Carbone v James McConvill & Associates
[2021] FCCA 661
•9 April 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Carbone v James McConvill & Associates [2021] FCCA 661
File number(s): MLG 3620 of 2019 Judgment of: JUDGE MCNAB Date of judgment: 9 April 2021 Catchwords: INDUSTRIAL LAW – Fair Work application – claims for breach of contract and claims under the Competition and Consumer Act 2010 (Cth) – where default judgment has been entered by the Federal Court in favour of the Applicant with damages to be assessed – matter remitted for hearing in the Federal Circuit Court for the assessment of damages, pecuniary penalties and any question of associated costs – where the Applicant abandoned claims for breach of contract Legislation: Competition and Consumer Act 2010 (Cth) sch 2 ss 2, 18, 31, 236.
Fair Work Act 2009 (Cth) ss 16, 90, 340, 341, 342, 343, 545, 546, 547, 570.
Federal Court of Australia Act 1976 (Cth) ss 51A, 52.
Federal Court Rules 2011 (Cth) r 5.23(2)(e).
Cases cited: Berry v CCL Secure Pty Ltd [2020] HCA 27
BHP v Steuler; Protect v Steuler [2014] VSCA 338
Carbone v James McConvill and Associates Pty Ltd (No 2) [2019] FCA 1594
Carbone v James McConvilland AssociatesPty Ltd [2019] FCA 1305
Cigarette & Gift Warehouse Pty Ltd v Whelan [2019] FCAFC 16
Construction, Forestry, Maritime, Mining and Energy Union v Melbourne Precast Concrete Nominees Pty Ltd (No 3) [2020] FCA 1309
Cummins South Pacific Pty Ltd v Keenan [2020] FCAFC 204
Dafallah v Fair Work Commission [2014] FCA 328
Henville v Walker [2001] HCA 52
Jamieson v Westpac Banking Corporation [2014] QSC 32
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7
O'Neill v Medical Benefits Fund Ltd [2002] FCAFC 1
PIA Mortgage Services Pty Ltd v King [2020] FCAFC 15
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543
Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4
Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550
Shea v TRUenergy Services Pty Ltd (No 6) [2014] FCA 271
The Environmental Group Ltd v Bowd [2019] FCA 951
Westpac Banking Corporation v Jamieson & Ors [2015] QCA 50
Number of paragraphs: 110 Date of last submission/s: 26 August 2020 Date of hearing: 29 July 2020 Place: Melbourne Counsel for the Applicant: Mr M Rinaldi Solicitor for the Applicant: Cooper and Sanders Legal Counsel for the Respondents: Mr M Wyles QC with Ms R Sweet Solicitor for the Respondents: Carter Newell Lawyers ORDERS
MLG 3620 of 2019 BETWEEN: JOSEPH CARBONE
Applicant
AND: JAME MCCONVILL & ASSOCIATES
First Respondent
JAMES MCCONVILL
Second Respondent
ORDER MADE BY:
JUDGE MCNAB
DATE OF ORDER:
9 APRIL 2021
THE COURT ORDERS THAT:
1.In respect of the Applicant’s claim under the Fair Work Act 2009 (Cth) (“the FW Act”), the First Respondent and Second Respondent jointly and severally pay to the Applicant the sum of $157,693.38 pursuant to section 545 of the FW Act.
2.In respect of the Applicant’s claim to compensation under the Competition and Consumer Act 2010 (Cth), the First Respondent and Second Respondent jointly and severally pay to the Applicant the sum of $5,061.45, in respect of annual leave entitlements.
3.In respect of pecuniary penalties, pursuant to section 546 of the FW Act:
(a)the First Respondent pay penalties in the total sum of $18,200.00, being:
(i)a civil penalty in the sum of $5,000 for adverse action pursuant to section 342(1), items 1(b), (c) and (d);
(ii)a civil penalty in the sum of $500 for coercion pursuant to section 343 of the FW Act;
(iii)a civil penalty in the sum of $2,500 for the adverse action constituted by the termination of employment pursuant to section 342(1), item 1(a);
(iv)a civil penalty in the sum of $10,200 for the employment records contraventions pursuant to section 535 and section 536 of the FW Act.
(b)the Second Respondent pay penalties in the total sum of $3,490.00, being:
(i)a civil penalty in the sum $600 for the Adverse Action pursuant to section 342(1), items 1(b), (c) and (d);
(ii)a civil penalty in the sum of $100 for coercion pursuant to section 343 of the FW Act;
(iii)a civil penalty in the sum of $750 for the adverse action constituted by the termination of employment pursuant to section 342(1), item 1(a); and
(iv)a civil penalty of $2,040 for the employment records contraventions pursuant to section 535 and section 536 of the FW Act.
4.Pursuant to section 546(3)(c) of the FW Act, the Respondents pay the pecuniary penalties, as set out in order 3 herein, to the Applicant.
5.The Respondents’ application for costs thrown away, made by submissions filed on 12 August 2020, be dismissed.
6.In relation to pre-judgment interest and any application for costs of the proceeding:
(a)by 4.00pm on 23 April 2021, the Applicant file and serve:
(i)a minute of draft orders which sets out the quantum of pre-judgment interest to be paid by the Respondents to the Applicant in relation to the compensation ordered herein;
(ii)any application for costs supported by submissions of no more than three (3) A4 pages;
(b)by 4.00pm on 10 May 2021, the Respondents file and serve:
(i)a minute of draft orders which sets out the quantum of pre-judgment interest to be paid by the Respondents to the Applicant in relation to the compensation ordered herein;
(ii)any response in relation to any application for costs, including the quantum of those costs, supported by submissions limited to three (3) A4 pages; and
(c)the Court will make orders in Chambers on the basis of the draft minute and submissions filed by the parties.
REASONS FOR JUDGMENT
Judge McNab:
INTRODUCTION
This matter was remitted to this Court by his Honour Justice Logan of the Federal Court of Australia on 16 September 2019, for the assessment of damages, pecuniary penalties and any related questions as to costs. The matter was heard by this Court on 29 July 2020 and judgment was reserved pending the receipt of written submissions from the parties.
BACKGROUND
Factual Background
The Applicant was initially employed as a Paralegal from 28 February 2014 to 17 March 2015 by the legal partnership of the Second Respondent and Mr Mark Stanarevic, who operated under the company name McConvill & Associates. The Applicant was paid $40 per hour and he pleads that he was entitled to superannuation benefits and statutory entitlements including leave entitlements. He pleads that he did not receive those entitlements.
The Applicant was subsequently employed fulltime from 17 March 2015 to 1 July 2015 as a Legal Practitioner by McConvill and Associates in accordance with what the Applicant calls the “Post Admission Agreement”. Among other things, the terms of the Post Admission Agreement included a provision that the Applicant, as stated at [8] of the Applicant’s affidavit filed on 19 March 2020, would be “remunerated 50% of the fees, less disbursements, received by the partnership from files of which I had carriage”.
When the law firm business was transferred to the First Respondent from the partnership, the Applicant was employed by the First Respondent pursuant to an employment agreement which was executed by the Second Respondent and the Applicant on or on about 8 August 2015 (“Contract 1”). The Applicant was employed under Contract 1 from on or about 1 July 2015 to 9 August 2016. Relevantly, Contract 1 included, amongst other things, terms that:
(1)the Applicant would receive a salary of $35,000 per annum; and
(2)the Applicant would be entitled to commission calculated on 50% of the fees received by the First Respondent from files in respect of which the Applicant was the ‘primary professional fee earner’ (“PPFE”), less employment costs, as defined in Schedule B of Contract 1: see Applicant’s affidavit filed on 18 March 2020, exhibit JAC2.
From on or around 9 August 2016, the Applicant continued to be employed fulltime as a Legal Practitioner by the First Respondent under a new written employment agreement (“Contract 2”). Contract 2 provided that the Applicant would receive a salary of $35,000 per annum and commission calculated on 40% (rather than 50% under Contract 1) of the fees received by the First Respondent from files in which he was the PPFE, but there would be no deductions for employment costs (as was the case under Contract 1).
In the course of employment under Contract 1 and Contract 2, the Applicant made a series of complaints to the Second Respondent. The nature of the complaints made by the Applicant are outlined at [22] – [23] of the Applicant’s Further Amended Statement of Claim filed in the Federal Court proceedings in this matter on 14 June 2019 (“the FASOC”) (see the FASOC at annexure ‘JAC1’ of the Applicant’s affidavit filed on 19 March 2020). The complaints are so numerous that they had to be set out in a separate annexure to the FASOC. There are said to be “244 complaints” which it is asserted give rise to “244 adverse actions” on the part of the Respondents: see Applicant’s affidavit filed on 19 March 2020 at [49].
Examples of the workplace complaints include complaints regarding invoicing such as “on or about 8 April 2016, the Applicant complained to the Second Respondent (on behalf of the First Respondent) that clients cannot be invoiced for work that had not been done”: see FASOC, Annexure A at [(a)(i)(1)]. There are 28 similar complaints regarding invoicing. There are also 19 ‘complaints’ regarding the First Respondent’s legal and regulatory compliance, an example being:
3. [the Applicant complained to the Second Respondent on behalf of the First Respondent that] on or about 24 April 2017, in relation to the Second Respondent’s romantic relationship with [name]. In particular, she was regularly dismissed and rehired, which caused:
a. file management issues, because [name] files would need to be distributed to other lawyers in the firm;
b. disruption to the First Respondent’s business;
c. exposure to ethical issues, as it was clear that [name] had invoiced clients for work that was not completed or done at all;
d. exposure to misconduct by the Second Respondent in relation to the above;
e. the Second Respondent to lose focus on running the First Respondent’s business and properly supervise lawyers and paralegals an employee of the First Respondent: see FASOC, Annexure A at (a)(ii)(3).
Additionally, the schedule to the FASOC sets out complaints made by the Applicant regarding:
(1)the management of files by the Second Respondent (30 complaints);
(2)the competence of staff; legal advice being given by paralegals to clients; and
(3)complaints made by other people regarding the Respondents.
I note that it is arguable which of the complaints are properly characterised as a “complaint or inquiry” in relation to his employment, as that expression is used in s341(1)(c) of the Fair Work Act 2009 (Cth) (“the FW Act”), other than 63 complaints or inquiries regarding outstanding or unpaid entitlements.
This case presents as an extreme example of many that come before this Court where a plethora of so-called “complaints” or “inquiries” are pleaded as workplace rights pursuant to s341(1)(c) of the FW Act. This creates a clear difficulty as such pleadings expand the scope of the evidence that has to be considered by the Court to determine what is or is not a “complaint or inquiry”, (as that expression is used in the FW Act) and whether an adverse action has been taken because of the exercise of that workplace right pursuant to s342 of the FW Act. It also leads to an increase in the costs for both parties in what is normally a cost free jurisdiction.
It also creates a difficulty for employers who are seeking to comply with the FW Act in determining if action they take involving employees is going to lead to a breach of the Act and to Court proceedings, including proceedings seeking a civil penalty. When the “complaint or inquiry” is not tethered to a corresponding legal entitlement of some kind[1] the Court must then deal with a wide range of communications that arise in a workplace as “complaints” or “inquiries” for the purposes of section 341.
[1] see Shea v TRUenergy Services Pty Ltd (No 6) [2014] FCA 271 at [29], [625]; Cigarette & Gift Warehouse Pty Ltd v Whelan [2019] FCAFC 16 at [28]; The Environmental Group Ltd v Bowd [2019] FCA 951 at [128]; PIA Mortgage Services Pty Ltd v King [2020] FCAFC 15 at [10] – [27]; see also Cummins South Pacific Pty Ltd v Keenan [2020] FCAFC 204 per Anastassiou J at [291] where his Honour dissented on this point with the plurality of Bromberg and Mortimer JJ
On 20 July 2018, the Applicant was dismissed by the Second Respondent, on behalf of the First Respondent. On the same day, the Applicant accepted the termination of employment under Contract 2 by email.
During the course of the Applicant’s employment under Contract 2, the Applicant received remuneration of $594,383.
Procedural Background
On 29 October 2018, the Applicant filed an originating application in the Federal Court of Australia under the FW Act, claiming that:
(1)he was dismissed in contravention of s340(1)(a)(ii);
(2)the First Respondent took adverse action against him within the meaning of s342(1), Item 1;
(3)the First Respondent coerced him not to exercise a workplace right within the meaning s343;
(4)the First Respondent failed to provide him with pay slips or proper pay slips, contrary to s535 and s536; and
(5)the Second Respondent was partly liable for the contraventions by the First Respondent.
The statement of claim was amended a number of times, and on 14 June 2019, the Further Amended Statement of Claim was filed. The FASOC alleges breaches of the ‘Post Admission Agreement’, breaches of the employment agreements (Contract 1 and Contract 2), breaches of the general protection provisions of the FW Act and breaches of s18 and s31 of the Australian Consumer Law (“the ACL”), as set out in Schedule 2 of the Competition and Consumer Act 2010 (Cth). The Court notes that at the hearing before this Court, the Applicant withdrew reliance on the contractual claims and relied solely on the claims brought pursuant to the FW Act and the ACL.
On 2 August 2019, the Applicant filed an interlocutory application in the Federal Court seeking orders that if they Respondents failed to comply with orders of the Court made on 16 July 2019 regarding discovery, the Respondents’ Further Amended Defence be struck out and default judgment be entered in his favour.
On 19 August 2019, at the hearing of the Applicant’s interlocutory application, her Honour Collier J made self-executing orders as follows:
1. The date for compliance by the Respondents with Orders 1 and 2 made by the Court on 16 July 2019 be extended to 4.00pm on 26 August 2019.
2. If the Respondents do not comply with Order 1 of these Orders:
(a) The Respondent’s Further Amended Defence be struck out; and
(b) Judgment be entered in favour of the Applicant.
3. The Applicant file any application for a formal Order giving effect to Order 2 of these Orders by 4.00pm on 30 August 2019.
4. The Respondents pay the Applicant’s costs of and incidental to this interlocutory application and the case management hearing on an indemnity basis, in a lump sum payment to be fixed by the Registrar and paid forthwith.
For completeness, Orders 1 and 2 made on 16 July 2019 were as follows:
1. The Respondent’s comply with the Orders of 5 March 2018, 28 May 2019 and 28 June 2019 regarding discovery within 14 days of the date of these Orders.
2. The Respondent file and serve a further amended defence within 7 days of the date of these Orders.
On 30 August 2019, the Applicant filed an application seeking orders giving effect to the orders made by Collier J on 19 August 2019.
In delivering Judgment on 16 September 2019 (see Carbone v James McConvill and Associates Pty Ltd (No 2) [2019] FCA 1594), Logan J struck out the Respondents’ Further Amended Defence, entered judgment in favour of the Applicant and remitted the matter to this Court for assessment of damages, penalty and any related questions as to costs. Whilst Logan J did not expressly refer to a rule in his orders, I proceeded on the basis that his Honour entered judgment in favour of the Applicant pursuant to r5.23(2)(e) of the Federal Court Rules 2011 (Cth) and I ruled to that effect in the course of hearing of this matter.
The pleading before the Court upon which judgment was given was the FASOC filed on 14 June 2019.
EVIDENCE
The Applicant relies on:
(1)the judgment of the Federal Court of 19 August 2019 (Collier J);
(2)the order of the Federal Court (Collier J) dated 19 August 2019;
(3)the judgment of the Federal Court of 16 September 2019 (Logan J);
(4)the order of the Federal Court (Logan J) dated 16 September 2019;
(5)the FASOC filed on 14 June 2019 with the Federal Court;
(6)his affidavit affirmed on 18 March 2020;
(7)his outline of submissions filed on 18 March 2020;
(8)his proposed minute of orders filed on 18 March 2020;
(9)his affidavit in reply filed on 18 May 2020 affirmed on 18 June 2020;
(10)his outline of submissions filed on 19 June 2020;
(11)his submissions in reply filed on 23 July 2020;
(12)his Affidavit affirmed on 26 August 2020;
(13)his Notice to Produce documents referred served on 24 July 2020;
(14)his Notice to Produce served on 24 July 2020; and
(15)his document with the title ‘Methodology B” sent by email to the Court on 29 July 2020.
The Respondents rely on:
(1)the Affidavit of Ms Rebecca Leslyee filed on 18 May 2020;
(2)the Affidavit of Ms Jane Quirk filed on 18 May 2020;
(3)the affidavit of Ms Michelle Christmas filed on 18 May 2020;
(4)the Affidavit of Mr James McConvill filed on 18 May 2020;
(5)an outline of submissions filed on 18 May 2020;
(6)an outline of submissions filed on 23 July 2020;
(7)the affidavit of Mr Brett Heath filed on 12 August 2020; and
(8)an outline of submissions filed on 20 August 2020.
SCOPE OF THE CLAIM
The Applicant’s Submissions
In relation to the ACL claims, the Applicant alleges at [36] of the FASOC that the First Respondent, by the Second Respondent, made representations to him:
(a) that he would be remunerated on a 40/60 fee share arrangement pursuant to Contract 2 with no deductions for expenses or disbursements;
(b) that he would he would be paid all entitlements under the FW Act;
(c) that the First Respondent had the financial capacity to pay the remuneration;
(d) that the Applicant would be reimbursed for expenses paid by him on behalf of the First Respondent;
(e) that the First Respondent would keep proper records of the financial operation of the First Respondent so as to enable the Applicant to calculate his entitlement under the Contract 2;
(f) that the Applicant would earn $500,000.00 per annum; and
(g) that the First Respondent would comply with the provisions of the FW Act (collectively, the Representations).
The Applicant alleges he relied on the representations to his detriment, as set out at [39] – [41] of the FASOC, which are as follows:
39. The Applicant relied upon the Representations and thereby acted to his detriment by:
(a) accepting the offer of employment;
(b) entering into Contract 2;
(c) remaining in the employment of the First Respondent;
(d) paying expenses on behalf of the First Respondent;
(e) travelling to the US and within Australia in connection with the First Respondent’s business; and
(f) assisting to manage the business of the First Respondent.
40. In fact the Representations were false and misleading in that:
(a) the First Respondent did not pay the Applicant the remuneration agreed upon;
(b) the First Respondent did not pay to the Applicant his entitlements under the FW Act;
(c) the First Respondent did not reimburse the Applicant for expenses paid by the Applicant on behalf of the First Respondent;
(d) the First Respondent did not have the financial capacity to pay the remuneration;
(e) the First Respondent did not keep proper records;
(f) the Applicant did not earn $500,000.00 per annum;
(g) the First Respondent failed to comply with the provisions of the FW Act in relation to the Applicant’s employment.
41. As a consequence of the Misleading Conduct, the Applicant suffered loss and damage.
Particulars
The Applicant is unable to quantify his loss and damage until after discovery because he does not have the necessary data. Full particulars will be provided after discovery.
It is pleaded that the representations were false and misleading as the First Respondent did not make good the representations and the Applicant thereby suffered loss and damage. The Applicant seeks orders for compensation pursuant to s236 of the ACL against the First Respondent and against the Second Respondent, on the basis the Second Respondent was knowingly involved in the contraventions of the First Respondent within the meaning of s2 of the ACL.
By written submissions filed on 26 August 2020, the Applicant confirmed the abandonment of the claim for damages arising from breaches of Contract 1 and Contract 2. The Applicant did not abandon the claims relating to breaches under the FW Act and ACL.
As to the claim for compensation payable for the breaches of the FW Act, the Applicant pleads at [29A] of the FASOC as follows:
29A. By Reason of the Adverse Action, the Termination and the Coercion (collectively the Unlawful Actions) pleaded herein, the Applicant has suffered loss and damage.
Particulars
But for the Unlawful Actions, the Applicant would have been likely to have remained employed for a period of at least 2 years beyond the date of the Termination, viz. to at least 20 July 2020. During that time, at the Applicant’s average annual rate of remuneration under Contract 1 and Contract 2 of $649,215, the Applicant would have earned $1,298,430. His loss and damage is in this amount less the amount of his post-termination earnings, full particulars of which will be provided prior to trial.
The quantum of compensation sought by the Applicant under the FW Act claim is $630,773.80, that amount being two times the annual rate of remuneration paid to the Applicant. The Applicant notes that between 9 August 2016 and 20 July 2018 he was paid $6065.13 per week and when that is multiplied by 104 weeks the remuneration he would have received is $630,773.80: see Applicant’s submissions filed on 26 August 2020 at [75]. It is therefore contended that the Applicant ought to be compensated that amount by reason of the pleading under [29A] of the FASOC.
The Applicant also seeks orders pursuant to s236 of the ACL on the basis of calculations set out in table 2 of ‘Methodology B Road Map’ (“Methodology B”), which was amended and provided to the Court and the Respondents on 29 July 2020. Table 2 is as follows:
Number of years employed under Contract 2
Total Remuneration the Applicant was entitled under Contract 2
Total Remuneration paid as per the PAYG
Total Compensation for breach of section 236 of the CCA
1
Total period the Applicant was employed pursuant to Contract 2 (98 weeks) divided by 52
1.88 years
2
The total remuneration the Applicant was entitled to be paid for the period he was employed under Contract 2 (being $500,000 per annum based on the Representation multiplied by 1.88 years)
$940,000
3
Less the total remuneration paid to the Applicant as per the PAYG for the period the Applicant was employed pursuant to Contract 2
$594,383
4
TOTAL
$345,617
In submissions filed on 26 August 2020, the Applicant seeks statutory compensation for damage and loss in the sum of $345,617.00. That amount is raised on the basis that a ‘loss of opportunity’ analysis does not apply in this matter, as outlined in the Applicant’s submissions at [30] – [37].
In the Applicant’s submissions at [31], the Applicant states that “…this is not a loss of opportunity case…rather it is a case of an executory contract…during which there was misleading and deceptive conduct”. In support of his submissions as to the proper approach to the calculation of compensation under the ACL claim, the Applicant cites Berry v CCL Secure Pty Ltd [2020] HCA 27, Henville v Walker (2001) 206 CLR 59, North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262; [2010] FCAFC 60 at [125].
The Applicant goes on to submit at [36] that even if a loss of opportunity analysis is applied, the loss may be calculated on the basis that, by entering into Contract 2 as a result of the misleading and deceptive conduct, the Applicant has forgone the opportunity to obtain the benefit of the payments under Contract 1. It is submitted that:
36. […] if (which is denied) a loss of opportunity analysis is to be applied, and if the loss is not $1,005,617 as noted in paragraph 33 above, it is at the least that same opportunity to remain under Contract 1 that has been foregone, which if based on the actual amounts paid under Contract 1 according to the Respondents’ own documents results in a minimum loss of $205,221.16 (being $754,604.16 payable based on Contract 1 Hourly Rate, as per (c) above, less $594,383 actually paid under Contract 2), plus $72,486 for annual leave as per Methodology B = $277,707.
The Respondents’ Submissions
The FW Act Claims
In submissions filed on 20 August 2020, the Respondents submit at [8] that, in relation to the Applicant’s claims under s340 of the FW Act and pursuant to s546 of the FW Act, the Applicant’s compensation and penalties should be assessed as follows:
(1)the Applicant receive $36,390 (being six weeks’ salary at the weekly rate used in Methodology B) as compensation for the termination of the Applicant’s employment in contravention of s340 of the FW Act;
(2)a pecuniary penalty of $5,100 (being 10% of the maximum penalty payable by a body corporate) be imposed against the First Respondent for terminating the Applicant’s employment in contravention of s340 of the FW Act; and
(3)a pecuniary penalty of $1,020 (being 10% of the maximum penalty payable by an individual) be imposed against the Second Respondent for terminating the Applicant’s employment in contravention of s340 of the FW Act.
The Respondents submit that:
(1)there is no deemed admission of the matters set out under the particulars in [29A] of the FASOC; and
(2)the Applicant would not have continued to work at James McConvill & Associates for a further two years but for the termination on 20 July 2018 and at best the Applicant could have expected to remain employed at James McConvill & Associates for a further six weeks.
On that basis, it is contended that the compensation that the Applicant should receive is the sum of $36,390 (being six weeks salary at the weekly rate used in Methodology B by the Applicant) as compensation for the termination of his employment in contravention of section 340 of the FW Act.
It is said that the evidence relied upon by the Applicant, in particular an offer made by the First Respondent to re-employ the Applicant as a Senior Associate on or about 26 October 2018 (an offer which was not accepted), suggested the Applicant would not countenance working with the firm and pursued other opportunities.
In relation to penalties, the Respondents submit that the Court has a discretion as to whether to order a penalty and, if the Court does so, a discretion as to the quantum of the penalty: see PIA Mortgage Services Pty Ltd v King [2020] FCAFC 15 at [54] per Rangiah and Charlesworth JJ; [189] per Snaden J. The Respondents submit that if a penalty is ordered by the Court, it should be nominal and, in the case of any penalty for the termination of employment, not more than 10% of the maximum range.
The ACL Claims
In relation to the Applicant’s claim under the ACL, the Respondents submit at [12], [14] – [17]:
12. Damages are assessed under s236 of the ACL with the objective of placing an Applicant in the position he or she would have been in “but for” the contravening conduct.
…
14. Pursuant to s236 of the ACL, Mr Carbone is entitled to damages where there is a deemed admission that but for his reliance on the representations, he would have pursued a different course, and, in particular that he forsook an opportunity of value.
15. As can be seen from Mr Carbone’s submissions and from his pleading, he does not assert that he gave up an opportunity in consequence of his reliance upon the deemed admitted representations.
16. Therefore, Mr Carbone’s damages have to be assessed on the basis that there is no deemed admission that in in consequence of Mr Carbone’s reliance he forsook an opportunity.
17. In the circumstances, Mr Carbone, not having pleaded the loss of an opportunity of value by consequence of the representations and his reliance upon them, his damages pursuant to section 236 must be assessed at nil.
As set out above, the Respondents submit at [14] that pursuant to s236 of the ACL, the Applicant is entitled to damages where there is a deemed admission that, but for his reliance on the representations, he would have pursued a different course, and in particular that he forsook an opportunity of value: see Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 355; O'Neill v Medical Benefits Fund Ltd [2002] FCAFC 1 at [27] – [29]. It is submitted at [15] – [17] that the pleading relied upon by the Applicant does not raise any pleaded loss of opportunity of value that he forsook as a result of his reliance on the representations and therefore his damages pursuant to s236 must be assessed as nil.
In relation to the claim for annual leave made by the Applicant as part of the ACL claim, in the course of submissions, the Applicant advised the Court that he no longer pressed his claim for accrued unpaid annual leave as a claim under the FW Act.
The Respondents submit that the Applicant now seeks to characterise the damage that he suffered in consequence of his reliance on the representation as to the payments of entitlements under the FW Act as his purported entitlement to annual leave during his employment with the First Respondent during Contract 2. Again, as submitted by the Respondents, no pleading is raised that the Applicant would have taken another course, or pursued another opportunity, as a consequence of his reliance on the s18 contravening conduct, and therefore his damages ought to be assessed as nil.
In essence, it is said that the Applicant’s claim is not for what ought to have been delivered or what was promised to be delivered as a result of the representations, but instead the value of the opportunities that he forsook as a result of the representations.
The Penalty Interest Claim
In relation to the Applicant’s claims in for penalty interest, the Respondents submit at [29] that “the Court has no power to award pre-judgment interest on pecuniary penalty orders”, citing s547(1) of the FW Act.
The Respondents further submit at [30] – [34] that:
30. The Court retains a discretion not to award pre-judgment interest on any amount of compensation awarded under the FW Act where “good cause” is shown for not making such an order. […]
31. For the following reasons, there is “good cause” not to award pre-judgment penalty interest on any damages or compensation awarded prior to judgment or, alternatively, prior to 29 July 2020.
32. Until 29 July 2020, the ACL claim was simply an alternative claim…and calculated on the basis of unpaid salary using the now-defunct concept of PPFE.
33. Further the Court can take judicial notice that, prior to 29 July 2020, the damages/penalties being sought by Mr Carbone were properly described as extreme. In circumstances where Mr Carbone has trimmed his claims, the McConvill parties have moved to deal with the assessment of those claims at the earliest opportunity.
34. Lastly, Mr Carbone’s claims have been brought in a no-costs jurisdiction. In those circumstances the Court should be hesitant in reaching a conclusion that penalty interest ought to be ordered in the circumstances of this case.
The Respondent’s claims as to costs in relation to the ‘Not Pressed Contractual Claim and the Costs of 29 July 2020’
The Respondent’s submits at [39] of submissions filed on 20 August 2020 that, pursuant to s570 of the FW Act, “in respect of [the Applicant’s] pursuit of the contractual claims up to 29 July 2020… Mr Carbone’s pursuit of these damages was an unreasonable act, or series of unreasonable acts, that caused the McConvill parties to incur costs.” This claim is pressed by the Respondents on the basis that “the non-pressed claim was made at common law, it was pursued within this proceeding, and, thus, the cost protection under s 570 of the FW Act applies to all claims made in the proceedings, unless a s570 exception applies.”: see Respondents’ submissions at [38].
On that basis, the Respondents submit at [35] – [37], [40] that:
35. Mr Carbone has had his costs of the proceeding up to judgment. The McConvill parties have had to prepare for the assessment on the basis that Mr Carbone was pursuing a claim for contractual damages, which was a complex claim and is no longer pressed.
36. It is the McConvill parties’ position that, if the assessment of damages had only involved an assessment on the grounds now pressed, it could have been dealt with at a much earlier time and without the need to take up the court time which has been taken up. Indeed, it may have ultimately been able to be dealt with on the papers.
37. Given that there was no material fact pleaded, and thus no deemed admission, that Mr Carbone had performed any work pursuant to Contracts 1 and 2, the determination not to press for an assessment of damages under those contracts was sensible and accorded with ss 37N and 37M of the Federal Court of Australia Act 1976 (Cth). That position was known to Mr Carbone when he sought judgment and it would have assisted the Court and the McConvill parties if he had indicated, prior to 29 July 2020, if he was not pressing for an assessment of damages on that basis.
…
40. It is appropriate to award the McConvill parties their costs in the assessment in respect of those claims. It is also appropriate to award the McConvill parties all or some of their costs of 29 July 2020, as an oral hearing (or whole day hearing) would likely have been unnecessary, if Mr Carbone had trimmed his claims appropriately prior to the hearing date.
CONSIDERATION
This case has some curious features. As a very junior lawyer, upon entering into Contract 1, the Applicant was paid $429,877.83 between 1 July 2015 and 8 August 2016 (being 59 weeks): see Applicant’s affidavit filed on 18 March 2020, annexure JAC6, JAC13. This was earned in his first year, post his admission as a legal practitioner.
Further, the Applicant received $594,383 in remuneration under Contract 2 during the period from 8 August 2016 to 20 July 2018: see Applicant’s affidavit filed on 18 March 2020, at JAC6, JAC13.
Claim that compensation for breach of the FW Act ought to be fixed at two years pay as a result of a deemed admission
The Applicant makes a claim for compensation pursuant to s545 of the FW Act. Subsections 545(1) and 545(2) provides that:
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.
I do not accept that the pleadings at [29A] of the FASOC fix the quantum of the compensation. The particulars under [29A] of the FASOC plead the ambit of the Applicant’s claim for compensation but do not have the effect of fixing the compensation, as it cannot do so. The particulars are not pleaded as material facts which are deemed to have been admitted. The material fact pleaded is that the Applicant suffered loss and damage as a result of the contraventions. It is the Court’s task to fix the appropriate compensation in assessing the damages flowing from the admitted breaches of the FW Act.
The proper approach to the determination of compensation was discussed in detail by her Honour Mortimer J in Dafallah v Fair Work Commission [2014] FCA 328 (“Dafallah”), at [146], [148] – [149] and [157] – [161]. In Dafallah, Mortimer J said as follows:
[146] Pursuant to s 545 of the FW Act, the Court may make any order it considers appropriate if satisfied that a person has contravened a civil remedy provision. By
s 545(2)(b), this includes an order for compensation for loss the person has suffered because of the contravention.…
[148] The language of s 545 is broad, allowing the Court to provide remedies which meet the circumstances of any given contravention, taking into account the range of parties who may have brought proceedings in relation to the contravention, and the actions which might in any given circumstance be required to remedy the contravention, or to ensure it does not occur again. Awarding compensation for loss is but one example and may not be appropriate, depending on what other action has been taken in respect of any losses. Each case will turn on its facts in that sense.
[149] Fixing compensation under s 545 is a statutory task, and the Court must not substitute that task with approaches derived from the general law: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at [44]; Qantas Airways Ltd v Gama [2008] FCAFC 69; (2008) 167 FCR 537 at [94] per French and Jacobson JJ.
…
[157] Further, the width of the power conferred by s 545(1) also allows for compensation which may not fully compensate a person for the loss suffered: see Gama at [94] per French and Jacobson JJ, where their Honours were considering similar statutory compensation provisions under s 46PO(4) of the Human Rights and Equal Opportunity Commission Act 1986 (Cth). In my opinion, that approach is available under s 545(1) because, as their Honours pointed out in Gama at [94], an award of compensation is discretionary. In s 545(1), the governing consideration is what the Court considers “appropriate”, and this in my opinion leaves room for a Court to find in a given case that less than full compensation might be appropriate.
[158] While by no means operating as a mandatory approach to a discretion such as that conferred by s 545(1), with respect I adopt the remarks of Lee J in Aitken v Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia (WA Branch) (1995) 63 IR 1, considering factors relevant to an award of compensation under s 170EE of the then Industrial Relations Act 1988 (Cth). His Honour said (at 9), that the Court will:
have regard to what is reasonable in the circumstances and will look at what would have been likely to occur had the Act not been contravened ... The Court will consider the detriment occasioned to the employee by the employer’s contravention of the Act, and the extent to which it is reasonable to compensate the employee for such consequences.
[159] One of the principal tasks, if compensation is to be awarded, is to ensure that there is the appropriate causal connection between the contravention and the loss claimed: Australian Licenced Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd [2011] FCA 333; (2011) 193 FCR 526 at [423] per Barker J.
[160] The Full Court in Burazin v Blacktown City Guardian Pty Ltd [1996] IRCA 371; (1996) 142 ALR 144 at [155] approved this approach. Some of the matters referred to by Lee J are similar to those set out as considerations in s 392(2). Although the power under s 545(1) is separate and independent, in my opinion, since the same statutory concept of compensation is involved, it is appropriate to consider factors similar to those set out in s 392(2).
[161] In considering causation, in the circumstances of a clearly fraught employment relationship as was the case between Ms Dafallah and Melbourne Health, it is appropriate in my opinion to consider that the employer would have in any event been entitled to exercise any power it had to bring the employment contract lawfully to an end in a way most beneficial to itself. The likelihood of an employer taking such a step will be fact dependent but, in contractual terms, it has been held to be relevant to the assessment of damages: see Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at [32]. In my opinion, it is a factor which can also be taken into account for the purposes of determining what compensation is appropriate under s 545(1), where compensation is limited to the loss caused by the contravention.
In Construction, Forestry, Maritime, Mining and Energy Union v Melbourne Precast Concrete Nominees Pty Ltd (No 3) [2020] FCA 1309 at [9] his Honour O’Callaghan J said as follows:
[9] In determining whether to award compensation of the type sought by Mr Hes, it is necessary to ask whether there is an “appropriate causal connection” between the loss suffered and the relevant contraventions of the FW Act: Australian Licenced Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd [2011] FCA 333; (2011) 193 FCR 526 at 592 [423]; Dafallah v Fair Work Commission [2014] FCA 328; (2014) 225 FCR 559 at 596 [15] (Mortimer J) (Dafallah). The assessment of compensation in this context is an “inherently imprecise” process: Fair Work Ombudsman v Maritime Union of Australia (No 2) [2015] FCA 814; 252 IR 101 at 113 [68] (Siopsis J). Where appropriate, an amount may be awarded that is less than what would be required to compensate the Applicant fully for the loss suffered: Dafallah at 596 [157].
In my view it is unlikely that the Applicant’s employment would have continued for a period of more than 26 weeks but for the termination of the Applicant’s employment by the First Respondent, having regard to the fraught nature of the relationship between the Applicant and the Second Respondent. There are allegations, and cross-allegations, passing between the Applicant and Second Respondent in relation to each other’s conduct/conduct towards the other, and in relation to the Applicant’s conduct toward other employees. These are outlined in the Applicant’s affidavit filed on 19 March 2020 at [52] where, amongst other things, he alleges that the Second Respondent, in the course of employment, systematically abused him and allowed other staff members to do the same, placed his practicing certificate at risk and subjected him to discrimination. What is apparent is that, in the context of a relatively small employer, an employee and principal were not working cooperatively. I note that the Respondents had received advice on 22 May 2018 from their legal representatives, Meerkin & Apel, that the Applicant’s employment ought to have been summarily terminated: see Second Respondent’s affidavit filed on 18 May 2020, annexure JAM-21.
I am of the view that the Applicant would have remained employed for a further 26 week period, rather than the shorter six weeks put by the Respondents, because, by any measure, he was the most successful fee earner at the firm and, in that regard, was a benefit to the Respondents. Notwithstanding his success as a fee earner, I do not believe that the Applicant’s employment would have continued for two years as alleged by the Applicant, or beyond a further 26 week period.
The fact that the Respondents made a without prejudice offer on 26 October 2018 to re-employ the Applicant, on the basis of him receiving approximately 33% of billings and $75.00 per hour for non-billable work, is not necessarily suggestive that the Applicant’s employment with the First Respondent would have continued for a further two years. I note that the offer was rejected by the Applicant and, further, the offer was made in the context of seeking to resolve legal proceedings rather than as a genuine statement of intent to employ the Applicant over a long-term period.
On that basis, I assess the Applicant’s compensation pursuant to s545 of the FW Act in the sum of $157,693.38, being 26 weeks at a rate of $6065.13 per week.
The ACL Claim
By way of proposed orders attached to Methodology B, the Applicant seeks:
(1)pursuant to s236 of the ACL, the Respondents jointly pay the Applicant damages in the sum of $418,103 for misleading or deceptive conduct; and
(2)pursuant to s545 of the FW Act, the Respondents jointly pay to the Applicant compensation in the sum of $630,773.80 for the loss and damage occasioned by the adverse action constituted by the termination of employment.
The FW Act claim and the ACL claim are cumulative and not put in the alternative. The FW Act claim seeks compensation for breaches of the FW Act and seeks damages arising from the adverse action constituted by the termination of employment. The ACL claim seeks damages for deceptive and misleading conduct and the damages sought are the difference between the income that the Applicant received during the course of his employment under Contract 2 and the income that was promised.
Relevantly, subsection 236(1) of the ACL is as follows:
(1) If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
The Applicant submits that this is a ‘no transaction’ case and the damages should be assessed on that basis. The notion of a ‘no transaction’ case was explained by Jackson J in Jamieson v Westpac Banking Corporation [2014] QSC 32 at [105] – [107], where his Honour stated:
105. Mr Jamieson alleges that he would not have entered into the MQ Gateway Trust investment and associated loans but for the Bank’s breach of contract, negligence or breach of statutory duty. Thus he would have avoided the alleged loss.
106. Such a claim is often described as a “no transaction” case. That label serves to distinguish it from other categories of claims for loss whether made for breach of contract, in tort or under equivalents of former ss 52 and 82 of the Trade Practices Act 1976 (Cth) (“TPA”), such as s 12DA(1) and s 12GF of the ASIC Act.
107. In a “no transaction” case, the question is not whether the breach of contract, or tortious or contravening conduct is a cause of the alleged loss. Where liability is based on that causal concept, a plaintiff is not required to show that but for the conduct they would not have entered into the relevant transaction. It is enough if it was a material cause of the loss. In contrast, a plaintiff in a “no transaction” case will seek to prove, on the balance of probabilities, that they would not have entered upon the transaction, so as to prove that they have suffered the alleged loss.
In Westpac Banking Corporation v Jamieson & Ors [2015] QCA 50 at [146] the Court of Appeal (McMurdo P, Morrison JA and Applegarth J) stated that in relation to the proof that the Plaintiff was required to put on in order to establish damages:
146. Any difference between the position of a plaintiff who seeks damages on the basis of a lost opportunity to profit and the position of a defendant who seeks to have an award of damages take account of the lost opportunity to make a loss is not based in principle. In neither case can it be said to be irrelevant to consider what the plaintiff would or might have done instead of entering into the subject transaction. This is not to say that a plaintiff in a so-called “no transaction” case must prove what alternative transaction would have been undertaken. It may be sufficient for the plaintiff to simply prove that he or she would not have entered into the subject transaction. Policy or pragmatic considerations suggest that a plaintiff should not necessarily be required to prove what else he or she would have done. A requirement for such proof increases the complexity and costs of litigation by exploring alternative transactions, including investments, which were not seriously considered.
That analysis must be viewed against the background of the views of the High Court expressed in Henville v Walker [2001] HCA 52 at [18], where his Honour Gleeson J stated:
18. Section 82 of the Act is the statutory source of the appellants' entitlement to damages. The only express guidance given as to the measure of those damages is to be found in the concept of causation in the word "by". The task is to select a measure of damages which conforms to the remedial purpose of the statute and to the justice and equity of the case. The purpose of the statute, so far as presently relevant, is to establish a standard of behaviour in business by proscribing misleading and deceptive conduct, whether or not the misleading or deception is deliberate, and by providing a remedy in damages. The principles of common law, relevant to assessing damages in contract or tort, are not directly in point. But they may provide useful guidance, for the reason that they have had to respond to problems of the same nature as the problems which arise in the application of the Act. They are not controlling, but they represent an accumulation of valuable insight and experience which may well be useful in applying the Act.
I adopt the following summary of the principles relevant to assessment loss or damage under the TPA, and by analogy under the ACL, stated by the Court of Appeal (Tate, Santamaria and Kyrou JJA) in BHP v Steuler; Protect v Steuler [2014] VSCA 338 at [540]:
(1) A plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage it has suffered in consequence of its altering its position under the inducement of the misrepresentations made by the defendant;
(2) Under s 82(1) of the TPA, as under the common law, a plaintiff can only recover compensation for actual loss or damage incurred, as distinct from potential or likely damage;
(3) In determining whether a plaintiff has suffered loss or damage under s 82(1), it is usually necessary to compare the position that the plaintiff is in having been misled, with the position it would have been in but for the misrepresentation; by undertaking this comparison a court can determine whether the plaintiff is worse off as a result of relying upon the misrepresentation made by a defendant;
(4) Section 82 requires identification of a causal link between loss or damage and conduct done in contravention of the Act the question of causation is relative to the purpose of s 82, applied to the circumstances of a particular case;
(5) Determining the question of causation will often involve considering how much worse off the plaintiff is as a result of entering into the transaction which the representation induced it to enter than it would have been had the transaction not taken place. This entitles the plaintiff to all the consequential loss directly flowing from its reliance on the representation, at least if the loss is foreseeable;
(6) Analysing the question of causation only by reference to what is, in essence, a ‘but for’ test has been found wanting in other contexts and it should not be treated as an exclusive test of causation under s 82 of the TPA either; especially where there is more than one cause of the loss;
(7) It is relevant to ask what the plaintiff would have done had it not relied on the representation;
(8) As the judge recognised here; there are cases where if the contravening conduct had not occurred which misled the plaintiff, the plaintiff would not have embarked upon the project or transaction at all (the ‘no transaction cases’), and there are cases where if the plaintiff had not been misled it would still have embarked upon the project or transaction, but would have done so by entering into an alternative arrangement with the same party or a different party (‘alternative transaction cases’);
(9) A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted;
(10) A court should not engage in speculation about multiple possibilities of past hypotheticals to which no specific evidence was directed;
(11) Once the causal connection is established, there is nothing in s 82 of the TPA which suggests that the amount that may be recovered under that section should be limited by drawing some analogy with the law of contract, tort or equitable remedies;
(12) If the defendant’s breach has ‘materially contributed’ to the loss or damage suffered, it will be regarded as a cause of the loss or damage, despite other factors or conditions having played an even more significant role in producing the loss or damage. As long as the breach materially contributed to the damage, a causal connection will ordinarily exist even though the breach without more would not have brought about the damage;
(13) In exceptional cases, where an abnormal event intervenes between the breach and damage, it may be right as a matter of common sense to hold that the breach was not a cause of damage. But such cases are exceptional.
(Citations omitted)
In fixing compensation the Court is required to make an assessment as to damages in the particular context of the case before it. In this case the misrepresentations are admitted by virtue of the entry of default judgment. The circumstances in which the misleading and deceptive conduct occurred are not analogous to those which pertained in O'Neill v Medical Benefits Fund Ltd [2002] FCAFC 1. That case involved an Applicant leaving employment to take up employment with a different employer on the basis of representations made. This is a case where representations were made in the course of employment and which resulted in a change in the contractual arrangements between the parties.
I do not accept that this is a ‘no transaction’ case as submitted by the Applicant. The Applicant was already engaged in a transaction with the First Respondent when the admitted misleading and deceptive conduct occurred. Further it is not the entry into Contract 2 which has caused the loss. The loss is caused (by virtue of the deemed admissions) because the First Respondent breached Contract 2. It is not the case that Contract 2 was breached as a result of the misleading and deceptive conduct which was the making of the representations: Cf Berry v CCL Secure P/L [2020] HCA 27 at [37].
In the Applicant’s affidavit filed on 19 March 2020, the Applicant states at [43] – [44] that:
43. I remained employed by the First Respondent by entering into Contract 2 as a lawyer with the First Respondent based on the representations (Representations) made by the Second Respondent (on behalf of the First Respondent) as detailed at para 36 of the FASOC . But for the Representations made by the Second Respondent I would not have remained in the employment of the First Respondent in accordance with the terms of Contract 2.
44. I relied on the Second Respondent’s representations which were misleading or deceptive contrary to the provisions of the [ACL] to my detriment, and as a result I suffered loss and damages in the sum of $796,811.09 by remaining employed in accordance with the terms of Contract 2 calculated by adding the:
(a) $700,836.45 for unpaid salary; and
(b) $95,974.64 for unpaid annual leave accrued during the 98 weeks (1.885 years) of Contract 2 at the weekly rate of $12,731.33 as noted in table 1 above
There is no pleading or evidence of what the Applicant would have done had he not remained employed by the First Respondent in accordance with the terms of Contract 2, save that he says he would not have remained in the employment of the First Respondent under Contract 2. The Applicant pleads at [39(d)] of the FASOC that he relied on the representations and remained in employment with the First Respondent. Further, whilst the Applicant pleads that he altered his position by entering into Contract 2, there is no basis for finding that he suffered a loss as a result of doing so. This is because he also claims that he was not being properly remunerated under Contract 1 and because it was not the entry into Contract 2 that caused the claimed loss; that loss was caused by the First Respondent’s breach of Contract 2. The pleadings and the evidence do not establish a causal link between misrepresentation and the damage alleged.
By submissions filed on 26 August 2020, the Applicant submits at [36] that if this is treated as a loss of opportunity case (while he denies that it should be) the Applicant’s position is that he lost the opportunity to remain employed under Contract 1. He then calculates the loss of that opportunity by extrapolating the income he received under Contract 1 through the period of Contract 2 and subtracts what he was paid under Contract 2 against what he says he would have earned had he not been deceived into entering into Contract 2. That loss is said to be $205,221.16.
The difficulty faced by the Court in assessing the claim on that basis is that there is no submissions that I can find pointing to evidence or pleading that the Applicant would have continued to receive the same level of remuneration that he had under Contract 1 during the period covered by Contract 2. Most of the Applicant’s remuneration under both contracts was from commission payments, calculated by a percentage of the fees rendered, based on the work performed by him. In the absence of evidence of the amount that the Applicant would have received under Contract 1 in the period covered by Contract 2, the Court is unable to determine what that loss is.
The Applicant’s calculation of the loss based on an imputed hourly rate of pay – taken by dividing the remuneration under Contract 1 by an hourly rate based on a 36 hour week – is not a satisfactory or appropriate means of calculating loss. Again, where both Contract 1 and Contract 2 provided for a base salary of $35,000 per annum, it is not open for the Court to assume that the same level of fees would have been rendered by the Applicant for the whole period that the Applicant was employed. I was not provided with a summary of the evidence which persuades me that the Applicant would have achieved a higher income had he remained employed under Contract 1.
I accept the submission made by the Applicant that, where a party fails to make proper discovery, does not cooperate to produce evidence or fails to cooperate to bring the matter on for trial, that conduct may operate to shift the evidentiary burden of proving the amount of loss from the Applicant to the Respondent: see Berry v CCL Secure Pty Ltd [2020] HCA 27 at [29].
In Carbone v James McConvilland AssociatesPty Ltd [2019] FCA 1305, the Federal Court (Collier J) found that the Respondents had failed to comply with orders for discovery and had failed to cooperate with the Court, and with the Applicant, in having the matter ready for trial.
However, the Respondent has filed evidence which contests the Applicant’s claims as to levels of fees he rendered: see the affidavit of James McConvill filed on 18 May 2020 at [75] – [83]. That evidence was in turn disputed by the Applicant by his affidavit filed on 18 June 2020. That is an affidavit of about 51 pages in length and approximately 1020 pages of annexures, many of which are financial documents relating to the levels of fees rendered.
Even having regard to the difficult position that the Applicant has been put in by the conduct of the Respondents, there is no submissions before the Court which points me to evidence which would support a finding that the Applicant would have been in a better position had he remained employed under Contract 1. Abandoning the claims under contract and relying on the ACL claim does not obviate the need to analyse the evidence of earnings in order to determine whether there was a loss. That analysis has not been provided to the Court.
In summary, in relation to the ACL claim for damages for misrepresentation regarding the level of remuneration the Applicant would have receive under Contract 2:
(1)the Applicant has not established that the representations caused the loss claimed (being the difference between what the Applicant was paid and the value of what was promised by the misrepresentations); and
(2)if the claim is one for lost opportunity, albeit one that was not pleaded, the Applicant has not proved that he would have earned more under Contract 1 had it continued, than he did under Contract 2.
Annual Leave
The Applicant also seeks damages pursuant to the ACL in relation to deceptive and misleading statements regarding his entitlements under the FW Act, on the basis that he was not paid annual leave entitlements as prescribed by s90 of the FW Act. By way of Methodology B, the Applicant claims a total of $72,486.17 in relation to his leave entitlement, based on the total remuneration that he received during the period of his employment.
Section 90 of the FW Act provides that:
(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee's base rate of pay for the employee's ordinary hours of work in the period.
(2) If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.
In relation to the phrase ‘base rate of pay’, s16(1) of the FW Act provides that:
(1) The base rate of pay of a national system employee is the rate of pay payable to the employee for his or her ordinary hours of work, but not including any of the following:
(a) incentive-based payments and bonuses;
(b) loadings;
(c) monetary allowances;
(d) overtime or penalty rates;
(e) any other separately identifiable amounts.
The Respondents submit that if damages are ordered in relation to annual leave, damages should be assessed on the basis of unpaid leave, calculated on the Applicant’s salary under Contracts 1 and 2, being $35,000 per annum. The Applicant submits that the annual leave entitlements should be calculated on the basis of the amounts that the Applicant was actually paid as disclosed by the First Respondent’s PAYG summaries: see Applicant’s affidavit filed on 18 March 2020, exhibit JAC13.
At [22] – [23] of submissions filed on 26 August 2020, the Applicant submits that the remuneration he received did not include any of the items set out in s16(1)(a) – (e) of the FW Act and therefore annual leave should be calculated on the sums paid to him.
The contracts signed by Applicant made specific reference the Applicant’s remuneration being constituted by a salary of $35,000 per annum and commission payments based on a percentage of fees, by which he is referred to as a ‘Primary Professional Fee Earner’. Given that the Applicant’s remuneration increased if he brought in an increase in fees, that commission arrangement is caught by the expression ‘incentive – based payments and bonuses’ and is therefore excluded from the definition of ‘base rate of pay’ for the purposes of s16 and s90(1) of the FW Act.
Subsection 90(2) of the FW Act deals with the requirement of untaken annual leave when an employee’s employment ceases and refers to the employer paying the employee the “amount that would have been payable to the employee had the employee taken annual leave”. There was not an agreement between the Applicant and the First Respondent that the Applicant would receive any greater amount than the base rate of pay when he took annual leave and therefore it follows that the Applicant is only entitled to damages in relation to annual leave based on the sum of $35,000.
The FASOC makes no reference to the amount of leave that the Applicant was entitled to but which was not paid. In his affidavit filed on 19 March 2020 at [42], the Applicant calculates unpaid annual leave on the basis that he never took paid annual leave and claims that he was entitled to $224,071.40 for all accrued leave entitlements over the course of his employment. In reference to the amounts claimed under the ACL he claims unpaid leave for the period by covered by Contract 2 (being 1.88 years) in the sum of $95,974.64. That said sum was adjusted in submissions filed on 26 August 2020 (at [36]) to $72,486.
The Respondents rely on an affidavit of a Bookkeeper Ms Jane Quirk filed on 18 May 2020 which exhibits an annual leave reconciliation report in respect of the Applicant. The report shows that the Applicant had a leave balance of 4.6 hours and puts the value of that balance at $78.12 based on the $35,000 salary.
By reason on the entry of Judgment against the Respondent, the Respondent is taken to have admitted to not providing payslips as alleged in [30] – [31] of the FASOC. I do not accept that the annual leave reconciliation report is an accurate record of entitlements that was maintained over the course of the Applicant’s employment. In those circumstances the value of annual leave entitlements accrued over the course of Contract 2, calculated based on a salary of $35,000, is $5,061.54. That is calculated by multiplying the weekly pay, being $673.07 (calculated on $35,000), by 4 weeks, and then multiplying that amount by 1.88 years, being the period of time worked under Contract 2.
The Applicant has given evidence that he was not paid annual leave entitlements under any of the contracts under which he was employed. That was denied by the Respondents. However, for the purpose of considering the Applicant’s claim for annual leave for the duration of Contract 2, I find that he has not been paid annual leave through that period. At [21] of the Applicant’s submissions filed 26 August 2020, it is submitted that:
21. […] the applicant may have taken up other opportunities, but he was induced to remain in the employment of the first respondent by the Misleading Conduct of the respondents in making the representations. If he had not entered into Contract 2 on the strength of those representations, he would have remained employed under Contract 1. If the respondents had not mislead or deceived the Applicant, that is if they had lived up to the representations, they would have complied with the [FW Act] requirements as to annual leave.
Whilst I doubt that the ACL claim is the proper vehicle to claim annual leave entitlements, nonetheless, it is a claim to statutory entitlements which he has proved that he was not paid and he should receive that entitlement. Therefore I find that the Applicant is entitled to receive $5061.54 as annual leave entitlements, based on his annual salary of $35,000.
Pecuniary Penalties
By his affidavit filed on 19 March 2020, the Applicant incorrectly submits at [50] – [51] that he had made 244 workplace complaints and therefore:
(1)the First Respondent should be liable to pay to him a maximum penalty of $15,372,000.00 (being 244 adverse actions multiplied by $63,000); and
(2)the Second Respondent should be liable to pay to him a maximum penalty of $3,07,400.00 (being 244 adverse actions multiplied by $12,600).
By way of the proposed orders attached to ‘Methodology B’, the Applicant seeks pecuniary penalties and pre-judgment interest to be payable by the Respondents as follows:
(1)pursuant to s546 of the FW Act, the Applicant seeks the First Respondent pay to the Applicant the sum of $71,400, being:
(a)a civil penalty in the sum of $40,800 for the adverse action: see s342(1), items 1(b), (c) and (d).
(b)a civil penalty in the sum of $10,200 for coercion;
(c)a civil penalty in the sum of $10,200 for the adverse action constituted by the termination;
(d)a civil penalty in the sum of $10,200 for the employment records contraventions;
(2)pursuant to s546 of the FW Act the Applicant seeks the Second Respondent pay to the Applicant the sum of $14,280, being:
(a)a civil penalty in the sum $8,160 for adverse action: see s342(1), items 1(b), (c) and (d);
(b)a civil penalty in the sum of $2,040 for coercion;
(c)a civil penalty in the sum of $2,040 for the adverse action constituted by the termination of employment;
(d)a civil penalty of $2,040 for the employment records contraventions;
(e)the Respondents pay to the Applicant pre-judgment penalty interest calculated by reference to the Reserve Bank of Australia Cash Rate plus 4% from 20 July 2018 to the date of judgment of the Federal Circuit Court for the contraventions of the FW Act under s547 of the FW Act; and
(3)the Respondents pay to the Applicant pre-judgment penalty interest calculated by reference to the Reserve Bank of Australia Cash Rate, plus 4% from 8 August 2018 to the date of judgment of the Federal Circuit Court, for the breach of the ACL pursuant to s51A and s52 the Federal Court of Australia Act 1976 (Cth).
Approach to be taken in relation to fixing penalty
A non-exhaustive list of factors relevant to the imposition of a penalty was usefully summarised by Mowbray FM (as he then was) in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 (“Mason”) at [26] to [59]. Those factors include:
(1)the nature and extent of the conduct which led to the breaches;
(2)the circumstances in which that conduct took place;
(3)the nature and extent of any loss or damage sustained as a result of the breaches;
(4)whether there had been similar previous conduct by the Respondents;
(5)whether the breaches were properly distinct or arose out of the one course of conduct;
(6)the size of the business enterprise involved;
(7)whether or not the breaches were deliberate;
(8)whether senior management was involved in the breaches;
(9)whether the party committing the breach had exhibited contrition, taken corrective action and co-operated with the enforcement authorities;
(10)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
(11)the need for specific and general deterrence.
This summary was adopted by Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 at [14]. While the summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion: see Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550. The discretion remains at large.
The factors which are material to this matter and the question of appropriate penalties are addressed below. What the Court needs to determine is an appropriate penalty proportionate to the gravity of the contravention.
Nature and Extent of the Conduct
This is a case where each of the First Respondent is a law firm and the Applicant and Second Respondent are legally qualified. The Applicant and the Respondents were all motivated to achieve particular commercial results. It is plain from reading the affidavits and submissions filed by the Applicant that he regarded himself as a major fee earner within the First Respondent business. It is also plain that, from the number of complaints and inquiries the made in relation to the conduct of others in particular other employees as set out in the material, he saw himself as part of the management in the business. There are deemed admissions made by the Respondents in relation to breaches of the FW Act and those breaches occur in circumstances where the First Respondent is a ‘small enterprise’ (although the exact size of the First Respondent business is uncertain, for the reasons set out at [98] below) without a dedicated human resources staff.
The breaches in relation to termination of employment occurred when there had been a breakdown in the relationship between the Applicant and the Second Respondent. Whilst the Applicant was a junior solicitor, he and the Respondents had negotiated and proceeded on the basis that he receive a significant share of the revenue and/or profits of the business. In that sense his position was more akin to that of an executive employee.
Similar previous conduct
There is no evidence of any prior contraventions of the FW Act by the Respondents.
Whether the breaches arose out of a course of conduct
The groupings now contended for by the Applicant reflect that there was a course of conduct and that is taken into account.
The size of the Respondent's business
The Respondents have submitted that the First Respondent business is a small enterprise. However, in various correspondence produced by the First Respondent, it is represented that the First Respondent had offices in, amongst other places, Ballarat, Ballina, the Bass Coast/Phillip Island, Byron Bay, Dromana, the Gold Coast, Grantville, Karratha, Lennox Head, Melbourne, the Mornington Peninsula, Pakenham, Port Hedland, Shepparton, West Perth, and had an affiliated firm in California, USA. It is not clear how all these locations were staffed or serviced. Letterhead and email correspondence of the First Respondent also made reference to offices in other overseas locations, being the British Virgin Islands, Miami, Tampa and New York.
If the First Respondent in fact is, or was, employing staff in any of those Australian regions then it is important that the Respondents have a clear understanding of the responsibilities under Australian workplace laws. The Second Respondent states in his affidavit filed on 18 May 2020 that there are 10 full time employees of the practice.
Ensuring compliance with minimum standards, specific and general deterrence
Specific and general deterrence forms part of the factors relevant to the imposition of a penalty under the FW Act: see Mason at [26] – [29]; Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543, 93.
For the reasons set out above, I do not believe that the facts of this case, arising from the deemed admissions, warrant a significant penalty for general deterrence. There is a need for specific deterrence to ensure that this solicitor, who purports to practice in the field of employment law, should be aware of the statutory requirements in relation to the formation of an employment contract, record keeping and the provision of payslips.
However, this is not a case where a significant penalty should be imposed as a means of achieving general or specific deterrence. It would seem that both the Applicant and the Second Respondent were conducting themselves in a commercial manner (or what they thought was commercial manner) and the dynamic between the parties was not the usual dynamic that one sees between an employee and employer. This is also a case where, had the Respondents not been so dilatory in the way that they managed their defence of the Applicant’s claims in the Federal Court and where default judgement had been entered by reason of that conduct, they may have had proper defences to matters raised against them in the FASOC.
Having regard to the circumstances of this case the Court imposes the following penalties pursuant to s546 of the FW Act:
(1)as against the First Respondent, penalties in the total sum of $18,200, being:
(a)a civil penalty in the sum of $5,000 for the Adverse Action: see s342(1), items 1(b), (c) and (d);
(b)a civil penalty in the sum of $500 for coercion;
(c)a civil penalty in the sum of $2,500 for the adverse constituted by the termination of employment; and
(d)a civil penalty in the sum of $10,200 for the employment records contraventions.
(2)as against the Second Respondent, penalties in the total sum of $3,490.00, being:
(a)a civil penalty in the sum $600 for the Adverse Action: see s342(1), items 1(b), (c) and (d);
(b)a civil penalty in the sum of $100 for coercion;
(c)a civil penalty in the sum of $750 for the adverse action constituted by the termination of employment; and
(d)a civil penalty of $2,040 for the employment records contraventions.
I have imposed a low penalty in relation to the coercion claim on the basis that there appears to be an overlap with the adverse action claim and there is a risk of double punishment. On a plain reading of the FASOC, the coercive conduct which was said to be for the purpose of dissuading the Applicant from exercising workplace rights was particularly ineffective. This is apparent given that the Applicant alleges that he made 244 workplace complaints/inquiries in the course of his employment, which included many complaints on the subjects that he alleges he was coerced into not making complaints/inquiries about.
I direct that the penalties, as set out above, be paid to the Applicant pursuant to s546(3)(c). This order is appropriate given that the Applicant was required to bring the application for penalties at considerable cost, both in terms of time and expense: see Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4 at [116].
Penalty Interest
I see no reason to depart from the usual course that penalty interest be paid on the amount ordered in relation to the FW claim, pursuant to s547 of the FW Act. The parties should confer with the aim of providing the Court with agreed proposed orders, no later than 14 days from the date of these orders, as to what amount should be awarded by way of pre-judgment interest additional to the compensation ordered herein. Subsection 547(3) of the FW Act requires that the Court take into account the period between the day the relevant cause of action arose and the day the order is made in determining the amount of interest.
Costs
The Respondent’s seek costs by reason of the Applicant’s decision to forego or abandon his claims made pursuant to Contract 1 and Contract 2, and instead proceeding for compensation and penalties for breach of the FW Act and the ACL.
In my view the decision on the part of the Applicant to make that decision was not an “unreasonable act or omission”: see s570(2)(b) of the FW Act. The decision was made for practical reasons, particularly the immense difficulty of seeking to ascertain damages under the contractual claims when the Respondents had not provided full disclosure of financial documents which might readily establish the quantum of the claim.
Had that decision not been made at the time of the final hearing, the hearing would have taken substantially more time, increasing the costs for all parties and making the Court’s task of determining the matter even more difficult. As the Court said to Counsel for the Applicant at the hearing, to require the Court to digest all the material that was being relied upon to prove the contractual damages was onerous. Whilst the volume of material that the Court was provided with has been onerous, particularly in the absence of a paginated Court Book, it is nothing like the task that the Court would have faced had the alternative course been pursued by the Applicant.
On that basis, I am not minded to award the Respondents’ costs on the grounds that the Applicant elected to abandon its contractual claims in this matter.
I certify that the preceding one hundred and ten (110) numbered paragraphs are a true copy of the Reasons for Judgment of Judge McNab. Associate:
Dated: 9 April 2021
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