Ballantyne v Hartnett Legal Services Pty Ltd
[2015] FCCA 371
•16 February 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BALLANTYNE v HARTNETT LEGAL SERVICES PTY LTD & ANOR | [2015] FCCA 371 |
| Catchwords: INDUSTRIAL LAW – Failure to pay accrued leave entitlement upon termination – contraventions made out – s.570(2)(b) Fair Work Act 2009 (Cth). PRACTICE & PROCEDURE – Judgment – judgment by default. COSTS – Indemnity costs. |
| Legislation: Fair Work Act 2009 (Cth), s.570(2)(b) |
| Fair Work Ombudsman v Proplas Industries Proprietary Limited & Another and Fair Work Ombudsman v Blacklight Investments Pty Ltd & Another (No.3) [2012] FMCA 130 Colgate Palmolive v Cussons Proprietary Limited [1993] FCA 536 |
| Applicant: | JAMES CAMERON BALLANTYNE |
| First Respondent: | HARTNETT LEGAL SERVICES PTY LTD |
| Second Respondent: | BEAU TIMOTHY JOHN HARTNETT |
| File Number: | BRG 1105 of 2014 |
| Judgment of: | Judge Vasta |
| Hearing date: | 16 February 2015 |
| Date of Last Submission: | 16 February 2015 |
| Delivered at: | Brisbane |
| Delivered on: | 16 February 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr B. Kidston |
| Solicitors for the Applicant: | Ballantyne Law Group |
| Solicitors for the First & Respondent: | Hartnett Legal Services |
ORDERS
As against the First Respondent
The First Respondent pay the Applicant the sum of $35,013.44 for claim and interest, made up as follows:
(a)$19,505.99 in respect of unpaid accrued annual leave entitlements;
(b)$16,822.70 in respect of unpaid accrued long service leave entitlements; and
(c)$1,348.44 in respect of interest on the sums at (a) and (b);
(d)LESS $2,663.69 in respect of an over payment made by the First Respondent to the Applicant.
It is declared that the First Respondent:
(a)contravened section 44 of the Fair Work Act 2009 (Cth), when it contravened section 90(2) of the Fair Work Act 2009 (Cth) by failing to pay to the Applicant his accrued annual leave entitlements upon his employment ending;
(b)contravened section 44 of the Fair Work Act 2009 (Cth), when it contravened section 125 of the Fair Work Act 2009 (Cth) by failing to provide a Fair Work Information Statement to the Applicant; and
(c)contravened on five occasions section 44 of the Fair Work Act 2009 (Cth), when it contravened section 536 of the Fair Work Act 2009 (Cth) by failing to provide payslips to the Applicant.
The First Respondent pay a penalty of $10,000 in respect of the contravention at order 2(a), pursuant to section 546 of the Fair Work Act 2009 (Cth).
The First Respondent pay a penalty of $5,000 in respect of the contravention at order 2(b), pursuant to section 546 of the Fair Work Act 2009 (Cth).
The First Respondent pay a penalty of $5,000 in respect of all of the contraventions at order 2(c), pursuant to section 546 of the Fair Work Act 2009 (Cth).
The penalties at orders 3 to 5 be paid within 21 days and to the Commonwealth.
As against the Second Respondent:
The Second Respondent pay the Applicant the sum of $20,287.30 for compensation, made up as follows:
(a)$19,505.99 in respect of unpaid accrued annual leave entitlements (being the obligation at order 1(a)); and
(b)$781.31 in respect of interest on the sum at (a) (being part of the interest at order 1(c)).
It is declared that:
(a)the written employment agreement between Kentgale Pty Ltd and the Second Respondent, as employer, and the Applicant, as employee, entered into in or about February 2006 (the “Employment Agreement”) was varied by a course of conduct between the parties such that the Second Responded ceased being a party to the Employment Agreement by June 2008;
(b)the Applicant’s employment pursuant to the Employment Agreement terminated on or about 25 May 2011; and
(c)clauses 7(d) “Client Protection Covenants” and 7(e) “Post Employment Restriction” of the Employment Agreement, and each of the them, have been unenforceable since at least 25 May 2014.
It is declared that the Second Respondent was involved in the:
(a)contravention of sections 44 and 90(2) of the Fair Work Act 2009 (Cth) by the First Respondent by it failing to pay to the Applicant his accrued annual leave entitlements upon his employment ending;
(b)contravention of sections 44 and 125 of the Fair Work Act 2009 (Cth) by the First Respondent by it failing to provide a Fair Work Information Statement to the Applicant; and
(c)contravention on five occasions of sections 44 and 536 of the Fair Work Act 2009 (Cth) by the First Respondent by it by failing to provide payslips to the Applicant.
The Second Respondent pay a penalty of $8,000 in respect of the contravention at order 9(a), pursuant to section 546 of the Fair Work Act 2009 (Cth).
The Second Respondent pay a penalty of $1,500 in respect of the contravention at order 9(b), pursuant to section 546 of the Fair Work Act 2009 (Cth).
The Second Respondent pay a penalty of $1,500 in respect of all of the contraventions at order 9(c), pursuant to section 546 of the Fair Work Act 2009 (Cth).
The penalties at orders 10 to 12 be paid within 21 days and to the Commonwealth.
As against the First Respondent and Second Respondent:
The First Respondent and Second Respondent pay the applicant’s costs of and incidental to the Application in a Case filed 30 December 2014 and the Application – Fair Work Division filed 9 December 2014, on an indemnity basis, as assessed or agreed.
.
| FEDERAL CIRCUIT COURT AT BRISBANE |
BRG 1105 of 2014
| JAMES CAMERON BALLANTYNE |
Applicant
And
| HARTNETT LEGAL SERVICES PTY LTD |
First Respondent
| BEAU TIMOTHY JOHN HARTNETT |
Second Respondent
REASONS FOR JUDGMENT
(Ex Tempore)
By application filed on 8 December 2014 the Applicant Mr Ballantyne sought from this Court orders contained in his Statement of Claim, also filed on 8 December 2014, against the First and Second respondents for what I will loosely call breaches of the Fair Work Act 2009 (Cth). It seems on my reading of the material that the Applicant Mr Ballantyne was employed as a solicitor by the firm Hartnett Lawyers. That employment started on or about 22 February 2006.
At that time, though working for Hartnett Lawyers through an employment contract, he was actually employed by a service company, Kentgale Proprietary Limited and Kentgale were the firm that employed him to provide legal services to Hartnett Lawyers. The fact of the employment being that way is evidenced in the payslips that have been exhibited to Mr Ballantyne’s affidavit that was filed in this Court on 10 February 2015. It is also obvious that the person really in charge of the First Respondent Hartnett Legal Services and previously of Kentgale Proprietary Limited is indeed the Second Respondent Mr Beau Hartnett.
Kentgale Proprietary Limited had voluntarily wound itself up in 2011 and responsibility for the payment of the Applicant for the provision of his legal services to Hartnett Lawyers was taken over by another service company, Hartnett Legal Services Proprietary Limited, the First Respondent. That too is evidenced on the payslips.
There does not seem to be any dispute that the Applicant finished his employment with the first respondent at 28 August 2014, having given notice some four weeks beforehand.
Upon the cessation of employment the First Respondent was liable to the statutory requirements to pay the leave entitlements of annual leave and on a pro rata basis the entitlements to his long service leave. Neither of those things were done.
Upon cessation of employment the Second Respondent sought to enforce restraint of trade covenants that had been in place in the contract originally signed between the Applicant and Kentgale Proprietary Limited.
Those covenants are reproduced under the statement of claim, paragraph 9(f) and (g),
“…
(f)by clause 7(d):
‘Client Protection Covenants
(i) At no time during the course of his or her employment shall the Employee be permitted to undertake work on behalf of one (1) of the Employer’s clients on his or her own account or on behalf of any other person unless agreed by the Employer.
(ii) The Employee covenants and agrees that, for each period specified in Clause 7(d)(iii), the Employee shall not:-
(A) solicit, canvas, or endeavour to obtain the custom or business of any client of the Employer (whether by letters, advertisements or otherwise), which client was introduced to the Employee during the course of his or her employment with the Employer, in order for such a client to become the client of the Employee or of another person, firm or company which provides similar professional services as the Employer;
(B)solicit, canvass, or endeavour to obtain the support of any organisation or association (whether by letters, advertisements or otherwise), which organisation or association has referred clients to the Employer, in order to have such organisation or association refer clients to the Employee or to another person, firm or company which provides similar professional services as the Employer;
(C) solicit, canvass, or endeavour to entice away from the Employer any employee of the Employer.
(iii) Each of the covenants contained in Clause 7(d)(iii) shall apply for the time period commencing on the date of termination of the Employee’s employment and shall continue for a period of:-
(A) three (3) months;
(B) six (6) months;
(C) twelve (12) months;
(D) twenty-four (24) months;
(E) thirty-six (36) months;
(F) forty-eight (48) months;
(G) sixty (60) months.
(iv)The Employee separately enters into with the Employer each of the covenants contained in Clause (7)(d)(ii) for each of the time periods referred to in Clause 7(d)(iii), it being agreed that such covenant and accompanying time period constitutes an independent and separate restraint imposed on the Employees under this Contract. If any covenant is or will become unenforceable, such unenforceability will not affect the validity and enforceability of the other covenants imposed under Clause 7(d)(iii) which shall remain binding on the Employees;
(v)The Employee agrees that the restrictions contained in Clause 7(d)(ii) are reasonable and necessary for the protection and continued viability of the Employer’s business. [“Client Protection Restraints”]’
(g) by clause 7(e)
‘Post Employment Restriction
(i)The Employee covenant with the Employer that she (sic) shall not, whether individually or as principal, agent, or partner, directly or indirectly without the previous consent in writing of the Employer be concerned or interest or employed in, or manage or operate or participate in the management or operation of legal firm or otherwise that undertakes legal work which is or is likely to be in competition with the Employer’s business activities during her employment, and for the periods and in the areas specified in this Clause 7(e), and the Employee covenants at the time of the termination of this Employment Contract or during any such period thereof.
(ii) The periods specified in the Clause 7(e)(I) are:
(A) During the first three (3) months after the termination of this Employment Contract;
(B) During the first six (6) months after the termination of this Employment Contract;
(C)During the first twelve (12) months after the termination of this Employment Contract;
(D) During the first twenty-four (24) months after the termination of this Employment Contract;
(E) During the first twenty-four (24) months after the termination of this Employment Contract;
(F) During the first forty-eight (48) months after the termination of this Employment Contract;
(iii) The areas specified in Clause 7(e)(i) are:
(A) Within 1km of the business premises of the Employer which is currently as 50 Appel Street, Surfers Paradise but which may change during the term of this Contract (“the Premises”);
(B) Within 3kms of the Premises;
(C) Within 5kms of the Premises;
(D) Within 10kms of the Premises;
(E) Within the Gold Coast;
(iv) This Clause 7(e) shall have effect as if it were a number of separate clauses each on being severable from the others, such separate clauses consisting of the covenants set out in Clause 7(e)(i) combined with each separate period referred to in Cluse 7(e)(iii) combined with each separate area referred to in Clause 7(e)(iii) and if any of the separate clauses shall be invalid or unenforceable for any reason, such invalidity or unenforceability shall not effect the validity or enforceability of any other separate clause.
(v)The Employee agrees that the restrictions contained in this Clause 7(e) are reasonable and necessary for protection of information concerning the business activities of the Employer and he further agrees that such restrictions are not severe. [“Post Employment Restraints”]’.”
There was no contract signed by the Applicant or the First Respondent. In my view there was an implied contract that the Applicant would provide his labour to the firm and that he would be remunerated by the First Respondent. On the evidence before me, both parties acted in accordance with the terms of the implied contract.
Mr Ballantyne, the Applicant, had for some time been attempting to sort this matter out. As was submitted, he had asked Mr Hartnett for what were statutorily his entitlements quite a number of times.
After his employment had finished Mr Ballantyne engaged lawyers, namely Adams Wilson Lawyers, to pursue the matter with Mr Hartnett and the First Respondent. Those pursuits by the lawyers led to what I consider to simply be stonewalling by the Respondents. The point reached a matter where Mr Ballantyne had to disengage those lawyers simply because of the cost and act for himself.
At Exhibit 19 of his affidavit filed in this Court on 10 February 2015, there is a letter sent by Mr Ballantyne on 17 November 2014 to the lawyers who were representing Hartnett Lawyers in this matter. In it he asks simply for what is his and for there not to be any action on the restraint of trade provision simply because they were unenforceable. On page 6 of that letter he talks about the steps that could be taken quite simply to resolve this dispute. There was no reply to that letter which led to the Statement of Claim being filed in this Court, on 8 December 2014.
What is plain is that upon the Application and Statement of Claim being filed upon the Respondents, the Respondents had 14 days to at least file an appearance and if they wished to resist the matter they had to file a response within 14 days.
That date was 29 December 2014, taking into account the public holidays that fell between the time of the service of the material and the 14 day limit. The fact is that there was no material filed in answer to the statement of claim within time. On 30 December 2014 the Applicant filed the application for, in effect, default judgment, pursuant to Rule 13.03 of the Federal Circuit Court Rules 2001. The matter was set down by the Registry for hearing today.
On 12 January 2015 a Defence was filed in this court. I use the word “Defence” in a very loose term because upon reading the document one actually has no idea as to what it is that either the First or the Second respondent are claiming to meet the Statement of Claim. In effect the defence refutes that the First Respondent was the employer of the Applicant. That plainly cannot be the case. It doesn’t do the Second Respondent any credit whatsoever to file a Defence like this in this Court. One might consider that this action illustrates both contempt for this Court and contempt for the proceedings. This is an alarming state of affairs given the oath that the Second Respondent must have taken upon his admission some, on what I’ve been told, 30 years ago.
The certificate of lawyer at page 5 of the Defence is, quite frankly, not worth the paper it’s written on. Notwithstanding that, it was a document that was filed in this Court. As a result of the Defence being filed the Applicant contacted the Respondents (see Exhibit 23 to the affidavit of 10 February 2015). The letter is dated 14 January 2015. I will read the letter onto the record. It is sent from the Ballantyne Law Group to Hartnett Lawyers:
“Dear sirs,
…
We refer to your facsimile of 13 January 2015 serving your clients’ defence and notices of address for service.
The defence is both late and inadequate.
As you are already aware (because it has been served on your Mr Hartnett and the first respondent company), our client has applied for judgment as a consequence of your clients’ default pursuant to Rule 13.03B of the Federal Circuit Court Rules 2001 (Cth).
We apprehend from the defence that despite their default, your clients intend to defend the application proper and oppose the making of the orders sought in the said application. If that is the case, please serve on us affidavit material addressing the usual matters in respect of setting aside default judgment and any other material you intend to rely on, by 23 January 2015.
Further, the certificate provided by Mr Hartnett in support of the defence is demonstrably untrue. Please ensure that Mr Hartnett is available for cross‑examination at the hearing of the application. Upon receipt of your material we will advise as to whether any other witnesses are required for cross‑examination.
We will serve our material in reply by 30 January 2015. This orderly exchange of material will ensure that the application can be heard on 16 February 2015. You can proceed confidently that any application for an adjournment by your clients on that date will be opposed.
Further, unless you inform us to the contrary by the close of business 16 January 2015, we intend informing the Registry that the application is contested and that our time estimate for its hearing is revised to two hours.”
Today Mr Reardon appears as town agent for the First and Second Respondents. His instructions were limited however, to mounting an argument, that, notwithstanding that there had been a late filing, it was still a Defence to the action. The submission was made and that there had been a mistake made. It had been thought that there was 28 days in which to file a Defence. As the Respondents acted upon that mistake the Defence was filed within 28 days and therefore the matter should proceed to a hearing proper.
However, there is no material by affidavit addressing the issue of the late filing of the Defence. I take it that this may very well be the instructions given to Mr Reardon but unless such is in evidence before me I cannot simply act upon contentions made at the Bar table. This is, of course, no reflection on Mr Reardon, who has quite properly conducted himself and upheld the traditions of the solicitors’ branch, of which he is a member, very admirably today.
The Second Respondent has totally ignored the letter of 14 January 2015. There is no material before me from either Respondent to clarify the matter for the Court.
So the question for me to decide is whether, on all the evidence, I should proceed pursuant to Rule 13.03B of the Federal Circuit Court Rules 2001 (Cth).
I am satisfied that pursuant to Rule 13.03A(2)(b)(ii) the Respondents have failed to file a response before the time for the Respondents to file a response has expired. Therefore the Respondents are in default. Pursuant to Rule 13.03B(2), as the respondent is in default the Court may do a number of things. I’ve been urged, and I will act, pursuant to rule 13.03B(2)(c),
“…(c)if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings--give judgment against the respondent for the relief that:
(i)the applicant appears entitled to on the statement of claim; and
(ii)the Court is satisfied it has power to grant…”
Having a look at the Statement of Claim there are two areas upon which it focuses. Firstly, the statutory entitlements. These are the accrued annual leave and the accrued annual long service leave. This has been helpfully set out by Mr Kidston in his submissions. The accrued annual leave sum is $19,505.99 and the accrued long service sum $16,822.70.
I accept that those are the proper sums that are calculated by looking at the amount of annual leave, calculated in hours and multiplied by how much an hour the Applicant was being paid. The long service leave sum is done on a pro rata basis; the Applicant was employed for eight years and six months, and so therefore on a pro rata basis that he has accrued that amount of long service leave given that he has left employment because of illness.
I calculate that it has been 172 days since those two sums have been owing. At 8.5 per cent interest per annum over those 172 days a further sum of $1,348.44 in interest is owed. However, as the applicant fairly acknowledges, there was an overpayment in that he was paid money by the First Respondent after the date of the effect of the resignation. That sum of $2,663.00 needs to be deducted.
Overall, the total then is $35,013.44.
The other aspect of the Statement of Claim is the “restraints of trade” that I have already spoken. In my view, with regard to the restraint of trade relating to employment I doubt that this clause is enforceable. But even if it were enforceable it could not be enforceable for anything more than a month at most. As far as the client protection restraints are concerned, whilst I accept that those are enforceable I could not be satisfied that anything more than six months would be an appropriate time for those.
So even if the restraint of trade clauses were valid and were operating as at August 2014 they would now be over.
But more importantly one has to look at the contract that created those clauses in the first place. That contract was between the Applicant and Kentgale. It was at the winding up of Kentgale, those clauses came into effect (if at all). If they came into effect as at May of 2011, once Kentgale was wound up, even on the most generous construction of those covenants (which is to assign a three year term for them), they are well and truly over.
It is my view, that the implied contract between the Applicant and the First Respondent contained nothing but the standard conditions of employment. The “restraint of trade” clauses cannot be part of the implied contract.
In my view, therefore, the relief sought in the Statement of Claim is proper and it is within my power to grant it. So the declaration is made pursuant to the Statement of Claim that the operation of the client protection restraints and the post‑employment restraints is that their terms have now ceased and that there is no longer any restraint of trade.
With regard to civil penalties, in my view one starts by looking at the letter at Exhibit 19 of the affidavit of Mr Ballantyne filed in this Court on 10 February 2015. Any conduct by the First and Second respondents not to comply with what was asked for in that letter is, in my view, not only unreasonable, it amounts to mischief. The fact is that the First and Second Respondent ought to have known that the monies that I’ve spoken of, were well and truly due and owing as at the time of the cessation of employment. The fact that they have had to be ordered by this Court to pay them, as I say, does nothing for Mr Hartnett’s standing as a solicitor of this Court and brings the profession into disrepute.
The principles in relation to penalties are set out in the matter of the Fair Work Ombudsman v Proplas Industries Proprietary Limited & Another and Fair Work Ombudsman v Blacklight Investments Pty Ltd & Another (No.3) [2012] FMCA 130. At paragraphs 14 and 15,
14. The federal courts have regard to general principles which have been developed in relation to the imposition of penalties, in matters under the WR Act and FW Act, and associated regulations, including the following:
a. fundamentally, the penalty must be proportionate to the gravity of the contravening conduct;[10]
b. penalties are imposed for the following purposes:
(i)punishment, proportionate to the offence and according to prevailing standards;
(ii)personal or specific deterrence, assessing the risk of reoffending, and general deterrence, as a deterrent to others who might be likely to offend; and
(iii) rehabilitation;[11]
(c) the sentencing task is one of instinctive synthesis in which the court takes account of all relevant factors and arrives at a single result taking due account of all of those relevant factors;[12]
(d) proportionality and consistency are a final check on the penalty assessed;[13]
(e) courts may identify a range of factors appropriate to the assessment of penalty, but ought to be wary of the use of check lists which “give rise to the risk of transforming the process of instinctive synthesis into the application of a rigid catalogue of matters for attention”;[14] and
(f) courts ought also be wary of comparing penalties from other cases when assessing the amount of penalty to be fixed.[15]
General considerations relevant to assessment of penalty
15. Considerations which may be taken into account in assessment of penalty are well established and have been consistently applied by this Court.[16] Broadly, the relevant factors can be listed as follows:
a. the nature and extent of the conduct which led to the contraventions;
b. the circumstances of the conduct (including deliberate defiance or disregard of Commonwealth workplace relations legislation);
c. the consequences of the contravening conduct;
d. the objects of Commonwealth workplace relations legislation;
e. whether the contraventions are distinct or arise from a single course of conduct;
f. deterrence, both general and specific;
g. relevant record of civil penalty contraventions;
h. the size and financial resources of the contravener;
i. co-operation with regulatory authorities (if any);
j. the contravener's contrition (if any);
k. the size of the prescribed penalty, and any recent increases to that prescription; and
l. the totality principle.”
As outlined above the considerations for giving of penalties have been well and truly set out and I take note of those and follow them.
To my mind the factors which are the most apposite for this matter are:-
·The non-payment of money at the time of cessation of employment;
·The disregarding of the letter of 17 November 2014;
·The fact that the Second Respondent is a solicitor of considerable seniority and ought know his obligations;
·The contemptuous nature of the Respondents’ approach to this Court;
·This is deliberate defiance of Commonwealth legislation;
·There has been no remorse for this behaviour;
·There has not be any attempts at mediation or conciliation by the Respondents;
·The need to generally deter others from this behaviour especially because of the Second Respondent’s standing as a solicitor;
·Then need to personally deter the Respondents;
·Balancing the maximum penalties with the orders to be made in favour of the Applicant to arrive at the appropriate quantum.
In my view there are clear breaches in this matter. They are:-
a)The non-payment of the leave entitlements;
b)The non‑provision of five payslips; and
c)The non‑provision of a Fair Work Statement.
In those matters I note that the maximum penalty given is $55,000 for a company and $11,000 personally. I do propose to make orders for pecuniary penalties or civil penalties for these breaches.
As far as costs are concerned, I am also cognisant of s.570(2)(b) of the Fair Work Act 2009 (Cth). I am also cognisant of the principles in Colgate Palmolive v Cussons Proprietary Limited [1993] FCA 536.
In my view, having a look at the contents of Exhibit 19 to Mr Ballantyne’s affidavit, the respondents have acted in an unreasonable and frivolous way in this matter and in my view the applicant should be awarded costs on an indemnity basis.
With respect to the breaches, I find that the non-payment of the leave entitlements is the most serious breach. I order the First Respondent pay a pecuniary penalty of $10,000.00 and the Second Respondent pay a pecuniary penalty of $8,000.00. For the other two breaches, I order the First Respondent pay a pecuniary penalty of $5,000.00 and the Second Respondent pay a pecuniary penalty of $1,500.00 on each breach.
The total of the pecuniary penalties overall is that the First Respondent pay $20,000.00 and the Second Respondent pay $11,000.00.
The pecuniary penalties are to be paid to the Commonwealth of Australia.
I make the orders as I have detailed.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Judge Vasta
Date: 23 February 2015
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