Rebecca Jane Walker v Dynamic Technology Solutions Pty Ltd
[2020] VCC 426
•16 April 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-19-01686
| REBECCA JANE WALKER | Plaintiff |
| v | |
| DYNAMIC TECHNOLOGY SOLUTIONS PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 19, 20, 25 February 2020 | |
DATE OF JUDGMENT: | 16 April 2020 | |
CASE MAY BE CITED AS: | Rebecca Jane Walker v Dynamic Technology Solutions Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 426 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT– EMPLOYMENT
Catchwords: CONTRACT – agreement between employee and employer – construction and interpretation – principles of construction – terms to be considered in context – meaning of “all sales” – when surrounding circumstances may be considered – ambiguity and plain meaning – whether contra proferentem rule applies – whether commission owed – implied terms
EMPLOYMENT – whether civil remedy provision of Fair Work Act (2009) breached – aim of the civil penalty provisions – consideration of factors to determine appropriate penalty for breach of a civil remedy provision
Legislation Cited: Evidence Act 2008 (Vic); Fair Work Act 2009 (Cth); Workplace Relations Act 1996 (Cth)
Cases Cited:Apple and Pear Australia Ltd v Pink Lady America LLC (2016) 343 ALR 112; Australian Broadcasting Commission v Australasian Performing Right Ltd (1973) 129 CLR 99; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; Avenia v Railway & Transport Health Fund Ltd (2017) 272 IR 151; Bank of New Zealand v Simpson [1900] AC 182; BP Refinery v Shire of Hastings (1977) 180 CLR 266; Briginshaw v Briginshaw (1938) 60 CLR 336; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Commonwealth of Australia v Director, Fair Work Building Inspectorate (2015) 326 ALR 476; Construction,Forestry, Mining and Energy Union v Coal and Allied Operations Pty Ltd (No 2) (1999) 94 IR 231; Construction, Forestry, Mining & Energy Union v Hamberger (2003) 127 FCR 309; Director, Fair Work Building Inspectorate v Robinson [2016] FCA 525; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; Hadgkiss v Sunland Construction (Qld) Pty Ltd [2006] FCA 1566; International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 157; Investors Compensation Ltd v West Bromwich Building Society [1998] 1 WLR 896; Kelly v Fitzpatrick (2007) 166 IR 14; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; MBF Investments Pty Ltd v Nolan [2011] VSCA 114; McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; McDonald v Longbottom (1859) 1 E&E 977; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; Prenn v Simmonds [1971] 1 WLR 1381; SDAEA v Arora Markets Pty Ltd & Ors [2018] FCCA 85; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Western Export Services Inc. v Jireh International Pty Ltd (2011) 282 ALR 604; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; Wong v R (2001) 207 CLR 584; Zauner Constructions Pty Ltd v Harvey [2004] NSWCA 8.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms R Muchinguri | Nevett Ford Lawyers |
| For the Defendant | Mr J.R.M. Tracey | Rigby Cooke Lawyers |
HIS HONOUR:
Introduction
1 The critical issue in this case is whether the plaintiff, Rebecca Walker (“Walker”), is entitled to commission on all sales made by the defendant, Dynamic Technology Solutions Pty Ltd (“DTS”),[1] or only upon all sales made by the defendant to new customers introduced by Walker.
[1]The company formerly known as Dynamic Technology Solutions Pty Ltd changed its name to Dynamic Trade Solutions Pty Ltd with effect from 26 June 2019.
Background
2 Walker had experience in the building industry. She worked for a little over five years, for example, at Chromagen Australia Pty Ltd, initially in the installation and service department and later in sales. While at Chromagen, she had dealings with Mark Bisby, who was and remains the managing director of DTS.
3 After leaving Chromagen, Walker joined L&O Technologies as State Sales Manager. L&O Technologies was a major competitor of DTS. Walker remained with this business for around seven months. She then moved to Telbix Australia Pty Ltd as National Sales Manager. Telbix made Walker redundant on 14 March 2014.
4 There was a dispute between the parties about who contacted whom in March 2014 regarding the existence of a possible job for Walker with DTS. Similarly, the principal witnesses disagreed about whether they met in person once or twice before DTS employed Walker.
5 Walker and Bisby agreed that they had lunch together on 27 March 2014 with Paul Stuart, the Operations Manager at DTS.
6 Walker began work at DTS on 5 May 2014. She signed her employment contract (“the employment contract”) at the office on her first day of work.
7 Within a short time of commencing work, Walker became ill and was unable to attend daily at the DTS office in Altona. Nor was she able to drive a motor vehicle. Bisby and Stuart visited Walker at home around September 2014, at least in part to discuss how to accommodate her need for flexible working arrangements. Because of her poor health, Walker agreed with DTS to change her employment contract so that she was paid only for the hours worked. DTS recovered from Walker the temporary vehicle which had been provided for her use. Walker did not regain her ability to drive before May 2017.
8 Walker entered a new contract of employment with DTS on about 30 March 2017. She was absent from work due to illness on a number of occasions throughout 2015, 2016, and early 2017. When not on sick leave, Walker primarily worked from home rather than the DTS office. This involved Walker working on her computer and the telephone.
9 On about 6 February 2017, Walker enquired for the first time about the commission which she said DTS owed her.
10 Between 7 April 2017 and 29 June 2017, DTS paid Walker commission in the sum of $22,652.95. At Walker’s request, there was an initial payment of $5,000 and then 12 weekly payments of $1,471.08.
11 On 12 April 2019, Walker issued proceedings against DTS in the County Court.
12 DTS paid Walker a further amount of $8,994.55 (plus interest of $2,737.44) on 21 February 2020.
13 By the time the trial reached final address, the parties agreed that if the court accepted the DTS interpretation of the employment agreement, then DTS had paid all the commission due to Walker. Alternatively, if the court accepted Walker’s interpretation of the employment agreement, then Walker was entitled to $285,898.27 by way of unpaid commission.
Issues
14 In dealing with this case and determining whether Walker is entitled to commission on all sales made by DTS or only on those she generated, there are a number of subsidiary issues to be addressed:
(a) is the employment contract ambiguous?
(b) if the employment contract is ambiguous and the court has regard to the surrounding circumstances, what is the outcome?
(c) can the court imply the term pleaded at paragraph 4(b) of the defence?
(d) should the court enforce a pecuniary penalty on DTS?
Parties contentions
15 The employment contract between the parties reveals a number of pertinent facts. DTS employed Walker in the position of Business Development Manager, a position which reported to the general manager of the company.[2] DTS was to remunerate Walker on a retainer and commission basis.[3] Walker’s salary was $100,000 per annum, including superannuation.[4] Normal working hours were 40 hours per week.[5] Walker’s position was such that she might be required to sometimes work outside of the hours of 9:00am to 6:00pm and also to work on public holidays.[6] The agreement listed eight public holidays. The agreement included an entire agreement clause which provided that:[7]
This contract replaces all previous written or oral agreements and understandings and represents a full record of the agreements entered into by you and the company.
[2]Clause 1.
[3]Clause 3.
[4]Ibid and Schedule 1.
[5]Clause 5.
[6]Ibid.
[7]Clause 18.
16 Schedule 1 of the employment contract set out the details of Walker’s position, including the starting date, office location, and salary. Schedule 2 dealt with the detail of the pay which Walker was to receive for her work. She was also entitled to commission to be paid as follows:
“1. The employee shall be entitled to the following sales commission.
1.25% on all sales payable at Final Invoice Stage.
2. The Company will only pay Commission where:
2.1Works have been completed, invoiced, and payment received.”
17 Schedule 3 of the employment contract listed duties associated with the employment position which Walker accepted:
“1. To provide the company with new and exclusive sales.
2.The employee has the responsibility to ensure that the sales function is carried out in a professional and responsible manner as directed by the company.
.
.
.
5.Each employee is responsible for the presentation of their own person and vehicle.
6.The Employee is to provide on a weekly basis a list of all prospects generated for the week.
(a)All deposits received must be reported to the office daily, on the day of the receipt and banked within 24 hours of its receipt with the Company, be it cash, cheque or credit card payment.
(b)Satisfactory customer feedback
(c)Any marketing costs must be detailed in weekly reports, and will be reimbursed following presentation of tax invoice and purchase report.”
18 Walker contended that clause 1 of Schedule 2 (“the commission clause”) should be given its plain and ordinary meaning. It referred to “all sales” and not a subset limited by the phrase “new and exclusive”. Walker submitted that the words “all sales” plainly referred to the whole of the sales made by DTS. Because there was no ambiguity in the commission clause, the task of construction should be confined to the text of the employment contract.
19 Alternatively, Walker submitted that, if the court found the contract was ambiguous, then the court should rely upon the contra proferentem rule to resolve the ambiguity in the plaintiff’s favour. Walker said that she had no role in the drafting of the agreement and simply signed the document put before her at the defendant’s office. Bisby said in his evidence that DTS personnel produced the agreement by “lifting” the main terms of the document from an employment agreement used by an associated entity, Burbank Homes, to employ someone else in a different role. At the time, Patrick Mylonas was head of human resources within the Burbank group of companies and was, consequently, the head of human resources for other entities in the group, including Burbank Homes and DTS. A person at Burbank Homes produced the agreement.
20 Although Walker contended in final address that there was no need to consider much of the evidence led at trial because it was irrelevant and inadmissible, the trial was conducted on a slightly different basis. Rather, in her opening, counsel for Walker said that, in the interests of expediency and convenience, the plaintiff proposed to lead evidence about the context in which the parties made their agreement. Further, she said that the plaintiff would not object to DTS leading evidence about such matters. Walker’s attitude was that, if the court determined that the evidence of the circumstances surrounding the making of the agreement were relevant and admissible, then such evidence favoured the plaintiff’s construction in any event. On this view too, she was entitled to 1.25% commission on the whole of the sales made by DTS during the applicable period.
21 Walker referred also to the entire agreement clause and submitted this was another reason for the court to disallow any reliance upon pre-contractual discussions which varied or altered the commission clause.
22 DTS rejected the plaintiff’s construction of the commission clause. It said that if the court accepted Walker’s interpretation of the clause, then it would lead to an extraordinary outcome which did not sit comfortably with commercial common sense. This was said to arise because in the period between 5 May 2014 and 1 April 2017, Walker would be paid 1.25% commission on the whole of DTS’s sales revenue irrespective of whether Walker introduced the customer to DTS or procured the customer to engage DTS. This outcome was said to be remarkable because, from inception of the DTS business in 2001, Burbank Homes, a related entity, provided about 80% of DTS’s revenue from electrical work. This arose because the then directors of Burbank Homes, Eddie Puhar and Eddie Sanfilippo, established DTS with Bisby. Each person had a one third interest in the business. Before 1 October 2001 when DTS began trading,[8] Puhar and Sanfilippo had already established a plumbing business called Burbank Plumbing. The arrangement between the founders of DTS was that Bisby would use his electrical licence for the new business and manage it, while the Burbank Homes directors would supply the new business with work. Burbank Homes has maintained that commitment to the DTS business until the present day.
[8]The company began trading under the name Burbank Electrical and Maintenance Pty Ltd. It changed its name to DTS in 2009. In 2019, it changed its name again to Dynamic Trade Solutions Pty Ltd.
23 DTS argued that, on the plaintiff’s case, it was necessary to supply additional words in order to give clear meaning to the commission clause – namely, “all sales made by the defendant”. DTS acknowledged that it too required further words to make good its competing construction – namely, “all new and exclusive sales provided by the employee”. DTS argued that, in the context, the reference to “exclusive” denoted that the sale must originate with, or be provided by, Walker herself and not another employee.
24 The thrust of DTS’s argument was that, because the commission clause required additional words to clarify its meaning, the clause was ambiguous in the sense that it was susceptible of more than one meaning. Accordingly, it contended the court should have recourse to the circumstances surrounding the making of the agreement in order to better understand the purpose or object of the agreement, the genesis of the transaction, and the context and market in which the parties were operating. It was submitted this would enable the court to arrive at the proper construction of the agreement.
Legal principles
25 An important factor in this case is the extent, if any, to which the court can have regard to the circumstances surrounding the making of the employment agreement between the parties and whether such circumstances, insofar as they are external to the written document, require the court to find the agreement is ambiguous. In Codelfa Construction Pty Ltd v State Rail Authority (NSW)[9], Mason J, with whom Stephen and Wilson JJ agreed, said:
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.”[10]
[9](1982) 149 CLR 337.
[10]Ibid at 352.
26 Shortly before stating the so-called “true rule” regarding the use of surrounding circumstances, Mason J referred to the joint judgment of himself, Stephen, and Jacobs JJ in DTR Nominees Pty Ltd v Mona Homes Pty Ltd[11]. There, a contract of sale identified land for sale as “lots 1-9 inclusive in the vendor’s plan of subdivision, a copy of which is annexed hereto”. There were 35 lots on the plan. Condition 4 of the contract provided that the annexed plan of subdivision had been lodged with the council and the vendor would proceed with all due dispatch to have the “relevant plan of subdivision” lodged for registration as a deposited plan. Under the contract, the purchaser did not have to complete the sale before registration of the vendor’s plan of subdivision of which the sale property formed part. The purchaser was to pay a deposit upon signing the contract and the balance of the purchase price within 14 days of the notification that the plan of subdivision was registered.
[11](1978) 138 CLR 423.
27 At the date of contract, the vendor had not lodged the plan referred to in condition 4 of the contract. It had lodged a plan of subdivision for the whole subdivision and sought approval only of that part relating to lots 1-9.
28 The High Court found that the vendor breached the contract of sale by not lodging the plan of subdivision annexed to the contract. It commented that the trial judge had been misled by background evidence about the parties’ understanding of the transaction which he appeared to have used for purposes of construing the contract. The joint judgment commented as follows:[12]
“A court may admit evidence of surrounding circumstances in the form of ‘mutually known facts’ ‘to identify the meaning of a descriptive term’ and it may admit evidence of the ‘genesis’ and objectively the ‘aim’ of a transaction to show that the attribution of a strict legal meaning would ‘make the transaction futile’.”
[12]Ibid at 429.
29 Especially in some decisions made by intermediate courts of appeal,[13] there developed a trend towards the view that the High Court, in later cases such as Pacific Carriers Ltd v BNP Paribas,[14] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd,[15] Wilkie v Gordian Runoff Ltd,[16] and International Air Transport Association v Ansett Australia Holdings Ltd,[17] had resiled from its earlier position in Codelfa. These decisions were to the effect that extrinsic evidence of surrounding circumstances was admissible even if the language in question was not ambiguous. The judgment of the House of Lords, especially Lord Hoffman, in Investors Compensation Ltd v West Bromwich Building Society[18] appeared to be influential in arriving at this view.
[13]For example, Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1, 10-11, 22, 48; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603, 616-8; MBF Investments Pty Ltd v Nolan [2011] VSCA 114 at [197]-[203]; Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633.
[14](2004) 218 CLR 451.
[15](2004) 219 CLR 165.
[16](2005) 221 CLR 522.
[17](2008) 234 CLR 157.
[18][1998] 1 WLR 896.
30 The most recent statement by the High Court of the principles applicable to the construction of contracts is found in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[19]. Here, French CJ, Nettle, and Gordon JJ said:[20]
[19](2015) 256 CLR 104.
[20]Ibid at [46] – [52].
“The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.
These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority (NSW) and Electricity Generation Corporation v Woodside Energy Ltd. We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd. (internal citations omitted).”
31 Kiefel and Keane JJ in their joint judgment noted that the judgment of Mason J in Codelfa contemplated that it was permissible to have regard to the parties’ mutual knowledge when construing an agreement.[21] The judgment accepted that there may be a need to have regard to the circumstances surrounding a commercial contract in order to construe its terms or to imply a further term. Mason J identified “mutually known facts” which might assist in understanding the meaning of a descriptive term or the genesis or aim of the transaction. His Honour referred with apparent approval to the judgment of Lord Wilberforce in Prenn v Simmonds,[22] where he said that agreements were no longer interpreted purely on internal linguistic considerations in isolation from the factual matrix in which they were set.
[21]Ibid at [108].
[22][1971] 1 WLR 1381, 1383-4.
32 Their Honours said that it was clear from the judgment of Mason J that the ambiguity he addressed was that which arose when words are susceptible of more than one meaning. His reasons were directed to how such an ambiguity might be resolved. It did not address how the ambiguity might be identified.
33 The joint judgment noted that in refusing special leave to appeal in Western Export Services Inc. v Jireh International Pty Ltd,[23] the court referred to a requirement that it was essential to identify ambiguity in the language of the contract before the court could have regard to the surrounding circumstances and the object of the transaction. Kiefel and Keane JJ said that there might be different views about whether this requirement arose from Codelfa. However, they said this was not the occasion to resolve that question.[24]
[23](2011) 282 ALR 604.
[24]Mount Bruce (2015) 256 CLR 104 at [111].
34 Their Honours went on to say that whether an ambiguity could be identified by reference to matters external to the contract did not arise in Mount Bruce and that the issue identified in Jireh was also not argued in Mount Bruce.
35 Bell and Gageler JJ in their joint judgment agreed that Mount Bruce did not concern the question of whether ambiguity must be shown before a court interpreting a written contract could have regard to background circumstances.[25] They noted that the parties agreed that certain terms of the agreement were ambiguous.
[25]Ibid at [118].
36 The Victorian Court of Appeal in Apple and Pear Australia Ltd v Pink Lady America LLC[26] examined in some detail the current state of the law regarding the use of surrounding circumstances and the interpretation of contracts.[27] Tate JA stated that:[28]
[26](2016) 343 ALR 112.
[27]Ibid at [91] – [140].
[28]Ibid at [137].
“it would be wrong to conclude that the High Court has endorsed an approach to the construction of commercial contracts, whereby the surrounding circumstances, including, relevantly, precontractual negotiations, can invariably be relied upon to assist construction.”
That was not to deny that the objective approach to contractual interpretation confirmed by the plurality in Mount Bruce, required reference to the text, context, and purpose of the agreement.
37 Ferguson and McLeish JJA, who agreed with the decision of Tate JA, noted that:[29]
[29]Ibid at [229] – [231].
· there was no doubt that when seeking to ascertain the meaning of contractual language, it was appropriate to resort to the context in which the language was used;
· it was apparent from the decision in Mount Bruce that the circumstances which the contract addressed and the commercial purpose to be secured by it were ordinarily able to be identified by reference to the contract alone;
· at least where the contractual language was ambiguous or susceptible of more than one meaning, evidence of circumstances or events external to the contract was permissible.
Is the employment contract ambiguous?
38 From the discussion of the cases referred to above, I consider that a court can have regard to surrounding circumstances in order to resolve an ambiguity, to define a descriptive term and to explain the genesis of a transaction. Surrounding circumstances cannot be employed to contradict the plain language of a written agreement or to prove a party’s subjective intentions.
39 The principal question in this case is how the commission clause should be interpreted. In order to address this, I first consider whether the clause is ambiguous or not.
40 In my opinion, the commission clause is not ambiguous and can be construed without having to consider the issues raised regarding surrounding circumstances. I consider that the better view of the commission clause is that Walker is not entitled to commission on all sales made by DTS over the applicable period. Rather, the commission is limited to those sales where Walker introduced or procured the new customer to retain DTS.
41 From the outset, it is important to note that the employment contract engages Walker as business development manager. Part of her role must be to develop and expand the defendant’s business. An obvious (but not the only) way of doing this is to generate additional sales by identifying and obtaining new customers for DTS.
42 There were some material clauses in the employment contract.
43 Clause 1 stated that Walker is expected to use her best endeavours to perform her duties and responsibilities in a manner which will promote the interests of the defendant. The first item specified in the “Duties Statement” comprising schedule 3 to the contract was “to provide the company with new and exclusive sales”.
44 Clause 3 provided that DTS employs Walker on a retainer and commission basis.
45 Clause 10 stated that Walker was expected to devote her whole time and attention to DTS during her working time. Moreover, during her employment, she was expected not to undertake any other paid employment outside working hours, nor was she permitted to have any interest in any business or engage in any other activities which might interfere with the performance of her duties for DTS.
46 Item 1 of schedule 1 to the employment contract provided that DTS engaged Walker in the position of business development manager with her duties being as set out in the attached schedule 3.
47 As noted, schedule 3 stated that the first listed duty which Walker had was to provide the company with new and exclusive sales. The schedule also provided that Walker, as an employee, was to ensure that the sales function was carried out in a professional and responsible manner as directed by the company. Walker was to work full time for DTS and not engage in other paid work.
48 The terms of the employment contract made clear a number of matters.
49 First, under the employment contract, DTS engaged Walker as the business development manager. Walker’s prime responsibility was to develop the business of DTS.
50 Secondly, DTS employed Walker on a retainer and commission basis. The retainer was $100,000 per annum, inclusive of superannuation, a not insignificant sum. In addition, there was provision for Walker to earn commission. In an employment context, especially with respect to sales people, commission payments are commonly used as an incentive mechanism to encourage employees to work hard in generating sales revenue for the employer. Employees who respond to this incentive and attract new customers to the business are rewarded by receiving part of the income earned from the customer. While I accept that such an incentive might operate also in a context where sales revenue exceeds a specific hurdle or minimum amount, the better view of this agreement is that it applies to all new sales – sales to a customer who previously did not retain DTS to supply goods or services. There was a reference in the employment contract to new sales and commission payment but no reference to sales thresholds or hurdles.
51 Thirdly, this view is reinforced by clause 1 of schedule 3 which explicitly refers to Walker’s duty to provide DTS with new sales. Such a clause speaks to what I regard as the proper view of the commission payment obligation in such a context. There is an obvious connection between the generation of sales and the earning of commission.
52 For the reasons set out, I consider that the expression “all sales” in the commission clause should be construed in the context of the agreement as a whole as all sales to new DTS customers introduced or procured by Walker.
53 I appreciate that Walker contended that, if the sales were to be so confined, then the words “new and exclusive” which appear in schedule 3, should have been inserted in the commission clause so that it read “1.25% on all new and exclusive sales”. While from one perspective, it might be regarded as a legitimate point to raise, in my view, it pays insufficient attention to the overall context created by the other terms in the employment agreement. The Walker construction focuses too narrowly on the commission clause alone and fails to read the clause in a wider context. It is a long established principle of construction that the words of a contract should be construed having regard to the document as a whole. An individual word or clause takes its meaning from the context in which it is found. In Australian Broadcasting Commission v Australasian Performing Right Ltd[30], Gibbs J said:[31]
[30](1973) 129 CLR 99.
[31]Ibid at 109. I note that this was a dissenting judgment. However, the passage has been referred to with approval in many subsequent cases.
“It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course, the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another.”
His Honour went on to say that if words are unambiguous, the court must give effect to them even if the result seems capricious or unreasonable and the court suspects the parties intended something different. But if the language is open to more than one construction, the court should prefer that which avoids an outcome which appears to be capricious, unjust, or unreasonable.
54 The construction of the commission clause for which Walker contended was simply too narrow and paid insufficient attention to the whole of the terms of the employment contract.
If the employment contract is ambiguous and the court has regard to the surrounding circumstances, what is the outcome?
55 Although I have found that when read as a whole, the employment contract was not ambiguous, I shall briefly consider the alternative scenario. This would involve finding that the agreement between the parties was ambiguous, because words in the commission clause were susceptible of more than one meaning - that is, the words “all sales” could be the whole of DTS’s sales or all sales generated by Walker. Assuming the court found ambiguity, it could examine the surrounding circumstances to interpret the written agreement between the parties. There were a number of relevant matters raised by the parties.
56 First, DTS acknowledged to Walker that, before and at the time it engaged her, its administration processes were ineffective, labour intensive, and in need of streamlining. From prior dealings between Walker and Bisby, each knew that Walker had experience and expertise in such work. Walker had materially improved the dealings between Chromagen and DTS through her efforts in the past.
57 Secondly, DTS explained to Walker that part of her role as business development manager involved promoting sales and finding builders to become new clients of DTS. Through her previous roles at Chromagen, L&O, and Telbix, Walker had knowledge of builders and networks of builders who might become customers of DTS. In her evidence, Walker said that she was aware that her duties included securing new business for DTS. This was consistent with Walker’s email to Bisby on 28 March 2014 where she said that the proposed role at DTS would give her an opportunity to expand her technical knowledge of the electrical industry and “pave the way for our success in gaining additional market share in Victoria”.
58 Thirdly, from the precontractual dealings between the parties, each was aware that:
· while Walker was an employee at Telbix, she introduced to DTS a customer, the 8 Star Group, which comprised about 90 builders; and
· DTS was prepared to pay Walker commission after she began work at DTS in relation to sales generated from the 8 Star Group, even though Walker was not a DTS employee when she introduced the 8 Star Group to DTS as a potential new customer. Bisby noted in an email to Walker on 4 April 2014, that if the 8 Star work yielded 400 homes per year at $5,000 per job, Walker would earn $30,000. In my view, such a comment emphasised that there was a link between Walker generating new sources of sales revenue for DTS and her receiving commission.
· Walker agreed with Bisby[32] that the job offer created the potential for Walker “to earn in the long run via the incentive based structure”. If the parties objectively contemplated that, from the commencement of Walker’s employment with DTS, she would earn commission on sales to each and every customer of DTS, then the reference to earning in the long run was puzzling – the commission earned would be immediate and not merely a potential possibility.
[32]See Walker’s email to Bisby dated 4 April 2014.
59 These factors suggest to me that the surrounding circumstances support my earlier view that Walker was entitled to commission in relation to all sales from new customers whom Walker either introduced to DTS or procured to order goods or services from DTS. The better view of the commission clause was that it not be read as granting Walker an entitlement to commission in respect of all sales made by DTS during the applicable period, but only regarding a subset of those sales.
60 Perhaps another way of examining the matter is to recognise that where words in a contract are susceptible of more than one meaning, extrinsic evidence is admissible to show the facts which the negotiating parties had in mind.[33] This approach is exemplified by the case of McDonald v Longbottom.[34] In that case, the defendant contracted to buy from the plaintiffs “your wool” at a particular price. Before entering the contract, there was a conversation between the plaintiff and the defendant’s agent in which the plaintiff explained that the wool for sale included what he had produced on his own farm and what he bought from other farms. The two sources of wool constituted the plaintiff’s wool. It was with this knowledge that the defendant contracted to buy “your wool”. Lord Campbell said:
[33]Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 350.
[34](1859) 1 E&E 977; 120 ER 1177. The case was followed by the Privy Council in Bank of New Zealand v Simpson [1900] AC 182 and by Mason J in CodelfaConstruction Pty Ltd (1982) 149 CLR 337, 349.
“There cannot be the slightest objection to the admission of evidence of this previous conversation, which neither alters nor adds to the written contract, but merely enables us to ascertain what was the subject matter referred to therein.”
In my view, a consideration of the factual context known to the parties at the time they entered the employment contract reinforces the view that the words “any sales” referred to sales which Walker herself generated or procured.
61 I note in passing that the plaintiff placed reliance upon the contra proferentem rule to argue that, if the employment agreement were ambiguous, then the court should construe the agreement against the party who drafted it, namely DTS. The contra proferentem maxim is a principle of last resort. Thus, judges should first apply accepted principles of construction to an agreement to ascertain its meaning in preference to the use of a mechanical formula.[35] Rules of construction can be useful tools but remain subordinate to the primary duty of upholding the bargain agreed between the parties.[36] Because of the view I have reached regarding the proper construction of the employment agreement, I do not need to further consider the applicability of the contra proferentem rule.
[35]McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579 at [74] per Kirby J; Zauner Constructions Pty Ltd v Harvey [2004] NSWCA 8 at [73].
[36]Avenia v Railway & Transport Health Fund Ltd (2017) 272 IR 151 at [124].
Can the court imply the term pleaded at paragraph 4(b) of the defence?
62 DTS argued that if the court rejected its primary construction argument, then the court should find the implied term pleaded at paragraph 4(b) of the defence as follows:
… it was a term of the Contract that the Plaintiff was only entitled to commission on all new and exclusive sales she provided to the Defendant, and not any other sales generated by the Defendant or its other employees;
63 DTS argued that the proposed implied term satisfied the criteria in BP Refinery v Shire of Hastings[37]. Walker argued that there was no proper basis to imply a term because it was not necessary to give business efficacy to the contract and contradicted an express term, namely, the commission clause. Nor was the implied term so obvious as to go without saying.
[37](1977) 180 CLR 266.
64 For a term to be implied, each criterion in the BP Refinery test must be satisfied. Accordingly, the term must:
· be reasonable and equitable;
· necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
· so obvious that it “goes without saying”;
· be capable of clear expression; and
· not contradict any express term of the contract.
65 The proposed term is reasonable and equitable. It makes sense that the commission payment is referable to sales for new customers who engaged DTS due to Walker’s efforts. It was through Walker’s work that businesses who are not customers of DTS became customers. Walker generated the additional sales through her initiative. By way of contrast, rewarding Walker with commission payments in relation to the DTS sales which emanated from Burbank Homes, a related entity, did not represent a reasonable or equitable use of commission incentives.
66 DTS contended that the term was necessary to give effect to the wage/work bargain being the underlying transaction between the parties. It was said that Walker’s service must be related to her remuneration and obtaining new sales was the consideration for the commission payments. Hence, unless the term was implied, the employment contract would have no business efficacy.
67 I do not accept the DTS contention. While it might be thought to be overly generous, it was quite possible that DTS considered the scope for improvement resulting from streamlined back office and business operations was so great as to justify awarding Walker commission on all sales by DTS. Bisby had seen Walker’s talent and its beneficial consequences first hand when dealing with Chromagen. When combined with Walker’s extensive contacts in the building industry, there was considerable upside for both parties. I consider the employment contract was effective without the implied term.
68 I am not of the view that the term is so obvious that it goes without saying. While there must be some connection between Walker’s remuneration and her work for DTS, this would not necessarily lead to the conclusion that her commission payments must be limited in the way contended for by DTS.
69 I accept that the term is capable of clear expression.
70 The proposed term is not inconsistent with any express term. The expression “all sales” in the commission clause is, when read in isolation, arguably ambiguous and the proposed term helps to explain it. The addition of the implied term gives greater clarity to the agreement generally and the commission clause in particular.
71 In summary, I do not consider that DTS is correct in arguing that the proposed implied term should be added to the employment contract.
Should the court impose a pecuniary penalty on DTS?
72 Walker’s statement of claim included an allegation that, by failing to pay her in full monthly for her work, DTS contravened section 323 of the Fair Work Act 2009 (Cth) (“FWA”) The prayer for relief sought a declaration of breach and the imposition of a penalty order made under section 546 of the FWA.
73 Section 323(1) of the FWA provides as follows:
(1)An employer must pay an employee amounts payable to the employee in relation to the performance of work:
(a) in full (except as provided by section 324); and
(b)in money by one, or a combination, of the methods referred to in subsection (2); and
(c) at least monthly.
74 Note 2 within section 323(1) further provides that:
Amounts referred to in this subsection include the following if they become payable during a relevant period:
(a) incentive‑based payments and bonuses;
(b) loadings;
(c) monetary allowances;
(d) overtime or penalty rates;
(e) leave payments
75 Note 1 of section 323(3) states that the subsection is a civil remedy provision of the FWA, meaning that the court, pursuant to its powers under section 546, can order DTS to pay a pecuniary penalty to the Commonwealth, a particular organisation, or person.
76 Counsel for Walker made no mention of the FWA in her opening. Counsel for DTS made no reference to this part of the claim in his opening either. I suspect this was because there was no advantage to DTS in raising a matter which Walker was apparently not pursuing.
77 In its defence, DTS admitted that it was bound by section 323(1) of the FWA, but otherwise denied it was at all material times required to pay Walker in relation to the performance of her work in full, in money, and at least monthly. Further, DTS pleaded that the allegation regarding the contravention was vague, embarrassing, lacking in particulars, did not disclose a cause of action, and was liable to be struck out. DTS also denied the alleged contravention.
78 Until final submissions, the court and DTS might reasonably have thought that Walker had abandoned her case in relation to the FWA claim. Given the potentially significant penalty which the court can impose upon a contravenor, I would have expected Walker to refer to this part of the claim in the plaintiff’s opening. Indeed, when counsel for Walker completed her opening, which was very brief and ignored all but one document in a court book of about 600 pages, I expressly asked her whether that was the extent of her opening. She told me that it was. Thus, it was somewhat surprising when Walker’s outline of final submissions raised the FWA claim. Although Walker submitted the evidence showed DTS contravened section 323 of the FWA and that the court should order a pecuniary penalty in such sum as it deemed fit, the plaintiff provided no assistance to the court in addressing the issue. Ultimately, Walker suggested the penalty order should be in the range of $100,000 - $150,000. But counsel offered no rationale of any kind to support this suggestion.
79 In his oral submissions, counsel for DTS argued that the court should not entertain the claim because it was unfair and prejudicial to DTS to expect it to address such a serious quasi-criminal claim in the present circumstances. He argued that it was incumbent upon Walker to plead the contraventions clearly, including their constituent elements. He noted that it was only in court on the last day of trial that the plaintiff had said that there were 35 contraventions. It was said that, by reason of the application of section 140 of the Evidence Act 2008 (Vic) and the principles of Briginshaw v Briginshaw[38] to the serious allegations made against DTS, the court should not uphold the claim.
[38](1938) 60 CLR 336.
80 Counsel for Walker did not include in her written or oral submissions guidance about matters including:
(a) how the relevant part of the FWA operated – the scope of the provisions, their structure, and purpose;
(b) the factors which the court might properly have regard to in determining whether a penalty should be ordered and, if so, how these factors led to a particular quantum of penalty;
(c) other cases which exemplified how the court might exercise its powers in such a case;
(d) the range of financial penalties which had been levied on other parties who contravened the same provisions of the FWA;
(e) the factual evidence in the present case referable to such factors;
(f) whether DTS was a first time or repeat offender;
(g) whether the senior management at DTS was aware of the contravention and, if so, when it became aware;
(h) whether the contravention was deliberate or inadvertent; or
(i) whether the totality principle applied and, if so, how and to what effect.
81 DTS did not grapple in any detail with the claim under the FWA. DTS made no submissions about the merits of the case or the factors which the court might take into account in dealing with the claim. Other than point to the alleged prejudice of having to deal late in the trial with the claim, which was said to be defectively pleaded and carried potentially significant consequences, DTS did not identify any specific prejudice it suffered, ask for an adjournment to consider this unexpected development, seek to either recall a witness or canvass other potential witnesses for extra evidence or apply to reopen its case. In substance, the DTS submissions did not proceed much beyond a contention that the court should not deal with this part of the claim.
82 DTS contended that Walker did not prove that she performed the work giving rise to payments of commission. Nor, it was said, was the commission paid an incentive based payment as required by the FWA. I reject both these submissions. By its actions in paying Walker, DTS effectively acknowledged that it owed her money. Walker’s claim was for commission said to be owing in respect of sales made by DTS. In conducting its defence, DTS relied on the dual nature of Walker’s renumeration, the fixed component and the incentive based component. DTS cannot now deny that the commission payments were incentive based payments in relation to work performed by Walker.
83 This aspect of the claim troubled me. On the one hand, Walker pleaded the claim, at least in general terms, and there was no serious contest on the facts that the commission payments were not made monthly. On the other hand, Walker made no reference to the claim in the plaintiff’s opening and appeared to have abandoned the claim. The consequences for DTS of the application of a civil penalty were potentially significant.
84 On balance, I consider that I need to deal with this aspect of the plaintiff’s case. It was pleaded and, in circumstances where there was no application to strike out the FWA allegation, it remained before the court. For this reason, DTS should have prepared for trial on the assumption that it had to defend this aspect of the claim. Alternatively, DTS could have argued precisely why the claim was so defectively pleaded that it was not possible either for Walker to succeed or for DTS to defend the claim. DTS referred to no cases or legal principles which explicitly addressed how the claim should be pleaded.
85 In my opinion, the elements relevant to the FWA claim were of limited scope. DTS, as the employer, had to pay its employee, Walker, amounts payable to her in full, in money, and at least monthly. The amounts payable included incentive based payments and bonuses. These factual matters were covered in the statement of claim. I accept that it was only on the last day of trial that Walker referred to 35 contraventions of the FWA. However, paragraph 9 of the statement of claim alleged that between 28 April 2014 and 1 April 2017, DTS did not pay any commission to Walker. Accordingly, DTS could have calculated the number of contraventions without much difficulty given the reference in the statement of claim to a statutory provision which imposed an obligation which was to be satisfied monthly.
86 Further, while DTS complained that it was unfair and prejudicial for it to deal with the plaintiff’s FWA claim, it was a general and vague complaint of a kind frequently made by lawyers on behalf of their clients. DTS failed to identify and articulate any particular harm or disadvantage it suffered. As noted, DTS did not seek to stand the matter down, to adjourn the trial, to call more evidence, or otherwise specify exactly how it was difficult to address the plaintiff’s case.
87 Before moving to address the FWA claim, I note my concern about the lack of help which the court received on this claim from the parties. There exists a special relationship between courts and the counsel appearing in them. Traditionally, judges rely upon counsel to help them decide cases by providing submissions about the material facts, the applicable law, and how the law should be applied to the facts to arrive at a particular outcome. I find it astonishing that the plaintiff in this case was so unwilling to provide assistance, especially when it was the party making the FWA claim. If this case were to proceed further, I would hope that the court would not allow the parties to address issues which they could have dealt with in this hearing but failed to do so.
Legal principles
88 The FWA does not state explicitly the factors which a court might take into account when imposing a civil penalty. It is accepted that the court has a broad discretion which it is to exercise according to the particular circumstances of each individual case.
89 Branson J in Construction,Forestry, Mining and Energy Union v Coal and Allied Operations Pty Ltd (No 2)[39] set out a suggested list of guideline principles regarding contraventions of the then Workplace Relations Act 1996 (Cth) as follows:
[39](1999) 94 IR 231.
The Act gives no explicit guidance as to the circumstances in which an order imposing a penalty under s298U of the Act will be appropriate or as to the circumstances in which a penalty of or near the maximum, or alternatively of a lesser amount, may be called for. The Court is simply directed to consider what is appropriate in all the circumstances of the case.
The following matters, which are not intended to comprise an exhaustive list, seem to me to be considerations to which the Court may appropriately have regard in determining whether particular conduct calls for the imposition of a penalty, and assuming that it does, the amount of the penalty:
(a) The circumstances in which the relevant conduct took place (including whether the conduct was undertaken in deliberate defiance or disregard of the Act);
(b) Whether the respondent has previously been found to have engaged in conduct in contravention of PtXA of the Act;
(c) Where more than one contravention of PtXA is involved, whether the various contraventions are properly seen as distinct or whether they arise out of the one course of conduct;
(d) The consequences of the conduct found to be in contravention of PtXA of the Act;
(e) The need, in the circumstances, for the protection of industrial freedom of association; and
(f) The need, in the circumstances, for deterrence.
90 In Kelly v Fitzpatrick[40], Tracey J identified a number of potentially relevant considerations for the court to note:[41]
[40](2007) 166 IR 14.
[41]Ibid at [14].
· the nature and extent of the conduct which led to the breaches;
· the circumstances in which that conduct took place;
· the nature and extent of any loss or damage sustained as a result of the breaches;
· whether there had been similar previous conduct by the respondent;
· whether the breaches were properly distinct or arose out of the one course of conduct;
· the size of the business enterprise involved;
· whether or not the breaches were deliberate;
· whether senior management was involved in the breaches;
· whether the party committing the breach had exhibited contrition;
· whether the party committing the breach had taken corrective action;
· whether the party committing the breach had cooperated with the enforcement authorities;
· the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
· the need for specific and general deterrence.
Similar lists appear in other cases such as Construction, Forestry, Mining & Energy Union v Hamberger[42] and Hadgkiss v Sunland Construction (Qld) Pty Ltd.[43]
[42](2003) 127 FCR 309 at [51].
[43][2006] FCA 1566 at [11].
91 Such lists can be useful provided they do not become a rigid catalogue of factors which improperly ossify and restrict the court’s broad discretion.
92 The aims of the civil penalty provisions have been described as punishment, deterrence, and rehabilitation.[44] The punishment must be proportionate to the offence and consistent with prevailing standards of punishment. Ultimately, the penalty must be proportionate to the crime.
[44]Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [93]-[94], quoted by Graham J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [53].
93 It seems tolerably clear that the aim of the civil penalty provision is not to act as retribution against a contravenor.[45] The High Court in Commonwealth of Australia v Director, Fair Work Building Inspectorate[46] said that whereas criminal penalties imported notions of retribution and rehabilitation, the purpose of a civil penalty was primarily to promote the public interest by encouraging compliance with the law. The aim of civil penalties was to induce the contravenor, and others who might break the law, to obey it. The method was to impose a penalty sufficiently meaningful to deter both repetition by the contravenor and wrongdoing by others.
[45]Director, Fair Work Building Inspectorate v Robinson [2016] FCA 525 at [64]-[65].
[46](2015) 326 ALR 476 at [55].
94 Before imposing an order, a court must be satisfied that it is appropriate in all the circumstances to do so. If the contravention is inadvertent or unintentional, a court may decide not to penalise a contravening party.
95 It seems well accepted that the totality principle is to be applied when penalising a contravenor for more than one offence. Indeed, the failure to take proper account of the totality principle was the reason the appeal succeeded in Australian Ophthalmic Supplies.[47] Hence, once the court decides the appropriate level of penalty for each contravention as if each were a separate offence, then it must look at the total sum of the penalties to determine whether that total is proportionate to the overall conduct of the contravenor. The sum of the penalties is not be oppressive or crushing. The aggregate sum should be just and appropriate.
[47](2008) 165 FCR 560.
96 In arriving at the quantum of the penalty, the court must undertake a reasoning process of instinctive synthesis. This involves taking account of all the relevant factors and arriving at a single result which takes due account of them all. It means the court is called upon to make a decision which balances many different and conflicting features.[48]
Consideration
[48]See Wong v R (2001) 207 CLR 584 at [74]-[76], referred to with approval in Australian Ophthalmic Supplies at [27].
97 The evidence shows and the DTS defence admits, that DTS did not pay Walker any commission between April 2014 and April 2017. There was no evidence of Walker making a request for payment of commission or complaining about her non-payment until early 2017. Although counsel for Walker acknowledged there was no evidence about why Walker made no request for the commission owing to her for about three years after starting work for DTS, she nonetheless submitted that I should infer that Walker felt vulnerable when she became ill and had to work from home soon after beginning her job. I reject this submission. First, it is not based in the evidence. Secondly, in circumstances where Walker became ill, DTS actively supported her in working from home, made no threats to terminate her, and took no action to terminate her employment. Indeed, the position in 2017 seems to have been that Walker still worked almost exclusively at home. She remains an employee of DTS. In short, I consider there is no proper evidence supporting any finding relating to vulnerability.
98 As noted above, there was a significant absence of helpful submissions from the parties about this FWA aspect of the case. Other than the fact of the late payment of commission, this part of the dispute was largely bereft of context. The evidence did not reveal for example:
· why DTS failed to pay any commission until 2017;
· whether the non-payment of commission was accidental or deliberate;
· whether senior DTS personnel were aware in the period 2014-2017 that DTS was not paying commission due to Walker;
· the financial position of DTS ;
· whether DTS had breached other material provisions of the FWA before or was a first time contravenor.
99 The evidence shows that shortly after Walker sought the commission payment due to her, DTS paid the commission.[49] DTS agreed to pay the commission by instalments as requested by Walker. There appears to have been substantial cooperation regarding the request for, and payment of, commission.
[49]DTS paid $5,000 starting on about 7 April 2017. It paid the balance in 12 weekly instalments of $1,471.08 starting on 13 April 2017 through to 29 June 2017.
100 Walker contended that in failing to pay the commission monthly as and when it fell due, DTS contravened the FWA 35 times. Because DTS argued that the contravention of the FWA exposed the company to maximum penalties in excess of $2,000,000, I infer that DTS accepted that this calculation was broadly correct.[50]
[50]In saying this, I note that in a later submission, DTS reduced its maximum figure due to the plaintiff overstating the maximum amount payable on each individual contravention.
101 Having regard to:
(a) the tolerant and cooperative attitude which DTS displayed toward Walker when she became ill in 2014 soon after joining the company;
(b) the continuing goodwill which DTS showed in checking on Walker’s health and allowing her the flexibility to work primarily from home;
(c) the payment of commission to Walker by instalments as she sought after her request for commission in 2017.
I think it unlikely that DTS deliberately withheld commission payments from Walker to intentionally punish her or to take for the company money due to her. Put another way, I am not satisfied on the evidence that DTS deliberately flouted its obligations. There was no suggestion that Walker suffered any unexpected or unusual harm or prejudice in not receiving her full entitlements.[51] Nor did the evidence disclose that DTS had a history of contravening section 323 of the FWA in respect of other employees. Most employees of DTS are electricians and plumbers. DTS has some staff to administer the business.
[51]Other than not having the money.
102 Under section 546 of the FWA, the court can make a pecuniary penalty order. By section 546(2), the penalty for a corporate body must not be more than five times the maximum number of penalty units referred to in column 4 of section 539(2). For the period between 5 May 2014 and 7 April 2017, each pecuniary unit is valued at $180. Hence, the maximum penalty for a contravention of section 323 was 300 penalty units. This was equivalent to $54,000.
103 There are a number of factors which can be considered in determining an appropriate penalty. They include:[52]
[52]SDAEA v Arora Markets Pty Ltd & Ors [2018] FCCA 85 at [83].
(a) the nature and extent of the contravention;
(b) the circumstances in which the contravention took place;
(c) the nature and extent of loss and damage suffered as a result of the contravention;
(d) whether the contravenor has engaged in any similar conduct in the past;
(e) the size of the contravenor;
(f) whether the contraventions involve senior management;
(g) any contrition or corrective action taken; and
(h) any co-operation with authorities which has been shown.
104 DTS paid Walker $22,652.96 between 7 April 2017 and 29 June 2017. There was an initial payment of $5,000 on about 7 April 2017, followed by 12 weekly payments of $1,471.08. DTS paid a further sum of $8,994.55 on 21 February 2020. The total commission paid was $31,647.51.
105 This was not a case where a statutory agency like the Fair Work Commission or Fair Work Ombudsman or some similar entity or person was involved. No agency made findings or gave directions which DTS ignored or repudiated. The evidence did not suggest that DTS deliberately refused or failed to pay Walker her entitlements.
106 There were no reports of similar prior misconduct by DTS.
107 The evidence did not disclose an explanation by DTS for its behaviour or obvious contrition for underpaying Walker.
108 A court is obliged to consider both specific and general deterrence in determining a penalty. Employers should understand that it is a serious matter when they fail to pay statutory and/or contractual entitlements. Especially is this so where the failure is deliberate or wilful.
109 I find that DTS contravened the FWA 35 times due to the failure to pay commission to Walker. In my view, each contravention could reasonably justify a penalty of five penalty units. This totals $900. Thus, the total penalty for all the contraventions would be $31,500.
110 Having assessed the penalty for each separate contravention and arrived at a total sum, I must then consider whether that total sum is appropriate having regard to the whole of the contravening conduct.[53]
[53]SeeSDAEA v Arora Markets Pty Ltd & Ors [2018] FCCA 85 at [81] and Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36, 53.
111 Here, the contravening conduct took only one form - the failure to pay commission. But for reasons not explained, the same conduct was repeated from month to month. There is no clear evidence about why Walker only sought the payment of commission in early 2017. One possibility is that her request was prompted by the negotiation of her next employment contract which took effect from 1 April 2017. The absence of any clause in that contract providing for commission payments might have spurred her to claim commission owing under the initial employment contract. However, the precise reason is unknown and is not relevant in any event.
112 In the present case, whilst DTS has contravened the FWA, I am not satisfied that the conduct was so bad as to warrant a penalty of the magnitude indicated by the individual contraventions. I regard a penalty of $15,000 as more appropriate and proportionate to the conduct of DTS.
Conclusion
113 In summary, I have found that:
(a) the words “all sales” in the plaintiff’s employment agreement should not be construed as the whole of the sales made by DTS but should be limited to all sales to new customers introduced or procured by the plaintiff.
(b) alternatively, if the employment agreement were ambiguous, then the same result would follow.
(c) the defendant cannot imply into the agreement a term of the kind alleged in paragraph 4(b) of the defence
(d) the defendant should pay a pecuniary penalty of $15,000.00.
114 I will hear the parties on the form of final order and costs. If these matters cannot be agreed between the parties then they should file and serve written submissions regarding these matters by 4:00 pm on 23 April 2020. These submissions should be no more than 6 pages long with a 40 mm margin, 12 point text and double spacing. I will decide the question of costs and final orders on the papers without an oral hearing unless the parties persuade me that such a hearing, which would take place by video, is essential.
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