HERIOT v Sayfa Systems Pty Limited (No.2)
[2014] FCCA 1627
•22 July 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HERIOT v SAYFA SYSTEMS PTY LIMITED (No.2) | [2014] FCCA 1627 |
| Catchwords: INDUSTRIAL LAW – Application for compensation and imposition of pecuniary penalties for breaches of Fair Work Act – where employment terminated because of disability. COSTS – Application for applicant to pay the respondent’s costs – application refused. |
| Legislation: Fair Work Act 2009, ss.117, 117(3), 351, 545(1), 545(2), 569, 569A, 570, 570(2), 570(2)(b), 571, 571(2) |
| Australian Licensed Aircraft Engineers Association v International Aviation Assistance Pty Ltd [2011] FCA 333 Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 CEPU v ACI Operations Proprietary Limited [2006] FCA 122 11 |
| Applicant: | DAVID HERIOT |
| Respondent: | SAYFA SYSTEMS PTY LIMITED (ACN 631 210 199) |
| File Number: | MLG 1236 of 2013 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 21 July 2014 |
| Date of Last Submission: | 22 July 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 22 July 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Addision |
| Solicitors for the Applicant: | Maddison & Associates |
| Counsel for the Respondent: | Mr McNabb |
| Solicitors for the Respondent: | Wotton & Kearney Insurance Lawyers |
ORDERS
The respondent pay to the applicant the sum of $2200 inclusive of pre-judgment interest pursuant to s.545(2) of the Fair Work Act 2009.
The respondent pay to the applicant a pecuniary penalty in respect of its breach of s.351 of the Fair Work Act2009 in the sum of $3300.
The application for costs made by the respondent is refused.
| FEDERAL CIRCUIT COURT AT MELBOURNE |
MLG 1236 of 2013
| DAVID HERIOT |
Applicant
And
| SAYFA SYSTEMS PTY LIMITED (ACN 631 210 199) |
Respondent
REASONS FOR JUDGMENT
Ex tempore
Yesterday, I determined issues of liability in this matter, and found that the applicant had proved a contravention of the Fair Work Act2009. It now falls to make a determination about what orders ought to be made as a consequence of that. Both parties have addressed submissions to me about that.
In his statement of claim filed on 27 March, 2014 this applicant seeks a number of orders. They are:
A. All remuneration lost because of the dismissal,
B. Compensation for pain and suffering and emotional distress;
C. Interest
D. Punitive damages
E. Costs;
F. A penalty pursuant to S 539 of the Fair Work Act against the respondent;
G. A declaration that the respondent has breached the terms of the Fair Work Act General Protection Provisions.
The applicant’s case in respect of his lost remuneration is problematical. In his statement of claim filed on 27 March, at paragraph 16, he alleges:
Because of the termination the applicant has suffered and continues to suffer loss and damage.
He then gives some particulars. He says, by way of particulars, that whilst employed by the respondent he was earning a package that was to the value of $115,970. That paragraph is not admitted by the respondent, and by its defence filed on 23 April, 2014 the respondent admits that the applicant’s gross earnings for the financial year ended 30 June, 2013 were $100,341. Those gross earnings included a payment of $23,851.36 in accordance with what is described in the pleading as the “Severance Agreement”.
In the course of his oral evidence, the applicant touched on his earnings. I say “touched on” because that is really all he did. He was asked about his salary package, and he said that, according to my notes, it was about $115,000 plus allowances “give or take” but his wife would know better than he does.
His wife gave evidence. She seemingly did not know better.
I find that, at the time of the termination, the applicant was earning a salary of $100,341 gross per annum. I reach that finding on the following basis:
a)I am not satisfied given the equivocal nature of the applicant’s own evidence that he earned about $115,000 “give or take”. He was unsure about how much he was earning and passed the ball to his wife. She gave no evidence about the matter.
b)The plea in the statement of claim, insofar as it is particularised, was not borne out in the evidence;
c)the plea by the respondent represents a statement against the respondent’s interests, which I can use to determine that he was earning, at least, the sum conceded by the respondent.
That would mean that on a weekly gross basis the applicant was earning about $1925.93. I do not lose sight of the fact that the amount pleaded by the respondent, which I have treated as a statement against interest includes the severance agreement money, but the evidence in this case is such that precision is impossible. The weekly figure might be broken down to a figure of about $385.18 per day for a five day working week.
The authorities reveal that the assessment of compensation under ss.545(1) and (2) of the Fair Work Act can include both economic and non-economic loss. Insofar as economic loss is concerned, the approach that seems to find favour is that stated in Re Bostik Australia Proprietary Limited v Gorgevski [1992] 36 FCR 20. The relevant passage is as follows:
Where an employee is wrongfully dismissed, he is entitled, subject to mitigation, to damages equivalent to the wages he would have earned under the contract from the date of the dismissal to the end of the contract. The date when the contract would have come to an end, however, must be ascertained on the assumption that the employer would have exercised any power he may have had to bring the contract to an end in the way most beneficial to himself; that is to say, that he would have determined the contract at the earliest date at which he could properly do so.
Bostik was a different case to this one. It was dealing with wrongful dismissal, and there are some other factual differences. But the principle remains apposite. It has been applied, most recently, by Barker J of the Federal Court in Australian Licensed Aircraft Engineers Association v International Aviation Assistance Pty Ltd [2011] FCA 333. It is the principle that I intend to apply in this case.
The evidence reveals that at the time of termination, the precise position with respect to the applicant’s medical condition was unknown both by him and by the respondent. His evidence was that he was awaiting a specialist’s appointment which was to take place, as I recollect the evidence, on or about 20 July or thereabouts. There was yet another three weeks to run until he would have information available to him, possibly, that would provide an answer or some conclusion to his health concerns and it would be that long until the respondent would know anything as well.
At that point, the respondent may well have taken a decision to nonetheless bring the applicant’s employment to an end. It was entitled to do that and the argument before me proceeded on the basis that in any event this contract of employment was determinable upon notice. Four weeks notice was what was suggested in the course of argument. I am not sure that four weeks is appropriate because the contract of employment – if there be one that is in writing – is not in evidence before me. The documents in evidence do not bear on the issue in any meaningful way.
In any event, the minimum period of notice is provided by s.117 of the Fair Work Act. For an employee who is over 45 years of age and who has had in excess of five years service with the respondent, the applicant is entitled to at least five weeks notice: see s.117(3) of the Act.
In those circumstances, it seems to me that the applicant’s damages ought to be limited to a period of eight weeks. That is, three weeks until some further precision might have been put to his medical condition and then the requisite period notice that the respondent would have been required to give him. The terms of the letter of 28 June, 2013 make it clear it seems to me, that the respondent had formed the view, rightly or wrongly, that the applicant would not be performing the work that he had performed for them in the past. Whether the respondent’s view was a correct one or not having regard to what it described as its “OH&S” obligations might remain a matter of debate. But the letter clearly signifies the respondent’s intention.
The respondent could have brought about the termination of the applicant’s employment in those circumstances by providing him with the requisite period of notice consistent with the principle to which I have referred in Bostik. I should assume that the respondent would have exercised the power it had to bring the contract to an end in the way most beneficial to itself; that is to say, that it would have determined the contract at the earliest date at which it could properly do so. That would have meant, as far as I can tell on the evidence scant as it is, a decision to terminate the applicant’s employment which would have seen the applicant receive a further eight weeks in terms of remuneration.
Eight weeks of remuneration is $15,407.44 on the figures that I have calculated. He has already received $25,000. But of that $25,000, $2000 is a car allowance and $9244.32 relates to annual leave that was accrued and paid out: 24 days of annual leave at the daily rate of $385.18. That is annual leave to which he was otherwise entitled. He has, therefore, in terms of his salary, received $13,755.68. The balance then is $1651.76.
Between the date of termination and the date upon which he might have been properly terminated, he would have accrued more annual leave. Again, the evidence in the case does not allow for precision but I will round the figure up to $2000 to include the possibility that he would have accrued more annual leave.
He is also entitled to interest. Submissions were made that the interest rate ought to be calculated by reference to the cash rate fixed by the Reserve Bank of Australia plus four per cent as provided for “in the rules”. But I see no authority in the Act or the Rules for that proposition.
Section 77 of the Federal Circuit Court of Australia Act1999 deals with the question of pre-judgment and post-judgment interest. Pre-judgment interest is left to the discretion of the Court. There is, it seems, no rule in the Federal Circuit Court Rules 2001 that deals with the calculation of pre-judgment interest. The Act makes it clear that it is, essentially, at large.
Post-judgment interest is a different matter and there is a rule that expressly deals with that issue. It directs attention to the Federal Court Rules 2011. Under those rules and their predecessors, there is a practice direction which fixes the relevant interest rate for post-judgment interest at four per cent above the cash rate fixed by the Reserve Bank of Australia from time-to-time. That practice direction has no application in this case insofar as the matter of pre-judgment interest is concerned. If I adopt an interest rate of six and a half per cent, the interest might be in the order of $150. I will round that up to $200.
Accordingly, by way of compensation for economic loss, I assess the applicant’s lost at $2200.
The applicant claims compensation for non-economic loss for pain, suffering and emotional distress. As I have already indicated, s.545(2) is wide enough to encapsulate compensation for such loss. But there needs to be some evidence upon which such loss can be assessed. The authorities bear that out. In particular, the decision of Marshall J in CEPU v ACI Operations Proprietary Limited [2006] FCA 122 11 is authority for the proposition that something more than mere assertion is required for compensation for non-economic loss. And, there needs to be something more than the usual element of distress, which accompanies most terminations. His Honour points out that:
Whilst “unusual and exacerbating circumstances” is not necessarily the yardstick, there must be something attending the termination which justifies an order for non-economic loss.
In this case, the only evidence that bears on this issue was that the applicant was shocked and, perhaps, distressed. But his evidence did not go on to elaborate on what that meant and whether the shock and distress had any particular effect on him. There was no medical evidence called and no attempt by him to as I have said, provide any elaboration on those issues. In those circumstances I am not satisfied that an award for pain, suffering and emotional distress, as claimed by him, is appropriate. He had the opportunity to lead that evidence but apparently chose not to do so.
No submissions were directed towards the award of punitive damages. I decline to award punitive damages.
I decline to deal with the issue of costs until I have finally dealt with these reasons.
The applicant seeks the imposition of a penalty on the respondent. It is clear that this matter involves a civil penalty provision and a civil penalty might be imposed. As Counsel for the respondent points out, it is not obligatory to impose a civil penalty.
There are any number of cases now that set out a convenient checklist of the matters that ought to be considered when determining whether a pecuniary penalty is appropriate and the extent of that penalty. The decision in Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 demonstrates that checklists are not always useful and attention needs to be given to the particular facts of the case as they appear from the evidence.
In this case the contravention has been found. It was a relatively straightforward exercise in determining that the Fair Work Act had been contravened. The respondent has not contravened the Act before, at least insofar as the evidence in this case reveals. The respondent, I am told from the bar table, is a relatively large concern. It turns over $18 million a year and has 48 employees. I am not sure what turnover has to do with it. There was no evidence about the profitability of the company or its net earnings. There was no evidence about its balance sheets.
A factor which is of some significance in this case is the way in which the termination in this case was brought about. It was brought about by relying upon a physical infirmity sustained by the applicant in circumstances where it was entirely unclear whether that infirmity was temporary or permanent. It was also unclear what effect in the long term that infirmity might have on the applicant’s capacity to perform the work. There was no evidence put before me which would suggest that the respondent considered deploying the applicant in any other aspect of its operation so as to preserve his employment. Those things are important in the context of this case because they demonstrate that, not only were senior managers involved in the contravention, but the thought given to the process by the senior managers was flawed.
Having said those things, this is not a case which is on a similar footing as those which deal with, for example, longstanding and contumelious disregard of employees’ entitlements under the Fair Work Act or relevant industrial instruments. This is not a case, for example, where there has been underpayment of wages over a long period of time in respect of a vulnerable employee or employees. It is a one off, seemingly, in response to some circumstances which no doubt took everybody in this case by surprise.
The maximum penalty that can be imposed on the respondent is $33,000.
I am not satisfied that specific deterrence has much of a role to play in this case. These proceedings themselves and the findings that I have made no doubt will have an impact upon the respondent and those who manage it. Were it the case that there was a history of this employer contravening its obligations under the Fair Work Act one might be inclined to take the view that a penalty which had more to do with specific deterrence than anything else might be appropriate, but that is not this case.
General deterrence, of course, is always important. Employers need to understand that the obligations cast on them by the Fair Work Act and industrial instruments need to be observed.
Having regard to all of those matters, I am not satisfied that a pecuniary penalty which is towards the upper end of the range is appropriate as the applicant submits. Nor am I satisfied that no penalty is appropriate.
I am satisfied that a pecuniary penalty of 10 per cent of the maximum, that is, $3300, is appropriate.
ORDERS DELIVERED
I decline to make the declaration sought by the applicant. Although it was said that it was necessary for specific deterrence purposes, that submission was not elaborated upon in any meaningful way. I am not satisfied that a declaration in this case would serve any useful purpose.
ORDERS DELIVERED
RECORDED: NOT TRANSCRIBED
This is an application for costs in proceedings that I have now determined. In the proceedings I made an order in favour of the applicant against the respondent. The order provided for the payment of compensation in the sum of $2200 and a pecuniary penalty in the sum of $3300.
The respondent says that there ought to be an order for costs in its favour on an indemnity basis because on 16 May, 2014 by letter dated that day it offered to settle these proceedings by way of a payment to the applicant of $35,000 less any tax payable under ss.82.130 of the Income Tax Assessment Act 1997 in full and final settlement of the proceeding. The applicant, needless to say, did not accept the offer.
Section 570 of the Fair Work Act sets out the rules about costs in this jurisdiction. Section 571 provides that a party to the proceedings in a court in relation to a matter arising under the Act may be ordered by the Court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or ss.569 or 569A of the Act.
It was not suggested in the course of argument that ss.569 or 569A of the Act were relevant. Attention was directed to s.570(2) of the Fair Work Act and, in particular, s.570(2)(b). That section says:
The party may be ordered to pay the costs only if the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs.
The submission put squarely is that the failure to accept the offer of 16 May, 2014 was an unreasonable act or omission on the part of the applicant which caused the respondent to incur costs. I reject that submission. There was nothing unreasonable about rejecting the offer made by the respondent to the applicant. Minds will differ about the way in which compensation ought to have been assessed in this case. Minds will differ about the amount which ought to have been awarded.
That the amount awarded by this Court is less than the amount of the offer does not necessarily mean that the refusal of the offer was unreasonable because, ultimately, the fixing of compensation and more importantly penalty is a matter of discretion for the Court under the Fair Work Act.
For those rather inelegant reasons the application for costs is refused.
I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Associate:
Date: 24 July 2014
Key Legal Topics
Areas of Law
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Employment Law
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Statutory Interpretation
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Civil Procedure
Legal Concepts
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Breach
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Costs
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Remedies
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Standing
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Statutory Construction
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