Butlin v ACA Home Improvements Pty Ltd
[2019] FCCA 2145
•6 August 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BUTLIN v ACA HOME IMPROVEMENTS PTY LTD & ANOR | [2019] FCCA 2145 |
| Catchwords: INDUSTRIAL LAW – Contravention of s.358 of the Fair Work Act 2009 – accessorial liability established – what penalty to impose on the First and Second Respondent – whether compensation be paid to the Applicant for non-economic loss – compensation awarded to the Applicant for economic loss. |
| Legislation: Fair Work Act 2009, ss.358, 545, 546, 547, 550, 570 |
| Cases cited: Australian Licensed Aircraft Engineers Association v International Aviations Service Assistance Pty Ltd [2011] FCA 333 Bostik v Gorgevski (1992) 36 FCR 20 |
| Applicant: | RODNEY BUTLIN |
| First Respondent: | ACA HOME IMPROVEMENTS PTY LTD (ACN 168 432 317) |
| Second Respondent | VINCENT SHEN |
| File Number: | MLG 437 of 2017 |
| Judgment of: | Judge Blake |
| Hearing date: | On the papers in chambers |
| Date of Last Submission: | 15 March 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 6 August 2019 |
REPRESENTATION
| Counsel for the Applicant: | On the papers |
| Solicitors for the Applicant: | Anderson Gray Lawyers |
| Counsel for the Respondents: | On the papers |
| Solicitors for the Respondents: | G & M Lawyers |
THE COURT DECLARES THAT:
The First Respondent contravened section 358 of the Fair Work Act 2009 (‘Act’) by dismissing the Applicant in order to re-engage him as an independent contractor.
The Second Respondent was involved, within the meaning of section 550 of the Act, in the First Respondent’s contravention of section 358 of the Act.
THE COURT ORDERS THAT:
Pursuant to section 545(1) of the Act, the First Respondent pay compensation to the Applicant in the amount of $43,406.38 on account of lost wages and superannuation.
Pursuant to sections 547(2) and 547(3) of the Act, the First Respondent pay interest to the Applicant at the applicable pre-judgment rate on the amount payable under the order set out at Order 3 above from
10 November 2016 until the date of this Order.Pursuant to section 546(1) of the Act, a pecuniary penalty of $6,750 be imposed on the First Respondent for its contravention of section 358 of the Act.
Pursuant to section 546(1) of the Act, a pecuniary penalty of $1,350 be imposed on the Second Respondent for his involvement, within the meaning of section 550 of the Act, in the First Respondent’s contravention of section 358 of the Act.
The penalty payments specified in Orders (5) and (6) above be paid to the Applicant.
NOTATION
A.This order has been amended on 13 August 2019 pursuant to r.16.05(2)(h) of the Federal Circuit Court Rules 2001.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 437 of 2017
| RODNEY BUTLIN |
Applicant
And
| ACA HOME IMPROVEMENTS PTY LTD (ACN 168 432 317) |
First Respondent
| VINCENT SHEN |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This matter concerns an application by Rodney Butlin (‘Applicant’) that the First Respondent, ACA Home Improvements Pty Ltd, contravened section 358 of the Fair Work Act 2009 (‘Act’) and that the Second Respondent was involved in the contravention of the Act by the First Respondent.
On 5 December 2018, Judge Wilson (as he then was) delivered judgment. In summary, Judge Wilson found that the First Respondent had contravened section 358 of Act by terminating the Applicant’s employment in order to engage the Applicant as an independent contractor to perform the same, or substantially the same, services. Judge Wilson also found that the Second Respondent was involved in the contravention by the First Respondent.
On 25 February 2019, Judge Wilson made orders for the filing and service of affidavits and written submissions in relation to compensation and penalties. Correspondence between the Court and the parties discloses that following the filing of those materials, the parties expected the Court’s judgment in respect of loss and penalties, however sought a further hearing on the issue of costs.
This decision concerns what, if any, compensation ought to be paid to the Applicant and whether pecuniary penalties ought to be imposed on the First Respondent and the Second Respondent.
In his written submissions, the Applicant claims compensation for economic loss, general damages for distress, shock, hurt and humiliation, and the imposition of pecuniary penalties against the First and Second Respondent at the level of 75% of the maximum penalty permitted under the Act. It is to these matters that I now turn.
The Claims for Compensation
Section 545(1) and (2) of the Act relevantly sets out the Court’s power in relation to remedies for breaches of a civil remedy provision. It provides as follows:
(1) The Federal Court or the Federal Circuit Court may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.
(2) Without limiting subsection (1), orders the Federal Court or Federal Circuit Court may make include the following:
(a) an order granting an injunction, or interim injunction, to prevent, stop or remedy the effects of a contravention;
(b) an order awarding compensation for loss that a person has suffered because of the contravention;
(c) an order for reinstatement of a person.
It is accepted that section 545 of the Act empowers the Court to order compensation for economic and non-economic loss: see Australian Licensed Aircraft Engineers Association v International Aviations Service Assistance Pty Ltd [2011] FCA 333 (‘IASA’). In order to recover compensation, there must be a causal connection between the contravention of the Act and the loss claimed.
The claim for economic loss
The Court has found that the Applicant was dismissed from his employment in order for the First Respondent to engage him as an independent contractor. Following his dismissal in November 2016, the Applicant was unable to obtain secure employment. He claims lost wages and superannuation in the sum of $43,406.38 plus interest. His unchallenged evidence is that he did not obtain work which provided him with a comparable amount of remuneration until he started working for an enterprise known as Creative Windows on 2 April 2018. His calculation of the loss between the time of dismissal and the time of his employment with Creative Windows is set out in paragraph 20 of his affidavit of 2 February 2019, which is unchallenged, and is as follows:
20. As a result of the dismissal, I suffered substantial financial loss. I did not earn a salary that was equal to, or greater than, my salary with ACA, until 2 April 2018, when I commenced working for Creative Windows. I would estimate that my financial loss for the period between 11 November 2016 and 1 April 2018 was $43,406.38. I arrive at this estimate as follows:
a. As noted, I was dismissed on 10 November 2016 and I did not earn a salary which was equal to, or greater than, my salary with ACA, until 2 April 2018;
b. From 11 November 2016 and 1 April 2018 is approximately 72 weeks;
c. My weekly salary with ACA as at the dismissal was $1,579.33 gross, including superannuation;
d. $1,579.33 (being my weekly salary with ACA as at the dismissal, including superannuation) x 72 (being the number of weeks that I did not earn a salary which was equal to, or greater than, my salary with ACA) = $113,711.76 (being the salary I would have earned from 11 November 2016 and 1 April 2018 had I remained in ACA's employment);
e. I earned approximately $2,500.00 through the independent contractor work;
f. I worked for Construct Homes between 9 May 2017 and on or about 27 March 2018, being 46 weeks, earning approximately $1,474.03 per week, including superannuation;
g. 46 (being the number of weeks I worked for Construct Homes) x $1,474.03 (being my weekly salary with Construct Homes, including superannuation)= $67,805.38 (being the salary I earned with Construct Homes between 9 May 2017 and 27 March 2018);
h. $113,711.76 (being the salary I would have earned from 11 November 2016 and 1 April 2018 had I remained in ACA's employment) – $2,500.00 (being an estimate of my earnings through the independent contractor work) - $67,805.38 (being the salary I earned with Construct Homes between 9 May 2017 and 27 March 2018) = $43,406.38 (being my estimate as to my loss as a result of the dismissal). (Emphasis in original)
In his affidavit of 2 February 2019, the Applicant also deposes to his attempts to find work. That evidence is unchallenged and I accept it.
The Respondents, in reply, rely on Bostik v Gorgevski (1992) 36 FCR 20 (‘Gorgevski’). In Gorgevski, it was held that while an employee wrongfully dismissed is entitled, subject to mitigation, to damages equivalent to the wages he would have earned under the contract from the date of the dismissal to the end of the contract, the date when the contract would have come to an end must be ascertained on the assumption that the employer would have exercised any power he may have had to bring the contract to an end in a way most beneficial to himself.
While I accept the statement made by the Full Court in Gorgevski, the circumstances in that case were different. In Gorgevski, the employee was immediately dismissed for a serious safety breach. Consideration was then given, in the circumstances of that case, to the prospect that the employer may have nevertheless dismissed the employee a short time later.
While the facts in Gorgevski are very different to those that arose in this matter, the principle from Gorgevski set out above remains applicable. It was the principle applied by the Federal Court in the IASA decision.
Applying the Gorgevski principle to this matter, the Respondents submit that the appropriate amount to award for economic loss is an amount equivalent to two months’ pay, or $13,687.50. The submission is put on the following bases. The Applicant’s employment was precarious because the role he was occupying was a new role in a new business offering where success was not guaranteed. The Applicant’s period of employment was short; he was not a longstanding employee. There were reduced workflows at the time of termination. There is a paucity of evidence to suggest the Applicant endeavoured to mitigate his loss. In short, it is submitted that the Applicant’s employment would have been terminated shortly in any event.
At the outset, I reject the proposition that there was a reduction in work in the business at the time of termination. I do so because Judge Wilson made express findings, having heard all of the evidence at trial, that the work would ebb and flow, and that at the time of termination, there were several jobs in the system. In summary, there was no shortage of work.
I also do not accept there is a lack of evidence in relation to the Applicant’s attempts to mitigate loss. The only evidence on this issue is adduced by the Applicant himself. His unchallenged affidavit evidence sets out the positive steps he took to secure employment. I am satisfied that the Applicant did attempt to mitigate his loss, however his attempts did not result in him being able to earn an income comparable to his income with the First Respondent.
I accept that the Applicant was employed in a new role in what was a new business venture. In respect of this, the Respondents submit that the nature of the Applicant’s employment was speculative because it was always possible that the new business offering did not have the client uptake that the First Respondent hoped for. The Respondents also submit that all of the witnesses, including the Applicant, gave evidence that there was decreased work in the pipeline. It is submitted that these matters should be taken account of and reflected in any award for economic loss.
The difficulty with much of these submissions are that they run squarely into the findings made by the trial judge, Judge Wilson. He did not accept the evidence of the Second Respondent in relation to the decreased work in the business. At paragraph [40] of his reasons, Judge Wilson accepted that Mr Dickinson’s work increased following the termination of the Applicant’s employment. At [46], Judge Wilson rejected the contention that the First Respondent did not have sufficient window installation work for the Applicant to perform. At [49], Judge Wilson made various findings. These included that he did not accept the First Respondent’s information in relation to the work pipeline, that he accepted that the work in the business had historically ebbed and flowed, he found that there were jobs in the system and that Mr Dickinson’s work increased following the Applicant’s departure. In light of these express findings made by the trial judge, I do not accept the contention advanced by the Respondents that the precarious or speculative nature of the role and the associated decrease in worth is a matter to be taken into account in assessing quantum of loss.
Finally, the Respondents contended that the Applicant’s employment tenure was short and submitted that that brief tenure did not suggest that such a role is likely to continue long into the future. I accept that the Applicant’s employment with the Respondent did not extend for a long period of time. However, Mr Dickinson continued to work and it is reasonable to infer the Applicant would have continued to work, but for the contravening conduct. There is nothing in the Applicant’s employment history which would lead to an inference he was unlikely to continue work. The trial judge has found there was work and it was in the nature of the business for it to ebb and flow. I was also not taken to any authority which suggests that a short employment period of itself warrants a discount to any damages payment.
On the basis of what I have set out above, compensation under this head should finally be assessed at $43,406.38 plus interest from the date of termination of the Applicant’s employment on 10 November 2016 to the date of this judgment.
The claim for non-economic loss
The Applicant claims general damages for distress, shock, hurt and humiliation in the amount of $25,000. The Applicant, in unchallenged affidavit evidence, has deposed to being upset and dumbfounded at his dismissal. He deposes to the stress that he felt, the effect on his mental health, and the trouble that he had sleeping.
The Applicant submits that damages awarded for non-economic loss ought to be more than nominal in light of prevailing community standards. In this respect, the Applicant relies on the decision of the Full Court of the Federal Court of Australia in Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82 (‘Richardson’). In reliance on this decision, the Applicant submits that damages should be on the medium to high end of the range.
Richardson concerned an employee who was subjected to serious sexual harassment and sex discrimination. The circumstances in that case are very different. Here, while the termination of employment came as a shock to the Applicant, it was not a termination that was affected with malice. The Applicant attended the workplace the next day for a farewell function. There is no evidence to suggest that what occurred here was anything more than the ordinary cessation of an employment relationship which commonly occurs in many workplaces on a daily basis.
The Applicant had the opportunity to put before the Court evidence from a medical practitioner as to the effect of the dismissal upon him, including any impact on his health. He did not do so. The Court therefore does not have before it any evidence from an appropriate expert that the impact of the dismissal on the Applicant was anything out of the ordinary compared to the distress that any other employee would go through upon being informed of the termination of his or her employment.
That there needs to be something more than an element of distress that accompanies most terminations of employment is a matter that was the subject of comment by Judge Jarrett of this Court in the matter of Heriot v Sayfa Systems Pty Ltd (No.2) [2014] FCCA 1627. At paragraph [21], in declining a claim for economic loss, Judge Jarrett stated:
[21] The applicant claims compensation for non-economic loss for pain, suffering and emotional distress. As I have already indicated, s.545(2) is wide enough to encapsulate compensation for such loss. But there needs to be some evidence upon which such loss can be assessed. The authorities bear that out. In particular, the decision of Marshall J in CEPU v ACI Operations Proprietary Limited [2006] FCA 122 11 is authority for the proposition that something more than mere assertion is required for compensation for non-economic loss. And, there needs to be something more than the usual element of distress, which accompanies most terminations. His Honour points out that:
Whilst “unusual and exacerbating circumstances” is not necessarily the yardstick, there must be something attending the termination which justifies an order for non-economic loss.
When the above matters are considered, I decline to make an order for compensation for distress, hurt and humiliation in favour of the Applicant.
Pecuniary Penalty
This matter concerns a single contravention of the Act. The maximum penalty able to be imposed on the First Respondent at the time of the contravention is $54,000. The maximum penalty able to be imposed on the Second Respondent at the time of the contravention is $10,800.
The Applicant seeks the imposition of a penalty on each Respondent equivalent to 75% of the maximum permitted under the Act. That equates to a penalty of $40,500 on the First Respondent and a penalty of $8,100 on the Second Respondent.
The matters to be taken into account in assessing the imposition of penalty under the Act are set out in Kelly v Fitzpatrick [2007] FCA 1080 to which both parties referred. I have not set out all of these principles below, but have had regard to them in this matter.
The nature and extent of the contravention has, to some extent, been touched upon. The Respondents have not previously contravened the Act. The contravention was a single contravention. There is no evidence that there were any prior attempts to coerce or persuade the Applicant to cease employment and take up a position as a contractor. The offer of a contractor role only arose in circumstances where the Applicant asked who was going to be doing the work. It is also to be remembered that the Applicant had been a contractor prior to his employment. This is not a case where an employee is suddenly pressured to take up a contractor position.
The Applicant submits that appropriate weight needs to be given to the importance of preventing sham contracting. I accept that submission. However, for the reasons articulated above, the way in which this single contravention arose is quite different from other cases where pressure is exerted for someone to become a contractor.
I accept the submission of the Applicant that the extent of the loss that he suffered was significant. He was forced to utilise his savings. He was unemployed for six months. He did not recover to gain employment in a position with comparable income for a lengthy period of time thereafter.
The Applicant contends there has been no remorse shown by the Respondents. I accept that there was no early plea, and that the Applicant was forced to run the matter to trial to achieve a result. The Applicant submitted that not only was there a lack of cooperation, but that the Respondent maintained an elaborate excuse to try and avoid liability.
I give some weight to these submissions, however, I also take account of the following. The Respondents have expressed contrition in their submissions on penalty. I am also of the view that while the Court ultimately did not accept the version of events put forward by the Respondents, that does not mean that the Respondents were engaged in a cover-up or conducted the litigation in such a manner as to deliberately frustrate the Applicant or the litigation process.
The Applicant submitted that given the lack of remorse shown, there was a need for specific deterrence, and any penalty imposed by the Court should reflect this. It was submitted further by the Applicant that there were admissions made by the Second Respondent of a failure to pay superannuation.
I accept that there is a need to set a penalty at a level that is appropriate to deter the Respondents from any future similar conduct. I will not have regard, however, to the allegations in relation to superannuation payments not being made to other employees. Those issues were not the subject of the present proceeding and were not thoroughly explored. I do not take them into account.
In support of its submission that a penalty should be set at the mid to higher end of the scale, the Applicant relied on Director of the Fair Work Building Industry Inspectorate v Robko Construction Pty Ltd & Anor(No.2) [2015] FCCA 177 (‘Robko’) and Fair Work Ombudsman v Ava Travel Pty Ltd [2018] FCCA 3627 (‘Ava’). I have reviewed each of these decisions. While I appreciate that there is a paucity of decisions dealing with contraventions under section 358 of the Act and fewer still that deal with penalties, each of these decisions provide limited guidance. Ava concerned a matter in which there were a number of other contraventions of workplace laws coupled with the breach of section 358. As I have mentioned, this matter concerns a single contravention. A feature of the decision of Robko was that there had been a multiplicity of contraventions of the Act demonstrating a need for specific deterrence and disentitling the Respondents to be penalised on the basis that the present contraventions were merely isolated occurrences. That consideration does not arise here.
This is a matter in which senior management were involved in the breach. The business is, however, at the end of the day, not a sophisticated operation. It is not a large business and I have had regard to that feature.
There is then the evidence of the Respondents in relation to the financial position of the business. That evidence is unchallenged. It discloses that the business made a profit of $1,279 in the 2016 financial year and a profit of $8,334 in the 2017 financial year. Those profit figures are against a backdrop of the Second Respondent paying himself an income of $70,000 in the 2017 financial year and $75,000 in the 2018 financial year. The amount of income paid to the Second Respondent by the First Respondent is not an extravagant amount.
The evidence also discloses that the draft profit and loss statement for the 2018 financial year shows a loss of $295,401.03. There is also evidence of a dip in sales figures in the 2019 financial year.
I was not taken to any authority in which the financial position of the business is a relevant consideration to the assessment of penalty. In submissions in reply, the Applicant did not make a submission in relation to this aspect of the argument advanced by the Respondents. While a penalty does need to be imposed, I regard it as important in the overall context to ensure that any penalty imposed is not crushing on the business of the First Respondent.
When all of the matters above are considered, I am of the view that I should fix a penalty on the First Respondent equal to 12.5% of the maximum penalty available (being $6,750) and a penalty on the Second Respondent equal to 12.5% of the maximum penalty available (being $1,350).
The Applicant seeks that the penalties be paid to him in this matter. The authorities cited to support this submission include Seven Network (Operations) Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (No.2) (2001) 110 IR 372 at [8], Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357 at [44] and Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4 at [120] - [121]. Having regard to those authorities, I accept that this is a matter in which the penalties should be paid to the Applicant and I so order.
Finally, I observe that this is a matter in which both parties wish to agitate a costs application. Submissions appear to have been made on this point to Judge Wilson. Written submissions were also contained in the submissions on penalty submitted by the Respondents. The Applicant seeks to agitate the issue of costs on the return date of this judgment, apparently on the basis of an unreasonable refusal to accept an offer of compromise.
Given this submission of the Applicant, I do not propose to make any order in relation to costs at this time, but I will hear from the parties on the issue. I observe, however, that the usual position in relation to proceedings under the Act is that each party bear its own costs. This is reflected in the language of section 570 of the Act and in countless decisions of the Courts. That there is a high threshold in order to convince a Court to award costs is a matter that was reaffirmed by Justice Pagone in CFMEU v Corinthian Industries (Australia) Pty Ltd (No.2) [2014] FCA 351. I also note the comments of Justice Mortimer in Ryan v Primesafe (2015) 323 ALR 107, that the discretion conferred by the terms of section 570(2) should be exercised cautiously, and the case for its exercise should be clear.
In light of these judicial statements, I will take some persuading that this is an appropriate matter in which to order costs.
I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Judge Blake
Associate: Daniela Glavan
Date: 6 August 2019
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