Pezzimenti v Rotary International (No.2)
[2020] FCCA 95
•24 January 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PEZZIMENTI v ROTARY INTERNATIONAL (No.2) | [2020] FCCA 95 |
| Catchwords: INDUSTRIAL LAW – Fair Work – adverse action – consideration of penalty and costs. |
| Legislation: Crimes Act 1914 (Cth), s.14 |
| Cases cited: Australian Building and Construction Commissioner v Construction Forestry Mining and Energy Union (2017) 254 FCR 68 |
| Applicant: | FRANK PEZZIMENTI |
| Respondent: | ROTARY INTERNATIONAL |
| File Number: | SYG 1099 of 2017 |
| Judgment of: | Judge Driver |
| Hearing date: | Decided on the papers |
| Date of Last Submission: | 23 December 2019 |
| Delivered at: | Sydney |
| Delivered on: | 24 January 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr T Brennan |
| Solicitors for the Applicant: | Kennedys (Australasia) |
ORDERS
Pursuant to s.546 of the Fair Work Act 2009 (Cth), the respondent shall pay to the applicant a penalty in the sum of $50,000.
Pursuant to s.570 of the Fair Work Act 2009 (Cth), the respondent shall pay the applicant’s costs and disbursements of and incidental to the proceedings on an indemnity basis on and from 7 March 2019.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1099 of 2017
| FRANK PEZZIMENTI |
Applicant
And
| ROTARY INTERNATIONAL |
Respondent
REASONS FOR JUDGMENT
Introduction and background
On 26 August 2019 I gave judgment in the principal proceedings in this matter.[1] I made the following orders:
(1) The Court declares that the respondent contravened s.340 of the Fair Work Act 2009 (Cth) by terminating the employment of the applicant on 30 June 2017.
(2) Pursuant to s.545(2)(b) of the Fair Work Act 2009 (Cth), the respondent is to pay compensation to the applicant in the sum of $205,342 within 28 days.
(3) The matter is listed for directions at 10.15am on 4 September 2019.
[1] Pezzimenti v Rotary International [2019] FCCA 1854
There was an outstanding issue of penalties and costs.
On 4 September 2019 I made orders setting out a timetable for the filing of further material relating to the outstanding issues. That timetable was not complied with by the respondent (Rotary). The reason appears to have been that Rotary (which is based in the United States) had parted company with its Australian legal advisors shortly before the principal judgment. On 17 November 2019 the Court received the following correspondence from Mr John M Wright, Senior Assistant General Counsel to Rotary in the United States:
The Honorable Judge Driver,
With sincere apologies, I regret that Rotary International has not complied with the timetable issued by the court on 4 September 2019. We take the court's decisions seriously and acknowledge that our seeming inaction could be misunderstood as disrespectful to the court and Mr. Pezzimenti.
We have been pursuing alternative counsel in Australia, but have been unable to retain counsel in time for this hearing.
If allowed by the court, Rotary still desires to file submissions and be heard on the question of penalties and costs. However, we need a further period to do so in light of the change of our legal representation.
Therefore, Rotary respectfully requests that the court grant it additional time to respond and that a hearing date, if needed, be allocated thereafter.
Thank you for your consideration of this request.
Taking into account the correspondence and submissions made on behalf of the applicant (Mr Pezzimenti), I made the following orders on 18 November 2019:
THE COURT ORDERS THAT:
1. The respondent is to file and serve on the applicant an outline of written submissions in relation to penalty and costs by 2 December 2019.
2. The applicant is to file and serve on the respondent an outline of written submissions in reply by 9 December 2019.
THE COURT NOTES THAT:
1. Unless there is an objection by the respondent, the matter will be dealt with on the papers and an oral hearing will be dispensed with pursuant to s.54 of the Federal Circuit Court of Australia Act 1999 (Cth) and rule 15.03 of the Federal Circuit Court Rules 2001 (Cth).
An affidavit by Persephone Forster made on 17 October 2019 was filed on behalf of Mr Pezzimenti the following day. Ms Forster is an employed solicitor with Mr Pezzimenti’s lawyers and deposes as to dealings between the parties in respect of settlement offers. On the same day, submissions were filed on behalf of Mr Pezzimenti on the question of penalty and costs.
Nothing was further was heard from Rotary and nothing further has been filed on behalf of Rotary. On 9 December 2019 submissions were filed on behalf of Mr Pezzimenti calling upon the Court to now determine the outstanding questions of penalty and costs.
On 23 December 2019 Mr Pezzimenti’s solicitors confirmed that they do not intend to submit anything further.
In these circumstances, I have decided to accede to the request made on behalf of Mr Pezzimenti and to now give judgment on the papers on the outstanding issues of penalty and costs.
Consideration of penalty
Power to impose penalty
In my principal judgment, I found that Rotary had dismissed Mr Pezzimenti because he commenced these proceedings.[2] By so acting, Rotary took adverse action against Mr Pezzimenti (dismissing him) because he had exercised the workplace right of initiating proceedings under a workplace law (s.340(1)(a)(ii) and 341(1)(b) Fair Work Act 2009 (Cth) (Fair Work Act).
[2] at [97]–[99]
It follows that pursuant to s.539(2) of the Fair Work Act read with item 11 in the table to that section and s.546, Mr Pezzimenti, as a person affected by the contravention, may apply to this Court for an order penalising Rotary, and the Court may impose a penalty up to the maximum.
Maximum penalty
The maximum penalty is 300 penalty units being five times the amount specified in column 4 of item 11 of the table (s.546(2)(b)).
The dismissal occurred on 30 June 2017 and at that date a penalty unit within the meaning of s.4AA of the Crimes Act 1914 (Cth) meant the amount of $180. It follows that the maximum penalty that may be imposed is $54,000.
Principles
The principles for setting such a penalty are well established and were most recently restated by the Full Federal Court in Australian Building and Construction Commissioner v Construction Forestry Mining and Energy Union.[3]
[3] (2017) 254 FCR 68 at [98] and [100]–[107]
While the factors there identified are a form of checklist or guide they are not intended to be exhaustive nor to replace the essential judicial function of fact finding in consideration of all relevant circumstances. They are not a rigid catalogue of matters for attention.[4]
[4] Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 171 FCR 357 at [58]
The following are to be especially noted on the facts of this case as found.
Objective seriousness
First, the contravention was deliberate. I did not merely find that Rotary had not discharged its onus of proof. I positively found that:
[97]…the goalposts of the PIP themselves changed following the commencement of proceedings. It was as if Mr Pezzimenti was from that point set up to fail.
[98]…the commencement of these proceedings changed and hastened the process that led to the dismissal of Mr Pezzimenti. … Rotary went looking for additional reasons to dismiss Mr Pezzimenti, and thought it had found it in the so-called breach of confidence. That was the charge Mr Pezzimenti was called to answer and he was dismissed when he failed to do so. The charge has the air of artificiality to it. … it is very hard to accept the proposition that the communication of a concern by the International Office Manager of Rotary to the Rotary regional director responsible for that office involves a breach of confidence.
Secondly, the contravention was by a corporation acting through a very senior officer. I found the most senior officer involved in the contravention was Ms Berg who was the Deputy General Secretary of Rotary reporting to the General Secretary. That is, she was the second-most senior person in the global operations of Rotary International. While I accepted at [97] that her role was probably a formal one acting on the advice of Mr Huerta, Mr Huerta himself reported directly to Ms Berg and was a very senior officer filling the role of Director of International Operations in which he was responsible for all international offices in the global Rotary International Group.
Thirdly, and as submitted by Mr Pezzimenti, it is difficult to conceive of a more objectively serious contravention. The adverse action was at the top end of detriments which might be imposed upon an employee: dismissal. The reason for it, the commencement of Court proceedings, marked the conduct as particularly egregious. I declined to accept, at [97], that Mr Huerta who I found to be a “clear thinking and dynamic senior official” of a global not for profit corporation could have thought it lawful or appropriate to take adverse action, outside the Court system, because a person had commenced Court proceedings. This was a contravention which struck at the heart of the system of workplace protections for which Australian law provides.
Fourthly, there is no evidence of a compliance system or a culture of compliance within Rotary International. In my principal judgment I found that Mr Huerta, together with the Global Director of Human Resources Mr Switzer, engaged in conduct having the effect of setting up Mr Pezzimenti to fail and securing his dismissal because he had commenced legal proceedings. Mr Pezzimenti submits that they were permitted, if not expressly authorised, to engage in that course of conduct by Ms Berg. I accept that there appears to have been nothing, even at those very senior levels of the organisation, which led any of those people to pause before engaging in the conduct.
Contravenor’s circumstances
Rotary is incorporated in Illinois and operates throughout the United States and outside the United States through a network of international offices. It is obviously a corporation of some substance. There is no evidence to suggest that by reason of its size or financial position it would have any difficulty in meeting the payment of a penalty.
There is no evidence of prior contraventions.
There is no evidence that Rotary has improved or modified its compliance systems since the contraventions. There has been no demonstration of contrition or remorse. However, the compensation awarded was paid.
I note that Rotary, facing the imminent judgment of this Court, terminated the retainer of its solicitors and has caused itself to remain unrepresented in this Court.[5]
[5] Ms Forster’s affidavit at [14]–[24]
In circumstances where the Court has found that the reason for the dismissal was the commencement of proceedings the requirements of general deterrence should be given significant weight.
The case for specific deterrence is overwhelming in circumstances where:
a)Rotary’s compliance system and culture of compliance were each apparently inadequate;
b)there has been nothing shown directed to improvement or modification of its compliance systems;
c)Rotary knew that it had dismissed Mr Pezzimenti because he commenced these proceedings;
d)Rotary defended the proceedings on the basis of Mr Huerta’s evidence when it must have known that evidence, in so far as it concerned the reasons for dismissal might be rejected; and
e)Rotary has, despite expressing a wish to do so, not participated in this aspect of the proceedings.
The objective seriousness of the contravention is at the top end of the range.
In all the circumstances Mr Pezzimenti submits the appropriate penalty is the maximum penalty of $54,000.
I accept Mr Pezzimenti’s submission that the objective seriousness of the contravention and the other factors referred to, places the appropriate penalty at the top end of the range. I will not, however, impose the maximum penalty. I will instead order that Rotary pay a penalty of $50,000 to Mr Pezzimenti.
I accept Mr Pezzimenti’s submission that the Court should order that the penalty be paid to him.
Costs
Section 570(1) of the Fair Work Act provides that costs may only be ordered in accordance with sub-section (2). Sub-section (2) relevantly provides that a party may be ordered to pay costs only if the Court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs.
Costs incurred after the refusal of a reasonable offer to settle the case can constitute an unreasonable act within the meaning of s.570(2)(b) of the Fair Work Act.[6]
[6] McDonald v Parnell Laboratories (Aust) (No.2) (2007) 164 FCR 591 at [30] and [31]
Whether such refusal constitutes unreasonable conduct is to be assessed in light of all the circumstances which existed at the time of the rejection.[7]
[7] Health Services Union v Jackson (No.5) [2015] FCA 1467 at [47]
Mr Pezzimenti relies upon Ms Forster’s affidavit which sets out a significant history of offers and counter-offers between the parties.
A mediation had occurred, pursuant to court order, on Thursday 19 October 2017. Agreement was not reached at that mediation but on the following Monday Mr Pezzimenti made an offer to settle the proceedings for an amount of $153,000. The offer was marked “Without Prejudice Save as to Costs” and was couched in such terms as to enable the offeree to make a comparison between the offer made and the orders sought against it in all aspects.[8] The offer was expressed to be on the basis that each party would bear their own costs, which is a proper form of offer.[9]
[8] See Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No.2) [2000] FCA 602 at [24]
[9] Health Services Union v Jackson at [45]
The offer explained the basis of calculation of the quantum of $153,000. It was said to constitute no more than the amount of salary and superannuation for the period of 1 July 2017 (being the date of termination of employment) to 31 March 2018 (being the date upon which it was then expected the Court would deliver judgment in a hearing which was then listed to commence in November 2017). That is, Mr Pezzimenti sought lost income for nine months.
The offer was rejected by Rotary on 24 October 2017 and Mr Pezzimenti relies upon that rejection as the unreasonable act of Rotary which has caused Mr Pezzimenti to incur all costs incurred in the proceedings after that date.
I accept that on 24 October 2017 Rotary knew:
a)the only concerns which it had at the time of termination of the employment which contributed to that termination were concerns identified as a result of the commencement of these proceedings;[10]
b)it had changed its attitude and had proceeded to terminate the employment because of the commencement of the proceedings;[11]
c)the termination was based upon the supposed breach of confidence which had an air of artificiality to it and the leave issue which was a storm in a teacup and capable of explanation from the records of Rotary;
d)it had substantially completed preparations for hearing which at that time was listed to commence within the next fortnight;
e)at the date of termination, Mr Pezzimenti was 61 years old and had worked in his role with Rotary since he was 50;[12]
f)Mr Pezzimenti had remained unemployed from the date of the termination of employment; and
g)it was at the time represented by specialist workplace relations lawyers.
[10] principal judgment at [118]–[120]
[11] principal judgment at [97]–[100]
[12] principal judgment at [101]
In those circumstances, Mr Pezzimenti invites the Court to find that Rotary well knew and understood all of the facts ultimately found to ground its liability. He submits that there can be no question that Rotary, in rejecting the offer, committed itself to running a case based upon Mr Huerta’s explanation of his reasons when it was clear to Mr Huerta and must have been clear to Ms Berg that the stated reasons for the dismissal, based as they were on the so-called breach of confidence and the leave issue, had only been identified because of the commencement of these proceedings; and that there was a substantial likelihood that the Court would find that they had been relied on because of the commencement of these proceedings.
Mr Pezzimenti further submits that, at the date of rejection of the offer, Rotary had no reason to think that Mr Pezzimenti’s period of unemployment following and resulting from the dismissal would be less than nine months and it is said to follow it had no reason to think that if found liable the order for compensation would be less than the amount which Mr Pezzimenti had proposed in his offer of compromise.
In those circumstances, Mr Pezzimenti submits that Rotary should be found to have known, when it rejected the offer, of the facts upon which it was found liable; that there existed substantial risk that it would be found liable because of those facts and if found liable that it would be ordered to pay compensation of not less than the amount the subject of the offer.
Mr Pezzimenti submits that, in the circumstances the rejection of the offer was unreasonable. By its rejection, and its subsequent repeated rejection of even lower offers, Rotary is said to have forced Mr Pezzimenti to trial.
I accept that if the conduct of Rotary was unreasonable, that enlivens not only the power to order costs, but also the power to order that they be assessed on an indemnity basis.[13]
[13] Health Services Union v Jackson at [47]-[49]
Mr Pezzimenti submits that the appropriate order is that Rotary is to pay his costs of the proceedings incurred after 24 October 2017 with such costs to be assessed on an indemnity basis.
I accept that there should be an indemnity costs order but the date from which that order should apply is considerably later than that put forward on behalf of Mr Pezzimenti. I take into account the affidavit of Ms Forster. That affidavit establishes that the negotiations between the parties extended well into 2019 and, in my view, it was not unreasonable for Rotary to reject prior offers given that negotiations resumed in 2019. Ms Forster relevantly deposes as follows:
Prior to commencement of the hearing scheduled for 6 November 2017, the proceeding was stood over for a hearing commencing on 11 March 2019. On 5 March 2019, I caused a letter to be sent to the then solicitors for the Respondent marked “Without Prejudice Save as to Costs” which set out the reasons why the Respondents would fail at trial. The letter noted that the Court would reject Armando’s Huerta’s explanation of his reasons and find they were cover for the real reason that the Applicant had commenced the proceeding. The letter also pointed to the difficulties the Respondent would face with Mathew Switzer not being available for cross-examination. The letter offered to settle the proceedings on the basis of a payment to the Applicant of $160,000 as general damages. That offer was open for acceptance until 4.00 pm on Thursday, 7 March 2019. A copy is annexed and marked “F”.
The Respondent did not reply to that offer.
On 4 July 2019, I received advice that the Court had listed the proceedings for judgment to be delivered on 26 August 2019. A copy of the email from Judge Driver’s Associate to the parties to that effect is annexed and marked “G”.
On 5 August 2019, the former solicitors for the Respondent served on Kennedys a Notice of Intention of Ceasing to Act. A copy is annexed and marked “H”.
On 26 August 2019, The Honourable Judge Driver entered orders in favour of the Applicant that compensation be paid to the Applicant in the sum of $205,342 (Judgment Sum). On this occasion, the Respondent was not represented in the proceedings and no-one attended at Court on behalf of the Respondent to receive judgment. As a consequence, the Court stood the proceeding over for directions on 4 September 2019 so that notice could be sent to the Respondent of the Court’s Judgment.
On 26 August 2019, Kennedys sent a letter to Rotary International enclosing a copy of the judgment delivered and the orders made on that date. A copy is annexed and marked with the letter “I”
On 28 August 2019, Kennedys sent a further letter to Rotary International enclosing the letter from 26 August 2019. A copy is annexed and marked with the letter “J”.
On 4 September 2019, the Respondent again did not appear at the directions hearing before the Honourable Judge Driver. The Court proceeded to make orders for preparation of the proceeding for hearing on the question of penalty and costs.
On 5 September 2019, Kennedys sent a further letter to John Wright, Senior Assistant General Counsel of Rotary International (Mr Wright) enclosing orders that were made by the Court on 4 September 2019. A copy is annexed and marked with the letter “K”.
On 6 September 2019, Kennedys sent a letter to Mr Wright setting out the details for the bank account in which moneys should be deposited. A copy is annexed and marked with the letter “L”.
On 26 September 2019, Mr Wright sent an email to Kennedys concerning payment of the Judgment Sum. A copy of that email is annexed and marked with the letter “M”.
On 27 September 2019, Mr Wright sent an email requesting the bank account details for the Applicant and payment was received shortly thereafter on that date. Payment was received four days late in breach of order 2 of the orders made by the Honourable Judge Driver on 26 August 2019. A copy of Mr John Wright’s email requesting the bank details is annexed and marked with the letter “N”.
At the date of my swearing this Affidavit the Respondent remains unrepresented.
Had the Respondent been represented I anticipate that I would have sought to negotiate and agree an amount to be imposed by way of penalty and to be fixed by way of costs to be paid by the Respondent, thereby avoiding the costs of preparing for and attending the further hearing of the matter on 18 November 2019.
In my view, Ms Forster was correct in her correspondence of 5 March 2019 in predicting why Rotary would fail at trial. A key factor was the unavailability of an important witness, Mr Switzer, but it was only towards the end of the trial when his unavailability became manifest to me. I am not persuaded that there was any unreasonable act or omission by Rotary prior to 7 March 2019 when the final offer made on behalf of Mr Pezzimenti expired. At that time, Rotary was on notice that its defence of the proceedings was in difficulty and why that was so. The difficulties were confirmed in my judgment. As a result of the judgment, Mr Pezzimenti did significantly better than the final offer made on his behalf. Rotary’s failure to accept that offer was an unreasonable omission.
In those circumstances, Rotary should pay the costs of Mr Pezzimenti on an indemnity basis on and from 7 March 2019.
I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 24 January 2020
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