Donnola v Silverleaf Constructions Co Pty Ltd (No 2)
[2024] FedCFamC2G 577
•28 June 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Donnola v Silverleaf Constructions Co Pty Ltd (No 2) [2024] FedCFamC2G 577
File number(s): SYG 2006 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 28 June 2024 Catchwords: PRACTICE AND PROCEDURE – Where in a claim for relief under the Fair Work Act 2009 (Cth) after declarations of contraventions have been made the first respondent resolves to go into voluntary liquidation – where applicant applies under s 500(2) of the Corporations Act 2001 (Cth) for leave to proceed against the first respondent for the purpose of applying for an order that the first respondent pay pecuniary penalties – whether Federal Circuit and Family Court of Australia (Division 2) has jurisdiction under s 134 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) over the matter that arises out of the applicant’s seeking to apply for leave to proceed under s 500(2) of the Corporations Act 2001 (Cth) - Federal Circuit and Family Court of Australia (Division 2) has jurisdiction – whether leave to proceed should be granted – leave to proceed refused.
INDUSTRIAL LAW – Assessment of pecuniary penalties against second respondent for contraventions of s 44 of the Fair Work Act 2009 (Cth) – payment of pecuniary penalties ordered.
Legislation: Corporations Act 2001 (Cth) ss 58AA(2), 500(2), 553B
Crimes Act 1958 (Vic) s 21A(2)
Fair Work Act 2009 (Cth) ss 12, 44, 546, 117(2), 557, 539(1)
Federal Circuit Court of Australia Act 1999 (Cth) s 18
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 134
Federal Court of Australia Act 1976 (Cth) ss 32, 86AA(4)
Trade Practices Act 1974 (Cth) s 51AB
Cases cited: Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 5) [2019] FCA 1544
Berlyn v Brouskos [2002] VSC 377
Bevis v VA Holdings Pty Ltd trading as Granton Homes & Ors [2020] FCCA 2082
Donnola v Silverleaf Constructions Co Pty Ltd [2024] FedCFamC2G 223
Fair Work Ombudsman v Australian Wild Tuna Pty Ltd & Anor [2016] FCCA 2626
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301
Fair Work Ombudsman v Safecorp Security Group Pty Ltd & Anor (No.3) [2019] FCCA 1756
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Ogawa v Federal Magistrate Phipps [2006] FCA 361
Palmer v Ayres; Ferguson v Ayres [2017] HCA 5
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; (1981) 148 CLR 457
Rana v Google Inc [2017] FCAFC 156
Rolfe v Pinnacle ACT Pty Ltd [2024] FedCFamC2G 285
Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4
Shergold v Tanner [2002] HCA 19
The BKH Contractors Case (No 2) [2018] FCA 1563
The Shin Kobe Maru v Empire Shipping Co Inc [1994] HCA 54
Allsop, Justice James, “An Introduction to the Jurisdiction of the Federal Court of Australia” (FCA) [2007] FedJSchol 15
Division: Fair Work Number of paragraphs: 48 Date of hearing: 13 June 2024 Place: Sydney Solicitor for the Applicant: M K Kutasi, of Solve Legal, for the applicant The Respondents: No appearance by, or on behalf of, the respondents ORDERS
SYG 2006 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ANDREW DONNOLA
Applicant
AND: SILVERLEAF CONSTRUCTIONS CO PTY LTD
First Respondent
JOSHUA MCKENZIE
Second Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
28 JUNE 2024
THE COURT ORDERS THAT:
1.The applicant’s application pursuant to s 500(2) of the Corporations Act 2001 (Cth) for leave to proceed against the first respondent is dismissed.
2.Pursuant to s 546(1) of the Fair Work Act 2009 (Cth) (FW Act) the second respondent:
(a)Pay a pecuniary penalty of $8,391 for the second respondent’s involvement in the first respondent’s contravention of s 44 of the FW Act identified in paragraph 2 of the declarations made on 8 March 2024.
(b)Pay a pecuniary penalty of $7,192 for the second respondent’s involvement in the first respondent’s contravention of s 44 of the FW Act identified in paragraph 3 of the declarations made on 8 March 2024.
3.Pursuant to s 546(3)(c) of the FW Act the second respondent pay the pecuniary penalties referred to in order 2 to the applicant within 28 days after the date on which these orders are pronounced.
4.The applicant’s application for costs is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
On 8 March 2024 I published reasons for judgment (earlier reasons) on the basis of which I made the following declarations:[1]
[1] Donnola v Silverleaf Constructions Co Pty Ltd [2024] FedCFamC2G 223
1.The first respondent, in breach of the employment contract it made with the applicant in about December 2019, failed to:
(a)pay to the applicant wages from Monday 28 June 2021 to Friday 13 August 2021, those wages being $14,807.69; and
(b)make superannuation contributions from 3 February 2020 to 19 August 2021 in the amount of $16,164.
2.The first respondent contravened s 44(1) of the Fair Work Act 2009 (Cth) (FW Act) by failing, contrary to s 90(2) of the FW Act, to pay to the applicant at the time the first respondent purported to terminate the applicant’s employment on 19 August 2021, accrued but untaken annual leave in the amount of $8,476.84.
3.The first respondent contravened s 44(1) of the FW Act by failing, contrary to s 117(2) of the FW Act, to provide to the applicant two weeks’ notice, or two weeks’ wages in lieu of the two weeks’ notice, at the time the first respondent purported to terminate the applicant employment on 19 August 2021.
4.The second respondent was involved in the applicant’s contraventions of s 44(1) of the FW Act referred to in declarations 2 and 3.
In these reasons for judgment I consider three sets of questions. The first is whether the Federal Circuit and Family Court of Australia (Division 2) (this Court) has jurisdiction to make an order under s 500(2) of the Corporations Act 2001 (Cth) (Corporations Act) to grant leave to the applicant, Mr Donnola, to proceed with his application for orders under s 546(1) of the FW Act that the first respondent (SCC) pay pecuniary penalties for its contraventions of s 44 of the FW Act and, if so, whether I should grant leave. The second question is what, if any, order for pecuniary penalties I should make. The third question is whether I should order that the respondents pay Mr Donnola’s costs.
JURISDICTION
The question of jurisdiction arises out of the second respondent, Mr McKenzie, as the sole member of SCC, having resolved on 15 April 2024 that SCC be wound up, and that a liquidator be appointed. It may be inferred that the resolution to wind up SCC was made pursuant to s 491 of the Corporations Act, which provides that, subject to s 490 of the Corporations Act, a “company may be wound up voluntarily if the company so resolves by special resolution”. Where a resolution for the voluntary winding up of a corporation has been made, s 500 applies, subsection (2) of which is as follows:
After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.
The expression “the Court” is defined in s 58AA(1) of the Corporations Act as follows:
Subject to subsection (2), in this Act:
“court” means any court.
“Court” means any of the following courts:
(a) The Federal Court;
(b) the Supreme Court of a State or Territory;
(c) the Federal Circuit and Family Court of Australia (Division 1);
(d)a court to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act.
Subsection 58AA(2) of the Corporations Act provides:
Except where there is a clear expression of a contrary intention (for example, by use of the expression “the Court”), proceedings in relation to a matter under this Act may, subject to Part 9.6A, be brought in any court.
Section 134 of the Federal Circuit and Family Court of Australia Act 2021 (Cth)
The Corporations Act does not confer any jurisdiction on this Court in relation to any matter arising under the Corporations Act. Section 134 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFC Act), however, confers the following jurisdiction on this Court:
To the extent that the Constitution permits, jurisdiction is conferred on the Federal Circuit and Family Court of Australia (Division 2) in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Federal Circuit and Family Court of Australia (Division 2) is invoked.
Section 134 of the FCFC Act is identical with s 32 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). The nature of the jurisdiction that s 32 of the FCA Act confers on the Federal Court of Australia was examined by the Full Federal Court in Rana v Google Inc:[2]
[T]he “associated jurisdiction” conferred under s 32 of the Federal Court of Australia Act is not concerned with the conferral of jurisdiction to determine non-federal matters that are said to be associated with a federal matter . . . It is not a synonym for “accrued” jurisdiction. The effect of s 32 is to confer jurisdiction to deal with a federal matter for which jurisdiction has not been conferred upon the Court where it is associated with another federal matter for which jurisdiction has been so conferred: Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; 148 CLR 457 at 516 per Mason J; Edensor 204 CLR at 579 [39] per Gleeson CJ, Gaudron and Gummow JJ; Elbe Shipping SA v The Ship “Global Peace” [2006] FCA 954; 154 FCR 439 at 454-455 [60]. The operation of s 32 can be seen in PCS Operations Pty Ltd v Maritime Union of Australia [1998] HCA 29; 153 ALR 520. There, Gaudron J held that s 32 extended the jurisdiction of the Federal Court to matters within ss 75 and 76 of the Constitution that are associated with a matter already within the jurisdiction of the Court, but for which jurisdiction is not specifically conferred upon this Court: 153 ALR at 525 [12]. In that case, the MUA claimed breach of an award and an enterprise agreement and contraventions of the Workplace Relations Act 1996 (Cth) and of the Corporations Law against certain members of the Patrick group, along with two common law actions for conspiracy against the Patrick parties, the National Farmers Federation and the Commonwealth. Although within s 75(iii), jurisdiction to hear the claim against the Commonwealth was not otherwise conferred on this Court. Section 32, nonetheless, conferred that jurisdiction on the Court for disposition of the proceedings. This is consistent with Allied Mills Industries Pty Ltd v Trade Practices Commission (No 1) (1981) 34 ALR 105 where it was held that s 32 operated to give this Court jurisdiction over a claim against the Trade Practices Commission (the Commission being equivalent to the Commonwealth for the purposes of s 75(iii) of the Constitution). The same conclusion was reached in respect of the status of ASIC for s 75(iii) purposes in Edensor 204 CLR at 579 [39] per Gleeson CJ, Gaudron and Gummow JJ.
[2] Rana v Google Inc [2017] FCAFC 156, at [23]
Section 134 of the FCFC Act is directed to a “matter” in relation to which this Court would not, but for s 134 of the FCFC Act, have (federal) jurisdiction (not included matter). “Matter” comprises two elements. The first is the subject matter of a justiciable controversy; that is, the “subject matter for determination in a legal proceeding”.[3] It is a subject matter that “is identifiable independently of proceedings brought for its determination and encompasses all claims made within the scope of the controversy”.[4] The second element of “matter” in s 134 is any one of the “matters” with respect to which s 75 of the Constitution confers original jurisdiction on the High Court, or any one of the matters with respect to which Parliament may, under s 76 of the Constitution, confer original jurisdiction on the High Court. Relevant to this proceeding is s 76(ii) of the Constitution, which provides that Parliament may make laws conferring original jurisdiction on the High Court “in any matter . . . [a]rising under any laws made by Parliament”.
[3] Palmer v Ayres; Ferguson v Ayres [2017] HCA 5, at [26]
[4] Palmer v Ayres; Ferguson v Ayres [2017] HCA 5, at [26]
The next thing to note is the circumstances in which s 134 of the FCFC Act confers jurisdiction on this Court in relation to a not included matter. First, there must be before this Court a matter in respect of which this Court has jurisdiction (included matter); second, there is before this Court, or there otherwise exists a not included matter; and, third, the not included matter is “associated” with the included matter.
The mechanism by which s 32 of the FCA Act (and s 134 of the FCFC Act) confers jurisdiction over a matter that is otherwise not within the Federal Court’s (or this Court’s) jurisdiction was more clearly explained by Justice Allsop writing extrajudicially:[5]
Though related, in a sense, to the question of the extent of the controversy or ‘accrued’ jurisdiction, s 32 provides for a conferral of jurisdiction in other federal matters not otherwise conferred, but available to be conferred, if there is conferral of some jurisdiction. Thus, if there is conferral by Commonwealth statute X of some federal jurisdiction, and jurisdiction under topic Y could be conferred on the Federal Court (by reference to ss 75 and 76 of the Constitution) but has not been so conferred and it is associated with the matter conferred by statute X, s 32 confers jurisdiction on the court in respect of topic Y for the disposition this controversy.
[5] Allsop, Justice James, "An Introduction to the Jurisdiction of the Federal Court of Australia" (FCA) [2007] FedJSchol 15
The meaning of “associated” in s 32 of the FCA Act (and s 134 of the FCFC Act) has not been much discussed in the authorities. In Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd, however, Gibbs J said that:[6]
Speaking generally it may be said that, given identity of parties, one matter is associated with another if the two matters arise out of substantially the same, or closely connected, facts.
[6] Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; (1981) 148 CLR 457, at pages 495-496
Does s 134 extend to an associated matter under the Corporations Act?
In Rolfe v Pinnacle ACT Pty Ltd Deputy Chief Judge Mercuri found there was doubt about whether this Court had jurisdiction under s 134 of the FCFC Act in relation to a matter arising under the Corporations Act.[7] The doubt arose from the judgment of Finkelstein J in Ogawa v Federal Magistrate Phipps.[8] In that case the question was whether this Court (then known as the Federal Magistrates Court) had jurisdiction under s 18 of the Federal Circuit Court of Australia Act 1999 (Cth) (FCC Act) (being the predecessor of s 134 of the FCFC Act) in relation to a matter based on a contravention of s 51AB of the Trade Practices Act 1974 (Cth) (TPA) in circumstances where this Court did have jurisdiction in relation to a matter based on an alleged contravention of s 52(1) of the TPA. Finkelstein J held this Court did not have jurisdiction under s 18 of the FCC Act because s 86AA(4) of the TPA provided that the jurisdiction s 86(1) conferred on the Federal Court under Part VI of the TPA was exclusive, subject to the jurisdiction s 86(1A) of the TPA conferred on this Court, which did not include claims based on contraventions of s 52AB. His Honour said:[9]
I think the intent of this provision is clear. Parliament has laid down that the Federal Magistrates Court is precluded from exercising jurisdiction in a matter arising under any part of the Trade Practices Act apart from a matter under Pt V. This is so whether or not an action in respect of that mater [sic] has begun in the Federal Court. Moreover, it would subvert Parliament’s intention if one were to accept the University’s contention that s 18 of the Federal Magistrates Court Act (the “associated jurisdiction” provision) has the effect of giving to the Federal Magistrates Court jurisdiction over a federal claim that is within the exclusive jurisdiction of the Federal Court. In my view whatever claims may be picked up as part of the Federal Magistrates Court’s associated jurisdiction they do not include claims that are within the exclusive jurisdiction of another federal court.
[7] Rolfe v Pinnacle ACT Pty Ltd [2024] FedCFamC2G 285
[8] Ogawa v Federal Magistrate Phipps [2006] FCA 361
[9] Ogawa v Federal Magistrate Phipps [2006] FCA 361, at [12]
It does not follow from the fact that s 58AA of the Corporations Act confers exclusive jurisdiction on courts that do not include this Court in relation to matters that arise under the Corporations Act that s 134 of the FCFC Act would not apply to such matters if there is before this Court a matter that is associated with a matter that arises under the Corporations Act. Section 134 of the FCFC Act is premised on some other court or courts having jurisdiction over a matter in relation to which this Court does not have jurisdiction, which necessarily implies that, but for s 134 of the FCFC Act, the jurisdiction of the other court or courts over such matter would be exclusive of the jurisdiction of this Court.
The starting point in construing s 134 of the FCFC Act, therefore, is not construing provisions, such as s 86AA(4) of the TPA or s 58AA of the Corporations Act, that confer jurisdiction on courts other than this Court, and seeking to draw implications from those provisions. The starting point is the text of s 134 of the FCFC Act, and the principles of construction that apply to such provisions. Section s 134 is a provision that confers jurisdiction. In The Shin Kobe Maru v Empire Shipping Co Inc, the High Court said that it “is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words”.[10]
[10] The Shin Kobe Maru v Empire Shipping Co Inc [1994] HCA 54, at [29]
It is, of course, relevant to construe provisions that confer jurisdiction on a court in relation to a matter over which this Court does not have jurisdiction that is associated with a matter that falls within this Court’s jurisdiction to determine whether such provisions limit the operation of s 134 of the FCFC Act; but such provisions are to be construed having regard to the principle stated by the High Court in Shergold v Tanner that “a law of the Commonwealth is not to be interpreted as withdrawing or limiting the conferral of jurisdiction unless the implication appears clearly and unmistakably”.[11] As was noted by the High Court in that case:[12]
That proposition reflects the general principles respecting implied repeal to which Gaudron J referred in Saraswati v The Queen. Her Honour said:
“It is a basic rule of construction that, in the absence of express words, an earlier statutory provision is not repealed, altered or derogated from by a later provision unless an intention to that effect is necessarily to be implied. There must be very strong grounds to support that implication, for there is a general presumption that the legislature intended that both provisions should operate and that, to the extent that they would otherwise overlap, one should be read as subject to the other: see Butler v Attorney-General (Vict).”
[11] Shergold v Tanner [2002] HCA 19, at [34] (the Court)
[12] Shergold v Tanner [2002] HCA 19, at [34] (the Court)
The question, then, is: assuming Mr Donnola’s application for leave to proceed under s 500(2) of the Corporations Act is a matter that is associated with the matter that has arisen on his claiming relief under the FW Act, does s 58AA of the Corporations Act exclude s 134 of the FCFC Act from applying to an application under s 500(2) of the Corporations Act for leave to proceed against SCC? That question is to be answered in the negative. Section 58AA of the Corporations Act does nothing more than confer jurisdiction on courts that answer the description of “Court” and also in “courts” in relation to matters arising under the Corporations Act; and by doing so, it supplies an essential predicate to the operation of s 134 of the FCFC Act, namely, the identification of matters over which this Court does not have jurisdiction. Section 58AA does not expressly purport to limit the operation of provisions such as s 134 of the FCFC Act; and it cannot be said that it necessarily excludes the operation of s 134 to matters arising under the Corporations Act because, as I have already noted, s 58AA does nothing more than supply an essential predicate to the operation of s 134 of the FCFC Act.
For s 58AA of the Corporations Act to impliedly exclude the application of s 134 of the FCFC Act to matters arising under the Corporations Act, there must be something in the text of s 58AA, or in the statutory context in which s 58AA appears, that unmistakably manifests an intention that matters arising under the Corporations Act must not be dealt with as part of a single controversy that involves one or more other matters that is or are before a (federal) court that does not otherwise have jurisdiction in relation to a matter arising under the Corporations Act. No such intention is manifested, either by the text of s 58AA of the Corporations Act, or by the statutory context in which s 58AA appears.
The final question is whether Mr Donnola’s application under s 500(2) of the Corporations Act for leave to proceed is “associated” with the matter that is constituted by his seeking relief under the FW Act. That is to be answered in the affirmative. The application for leave to proceed goes to the ability of Mr Donnola to proceed with his claims for relief under the FW Act against SCC.
I am therefore satisfied this Court has jurisdiction to determine Mr Donnola’s application for an order under s 500(2) of the Corporations Act that he have leave to proceed against SCC.
SHOULD LEAVE TO PROCEED BE GRANTED?
The immediate difficulty in my granting Mr Donnola leave to proceed against SCC is that an order for a penalty would not be a provable debt in the winding up of SCC. That follows from s 553B(1) of the Corporations Act, which provides that, subject to s 553B(2) (which is not relevant to what I have to decide), “penalties or fines imposed by a court in respect of an offence against a law are not admissible to proof against an insolvent company”.
It is the case that s 553B of the Corporations Act is not a bar to the granting of leave to proceed for an order for the payment of a pecuniary penalty; and that is because there may be a public interest in imposing a penalty for the purpose of generally deterring others from contravening provisions of the FW Act.[13] I am not satisfied, however, that there would be any public interest to warrant my granting Mr Donnola leave to proceed against SCC to claim an order for a pecuniary penalty. There remains on foot Mr Donnola’s application for orders that Mr McKenzie pay a pecuniary penalty in relation to the contravening conduct in which SCC engaged and in which I have found Mr McKenzie was involved. The public interest in setting a penalty will be served by my determining Mr Donnola’s application that Mr McKenzie be ordered to pay pecuniary penalties.
PENALTY
[13] See Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 5) [2019] FCA 1544, at [31]-[36]; and see more recently Commissioner of the NDIS Quality and Safeguards Commission v Aurora Community Care Pty Ltd (in liquidation) [2024] FCA 679
Power
Subsection 546(1) of the FW Act provides that this Court may, on application, order a person to pay a pecuniary penalty this Court considers is appropriate if this Court is satisfied the person has contravened a “civil remedy provision”.[14] That expression is defined in s 539(1) of the FW Act to include the provisions identified in column 1 of the table to s 539(2) of the Act. Section 44 is in column 1 of that table.
[14] I repeat in this and the following 4 paragraphs what I said in Bevis v VA Holdings Pty Ltd trading as Granton Homes & Ors [2020] FCCA 2082, at [33]-[38]
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)”. The maximum penalty units for a contravention of s 44(1) of the FW Act in August 2021 (excluding “serious contraventions”, as defined in s 557A of the FW Act) are 60 penalty units for an individual.
Section 12 of the FW Act provides that “penalty unit” has the meaning given by s 4AA of the Crimes Act 1914 (Cth). The penalty unit provided for by s 4AA of that Act as at August 2021 was $222.[15] Thus, $13,320 is the maximum penalty an individual may be ordered to pay for each contravention of a civil remedy provision.
[15] As notified on 14 May 2020 by Notice of Indexation of the Penalty Unit Amount, F2020N00061
Principles
When assessing the amount of the pecuniary penalty the Court should order be paid, it is useful to distinguish between the purpose or purposes for which pecuniary penalties are to be imposed and, given that purpose or purposes, the matters that may be relevant to assessing the penalty. As for the purpose of imposing pecuniary penalties, the Full Federal Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union said:[16]
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 contravener 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.
The question whether a pecuniary penalty involves an element of punishment remains somewhat controversial. To a certain extent, that debate appears to be more semantic or philosophical than real. It is sufficient to say that, accepting that the primary purpose of imposing a pecuniary penalty is to protect and deter, that purpose is achieved by imposing a punishment in the form of a pecuniary penalty.
[16] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113, at [98], [99] (citations omitted)
That the principal purpose of making an order for the payment of a pecuniary penalty is deterrence was confirmed by the plurality in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (references omitted):[17]
[T]he principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners.
[17] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3, at [116] (Keane, Nettle and Gordon JJ) (citation omitted)
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 (emphasis in original):[18]
(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].
[18] Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301, at [36]. In the following five paragraphs I repeat what I said in Fair Work Ombudsman v Safecorp Security Group Pty Ltd & Anor (No.3) [2019] FCCA 1756, at [17]-[21]
The approach of most judges when assessing penalties for single contraventions of a provision of the FW Act is to take into account the non-exhaustive considerations Tracey J identified in Kelly v Fitzpatrick,[19] which his Honour adopted from the judgment of Mowbray FM in Mason v Harrington Corporation Pty Ltd. [20] Those considerations are:
[19] Kelly v Fitzpatrick [2007] FCA 1080, at [14]
[20] Mason v Harrington Corporation Pty Ltd [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:[21]
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 . . . .
[21] The BKH Contractors Case (No 2) [2018] FCA 1563, at [19] (Flick J)
What are the contraventions?
There are two contraventions of s 44, namely, SCC’s failure, contrary to s 90(2) of the FW Act, to pay to Mr Donnola accrued but untaken annual leave in the sum of $8,476.84; and SCC’s failure, contrary to s 117(2) of the FW Act, to provide to Mr Donnola two weeks’ notice, or two weeks’ wages in lieu of two weeks’ notice, at the time SCC purported to terminate Mr Donnola’s employment on 19 August 2021.
Does s 557(1) apply?
The first question is whether s 557(1) of the FW Act applies to the contraventions. That subsection provides:
For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
The two contraventions of s 44 of the FW Act were committed by the one person, namely, SCC. The question is whether the contraventions arose “out of a course of conduct by” SCC. In Fair Work Ombudsman v Australian Wild Tuna Pty Ltd & Anor,[22] I referred to Nettle J, in Berlyn v Brouskos, construing “course of conduct”, as that expression appeared in s 21A(2) of the Crimes Act 1958 (Vic), to mean “a pattern of conduct composed of a series of acts over a period of time however short, evidencing a continuity of purpose”.[23] I am not satisfied that SCC’s failing to pay Mr Donnola accrued but untaken annual leave, and SCC’s failing to give Mr Donnola two weeks’ notice, constituted a pattern of conduct that evidenced any continuity of purpose. Thus, the penalty for each of SCC’s two contraventions is to be assessed separately.
Assessment of contravention of s 44 based on failure to comply with s 90(2) (before any adjustments)
[22] Fair Work Ombudsman v Australian Wild Tuna Pty Ltd & Anor [2016] FCCA 2626, at [33]
[23] Berlyn v Brouskos [2002] VSC 377, at [18], and [20]
Nature, extent, circumstances, and deliberateness of contravening conduct
The contravention consisted of SCC’s failing to pay accrued but untaken annual leave. As I noted in the earlier reasons, the respondents did not dispute SCC owed Mr Donnola $8,476.84 for accrued but untaken annual leave;[24] and SCC has given no explanation for not paying to Mr Donnola his accrued but untaken annual leave. It is the case that SCC relied on an asserted right of set off; but the respondents did not submit, and there is in any event no evidence, that the respondents decided not to pay Mr Donnola his accrued but untaken leave because they believed SCC had a right of set off. SCC’s failure to pay Mr Donnola’s entitlement, therefore, may be characterised as deliberate.
[24] Donnola v Silverleaf Constructions Co Pty Ltd [2024] FedCFamC2G 223, at [97]
Nature and extent of any loss or damage
The loss Mr Donnola sustained as a consequence of the SCC’s contravening conduct was not being paid money to which he was entitled. That totalled $8,476.84, which is a significant loss.
Deterrence
It is open to find there are prospects Mr McKenzie will continue to work in the building industry and employ, or control a company that will employ, persons. The penalty, therefore, should incorporate an element for specific deterrence.
As for general deterrence, the penalty should be set at the level that would deter others in a similar position in which Mr McKenzie found himself when he failed to cause SCC to pay to Mr Donnola his entitlement to accrued but unpaid annual leave which amounted to $8,476.84.
Assessment
I am satisfied that the appropriate penalty for Mr McKenzie’s contravention of s 44 of the FW Act, based on his failure to comply with s 90(2), is $9,324, being 70% of the maximum penalty.
Assessment of contravention of s 44 based on failure to comply with s 117(2) (before any adjustments)
Nature, extent, circumstances, and deliberateness of contravening conduct
The contravention consisted of SCC’s failing to give Mr Donnola two weeks’ notice that his employment would be terminated. SCC had given evidence which, if accepted, would explain why it did not give Mr Donnola two weeks’ notice; but I did not accept it. That does not necessarily imply that Mr McKenzie did not genuinely believe he was entitled to summarily dismiss Mr Donnola from his employment. I do not, therefore, consider it to be open to me to assess penalty on the basis that SCC’s failure to give two weeks’ notice was deliberate in the sense that Mr McKenzie was aware SCC was required to give Mr Donnola two weeks’ notice, but he proceeded to cause SCC not to give Mr Donnola two weeks’ notice. Nevertheless, given the findings I have made, and the evidence that was before me, it is also not open to me to find that Mr McKenzie had reasonable grounds for believing SCC was entitled to summarily dismiss Mr Donnola from his employment.
Nature and extent of any loss or damage
The loss Mr Donnola sustained as a consequence of the SCC’s contravening conduct was losing the opportunity to work two weeks for his agreed salary (being $4,230 for two weeks) or, in the alternative, being given an amount equal to two weeks of his salary in lieu of notice. Mr Donnola’s loss, therefore, is either being deprived of the opportunity to work for two weeks, and thus earn $4,230, or not being paid that amount in lieu of notice. That is a significant loss.
Deterrence
As I have already noted, it is open to find there are prospects Mr McKenzie will continue to work in the building industry and employ, or control a company that will employ, persons. The penalty, therefore, should incorporate an element for specific deterrence.
As for general deterrence, the penalty should be set at the level that would deter others in a similar position in which Mr McKenzie found himself when he failed to cause SCC to give the required notice. In particular, the penalty should be set at a level that deters employers from summarily dismissing employees without taking reasonable steps to obtain information and, on the basis of that information, satisfy themselves that summary dismissal is justified.
Assessment
I am satisfied that the appropriate penalty for Mr McKenzie’s contravention of s 44 based on his failure to comply with s 117(2) of the FW Act is $7,992, being 60% of the maximum penalty.
Adjustments?
I am satisfied that an adjustment of 10% should be made on the basis of the one transaction principle, but no further adjustment should be made. That would result in a penalty of $8,391 and $7,192 receptively for Mr McKenzie’s involvement in SCC’s contraventions of s 44 based on SCC’s failure to comply with s 90(2) and s 117(2) of the FW Act.
To whom penalties should be paid
Subsection 546(3)(c) of the FW Act provides that the Court may order that a pecuniary penaltybe paid to a “particular person”. Mr Donnola is in a similar position to that of the applicant in Sayed v Construction, Forestry, Mining and Energy Union:[25]
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.
[25] Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4, at [116]
It is appropriate I make an order under s 546(3)(c) of the FW Act that Mr McKenzie pay to Mr Donnola the penalties I propose to order.
COSTS
Mr Donnola also applies for an order that the respondents pay his costs. The basis of that application is what is said to be the respondents’ unreasonably not accepting an offer made by Mr Donnola’s solicitor’s letter dated 26 July 2022. In that letter, Mr Donnola offered to settle his claims on the basis that the respondents pay Mr Donnola $45,000, inclusive of costs. The respondents’ solicitor responded by letter dated 29 July 2022 in which he rejected the offer made in Mr Donnola’s solicitor’s letter dated 26 July 2022. The respondents’ solicitor, however, offered that “[o]ur client” would pay Mr Donnola $30,000. I have included “our client” in quotations because Mr Kutasi, who appeared for Mr Donnola, submitted that the letter rejecting Mr Donnola’s offer was sent only on behalf of SCC. I do not accept that submission.
I am not satisfied that it was unreasonable for Mr McKenzie not to accept an offer that he join with SCC in agreeing to settle Mr Donnola’s claims on the basis that Mr Donnola be paid $45,000. The amount of compensation on 22 March 2024 I ordered Mr McKenzie pay to Mr Donnola was $14,673.40. I therefore do not propose to make an order that Mr McKenzie pay Mr Donnola’s costs.
DISPOSITION
I propose to:
(a)dismiss Mr Donnola’s application for leave under s 500(2) of the Corporations Act to proceed against SCC;
(b)order that Mr McKenzie pay to Mr Donnola pecuniary penalties in the amounts of $8,391 and $7,192, and that Mr McKenzie pay these amounts to Mr Donnola within 28 days after I pronounce orders; and
(c)dismiss Mr Donnola’s application for costs.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 28 June 2024
7
25
7