an acceptable cost of doing business, that the cost becomes too high. 

We have not reached that point yet, but there may come a point, and, in my submission, the courts should not assume that that point will never be reached.  Until then, in my submission, the appropriate mindset or framework for the Court to pursue is to endeavour up to the limit that Parliament has set to bring about compliance with the regime.  The regulator is charged with the statutory duty of bringing about compliance with the regime and that, in my submission, is what they should endeavour to do.

The unchallenged factual finding at paragraph 83 demonstrates that to date the Union has regarded the deliberate defiance of the law in the implementation of its “no ticket, no start” policy and the attendant penalties as an acceptable cost of doing business which, as Justice Gordon pointed out, was the very thing that the Court said in TPG was to be avoided, that penalties should not be able to be viewed in that way. 

Now, that set of findings formed the basis for Justice Snaden’s judgment imposing a single maximum penalty.  Just before I take your Honours to that, I should highlight one passage, or two paragraphs, in his reasons before taking you to the penalty, which appear at paragraphs 72 to 73 on page 33 of the book.  His Honour, having noted the objective of civil penalties being to deter:

The court is charged, simply enough, with fashioning a penalty that serves to deter, both generally and specifically –

his Honour posed the question for himself:

If the only way to deter . . . is to impose a penalty at or approaching the maximum amount available, then the imposition of anything less would necessarily result in a failure to achieve the only object to which the imposition of civil penalties is directed . . . To phrase that proposition as a question:  how can a penalty be disproportionate to the nature or gravity of the conduct in respect of which it is imposed if it is no more than what is necessary to achieve the only objective that its imposition is meant to achieve?

His Honour then sets out what has been the conventional expression of the limiting proposition in the joint judgment of Justice Burchett and your Honour Justice Kiefel, as your Honour then was, in Frozen Foods:

if deterrence is the object, the penalty should not be greater than is necessary to achieve this object –

So that is a conventional expression of the limit that we entirely embrace, and that was what caused me to answer Justice Edelman’s question as I did earlier in a situation where, if the Court were to be satisfied that deterrence both general and specific could be achieved by a low penalty or no penalty, then it would seem to contravene that formulation to impose a penalty greater than was necessary to achieve the deterrent effect.

But, subject to that, in our submission, there is no good answer to the question that the learned primary judge posed in paragraph 72 that would explain why a penalty lower than is necessary to deter should be imposed or how it could properly be concluded that the penalty was disproportionate to the contravention, even if it was no more than is necessary to deter contraventions of that kind.  The penalty that his Honour imposed ‑ ‑ ‑

EDELMAN J:   Mr Solicitor, when you are talking about no more than is necessary to deter contraventions, are you talking about specific deterrence, general deterrence, or both?  If you are also talking about general deterrence, then you do run into the problem that I raised with you right at the start that there is no litmus point at which every single other potential offender will be deterred.  There are points where at a very, very low end of the scale might be some other offenders that are deterred, and at a very, very high end of the spectrum there will be some offenders who are not deterred.  There still needs to be some other criterion by which the Court assesses to set the penalty.

MR DONAGHUE:   I am not sure that I understand what the other criterion that your Honour is putting to me is.  I do accept that this is not a perfect science, that one cannot look at a particular penalty and say this will achieve – it is easier to be more precise with specific deterrence than general, but even with specific deterrence it may be impossible to be certain that deterrence will be achieved by a particular penalty, and with general deterrence the task is harder. 

But that, in my submission, is not a reason for the Court not to endeavour, having regard to the familiar kinds of factors identified in CSR and the other cases, to do its best to identify the penalty that will achieve that end, in the same way as a criminal court in sentencing to the extent that deterrence is in play, does not know exactly what will be necessary but can still do its best to make an assessment of how deterrence is best achieved.

EDELMAN J:   Is the effect of your submission that the primary judge erred therefore by awarding only half of the maximum penalty which could have been awarded?

MR DONAGHUE:   Your Honour, as is recorded by his Honour at paragraph 25 on the bottom of page 17, the Commissioner contended at first instance that:

the Agreed Contraventions should attract penalties at or approaching the maximum in respect of the Union (that is, a total of, or near, $126,000.00) –

His Honour did not do that, because at 113 he considered it appropriate to impose a course of conduct‑type analysis that led him to conclude that even though he thought the maximum was appropriate, and he recorded that in 115 – he said:

I am minded to impose upon the Union two penalties each set at the maximum amount, $63,000.

So that was what he was minded to do, but he then applied the course of conduct‑type principle to reduce it down to one.  We did not cross‑appeal in respect of that finding.

So, while the position that your Honour puts to me aligns with the position that we put to his Honour, I accept the fact that we did not put that issue in the Full Federal Court and it has not been put in play before your Honours.  But, analytically, the position that – the conduct of the Union warranted penalties near the maximum is consistent with how we always conducted this case.  I have just referred your Honours to paragraph 115, where you see at the start of that paragraph…..having said:

I am minded to impose upon the Union two penalties, each set at the maximum . . . In light of. . . the “course of conduct” principle, those penalties will be reduced to the equivalent of a single maximum penalty.

So, a penalty of $63,000.  The Full Court – after engaging in a rather elaborate analysis, to which I am going to take your Honours – found that that involved error.  In some respects ‑ ‑ ‑

GLEESON J:   Mr Solicitor, could I just clarify?  So, you are saying that the “course of conduct” principle is still an appropriate principle to be applied in the assessment of a civil penalty?

MR DONAGHUE:   Your Honour, we accept – as the learned primary judge explained in his analysis from 103 through to about 113 – that there are many cases where it has been said that it is not a rule, but it is a principle or a tool that the Court might analytically deploy in assessing the appropriate penalty.  We have not but in issue in this appeal – or we did not put in issue in the appeal to the Full Court – his Honour’s application of that principle.  So, in my submission, I am somewhat constrained in what I can say about that in circumstances where his Honour applied the principle.  We do not object to his Honour’s analysis of the authorities in 105 through to 108.  We do not entirely agree with the way that his Honour supplied that, but we did not appeal against it.

EDELMAN J:   Your submission, Mr Solicitor, as I understand it is therefore that had, in this case or maybe in a future case, there been 10 contraventions, all part of the same course of conduct and perhaps all very closely related – but 10, rather than two - that the appropriate penalty would have been at or close to $630,000, no matter how minor those 10 contraventions are – if the evidence was that this was just - the cost of paying penalties was just a cost of doing business.

MR DONAGHUE:   Your Honour, I think your Honour’s question said, “would have been”.  I would answer, “could have been” – that the available maximum would have been there and then the court would have needed to look at all of the relevant factors guided by the purpose of achieving deterrence.  I do not submit that it is not permissible to look at totality, for example – so, to look at the total penalty that would be being imposed – but all guided by the pursuit of the objective of deterrence. 

It might be the case – and, your Honours, Volkswagen was actually an example – the case your Honour Justice Edelman raised to me earlier – where the Full Court accepted that that was a case where there was effectively no maximum because the…..maximum was in the…..by reason of the very large number of contraventions and possible limits.  So, it is not the case that the existence of a very high possible maximum necessarily means that that penalty has to be imposed. 

There are cases, and the money‑laundering cases are another example where the notional maximum is so high that it cannot sensibly guide the court, so the court needs to do the best it can, having regard to other factors to impose an appropriate deterrent penalty.

I am not suggesting that an appropriate deterrent penalty would be to crush the Union out of existence for one contravention because the notional penalty would allow that to occur.  A court is most unlikely to think that that is an appropriate way to respond to the contraventions, but it should be, in my submission, seeking to bring about compliance with the law.

Where one has unchallenged findings that a contravention is the result of a deliberate policy not to comply with the law, in my submission there should be…..difficulty with the proposition that that is a scenario that calls for the imposition of, at the very least, the single maximum penalty that Justice Snaden found.

In order to succeed in this appeal, your Honours, all I have to do is to demonstrate that against that background of unchallenged findings the Full Federal Court was wrong to say not even a single maximum, let alone the possible maximums for the two contraventions, was warranted by these facts.

In our submission, the clearest indication of error in the judgment below is when you look at what the Federal Court did at the very end of its judgment at page 151 in paragraph 222.  This is in imposing what the Full Court described as the appropriate penalty and your Honours see it accepted that:

In the light of the history of contravening conduct in attempted enforcement of the union’s policy, the absence ‑ ‑ ‑

So, there is a history of attempting to implement the “no ticket, no start” policy, there is an absence of contrition or evidence that the policy has changed or ended, and it is said in what we submit is rather an understatement that:

the call for deterrence is heightened . . . It can be taken that the contravening . . . is an example of a continuation of a policy framed and implemented in direct opposition to the statutory policy of freedom of association . . . and reflects a willingness . . . to contravene the statute.

In our submission, accepting all of that, the maximum is clearly appropriate, but what their Honours then do from the next sentence, in the second part, having said well, we take that all into account, but - and it is the “but” that reveals the error because what their Honours then do is discount the maximum penalty back by reference to what they describe as:

the nature of the objective circumstances of what actually occurred -

Their Honours are referring to the fact that it was a single exchange of two people, that there was no evidence of proof of financial impact.  In fact, at 218 they mention the fact that there was not any evidence of a confrontation of the kind that sometimes occur.

So those, what are called “objective circumstances”, cause conduct that is accepted to have been one step in a policy of defiance of the law to attract only two‑thirds of the maximum for a single contravention, let alone the maximum theoretically available by reference to the fact that two contraventions had occurred. 

In our submission, one sees nowhere in this judgment any explanation as to how a penalty at that level could reasonably have been thought to have any prospect of deterring the Union, particularly in circumstances where penalties – that resultant penalty, the $40,000 is lower – than penalties that had previously been imposed upon this same Union in respect of “no ticket, no start” contraventions without effect.  We have cited those cases in footnotes 1 and 2 in paragraph 6 of our submissions.  So, in our submission ‑ ‑ ‑

STEWARD J:   Mr Solicitor, I am sorry to interrupt, I apologise.  Is there anywhere in the reasoning where one sees a justification for the $2,000 penalty?

MR DONAGHUE:   I do not think so, your Honour.  I think that is giving effect to the fact there were two contraventions, so that the Court wanted to impose a penalty for each, and it split them up rather differently to the way Justice Snaden had done.  Justice Snaden just halved them so as to arrive at a total, but I do not think that that is explained.

STEWARD J:   Is there a finding that the second contravention was demonstrably less…..than the first?

MR DONAGHUE:   No, your Honour, because it was a single utterance made to two people.  So, it was exactly the same conduct.

STEWARD J:   Thank you.

MR DONAGHUE: Your Honours, can I take you now briefly to the Act which your Honours will find relevantly in volume 2, tab 4 and invite you to turn to section 546, which is the power to impose pecuniary penalty orders, relevantly:

The Federal Court . . . may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.

So, the statutory question for the court is, is it satisfied that the contravention has occurred?  If so, then the only statutory guidance is to impose the penalty that the court considers appropriate.  But, having regard to the authorities in this Court that I am about to come to, that is a question properly understood as meaning considers appropriate in order to achieve – or to endeavour to achieve – compliance with the relevant statutory regime, not what is appropriate to achieve retribution for the non‑compliance with the relevant norm of conduct.

In our submission, one sees nothing particularly that would justify an overlay that means that the penalty that is appropriate to deter nevertheless cannot be imposed if it is not proportionate to the objective circumstances of the contravention.

Now, I will not take your Honours to it right now, but I will shortly come to the Penalty Indemnification Case in this Court, where your Honours Justices Keane, Nettle and Gordon made some remarks about how one should construe a power phrased in similar terms. That judgment was dealing – in the relevant passage - with section 545, which is the power to make other orders that the court considers appropriate.

In that circumstance, at paragraph 103, the plurality judgment explained that the starting point must of course be the text of the provision, and then, your Honours said this and if I could just read a few sentences:

the first and most immediate point of significance is the breadth of the terms in which s 545(1) empowers the court to make any order the court considers appropriate. What is “appropriate” for the purposes of s 545(1) falls to be determined in light of the purpose of the section and is not to be artificially limited . . . such broad terms of empowerment are constrained only by limitations that are strictly required by the language and purpose –

Their Honours cited the famous passage in Shin Kobe Maru where Justice Gaudron explained that it was wrong to read…..granting powers to courts by making implications or imposing limitations not found in the words.

So the starting point in construing 546, which in our submission should be uncontroversial, is that it would be wrong to imply into the broad power to order a person to pay a pecuniary penalty that the court considers appropriate any artificial limits or limits that are not strictly required by the language of the section but, in our submission, for the reasons that I will develop in the course of our case, that is precisely what the Full Court did by importing from the criminal law limiting ideas that have their foundation in retributive notions.

EDELMAN J:   Mr Solicitor, if your submission is accepted, that “appropriate” really means appropriate to achieve compliance with the statute, then why should the Court accept your concession that notions of totality, which are also seen in the criminal law, should have any role to play?  For example, if you have a situation of a serial offender where the only way to deter - to achieve compliance with the statute, is – to use your phrase – to crush the offender out of existence, then why should that not be what is required by the statute?

MR DONAGHUE:   Well, your Honours are ultimately engaging in a task of construction as to what that word means, the power having been conferred upon a court in pursuit of the objective that I have identified.  In my submission, it would be a rather extreme interpretation of that provision to say that Parliament’s intention was that the court should crush anybody who contravenes the regime that it has created at all if they have contravened in a way that makes it possible to impose a crushing burden of that kind, bearing in mind that there are some regimes – and this kind of language ‑ the penalty the Court considers appropriate is found in the Fair Work Act but there is similar language in the penalty empowering provisions in the legislation in the consumer context and in other penalty contexts.

So what the Court says here will have some ramifications beyond the fair work regime, and in a context where it might be the case that the regime can be contravened literally thousands or hundreds of thousands of times so that the notional penalty becomes extremely large, it would be an unreasonable exercise of that power to utilise it in a way that had the extreme consequences that your Honour puts to me.

Perhaps another way of answering this question, your Honour, is to say that while the sole and perhaps only object is to pursue deterrence, that does not mean that deterrence has to be pursued at any cost no matter how ‑ ‑ ‑

GORDON J:   Mr Solicitor, sorry, just so I understand it, is your argument reduced to the following propositions – and I may have them out of order.  As I understand it, the way you put it is that 546 empowers the court to impose a pecuniary penalty that is appropriate provided of course they have satisfied or contravened the civil remedy provision.  What is appropriate is determined by reference to the purpose of 546 and is not artificially limited and, as I understand it, you cite for that paragraph 103 of the indemnification case. 

MR DONAGHUE:   Yes, your Honour.

GORDON J:   Is it then that the object of the penalty under 546 is deterrence both specific and general and that notions of retribution and, to that extent, rehabilitation have no role to play, but one of the limits is they are not to be regarded – that is, the penalty imposed and fixed is not to be regarded as a cost of doing business, consistent with what the Court said in ACCC v TPG. 

Then, is it, in answer to Justice Edelman’s question, that what is appropriate to achieve deterrence is going to be informed by a range of factors including those identified, for example, by Justice French in CSR, that there are then these three limits, that is, this discretion really, which is broad, to impose the penalty is not itself unlimited.  You have the maximum penalty operating as a cap.  It cannot be any greater than is necessary to achieve, as I understand it, your deterrence objective and three, there is of course the requirement that it be exercised within the bounds of reasonableness as in effect derived from the text, scope, purpose and object of the provision.  Is that the way you put it?

MR DONAGHUE:   It is, your Honour.  I agree with everything that your Honour just put to me.  The only thing that I would add is that, while we submit that the penalty is to be appropriate to achieve the objective of general and specific deterrence, it is of deterrence not unfettered from the actual contravention before the court, so one is seeking to deter contraventions of a like kind to that that have occurred. 

So, one does not take – one of the things that was suggested in the court below is that to approach this in the way that we urge completely untethers the setting of the penalty from the contravention that has occurred.  That is not so, in our submission, because it is that contravention that one looks at, applying the Justice French CSR‑type factors, to assess what is appropriate to achieve general and specific deterrence, not contraventions of a completely different kind.  But, subject to that addition, I ‑ ‑ ‑

GORDON J:   I am sorry, I just have one final matter.  Does that mean that if you flip it and you look at it in terms of this requirement of notion of proportionality being a further limit on 546, what that does in a sense is takes the cap as a cap which is not a cap in terms of monetary imposition of penalty, but a cap by which you must assess a scale of contravening conduct.  Is that the way in which it is said to work?

MR DONAGHUE:   It is.  So, in effect, what the Full Court’s approach requires is that in addition to a French‑type factor analysis of what is appropriate, you also need to try to situate this contravention on a scale possible from least worst to most worst kind of contraventions.  The cap is only available for the most extreme category, and so the notional cap drops back depending on where on that scale or yardstick the particular instant contravention is situated and that, we submit, is the error.

EDELMAN J:   At some point, Mr Solicitor, it would help me if you could explain to me what the difference is between “proportionality” and the “bounds of reasonableness” – the former of which, you say, has no role to play, but the latter of which does have a role to play.

MR DONAGHUE:   I am going to do that, your Honour, because “proportionality” – it might be as a matter of language that they might be similar in some context but what the Full Court meant by the notion of proportionality is something very much more specific than that.  I intend to take on that burden shortly.

KEANE J: Mr Solicitor, just before you go on, looking at section 546, it is the conferral of a power on a court by statute. Does one not, inevitably – in the absence of some extreme language – understand that as conferring a power to be exercised judicially by the court and that that always requires reasonableness and fairness in the exercise of the discretion?

MR DONAGHUE:   Absolutely, your Honour.  That is what I was endeavouring to say to Justice Edelman earlier.

KEANE J:   Insofar as proportionality is deployed as a concept – or a notion of proportionality is deployed by the Full Court in this case – it is derived from the notion that, in sentencing for crime, the sentence that is imposed must be proportionate to the just deserts – that is to say, the seriousness of the offence warranting punishment of the individual offender – and that, in that context, that is what proportionality is about.

MR DONAGHUE:   Exactly, your Honour.  In that context, the point is to stop other sentencing purposes being used in a way that result in a penalty that is not proportionate to the just deserts.  That is the purpose of the principle in criminal law.  But it does not work in the context of civil penalties because you are not reconciling competing sentencing objectives, you are just pursuing deterrents.  So, the whole reason for the principle in criminal law is not capable of sensible translation, in our submission.

EDELMAN J:   Except for the fact that, historically, the purpose of – or the role of a principle of proportionality has been expressed as performing a function judicially, which is exactly the proposition that Justice Keane put to you and you agreed with. 

MR DONAGHUE:   Your Honour, Justice Keane’s proposition – one needs not just the notion of proportionality but proportionality to what?  In criminal law, it is proportionality to ensuring that the penalty is not – “the punishment fits the crime”, to use the colloquial‑type phrase.  So, one is linking punishment with gravity of misconduct in an explicitly retributive context.  That context is not present here, so one cannot use the same idea without taking account of the different underlying objectives or purposes.

GLEESON J:   Mr Solicitor, in Markarian the Court identified maximum penalty as having particular significance as a yardstick and as identifying the appropriate penalty for the worst category of cases.  Markarian has been applied in the Federal Court now for many years as a starting point in the assessment of civil penalties and, for example, was applied in TPG at first instance and in the Federal Court with no…..comment from this Court.  At some stage, it would be very helpful if you could address whether the effect of your submission is to say that Markarian does not apply in relation to civil penalties and, if not, why not.

MR DONAGHUE:  Your Honour, can I come to that.  I am going to come to the role of the maximum and that idea, but if I might I will do it within the structure of the submission I am seeking to develop.  But I will come to it.

Before I leave the statute, your Honours, can I ask you to note a few other provisions that draw a very clear demarcation between the civil penalty regime that the Fair Work Act creates and the criminal law, again, these provisions are the kind that are common to civil penalty regimes and your Honours will have seen them before.  Here, looking first at 549 of the Act, in Division 4, “General provisions relating to civil remedies”, it says:

A contravention of a civil remedy provision is not an offence.

In section 551:

A court must apply the rules of evidence and procedure for civil matters when hearing proceedings relating to a contravention . . . of a civil remedy provision.

That particular provision is of a kind that makes express – a point that your Honour Justice Keane made in the Agreed Penalties Case – that this regime is avowedly distinct from a regime that would be appropriate for the imposition of criminal sanctions. 

The statute also addresses the relationship between civil penalties and crime so that in section 552 it is said that there cannot be a civil penalty order after a person has been convicted, but the reverse is not true in section 554, criminal proceedings can be commenced after a civil penalty has been obtained, although there are some restrictions in section 555 on the use of evidence in those subsequent criminal proceedings that came from the civil penalty proceeding.

All of that reflecting the observation in the Agreed Penalties Case, that I am about to come to, where the Court said that that kind of demarcation points against importing criminal principles into a regime that was “precisely calculated to avoid the notion of criminality”, to quote your Honours in paragraph 54.  So, it is a statutory regime providing for the imposition of appropriate civil penalties in respect of contraventions by a regime that is quite deliberately not a regime involving criminal punishment or criminal responsibility and that is significant in terms of the underlying purposes.

Can I come then to the two cases that I have already briefly mentioned, the Agreed Penalties Case and the Non‑Indemnification Case in this Court, starting with the Agreed Penalties Case (2015) 258 CLR 482which your Honours have in volume 5, tab 14. Your Honours might recall that in some respects there are some similarities between that case and this in that in there the Full Federal Court had taken some statements made by this Court in the criminal context, in Barbaro’s case, and had held that they applied in the context of criminal sentencing, and this Court unanimously said, allowing the appeal, that those principles should not have been imported from criminal sentencing into the task of imposing civil penalties.

The leading judgment is the judgment of five members of the Court, Chief Justice French, Justice Kiefel, as your Honour then was, and Justices Bell, Nettle and Gordon.  If I could ask your Honours to start at paragraph 24 on page 495, where having noted in the previous paragraph that:

Since 1974, the Commonwealth has enacted a considerable number of civil penalty provisions -

your Honours then explain:

civil penalty provisions are included as part of a statutory regime involving a specialist industry or activity regulator . . . with the statutory function of securing compliance with provisions of the regime that have the statutory purpose of protecting or advancing particular aspects of the public interest.

That is what I was drawing from in some of the earlier answers I have given to the Court.  It is the purpose of securing compliance with the regime in protecting or advancing the public interest.  “Typically”…..there are other ways of doing it:

injunctions, compensation orders –

et cetera, which one also has here in section 545 of the Fair Work Act, although it is not directly in issue.

If your Honours could then move forward to paragraph 50 on page 505, the Court says that in two individual judgments in the Federal Court, Justices Middleton and McKerracher, had been:

correct in their view that what was said in Barbaro applies only to criminal proceedings –

and their Honours then go on to explain why:

Contrary to the Full Court’s reasoning, there are basic differences between a criminal prosecution and civil penalty proceedings and it is they that provide the “principled basis” for excluding –

Barbaro.  At 54, the second sentence:

But a criminal prosecution is aimed at securing, and may result in, a criminal conviction.  By contrast, a civil penalty proceeding is precisely calculated to avoid the notion of criminality as such.

That is the passage I was referring to a few moments ago.  Then the key passage at 55, which has been commonly cited in the Federal Court since:

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 –

So, again, that public interest in compliance with the regime.  Punishment has three elements:

deterrence, both general and individual, retribution and rehabilitation.  Neither retribution nor rehabilitation –

I will not read it all but are imported:

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.”

Then paragraph 59, it is repeated near the top of 508:

Once it is understood that civil penalties are not retributive –

So, the Court is quite emphatic.  In the last few lines of paragraph 60:

As was emphasised in NW Frozen Foods, it is the function of the regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry –

so that is picking up again the point:

and the level of penalty necessary to achieve compliance.

So that ties in to paragraph 24 earlier, and at the end of 62 near the top of 509:

By providing for civil penalty proceedings, it implicitly assumes the application of the general practice and procedure regarding civil proceedings and eschews the application of criminal practice and procedure.

Your Honour Justice Keane agreed with the plurality, and also at paragraph 110 of your Honour’s reasons starting at the bottom of page 523 picked up the TPG statement that Justice Gordon mentioned earlier:

a civil penalty . . . 

“must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business.”

So that is picking up the plurality’s observations in TPG Internet.  So that case, in my submission, is very clear that the purpose of penalties is to deter both specifically and generally for the purpose of encouraging compliance with the regime that the regulator is tasked with enforcing.  Those points were reinforced perhaps even more emphatically by the Court in the Non‑Indemnification Case (2018) 262 CLR 57 which your Honours have in volume 5 behind tab 12. The leading judgment is the joint judgment of Justices Keane, Nettle and Gordon. If your Honours turn to paragraph 87 on page 185 it said:

As the primary judge stated, the principal consideration in the imposition of penalties for contravention of civil remedy provisions is deterrence, both specific and general; more particularly, the objective is to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who  might be tempted to contravene -

citing the Agreed Penalties Case, and there is reference to the CFMMEU’s antecedents:

penalties needed to be fixed with particular reference to providing specific deterrence against further contraventions by the CFMEU.

Then in the same judgment there is the passage at 103 that I mentioned in my submissions earlier in relation to the construction of the Act, but did not take your Honours to, so that is at the bottom of page 190 over onto page 191. That is the passage about not artificially limiting the power. Then, at 116, their Honours come back to dealing just specifically with section 546 of the Act:

the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would‑be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred -

That, in my submission, accepts your Honour Justice Edelman’s point that there is a spectrum.  It is not a “yes” or “no”.  But one is attempting to identify a sting or burden that will motivate compliance.  At the end of the page:

Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d’etre of its imposition.

So, that is a rather emphatic statement as to the purpose of the imposition of the penalty.  Your Honour Chief Justice Kiefel said something similar at paragraphs 141 to 144 – including in 144, that “attainment of the deterrent effect” is the very point of pecuniary penalties, is the way that your Honour put it there.  I may have misspoken, your Honours.  I was intending to refer to 41 and 42 of the Chief Justice’s judgment and then to 44.

So, in our submission, we respectfully submit, it is very difficult to see how this Court could have been clearer in relation to two main points:  one, that provisions authorising the imposition of civil penalties are concerned principally, if not solely, with deterrence and should be construed as requiring penalties to be imposed that are appropriate – putting a price on contravention sufficiently high to deter repetition of contravening conduct of that kind; and, second, that retributive principles have no place in the setting for the imposition of civil penalties.  Those two principles are, we submit, in stark tension with the Full Court’s analysis.

Can I ask your Honours to turn to the Full Court’s judgment – which you have in the core appeal book, behind tab 5.  It is, in my submission, a complex, difficult judgment.  So, can I start with an overview of the sections into which it falls and then come back to focus on the particular parts that are significant in identifying the errors because one can usefully break the judgment up into a number of discrete sections.

Your Honours will appreciate there are two judgments – a joint judgment of Chief Justice Allsop and Justices White and Wigney – and then a short concurring judgment of Justices Besanko and Bromwich – which is only three or four pages long.  So, my focus will be on the joint judgment of three of their Honours and when I am not referring to that judgment, I will refer your Honours, specifically, to the short concurring reasons.  The joint judgment starts at paragraph 1 on page 71 with an acknowledgement of the importance of the issues raised:

important questions as to the proper approach to the determination of the appropriate level of civil penalties . . . in particular –

in a case of a contravener with a demonstrated:

unwillingness to obey a statute.

So, that is the issue.  Their Honours, from paragraph 7 through to paragraph 20 summarised the primary judgment, including on page 75 quoting the findings at paragraph 84, I think, and at paragraph 20…..against those findings.  Then, on page 78, from paragraph 25 through to about 37, their Honours summarised the judgment in this Court that I have just taken your Honours to, and some in the Federal Court as to the purpose of penalties.  Interestingly, and perhaps slightly oddly, at paragraph 26, your Honours will see the Court saying that:

the Agreed Penalties Case (HC) settled what had been perceived to be a difference . . . as to the object of the imposition of civil penalties.

In my submission, that is a surprising way to put it in circumstances where there were numerous cases in the Federal Court that actually held that the purposes of penalty is included - punishment, deterrence and rehabilitation – and you can see that, for example, in paragraph 29, on the next page, quoting from Ponzio v B & P Caelli Constructions – where the quote begins:

There are three purposes at least for imposing a penalty -

So, it was a not a perceived difference, in our submission.  This Court in the Agreed Penalties Case held that that kind of analysis is wrong.  So, cases that precede the Agreed Penalties Case need to be approached with some level of caution, because there was a stream of authority in the Full Federal Court that treated penalties as in part serving retributive objectives.

Then, after a short discussion on pages 82 and 83 of “The place of punishment” – where their Honours said it might be better to try to avoid that word, lest notions of retribution intrude – there is, starting at paragraph 40, under the heading “Principles of sentencing in crime” a very long discussion of criminal sentencing principles.  It runs from page 83, paragraph 40, through to page 99, paragraph 93. 

I am going to come back to aspects of that, but you can just see structurally that fairly early in the judgment there is a 16‑page discussion of criminal sentencing principles, which gives some feel for the role – the foundational role that they played in the analysis of the court that follows.  But as I say, I will come back to it.

Then at 99, the statutory provisions are set out – 99 through to 102.  Then the next section starts at 102, under the heading “The appropriate penalty” and runs through to about line 10, and there are quite a number of statements of legal principle in that section of the judgment – quite a number which are uncontroversial – there is the CSR factors, and there is a reference in 103 to the Frozen Foods passage that I have mentioned earlier.

It is difficult, just reading this part of the judgment, to put one’s finger on error because much turns upon exactly what particular phrases mean.  So, one sees in 104 the introduction of the Full Court’s notion of proportionality and, indeed, the way that the Full Court have linked together a number of principles is explained in 104 to come up with that context – with that concept.

But a lot turns upon what is meant by the phrase “imposed for the instant contravention” or “guided by the statutory maximum” and what the court means by that becomes clear only later in the judgments.  So, it is later in the judgment where I propose to focus.

After that summary of legal principles, many of which are correct or uncontroversial and some of which are ambiguous, there then commences the next section on page 110 of the judgment, at paragraph  113, which is again a long discussion of authority in the Full Federal Court or the Federal Court post the Agreed Penalties Case.  That discussion lasts about 30 pages.  It runs from 110 through to 140 and includes a 16‑page discussion of Broadway on Ann, which was significant in the primary judge’s reasoning, a few pages discussion of Parker. 

I will come back to that discussion as well because it is particularly in the court’s adoption of the dissenting reasons of Justice Bromwich in Broadway on Ann that the error, in our respectful submission, starts to become clear.

Neither course of conduct nor totality have those characteristics.  They are both analytical tools which can have analogical work to do in setting an appropriate civil penalty.  It is not because they are mandatory sentencing rules and it is certainly not because they are retributive in their very nature, but it is because they assist the court in a practical task.

So, a course of conduct analysis - you will know has been emphasised in many, many cases – this is a way of analysing what actually happened and asking what is the character of the events and circumstances which attract the penalty.  Your Honours could go to many, many cases that pick up this language that the course of conduct principle is no more than a tool of analysis which can – but need not be – used in any given case.

A Full Federal Court case which makes that point is ACCC v Yazaki Corporation, which is cited by the primary judge in the discussion at 105 to 108 of his Honour’s reasons.  The same point is made in other Full Federal Court cases - ACCC v Cement Australia (2017) 258 FCR 312 at 421 to 424, and likewise in Singtel Opus v ACCC (2012) 287 ALR 249 at [53].

So, it is uncontroversial that that is just a tool that can be used and can be helpful.  It does not stand inconsistently with putting proportionality squarely back and only back in the criminal sentencing world.  Likewise, in totality, that is just a practical tool that ensures that the limits set out in the passage we have referred to many times now in NW Frozen Foods, is adhered to:

the penalty should not be greater than is necessary to achieve –

deterrence, so if you have many penalties that are being imposed for separate contraventions, and you get at the end of the task, and you look at the mathematical accumulation of all of those, and you say, as the court, this mathematical accumulation would be more than is necessary to achieve deterrence, totality is, if you like, a label for the tool by which you can reduce that to what is appropriate.  So, there is no inconsistency, with respect, between what we say about proportionality having no role to play and these other principles remaining.

The final matter is a question of the appropriate orders here, and any re‑exercising of the discretion.  The appropriate order, we say, is that which is sought in order 2 of the notice of appeal, that is, the orders of the Full Court should be set aside and in their place order that the appeal to the Full Court be dismissed.  The effect of that will be that the learned primary judge’s orders will be restored, and we have not sought to…..in this appeal.

KIEFEL CJ:   What do you say about the position of Mr Pattinson, Mr Begbie?

MR BEGBIE:   Your Honour will appreciate that our primary focus in this appeal has been on the Union.  If the Court felt that it was not appropriate to disturb the Full Court’s orders with respect to Mr Pattinson, we do not wish to be heard against that.

KIEFEL CJ:   Yes, thank you. 

MR BEGBIE:   If the Court pleases, those are the reply submissions.

KIEFEL CJ:   Thank you.  The Court reserves its decision in this matter and adjourns to 2.15 pm tomorrow.

AT 4.24 PM THE MATTER WAS ADJOURNED