Hurley v Security & Technology Services (NT) Pty Ltd (No 2)
[2021] FedCFamC2G 387
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Hurley v Security & Technology Services (NT) Pty Ltd (No 2) [2021] FedCFamC2G 387
File number(s): SYG 530 of 2020 Judgment of: JUDGE STREET Date of judgment: 5 November 2021 Catchwords: INDUSTRIAL LAW – Fair Work – penalty hearing – costs hearing – whether there was unreasonable conduct on behalf of the respondents – where a Calderbank offer had been made by the applicant – costs awarded – whether the nature, character and seriousness in the circumstances warranted a penalty – whether the maximum penalty ought to be imposed – penalty imposed Legislation: Corporations Act2001 (Cth)
Fair Work Act 2009 (Cth) ss 44, 117, 123, 545, 546, 570
Federal Court of Australia Act 1976 (Cth) pt 5B
Cases cited: Fair Work Ombudsman v NSHNorth Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 Division: Division 2 General Federal Law Number of paragraphs: 28 Date of hearing: 5 November 2021 Place: Sydney Counsel for the Applicant: Ms C Ronalds
Ms R KumarSolicitors for the Applicant: Nicole Dunn Lawyers Counsel for the Respondents: Mr M Seck Solicitors for the Respondents: Seyfarth Shaw Australia ORDERS
SYG 530 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MARK HURLEY
Applicant
AND: SECURITY & TECHNOLOGY SERVICES (NT) PTY LTD ACN 110 544 753
First Respondent
MARK RANYARD
Second Respondent
ORDER MADE BY:
JUDGE STREET
DATE OF ORDER:
5 NOVEMBER 2021
THE COURT ORDERS THAT:
1.Pursuant to s 570(2)(b) of the Fair Work Act 2009 (Cth)
(a)the first respondent pay the costs of these proceedings from the date of commencement up to 6 April 2021 on a party - party basis, as agreed or as assessed;
(b)the first respondent pay the costs of these proceedings from 6 April 2021 to date on an indemnity basis, as agreed or as assessed.
2.Pursuant to s 546(3)(c) of the Fair Work Act 2009 (Cth) the first respondent pay a pecuniary penalty to the applicant of $50,000 within 28 days of the date of this order.
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).
EX TEMPORE REASONS FOR JUDGMENT
JUDGE STREET:
Introduction
These proceedings were commenced on 4 March 2020. On 2 November 2021, the Court found that the first respondent had contravened s 44 of the Fair Work Act 2009 (Cth) (“the Act”) in relation to a failure under s 117 of the Act. On that date, the Court also ordered compensation under s 545 of the Act in the amount of $308,401.83, plus interest under s 547 of the Act.
The proceedings were fixed today for hearing of the issues in respect of costs and penalty. Both parties have helpfully put on written submissions. An affidavit sworn by the applicant’s solicitor was read in relation to the issue of costs that identifies a Calderbank offer sent on 6 April 2021 to the respondents’ solicitor, offering to compromise the matter for $261,000.00 with each party to pay their own costs, together with a deed of settlement and release. That email was not the subject of an engaging response by the respondents. The letter from the applicant’s solicitor also foreshadowed seeking an order for indemnity costs from the date of the letter if the applicant were successful in recovering the full amount claimed. The applicant was so successful.
The Issue of Costs
In relation to the issue of costs, the ordinary rule under s 570(1) of the Act is that each party must pay their own costs, and it is only if the Court finds that there is relevant conduct falling within s 570(2) of the Act that the power to make an adverse costs order is engaged. The applicant in the present case relies upon s 570(2)(b) of the Act. In their submissions, the applicant identified the contention that their costs have been caused by the unreasonable act of the first respondent.
This is a case where the Court found that the summary dismissal procedure that was adopted by the first respondent was unfair and adopted at a point in time when the applicant was, in fact, the subject of a medical certificate identifying that he was unwell, and the first respondent forged ahead with an accelerated process, unfairly, for the summary dismissal of the applicant. The first respondent’s conduct can be properly characterised as reprehensible and callous in circumstances where the applicant was the subject of an existing medical certificate at the time of the summary dismissal.
Mr Seck, of Counsel for the respondents, submitted that the construction of s 570(2)(b) of the Act should be confined to the conduct of the proceedings and the issues raised in the proceedings. Adopting that approach in respect of these proceedings, the defence put on by the respondents, contending that the summary dismissal was justified for serious misconduct, was itself an unreasonable act within s 570(2)(b) of the Act that justifies costs in the circumstances of this matter.
The first respondent advanced, as a core part of its case of serious misconduct, services it had itself been providing to a relevant supplier. At the time of the defence, the first respondent had available to it ample information to identify that the core basis of the alleged offence of misconduct was completely wanting in merit and was unreasonable. The added argument relating to services provided to the seller's representative was hollow of any real consequence to the first respondent and unlikely, on its face in any reasonable assessment, to justify putting on a defence of serious misconduct.
Confining the issue of unreasonably under s 570(2)(b) of the Act to the conduct of the case, the first respondent also put on two defences in relation to alleged industrial action and the Corporations Act2001 (Cth), which the Court described as spurious. The Court is satisfied that the first respondent's unreasonable act in the filing of a defence to these proceedings in the circumstances known to the first respondent at the time it put on that defence gives rise to there having been an unreasonable act that has caused the applicant to incur costs, by reason of which the applicant should have its party - party costs up to and including 6 April 2021.
The issue then arises as to whether or not there should be a different costs order from the date of the Calderbank offer. Before the Court turns to that, the Court would also make the following finding. The Court takes the view that s 570(2)(b) of the Act should not be so confined that the unreasonable act is one to be isolated from the conduct which is the subject matter of the proceedings. These are proceedings in which, for the reasons the Court has already summarised, the first respondent’s approach to the proceedings and the summary dismissal was unfair and unreasonable. On that further basis, the Court would find that there was an unreasonable act by the first respondent that justifies costs being ordered in this case under s 570(2)(b) of the Act, notwithstanding the ordinary rule from the commencement of the proceedings on a party - party basis.
In respect of the Calderbank argument, Mr Seck has helpfully drawn the Court’s attention to the authorities that identify that such an order should only be made where the Court is satisfied that the conduct was imprudent or plainly unreasonable, or the subject of some relevant delinquency. The failure to accept the Calderbank offer in the circumstance of this case was patently imprudent and plainly unreasonable, given the knowledge that the first respondent had as to the unfair process it had adopted for the summary dismissal.
The failure was also patently imprudent and plainly unreasonable given the absence of any real substance in the core argument relating to Integrated Products and absence of any real consequence adverse to the first respondent in respect of the alleged conduct concerning the seller’s representative. On the evidence before the Court, the failure to respond at all to that Calderbank offer within the time period identified was imprudent and plainly unreasonable conduct by the first respondent in this case.
It is important that the Court is able to take into account under s 570(2)(b) of the Act, reasonable and proper offers made to try and resolve proceedings. There is a public interest to do so. Where one party adopts a position of intransigency in respect of the endeavours to resolve the matter, that party faces the real risk of the consequence of the Court finding that their action in rejecting the offer or not engaging at all is imprudent and plainly unreasonable. The Court makes such findings in the present case.
Unfortunately, these proceedings were heard before this Court has adopted the provisions of pt 5B of the Federal Court of Australia Act 1976 (Cth), which impose obligations on both parties and their representatives. That standard does not reflect the conduct that has been engaged in by the first respondent in the present case, had those provisions had application.
The Court is of the view that the rejection of the Calderbank offer in the present case by the respondent is relevant delinquency in the conduct of the litigation that warrants an indemnity order from 6 April 2021.
The Issue of Penalty
Turning to the issue of penalty, the first respondent, in light of the Court’s findings, does not contend that this is a case where no penalty should be imposed. Rather, the respondent has drawn the Court’s attention to the overarching principle behind s 546 of the Act to promote the public interest in compliance, and has identified a singular contravention under s 44 of the Act, referable to s 117, and the limited five-week notice period itself identified by s 117 of the Act.
The Court takes into account the principles identified by Bromwich J at [36] and at [89] to [107] in Fair Work Ombudsman v NSHNorth Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301.
The maximum penalty in respect of s 44 of the Act in the present case, being a single contravention, is $63,000. In this case, there is no need to deal with the consequences of multiple contraventions and the Court must determine the appropriate penalty in respect of the contravention that the Court has found.
The nature, character and seriousness of the conduct and the circumstances in which the conduct took place in the present case are circumstances that indicate a potential need for specific deterrence. The conduct occurred in terms of the summary dismissal at a point in time when the applicant was the subject of a certificate from a doctor identifying that he was unfit for work. Withstanding that certificate, the first respondent adopted a process of accelerated determination unfairly of alleged grounds for summary dismissal. Their alleged grounds reflected no fair or proper process by the first respondent.
The circumstances in which the contravention took place are ones engaged in because of the potential defence to s 117 through the reference to serious misconduct by the applicant under s 123 of the Act. The contentions being advanced by the first respondent to justify the serious misconduct have been identified by the Court in its reasons to have been false and misleading. The conduct of the first respondent can properly be characterised as both callous and reprehensible in the circumstances where the applicant was on sick leave at the time of the accelerated process for purported dismissal for serious misconduct.
Contraventions of the Act by their very nature are serious. The monetary consequence for the applicant in the present case was significant, as reflected in the amount of the award that was made under s 545 of the Act. Mr Seck submitted that the Court should only turn its mind to the consequence of the five-week period the subject of s 117 of the Act, because that was the provision the subject of the notice requirement. There is force in Mr Seck's submission that the Court must focus on the contravention of s 117 of the Act. However, the consequences of that contravention are still relevant in relation to the nature of the conduct and the circumstances.
The Court is satisfied that it is appropriate to take into account the significant consequence, in terms of detriment to the applicant, from the failure to give notice purporting to rely upon a ground of serious misconduct that the court has found was the subject of an unfair process.
In relation to the loss and damage that was caused, for the reasons the Court has just identified, the Court has taken into account both the five-week period and the more significant consequence for the applicant overall, given the amount that the Court ultimately ordered, albeit the Court accepts that the notice period the subject of the contravention was five weeks.
In relation to the deliberateness of the conduct, the first respondent identifies no adverse finding as to the conduct being deliberate in relation to s 117 of the Act. There is no question but that the summary dismissal was deliberate by the first respondent. The conduct does have an element of deliberateness in the contravention in relation to s 117 of the Act in the circumstances of the present case.
In terms of time, the relevant conduct occurred on 31 October 2019. The Court accepts that it was isolated, and the Court accepts that, other than the circumstance of the present case, it does not appear to have been the subject of some systemic approach by the first respondent to employees at large. However, there were obvious systemic deficiencies in the processes that were adopted by the first respondent. There is no evidence to suggest that the first respondent is a small business, which is a factor to be taken into account in determining a penalty that will have sufficient sting to ensure compliance so far as both general deterrence and specific deterrence is concerned.
This is a case in relation to a degree of involvement by senior management. It is apparent that senior management was involved in the decision to terminate the applicant’s employment, that being the role, at least, of Mr Cherrington. It did appear that there was a general counsel who played some role in the proceedings, but that was not explored. There is an obvious loss of legal privilege where legal counsel or general counsel engage in commercial and operational decisions and participate in that decision-making process. That has not been explored in this case, but it is apparent that senior management was involved in what the Court has found to be a contravention of the Act, which must be taken into account in determining the quantum of penalty.
In terms of culture of the organisation, the Court accepts that this appears to be a neutral factor, and the Court has no evidence to suggest any earlier history of contraventions. The Court takes into account what, on its face, appears to be a good corporate record by the first respondent in determining the quantum and penalty.
In relation to the issue of cooperation and contrition, the proceedings have been contested and there has been no identification of contrition or cooperation in relation to the determination of penalty until the bringing of this hearing relating to penalty. It is fair to say that the first respondent has not disputed that a penalty is appropriate and has, to that extent, cooperated with the penalty process and provided helpful and constructive submissions.
Conclusion
The applicant has sought a penalty in the maximum amount. Taking into account the principles that have been referred to, the Court is not satisfied that the maximum would be an appropriate penalty in all the circumstances. The Court is satisfied that a penalty in an amount of approximately 80 per cent has sufficient sting in relation to the contravention to provide both an adequate degree of specific deterrence as well as to ensure the importance at large of general deterrence in respect of a contravention of s 117 of the Act.
Accordingly, the Court is of the view that the appropriate penalty in all the circumstances under s 546 of the Act is a penalty in the sum of $50,000.00.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the settled transcript of the published oral reasons for judgment of Judge Street delivered in open Court on 5 November 2021 and the parties were sent a sealed copy of the Court’s orders.
Associate:
Dated: 6 May 2022
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