Molina v Galloway
[2022] FedCFamC2G 904
Federal Circuit and Family Court of Australia
(DIVISION 2)
Molina v Galloway [2022] FedCFamC2G 904
File number(s): SYG 930 of 2022 Judgment of: JUDGE GIVEN Date of judgment: 1 November 2022 Catchwords: INDUSTRIAL LAW – default judgment – solicitor as respondent employer – failure to pay compensation ordered by Fair Work Commission – failure to pay superannuation and long service leave entitlements – failure to file Notice of Address for Service – failure to defend proceedings with due diligence – failure of respondent to attend Court ordered mediation – whether failure to attend mediation constitutes default – imposition of penalties – discount for corrective action – whether unreasonable acts or omissions caused applicant to incur costs – mediation costs awarded on party/party basis – failure to engage in reasonable process of settlement – remainder of costs of proceedings ordered on indemnity basis Legislation: Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) ss 323, 405, 545, 557, 570
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 191
Federal Court of Australia Act 1976 (Cth) s 37M
Long Service Leave Act 1955 (NSW) s 4
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 13.04, 13.05, 13.06
Federal Court Rules 2011 (Cth) r 5.22
Cases cited: Adamczak v Alsco Pty Ltd (No 4) (2019) 284 IR 337
Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433
Australian Building and Construction Commissioner v Construction, Mining, Forestry, and Energy Union (2018) 262 CLR 157
Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383
Australian Competition and Consumer Commission v Yellow Page Marketing BV (No. 2) (2011) 195 FCR 1
Carr v ILSC (Brisbane) Pty Ltd, Pathik v ILSC (Brisbane) Pty Ltd (No 2) [2019] FCCA 1028
Celand v Skycity Adelaide Pty Ltd (2017) 256 FCR 306
Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225
Council of the Law Society of New South Wales v Galloway [2012] NSWADT 176
Fair Work Ombudsman v ADADN Pty Ltd [2021] FCCA 756
Fair Work Ombudsman v Anvisco Pty Ltd (In Liq) [2022] FedCFamC2G 738
Fair Work Ombudsman v Bosen Pty Ltd [2011] VMC 81
In Fair Work Ombudsman v Port Douglas Investments As Trustee For The Theo Sourlos Family Trust & Anor [2018] FCCA 488
Kelly v Fitzpatrick (2007) 166 IR 14
Louis Vuitton Malletier v Sonya Valentine Proprietary Limited (2013) 222 FCR 45
Luna Park v Bose [2006] FCA 94
Mayberry v Kijani Investments Pty Ltd as Trustee for the Dawe Investments Trust Subway Wallsend trading as Subway [2011] FCA 1238
Milena Molina & Anor v Brett Galloway [2022] FWC 776
Milena Molina and Raymond Zhai v Brett Galloway [2022] FWC 776
Rossetti v Aus Gold Mining Group Pty Ltd [2018] FCA 1649
Ryan v Primesafe [2015] 323 ALR 107
Sayed v Construction, Forestry, Mining and Energy Union (2016) 239 FCR 336
Division: Division 2 General Federal Law Number of paragraphs: 92 Date of hearing: 1 November 2022 Place: Sydney Counsel for the Applicants: Mr I Latham Solicitor for the Applicants: Marrickville Legal Centre The Respondent: No Appearance ORDERS
SYG 930 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MILENA MOLINA
First Applicant
RAYMOND ZHAI
Second Applicant
AND: BRETT GALLOWAY
Respondent
order made by:
JUDGE GIVEN
DATE OF ORDER:
1 NOVEMBER 2022
THE COURT ORDERS THAT:
1.Pursuant to r 13.05(2)(c) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (Rules) judgment is entered for the applicants by reason of the failure of the respondent, Mr Brett Galloway, to:
(a)comply with orders 2 and 3 made by the Court on 27 July 2022 which constitutes a default for the purposes of r 13.05(2)(c)(iii) of the Rules; and
(b)attend the mediation on 30 September 2022, as ordered by the Court on 27 July 2022, which constitutes a default for the purposes of rr 13.05(2)(c)(iii) of the Rules and a failure to defend the proceeding with due diligence for the purposes of r 13.05(2)(c)(vii) of the Rules.
2.Upon the admissions which the respondent is taken to have made, consequent upon default pursuant to r 13.04(2) of the Rules, the Court declares that the respondent has contravened:
(a)section 405 of the Fair Work Act 2009 (Cth) (Act) in not paying the amounts owed to the first applicant pursuant to the orders made on 6 April 2022 in Milena Molina and Raymond Zhai v Brett Galloway [2022] FWC 776.
(b)section 405 of the FW Act in not paying the amounts owed to the second applicant pursuant to the orders made on 6 April 2022 in Milena Molina and Raymond Zhai v Brett Galloway [2022] FWC 776.
(c)section 323 of the FW Act in not paying pro-rata long service leave owed to the first applicant pursuant to s 4 of the Long Service Leave Act 1955 (NSW) (LSL Act).
3.Pursuant to s 545(1) of the FW Act, the respondent must pay the following in respect of the first applicant within 28 days of the date of this order:
(a)$16,778.78 pursuant to s 4 of the LSL Act payable to the first applicant; and
(b)$3,924.05 payable to the first applicant’s nominated superannuation fund.
4.Pursuant to s 545(1) of the FW Act, the respondent must pay $2,240.70 to the second applicant’s nominated superannuation fund within 28 days of the date of this order.
5.The respondent is to pay interest of 4% of the amounts the subject of orders 3 and 4 above.
6.The respondent must pay a civil penalty in respect of the contravention the subject of declaration 2(a) above in the amount of $10,000.
7.The respondent must pay a civil penalty in respect of the contravention the subject of declaration 2(b) above in the amount of $10,000.
8.The respondent must pay a civil penalty in respect of the contravention the subject of declaration 2(c) above in the amount of $9,000.
9.Pursuant to s 546(3) of the Act:
(a)the pecuniary penalties referred to in orders 6 and 8 above are be paid to the first applicant within 28 days of the date of this order.
(b)the pecuniary penalties referred to in order 7 above is to be paid to the second applicant within 28 days of the date of this order.
10.The respondent is to pay the applicants’ costs and disbursements thrown away of and incidental to the mediation the subject of order 5 made on 27 July 2022 on a party/party basis fixed in the sum of $5,764.00.
11.The respondent is to pay the applicants’ costs and disbursements of the proceedings on an indemnity basis, other than the costs the subject of order 10 above, fixed in the sum of $13,475.00.
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
(revised from transcript)JUDGE GIVEN:
I have before me two applications filed for the applicants, being:
(a)an Application in a Proceeding filed on 23 September 2022 (default judgment application); and
(b)an Application in a Proceeding filed 4 October 2022 (mediation costs application).
In respect of the Applications in a Proceeding at the commencement of the hearing, Counsel moved on each and in support thereof relied upon the following affidavits of Genevieve Barry, affirmed on:
(a)27 July 2022 (first Barry Affidavit);
(b)23 September 2022 (second Barry Affidavit);
(c)4 October 2022 (third Barry Affidavit); and
(d)28 October 2022 (fourth Barry Affidavit).
I also received a number of documents by tender:
(a)a printout of a Superannuation Guarantee Percentage Table from the Australian Taxation Office (Exhibit “1A”);
(b)long service leave calculator from the New South Wales Industrial Relations website, calculating amounts in respect of the first applicant (Exhibit “2A”); and
(c)a letter from the Marrickville Legal Centre to the respondent dated 20 July 2022 (Exhibit “3A”) (first offer).
The applicants are each former employees of the respondent, Mr Brett Galloway, who is a solicitor. In March 2020 the applicants were dismissed from their employment by Mr Galloway and commenced proceedings thereafter in the Fair Work Commission (FWC) for unfair dismissal and seeking payment of certain of their statutory entitlements.
These proceedings were commenced by the applicants on 29 June 2022 consequent upon the following orders being made in their favour by DP Easton of the FWC on 6 April 2022 following delivery of judgment: see Milena Molina & Anor v Brett Galloway [2022] FWC 776 (FWC judgment):
Order for Compensation.
Further to the decision in [2022] FWC 776, the Fair Work Commission orders pursuant to s.392 of the Fair Work Act 2009 (Cth):
[1]Mr Brett Galloway is to pay Ms Milena Molina the sum of $41,305.78 as compensation in lieu of reinstatement, less taxation as required by law, plus an additional component for superannuation.
[2]Mr Brett Galloway is to pay Mr Raymond Zhai the sum of $23,586.41 as compensation in lieu of reinstatement, less taxation as required by law, plus an additional component for superannuation.
[3] The above amounts are to be paid within 21 days of the date of this Order.
By their Statement of Claim filed on 29 June 2022 (SOC), the applicants alleged failure to comply with the orders of the FWC and sought declarations for contraventions of the Act, civil penalties and costs. The proceedings were first made returnable before me on 29 July 2022. On 27 July 2022 the applicants filed an Application in a Proceeding seeking orders for substituted service after multiple attempts to serve Mr Galloway personally, had been unsuccessful.
On 20 July 2022 the applicants’ solicitor sent Mr Galloway the first offer (on a without prejudice basis), to which no response was received (see Second Barry Affidavit at [20] to [21]).
On 29 July 2022 the matter came before me for a first court date. Although based on the matters which underpinned the substituted service application an appearance was not expected from Mr Galloway, Counsel appeared for him on that occasion. At that first court date I made orders inter alia that the respondent file and serve a Notice of Address for Service within seven days and that until such time as that occurred, service on Mr Galloway could be effected by emailing him at a particular Gmail address (Gmail address). I otherwise made orders for the preparation of the matter which included:
…
2. The respondent must file and serve a Notice of Address for Service on or by 5 August 2022.
3. The respondent must file and serve a Defence on or by 12 August 2022.
4. The Applicant must file and serve any Reply on or by 16 September 2022.
5. The matter be referred to mediation before a Registrar of the Court pursuant to s 169 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), at which each person participating in the mediation including legal representatives, whether attending in person or by video/audio link, is to attend for the full duration of the mediation.
6. In the event that the mediation referred to in order 5 is unsuccessful, the parties must jointly approach the Chambers to Judge Given within 7 days of the concluded mediation, with a view to the matter being relisted for a directions hearing.
7. Costs are reserved.
…
From the second and third Barry Affidavits the Court is informed that between the first court date and the filing of the default judgment application, the following relevantly occurred.
On 3 August 2022 the applicants’ solicitors sent Mr Galloway a without prejudice letter again seeking to resolve the matter, to which no reply was received.
On 3 August 2022 the Court Registry wrote to the applicants’ solicitor informing her that the matter was listed for a Court-annexed mediation on 30 September 2022 (mediation notification). By reason of Mr Galloway having yet to file an appearance, the Registry (presumably having not seen the order pertaining to Mr Galloway’s Gmail address) requested that the applicants’ solicitor inform Mr Galloway of the mediation date.
On 4 August 2022 the applicants’ solicitor forwarded the mediation notification to Mr Galloway’s Gmail address, and also responded to the mediation notification email. Mr Galloway’s Gmail address was copied into the email to inform the Court that it had been forwarded to Mr Galloway, and to acknowledge receipt on behalf of the applicants. On 4 August 2022, the applicants’ solicitors also wrote separately to Mr Galloway to record that neither of the applicants had received the compensation amounts referred to at [5] above. Those amounts were then paid on 4 August 2022, however the first applicant received no superannuation or long service leave payments and the second applicant received no superannuation payment.
At 11:04am on 23 September 2022, the applicant’s solicitor forwarded to Mr Galloway an email form the Court requesting contact details for the parties attending the mediation (see third Barry Affidavit Exhibit “GB-M-5”).
At 11:09am on 23 September 2022, the applicant’s solicitor received an email from the Court (to which Mr Galloway was copied at his Gmail address), reminding the parties that the Court required contact information for all persons participating in the mediation, by close of business on 23 September 2022 (see third Barry Affidavit Exhibit "GB-M-6").
At 11:10am on 23 September 2022, the applicants’ solicitor provided to the Court the contact details for herself, the applicants and their Counsel.
At 1:26pm on 23 September 2022, the applicants’ solicitor emailed the Court (copied to Mr Galloway at his Gmail address) the mediation summary in preparation for the mediation (third Barry Affidavit annexure “GB-M-7'')
At 11:17am on 29 September 2022, the applicants’ solicitor sent an email to Mr Galloway (copied to the Court) reminding him of the mediation scheduled for 30 September 2022 and confirming that his mediation summary was yet to be received. The applicant’s solicitor also requested that Mr Galloway provide his mediation summary as a matter of urgency (third Barry Affidavit annexure "GB-M-8").
No acknowledgment or response to the email of 29 September 2022 was received by the applicants’ solicitor.
On 30 September 2022, the applicants, together with their solicitor and Counsel attended the mediation before a Registrar of this Court. The Registrar confirmed that several unsuccessful attempts had been made to contact Mr Galloway, both by email and telephone, and that emails had been sent to Mr Galloway on 23 September 2022 (“GB-M-6”), 26 September 2022 and 30 September 2022.
On 23 September 2022 the applicants filed the default judgment application which was given a return date by the registry of 6 October 2022. Correspondence on the Court file demonstrates that on 4 October 2022 the applicants’ solicitor wrote to my chambers, copying Mr Galloway at his Gmail address, indicating that she was unable to attend the substantive hearing of the default judgment application on 6 October 2022 and requesting that it be adjourned. On 5 October 2022, my Associate responded to the parties (including to the respondent at his Gmail address) indicating that the 6 October 2022 fixture was for directions only.
On 6 October 2022 Ms Barry appeared on behalf of the applicants at the directions hearing. There was no appearance by, or on behalf of, the respondent. I listed each of the default judgment and mediation costs applications for hearing before me at 10:15am today.
This morning at 10:15am there was no appearance by, or for, Mr Galloway. At the commencement of the hearing I had the matter called outside the court room which also yielded no appearance. I am satisfied, including from the Court’s own correspondence, that Mr Galloway is aware of the hearing of the applicants’ respective applications today and that he has, for whatever reason, chosen not to attend, which is in keeping with his conduct throughout these proceedings. The applicants are represented today by Counsel, who is instructed by their solicitor.
Default judgment
The applicants primarily seek orders for default judgment based on Mr Galloway’s failure to comply with the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2022 (Cth) (Rules), together with declarations of contravention and orders on default pursuant to r 13.05(2)(c) of the Rules. The applicants allege that Mr Galloway has contravened various provisions of the Act which are set out in the SOC as follows:
Contraventions
12. Ms Molina was entitled to be paid pro-rata long service leave (the Long Service Leave Entitlements).
13. In not paying the Long Service Leave Entitlements the Respondent contravened 323 of the FW Act and s4 of the LSL Act.
14. In not paying the amounts in the FWC Orders owed to Ms Molina and Mr Zhai, the Respondent contravened a term of the orders made by Deputy President Easton and thereby contravened ss 405 of the FW Act.
Liability of the Respondent
15. As a result of the contraventions, the Respondent is liable to make a payment to:
(a) Ms Molina of $16,778.78 in respect of her Long Service Leave Entitlements;
(b) Ms Molina of $41,305.78 less appropriate taxation.
(c) The superannuation fund for Ms Molina in respect of superannuation arising from the FWC orders in the amount of $3,924.05;
(d) Mr Zhai of $23,586.41 less appropriate taxation, plus
(e) The superannuation fund for Mr Zhai in respect of superannuation arising from the FWC orders in the amount of $2,240.70.
16. As the Respondent is in contravention of ss 405 and 323 of the FW Act, the Respondent is liable for orders for payment of pecuniary penalties under s 546 of the FW Act.
In terms of the relevant principles for the entry of judgment, r 13.05 of the Rules provides as follows:
Orders on default judgment
(1) If an applicant is in default, the Court may order that:
(a)the proceeding be stayed or dismissed as to the whole or any part of the relief claimed by the applicant; or
(b) a step in the proceeding be taken within the time limited in the order; or
(c) if the applicant does not take a step in the time mentioned in paragraph (b)—the proceeding be stayed or dismissed as to the whole or any part of the relief claimed by the applicant.
(2) If a respondent is in default, the Court may:
(a) order that a step in the proceeding be taken within the time limited in the order; or
(b) if the claim against the respondent is for a debt or liquidated damages—grant leave to the applicant to enter judgment against the respondent for:
(i) the debt or liquidated damages; and
(ii) if appropriate—costs; or
(c) if the proceeding was started by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings—give judgment against the respondent for the relief that:
(i) the applicant appears entitled to on the statement of claim; and
(ii) the Court is satisfied it has power to grant; or
(d) give judgment or make any other order against the respondent; or
(e) make an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order.
(3) The Registrar must enter judgment for the debt or liquidated damages, costs and interest against the respondent as specified in leave granted under paragraph (2)(b), without giving notice, or further notice, to the respondent, if the applicant has filed in the Registry:
(a) an affidavit, or affidavits, proving:
(i) service of the application claiming judgment for the debt or liquidated damages; and
(ii) that the respondent is in default; and
(b) an affidavit for the debt or liquidated damages in accordance with the approved form.
(4) Unless the Court otherwise orders, if a respondent to a cross‑claim is in default:
(a) a judgment or decision on any claim, question or issue in the proceeding on the originating process; or
(b) any other cross‑claim in the proceeding;
is binding as between the cross‑claimant and the respondent to the cross‑claim, to the extent that the judgment or decision is relevant to any claim, question or issue in the proceeding on the cross‑claim.
(5) In subrule (4):
decision includes a decision by consent.
judgment includes a judgment by default or by consent.
(6) The Court may make an order of the kind mentioned in subrule (1), (2) or (4), or any other order, or may give any directions, and specify any consequences for non‑compliance with the order, that the Court thinks just.
Orders for default judgment can be made pursuant to r 13.05(2)(c) of the Rules if the Court is satisfied that there is a sufficient basis for the relief sought by an applicant on the face of the SOC, and the Court is satisfied that it has the power to make the grant. It is well established that in being so satisfied, the Court does not require proof by way of evidence: Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 at [3], cited in Luna Park v Bose [2006] FCA 94 at [20].
An application under rule 13.05(2)(c) is determined solely on the face of the facts pleaded in the statement of claim alone. The Rules provide at r 13.04(2) that for the purposes of r 13.05 the following constitutes defaults by a respondent:
(2) For the purposes of rule 13.05, a respondent is in default if the respondent:
(a) has not satisfied the applicant’s claim; and
(b) fails to:
(i)give an address for service before the time for the respondent to give an address has expired; or
(ii) file a response before the time for the respondent to file a response has expired; or
(iii) comply with an order of the Court in the proceeding; or
(iv) file and serve a document required under these Rules; or
(v) produce a document as required by Part 14; or
(vi) do any act required to be done by these Rules; or
(vii) defend the proceeding with due diligence.
Rule 13.06(2) of the Rules provides that the Court may make an order of a kind referred to in r 13.05(2) if a party to a proceeding is absent from a hearing.
In terms of the basis of the defaults the applicants say that on 29 July 2022, the Court made orders, inter alia, requiring Mr Galloway to file and serve a Notice of Address for Service on or by 5 August 2022 and a Defence on or by 12 August 2022 (see [8] above). A further order was made for mediation (see [8] above). Mr Galloway has not complied with any of those orders and the applicant says that there is no indication that he intends to do so.
In relation to Mr Galloway’s failure to attend the mediation, it is apparent from the content of Ms Barry’s second and third Affidavits that, since the date of the mediation, the applicants’ solicitor has received no correspondence from Mr Galloway. It is reasonable to infer, and I do, that had some misadventure befallen Mr Galloway such that he could not have attended the mediation (or at least to have even done the courtesy of notifying his imminent non-attendance either in advance, or on the date of, the mediation), that an explanation would have been rapidly forthcoming afterwards, together with a request for another mediation date sought on the basis of whatever mishap had occurred.
I am satisfied from the material set out in the third Barry Affidavit that Mr Galloway was on notice of the mediation from a number of sources and was notified on a number of occasions, and that, for whatever reason, he chose not to attend on that occasion.
An unexplained failure to attend mediation is not strictly a failure to attend a hearing of a proceeding for the purposes of the Rules. There is authority regarding s 37M(3) of the Federal Court of Australia Act 1976 (Cth) (the analogue of which is s 191(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (Court Act)) to the effect that an unexplained failure of a party to attend a mediation which has been regularly convened, does fall within the notion of a failure to defend proceedings with due diligence as is invoked in relation to the Federal Court Rules 2011 (Cth) in r 5.22(d) which is, relevantly, identical to r 13.04(2)(b)(vii) of the Rules: Louis Vuitton Malletier v Sonya Valentine Proprietary Limited (2013) 222 FCR 45 per Jessup J at [7].
Accordingly, in addition to Mr Galloway’s patent failure to comply with the orders of this Court made on 27 July 2022 in contravention of r 13.04(2)(b)(iii) of the Rules, I am satisfied that (quite aside from the significant discourtesy of his actions in failing to attend the mediation which I ordered), Mr Galloway’s failure to attend mediation is a default under r 13.04(2)(b)(vii) of the Rules. These defaults are also surprising, given that Mr Galloway is an officer of the Court.
Entitlement to relief
By reference to Ms Barry’s second Affidavit, I am satisfied that on 4 August 2022 each of the applicants were paid the sums ordered by the FWC in relation to compensation, except for the following amounts:
(a)no amount has been paid towards the first applicant’s superannuation and she has not been paid any amount for her long service leave; and
(b)no amount has been paid towards the second applicant’s superannuation.
In respect of each of those outstanding amounts I am satisfied that the case for superannuation was expressly ordered by the FWC: see FWC judgment at [142].
In relation to the first applicant’s claims pertaining to long service leave under the LSL Act (which comes within the ambit of s 323 of the FW Act), having regard to the aforementioned principle that orders for default judgment can be made if the Court is satisfied that there is a sufficient basis for the relief sought by an applicant on the face of the SOC, I am sufficiently satisfied that by the length of her service the first applicant would have been entitled to accrue long service leave during the time of her employment with the respondent, and that to the extent this is claimed and has not been disputed by the respondent despite ample opportunity for him to do so that the judgment should extend to this relief also. By Exhibit “2A” I have before me a calculation in relation to the pro rata amount because the first applicant’s service was between 5 and 10 years, and I am prepared to accept that pro-rata calculation as being correct.
The facts summarised above give rise to contraventions of the Act by Mr Galloway as pleaded in the SOC, notwithstanding that payments have now been made which satisfy [15(b)] of the SOC in respect of the first applicant and [15(d)] of the SOC in respect of the second applicant. The Court has power to make orders it considers appropriate if it is satisfied of a contravention under the Act, including:
(a)declarations pursuant to s 141 of the Court Act;
(b)remedial and compensatory orders under s 545 of the Act: see Australian Building and Construction Commissioner v Construction, Mining, Forestry, and Energy Union (2018) 262 CLR 157; and
(c)pecuniary penalties pursuant to s 546 of the Act.
The Court’s power to make declarations involves a wide discretion, and the Court is empowered to make declarations based on admissions made consequent upon default in a particular case if the case involves issues of public interest such as enforcing compliance with terms and conditions of employment as well as the public interest of the enforcement of pecuniary penalties: see Australian Competition and Consumer Commission v Yellow Page Marketing BV (No. 2) (2011) 195 FCR 1 at [65].
I am satisfied from the broad relief sought by the default judgment application (read in conjunction with the SOC) that Mr Galloway has been on notice since the date of service of the default judgment application that all matters may be determined by the Court at today’s hearing which was set down on 6 October 2022.
I am satisfied on the basis of the matters set out in the SOC that, the applicants have an entitlement to the relief sought. I am also of the view that there is a utility in the making of certain of the declarations sought by the applicants.
Relief sought
The applicants seek that, consequent the entry of default judgment that the Court proceed to determine the question of penalty and costs. I am satisfied that given Mr Galloway has entirely failed to comply with any of the orders of the Court in these proceedings and that he has been on notice that the matter may be finally disposed of today, that there would be little utility in putting the applicants to further expenditure by bifurcating the question of penalty and costs to a further hearing.
Having regard to the principle that the Court’s discretion in relation to penalty is unfettered and noting that it is not to be exercised by consideration of a mandatory checklist, it remains true that a number of factors commonly arise for consideration (see Kelly v Fitzpatrick (2007) 166 IR 14 per Tracey J at [14]).
In the present case, I consider the relevant factors to include the following:
(a)the nature and extent of the conduct which led to the breaches;
(b)the circumstances in which that conduct took place;
(c)whether there had been similar previous conduct by the respondent;
(d)the size of the business enterprise involved;
(e)whether or not the breaches were deliberate;
(f)whether the party committing the breach had exhibited contrition;
(g)whether the party committing the breach had taken corrective action; and
(h)the need for specific and general deterrence.
In this respect (and in my general approach to the question of penalty) I have had regard to the High Court’s decision in Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383 (Pattinson). In Pattinson the High Court cautioned against the use of formulae and a rigid approach to analogy between cases, in the determination of appropriate penalty. The decision of the majority made clear (at [10]) that:
a penalty must be proportionate to the seriousness of the conduct that constituted the contravention…What is required is that there be "some reasonable relationship between the theoretical maximum and the final penalty imposed" That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others.
The majority in Pattinson (supra) went on to hold at [60] that subjective factors are important in that determination, stating:
it is simply undeniable that, all other things being equal, a greater financial incentive will be necessary to persuade a well-resourced contravenor to abide by the law rather than to adhere to its preferred policy than will be necessary to persuade a poorly resourced contravenor that its unlawful policy preference is not sustainable. It is equally obvious that, the more determined a contravenor is to have its way in the workplace and the more deliberate its contravention is, the greater will be the financial incentive necessary to make the contravenor accept that the price of having its way is not sustainable.
As stated in Fair Work Ombudsman v Bosen Pty Ltd [2011] VMC 81 at [51]:
There is a need to send a message to the community at large, and small employers particularly, that the correct entitlement for employees must be paid and that steps must be taken by employers (of all sizes) to ascertain and comply with minimum entitlements (as opposed to ignoring those obligations). Compliance should not be seen as a bastion of the large employer, with human resources staff and advisory consultants (accountants, consultants, lawyers) behind them.
Where there is more than one contravention, the approach to assessing penalty is well-established. As I observed in Fair Work Ombudsman v Anvisco Pty Ltd (In Liq) [2022] FedCFamC2G 738 at [16]:
The approach to assessing penalties for multiple contraventions of the Act is helpfully summarised in Fair Work Ombudsman v NSH North Pty Ltd (t/as New Shanghai Charlestown) (2017) 275 IR 148 (New Shanghai) per Bromwich J at [36] as involving the following five step process:
(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].
In relation to the conduct in the circumstances of this case which has given rise to the contraventions, in my view the approach contended for by the applicants is appropriate.
The FWC made orders which clearly encompassed conduct which gives rise to separate contraventions insofar as those orders encompassed payments of compensation as well as superannuation amounts: FWC judgment at [142].
Accordingly, the failure to pay compensation to each of the applicants constitutes a contravention of s 405 of the Act. The failure to pay each of the applicants their superannuation entitlements constitutes a contravention of s 323 of the Act.
The Court is required to determine the common elements of each contravention as part of assessing penalty and to apply the penalty that applies to a course of conduct and totality principles to the final conclusion. In the instant case I accept that the statutory course of conduct provisions prescribed by s 557 of the Act do not apply.
In my view, the position contended for by the applicants on the question in relation to penalty is appropriate. Namely, that the failure to pay each of the applicants pursuant to the orders in respect of the FWC are contraventions which overlap sufficiently so as to be treated as one course of conduct in respect of each of the applicants, amounting to a contravention of s 405 of the Act.
I am satisfied, for the foregoing reasons, that the applicants are entitled to the relief sought on the face of the SOC, and that the respondent’s failure to comply with the orders of the FWC in respect of each of the applicants is a contravention of s 405 of the Act. I will make declarations to that effect.
I also accept the submission for the applicants that there are no common elements between the contraventions referred to above in relation to the first applicant and the long service leave contravention, other than a blanket failure to pay her her lawful entitlements. Accordingly, I accept there is an additional course of conduct in relation to the respondent’s failure to pay the first applicant for long service leave entitlements, which I find to be a contravention of s 323 of the Act. I will make a declaration to this effect also.
In relation to the nature and circumstances of the conduct, the applicants were dismissed by the respondent in March 2020, which was found by the FWC to be unfair for the reasons which are set out in its decision. At the time of their dismissal, the respondent had not paid to the applicants certain entitlements, namely certain amounts of superannuation and long service leave in relation to the first applicant (only), as well as certain amounts of superannuation in relation to the second applicant.
In addition to those entitlements, the FWC ordered that the respondent pay each of the applicants’ compensation for their unfair dismissal.
Relevant to the circumstances of that conduct is that the respondent is a solicitor, and, accordingly, he is an officer of the Court. That his failure to pay the applicants their entitlements gave rise to certain contraventions is a matter of moment, but of significance also, is that once ordered by the FWC to do so, the respondent failed not only to comply with the order in relation to statutory entitlements but the order for compensation also. Mr Galloway’s failure to file a Defence in these proceedings or to advance any material going to mitigation or explanation of his failure to pay the applicants, together with his wholesale failure to participate in these proceedings or even correspond with the applicant’s solicitors leaves open the inference that the conduct giving rise to the contraventions was deliberate.
It can be inferred from the fact that the respondent appears to be a sole practitioner and that the applicants were employed by him directly without any corporate entity, that his business enterprise is not large. There is no suggestion that any other person has a senior managerial role in Mr Galloway’s business. It is open to infer, and I do, that Mr Galloway was the controlling, if not sole, mind behind the decision to not pay the applicants.
While it is true that the compensation payments reflected the largest amounts owing to the applicants, their statutory entitlements remain outstanding notwithstanding that some corrective action has been taken insofar as those larger amounts have now been paid. That is a relevant factor to consider and, again, intersects with the fact that the respondent is a solicitor who ought to conduct himself in an exemplary fashion, including in his capacity and obligations as an employer.
In terms of whether there has been similar previous conduct by the respondent, reliance was placed by the applicants on the decision of the Council of the Law Society of New South Wales v Galloway [2012] NSWADT 176 per Deputy President Patten and Members Currie and Fitzgerald. Those proceedings were brought by the Law Society of New South Wales against Mr Galloway in the (then) Administrative Decisions Tribunal (ADT) seeking a finding that he was guilty of professional misconduct. At [2] of its decision, the ADT observed:
There was also a failure to pay superannuation entitlements and annual leave entitlements and provide a Group Certificate to an employee.
This is the only material before the Court to indicate that similar previous conduct has been engaged in by Mr Galloway. It was conceded by Counsel for the applicants that there is no material to suggest that the conduct to which the ADT referred was found by any court to be a contravention of the Act, nor that any civil penalty was imposed. However, the above observation by the ADT does indicate that, as a matter of fact, Mr Galloway has previously failed to adhere to his obligations as an employer in a manner relevantly identical to the conduct giving rise to the contraventions in the instant case. Even if that failure did not sound in the finding of contravention and penalty, it remains a factor relevant to my consideration.
The applicants contend that because of the aforementioned previous similar conduct, the instant case is, “a classic example of the need for deterrence”. I am urged to infer from the ADT decision that the instant case is not the first time that Mr Galloway has failed to pay superannuation or statutory entitlements. As such, I am prepared to draw that inference and that this is a factor which is relevant to the need for specific deterrence in the respondent’s case as well as one which speaks to Mr Galloway’s lack of contrition.
In relation to deterrence (both general and specific) the applicants contend that matters such as the instant case are often challenging because the sums of money owed (making specific reference to superannuation entitlements) are relatively modest and can often be overwhelmed by the costs of litigating them, having particular regard to the limitations imposed by s 570 of the Act. The applicants say that absent penalty being fixed in a sufficient amount as to constitute a deterrent, the cost of litigation itself acts as a powerful disincentive to applicants seeking to enforce their legal rights. The applicants contend that in their case it can be inferred that Mr Galloway was prepared to take advantage of those potential challenges when deciding not to pay the moneys owed.
In Fair Work Ombudsman v ADADN Pty Ltd [2021] FCCA 756 (ADADN) Judge Jarrett (as his Honour then was) described the significance which should be attached to any employer refusing to comply with the FWC’s orders. His Honour held (at [30]) that:
The first respondent's failure to comply with the Fair Work Commission order demonstrates a wilful disregard of the Fair Work Commission's authority and integrity. That is significant because it "signifies a refusal to accept the umpire's decision. It should not go unpunished"…
The first respondent’s failure to comply with the FWC order demonstrates a wilful disregard of the body’s authority and integrity. That is significant because it “signifies a refusal to accept the umpire’s decision. It should not go unpunished”: see: Mayberry v Kijani Investments Pty Ltd as Trustee for the Dawe Investments Trust Subway Wallsend trading as Subway [2011] FCA 1238 at [20].
Deliberate defiance of an order of the FWC is a serious matter. In Fair Work Ombudsman v Port Douglas Investments As Trustee For The Theo Sourlos Family Trust & Anor [2018] FCCA 488 (Port Douglas Investments) the Court observed at [43] that the overriding consideration in determining penalty was the deliberate defiance of an order of the FWC. The Court observed at [46]:
The Court must, in imposing penalty, make a very loud statement that the Fair Work Commission must be respected. Section 405 must be a section by which the Court shows its absolute displeasure at any disrespect shown by any party towards the Fair Work Commission.
Having regard to the aforementioned principles, in the present case questions of both general and specific deterrence are weighty factors going to the question of penalty. In terms of general deterrence, having regard to the aforementioned decisions in ADADN and Port Douglas Investments if, in imposing penalty, the Court should reinforce the need to respect the FWC and that the implementation of s 405 of the Act is a mechanism by which this Court is to show its absolute displeasure at any such disrespect by employers, then there must be an aspect of this that is a fortiori in respect of an employer who is also an officer of the Court.
In terms of contrition and corrective action, it is true that the respondent has now paid some of the amounts that are subject of the FWC’s orders, namely the compensation amounts. Some regard must be had to his corrective action in relation to those contraventions. If corrective action were to have no impact on penalty there would be a correlative disincentive to ever rectify conduct.
In terms of the corrective action taken to pay the respective compensation amounts to the applicants in August 2022 it is open to infer, and I do, that this corrective action was taken shortly prior to the scheduled mediation, perhaps with the potential hope that the matter would simply go away. If Mr Galloway had not been wholly uncommunicative with the applicants’ solicitors, including in relation to their various settlement offers, then his payments of compensation, together with those negotiations, may have resulted in an arrangement whereby these proceedings may have resolved. The respondent was not entitled from the time of the making of the FWC’s orders to simply bury his head in the sand.
There is nothing before me, emanating from Mr Galloway or otherwise, to suggest that he is contrite at all.
By their submissions, the applicants do not assert that Mr Galloway’s conduct falls within the worst category of unlawfulness. However, what the applicants do contend is that the penalty for each contravention should be set towards the top of the range having regard to:
(a)the nature of the contravention going towards the heart of the administration of justice;
(b)the prevalence of superannuation underpayments in general;
(c)the lack of any subjective factors in the respondent’s favour; and
(d)an utter lack of contrition and remorse.
I accept that submission.
Pursuant to s 4AA of the Crimes Act 1914 (Cth), a single penalty unit as at the date of the contraventions (and currently) has a value of $222 per unit. The maximum penalty for a contravention of s 405 of the Act is 60 penalty units (see item 13 of s 539 of the Act). The maximum penalty for a contravention of s 323 of the Act is 60 penalty units (see item 10 of s 539 of the Act). The maximum penalty for a body corporate, which I accept the respondent is not, is five times the maximum set out (see s 546(2)(b) of the Act).
Accordingly, the maximum penalty which can be ordered in respect of the respondent is 60 penalty units for each contravention, being a maximum total of $13,320 for each contravention.
Having regard to all the foregoing circumstances and, in the exercise of my discretion, I find that each of the s 405 contraventions (which include the overlap of the failure to pay the superannuation entitlements) warrants a penalty towards the top end of the range with a discount for corrective action.
However, in the instant case, that discount ought not be significant because it is open to infer that Mr Galloway only made the compensation payments because the mediation was approaching and, thereafter, appears to have taken no further steps to either rectify the remaining amounts, nor to have otherwise defended these proceedings.
An appropriate amount in relation to each of the contraventions, having regard to all the forgoing circumstances, is $11,000 in respect of each of the s 405 contraventions, to which I would apply a 10 per cent reduction to reflect the corrective action taken in August 2022 in making the compensation payments to each of the applicants.
In all of the circumstances of this case, and in the exercise of my discretion, the failure to pay the first applicant’s long service leave entitlements warrants a penalty of $9,000. That those statutory entitlements have been the subject of no corrective action warrants, in my view, no further discount, and I will make orders to that effect.
I have had regard to the decision of the Full Federal Court in Sayed v Construction, Forestry, Mining and Energy Union (2016) 239 FCR 336 per Tracey, Barker and Katzmann JJ where at [101] their Honours held:
Given the legislative history of ss 539(2) and 546(3) of the FW Act, since the enactment of ss 44 and 45 in the pioneering 1904 Act, and the manner in which the “usual order“ was articulated in such early cases as the Vehicle Builders’ Employees’ Federation case and Seymour, which is reflected in the Explanatory Memorandum, we consider that the power conveyed by s 546(3) is ordinarily to be exercised by awarding any penalty to the successful applicant. We accept that there may be cases (of which this is not one) where the penalty, or a part of the penalty, should be paid to another person in the circumstances described by Gray J in Plancor at [44] (as set out at [96] above).
In my view, it is appropriate in the present case that the penalties ordered should be paid to the respective applicants in respect of whom the contraventions occurred, and I will so order.
Costs
In respect of the question of costs, the applicants say that the costs of these proceedings should be theirs, having regard to the provisions of s 570 of the Act:
(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.
In particular, the applicants say that pursuant to s 570(2)(b) that there are relevant and unreasonable acts or omissions which have caused them to incur costs. This is said to have arisen in four ways, being:
(a)the failure of Mr Galloway to comply with the Court’s orders;
(b)the unreasonable resistance to the applicants’ claims, albeit not in a formal sense because Mr Galloway never, in fact, defended these proceedings;
(c)the failure of Mr Galloway to engage in a reasonable process of settlement, by reference to his failure to attend the court ordered mediation; and
(d)the failure of Mr Galloway to attend the mediation itself at which the applicants were represented by Counsel and their solicitor for whose fees they were liable and which fees would have been avoided if the respondent had, at least, presaged his non-attendance.
In considering whether to award costs in this matter under the Act by reference to s 570, the Court must first be satisfied there has been unreasonable conduct by a party which has caused another party to incur costs, and if so satisfied, whether, in the exercise of the Court’s discretion, costs should be awarded, including as to on what basis.
In respect of each of those matters and having regard to the content of the third Barry Affidavit, I accept that the respondent’s wholly unexplained and utter failure to attend the mediation did unreasonably cause the applicants to incur costs. The failure to attend a mediation can, and should, lead to a costs order in its own right: Rossetti v Aus Gold Mining Group Pty Ltd [2018] FCA 1649 per Burley J at [18] where his Honour found as much in circumstances where the relevant party was in fact legally represented at the mediation, but did not attend in person themselves. In the present case there was absolutely no appearance by or for the respondent: see also Louis Vuitton Malletier (supra).
Mr Galloway’s failure to notify his non-attendance at mediation within a timely fashion against the inferences which I have drawn from the lack of communication thereafter indicates that, at least in respect of the mediation, Mr Galloway chose not to attend. The applicants’ costs incurred by reason of the wasted mediation are said to be $5,764 on a party/party basis, and I am satisfied that those costs should be the applicants.
In addition, the applicants seek an order for the remaining costs of the proceedings on an indemnity basis in a fixed amount. This is said to be by reason of the factors referred to earlier in relation to the unreasonable resistance by the respondent to the applicants’ claims, as well as a refusal or failure to engage in a reasonable process of settling the case and accepting reasonable offers. In the instant case that is said to exist by reason of Mr Galloway’s failure to accept the first offer referred to at [3(c)] above.
Such offers, when properly made, are intended to place a litigant under pressure and in such a situation, a prudent litigant must carefully weigh up the pros and cons, risks and possible benefits, which may accrue by continuing with the litigation despite what has been offered to them to otherwise resolve the matter: see Adamczak v Alsco Pty Ltd (No 4) (2019) 284 IR 337 per Judge Brown at [119]. In Celand v Skycity Adelaide Pty Ltd (2017) 256 FCR 306 Bromberg J found at [165] that in the context of a Calderbank offer (which the first offer in this case was), the word unreasonable might be used synonymously with the word imprudent.
Even the mere failure to give proper consideration to an offer of a settlement can give rise to a costs order. In Carr v ILSC (Brisbane) Pty Ltd, Pathik v ILSC (Brisbane) Pty Ltd (No 2) [2019] FCCA 1028 Judge Cameron at [21] held that:
It is apparent that the offers were rejected with little reflection. The speed with which the rejections were communicated and the terms in which they were made, by counter — offers to accept amounts which could not have been achieved in the compensation proceedings, bespeak a lack of willingness to consider settlement in a serious way. That behaviour was unreasonable given the parties' obligation under r 1.03(4) to facilitate the just resolution of disputes by avoiding undue delay, expense and technicality.
The applicants say that the instant case is comparable to the decision of Carr which is referred to therein. In my view, the instant case is a fortiori given the absolute silence with which the applicants’ settlement attempts have been met, by reference to the Second Barry Affidavit in addition to the respondent’s wholesale failure to attend the mediation. As noted, before the Court as Exhibit “3A” is the first offer, which was made to Mr Galloway on 20 July 2022.
By reference to the content of the first offer, and the ultimate resolution of these proceedings, the applicants say that the appropriate order in relation to the proceedings would be an order for costs on an indemnity basis from the closure of the first offer by the applicants: see Ryan v Primesafe [2015] 323 ALR 107 per Mortimer J at [114]. I have also had regard to the principles in Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 (Palmolive).
In my view, the conduct by Mr Galloway who is not only a party to these proceedings, but also a solicitor, in entirely failing to engage with the proceedings, and by reason of the admissions which the respondent can be taken to have made consequent upon his various defaults, renders his refusal to accept the first offer, unreasonable.
Counsel for the applicants, noting that the proceedings are ex parte consequent upon the respondent’s non-appearance today, said that a counter argument might be made in relation to costs that the Court could not be confident that the respondent’s actions were necessarily due to a conscious or deliberate choice. However, having regard to all the circumstances of this case and the types of misconduct contemplated by Palmolive, I am sufficiently satisfied that the present proceedings do warrant a costs order being made in relation to what I find to be unreasonable conduct on the part of the respondent, and that having regard to those principles, those costs should be ordered to be on an indemnity basis.
The applicants seek that order in a lump sum in the amount of $13,475, and I will so order.
I certify that the preceding ninety-two (92) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Given. Associate:
Dated: 17 November 2022
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