King v PIA Mortgage Services Pty Ltd and Ors (No.2)

[2019] FCCA 1460

FEDERAL CIRCUIT COURT OF AUSTRALIA

KING v PIA MORTGAGE SERVICES PTY LTD & ORS (No.2) [2019] FCCA 1460

Catchwords:
INDUSTRIAL LAW – Penalty – consideration of the appropriate penalty for each contravention – no penalty imposed in respect of contravention of s 340(1) of the Fair Work Act 2009 (Cth) against either respondent – penalty imposed in respect of contravention of s 90(2) of the Fair Work Act 2009 (Cth) against the first respondent.

COSTS – Court not satisfied that the requirements of s 570(2) of the Fair Work Act 2009 (Cth) have been made out – no order for costs made in respect of either party.

Legislation:

Australian Consumer Law 2010 (Cth), sch.2.

Fair Work Act 2009 (Cth), ss.90, 340, 361, 538, 545, 546, 550, 566, 570.

Federal Circuit Court of Australia Act 1999 (Cth), s.13(4)(b).

Applicant: LEIGHTON KING

First Respondent: PIA MORTGAGE SERVICES PTY LTD

Second Respondent: THE PROPERTY INVESTORS ALLIANCE PTY LTD

Third Respondent: YUE (‘JUSTIN’) WANG

File Number: SYG 1983 of 2017

Judgment of: Judge Street

Hearing date: Decided on the papers

Date of Last Submission: 15 May 2019

Delivered at: Sydney

Delivered on: 30 May 2019

REPRESENTATION

Counsel for the Applicant: Mr I Taylor SC and Ms P Thew

Solicitors for the Applicant: Lander & Company

Counsel for the Respondents: Mr T Dixon

Solicitors for the Respondents: Rutlands Law Firm

ORDERS

1. The First Respondent in respect of the contravention of s 90(2) of the Fair Work Act 2009 (Cth) pay the Applicant a penalty in the sum of $43,200.00 pursuant to s 546(1) Fair Work Act 2009 (Cth).

2. The application for a penalty for contravention of s 340(1) Fair Work Act 2009 (Cth) is dismissed.

3. The competing applications for costs are dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1983 of 2017

LEIGHTON KING

Applicant

And

PIA MORTGAGE SERVICES PTY LTD

First Respondent

THE PROPERTY INVESTORS ALLIANCE PTY LTD

Second Respondent

YUE (‘JUSTIN’) WANG

Third Respondent

REASONS FOR JUDGMENT

Background

1. These are proceedings that were brought within the Court’s jurisdiction under s 566 of the Fair Work Act 2009 (Cth) (“the Act”) for alleged contraventions of the Act, as well as for breach of contract and contravention of the Australian Consumer Law 2010 (Cth) (“the ACL”).

2. The substantive proceedings were heard and determined by the learned Judge Smith, formerly of this Court, on 12 December 2018. On that occasion, his Honour Judge Smith made declarations as to the first respondent having contravened s 340(1) and s 90(2) of the Act. The Court also made a declaration that the third respondent was involved in the contravention of s 340 of the Act for the purpose of s 550 of the Act. The Court also made orders for the payment of an amount of $100,000.00 pursuant to s 545(2)(b) of the Act by the first and third respondents and for the first respondent to pay a further sum of $10,348.48.

Procedural history of the matter

1. On 12 December 2018, Judge Smith listed the matter for directions on 14 December 2018 concerning the issues of penalty and costs. On 14 December 2018, after appearance by representatives on behalf of the applicant and the respondents, Judge Smith made orders for the filing and serving of any evidence and submissions by the applicant in relation to penalties and costs and also by the respondents in relation to penalties and costs. The Court also ordered that the question in relation to costs and penalties be decided on the papers. The parties have consented to this process without an oral hearing pursuant to s 13(4)(b) of the Federal Circuit Court of Australia Act 1999 (Cth).

2. Pursuant to those orders, the applicant filed an affidavit of Mr Leslie Pozniak dated 1 March 2019 identifying calculations in respect of post judgment interest and annexing correspondence in respect of settlement offers in support of the applicant’s application for costs. There has also been filed and treated as read by the Court, the affidavit of Rutland Cheng dated 6 March 2019.

3. On 1 March 2019, the applicant filed submissions on penalties. The applicant in substance sought 90% of the maximum amount of $54,000.00 against the first respondent corporate entity in respect of the breach of s 90 of the Act amounting to $48,600.00; 90% of the maximum amount of $54,000.00 against the first respondent corporate entity in respect of the breach of s 340 of the Act amounting to $48,600.00; and 90% of the maximum amount of $10,800.00 against the third respondent in respect of the breach of s 340 of the Act amounting to $9,720.00 making a total of $106,920.00.

4. On 4 March 2019, this Court made orders in Chambers listing the matter for directions on 6 March 2019. Mr Rutland Cheng’s affidavit concerned communications that had taken place between the parties following the making of the orders by Judge Smith.

5. On 6 March 2019, neither counsel sought any variation in respect of the order made by Judge Smith for the issue of costs and/or penalty to be determined on the papers. On that date, liberty was granted to the parties to file consent orders if an agreement was able to be achieved. No such agreement has been achieved.

6. On 6 March 2019, the applicant filed submissions on costs contending that the applicant has incurred costs in the amount of $573,648.33 but seeking an order of payment of his costs of $372,871.47. The applicant in the alternative, seeks an amount of $325,849.24 or in the alternative, the applicant seeks such an amount as deemed appropriate by the Court.

7. On 15 April 2019, the respondents filed submissions on costs identifying settlement negotiations that had taken place and contended that there were unreasonable acts by the applicant. Those submissions seek an order seek that the applicant pay the respondents’ costs in respect of the failed ACL claims and that otherwise there be no order as to costs.

8. On 15 April 2019, an affidavit by Mr Yue Weng was filed and has been read that identified payment to the applicant’s solicitors trust account of the amounts ordered by the Court being effected on 26 January 2019. Those amounts were paid in circumstances where it was identified an appeal was being pursued and there was a request for the holding of that sum in a trust account, earning interest pending the outcome of the appeal. On the face of the evidence before the Court, the substantive amounts the subject of the orders of the Court have been paid, albeit, that it is apparent that there are further amounts of interest that would be payable by the first and third respondents in respect of the substantive orders, if the appeal is unsuccessful. No submission has been advanced that the Court should take into account the absence of payment of interest in relation to the issue of penalty. In any event, given the appeal on foot, the Court is not satisfied that the absence of payment of interest is a significant factor.

9. On 15 April 2019, the first and third respondents filed their submissions on penalty.

10. On 29 May 2019, this Court made orders listing the matter for judgment on 30 May 2019.

The Issue of Penalty

1. Section 546 of the Act identifies the power to make a pecuniary penalty order that the Court considers is appropriate, if the Court is satisfied the person has contravened a civil penalty provision. The pecuniary penalty must not be more than the maximum identified in s 546(2) of the Act. The principles in relation to the imposition of penalties requires identification of the separate contraventions involved. The contravention of s 340 of the Act found by Judge Smith was found to have involved the first respondent taking adverse action against the applicant because the applicant under s 340(1)(a)(ii) Act has exercised a workplace right. The alleged workplace right was identified in the pleading under s 341(1)(c)(ii) of the Act and refers to a person having a workplace right if the person is able to make a complaint or an inquiry, relevantly if the person is an employee in relation to his or her employment.

2. Judge Smith referred to the presumption under s 361 of the Act of that contravention and referred to the breadth of the meaning of the word “complaint.” The learned Judge found that the applicant made a complaint in relation to his employment and that the  applicant complained that his rights under the contract of employment to be employed and to be paid for a term of 5 years was unfair given the third respondent’s indication that he was going to terminate that contract.

3. In the reasons of the learned Judge Smith, there was identified a meeting that took place on 3 April 2017 in which the third respondent identified the intention to terminate the applicant’s employment and proposed 4 months’ salary and some training input by the applicant.

4. An email sent on 4 April 2017 referred to the terminating of the applicant’s contract and the proposal to pay the $100,000.00. The communication of 4 April 2017 alleged disappointment, asserted that the applicant was misled, and invited a more meaningful offer requesting communication by close of business on 5 April 2017.

5. It is apparent that the applicant did not return to work after 4 April 2017. There was a further communication sent on 12 April 2017 from the applicant’s lawyers, that Judge Smith found identified an understanding that a decision had already been made to terminate the contract. Judge Smith found that at the meeting on 3 April 2017, the third respondent indicated he was going to terminate the applicant’s contract on 4 months’ notice. The applicant identified in a communication sent by his lawyers on 12 April 2017 that he wanted $900,000.00 in respect of the termination of his employment. There was a response sent on behalf of the respondents on 23 April 2017 which referred to the failure of the applicant to comply with his terms of employment and being absent from work. That communication identified that the first respondent accepted the repudiation conduct and terminated the employment of the applicant on 21 April 2017. Judge Smith found that in contravention of s 340(1) of the Act, the applicant was dismissed because he had exercised a workplace right in these circumstances and made a declaration the subject of the workplace penalty.

6. The other contravention in respect of the declaration concerning s 90(2) of the Act arose in circumstances where the applicant’s payslip showed he had accrued 68.4 hours of annual leave amounting to $10,384.48 and that this amount had not been paid in contravention of s 90(2) of the Act. Judge Smith rejected the contention that the respondents could offset days not worked in respect of that entitlement.

7. Those are the two separate contraventions involved in respect of the application for a penalty. There is no suggestion that the two contraventions constitute a single course of conduct and accordingly, the two contraventions are not treated as a single breach. There is no issue in respect of grouping in respect of the contraventions in the circumstances of the present case.

Consideration of the appropriate penalty

1. The Court must then consider the appropriate penalty for each breach. The Court must also apply the totality principle where a penalty is imposed and the Court must consider the aggregate penalty overall and determine whether it is an appropriate response to the conduct which resulted in the breaches. The Court must ensure that this involves an instinctive synthesis by the Court in determining whether a penalty should be imposed and the amount. The Court is to take into account the nature and extent of the conduct which led to the breaches and each of the factors addressed below.

2. In that regard, it is apparent that the conduct that led to the breach in respect of s 340 of the Act, were communications that took place following the third respondent conveying, on behalf of the first respondent, to the applicant that his contract would be terminated. It is the communications following the indication that the applicant would be terminated which have been treated by the Court as a complaint falling with the meaning of “adverse action” which give rise to the contravention.

3. Whilst the Court is bound by the findings of Judge Smith, it is on its face a technical contravention of the Act. This is not a case where prior to the notification of the intention to terminate, the applicant had been advancing a workplace right. The nature and extent of the conduct of the respondents in this regard is relevant to whether a penalty should be imposed and if so the amount thereof.

4. The circumstances giving rise to the decision to terminate the applicant have been discussed at length in Judge Smith’s reasons reflecting a loss of the underlying brokering contracts and consequential want of viability of the business. The nature of the conduct did not involve a flagrant breach of s 340 of the Act by either the first or third respondent. The negotiations in respect of the termination effectively took place between lawyers. The Court must also take into account the circumstances in which that conduct took place in respect of s 340 of the Act to which the Court has referred above.

5. The breach in respect of s 90(2) of the Act, is one in which it appears that the first respondent erroneously contended an entitlement to set off time when the applicant did not attend work. It was erroneous for the first respondent to do so. The nature and extent of the conduct is isolated. The circumstances in which it took place were ones in respect of which there were substantial disputes raised by the applicant in relation to misleading and deceptive conduct, breach of contract and other contraventions on which the applicant has ultimately failed. However, the failure to pay occurred in circumstances where it is apparent the applicant was entitled to payment for the annual leave that had accrued and that there should have been no offset for absence of the applicant from work imposed by the first respondent. The Court notes that the contravention of s 90 of the Act was one by the first respondent only. The circumstances in which the conduct took place in respect of s 90(2) of the Act are referred to above.

6. In relation to the nature and extent of the loss or damage sustained as a result of the contraventions, those are reflected in the declarations identified by the Court. There was no suggestion that either the first or third respondent has been involved in any previous contravention.

7. For the reasons already given, the breaches are separate, albeit, arising in the context of the dismissal of the applicant. On the face of the evidence before the Court, the business of the first respondent was no longer viable because of the reputation and loss of broker contracts, which is what gave rise to the termination.

8. In relation to whether the breaches were deliberate, Judge Smith found, in relation to s 340 of the Act, that the third respondent was involved in the contravention. To be involved in the contravention requires knowing involvement and this in turn requires intentional conduct. In these circumstances, the Court finds the contravention of s 340 of the Act was a deliberate breach on the findings made by Judge Smith.

9. In respect of the contravention of s 90 of the Act by the first respondent, the Court finds it was a deliberate breach. The first respondent was purporting to set off time that the applicant was absent from work and this reveals intentional conduct.

10. In respect of the contravention of s 340 of the Act, the first respondent and senior management and corporate mind, being the third respondent, was involved in the contravention of s 340 of the Act. Judge Smith found the third respondent was not involved in the breach of s 90(2) of the Act.

11. It is apparent that the proceedings were contested hotly on a number of issues and this is not a case where contrition is relevant. For the reasons earlier given, it is apparent that the first and third respondents have attended to and paid the amounts owing due to the breach found by the learned trial judge. No complaint has been made in respect of the absence of payment of interest.

12. This is not a case involving the enforcement authorities. The Court is conscious of the need to take into account compliance with the minimum standards and the enforcement of employee entitlements.

13. The Court also takes into account the need for specific and general deterrence.

14. The Court has a discretion to exercise in determining whether any penalty should be imposed and that discretion must take into account all of the above factors in determining whether no penalty is appropriate. The Court accepts that it is satisfied that there has been a contravention of the civil penalty provisions identified. Taking into account all the above factors in relation to s 340 of the Act, the Court is not satisfied in all the circumstances that any penalty is appropriate and the Court determines that no penalty should be imposed.

15. Taking into account all the above factors in respect of the contravention of s 90(2) of the Act, the Court is satisfied that it is appropriate to impose a penalty on the first respondent in respect of the contravention found by Judge Smith. Whilst not of great weight, there is still a need for specific deterrence. Whilst the amount outstanding is not significant, it is important that corporate entities comply with their obligations under s 90(2) of the Act and the purported set off on its face had no substance. General deterrence is of considerable weight in this regard and in all the circumstances, and taking into account the other factors referred to, does warrant the imposition of a penalty on the first respondent. Applying the totality principle and taking into account all of the circumstances, the Court finds that the appropriate penalty to be imposed on the first respondent is 80% of $54,000.00 being $43,200.00. The Court is satisfied that it is appropriate in all the circumstances to order that the penalty be paid to the applicant.

16. The Court has found a penalty of $43,200.00 should be imposed in respect of the contravention of s 90(2) of the Act by the first respondent and should be paid to the applicant.

17. The Court has found that no penalty should be imposed in respect of the contravention of s 340(1) of the Act against either respondent.

Issue of Costs

1. The principles relating to costs are identified in s 570 of the Act which relevantly provides as follows:

   (1)  A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.

   Note:         The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.

   (2)  The party may be ordered to pay the costs only if:

   (a)  the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or

   (b)  the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs; or

   (c)  the court is satisfied of both of the following:

   (i)  the party unreasonably refused to participate in a matter before the FWC;

   (ii)  the matter arose from the same facts as the proceedings.

2. An underlying premise in the applicant’s submissions in respect of unreasonable conduct appears to be a substantial recovery in respect of penalty. That premise is not made out. Further, a penalty if imposed is not compensation to the applicant, but is a power exercised in the public interest to ensure compliance with the Act. Further, the applicant is not as of right, entitled to any penalty if ordered as there is a discretion to be exercised in relation to whom the penalty should be paid. The Court is not satisfied that the applicant has incurred costs by reason of the unreasonable act or omission by the first and third respondents. The applicant pursued substantive proceedings seeking relief in respect of other contraventions, misleading and deceptive conduct and breach of contract in which the applicant failed. The ordinary principle under s 570(1) of the Act is that costs are only to be ordered in accordance with s 570(2) of the Act. The Court is not satisfied the requirements of s 570(2) of the Act have been made out by the applicant insofar as the applicant contends an order for costs should be made against the respondents.

1. Section 570 of the Act applies to the proceedings as a whole and accordingly, notwithstanding that the respondents have succeeded on other issues, the respondents are not entitled to an order for costs unless the requirements of s 570(2) of the Act are satisfied.

2. In summary, the applicant offered to settle the matter for $500,000.00 on 17 November 2017 and the respondents offered to settle the matter for $100,000.00 on 31 May 2018. The respondents made a further offer on 6 June 2018 for $110,000.00 and the applicant made a counteroffer to settle the matter for $250,000.00 on 8 June 2018 which was the subject of an extension. None of those matters identify grounds upon which the Court is satisfied the applicant’s unreasonable act or omission caused the respondents to incur costs.

3. The Court is not satisfied that the requirements of s 570(2) of the Act are made out by the respondents insofar as the respondents contend an order for costs should be made against the applicant.

4. In respect of the ACL claims, for the reasons already given, the ACL claims falls within the same application of the principle identified in s 570 of the Act.

5. The Court accordingly finds that no order should be made in respect of costs in favour of either party. For these reasons, the Court makes the above orders.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Judge Street

Date: 30 May 2019