Coote v Mainline Access Pty Ltd & Anor (No.3)
[2019] FCCA 383
•28 February 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| COOTE v MAINLINE ACCESS PTY LTD & ANOR (No.3) | [2019] FCCA 383 |
| Catchwords: INDUSTRIAL LAW – Construction of s.323(1) of the Fair Work Act 2009 (Cth) – whether s.323(1) is contravened only because an employer fails to pay an amount payable under a term of a contract of employment for the performance of work – no settled authority to the effect that s.323(1) is contravened only because an employer fails to pay an amount payable under a contract of employment for the performance of work. INDUSTRIAL LAW – Application for final relief and the imposition of penalties – compensation under s.545 of the Fair Work Act 2009 (Cth) assessed and other remedies granted – civil penalties ordered. INDUSTRIAL LAW – COSTS – Application for costs – whether respondents acted unreasonably – application for costs dismissed. |
| Legislation: Federal Circuit Court of Australia Act 1999 (Cth), ss.8, 15(a), 76 Federal Circuit Court Rules 2001 (Cth), r.16.05(2)(c), 16.05(2)(e) Fair Work Act 2009 (Cth), ss.12, 44, 45, 61(2), 90(2), 139(1), 323, 324, 535, 536, 542, 543, 545, 546, 547, 550(2), 557(1), 570 Manufacturing and Associated Industries Award 2012, cl.34, 35.2 |
| Cases cited: Association of Professional Engineers, Scientists and Managers, Australia v Wollongong Coal Limited [2014] FCA 878 |
| Applicant: | MARK COOTE |
| First Respondent: | MAINLINE ACCESS PTY LTD ACN 146 159 346 |
| Second Respondent: | SHAUN WHELAN |
| File Number: | SYG 1493 of 2016 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 5 February 2019 |
| Date of Last Submission: | 15 February 2019 |
| Delivered at: | Sydney |
| Delivered on: | 28 February 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms L Saunders |
| Solicitors for the Applicant: | John F Morrissey & Co |
| Counsel for the Respondents: | Ms A Perigo |
| Solicitors for the Respondents: | Marrawah Law |
DECLARATIONS
The first respondent contravened s.45 of the Fair Work Act 2009 (Cth) (FW Act) by failing to pay the applicant ordinary wages totalling $9,548.29 during the applicant’s employment with the first respondent from 18 March 2014 to 10 April 2015 (Employment Period), contrary to cl.34 of the Manufacturing and Associated Industries Award 2012 (Award).
The first respondent contravened s.45 of the FW Act by failing to make superannuation contributions totalling $3,868.66 in relation to the applicant’s employment during the Employment Period, contrary to cl.35.2 of the Award.
The first respondent contravened s.44 of the FW Act by failing, contrary to s.90(2) of the FW Act, to pay to the applicant at the time he left his employment $7,946.40, being the amount payable to the applicant for accrued but untaken annual leave.
The first respondent contravened s.323(1) of the FW Act by making deductions totalling $21,416.59 from amounts payable to the applicant in relation to the performance of work.
The first respondent contravened s.535 of the FW Act by failing to make employee records in relation to the applicant of the kind prescribed by the Fair Work Regulations 2009 (Cth).
The first respondent contravened s.536 of the FW Act by failing to give a pay slip to the applicant within one working day on each occasion it paid an amount to the applicant in relation to the performance of work.
The second respondent was involved within the meaning of s.550(2) of the FW Act in the first respondent’s contraventions identified in declarations 1-6.
The first and second respondents are liable to orders under s.545(2)(b) of the FW Act that they pay to the applicant:
(a)the amount of $9,548.29, which represents the loss the applicant suffered because of the contravention identified in declaration 1;
(b)the amount of $7,946.40, which represents the loss the applicant suffered because of the contravention identified in declaration 3; and
(c)the amount of $21,416.59, which represents the loss the applicant suffered because of the contravention identified in declaration 4.
The first and second respondents are liable to an order that there be added to the amounts referred to in declaration 8 interest in the following amounts:
(a)$2,283.35 in relation to the amount stated in declaration 8(a);
(b)$1,767.58 in relation to the amount stated in declaration 8(b); and
(c)$5,121.50 in relation to the amount stated in declaration 8(c).
The first and second respondents are liable to an order under s.545(1) of the FW Act that within 21 days of the pronouncement of these orders they pay $3,868.66, being the amount referred to in declaration 2, to a superannuation fund nominated by the applicant.
The first and second respondents are liable to an order that there be added to the amount referred to in declaration 10 interest in the amount of $925.14.
ORDERS
Pursuant to r.16.05(2)(c) of the Federal Circuit Court Rules 2001 (Cth) orders 1 and 2 of the orders made on 9 November 2018 are set aside.
The first respondent pay pecuniary penalties in the sum of $88,128 pursuant to s.546(1) of the FW Act for its contraventions of the FW Act identified in the declarations made above.
The second respondent pay pecuniary penalties in the sum of $22,032 pursuant to s.546(1) of the FW Act for his involvement in each of the first respondent’s contraventions of the FW Act identified in the declarations made above.
Pursuant to s.546(3)(c) of the FW Act the first respondent and the second respondent each pay the penalties referred to in orders 13 and 14 to Mr Coote by 28 March 2019.
Pursuant to s.545 and s.547 of the FW Act the first and second respondents pay to the applicant the amount of $21,545.62, such amount being the sum of:
(a)$9,548.29 together with interest of $2,283.35, being the amounts referred to in declarations 8(a) and 9(a) respectively; and
(b)$7,946.40 together with interest of $1,767.58, being the amounts referred to in declarations 8(b) and 9(b) respectively.
Pursuant to s.545(1) of the FW Act the first and second respondents, within 21 days of the pronouncement of these orders, pay $4,793.80, being the sum of the amounts referred to in declarations 10 and 11, to a superannuation fund nominated by the applicant, such nomination to be communicated by the applicant to the respondents within 14 days of the pronouncement of these orders.
Pursuant to s.545 of the FW Act the first and second respondents pay to the applicant the amount of $26,538.09, such amount being the sum of the amounts referred to in declarations 8(c) and 9(c) respectively.
Judgment for the applicant against the first respondent in the amount of $58,845.52, such amount being the sum of $47,489.11 (being the amount which, in breach of the agreement it made with the applicant on 18 March 2014 (March Agreement), the first respondent failed to pay to the applicant for work performed) and interest of $11,356.41.
The first respondent specifically perform the March Agreement by paying within 21 days of the pronouncement of these orders $4,419.16 to a superannuation fund nominated by the applicant, such nomination to be communicated by the applicant to the first respondent within 14 days of the pronouncement of these orders.
The application for costs made by the applicant is dismissed.
The parties have liberty to apply within 14 days of the pronouncement of these orders:
(a)for an order discharging declarations 8(c) and 9(c), and order 18; and
(b)for an order varying any of the amounts stated in the declarations and orders on the ground that those amounts are based on an incorrect interest rate or the amounts include amounts for interest that have been incorrectly calculated.
THE COURT NOTES
Payment by the first and second respondents of the amounts referred to in order 16(a) shall to the extent of the payment constitute a discharge of the liability the first respondent has under order 19.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1493 of 2017
| MARK COOTE |
Applicant
And
| MAINLINE ACCESS PTY LTD |
First Respondent
| SHAUN WHELAN |
Second Respondent
REASONS FOR JUDGMENT
(Corrected)
Introduction
On 12 October 2018 I published reasons for judgment (earlier reasons) in which I found that the first respondent (Mainline Access) contravened s.44, s.323, s.535, and s.536 of the Fair Work Act 2009 (Cth) (FW Act), and that the second respondent, Mr Whelan, was involved in those contraventions.[1] In the earlier reasons I also found that Mr Coote’s employment was covered by the Manufacturing and Associated Industries Award 2012 (Award), and I made findings about the hours Mr Coote worked and the amounts Mainline Access paid Mr Coote for the work he performed.
[1] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892
I did not make any findings about whether Mainline Access had contravened any term of the Award, other than the term requiring the making of superannuation contributions. As I explained in my earlier reasons, I was not in a position to do so because Mr Coote was paid at a rate that was higher than the rate payable under the Award, and I indicated that if Mr Coote wished to maintain an action for the recovery of amounts under the Award, he would need to appropriate the amounts Mainline Access paid to him against the amounts that became owing to him under the Award for the work he performed.
When I published my reasons for judgment I set the matter down for a directions hearing on 9 November 2018. When the matter came before me on that day I made orders by consent that included the following orders (Orders):
1.The first and second respondent are, jointly and severally, to pay Mr Coote compensation of:
a.$55,776.93 in respect of unpaid wages and superannuation;
b.$7,946.49 in respect of accrued but untaken annual leave;
being $63,723.42 within 28 days of this order.
2.The first and second respondents are, jointly and severally, to pay Mr Coote interest on the amounts ordered at [1] above in accordance with the Federal Court of Australia Interest on Judgments Practice Note within 28 days of this order.
Although not apparent from the form of the Orders,[2] the $55,776.93 referred to in paragraph 1(a) of the Orders represents the sum of two amounts. The first, $47,489.11, is the sum of the amounts Mainline Access failed to pay to Mr Coote under what in the earlier reasons I described as the “March Agreement”.[3] I found that under that agreement Mainline Access agreed to pay Mr Coote at the hourly rate of $42. The second amount is $8,287.82 for superannuation, calculated on the assumption that Mainline Access was required to pay $47,489.11 to Mr Coote under the March Agreement.[4] The amounts comprised in the Orders are greater than the amounts Mainline Access failed to pay to Mr Coote under the Award. Those amounts are $9,548.29 for unpaid wages, and $3,868.66 towards a superannuation fund.[5]
[2] I made the Orders on the basis of short minutes of order that were handed up to me during the directions hearing on 9 November 2018.
[3] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [30]
[4] See Exhibit A, being letter dated 5 November 2018 from JFM Law to Thomas Cameron
[5] See Exhibit A
In addition to making the Orders, on 9 November 2018 I set the matter down for hearing on 5 February 2019 to hear an application for costs that the applicant, Mr Coote, proposed to make against the respondents, and also to hear submissions about the assessment of penalties for the contravening conduct which, in the earlier reasons, I found the respondents had engaged in. At the hearing before me on 5 February 2019 counsel for the respondents applied for an order that I set aside the Orders. Counsel for Mr Coote opposed that application. After I heard submissions on that question, and on the questions of costs and penalty, I listed the matter for judgment on 22 February 2019, and made directions for the parties to file further written submissions. The parties filed written submissions, and I arranged to postpone the delivery of judgment to 28 February 2019 to give me further time to consider the submissions the parties made.
These reasons for judgment, therefore, address the following questions.
a)Does the Court have jurisdiction to set aside the Orders and, if it does, should I set aside the Orders?
b)Should any penalty be imposed for any one or more of the respondents’ contraventions of civil remedy provisions I identified in the earlier reasons and, if so, for what amount or amounts?
c)Should the respondents pay Mr Coote’s costs?
Setting aside the Orders
Counsel for the respondents submits the Orders should be set aside for two reasons. First, the amounts the Orders require the respondents pay, jointly and severally, do not reflect the findings I made in the earlier reasons. More particularly, the amounts the Orders require Mr Whelan to pay does not reflect the amount Mainline Access failed to pay under the Award, but instead reflects the amounts Mainline Access was obliged to pay under the March Agreement.[6] The respondents submit that Mr Whelan was not a party to the March Agreement and, for that reason, he cannot have any liability under that agreement. Second, counsel for the respondents submits that the amounts the Orders require the respondents to pay includes an amount for superannuation. Counsel submits that an amount payable on account of superannuation cannot be paid to the employee, but must be paid to an appropriate superannuation fund. Counsel for the respondents further submits the Court has power to set aside the Orders because they are interlocutory in nature and, under r.16.05(2)(c) of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules), the Court may vary or set aside a judgment or order after it has been entered if “it is interlocutory”. Counsel also submits the Court has power under r.16.05(2)(e) of the FCC Rules because the Orders do not reflect the intention of the Court.
[6] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [30]
Counsel for Mr Coote, on the other hand, submits the Orders are not interlocutory and, for that reason, the Court does not have jurisdiction to set them aside. In any event, assuming the Court does have jurisdiction to set aside the Orders, it can only do so if some proper basis is demonstrated. Counsel submits, however, that the only basis on which the respondents rely for seeking to set aside the Orders is that the Court had no power to order that Mr Whelan be jointly and severally liable with Mainline Access to pay the wages Mainline Access had not paid to Mr Coote under the March Agreement. Counsel submits the Court does have that power. Counsel submits Mainline Access’s failure to pay amounts under the March Agreement constituted a contravention of s.323 of the FW Act, and for that reason represents the amount for which Mr Whelan is jointly and severally liable with Mainline Access to pay to Mr Coote. Counsel submits s.323 of the FW Act is not confined to amounts payable under an award or enterprise agreement; it also applies to amounts payable under a contract of employment. In those circumstances, counsel submits:
a)the amounts payable under the March Agreement were amounts payable to Mr Coote for the performance of work within the meaning of s.323 of the FW Act;
b)by failing to pay Mr Coote these amounts in full, Mainline Access contravened s.323 of the FW Act; and
c)Mr Whelan is capable of being an accessory to this contravention under s.550 of the FW Act, and in accordance with his concession at the hearing that he was involved in Mainline Access’s contraventions of provisions of the FW Act (which includes s.323), Mr Whelan is liable to pay to Mr Coote the amounts Mainline Access is liable to pay to Mr Coote for its contraventions of s.323 of the FW Act.
In response to these submissions, counsel for the respondents submits that it is not open to the Court not to set aside the Orders because the Orders may be capable of being justified on the ground that, on the findings I have made, Mainline Access contravened s.323 of the FW Act. Counsel for the respondents submits Mr Coote advanced no such case at the hearing.
From these competing submissions the following issues arise:
a)Are the Orders interlocutory?
b)Are the Orders in any event liable to be set aside because they do not reflect the intention of the Court?
c)Does the Court nevertheless have power to set aside the Orders, even if the Orders are not interlocutory or if they do reflect the Court’s intention?
d)Assuming the Court has power to set aside the Orders, is there a proper basis for setting them aside?
The determination of these questions may also be relevant to the assessment of penalties. If counsel for Mr Coote is correct, I will be required to assess penalties on the basis that the relevant contravening conduct is Mainline Access’s failure to pay amounts payable under the March Agreement, rather than Mainline Access’s failure to pay the lesser amounts under the Award.
Are the Orders “interlocutory”?
The question whether a judgment is final or interlocutory has usually arisen in the context of statutory provisions that confer rights of appeal from orders or judgments of a court. The usual consequence of characterising a judgment or order as “interlocutory” rather than as final is that an appeal may only be brought by the leave of the appeal court. In that context:[7]
the usual test for determining whether an order is final or interlocutory is whether the order, as made, finally determines the rights of the parties in a principal cause pending between them. That question is answered by determining whether the legal effect of the judgment is final or not. If the legal effect of the judgment is final, it is a final order; otherwise, it is an interlocutory order.
[7] Re Luck [2003] HCA 70, [4] (McHugh ACJ, Gummow and Heydon JJ)
Counsel for Mr Coote submits that, when considering whether a particular judgment is final or interlocutory, the relevant question is whether the making of the order finally resolves the action in response to which the order is made. That there may still be outstanding an application for an additional order does not deprive an order that has been made disposing of an action from the status of being final.
There is support for counsel’s submission. It has been held that where damages are not the gist of a cause of action, such as a cause of action for breach of contract, a judgment for the plaintiff with damages to be assessed is a final judgment.[8] And it has also been held that a judgment against a defendant for knowingly participating in a breach of trust with damages to be assessed was a final judgment.[9] On the other hand, declarations and orders that have been made finally disposing of claims for passing off and contraventions of the Trade Practices Act 1974 (Cth) (TPA) have been held to be interlocutory because the successful applicant had not yet elected whether it would seek damages or an account of profits.[10] It has also been held that a declaration that a respondent had contravened s.52(1) of the TPA was an interlocutory judgment in circumstances where it was ordered that damages for the contravention would be assessed.[11]
[8] Hall v Busst (1960) 104 CLR 206, at page 218 where Dixon CJ said: “An objection was taken to [the appeal’s] competence on the ground that the order appealed from was interlocutory. I think that the order was intended as a judgment for the plaintiff for damages to be assessed and therefore that it is final . . . .”
[9] National Australia Bank Ltd v Maher (No 2) [1999] VSCA 189
[10] Caterpillar Inc & Anor v Sun Forward Pty Ltd [1996] FCA 1187: “As the orders and declarations made by Drummond J included interlocutory orders in relation to damages and an account for profits, they did not finally dispose of the proceeding. Accordingly, the judgment is an interlocutory one and leave to appeal is necessary . . . . Both parties accepted that leave to appeal was necessary.”
[11] National Australia Bank Ltd v Cunningham (1990) [1990] FCA 310, [3], [18]
I turn, however, to the authority on which counsel for the respondents relies, and that is the judgment of Rares J in Australian Postal Corp v Stephens.[12] In that case an employer sought leave to appeal an order requiring the employer to reinstate the employee. The employee submitted the application for leave to appeal was incompetent because the order for reinstatement was final. Justice Rares did not accept that submission because the parties had asked the primary judge to defer the question of whether penalties should be imposed if the primary judge were to find the employer had contravened the FW Act. His Honour concluded that, in those circumstances, “the orders in relation to reinstatement were interlocutory because they did not finally determine the whole of [the employee’s] claim that he had taken to the court below”.[13]
[12] [2011] FCA 947
[13] [2011] FCA 947, [3]
Counsel for Mr Coote submits I should treat Stephens “with caution” because it relies on Jefferson Ford Pty Ltd v Ford Motor Co of Australia,[14] which, in turn involved conflicting views about whether an order was interlocutory or final. Whether or not counsel is correct about Jefferson, I do not think it is open to me to treat Stephens with caution because the judgment is binding on me. In any event, and with respect, Rares J’s judgment is consistent with the cases to which I have referred where orders or declarations determining parties’ rights have been held to be interlocutory because there remained for determination some outstanding claim for relief.
[14] [2008] FCAFC 60
I conclude, therefore, that the Orders are interlocutory and, for that reason, the Court has power to set aside the Orders under r.16.05(2)(c) of the FCC Rules. That, however, by itself says nothing about whether there is any ground for exercising the power to set aside the Orders. Whether or not such power should be exercised depends on whether the circumstances of this case engage the principles I discuss later in these reasons.
Orders not reflect intention of Court?
The ground on which counsel for the respondents submits the Orders do not reflect the intention of the Court is that the Orders are inconsistent with the findings contained in the earlier judgment.[15] I do not accept this submission. I made the Orders in response to, and in accordance with draft short minutes of order handed up to me at the directions hearing on 9 November 2018. My intention was to give effect to the apparent agreement between the parties. I think I can say with accuracy that when making the Orders I assumed the parties intended to give effect to the findings I had made, but I did not myself consider whether the Orders reflected the findings. The Court, therefore, does not have power under r.16.05(2)(e) to set aside the Orders.
[15] The Respondents Futrher Submissions Re Penalties and Costs, [24]
Other source of power for setting aside the Orders?
There is another source of power that may be available to this Court to set aside orders made by consent; and the nature of this power is to be found in cases that have held that superior courts have inherent jurisdiction to set aside orders made by consent, even after the orders have been entered.
A useful statement of the circumstances in which a superior court may do so was provided by Brennan J when sitting as a judge of the Supreme Court of the Australian Capital Territory in Permanent Trustee Co (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd.[16] After referring to the general rule that a perfected judgment cannot be recalled or varied, his Honour said:[17]
There are some exceptions to this general rule. The exceptions fall into three classes: those which are founded upon the inherent jurisdiction of the court to ensure that its procedures do not effect injustice; those which are authorized [sic] by statute; and those which override the general rule in order to give relief where the judgment is obtained by fraud or by an agreement which is void or voidable.
[16] (1976) 15 ACTR 45
[17] (1976) 15 ACTR 45. The authorities were recently reviewed by Beazley P in The Owners Strata Plan No 57164 v Yau [2017] NSWCA 341, [57]-[82]
The justification for the existence of the jurisdiction to set aside consent orders in the case of superior courts has been explained in terms of the inherent jurisdiction of such courts. In Logwon Pty Ltd v Warringah Shire Council, speaking of the jurisdiction of a superior court to set aside consent orders made under mistake, Sheller JA said:[18]
A superior court’s inherent jurisdiction to uphold, protect and fulfil its function by ensuring that justice is administered according to law and in an effective manner in my opinion enables it in the absence of a statutory limitation to discharge or revoke a consent order made by giving effect to a compromise of proceedings before the court and entered into by a party under a mistake.
[18] (1993) 33 NSWLR 13, at page 30
The notion of inherent jurisdiction does not apply to statutory courts, such as this Court. An analogous notion, however, does apply; and that is the implied power incidental to the exercise of the express powers that have been conferred on a statutory court. The notion of implied incidental power was explained by Bowen CJ in Jackson v Sterling Industries Limited, Bowen CJ:[19]
In relation to a statutory court such as the Federal Court it is wise to avoid the use of the words “inherent jurisdiction”. Nevertheless a statutory court which is expressly given certain jurisdiction and powers must exercise that jurisdiction and those powers. In doing so it must be taken to be given by implication whatever jurisdiction or powers may be necessary for the exercise of those expressly conferred. The implied power for example to prevent abuse of its process, is similar to, if not identical with, inherent power.
[19] [1986] FCA 343, at [18]. This passage was quoted with approval by Deane J in Jackson v Sterling Industries Ltd (1987) 162 CLR 612, pages 623-624
Other judges have explained the notion of implied incidental power. For example in Grassby v The Queen Dawson J said that:[20]
every court undoubtedly possesses jurisdiction arising from implication upon the principle that a grant of power carries with it everything necessary for its exercise . . . . Those implied powers may in many instances serve a function similar to that served by the inherent powers exercised by a superior court but they are derived from a different source and are limited in their extent.
[20] (1989) 168 CLR 1, pages 16-17
It would also be useful to refer to the following passage from the judgment of Gaudron J in Jago v District Court of New South Wales:[21]
[A] court necessarily has power (whether that power is identified as inherent power or a power necessarily to be implied from relevant statutory provisions) to control its own process and proceedings.
[21] (1989) 168 CLR 23, page 74
In my opinion it would be within this Court’s implied incidental power to set aside an order or judgment that has been entered by consent in the same circumstances in which it has been held it is within a superior court’s inherent jurisdiction to set aside a judgment or an order made by consent. Thus, even if the Orders are not interlocutory, this Court has jurisdiction to use its powers, and in particular the powers conferred on it by s.15(a) of the Federal Circuit Court of Australia Act 1999 (Cth) (FCC Act),[22] to set aside the Orders if, for example, the agreement pursuant to which the consent orders were made is liable to be set aside or is otherwise unenforceable, or where setting aside the Orders is necessary to ensure the Court’s procedures do not effect injustice on any of the parties, or where it is necessary to do so to ensure that justice is administered according to law. Further, even if the Orders are interlocutory, the grounds on which a superior court can set aside consent orders are the relevant grounds on which it is open to this Court to set aside the Orders.
[22] Which provides that “the Federal Circuit Court of Australia has power in relation to matters in which . . . it has jurisdiction to make orders of such kinds, including interlocutory orders, as the Federal Circuit Court of Australia thinks appropriate”.
Grounds for setting aside – Order does not reflect findings
As I have already noted, counsel for the respondents submits the Orders should be set aside because they do not reflect the findings made in the earlier reasons. Two questions arise. The first is whether it is a ground for setting aside a consent order that the order does not reflect or is inconsistent with the findings the court makes. The second question is, assuming that affords a ground for setting aside an order, whether the Orders do not reflect the findings made in the earlier reasons.
Turning to the first of these questions, apart from relying in r.16.05(2)(e) of the FCC Rules (which I have found does not apply), counsel for the respondents has not articulated the reason why an order made by consent that does not reflect findings made by the court should lead the court to set aside the order. Counsel has not referred to any authority, and in the limited research I have undertaken, I have not found any authority on the question. In my opinion, however, there is an obvious reason why a consent order made by a court that does not reflect findings the court has made after a contested hearing are amenable to being set aside. An order made by a court “should conform to legal principle”, and a court would be justified not to make orders by consent “if they do not conform to legal principle”.[23] A fundamental legal principle is that any order a court makes must be one that is available to be granted, given the findings of fact and law the court has made. A consent order would not be made in conformity with legal principle if the findings of fact and law the court has made cannot support the orders, or if the orders are inconsistent with the court’s findings of fact and law. In my opinion, therefore, where a consent order has been made contrary to these principles, this Court’s implied incidental power to ensure the proper exercise of its express powers extends to setting aside the consent order.
[23] Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150, at pages 165-166
The second question is whether the Orders are not based on findings I made in the earlier reasons or are even inconsistent with those findings. That requires me to set out the claims Mr Coote made based on s.323 of the FW Act, and the findings I made in relation to the claims. I begin by noting that Mr Coote did not allege in his application or statement of claim that Mainline Access contravened s.323 of the FW Act. That allegation was first made in his counsel’s written submissions that were filed shortly before the hearing. After setting out the text of s.324 of the FW Act (which identifies deductions an employer may permissibly make from wages due to an employee), counsel submitted as follows:[24]
[24] Applicant’s Submissions, 11.09.2017, [37]-[38]
37. None of the circumstances in s.324(1) are enlivened. The express deductions are barely (if at all) explained, let alone authorised in writing. Accordingly, the deductions from Mr Coote’s wage were improperly made and are no defence to mainline Access’s breach of its obligations under s.323.
38. In failing to pay Mr Coote $71,808 in respect of his ordinary hours, mainline Access has contravened:
a. Section 323 of the Act, by failing to pay Mr Coote in full and in money; and
b. Section 45 of the Act, by failing to comply with cl.34 (Payment of Wages) of the Award.
Counsel for the respondents did not object to Mr Coote relying on s.323 of the FW Act. To that extent, therefore, the respondents may be taken to have chosen to disregard the pleadings. The claim based on contravention of s.323 that was before me, however, was that articulated in counsel for the respondents’ written submissions. The claim was directed to Mainline Access deducting amounts from wages Mainline Access owed to Mr Coote. Mr Coote did not claim that Mainline Access contravened s.323 by failing to pay to Mr Coote the amounts that were due to him under the March Agreement. That is reflected in the finding I made on Mr Coote’s claim based on contravention of s.323 of the FW Act, namely, that Mainline Access “contravened s.323 of the FW Act by paying the amounts it did to Mr Coote after it made the deductions”.[25]
[25] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [88]
Mr Coote did claim that by not paying the amounts due to him under the March Agreement, Mainline Access contravened a provision of the FW Act. But it was s.45 of the FW Act Mr Coote claimed Mainline Access contravened, not s.323 of the FW Act. Further, although I did not accept Mr Coote’s claim that he was entitled to recover the hourly rates he worked under the terms of the Award, I found that Mr Coote could pursue concurrently two actions, one under the March Agreement, and one under s.545 of the FW Act for such amounts as remained owing to him under the Award after appropriation of the amounts Mainline Access paid to the applicant pursuant to the March Agreement. I made no finding that Mr Coote could pursue an action against Mr Whelan to recover amounts Mainline Access failed to pay to Mr Coote under the March Agreement.
In my opinion, the Orders are not supported by the findings I made. First, the only remedy to which I found Mr Coote was entitled to recover wages owing to him under the March Agreement was an action against Mainline Access under the March Agreement. I made no finding that Mainline Access had contravened s.323 of the FW Act by failing to pay to Mr Coote wages owing to him under the March Agreement and that Mr Coote had a right of action under the FW Act against Mainline Access to recover the wages payable under the March Agreement. Second, I found that Mainline Access “contravened s.323 of the FW Act by paying the amounts it did to Mr Coote after it made the deductions”, being the deductions I identified in the earlier reasons.[26] That is inconsistent with the premise on which counsel for Mr Coote now seeks to support the Orders, namely, that Mainline Access contravened s.323 of the FW Act by failing to pay wages due to Mr Coote under the March Agreement. Even if not inconsistent, I made no finding to the effect that Mainline Access contravened s.323 of the FW Act by failing to pay wages due to Mr Coote under the March Agreement, which means there is no finding that is capable of supporting the premise on which the Orders are now sought to be supported. Nor is there any allegation in the pleading, nor was there any allegation otherwise made, to the effect that Mainline Access contravened s.323 of the FW Act by failing to pay wages due to Mr Coote under the March Agreement
[26] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [88]
In light of my conclusion that the Orders are not supported by the findings I made, I am of the opinion that, subject to the discretionary consideration I discuss later, the Orders are liable to be set aside.
Grounds for setting aside – agreement pursuant to which Orders made not enforceable?
I have already referred to the power available to courts to set aside a consent order if the agreement pursuant to which the consent order was made is liable to be set aside. One authority that is often referred to is Huddersfield Banking Co Ltd v Henry Lister & Son Ltd.[27] In that case a consent order permitting the sale of certain goods was set aside on the ground that the parties who consented to the order made a common mistake that the goods in question were fixtures. Lindley LJ said he had not “the slightest doubt that a consent order can be impeached, not only on the ground of fraud, but upon any grounds which invalidate the agreement it expresses in a more formal way than usual”, and that “if that agreement cannot be invalidated the consent order is good. If it can be, the consent order is bad”.[28] Lopes LJ said:[29]
The law seems to be that a consent order may be set aside for the same reasons as those on which an agreement may be set aside. It appears to me that when once a common mistake is established you can set aside an agreement.
[27] [1895] 2 Ch 273
[28] [1895] 2 Ch 273, page 280
[29] [1895] 2 Ch 273, page 283
And Kay LJ said:[30]
… both on principle and on authority, when once the Court finds an agreement has been come to between parties who were under a common mistake of a material fact, the Court may set it aside, and the Court has ample jurisdiction to set aside the order founded upon that agreement.
[30] [1895] 2 Ch 273, page 284
It has not been contended by the respondents that the agreement between the parties that led to my making the Orders is liable to be set aside because of mistake or some other reason. There is one matter, however, that may be worth noting. On the material before me it appears that no consideration was given to support Mr Whelan’s agreement that he be jointly and severally liable to pay the amounts Mainline Access is liable to pay to Mr Coote under the March Agreement. There is no suggestion that Mr Coote agreed to compromise the amounts which, on the basis of the findings I made in the earlier decision, Mr Coote is entitled to be paid under the March Agreement. Thus, there is nothing before me to suggest Mr Coote agreed to suffer some detriment as consideration for Mr Whelan’s promise to assume a liability which none of the findings I made suggested Mr Whelan has to pay to Mr Coote wages Mainline Access owed to Mr Coote under the March Agreement. Nor is there any suggestion in the material before me that Mr Whelan received any benefit for assuming a liability to pay the wages payable under the March Agreement in circumstances where he had no legal obligation to pay. If, as on the material it appears might be the case, Mr Whelan’s agreement to consent to the Orders was not supported by any consideration, the agreement pursuant to which I made the Orders is not a legally binding agreement, and that might afford an additional ground for setting aside the Orders.
I make no findings about these matters, however, because the enforceability of the agreement pursuant to which the Orders were made was not raised as an issue by any of the parties.
Discretionary considerations
I next consider whether there are any discretionary considerations against my setting aside the Orders.
There is one potential discretionary consideration; and that is the submission counsel for Mr Coote made that, on the findings contained in the earlier reasons, and on the concessions Mr Whelan made that he was involved in Mainline Access’s contraventions of the FW Act, it is inevitable that Mainline Access contravened s.323 of the FW Act by not paying to Mr Coote the amounts owing to him under the March Agreement, that Mr Whelan was involved in Mainline Access’s contraventions of s.323, and that the loss Mr Coote suffered, and for which he would be entitled to be compensated by an order made under s.545 of the FW Act, is the wages he was not paid under the March Agreement. That submission if correct, may be a powerful reason against my exercising the discretion to set aside the Orders.
The starting point in assessing counsel’s submission is the text of s.323 of the FW Act, which is as follows:
(1) An employer must pay an employee amounts payable to the employee in relation to the performance of work:
(a) in full (except as provided by section 324); and
(b) in money by one, or a combination, of the methods referred to in subsection (2); and
(c) at least monthly.
(2) The methods are as follows:
(a) cash;
(b) cheque, money order, postal order or similar order, payable to the employee;
(c) the use of an electronic funds transfer system to credit an account held by the employee;
(d) a method authorised under a modern award or an enterprise agreement.
(3) Despite paragraph (1)(b), if a modern award or an enterprise agreement specifies a particular method by which the money must be paid, then the employer must pay the money by that method.
The principal provision is s.323(1). It does not prohibit conduct; it mandates an employer to undertake conduct. The conduct consists of paying to an employee “amounts payable to the employee in relation to the performance of work”. There are at least two circumstances in which an amount may become payable to an employee in relation to work performed by an employee. The first, and most fundamental, is under the contract of employment. The second is under a term of an award. The conduct that s.323(1) of the FW Act mandates, however, does not only consist of paying to the employee amounts payable in relation to the performance of work. That is, s.323(1) does not simply require the employer to pay the employee amounts payable to the employee in relation to work performed. Subsection 323(1) requires payment of amounts payable for work performed together with three other things.
The first is the matter required by s.323(1)(a) of the FW Act, namely, that the payment must be “in full”. One available construction of s.323(1)(a) is that it operates only at the point when the employer makes a payment to the employee in relation to work performed by the employee. What s.323(1)(a) requires is that, when the employer makes a payment to an employee in relation to the performance of work, the payment the employer makes must be the full amount payable to the employee. This construction is supported by the consideration that if the intention of s.323(1)(a) of the FW Act were to require the employer to pay amounts payable for work performed, there would have been no need for it to have added the requirement that it be paid “in full”; an unqualified requirement to pay money that is payable for work performed necessarily implies an obligation that it be paid in full.
On this construction, therefore, s.323(1)(a) of the FW Act is not contravened only because an employer fails to pay an employee any amount payable for the performance of work. In other words, s.323(1)(a) does not have the effect of exposing an employer to a pecuniary penalty only because an employer, in breach of a term of a contract of employment, fails to make any payment for work performed under the contract. Paragraph 323(1)(a) of the FW Act is contravened only if an employer makes a payment to the employee for work performed, but the amount the employer tenders is insufficient to discharge the obligation the employer incurred because of the employee’s performance of work, and purportedly on account of which the employer tenders payment.
The second thing s.323(1) of the FW Act requires an employer to do is that provided for by s.323(1)(b), namely, that the employer pay amounts payable to the employee in relation to the performance of work “in money by one, or a combination, of the methods referred to” in s.323(2). More obviously than s.323(1)(a) of the FW Act, the requirement imposed by s.323(1)(b) operates at the point when the employer makes a payment to the employee in relation to work performed by the employee. It will be contravened if the employer tenders to an employee something other than money purportedly to discharge employer’s obligation to pay the employee for having performed work.
The third and final thing s.323(1) of the FW Act requires an employer to do is that provided for by s.323(1)(c), namely, that the employer pay at least monthly amounts payable to the employee in relation to the performance of work. This obligation deals with the discrete matter of the times by which an employer must pay amounts otherwise payable to an employee for work performed. It has the effect of overriding terms of contracts of employment that provide for payment for work performed at intervals greater than a month, or contractual obligations to perform work that, under the common law, would be construed as entire obligations which would entitle the employee to payment only on the completion of the work.[31] Paragraph 323(1)(c) of the FW Act, however, does not require the employer to pay an amount the employer is otherwise obliged to pay to the employee for work performed.
[31] See, for example, Cutter v Powell [1795] EngR 4125; (1795) 6 TR 320; 101 E.R. 573
On this analysis, s.323(1) of the FW Act does not per se require an employer to pay amounts an employer is otherwise liable to pay under a term of a contract to an employee for work the employee performs. Paragraphs (a) and (b) of s.323(1) require an employer to do things at the point at which the employer tenders money or some other thing to an employee on or purportedly on account of work the employee has performed; and paragraph (c) of s.323(1) requires that the employer pay at least monthly whatever amounts the employer owes or may come to owe the employee for work performed.
The construction I have given to s.323 of the FW Act it is supported by a number of matters. First, there is s.542 and s.543 of the FW Act which provide as follows:
542 Entitlements under contracts
(1) For the purposes of this Part, a safety net contractual entitlement of a national system employer or a national system employee, as in force from time to time, also has effect as an entitlement of the employer or employee under this Act.
(2) The entitlement has effect under this Act subject to any modifications, by a law of the Commonwealth (including this Act or a fair work instrument), a State or a Territory, of the safety net contractual entitlement.
543 Applications for orders in relation to statutory entitlements derived from contracts
A national system employer or a national system employee may apply to the Federal Court or the Federal Circuit Court to enforce an entitlement of the employer or employee arising under subsection 542(1).
The expression “safety net contractual entitlement” is defined in s.12 of the FW Act to mean:
an entitlement under a contract between an employee and an employer that relates to any of the subject matters described in:
(a)subsection 61(2) (which deals with the National Employment Standards); or
(b)subsection 139(1) (which deals with modern awards).
None of the subject matters described in the National Employment Standards, being the subjects identified in s.61(2) of the FW Act, concerns wages. Many of the subjects contained in s.139(1) of the FW Act do concern wages. What is relevant is that an entitlement under a contract that is a “safety net contractual entitlement” – such as an entitlement to be paid at a particular rate of wages - may be enforced by the person who holds the entitlement applying to this Court or to the Federal Court. The right of enforcement, however, is provided for by s.543, not by s.545 of the FW Act. That, in turn, suggests that an employer’s failure to perform a term of a contract that is a “safety net contractual entitlement”, such as a term requiring the employer to pay wages, is not, only because of the breach of the term of the contract, a contravention of a civil remedy provision. In those circumstances, it might be considered to be inconsistent with s.542 and s.543 of the FW Act to construe s.323(1) of the FW Act as rendering without more an employer’s failure to abide by a term of the contract to pay wages for work performed a contravention of a civil remedy provision, thereby exposing the employer to the risk of the imposition of a civil penalty, and also exposing persons involved in the breach liable not only to the risk of the imposition of a civil penalty, but also liable to an order for compensation under s.545 of the FW Act.
A second matter which supports the view that s.323(1) of the FW Act does not per se require an employer to pay amounts an employer is otherwise liable under a term of a contract to pay to an employee for work the employee performs is the mischief that is addressed by s.323 of the FW Act. In Construction Forestry Mining and Energy Union v Mammoet Australia Pty Ltd, the High Court said:[32]
It is tolerably clear from the terms of s 323(3), and is confirmed by the Explanatory Memorandum which accompanied the Bill for the Fair Work Act 2009, that s 323(1) addresses the same mischief addressed by “Truck Acts” as they had by then come to exist in each State, that is, that an employee’s entitlement to payment for work might be compromised by an employer requiring the employee to accept some form of payment in kind of less value than the payment of money forgone.
[32] [2013] HCA 36, [45] (references omitted)
Given the mischief s.323(1) of the FW Act is intended to address, it would be surprising if it were construed not only as intending to regulate the means and the times by which an employer must perform his or her obligation to pay for work an employee performs, but also as intending that the employer perform the obligation that s.323(1) of the FW Act assumes the employer already has to pay for work that is performed.
There are suggestions in the cases, however, that the effect of s.323(1) of the FW Act is to require an employer to perform a term the employer is already under an obligation to perform requiring the payment of money for work done. First, there is the judgment of Jessup J in Murrihy v Betezy.com.au Pty Ltd.[33] In that case the applicant claimed that, in contravention of s.323 of the FW Act, the employer did not pay commissions that were said to be payable under a contract. The employer apparently did not dispute that by failing to pay commissions due under the contract it had contravened s.323 of the FW Act. That is apparent in the following passage from his Honour’s judgment:[34]
It was not suggested by the respondents that their failure to pay the applicant’s commission entitlements did not involve a contravention of s 323(1). It clearly was such a contravention. Pursuant to cl 3 of the 2009 commission agreement, and the corresponding provision in the 2010 commission agreement, commission ought to have been paid monthly and, as it happens, that corresponds with the least frequent basis of payment for which s 323(1) provides. Subject to any submissions I may receive from the parties, it appears that there was, therefore, a contravention of the section at the end of every month during which a commission entitlement arose.
[33] [2013] FCA 908
[34] [2013] FCA 908, [119]
Later in the judgment, however, his Honour said:[35]
A significant innovation introduced by the FW Act was the imposition of an obligation upon a “national system employer” (such as each of the respondents was) to pay its employees amounts payable to them in relation to the performance of work in full at least monthly: s 323(1) of the FW Act. Thus the legislation picks up, amongst other things, entitlements arising under contracts of employment and gives statutory consequences to an employer’s failure to make good on them.
[35] [2013] FCA 908, [142]
It may be noted that his Honour’s observation about the effect of s.323(1) of the FW Act does not purport to represent the construction of the text of that provision, considered alone, or in the broader statutory context in which s.323(1) appears. That may not be surprising. As I have already noted, it appears the employer accepted that s.323(1) of the FW Act had been contravened; and his Honour expressed this opinion, not in the course of considering the effect of s.323(1) of the FW Act, but when considering the question of whether “the seeking of legal advice falls within the connotation of a complaint or inquiry within the meaning of s 341(1)(c)(ii)” of the FW Act.[36]
[36] [2013] FCA 908, [142]
Next there is the judgment of Buchanan J in Association of Professional Engineers, Scientists and Managers, Australia v Wollongong Coal Limited.[37] In that case, an employee association claimed that an employer contravened s.323 of the FW Act by failing to pay bonuses to employees under their contracts of employment. It was not alleged the employer contravened any other provision of the FW Act. The employer applied to have the proceeding dismissed on the ground the employees had no reasonable prospects of succeeding on their claims. Buchanan J disagreed the employees did not have reasonable prospects of success. Having referred to Jessup J’s observations on s.323 in Murrihy, Buchanan J said:
[37] [2014] FCA 878
[30] The ordinary language of s 323 is apt to identify, and provide for the enforcement of, an obligation to pay amounts which have become payable, as well as the more specific obligation to pay such amounts in full, in money and at least monthly (subject to the statutory exemptions which accompany the obligation). It does so by permitting the imposition of a civil penalty for contravention of the obligation.
. . . .
[36] . . . . it seems to me that I should approach the question of construction of s 323 in conformity with the views expressed by Jessup J. I should do so as a matter of comity in any event, but I also regard the language of s 323 as sufficiently wide to accommodate the present proceedings. I do not accept the more confined construction advanced by the respondents.
Finally, I should refer to the following passage from the judgment of Bromberg J in Australian Education Union v State of Victoria (Department of Education and Early Childhood Development):[38]
Section 323(1) operates upon an existing obligation on the employer to pay. But it also imposes a further statutory obligation to pay in full, in money and at least monthly (except as provided for by s 324): Association of Professional Engineers, Scientist and Managers, Australia v Wollongong Coal Limited [2014] FCA 878 at [28]–[33] (Buchanan J); and Murrihy v Betezy.com.au Pty Ltd [2013] FCA 908;(2013) 238 IR 307 at [142] (Jessup J).
[38] [2015] FCA 1196, [265]
In my opinion, there is no settled authority to the effect that an employer contravenes s.323(1) of the FW Act only because an employer, in breach of a term of a contract, fails to pay an employee for work done. As I have already noted, in Murrihy it appears the employer conceded it had contravened s.323(1) which means that the opinions his Honour expressed were not the result of his Honour considering any competing submissions. In Wollongong Coal Limited Buchanan J decided nothing further than that a claim based on s.323(1) of the FW Act for the payment of amounts an employer was contractually bound to pay did not have no reasonable prospects of success. Perhaps more significantly, however, is the passage from the judgment of Bromberg J in Australian Education Union I have set out. It indicates his Honour was of the view that s.323(1) added a statutory obligation to an existing obligation to pay, thus suggesting that his Honour was of the view that s.323(1) of the FW Act did not require an employer to perform his or her existing obligations per se but, rather, it required the employer to perform the additional matters provided for by s.323(1) of the FW Act, namely to pay in full, in money, and at least monthly.
Given my analysis of the text of s.323(1) of the FW Act, considered in the context of s.542 and s.545, the mischief it is intended to address, and the absence of any settled authority to the effect that an employer contravenes s.323(1) by omitting to pay any amount the employer is obliged to pay under a contract of employment, I do not accept counsel’s submission that on the findings contained in the earlier reasons, and on the concessions Mr Whelan made that he was involved in Mainline Access’s contraventions of the FW Act, it is inevitable that Mainline Access contravened s.323(1) by not paying to Mr Coote the amounts owing to him under the March Agreement, that Mr Whelan was involved in Mainline Access’s contraventions of s.323(1), and that the loss Mr Coote suffered, and for which he would be entitled to compensation by the making of an order under s.545 of the FW Act, is the wages he did not receive under the March Agreement.
Superannuation
In the earlier reasons I found that Mainline Access contravened cl.35.2 of the Award and, therefore, s.45 of the FW Act, by not making payments to a superannuation fund for the benefit of Mr Coote.[39] The Orders include the payment to Mr Coote of the amount of superannuation Mainline Access failed to pay but which it ought to have paid under the terms of the March Agreement. To that extent, the Orders are not supported by the findings I have made. The appropriate order should be that Mainline Access and, Mr Whelan should pay to a superannuation fund nominated by Mr Coote the amounts Mainline Access was required under the Award to pay.
[39] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [77]-[80]
Setting aside Orders – conclusion and proposed orders
I propose, therefore, to order to set aside the Orders pursuant to r.16.05(2)(c) of the FCC Rules. I propose to do so, however, on terms.
Although I am of the opinion that s.323(1) of the FW Act is not contravened only because an employer does not make a payment as required by a term of the contract, I am of the view that s.323(1) is contravened if an employer pays an amount to an employee, but the amount the employer pays is less than the amount the employer is required to pay. In those circumstance the employer has not paid to the employee “in full” amounts payable to the employee in relation to the performance of work. Further, where an employer has not paid an employee in full, then at the very least it is arguable that the loss an employee suffers is measured by the extent to which the employee was not paid in full.
In the earlier reasons I found that Mainline Access contravened s.323(1) of the FW Act by paying amounts to Mr Coote after it made the deductions identified in paragraph 87 of the earlier reasons.[40] Those deductions total $21,416.59. It is at the very least arguable that the loss Mr Coote suffered because of Mainline Access’s contravention of s.323(1) of the FW Act is the total of the amounts that had been deducted from his pay that was owed under the March Agreement. I propose, therefore, to set aside the Order on terms that I make a declaration that $21,416.59 represents the loss Mr Coote suffered because of Mainline Access’s contraventions and an order under s.545(2)(b) that Mainline Access and Mr Whelan pay to Mr Coote compensation in that amount together with interest. Given I have not heard argument about whether the $21,416.59 represents Ms Coote’s loss, however, I will reserve liberty to the parties to apply to set aside the declaration and order I propose to make.
[40] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [88]
There is material before me on the basis of which I can make orders for compensation in relation to the other contraventions; and that material consists of Exhibit A, being a letter dated 5 November 2018 from Mr Coote’s lawyer to the lawyer for the respondents. That letter quantifies the consequences of the findings contained in the earlier reasons as follows:
a)under the Award:
i)Mr Coote was entitled to be paid $46,075.59 but was paid only $39,751, meaning that Mr Coote was paid $9,548.29 less than what he was entitled to be paid under the Award; and
ii)Mainline Access was required to contribute $3,868.66 for superannuation in relation to Mr Coote, but it made no contribution, meaning that Mainline Access continues to be liable to make a contribution in that amount; and
b)under the March Agreement:
i)Mr Coote was entitled to be paid $87,240.23 but instead was paid only $39,751, meaning that Mr Coote was paid $47,489.11 less than what he was entitled to be paid under the March Agreement; and
ii)Mainline Access was required to contribute $8,287.82 for superannuation, but it made no contribution, meaning that Mainline Access continues to be liable to make a contribution in that amount;
c)the amount Mr Coote ought to have been paid for accrued but untaken annual leave is $7,946.40.
The orders for compensation that are available to be made on the basis of these calculations are as follows:
a)Judgment against Mainline Access in the sum of $47,489.11, together with interest.
b)An order under s.545(2)(b) of the FW Act that Mainline Access and Mr Whelan jointly pay to Mr Coote $17,494.69, together with interest. This is the sum of the Award underpayments and the amount of accrued but untaken annual leave.
c)An order under s.545(1) of the FW Act that Mainline Access and Mr Whelan pay to a superannuation fund nominated by Mr Coote the sum of $3,868.66.
That leaves the difference between the superannuation that Mainline Access is liable to pay under the March Agreement ($8,287.82) and the $3,868.66 payable under the Award, that difference being $4,419.16. Mainline Access’s failure to pay that amount is not the consequence of Mainline Access having contravened a civil remedy provision, which means that I cannot make an order under s.545 of the FW Act requiring Mainline Access to pay superannuation contributions to a superannuation fund. Mr Coote, therefore, is restricted to general law remedies that are available for breach of contract.
There are two potential remedies. One is damages. Mr Coote is entitled to be paid that amount of money that would place him in the position he would have been in had Mainline Access made the superannuation contributions. That amount, however, would not be represented by the $4,419.16 Mainline Access did not pay because, had Mainline Access made the contributions, Mr Coote would not have received the payment itself; the $4,419.16 would have been paid into a superannuation fund to which Mr Coote would not have access for many years. The amount of damages, therefore, would need to be discounted to take into account the fact that Mr Coote would receive the benefit of money possibly decades before he would be entitled to receive it. The calculation of the discount, however, would be difficult and at best result in an imprecise estimate. Assumptions would therefore need to be made about the superannuation fund into which the $4,419.16 would have been paid, the time by which Mr Coote could access the money, the returns Mr Coote would have earned had the amount been paid into a superannuation fund, and the discount that should be applied to take into account Mr Coote’s receiving the money years in advance of his entitlement to receive it. For these reasons, an award of damages is not an adequate remedy.
That leads to another potential remedy, and that is an order for specific performance. This Court has jurisdiction under s.543 of the FW Act to grant such general law remedies the Court otherwise has power to grant. Under s.8 of the FCC Act this Court is a court of record, and is a court of law and equity; and under s.15(a) of the FCC Act this Court has power in relation to which it has jurisdiction to “make orders of such kinds” the Court “thinks appropriate”. In my opinion, given the inadequacy of damages as a remedy for Mainline Access’s breach of the March Agreement by failing to make the superannuation contributions it had agreed to make, I propose to make an order that Mainline Access specifically perform the March Agreement by paying $4,419.16 to a superannuation fund nominated by Mr Coote. The order cannot require Mainline Access to pay an amount for interest because the March Agreement contains no term requiring it to pay interest. Although this will deprive Mr Coote interest, the remedy of damages nevertheless remains an inadequate remedy compared with an order for specific performance that can compel the payment of the payment of $4,419.16, but cannot compel the payment of any interest.
Interest
I have in referred to interest being included in the amounts the respondents will be ordered to pay. To the extent the order for compensation is made under s.545 of the FW Act, the source of the power to order interest is s.547 of the FW Act, and to the extent an order is made under the general law the source of the power to order interest is s.76 of the FCC Act. I propose that interest be calculated by applying the rates prescribed by the Interest on Judgments Practice Note (GPN-INT) issued by the Federal Court of Australia. That practice note provides for an interest rate of 4% above the cash rate last published by the Reserve Bank of Australia. I propose to apply the average rate of interest over the period for which interest is to be calculated, as follows:
Loss
Period[41]
Interest rate (average)
Amount of interest
Loss including interest
$9,548.29 (underpayment under Award)
01.01.2015 – 28.02.2019
5.75%
$2,283.35
$11,831.64
$7,946.40 (accrued but untaken annual leave)
15.4.2015- 28.02.2019
5.75%
$1,767.58
$9,713.98
$21,416.59 (s.323 of the FW Act)
01.01.2015 – 28.02.2019
5.75%
$5,121.50
$26,538.09
$3,868.66 (underpayment of super under Award)
01.01.2015 – 28.02.2019
5.75%
$925.14
$4,793.80
$47,489.11 (Underpayment under March Agreement)
01.01.2015 – 28.02.2019
5.75%
$11,356.41
$58,845.52
[41] I am aware that in relation to the contraventions based on the failure to pay wages and superannuation, and, for that reason, multiple contraventions or breaches of contract occurred before 1 January 2015. In my opinion, the evidence does not permit me to identify the date of each contravention and the amount involved in each contravention. I therefore have adopted 1 January 2015 as the appropriate date from which to calculated interest.
I have made these interest calculations without any submissions from the parties. In those circumstances, although I propose to make declarations and orders based on these calculations, I will reserve to the parties liberty apply to vary any of the amounts stated in the declarations and orders I propose to make on the ground that those amounts are based on an incorrect interest rate, or the amounts include amounts for interest that have been incorrectly calculated.
Penalties
I now turn to the question of penalties.
Statutory framework
Subsection 546(1) of the FW Act provides that this Court may, on application, order a person to pay a pecuniary penalty the Court considers is appropriate if the Court is satisfied the person has contravened a “civil remedy provision”. That expression is defined in s.539 of the FW Act to include the provisions identified in column 1 of the table to s.539(2) of the Act. Sections 44, 45, 323, 535, and 536 of the FW Act, being the provisions of the FW Act I have found Mainline Access and Mr Whelan contravened, are provisions included in that column.
Subsection 546(2) of the FW Act provides that the pecuniary penalty the Court may impose must not, where the person is an individual, be more than “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2)” and, if the person is a body corporate, must not be more than five times “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2)”. The maximum penalty units for each contravention of s.44, s.45, and s.323 of the FW Act are 60 penalty units for an individual and 300 for a body corporate, and the maximum penalty units for an individual, at the time of the contraventions, were 60 penalty units for an individual and 300 penalty units for a body corporate.
I also need to refer to s.12 of the FW Act which provides that “penalty unit” has the meaning given by s.4AA of the Crimes Act 1914 (Cth). It is common ground that $170 was penalty unit provided for by s.4AA for the period in which the contraventions I found occurred.
Principles
The approach to assessing penalties for contraventions of provisions of the FW Act was outlined by Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown as follows:[42]
(1) Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2) Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3) Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4) Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5) Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23] [71] and [102].
[42] [2017] FCA 1301, at [36]
In Fair Work Ombudsman v A To Z Catering Solution Pty Limited (No.3),[43] I noted that step 3 (which I understood to express the “one transaction principle”) could be taken to suggest that it is appropriate to further group contraventions after the application of s.557(1) of the FW Act. For the reasons I gave in A To Z Catering Solution,[44] the proper approach appears to be to assess the penalties to contraventions after the application of s.557(1) of the FW Act, and then to consider:[45]
whether the conduct giving rise to separate contraventions was such that the separate imposition of penalties would be effectively imposing multiple penalties for either the same conduct or for overlapping parts of the same conduct which separately went to make out the separate contraventions; and
ensure that a person who has engaged in contravening conduct is not punished twice for the same conduct and to ensure that the total penalty imposed in respect to the contraventions is “just and appropriate” and not disproportionate.
[43] [2018] FCCA 3574, at [27]
[44] [2018] FCCA 3574, at [28]
[45] Australian Building and Construction Commissioner v Construction, Forestry,Mining and Energy Union (the BKH Contractors Case) (No 2) [2018] FCA 1563, [59] (Flick J)
That is the approach I will follow in this case.
In ABCC v CFMEU the Full Federal Court provided the following guidance to assessing penalties:[46]
[46] [2017] FCAFC 113, [100]-[104]
The fixing of a pecuniary penalty involves the identification and balancing of all the factors relevant to the contravention and the circumstances of the defendant, and making a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty.
….
In general terms, the factors that may be relevant when fixing a pecuniary penalty may conveniently be categorised according to whether they relate to the objective nature and seriousness of the offending conduct, or concern the particular circumstances of the defendant in question.
The factors relating to the objective seriousness of the contravention include: the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the defendant is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention.
The factors that concern the particular circumstances of the defendant, particularly where the defendant is a corporation, generally include: the size and financial position of the contravening company; whether the company has been found to have engaged in similar conduct in the past; whether the company has improved or modified its compliance systems since the contravention; whether the company (through its senior officers) has demonstrated contrition and remorse; whether the company had disgorged any profit or benefit received as a result of the contravention, or made reparation; whether the company has cooperated with and assisted the relevant regulatory authority in the investigation and prosecution of the contravention; and whether the company has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law.
It would also be useful to refer to what the Full Federal Court said in the context of assessing pecuniary penalties for contraventions of the Trade Practices Act 1974 (Cth) in Flight Centre Ltd v Australian Competition and Consumer Commission (No 2):[47]
[T]he task is one that is evaluative, taking into account all the circumstances of the case, not to be reached mechanically or by some illusory process of exactitude, but rather by evaluation that is articulated to a point (but no further) that is useful and meaningful. One starts the process by giving proper weight to the statutory maximum as referable to the most serious kind of contravention.
[47] [2018] FCAFC 53, at [55]
Often referred to as relevant to assessing penalties are the factors identified by Tracey J in Kelly v Fitzpatrick,[48] which his Honour adopted from the judgment of Mowbray FM in Mason v Harrington Corporation Pty Ltd.[49] Those factors are:
[48] [2007] FCA 1080, [14]
[49] [2007] FMCA 7
a)the nature and extent of the conduct which led to the breaches;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the breaches;
d)whether there had been similar previous conduct by the respondent;
e)whether the breaches were properly distinct or arose out of the one course of conduct;
f)the size of the business enterprise involved;
g)whether or not the breaches were deliberate;
h)whether senior management was involved in the breaches;
i)whether the party committing the breach had exhibited contrition;
j)whether the party committing the breach had taken corrective action;
k)whether the party committing the breach had cooperated with the enforcement authorities;
l)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
m)the need for specific and general deterrence.
Also relevant is the maximum penalty for the contravention provided for by the FW Act; and here I need only refer to the following passage from the judgment of Flick J in The BKH Contractors Case (No 2):[50]
In undertaking the task of assessing and quantifying the penalties to be imposed, the maximum penalty prescribed by the Commonwealth legislature for a specific contravention serves as a “yardstick” against which the assessment of penalties is generally to proceed . . . .
[50] [2018] FCA 1563, [19]
Preliminary matter
Counsel for the respondents drew my attention to Mr Coote not having included in the application by which he commenced this proceeding, or in his statement of claim, a claim for an order under s.546 of the FW Act that penalties be imposed. Counsel accepted, however, that before the hearing on liability commenced, counsel for Mr Coote stated in her written submissions that Mr Coote was seeking the imposition of penalties. Counsel who then appeared for the respondents did not object. In those circumstances, I do not see that Mr Coote’s not having included in his application or statement of claim a claim for the imposition of a penalty now prevents him from claiming the Court impose a penalty.
Counsel for the respondents also drew my attention to Mr Coote not having sought any declarations, and to my not having made any declaration that the respondents have contravened provisions of the FW Act. It was not suggested, however, that that prevents me from considering an application for the imposition of a penalty; nor does it prevent me from making declarations in any event, if I consider it is appropriate that I do so.
The contraventions
Counsel for the respondents also submitted that the Court has made no declaration identifying with precision the contraventions for which the applicant seeks orders for the imposition of penalties. In those circumstances, counsel submits that on the findings contained in the earlier reasons, Mainline Access engaged in conduct that contravened four provisions.[51] I do not accept these submissions.
[51] Respondent’s Outline of Submissions Re Penalties and Costs, [24]
It is true I have made no declarations. And it is true that I made no finding that Mainline Access contravened any term of the Award or that Mr Whelan was involved in any such contravention. I made no such finding, however, because I found that whether or not Mainline Access did contravene a term of the Award depended on whether, after appropriating the amounts that Mainline Access paid to Mr Coote, there are obligations under the Award that remained undischarged, and on the material before me the answer to that question was not apparent. I did, however, make two conditional findings. One was that, to the extent the money Mainline Access paid to Mr Coote under the March Agreement did not discharge the amounts for which Mainline Access became liable under the Award, Mainline Access contravened a term or terms of the Award and, therefore, Mainline Access contravened s.45 of the FW Act.[52] The second conditional finding is that if Mr Coote maintains his action for non-payment of amounts under the Award for hours worked and if, after the appropriation of the payments he received from Mainline Access there are amounts owing under the Award, Mr Whelan will have been involved in Mainline Access’s breaches of the Award and, therefore, Mainline Access’s contraventions of s.45 of the FW Act.[53]
[52] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [110(i)]
[53] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [96]
By 9 November 2018, when I made the consent orders, Mr Coote had appropriated the amounts he had been paid against the obligations Mainline Access incurred under the Award. The results of the appropriation are set out in Exhibit A, and they are to the effect that Mainline Access underpaid Mr Coote $9,548.29 of the amounts to which Mr Coote was entitled under the Award. Although Mr Coote has not identified the term of the Award Mainline Access contravened, it is clear that Mainline Access contravened cl.34 of the Award.[54] Having regard to these matters, it is open to me to make a declaration to the effect that Mainline Access contravened s.45 of the FW Act by failing to pay to Mr Coote, contrary to cl.34 of the Award, amounts totalling $9,548.29, and that Mr Whelan was involved in those contraventions. I propose to make declarations to that effect and assess penalty in relation to those contraventions.
[54] There is attached to the “Applicant Submissions in Reply Re penalty and Costs” a document titled “Annexure A – Award Underpayments”. It includes a number of tables, the first two tables of which have columns that include the headings “Award C10 Rate: $19.07”, and “Award C10 rate: $19.64”. During the hearing of 5 February 2019 counsel for Mr Coote said that the amounts stated in the annexure represent “the base trade award rate”.
Although in the earlier judgment I found that Mainline Access contravened cl.35.2 of the Award and, therefore, s.45 of the FW Act by failing to make any superannuation contributions, I did not make a finding of the amounts Mainline Access was required but failed to contribute under the Award. Exhibit A records that Mainline Access was required to contribute $3,868.66. Thus, it is open to me to make a declaration to the effect that Mainline Access contravened s.45 of the FW Act by failing to make superannuation contributions in relation to Mr Coote’s employment in the amount of $3,868.66, contrary to cl.35.2 of the Award, and that Mr Whelan was involved in those contraventions. I propose to make declarations to that effect and assess penalty in relation to that contravention.
There are four other contraventions. These are
a)Mainline Access failing to pay to Mr Coote accrued but untaken annual leave, contrary to s.90(2) of the FW Act. That constitutes a contravention of s.44 of the FW Act.
b)Mainline Access making deductions from amounts that were payable to Mr Coote for work he performed. That constitutes contraventions of s.323 of the FW Act.
c)Mainline Access failing to keep records s.535 of the FW Act required be kept.
d)Mainline Access failing to provide payslips to Mr Coote, contrary to s.536 of the FW Act.
Although Mainline Access’s conduct involved multiple contraventions of cl.34 and cl.35.2 of the Award, and s.323, s.535, and s.536 of the FW Act, counsel for Mr Coote has proceeded on the basis that each of these multiple contraventions should be treated as one contravention. In my opinion, that is the correct approach because of s.557(1) of the FW Act.
My task, therefore, is to assess penalties for the six contraventions I have identified.
Contravention of s.45 by failing to pay wages under Award
Nature and extent of conduct and circumstances in which it occurred. The relevant conduct is set out in the earlier reasons.[55] The conduct reveals that up to around October 2014 Mainline Access made more or less regular payments to Mr Coote, but during the period from around October 2014 to April 2015 Mainline Access did not pay Mr Coote, or it paid him very little, for work Mr Coote performed. This conduct is serious, and is a matter that weighs in favour of assessing the penalty at the higher end of the scale.
[55] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [31]-[34], [97], [98]
Counsel for the respondents submits that an important circumstance I should take into account is that, on my findings, Mainline Access and Mr Coote proceeded on the basis that Mr Coote was engaged as an independent contractor. That the parties may have considered Mainline Access engaged Mr Coote as an independent contractor does not palliate the gravity attached to Mainline Access’s failure to pay to Mr Coote money for work he performed. Whether or not Mainline Access and Mr Whelan believed Mr Coote was engaged as an independent contractor, the fact is Mainline Access did not pay Mr Coote money for the work he performed.
Counsel for the respondents referred to evidence given by Mr Whelan that he and Mr Coote had a close personal relationship both at work and socially, and that their personal and professional relationship were closely tied together. To the extent those considerations are relevant, they would tend to constitute matters of aggravation. I do not, however, consider the matters relevant.
Finally, counsel for the respondents also refers to Mainline Access’s contravening conduct having affected only one employee. That is a matter that weighs in favour of assessing the penalty at the lower end of the scale.
Nature and extent of any loss or damage sustained. Mr Coote was underpaid amounts totalling $9,548.29. That is a significant amount, and weighs in favour of assessing the penalty at the higher end of the scale.
The size of the business enterprise involved. It appears, and I am prepared to find, that the business Mainline Access conducted was small. That, however, does not by itself carry much weight in the assessment of penalties. Small businesses “have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur”, and that a penalty must be imposed at a meaningful level.[56]
[56] Kelly v Fitzpatrick [2007] FCA 1080, [30]
Deliberateness of contraventions. I made no finding that Mainline Access or Mr Whelan were aware that the Award or any other award covered Mainline Access’s engagement of Mr Coote to perform work. The findings I have made, however, indicate that Mainline Access deliberately did not pay amounts owing to Mr Coote. That is a factor that weighs in favour of assessing the penalty at the higher end of the scale.
Contrition and corrective action. Counsel for the respondents points to admissions the respondents made in the proceeding, and in particular admissions to the effect that Mainline Access and Mr Coote were in an employment relationship, and that Mainline Access had not paid amounts owing to Mr Coote. These are matters that weigh in favour of assessing the penalty at the lower end of the scale. Counsel for the respondents also conveyed from the bar table that the respondents are sorry for the actions that led to the proceeding. Mainline Access, however, has not paid Mr Coote the amount of the underpayments. That is a matter that weighs in favour of assessing the penalty at the higher end of the scale.
Specific and general deterrence. There is no suggestion that Mainline Access is not trading or that Mr Whelan does not propose to continue managing Mainline Access. On the other hand, there is nothing to suggest Mainline Access will contravene provisions of the FW Act in the future. In these circumstances, the penalty that is to be imposed should not include an element for specific deterrence.
General deterrence, however, should constitute a significant factor in the penalty that should be assessed. The principal, if not the only, purpose for imposing penalties is to ensure compliance with the FW Act:[57]
Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is primarily, if not wholly, protective in promoting the public interest in compliance. The principal object of a pecuniary penalty is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene; both specific and general deterrence are important. A pecuniary penalty for a contravention of the law must be fixed with a view to ensuring that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business. In relation to general deterrence, it is important to send a message that contraventions of the sort under consideration are serious and not acceptable.
[57] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113, [98] (citations omitted)
It has also been said that a penalty “should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations”.[58]
[58] Ponzio v B & P Caelli Constructions [2007] FCAFC 65, at [93] (Lander J)
In my opinion, the penalty should be set at a level that sgnals to employers, particularly those in positions similar to that of Mainline Access, or the position that Mainline Access represented to Mr Coote (that is, not having sufficient funds to pay employees), who might be tempted not to inquire into their legal obligations as employers or not to comply with their legal obligations, that they face a significant risk of being exposed to the imposition of a pecuniary penalty if they are to succumb to such temptation.
Other matters. Counsel for the respondent refers to evidence that another employee had made a complaint to the Fair Work Ombudsman that was resolved, and submitted there is no evidence Mainline Access had previously breached the FW Act. These matters carry very little weight. That there is no evidence that Mainline Access has not previously contravened any provision of the FW Act is not a rational ground for finding that Mainline Access has always complied with the FW Act. The absence of evidence of previous contraventions, therefore, is a neutral factor.[59]
[59] See Sayed v Construction, Forestry, Mining and Energy Union:[2015] FCA 338, [51]
Assessment. Weighing all these matters, I assess the penalty for Mainline Access’s contraventions of cl.34 of the Award, and therefore of s.45 of the Award, and Mr Whelan’s involvement in those contraventions, as follows:
Respondent
Maximum Penalty
Penalty %
Amount
Mainline Access
$51,000
60%
$30,600
Mr Whelan
$10,200
60%
$6,120
Contravention of s.45 by failing to make superannuation contributions in contravention of cl.35.2 of Award
Nature and extent of conduct and circumstances in which it occurred. The relevant conduct consists of Mainline Access failing to make any contribution towards superannuation. [60] The contraventions constitute a complete repudiation by Mainline Access of its superannuation obligations in relation to Mr Coote and, for that reason, are serious. That is a matter that weighs in favour of assessing the penalty at the higher end of the scale.
[60] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [77]-[78], [99]
That Mainline Access and Mr Coote may have assumed that Mr Coote had been engaged as an independent contractor is not a matter that should tend to weigh in favour of assessing the penalty at the lower end of the scale. Whether or not Mainline Access and Mr Whelan believed Mr Coote was engaged as an independent contractor, the fact is Mainline Access agreed it would make superannuation contributions, but it failed to make any contributions.[61] That Mr Coote and Mr Whelan may have had a personal relationship is not relevant to the assessment of the penalty. Finally, that Mainline Access’s contravention related only to one employee is a factor that weighs in favour of assessing the penalty at the lower end of the scale.
[61] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [119(c)]
Nature and extent of any loss or damage sustained. The amount of the superannuation contribution Mainline Access failed to make totals $3,868.66. That is a significant amount, and weighs in favour of assessing the penalty at the higher end of the scale.
Other matters. What I have said above in relation to the size of Mainline Access’s business, the deliberateness of the contraventions, contrition and corrective action, specific and general deterrence, the handing of the complaint made by another employee, and the absence of evidence of any contravention of a provision of the FW Act apply to the contraventions of cl.35.2 of the Award and, therefore, s.45 of the FW Act.
Assessment. In light of these matters, I assess the penalty for Mainline Access’s contraventions of cl.35.2 of the Award, and therefore of s.45 of the FW Act, and Mr Whelan’s involvement in those contraventions, as follows:
Respondent
Maximum Penalty
Penalty %
Amount
Mainline Access
$51,000
60%
$30,600
Mr Whelan
$10,200
60%
$6,120
Contraventions of s.323 of the FW Act
The relevant conduct consists of Mainline Access making payments to Mr Coote after deductions from amounts Mainline Access believed were owing to Mr Coote for work he performed.[62] The deductions total $21,416.59.
[62] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [87], [101]
The considerations relevant to assessing penalty overlap with the conduct constituting mainline Access’s contraventions of cl.34 of the Award. That is because by deducting amounts Mainline Access failed to pay amounts it ought to have paid to Mr Coote. For that reason, the matters I considered when assessing the contraventions of cl.34 of the Award apply to the assessment of the penalty for Mainline Access’s contraventions of s.323 of the FW Act.
I therefore assess the penalty for Mainline Access’s contraventions of s.323 of the FW Act, and Mr Whelan’s involvement in those contraventions, as follows:
Respondent
Maximum Penalty
Penalty %
Amount
Mainline Access
$51,000
60%
$30,600
Mr Whelan
$10,200
60%
$6,120
Contraventions of s.44 of the FW Act by failing to pay accrued but untaken annual leave in contravention of s.90(2) of the FW Act
Nature and extent of conduct and circumstances in which it occurred. The relevant conduct consists of Mainline Access not paying to Mr Coote, contrary to s.90(2) of the FW Act, an amount that represents annual leave Mr Coote accrued but did not take.[63] The contravention constitutes a complete breach of the obligations Mainline Access had under s.90(2) of the FW Act to pay Mr Coote accrued annual leave. That is a factor that weighs in assessing the penalty at the higher end of the scale.
[63] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [81]-[85]
Relevant to assessing the penalty is the findings of fact I made relating to the relationship Mr Coote and Mainline Access considered themselves to be in. I found that after Mainline Access engaged Mr Coote as an employee, Mr Coote requested, and Mr Whelan agreed, that Mr Coote should be engaged as an independent contractor. I did not accept Mr Coote’s evidence that he and Mr Whelan agreed that Mr Coote would revert to being engaged as an employee. It was not suggested to Mr Whelan, and counsel for Mr Coote has not pointed to any evidence that suggests, that Mr Whelan did not believe that Mr Coote had been engaged as an independent contractor. That is a circumstance that weighs in favour of assessing the penalty at the lower end of the scale.
That Mr Coote and Mr Whelan may have had a personal relationship is not relevant to the assessment of the penalty. Finally, that Mainline Access’s contravention related only to one employee is a factor that weighs in favour of assessing the penalty at the lower end of the scale.
Nature and extent of any loss or damage sustained. It is accepted that $7,946.49 is the amount Mr Coote ought to have been paid for accrued but untaken annual leave. That is a significant amount.
General deterrence. Questions of general deterrence, however, must be considered. As an entity that engaged another person to perform work, Mainline Access ought to have considered the nature of the relationship it had with Mr Coote after it agreed to Mr Coote’s request that he be engaged as an independent contractor. The penalty, therefore, should be assessed to include an element that signals to persons who engage other persons to perform work that they should carefully consider the nature of the relationship they enter into when they engage a person to perform work, and in particular, whether the relationship is one of an employer and employee.
Other matters. What I have said above in relation to the size of Mainline Access’s business, contrition and corrective action, specific deterrence, the handing of the complaint made by another employee, and the absence of evidence of any contravention of a provision of the FW Act apply to the contraventions of s.90(2) of the FW Act and, therefore, s.44 of the FW Act.
Assessment. In light of these considerations, I assess the penalty for Mainline Access’s contraventions of s.90(2) of the FW Act and, therefore, of s.44 of the FW Act of the Award, and Mr Whelan’s involvement in those contraventions, as follows:
Respondent
Maximum Penalty
Penalty %
Amount
Mainline Access
$51,000
30%
$15,300
Mr Whelan
$10,200
30%
$3,060
Contraventions of s.535 of the FW Act
The relevant conduct consists of Mainline Access not maintaining records it was required to keep by s.535 of the FW Act. [64]
[64] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [90]-[92]-[102]
Relevant to assessing the penalty is the findings of fact I made relating to the relationship Mr Coote and Mainline Access considered themselves to be in. I found that after Mainline Access engaged Mr Coote as an employee, Mr Coote requested, and Mr Whelan agreed, that Mr Coote should be engaged as an independent contractor. I did not accept Mr Coote’s evidence that he and Mr Whelan agreed that Mr Coote would revert to being engaged as an employee. It was not suggested to Mr Whelan, and counsel for Mr Coote has not pointed to any evidence that suggests, that Mr Whelan did not believe that Mr Coote had been engaged as an independent contractor. That is a circumstance that weighs in favour of assessing the penalty at the lower end of the scale.
Questions of general deterrence, however, must be considered. As an entity that engaged another person to perform work, Mainline Access ought to have considered the nature of the relationship it had with Mr Coote after it agreed to Mr Coote’s request that he be engaged as an independent contractor. The penalty, therefore, should be assessed to include an element that signals to persons who engage other persons to perform work that they should carefully consider the nature of the relationship they enter into when they engage a person to perform work, and in particular whether the relationship is one of employer and employee.
What I have said above in relation to the size of Mainline Access’s business, the handing of the complaint made by another employee, and the absence of evidence of any contravention of a provision of the FW Act apply to the contraventions of s.535 of the FW Act and Mr Whelan’s involvement in those contraventions. I assess the penalty as follows:
Respondent
Maximum Penalty
Penalty %
Amount
Mainline Access
$25,500
30%
$7,650
Mr Whelan
$5,100
30%
$1,530
Contraventions of s.536 of the FW Act
The relevant conduct is set out in the earlier reasons.[65] It consists of Mainline Access not maintaining records it was required to keep by s.535 of the FW Act.
[65] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [89], [102]
The matters I have considered I relation to the contraventions of s.535 of the FW Act apply in relation to the contraventions in relation to s.536 of the FW Act. I assess the penalty as follows:
Respondent
Maximum Penalty
Penalty %
Amount
Mainline Access
$25,500
30%
$7,650
Mr Whelan
$5,100
30%
$1,530
Summary of penalties
It would be convenient to set out in two tables the penalties I have assessed before I consider whether I should make any adjustments.
Mainline Access:
Provision of FW Act
Contravention
Underpayment
Penalty
Section 45
Failure to pay amounts required by cl.34 of Award
$9,548.29
$30,600
Section 45
Failure to make superannuation contribution required by cl.35.2
$3,868.66
$30,600
Section 323
Paying amounts after making deductions
$21,416.59[66]
$30,600
Section 44
Failure to pay accrued but untaken annual leave
$7,946.49
$15,300
Section 535
Failure to keep records
-
$7,650
Section 536
Failure to provide payslips
-
$7,650
TOTAL
$122,400
[66] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [87]
Mr Whelan:
Provision of FW Act
Contravention
Underpayment
Penalty
Section 45
Failure to pay amounts required by cl.34 of Award
$9,548.29
$6,120
Section 45
Failure to make superannuation contribution required by cl.35.2
$3,868.66
$6,120
Section 323
Paying amounts after making deductions
$21,416.59[67]
$6,120
Section 44
Failure to pay accrued but untaken annual leave
$7,946.49
$3,060
Section 535
Failure to keep records
-
$1,530
Section 536
Failure to provide payslips
-
$1,530
TOTAL
$24,480
[67] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [87]
Adjustments
I now consider whether, under step 3 identified by Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai, there are any common elements between any of the contraventions (including the grouped contraventions) for which I have assessed penalties to warrant any downward adjustment to the penalties I have assessed. In my opinion, there are common elements to the contraventions of cl.34 of the Award, and hence s.45 of the FW Act, and s.323 of the FW Act. I propose to reduce each penalty for these contraventions by 20%. That results in the following penalties:
Mainline Access:
Provision of FW Act
Contravention
Underpayment
Penalty
Section 45
Failure to pay amounts required by cl.34 of Award
$9,548.29
$24,480[68]
Section 45
Failure to make superannuation contribution required by cl.35.2
$3,868.66
$30,600
Section 323
Paying amounts after making deductions
$21,416.59[69]
$24,480[70]
Section 44
Failure to pay accrued but untaken annual leave
$7,946.49
$15,300
Section 535
Failure to keep records
-
$7,650
Section 536
Failure to provide payslips
-
$7,650
TOTAL
$110,160
[68] 80% x $30,600 = $24,480
[69] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [87]
[70] 80% x $30,600 = $24,480
Mr Whelan:
Provision of FW Act
Contravention
Underpayment
Penalty
Section 45
Failure to pay amounts required by cl.34 of Award
$9,548.29
$4,896[71]
(80%)
Section 45
Failure to make superannuation contribution required by cl.35.2
$3,868.66
$6,120
Section 323
Paying amounts after making deductions
$21,416.59[72]
$4,896[73]
Section 44
Failure to pay accrued but untaken annual leave
$7,946.49
$3,060
Section 535
Failure to keep records
-
$1,530
Section 536
Failure to provide payslips
-
$1,530
TOTAL
$22,032
[71] 80% x $6,120 = $4,896
[72] Coote v Mainline Access Pty Ltd & Anor (No.2) [2018] FCCA 2892, [87]
[73] 80% x $6,120 = $4,896
The final matter to consider is whether the penalties I have assessed viewed as a whole are appropriate and proportionate to the contravening conduct viewed as a whole.
I am troubled by the absolute size of the aggregate of the penalties I have assessed for Mainline Access. It is a small business, and there is a significant risk that the imposition of penalties totalling $110,160 would be crushing. In those circumstances, I propose to reduce all the penalties I have so far assessed by 20%, leaving an aggregate of $88,128. I am not, however, similarly troubled by the absolute size of the aggregate of the penalties I have assessed for Mr Whelan. In my opinion, they are appropriate and proportionate to the contravening conduct viewed as a whole.
I propose, therefore, to make orders that Mainline Access pay pecuniary penalties in the sum of $88,128, and that Mr Whelan pay pecuniary penalties in the sum of $22,032.
Person to whom penalties should be paid
Subsection 546(3)(c) of the FW Act provides that the Court may order that a pecuniary penalty be paid to a “particular person”. Counsel for Mr Coote submits that the penalties I order the respondents pay be paid to him, submitting that this is a usual order where a “particular person” successfully obtains an order for the payment of a pecuniary penalty. Counsel for the respondents has not submitted otherwise. In my opinion, Mr Coote is in the position of the applicant in Sayed v Construction, Forestry, Mining and Energy Union:[74]
In this appeal . . . the policy considerations of s 546(3) “speak loudly” in the circumstances to justify the payment of the penalty imposed to the individual affected by the contravention who, under the authority of the FW Act, commenced and maintained this enforcement proceeding. If [the applicant] had not pursued the action, it is unlikely that it would have been pursued. He took on the proceeding at obvious cost to himself.
[74] [2016] FCAFC 4, [116]
It is appropriate, and I therefore propose, to make an order under s.546(3)(c) of the FW Act that the penalties I have ordered the respondents to pay be paid to Mr Coote, and that they be paid within 28 days.
Application for costs
The Court’s jurisdiction to order costs in relation to a matter arising under the FW Act is conferred by s.570 of the FW Act which provides as follows:
(1) A party to proceedings . . . in a court . . . in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceeding only in accordance with subsection (2) or section 569 or 569A.
(2) The party may be ordered to pay costs only if:
(a) the court is satisfied that the party instituted the proceeding vexatiously or without reasonable cause; or
(b) the court is satisfied that the party’s unreasonable acts or omission cause the other party to incur the costs.
Counsel for Mr Coote submits that his costs of the entire proceedings was caused by the respondents’ unreasonable acts of omissions, those being the respondents’ not accepting an offer of compromise and the respondents in any event prolonging without sufficient cause the proceeding by failing to make obvious concessions and by pursuing a cross-claim that was untenable. Counsel for Mr Coote further submits that Mainline Access brought its cross-claim without reasonable cause. I will consider each of the matters on which Mr Coote relies.
Unreasonable rejection of offer of compromise
The offer of compromise Mr Coote claims the respondents unreasonably rejected is contained in a letter dated 16 March 2016 from Mr Coote’s Lawyer to the lawyers for Mainline Access and Mr Whelan.[75] After referring to a number of matters, the letter states that “[w]e are now instructed to commence the drafting of a statement of claim to file in the District Court of New South Wales to recover those amounts referred to in our enclosed letter”.
[75] Affidavit of J F Morrissey, annexure A-3
The “enclosed letter” is a letter dated 19 February 2016 from Mr Coote’s lawyers to Mainline Access. In that letter it is alleged Mainline Access owed Mr Coote the sum of $132,357.13, including superannuation. The letter notes that this amount did not include a claim for underpayment based on Mr Coote’s being a casual employee, a claim said to be “at least another $10,000 to $20,000 on the basis that our client was working up to 12 hours a day”. The letter then demanded payment of three amounts - $95,835.13, $12,573.93 to Mr Coote’s nominated superannuation find, and $2,060.50 for Mr Coote’s legal costs. The letter also demanded his group certificates. The letter further stated that Mr Coote “is also considering personal actions against” Mr Whelan “for breaches of the Corporations Act . . . and the Fair Work Act”.
The offer made in the letter dated 16 March 2016 included the terms that Mainline Access pay Mr Coote $15,000 net, with Mainline Access paying any tax that may become payable on that amount; that Mainline Access indemnify Mr Coote “in regards to any taxation obligations since the commencement of his employment on about 18 March 2014”, and that the parties enter into a deed containing mutual releases.
Counsel for Mr Coote submits that an “offer of $15,000, in light of the magnitude of the compensation awarded to Mr Coote and the prospect of penalty orders, is manifestly reasonable”, particularly in the light of the respondents’ late concession that Mr Coote was an employee, and Mr Whelan’s late concession as to the non-payment of superannuation contributions.
Whether or not the respondents acted unreasonably by not accepting the offer must be assessed in the circumstances in which the offer was made and not accepted. And here there are two relevant matters. The first, and most significant, is the claim in relation to which the offer of compromise was made. That claim, which is set out in the letter dated 19 February 2016, is not stated to be made under the FW Act. That is apparent from the statements that Mr Coote will be commencing proceedings in the District Court, and that Mr Coote “is also considering personal actions against” Mr Whelan under the FW Act. Further, there is nothing that could reasonably have suggested to the respondents that the claim in relation to which the offer of compromise was made was based on any alleged contraventions of the FW Act. Although the letter claims Mr Coote had been engaged as an independent contractor, it is not alleged that he was in truth engaged as an employee. In those circumstances, it cannot be said that Mr Coote’s commencement of the proceeding in this Court was due to the respondents’ unreasonably rejecting an offer of compromise in circumstances where the offer of compromise the respondents rejected related to a claim that was not stated to be made under the FW Act.
The second relevant matter is that one of the terms on which the offer was made was that the respondents indemnify Mr Coote “in regards to any taxation obligations since the commencement of his employment on about 18 March 2014”. Given the width and uncertainty of the indemnity, if given, it was not unreasonable for the respondents not to accept the offer of compromise that included this term.
Unreasonably prolongation of proceeding and untenable cross-claim
Counsel for Mr Coote submits the respondents acted unreasonably by making concessions late into the proceeding that Mainline Access and Mr Coote were in an employment relationship, and that Mainline had made no superannuation contributions. Counsel further submits that the cross-claim was untenable, and that Mainline Access abandoned part of the cross-claim. The only matters on which counsel appears to rely for submitting that these matters constituted unreasonable conduct are the respondents making the concessions, abandoning part of the cross-claim, and not succeeding on that part of the cross-claim.
These matters by themselves do not demonstrate the respondents acted unreasonably. If they did then aspects of the manner in which Mr Coote conducted his case would equally be characterised as unreasonable conduct. And here there are a number of matters. First, on the findings I made, Mr Coote incorrectly claimed he was entitled to be paid under the Award at the rates not provided for by the Award but at the rates he agreed with Mr Whelan. Second, Mr Coote claimed that he entered into an agreement with Mr Whelan in which it was agreed he would be again engaged as an employee. That claim was rejected. Third, again on the findings I made, Mr Coote overstated the hours he recalled working.
Conclusion on costs
For these reasons, Mr Coote’s application for costs should be dismissed.
Disposition
I propose to dispose of the proceeding by:
a)ordering that orders 1 and 2 of the orders I made on 9 November 2018 be set aside;
b)making declarations identifying the relevant contraventions of the FW Act and the entitlements Mr Coote has to the payment of compensation for loss or damage he suffered because of those contraventions, including the payment of interest;
c)ordering that pecuniary penalties be paid in the amounts I have assessed, and that the penalties be paid to Mr Coote within 28 days of my making the order;
d)making the compensation orders to which I referred earlier in these reasons together with interest;
e)making an order that within twenty one days Mainline Access and Mr Coote pay $3,868.66 together with an amount for interest to a superannuation fund to be nominated by Mr Coote by no later than fourteen days from my making the order;
f)ordering judgment against Mainline Access for the amounts it failed to pay Mr Coote under the March Agreement together with interest;
g)ordering Mainlined Access specifically perform the March Agreement by paying within twenty one days $4,419.16 to a superannuation fund to be nominated by Mr Coote by no later than fourteen days from my making the order;
h)reserving to the parties liberty to apply to set aside the declaration and order I propose to make that Mainline Access and Mr Whelan pay to Mr Coote $21,416.59, being the total of the amounts Mainline Access deducted from the payments Mainline Access made to Mr Coote for work performed;
i)reserving to the parties liberty to apply to vary any of the amounts stated in the declarations and orders I propose to make on the ground that those amounts are based on an incorrect interest rate, or the amounts include amounts for interest that have been incorrectly calculated; and
j)ordering that Mr Coote’s application for costs be dismissed.
I also propose to note in the orders that any payments Mainline Access and Mr Whelan make to discharge their liability (together with interest) to compensate Mr Coote for the $9,548.29 underpayment under the Award be treated as discharging to the extent of the payment the liability Mainline Access has under the March Agreement for unpaid wages.
I certify that the preceding one hundred and forty-three (143) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 28 February 2019
CORRECTION
Paragraph 23 of the orders has been amended by substituting “15(a)” with “16(a)”.
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