Coles v Elsen Bros Pty Ltd
[2007] FMCA 1838
•2 November 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| COLES v ELSEN BROS PTY LTD | [2007] FMCA 1838 |
| INDUSTRIAL LAW – Pecuniary penalties – breaches of award – underpayment of annual leave, annual leave loading and payment in lieu of notice. |
| Workplace Relations Act1996; ss, 167 |
| Kelly v Fitzpatrick [2007] FCA 1080 Gibbs v City of Altona (1992) 42 IR 255 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Martin v W & K Crust Pty Ltd [2007] FMCA 992 |
| Applicant: | ALLISON MARGARET COLES |
| Respondent: | ELSEN BROS PTY LTD T/as BRISBANE ROCK SALES & HELIDON DIMENSIONAL SANDSTONE |
| File number: | BRG 573 of 2007 |
| Judgment of: | Wilson FM |
| Hearing date: | 31 October 2007 |
| Date of last submission: | 31 October 2007 |
| Delivered at: | Brisbane |
| Delivered on: | 2 November 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr Horneman-Wren |
| Solicitors for the Applicant: | Clayton Utz |
| Counsel for the Respondent: | Mr Murdoch |
| Solicitors for the Respondent: | Bennett Carroll |
ORDERS
The respondent pay to the Commonwealth the following penalties:
(a)In respect of the admitted breach of clause 4.9.2 of the Notional Agreement Preserving State Awards between the respondent and Mr Patrick Scherger the sum of $8,800.00;
(b)In respect of the admitted breach of clauses 7.1.1, 7.1.2, 7.1.3 and 7.1.4 of the Notional Agreement Preserving State Awards between the respondent and Mr Patrick Scherger the sum of $11,600.00;
(c)In respect of the admitted breach of clauses 7.1.5 of the Notional Agreement Preserving State Awards between the respondent and Mr Patrick Scherger the sum of $1,600.00.
Payment of the penalties in order (1) be made as follows:
(a)The sum of $5,000.00 on or before 30 November 2007;
(b)The sum of $5,000.00 on or before 31 December 2007;
(c)The sum of $5,000.00 on or before 31 January 2008;
(d)The sum of $5,000.00 on or before 29 February 2008; and
(e)The sum of $2,000.00 on or before 31 March 2008.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 573 of 2007
| ALLISON MARGARET COLES |
Applicant
And
| ELSEN BROS PTY LTD T/as BRISBANE ROCK SALES & HELIDON DIMENSIONAL SANDSTONE |
Respondent
REASONS FOR JUDGMENT
Until 12 May 2006 Patrick Scherger was employed by the respondent as its Site Senior Executive managing work performed at the respondent’s quarry. Mr Scherger was dismissed in somewhat unusual circumstances. He had been having an affair with the then wife of one of the then directors of the respondent. He had also requested a reference from the respondent’s office manager, no doubt creating a belief in the minds of those controlling the respondent that he intended to resign from his employment.
Following upon unsuccessful negotiations the applicant, a workplace inspector employed by the Workplace Ombudsman, and appointed as such under section 167 of the Workplace Relations Act1996 (Cth) (“the Act”) brought proceedings against the respondent pursuant to s.718 and 719 of the Act.
The applicant sought penalties, alleging that the respondent had breached applicable provisions in the Quarry, Crushed Stone, Sand And Gravel Industry Award – State (Queensland) 2003 (now a Notional Agreement Preserving State Award) that governed Mr Scherger’s employment. The respondent has now admitted three breaches of applicable provisions in the award, and I am required to determine the appropriate penalty to be imposed on the respondent. The parties proceeded on the basis of an agreed statement of facts, a copy of which is annexed to these reasons for judgment.
The principles applicable to determining the appropriate penalty are not controversial. In Kelly v Fitzpatrick [2007] FCA 1080 Tracey J at [14] said:
“In Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mowbray FM identified “a non exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty”. Those considerations were derived from a number of decisions of this Court. I gratefully adopt, as potentially relevant and applicable, the various considerations identified by him. They were:
·The nature and extent of the conduct which led to the breaches
·The circumstances in which that conduct took place
·The nature and extent of any loss or damage sustained as a result of the breaches
·Whether there had been similar previous conduct by the respondent
·Whether the breaches were properly distinct or arose out of the one course of conduct
·The size of the business enterprise involved
·Whether or not the breaches were deliberate
·Whether senior management was involved in the breaches
·Whether the party committing the breach had exhibited contrition
·Whether the party committing the breach had taken corrective action
·Whether the party committing the breach had cooperated with the enforcement authorities
·The need to ensure compliance with minimum standards by provision of an effective means of investigation and enforcement of employee entitlements and
·The need for specific and general deterrents.”
Further, in Kelly at [30] Tracey J. said:
“Another factor that must be taken into account in the fixing of pecuniary penalties for multiple breaches of statutory stipulations is the totality principle. This principle is designed to ensure that the aggregate of the penalties imposed is not such as to be oppressive or crushing. Different views have been expressed as to the manner in which the principle ought properly be applied. On one view the starting point should be the determination of an appropriate total penalty. That figure would then be divided by the number of breaches to produce a penalty for each breach: see CPSU v Telstra Corporation Limited (2001) 108 IR 228 at 230 [7]. The orthodox position, however, which I consider should be adopted, is that the starting point is the determination of appropriate penalties for each contravention of the statutory norm. The aggregate figure is then considered with a view to ensuring it is an appropriate response to the conduct which led to the breaches: see Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53. See also Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 at [145] per Jessop J. This approach was recently described, in the criminal context from which the totality principle is derived, as “the orthodox, but not necessarily immutable, practice” adopted by sentencing courts, see Johnston v R (2004) 205 ALR 346 at 356 [26] per Gummow, Callinan and Heyden JJ.”
As appears from the agreed statement of facts the conduct of the respondent led to underpayment to Mr Scheger of $12,621.25 in aggregate.
It is agreed that this sum is comprised of amounts flowing from three breaches of the award referred to above. The most serious breach, in terms of quantum, is that relating to the respondent’s failure to pay Mr Scherger an amount for accrued annual leave on the termination of his employment. That amount comprises $8,550.00 out of the total underpayment. As appears in the agreed statement of facts, at paragraph 5, each of Mr Scherger and the respondent believed that the other was responsible for maintaining his annual leave records. Therefore, at the time of termination of his employment the respondent believed that no money was in fact owing, because no records had been maintained. The applicable clauses setting out Mr Scherger’s entitlements in respect of annual leave are set out in paragraphs 13 to 17 of the agreed statement of facts.
The second breach, that in quantum amounts to $1,671.75, is the failure of the respondent to pay annual leave loading of 17.5% on accrued unpaid annual leave. The parties accepted, on the authority of Gibbs v City of Altona (1992) 42 IR 255 that although the failure to pay leave loading was practically consequent upon the failure to pay accrued annual leave, this constituted two separate and distinct breaches of Mr Scherger’s terms of employment and could not amount to a course of conduct justifying the imposition of but one penalty.
The third breach admitted by the respondent is its failure to pay Mr Scherger an amount commensurate with proper notice in lieu stipulated by the award. Some amounts were paid but there was an agreed short fall of 12 days. This was after deduction of an amount owed by Mr Scherger to the respondent.
I accept the submission on behalf of the respondent, which was not meaningfully gainsaid by the applicant, that the respondent’s conduct occurred on a single occasion. That is, on the termination of Mr Scherger’s employment the respondent thereupon committed the three breaches of applicable provisions of Mr Scherger’s conditions of employment. It was not an ongoing pattern of behaviour on the part of the respondent. Whilst it might be said that Mr Scherger either was not entitled to, or did not take his full quota of annual leave during the currency of his employment, it was only when his employment was terminated that he was then entitled to be paid for accrued annual leave. This is the occasion on which the breach occurred.
I have briefly outlined above the circumstances in which the conduct took place. As appears from the agreed statement of facts a small payment was made by the respondent to Mr Scherger on termination. This was said to be on account of payment in lieu of notice. Some thirteen days after termination an amount was paid representing the equivalent of five days annual leave. No other amount was allowed for leave loading.
I have earlier quantified the underpayment by the respondent. The respondent submitted, and I accept, that the quantum of underpayment must be looked at against the remuneration paid to Mr Scherger. Mr Scherger was paid a salary above the award. He was also paid an annual Christmas bonus.
The respondent has agreed to reimburse Mr Scherger for the underpayment and a cheque for that amount has been presented to the applicant but has not yet been banked. The penalties imposed herein are determined on the assumption that the respondent has made full restitution to Mr Scherger.
There is no evidence of any previous similar conduct by the respondent. The breaches were distinct in the sense that separate clauses of the award were breached but, as I have said, occurred on a single occasion. In the case of leave loading the only factor that suggests it was not an entirely technical breach attracting a nominal penalty is the fact that some payment was made to Mr Scherger for unpaid annual leave following his termination but the, apparently conscious, decision was taken not to pay the 17.5% loading. That suggests either a wilful breach of the applicable provisions of the award or, at the least, inappropriate ignorance of Mr Scherger’s conditions of employment.
There is no specific evidence as to the size of the respondent business. The respondent employs twenty workers of whom eleven are employed at its quarry. There are two administrative staff and a number of employed drivers. The size of the respondent business is perhaps best demonstrated by its request that any penalty imposed be repaid at the rate of $5,000.00 per month. That request for time to pay was not opposed by the applicant. It bespeaks an organisation with limited resources at its disposal, particularly after it has repaid the amounts owing to Mr Scherger.
In the case of the failure to pay accrued annual leave, there is some ground for concluding that the breach by the respondent was not deliberate. The reasons for this are set out above, and at paragraphs 5 and 16 of the agreed statement of facts. The failure to pay leave loading was, as I have said, deliberate in the sense that no loading was paid on that annual leave paid to Mr Sherger thirteen days after the termination of his employment. It is difficult to conclude other than that the failure to pay in lieu of notice was deliberate conduct on the part of the respondent.
The respondent business is not a large one, and its management is involved in its day to day activity. One of its directors was involved in the decision to terminate Mr Scherger’s employment. There is no demonstrated contrition on the part of the respondent apart from its admission that breaches have occurred. No statement of apology or of remorse was made to the Court on the hearing of the application for penalties and the respondent submitted that the amount involved was relatively low, and that it was not “significant”. At paragraph 38 of the respondent’s submissions it was acknowledged that the breaches were “not insignificant” and that it had taken some time for the respondent to acknowledge its breaches.
Counsel for the respondent stated that it had taken corrective action in that annual leave records were now maintained for the Site Senior Executive. It could not be said that the respondent has cooperated with enforcement authorities. It initially denied any breach and required the applicant to commence court proceedings. The agreed statement of facts was received on the day before this matter was due to commence a three day hearing, which was allocated in early August. I accept that there have been negotiations between the parties in the weeks preceding the final hearing which lead to the agreed statement of facts, but it cannot be said that there was an early recognition by the respondent of its liability nor a high degree of cooperation with the enforcement authorities.
Both counsel referred, in providing examples of comparable decisions, to two decisions: Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 and Martin v W & K Crust Pty Ltd [2007] FMCA 992. Of course, as both counsel accepted, each case turns on its own facts, but I accept there should be parity in penalty in comparable cases. Mason involved breaches involving two employees who where Filipino migrants and relied upon their employer for the continuation of their visas. There was an element of vulnerability that is absent in this case. There were multiple breaches but the underpayments were of lower magnitude than in the present case. That is because the workers were receiving lower levels of remuneration. In that case, Mowbray FM approached the matter by determining an overall penalty and then apportioning it as between the various breaches. As Tracey J. pointed out in Kelly, supra, the better approach is to make a determination of penalty in relation to each breach and then determine whether the aggregate is appropriate.
It is nevertheless worth observing that in Mason a failure to pay less than $400.00 in pro-rata annual leave attracted a penalty of $6,000.00, after discount for the admission of breach. His Honour did not impose any additional penalty for failure to pay leave loading. The penalty for underpayment of $578.20 notice in lieu of termination attracted a penalty, after discount of $7,500.00. Higher penalties are called for in this case.
In Martin v W & K Crust Pty Ltd Jarrett FM imposed two penalties of $8,250.00 where the annual leave shortfall was $3,181.46 and the amount which the respondent failed to pay in lieu of notice was $3,544.00. I note that in the present case the agreed underpayment in lieu of notice is $2,400.00, but that sum is arrived at after treating a further payment of $2,000.00 as repayment of the loan made by the respondent to Mr Scherger. It is relevant to note that in Martin v W & K Crust Pty Ltd no discount was allowed because of the absence of any cooperation with the prosecuting authorities. In respect of the failure to pay in lieu of notice, a higher penalty is called for in this case.
Both parties agree that in the present case the appropriate discount was in the range of 20% to 25% because of the admission made by the respondent. In my view, the appropriate discount should be 20%. The respondent’s conciliatory conduct occurred very late in the litigation. There is no power under the Act to award costs against the respondent in a case such as the present, and the applicant was forced to put on its evidence for the final hearing before reaching agreement with the respondent as to the facts upon which penalties should be determined.
The maximum penalty for each breach is $33,000.00. In the case of failure to pay in lieu of notice I consider that a penalty of $11,000.00 is appropriate. I take into account that although Mr Scherger was underpaid four weeks and two days out of a possible five weeks in lieu of notice of termination, he did previously receive the benefit of a loan from his employer of approximately one half of the amount of underpayment.
In relation to the failure to pay accrued annual leave, I consider that an appropriate penalty is $14,500.00. The amount involved was significant, constituting 42.75 days of unpaid annual leave. For the failure to pay annual leave loading, I consider that an appropriate penalty is $2,000.00. I have concluded that the failure to pay this amount was deliberate. The quantum involved was, however, small. Although separate breaches, and therefore attracting separate penalties, it will noticed that when the two penalties are combined they represent the amount of $16,500.00 being one half of the maximum amount that can be imposed in respect of either of the two breaches.
The total penalty is therefore $27,500.00. This should be discounted by 20%, leading to a total penalty of $22,000.00. This is to be apportioned:
a)In respect of the breach of failing to pay in lieu of notice, the sum of $8,800.00
b)In respect of the breach of failing to pay accrued annual leave, the sum of $11,600.00
c)In respect of the breach of failing to pay annual leave loading, the sum of $1,600.00
The applicant did not oppose giving the respondent time to pay the penalties, and I will so order.
I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 2 November 2007
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