Sutton v Edyvane's Transports Pty Ltd (No 2)
[2022] FedCFamC2G 1062
•21 December 2022
Federal Circuit AND FAMILY Court of Australia
(DIVISION 2)
Sutton v Edyvane’s Transports Pty Ltd (No 2) [2022] FedCFamC2G 1062
File number: MLG 1870 of 2021 Judgment of: JUDGE RILEY Date of judgment: 21 December 2022 Catchwords: INDUSTRIAL LAW – penalties – 10 contraventions over an extended period by corporation – disregard of awards and legislation – serious contraventions – director involved in six contraventions – costs. Legislation: Fair Work Act 2009 ss.45, 90(2), 323, 535, 536, 546, 557, 557A(5A) 570
Fair Work Regulations 2009 reg.3.32, 3.33, 3.34, 3.36, 3.37(1), 3.42 and 3.46
Other material: Road Transport and Distribution Award 2010 cl.5, 16.2(b)(vi), 16.4(b)(ii)
Road Transport (Long Distance) Operation Award 2010 cl.5, 14.1(c),(i),(v), 14.2(b)(i)
Cases cited: AMIEU v Greenmountain Food Processing [2015] FCCA 2655
Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (Nine Brisbane Sites Appeal) (2019) 269 FCR 262; (2019) 366 ALR 698; (2019) 286 IR 336; [2019] FCAFC 59
Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13
Fair Work Ombudsman v Bedington [2012] FMCA 1133
Fair Work Ombudsman v Nobrace Centre Pty Ltd (In Liq) (ACN 121 556 447) (No. 2) [2019] FCCA 2970
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301
Jess v Cooloola Milk Pty Ltd [2021] FCCA 1526
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70
Parker v Australian Building and Construction Commissioner (2019) 270 FCR 39; (2019) 365 ALR 402; (2019) 286 IR 116; [2019] FCAFC 56
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Rocky Holdings Pty Limited v Fair Work Ombudsman (2014) 221 FCR 152; (2014) 243 IR 244; [2014] FCAFC 62
Sayed v Construction Forestry Mining and Energy Union (2016) 239 FCR 336; (2016) 259 IR 274; [2016] FCAFC 4
Trade Practices Commission v CSR Ltd (1991) ATPR 41-076; [1990] FCA 52
Division: Division 2 General Federal Law Number of paragraphs: 136 Date of hearing: 24 October 2022 Place: Melbourne Counsel for the Applicant: Alan Ford Solicitor for the Applicant: Peter Hull & Associates Counsel for the Respondents: Stephen Bunce Solicitor for the Respondents: Wakefield Vogrig & Boote Lawyers ORDERS
MLG 1870 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: RONALD SUTTON
Applicant
AND: EDYVANE'S TRANSPORTS PTY LTD
(ACN 004 749 759)First Respondent
MARIANNA LYNETTE EDYVANE
Second Respondent
order made by:
JUDGE RILEY
DATE OF ORDER:
21 December 2022
THE COURT ORDERS THAT:
1.Pursuant to s.546(1) of the Fair Work Act 2009 (“the Act”), the first respondent pay to the applicant pecuniary penalties in the following amounts:
(a)$96,000, in respect of its failure to keep employee records in contravention of s.535 of the Act;
(b)$96,000, in respect of its failure to make employee records available on request in contravention of s.535 of the Act;
(c)$96,000, in respect of its failure to provide pay slips with all the required information in contravention of s.536 of the Act;
(d)$96,000, in respect of its failure to ensure that copies of the relevant awards and the National Employment Standards were available to the applicant in contravention of s.45 of the Act;
(e)$96,000, in respect of its failure to pay the applicant his long service leave entitlements in contravention of s.323 of the Act;
(f)$96,000, in respect of its failure to pay the applicant his annual leave entitlements in contravention of s.90(2) of the Act;
(g)$96,000, in respect of its failure to reimburse the applicant for work diaries in contravention of s.45 of the Act;
(h)$96,000, in respect of its failure to reimburse the applicant for protective clothing in contravention of s.45 of the Act;
(i)$96,000, in respect of its failure to pay the applicant a livestock carting allowance in contravention of s.45 of the Act; and
(j)$96,000, in respect of its failure to pay the applicant a long distance operations allowance in contravention of s.45 of the Act.
2.Pursuant to s.546(1) of the Act, the second respondent pay to the applicant pecuniary penalties in the following amounts:
(a)$8,820, in respect of her failure to provide pay slips with all the required information in contravention of s.536 of the Act;
(b)$8,820, in respect of her failure to ensure that copies of the awards and the National Employment Standards were available to the applicant in contravention of s.45 of the Act;
(c)$8,820, in respect of her failure to reimburse the applicant for work diaries in contravention of s.45 of the Act;
(d)$8,820, in respect of her failure to reimburse the applicant for protective clothing in contravention of s.45 of the Act;
(e)$8,820, in respect of her failure to pay the applicant a livestock carting allowance in contravention of s.45 of the Act; and
(f)$8,820, in respect of her failure to pay the applicant a long distance operations allowance in contravention of s.45 of the Act.
3.The respondents pay the applicant his costs of the proceeding on the scale of this court, to be fixed by the court if not agreed.
4.The parties have liberty to apply on the fixing of the amount of costs.
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).
REASONS FOR JUDGMENT
JUDGE RILEY:
Introduction
This is an application for penalties and costs in relation to a number of claims brought under the Fair Work Act 2009 (“the Act”). Liability was established in Sutton v Edyvane’s Transports Pty Ltd [2022] FedCFamC2G 834, where the court made the following declarations:
1. The first respondent contravened the following civil remedy provisions of the Fair Work Act 2009 (“the Act”) and the Fair Work Regulations 2009 (“the regulations”):
(a) s.535 of the Act, by contravening:
(i) reg.3.32(a), (b), (c), (d) and (e) of the regulations by not making and keeping records with the required content;
(ii) reg.3.33(1)(a) and (3)(c), (d) and (e) of the regulations by not making and keeping records with the required details of pay;
(iii) reg.3.34 of the regulations by not making and keeping records with the required details regarding overtime;
(iv) reg.3.36(1)(a) and (b) and (2)(a) and (b)(i) and (ii) of the regulations by not making and keeping records with the required details regarding leave;
(v) reg.3.37(1)(d) and (e) of the regulations by not making and keeping records with the required details regarding superannuation contributions; and
(vi) reg.3.42(1), (2), and (3) or (4) of the regulations by not making employment records available on request;
(b) s.536 of the Act and reg.3.46 of the regulations by failing to provide pay slips with all of the required information;
(c) s.45 of the Act by contravening cl.5 of:
(i) the Road Transport and Distribution Award 2010 (“the RTD”); and
(ii) the Road Transport (Long Distance) Operation Award 2010 (“the RTLDO”),
by failing to ensure that copies of the awards and the National Employment Standards were available to the applicant either on a noticeboard which was conveniently located at or near the workplace or through electronic means, whichever made them more accessible;
(d)s.323 of the Act, by failing to pay the applicant on his retirement for 20 weeks of his long service leave entitlement in the sum of $24,000;
(e)s.90(2) of the Act by failing to pay the applicant on his retirement for 56 weeks of annual leave in the sum of $67,200;
(f) s.45 of the Act, by failing to comply with cl.16.4(a) of the RTD and cl.14.2(a) of the RTLDO by failing to reimburse the applicant for work diaries in the sum of $160;
(g)s.45 of the Act, by failing to comply with cl.16.4(b)(ii) of the RTD and cl.14.2(b)(i) of the RTLDO by failing to reimburse the applicant for protective clothing;
(h) s.45 of the Act, by failing to comply with cl.16.2(b)(vi) of the RTD, cl.14.1(c)(v) of the RTLDO and cl.14.1(c)(i) of the RTLDO by failing to pay the applicant $4,321.40 for the livestock carting allowance and $1,800.64 for the long distance operations allowance.
2. Each of the civil remedy provisions contravened by the first respondent is a serious contravention within the meaning of s.557A of the Act.
3. Pursuant to s.550 of the Act, the second respondent was involved in each of the first respondent’s contraventions identified in declarations 1(b), (c), (f), (g) and (h).
In the principal judgment, it was found that the first respondent’s contraventions were serious contraventions. However, there was no finding that the second respondent’s contraventions were serious. To have been found to be serious contraventions, it would have been necessary to have made a finding under s.557A(5A) of the Act that the second respondent knew that the first respondent’s contraventions were serious contraventions. There was and is no reason to conclude that the second respondent had such knowledge. Consequently, the penalties to be imposed are for serious contraventions in the case of the first respondent but not for serious contraventions in the case of the second respondent.
MATERIAL RELIED UPON
In the penalty application, the applicant (“Mr Sutton”) relied upon:
(a)his written submissions on penalty filed on 24 October 2022; and
(b)the agreed table of penalties emailed to chambers on 24 October 2022.
The first respondent (“Edyvane’s”) and the second respondent (“Ms Edyvane”) relied upon:
(a)their written submissions on penalty filed on 24 October 2022;
(b)the affidavit of Marianna Lynette Edyvane affirmed on 21 October 2022; and
(c)the agreed table of penalties emailed to chambers on 24 October 2022.
penalties for breach of civil remedy provision
Section 546(1) of the Act provides that this court may order a person to pay a pecuniary penalty for a breach of a civil remedy provision. Subsection 546(2) of the Act provides that the penalty cannot be more than the amount calculated in accordance with s.539(2) of the Act for an individual, and five times that amount for a corporation. Subsection 539(2) of the Act is expressed in terms of penalty units, the value of which varied over the period of the contraventions in the present case.
Contravention Penalty Unit Maximum Penalty for Edyvane’s Maximum Penalty for Ms Edyvane 1. Record-keeping contravention (s.535) $210 $630,000 N/A 2. Make available records (s.535) $222 $666,000 N/A 3. Incorrect payslips (s.536) $210 $630,000 $12,600 4. Display Modern Awards and the NES (s.45) $210 $630,000 $12,600 5. Fail to pay long service leave (s.323) $210 $630,000 N/A 6. Fail to pay annual leave (s.90(2)) $210 $630,000 N/A 7. Fail to reimburse cost of work diaries (s.45) $210 $630,000 $12,600 8. Fail to reimburse cost of protective clothing (s.45) $210 $630,000 $12,600 9. Failure to pay livestock carting allowance (s.45) $210 $630,000 $12,600 10. Failure to pay long-distance operations allowance $210 $630,000 $12,600 Total $6,336,000 $75,600
The parties provided to the court an agreed table of the maximum penalties for each contravention in this case. The table included figures for Ms Edyvane’s contraventions assuming that they were serious contraventions. However, as discussed above, they were not. The table, as amended to reflect that correction, is as follows:
the purpose of civil penalties
In Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13, all the members of the High Court, except Edelman J, said that:
[9]… Under the civil penalty regime provided by the Act, the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act. In that context, the penalties fixed by the primary judge were appropriate because they were no more than might be considered to be reasonably necessary to deter further contraventions of a like kind by Mr Pattinson, the CFMMEU or others. They represented a reasonable assessment of what was necessary to make the continuation of the CFMMEU’s non-compliance with the law, amply demonstrated by the history of its contraventions, too expensive to maintain.
[10]The Full Court’s critical error was that it was distracted by a concern, drawn from the criminal law, that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a “notion of proportionality”, in the sense in which the Full Court used that term, in a civil penalty regime. Further, and relatedly, their Honours were misled by the view that the Act required that the maximum penalty be reserved for only the most serious examples of the offending comprehended by s 349(1), and that this principle could prevent the court from imposing the maximum penalty even though a penalty in that amount might reasonably be considered to be necessary to deter future contraventions of a like kind. Nothing in the text, context or purpose of s 546 requires that the maximum penalty be reserved for the most serious examples of misconduct within s 349(1). 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.
…
[15]Most importantly, it has long been recognised that, unlike criminal sentences, civil penalties are imposed primarily, if not solely, for the purpose of deterrence. The plurality in the Agreed Penalties Case said:
[W]hereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd , is primarily if not wholly protective in promoting the public interest in compliance:
“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”
(citations omitted)
proportionality
In Pattinson, the High Court addressed the question of proportionality as follows:
[40]Nothing in the text, context or purpose of s 546 of the Act suggests that the Full Court’s “notion of proportionality” inheres in the court’s task, pursuant to s 546, to fix a penalty which it considers to be an “appropriate” penalty. The discretion conferred by s 546 is, like any discretionary power conferred by statute on a court, to be exercised judicially, that is, fairly and reasonably having regard to the subject matter, scope and purpose of the legislation. In a civil penalty context, Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission said:
“[I]nsistence upon the deterrent quality of a penalty should be balanced by insistence that it ‘not be so high as to be oppressive’. Plainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression.”
[41]It may therefore be accepted that s 546 requires the court to ensure that the penalty it imposes is “proportionate”, where that term is understood to refer to a penalty that strikes a reasonable balance between deterrence and oppressive severity. It is in this sense that the Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd used the term “proportionality”, when their Honours said:
“If it costs more to obey the law than to breach it, a failure to sanction contraventions adequately de facto punishes all who do the right thing. It is therefore important that those who do comply see that those who do not are dealt with appropriately. This is, in a sense, the other side of deterrence, being a dimension of the general deterrence equation. This is not to give licence to impose a disproportionate or oppressive penalty, which cannot be done, but rather to recognise that proportionality of penalty is measured in the wider context of the demands of effective deterrence and encouraging the corresponding virtue of voluntary compliance.” (emphasis added)
[42]However, the Full Court’s “notion of proportionality” derived from Veen (No 2) is something quite different. That notion cannot be reconciled with the decisive statements in the Agreed Penalties Case that civil penalties are not retributive, but rather are protective of the public interest in that they aim to secure compliance by deterring repeat contraventions. To introduce considerations drawn from theories of retributive justice into the application of s 546 of the Act undermines the primary significance of deterrence.
…
[46]It does not follow, as the Full Court suggested and as the CFMMEU argued in this Court, from the rejection of the Full Court’s “notion of proportionality” that s 546 must be taken to require the imposition of a penalty approaching the maximum in relation to any and every contravention by a recidivist offender. It is important to recall that an “appropriate” penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a “one-off” result of inadvertence by the contravenor rather than the latest instance of the contravenor’s pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law on the part of a union official, or where the official responsible for a deliberate breach has been disciplined by the union. In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
[47]The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors of the kind adverted to by French J in CSR. For example, where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
…
[50]This Court’s reasoning in the Agreed Penalties Case is distinctly inconsistent with the notion that the maximum penalty may only be imposed in respect of contravening conduct of the most serious kind. Considerations of deterrence, and the protection of the public interest, justify the imposition of the maximum penalty where it is apparent that no lesser penalty will be an effective deterrent against further contraventions of a like kind. Where a contravention is an example of adherence to a strategy of choosing to pay a penalty in preference to obeying the law, the court may reasonably fix a penalty at the maximum set by statute with a view to making continued adherence to that strategy in the ongoing conduct of the contravenor’s affairs as unattractive as it is open to the court reasonably to do.
(citations omitted)
Approach to determining penalty
Bromwich J summarised the proper approach to determining penalty in cases such as this in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 at [36] as follows:
(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].
A convenient checklist of the factors that the court might consider in determining a penalty of appropriate deterrent value were identified by French J in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076; [1990] FCA 52 at [42] and adopted by the High Court in Pattinson. That list is as follows:
1.The nature and extent of the contravening conduct.
2.The amount of loss or damage caused.
3.The circumstances in which the conduct took place.
4.The size of the contravening company.
5.The degree of power it has, as evidenced by its market share and ease of entry into the market.
6.The deliberateness of the contravention and the period over which it extended.
7.Whether the contravention arose out of the conduct of senior management or at a lower level.
8.Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.
9.Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.
The court must, of course, be mindful of the caution expressed by the High Court in Pattinson at [19] as follows:
It may readily be seen that this list of factors includes matters pertaining both to the character of the contravening conduct (such as factors 1 to 3) and to the character of the contravenor (such as factors 4, 5, 8 and 9). It is important, however, not to regard the list of possible relevant considerations as a “rigid catalogue of matters for attention” as if it were a legal checklist. The court’s task remains to determine what is an “appropriate” penalty in the circumstances of the particular case.
(footnotes omitted)
Step 1: identifying the breaches
As previously stated, Edyvane’s breached:
(a)s.535 of the Act by contravening:
(i)reg.3.32(a), (b), (c), (d) and (e) of the Fair Work Regulations 2009 (“the Regulations”) by not making and keeping records with the required content;
(ii)reg.3.33(1)(a) and (3)(c), (d) and (e) of the Regulations by not making and keeping records with the required details of pay;
(iii)reg.3.34 of the Regulations by not making and keeping records with the required details regarding overtime;
(iv)reg.3.36(1)(a) and (b) and (2)(a) and (b)(i) and (ii) of the Regulations by not making and keeping records with the required details regarding leave;
(v)reg.3.37(1)(d) and (e) of the Regulations by not making and keeping records with the required details regarding superannuation contributions; and
(vi)reg.3.42(1), (2), and (3) or (4) of the Regulations by not making employment records available on request;
(b)s.536 of the Act and reg.3.46 of the Regulations by failing to provide pay slips with all of the required information;
(c)s.45 of the Act by contravening cl.5 of:
(i)the Road Transport and Distribution Award 2010 (“the RTD”); and
(ii)the Road Transport (Long Distance) Operation Award 2010 (“the RTLDO”),
by failing to ensure that copies of the awards and the National Employment Standards were available to Mr Sutton either on a noticeboard which was conveniently located at or near the workplace or through electronic means, whichever made them more accessible;
(d)s.323 of the Act, by failing to pay Mr Sutton on his retirement for 20 weeks of his long service leave entitlement in the sum of $24,000;
(e)s.90(2) of the Act by failing to pay Mr Sutton on his retirement for 56 weeks of annual leave in the sum of $67,200;
(f)s.45 of the Act, by failing to comply with cl.16.4(a) of the RTD and cl.14.2(a) of the RTLDO by failing to reimburse Mr Sutton for work diaries in the sum of $160;
(g)s.45 of the Act, by failing to comply with cl.16.4(b)(ii) of the RTD and cl.14.2(b)(i) of the RTLDO by failing to reimburse Mr Sutton for protective clothing;
(h)s.45 of the Act, by failing to comply with cl.16.2(b)(vi) of the RTD, cl.14.1(c)(v) of the RTLDO and cl.14.1(c)(i) of the RTLDO by failing to pay Mr Sutton $4,321.40 for the livestock carting allowance and $1,800.64 for the long distance operations allowance.
Ms Edyvane was involved in each of Edyvane’s contraventions identified above in paragraphs 12(b), (c), (f), (g) and (h).
Step 2: s.557 single course of conduct
Subsection 557(1) of the Act relevantly provides that:
(1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
The parties agreed that the record keeping contraventions in paragraph 12(a)(i) to (v) above were part of a single course of conduct. I accept that. This was Edyvane’s first contravention. Ms Edyvane was not involved in it.
The parties also agreed that the contravention in paragraph 12(a)(vi) above, not making employment records available on request, was another separate contravention. This was Edyvane’s second contravention. Ms Edyvane was not involved in it.
However, the respondents argued that the payslip contravention, in paragraph 12(b) above, was part of the same course of conduct as the record keeping contraventions. Mr Sutton disputed that, saying that the record keeping contraventions were contraventions of s.535 of the Act, while the payslip contraventions were contraventions of s.536 of the Act.
Subsection 557(1) of the Act allows multiple contraventions of “a civil remedy provision” (emphasis added) to be treated as part of a single course of conduct. Hence, Mr Sutton argued that the payslip contraventions could not be treated as part of the same course of conduct as the record keeping contraventions.
The respondents argued that the payslip contraventions arose from the same failure to update their decades-old pay system as the record keeping contraventions, so the contraventions should be grouped under the common law, if not under the statute.
It is important to distinguish between grouping under the single course of conduct provisions in s.557 of the Act (step 2), and grouping under the common law requirement to ensure that a person is not punished twice for essentially the same act (step 3).
Section 557 of the Act is clear that the only contraventions that can be grouped under the single course of conduct provisions are contraventions of the one legislative provision. Consequently, under s.557, the record keeping and payslip contraventions cannot be treated as a single course of conduct. I will treat the payslip contraventions as Edyvane’s third contravention. Ms Edyvane was involved in it.
The parties also agreed that the failure to ensure that copies of the relevant awards and the National Employment Standards were available to Mr Sutton either on a noticeboard which was conveniently located at or near the workplace or through electronic means, whichever made them more accessible, was a single course of conduct. I accept that. This is Edyvane’s fourth contravention. Ms Edyvane was involved in it.
The parties also agreed that the failures to pay long service leave and annual leave were separate contraventions. I accept that. These are Edyvane’s fifth and sixth contraventions. Ms Edyvane was not involved in them.
The parties also agreed that the failures to pay Mr Sutton for his work diaries and his protective clothing were also separate contraventions. I accept that. These are Edyvane’s seventh and eighth contraventions. Ms Edyvane was involved in both of them.
Mr Sutton argued that the failures to pay the long distance operation allowance and the livestock carting allowance were two separate contraventions. The respondents argued that they were part of a single course of conduct. The failure to pay the livestock carting allowance was a breach of cl.16.2(b)(vi) of the RTD and cl.14.1(c)(v) of the RTLDO. The failure to pay the long distance operations allowance was a breach of cl.14.1(c)(i) of the RTLDO.
Mr Sutton relied on Rocky Holdings Pty Limited v Fair Work Ombudsman (2014) 221 FCR 152; (2014) 243 IR 244; [2014] FCAFC 62, where the Full Court of the Federal Court said:
19.... The reasoning of Logan J in QR Limited FCA at [16] to [19] is against the appellants. Logan J said:
16 In my view, the course of conduct must be associated with the particularised term of the particularised instrument. That is the contravention of the term of the transitional instrument. One does not look at course of conduct for the purposes of s 557 at a level of abstraction divorced from the contravened provision as particularised (ie the term in question and the transitional instrument in question).
17 Were s 557 to be read at the level of abstraction for which the QR respondents contend (in other words, the same provision, just looking at item 2(2) in its generality, a provision which is applicable to different terms in different instruments in particular cases) the result would be that different terms in different instruments, or different terms in the same instrument perhaps embracing quite different forms of conduct would all be assimilated as one. Each would just be a civil remedy provision. If the overall conduct gave rise to breaches of different terms, they would be treated as but one contravention.
18 That seems an odd result to me.
19 Especially that is so in light of s 557(3). That renders the otherwise beneficial effects of s 557 inapplicable if a penalty has already been imposed for a breach of a civil remedy provision. On the construction for which the QR respondents contend, if a person had contravened item 2(2) in respect of a term quite unrelated to consultation and in but one of the applicable transitional instruments, that person would be denied the beneficial effects of s 557(1). That seems to me to be a result contrary to the intendment of the provision concerned.
20.We agree with this reasoning. The appellants’ argument to the contrary, that the controlling mechanism is that the contraventions arise from a course of conduct, is not a persuasive answer, particularly in light of his Honour’s observations about the operation of s 557(3).
Mr Sutton noted that aspect of Rocky Holdings was approved by a subsequent Full Court of the Federal Court in Parker v Australian Building and Construction Commissioner (2019) 270 FCR 39; (2019) 365 ALR 402; (2019) 286 IR 116; [2019] FCAFC 56, which said:
285.The Full Court in Rocky Holdings at [14] embraced the following example from the Explanatory Memorandum for the Fair Work Bill 2008 (Cth), aided by the operation of s 15AB(1)(b) of the Acts Interpretation Act 1901 (Cth), as reflecting the true operation of s 557(1) of the Act:
For example, if a company contravenes a single term of a modern award in respect of ten employees, these ten contraventions are taken to be a single contravention. This means that the maximum penalty that the Court can impose for the contravention is 300 penalty units.
Similarly, if a company contravenes five separate terms of a modern award in respect of ten employees, these 50 contraventions are taken to be five contraventions. This means that the maximum penalty that the Court can impose is five times a maximum penalty of 300 penalty units.
286.Analogous reasoning must apply when the contravention is one of different terms of an enterprise agreement, each of which is found to be in breach of s 50. Multiple contraventions of a single term may be deemed to be a single contravention (occurring so as to be a course of conduct, as required by s 557(1)(b)), but contraventions of different terms will be separate contraventions, even though sanctioned by the same civil penalty provision in the Act. In the case of Mr Reeves, s 557 not only did not require any grouping of his conduct in respect of contravening a term of the enterprise agreement and organising industrial action, but, in fact, did not permit that to take place. The primary judge therefore cannot be said to have erred in that respect.
On that authority, I conclude that, because the contraventions of the requirements to pay the long distance operation allowance and the livestock carting allowance were contraventions of separate award provisions, the contraventions should not be treated under s.557 of the Act as a single course of conduct. The long distance operations allowance breach and the livestock carting allowance breach will be Edyvane’s ninth and tenth breaches respectively. Ms Edyvane was involved in both of them.
Step 3: common law grouping of breaches
The respondents argued that the record keeping contraventions and the payslip contraventions should be grouped as a single breach, and the failures to pay the long distance operation allowance and the livestock carting allowance should be treated as another single breach. Mr Sutton opposed that.
In relation to the record keeping contraventions and the payslip contraventions, the respondents argued that they should be grouped because they all arose from the same circumstance that Edyvane’s maintained a pre-Fair Work Act2009 record keeping system, which it had used for decades, and not updated. The respondents said that their record keeping system applied to both employment records generally and pay slips.
In Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (Nine Brisbane Sites Appeal) (2019) 269 FCR 262; (2019) 366 ALR 698; (2019) 286 IR 336; [2019] FCAFC 59, Rangiah J, with whom Allsop CJ agreed, said:
123.The course of conduct (or one transaction) principle under the general law has been stated in a variety of ways. A useful exposition of the principle was given by Owen JA in Royer v Western Australia (2009) A Crim R 319; [2009] WASCA 139 at [22]:
… At its heart, the one transaction principle recognises that, where there is an interrelationship between the legal and factual elements of two or more offences with which an offender has been charged, care needs to be taken so that the offender is not punished twice (or more often) for what is essentially the same criminality. The interrelationship may be legal, in the sense that it arises from the elements of the crimes. It may also be factual, because of a temporal or geographical link or the presence of other circumstances compelling the conclusion that the crimes arise out of substantially the same act, omission or occurrences.
124.In Transport Workers’ Union of Australia v Registered Organisations’ Commissioner (No 2) (2018) 363 ALR 464; [2018] FCAFC 203 at [84]–[91], the Full Court, referring to other judgments of the Full Court, considered the application of the course of conduct principle in the assessment of pecuniary penalties. The principles include the following:
(1)The purpose of the common law course of conduct principle is to ensure that, having regard to the circumstances (factual and legal), a party is not penalised more than once for the same conduct.
(2)That phrase should not simplistically be adopted to transfer multiple contraventions into one contravention, or, necessarily, to impose one penalty by reference to one maximum amount.
(3)The principle cannot, of itself, operate as a de facto limit on the penalty to be imposed.
(4)The application of the principle must be informed by the particular legislative provisions relevant to the proceedings. In particular, weight must be given to the fact that the legislature has deliberately and explicitly created separate contraventions for each relevant action. (emphasis added)
(5)The application and utility of the principle must be tailored to the circumstances.
(6)A judge is not obliged to apply the principle if the resulting penalty fails to reflect the seriousness of contraventions.
(7)The task is to evaluate the conduct and its course and assess what penalty is, or penalties are, appropriate for the contraventions.
(8)It is necessary to examine all the conduct and enquire how its course and its explanation factually and legally informs the imposition of penalties, in order to avoid double punishment.
…
127.… In Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1, Middleton and Gordon JJ observed at 12 [39] that, “Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions”. …
On the other hand, the respondents relied on Fair Work Ombudsman v Nobrace Centre Pty Ltd (In Liq) (ACN 121 556 447) (No. 2) [2019] FCCA 2970, a decision of this court, where it was said at [26] that:
… it was further submitted that grouping was not open on the basis of a course of conduct in cases involving the contravention of different obligations. Similarly, it was further submitted that multiple contraventions of different obligations were to be considered as arising out of a single course of conduct only if they had common elements in relation to the acts or omissions which led to the contraventions, and that the court was required to “recognise the existence of a course of conduct and of inter-related or overlapping elements.” It was then said that in considering whether there is a course of conduct with common elements, the court is required to give weight to the separate legal character of the contraventions. Nonetheless, it is open to the court to group separate contraventions together where the contraventions overlap with each other or, if treated separately, would result in the respondents being penalised twice for substantially similar conduct. (citations omitted)
However, the applicant noted that, in Nobrace, the court did not actually proceed to group contraventions of different award provisions. In particular, the court said:
37.… the requirement to identify contraventions that have common elements (Step 3) is a requirement that is separate and distinct from the application of the totality principle (Step 5). They should not be seen as authorising the grouping of contraventions (Step 2) merely because they can be seen as having common elements (Step 3).
…
39.[In Cahill, Middleton and Gordon JJ said]:
. . . where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a Court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion. It is a tool of analysis which a Court is not compelled to utilise.
In Offshore Marine, the other member of the court, Moore J, agreed with the plurality that the court was “not obliged to engage in the process of determining whether several acts constituting individual offences should be viewed as a course of conduct.”
40.These authorities reinforce the need to recognise that a decision on penalty is a discretionary judgment which requires: “the weighing of elements, not the formulation of adjustable rules or benchmarks.”
41.Upon those principles, FWO correctly submitted that the court could decline to undertake grouping in the exercise of discretion but that if it did so, it would be erroneous to group contraventions by the same person unless they arose from same course of conduct and involved the same civil remedy provision. It is apparent that grouping operates within relatively narrow parameters and is properly deployed as an analytical tool with the object of ensuring that a person is not punished twice for what is essentially the same unlawfulness. The grouping into the four categories as suggested by the respondents is not open. For example, the grouping of minimum wages, overtime, weekend loading and public holiday penalty rates involved contraventions that were quite distinct. They did not involve the same unlawfulness – each was a breach of a distinct law. There is no warrant for grouping those legally distinct contraventions. More broadly, the respondents’ submissions assumed that the court was obliged to undertake the analytical task of grouping, an assumption which the foregoing authorities demonstrate to be unfounded. For the same reason, the respondents’ submission that FWO’s approach conflated the applicable principles was wrong. To the contrary, it was the respondents’ submission that sought to conflate Step 2 and Step 3 of the analytical process that is required.
42.In accordance with the authorities cited above, the fact that many of the contraventions flowed from NoBrace ’s decision to pay Ms Lee a flat rate of pay does not warrant the grouping of so many legally distinct contraventions. Nor should that be seen as resulting in a capricious outcome. The multiple contraventions by NoBrace involved failures to observe minimum rates of pay, pay public holiday penalty rates, weekend loading and overtime rates. None of those contraventions are treated as involving one contravention of the Act, Regulations or Award. There was no attempt to penalise the respondents twice.
(citations omitted)
In my view, the payslip and record-keeping contraventions should not be grouped. They are entirely separate administrative tasks. I also give weight to the fact that “the legislature has deliberately and explicitly created separate contraventions for each relevant action”. The respondents’ argument is basically that, because their processes for calculating and paying wages and providing payslips were really poor for a really long time, they should be at least partially excused for the separate contraventions created by the Parliament. I do not accept that submission. Record keeping and payslip contraventions are inherently distinct.
In addition, the respondents argued that the breaches of the long distance operations allowance provision and the livestock carting allowance provisions were the result of one course of conduct, because they both emanated from the same decision to pay a global trip allowance.
It should not be forgotten that the trip allowance was not actually paid, following what appears to have been an accounting sleight of hand. See [165] to [168] of the principal judgment.
More importantly, taking the respondents’ argument to its logical conclusion would mean that the worst culprits would be liable to the lowest penalties. They could say that all of their breaches should be grouped, because they all emanated from a single decision to have no regard to the Act and the applicable awards. That would obviously be an outrageous outcome.
I consider that the failure to pay the long distance operations allowance and the livestock carting allowance should not be grouped. The two obligations were entirely distinct. Any conscientious employer could not have made a single decision applying to both of them. The respondents should not be rewarded for what can only be described as a gross dereliction of their duties as employers.
It follows that there will be no grouping beyond the 10 breaches identified in step 2.
Step 4: the appropriate penalty for the breaches
a. the nature and extent of the contravening conduct
As noted above, there were 10 separate contraventions by Edyvane’s and six in which Ms Edyvane was involved. All of the contraventions concerned one employee.
i. Record keeping
The record-keeping contraventions lasted the whole of Mr Sutton’s 34 years’ of employment with Edyvane’s. However, the particular record-keeping obligations breached only came into force with the Act in July 2009. Mr Sutton retired in July 2019. The record keeping contraventions therefore continued for 10 years.
The flaws in the record-keeping are detailed in the principal judgment. However, in summary, Edyvane’s had no regard to its obligations under the Act and the Regulations. Edyvane’s only kept such records as it pleased. The failure to keep the required records had flow on consequences, particularly for the calculation of Mr Sutton’s correct annual leave and long service leave.
ii. Make records available
The failure to make available records occurred on two separate occasions. The first followed a letter dated 1 July 2020 from Mr Sutton’s solicitor requesting all records required to be kept under the Regulations in relation to Mr Sutton. The respondents ignored that letter. The second followed consent orders made on 27 September 2021 for the same documents to be provided by 13 October 2021. Edyvane’s provided some but not all of the required documents by the stipulated date.
iii. Payslips
Edyvane’s never provided payslips with the required content to Mr Sutton. As discussed, his employment with Edyvane’s lasted 34 years, but the particular obligations under the Act and Regulations only came into force in July 2009. Consequently, Edyvane’s was in breach of the payslip requirements for about 10 years. Significantly, the payslips that Edyvane’s provided did not include the name and ABN of the employer, the date and period to which the pay slip related, the rate of pay or the number of hours worked.
iv. Display modern award and NES
By s.45 of the Act, Edyvane’s was obliged to comply with the requirements of the applicable awards. The RTD and the RTLDO both came into effect in 2010. They both required Edyvane’s to display the award and the NES or make it available electronically. Edyvane’s did neither, from 2010 until Mr Sutton’s retirement in 2019.
v. Failure to pay long service leave
Edyvane’s failed to pay $24,000 in accrued long service leave to Mr Sutton upon his retirement. This came about partly because Edyvane’s had failed to keep proper records for the entirety of Mr Sutton’s 34 years’ employment.
vi. Failure to pay annual leave
Edyvane’s failed to pay $67,200 in accrued annual leave to Mr Sutton upon his retirement. This came about partly because Edyvane’s had failed to keep proper records for the entirety of Mr Sutton’s 34 years’ employment.
vii. Failure to pay for work diaries
Edyvane’s failed to pay $160 to Mr Sutton for work diaries.
viii. Failure to reimburse for protective clothing
Edyvane’s failed to reimburse Mr Sutton an unknown amount for protective clothing.
ix. Failure to pay livestock carting allowance
Edyvane’s failed to pay Mr Sutton a livestock carting allowance under the RTD and the RTLDO. Both of those awards came into effect in 2010. The allowance was not paid at any time prior to Mr Sutton’s retirement in July 2019. Consequently, this contravention lasted about nine years.
x. Failure to pay long distance operation allowance
Edyvane’s failed to pay Mr Sutton a long distance operation allowance under the RTLDO. This award came into effect in 2010. The allowance was not paid at any time prior to Mr Sutton’s retirement in July 2019. Consequently, this contravention lasted about nine years.
b. the nature and extent of any loss or damage caused
i. Record keeping
The record-keeping contraventions had flow on consequences, particularly for the calculation of Mr Sutton’s correct annual leave and long service leave. They also made it much harder for Mr Sutton to ascertain his correct entitlements, and prosecute this proceeding as cheaply and efficiently as possible.
ii. Make records available
The failure to make available records made it much harder for Mr Sutton to ascertain his correct entitlements, and prosecute this proceeding as cheaply and efficiently as possible.
iii. Payslips
The failure to provide adequate payslips made it much harder for Mr Sutton to ascertain his correct entitlements, and prosecute this proceeding as cheaply and efficiently as possible.
iv. Display modern award and NES
The failure to display the awards and the NES made it much harder for Mr Sutton to ascertain his correct entitlements, and prosecute this proceeding as cheaply and efficiently as possible.
v. Failure to pay long service leave
The failure of Edyvane’s to pay $24,000 in accrued long service leave to Mr Sutton upon his retirement meant that Mr Sutton was out of pocket for a considerable period of time, and was only able to obtain an order for repayment of his full entitlements after a hard fought legal proceeding.
vi. Failure to pay annual leave
The failure of Edyvane’s to pay $67,200 in accrued annual leave to Mr Sutton upon his retirement meant that Mr Sutton was out of pocket for a considerable period of time, and was only able to obtain an order for repayment of his entitlements after a hard fought legal proceeding.
vii. Failure to pay for work diaries
Edyvane’s failure to pay Mr Sutton for work diaries meant he was out of pocket by $160.
viii. Failure to reimburse for protective clothing
Edyvane’s failure to reimburse Mr Sutton for protective clothing meant he was out of pocket by an unknown amount.
ix. Failure to pay livestock carting allowance
Edyvane’s failure to pay Mr Sutton a livestock carting allowance meant that he was out of pocket by $4,321.40 for a considerable period of time, and was only able to obtain an order for repayment of his entitlements after a hard fought legal proceeding.
x. Failure to pay long distance operation allowance
Edyvane’s failure to pay Mr Sutton a long distance operation allowance under the RTLDO meant that he was out of pocket by $1,800.64 for a considerable period of time, and was only able to obtain an order for repayment of his entitlements after a hard fought legal proceeding.
c. the circumstances in which the conduct took place
The circumstances in which the contraventions took place were as follows. Edyvane’s commenced as a partnership between Ms Edyvane and her husband in 1955. The business was incorporated in 1968. Their business was transporting livestock. Mr Edyvane was the director of the company until he passed away, on an unspecified date after 2015. Ms Edyvane has always run the office and administration. She and her daughter are now co-directors of the company.
Ms Edyvane did not update her employment and wage record systems when the Act and Regulations came into effect in 2009.
d. the size of the contravening company
The respondents chose not to provide any evidence to the court about the size of the business. However, in their written submissions, they said Edyvane’s had about nine employees, including the directors. Mr Sutton accepted that Edyvane’s was probably a medium or small business. I am prepared to proceed on the basis that Edyvane’s was a small business.
Nevertheless, Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [28]:
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level.”
(footnote omitted)
Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at [27]:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.
e. the degree of power it has, as evidenced by its market share and ease of entry into the market
This factor applies more to trade practices cases than Fair Work cases. In any event, Edyvane’s did not have a particularly large share of the livestock transportation market.
f. the deliberateness of the contravention and the period over which it extended
The period over which most of the contraventions extended was from at least July 2009, when the Act and Regulations commenced, until July 2019, when Mr Sutton retired.
The contraventions were deliberate, in the sense that Ms Edyvane acknowledged that she had copies of the relevant awards, but did not apply them. She claimed that she paid an hourly rate that was higher than the awards required. However, her hourly rate was only higher than the award rate for ordinary hours, and was not higher than the total amounts that should have been paid under the awards.
The contraventions were also deliberate in the sense that Ms Edyvane, on behalf of Edyvane’s, chose not to accurately ascertain her legal obligations under the awards and the Act and the Regulations. Ms Edyvane claimed that she obtained and followed advice from an accountant. However, no such advice was provided to the court. Moreover, if Ms Edyvane had actually followed the advice of an accountant, it appears that the advice would have been professionally negligent. That is especially apparent in relation to the trip allowances. It may have been that Ms Edyvane obtained competent advice from an accountant, but failed to properly understand or apply it. One way or another, Ms Edyvane, on behalf of Edyvane’s, did not act with the rigour required of employers.
Ms Edyvane, for many years, followed a process that she established. The contraventions were not the result of an isolated or accidental error in an otherwise adequate system. In that sense also, the contraventions were deliberate.
g. whether the contravention arose out of the conduct of senior management or at a lower level
The contraventions all arose from the conduct of Ms Edyvane, who was a director of Edyvane’s.
h. whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention
There was no evidence of Edyvane’s having a corporate culture of compliance with the Act and Regulations, as evidenced by educational programs, or disciplinary or other corrective measures in response to an acknowledged contravention.
Having said that, there was no evidence of Edyvane’s or Ms Edyvane having been previously found to have contravened the Act and Regulations.
The respondents claimed to have taken corrective action by making an adjustment to Mr Sutton’s long service leave, at his request, after his retirement and prior to these proceedings being commenced. However, that adjustment was insufficient. The respondents also claimed that they had extensively checked Mr Sutton’s annual leave records in an attempt to ensure they had paid Mr Sutton correctly. However, their very poor record keeping over many years meant that effort, again, was insufficient.
i. whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention
This proceeding was brought by Mr Sutton personally, rather than a Fair Work authority. However, the respondents cannot be said to have co-operated with Mr Sutton. It is true that:
(a)the respondents inadequately tried to reconcile their long service and annual leave payments with what Mr Sutton was owed;
(b)their counsel assisted the court by reaching agreement on certain parameters of the dispute; and
(c)the respondents conceded, as they should have, that they had breached the payslip requirements.
Overall, however, the respondents fought this case vigorously.
j. specific deterrence
Ms Edyvane said in her affidavit affirmed on 21 October 2022, for the purposes of the penalty proceeding, that Edyvane’s ceased trading on 18 May 2022 but remains registered for the purposes of winding up and pending the resolution of these proceedings. Ms Edyvane said that she retired on 24 June 2022.
Mr Sutton argued that this case was similar to Pattinson, where the High Court said at [64] that Mr Pattinson’s retirement said nothing about the appropriateness of the penalty fixed by the primary judge. However, that submission misunderstands the timeline in Pattinson. In Pattinson, the retirement occurred after the primary judge had fixed the penalty. In the present case, Ms Edyvane’s retirement has preceded the fixing of the penalty. I consider that specific deterrence for Ms Edyvane is not a weighty factor.
Mr Sutton also argued that corporate contravenors should not be allowed to avoid penalties by ceasing trading or being wound up. I consider that, unless and until Edyvane’s is actually wound up, there remains a risk that it will re-emerge as a livestock transport company with employees. Consequently, I consider that there is still a need for specific deterrence in relation to Edyvane’s.
k. general deterrence
Obviously, general deterrence is a weighty factor in assessing penalty in this matter. It is imperative that employers generally understand that the Act, Regulations and awards must be complied with, and that the cost of failing to comply will be sufficient to deter others from similar conduct.
l. remorse
The respondents did not express any remorse until after the primary judgment was handed down. Prior to that, Mr Sutton described the respondents’ behaviour as belligerent and uncooperative.
In preparation for the penalty hearing, Ms Edyvane affirmed an affidavit in which she said:
6.As a family regional community business I wanted to leave a legacy as a good employer providing a good service with a good reputation and I am regretful that the cessation of trading has coincided with these proceedings.
7. I feel genuinely sorry that I unknowingly ran aspects of the business incorrectly. I had tried to look after the employees as best as I knew how and wish to make things right for the errors I have made.
8. Given my recent retirement, and looking back over my career, the Court's findings make me feel very sad and disappointed. I apologise for my errors. I have no further involvement in employing people (and neither does Edyvane's Transport) however I respectfully acknowledge the Court's findings and hope things can be made right.
Mr Sutton described that as “a thinly veiled attempt to minimise penalties”.
While Ms Edyvane said that she apologises, it is not clear who she is apologising to. I suspect it is to the court. There is no evidence that she has apologised directly to Mr Sutton. It is unlikely that she meant her apology to be to Mr Sutton, because she has specifically and strenuously argued that any penalty should not be paid to him, but should be paid to:
(a)the Commonwealth;
(b)the Leukaemia Foundation;
(c)Healthy Heads in Trucks and Sheds, a charity which helps truck drivers with mental health; or
(d)Till the cows come home, a charity which rescues domestic and farm animals and rehabilitates and rehomes them.
I take Ms Edyvane’s strenuous argument that any penalty should not be paid to Mr Sutton as a very strong sign that she does not feel sorry, towards him, for her contraventions.
The lack of remorse is a significant factor in determining penalty.
m. admissions
The parties agreed that a discount for admissions in relation to the pay slips contravention was appropriate in this case.
In Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70, Stone and Buchanan JJ held at [75]:
A conventional consideration in assessing a discount in a criminal case for a plea of guilty is the stage in the proceedings at which the plea is entered. Normally, the maximum discount for this factor, sometimes thought to be 25%, is reserved for a plea made at the first reasonable opportunity …
In Fair Work Ombudsman v Bedington [2012] FMCA 1133 Jarrett FM held at [87]:
The cases indicate that a discount on the penalty to be imposed is appropriate where there has been co-operation and admissions early in the course of an investigation or soon after the commencement of proceedings. Such discounts range as high as 30% in some cases. …
I accept that it is appropriate to give a discount for the admission in relation to payslips. However, it should not be a very big discount, because it was not given early in the proceeding, and the admission was virtually unavoidable.
There were no other admissions, so the usual discount for admissions does not apply to the other contraventions.
n. general mitigating factors
The respondents argued in paragraph 11 of their written submissions that there were numerous general mitigating factors as follows:
a. Edyvanes Transport has very recently ceased trading and Mrs Edyvane has retired, nullifying need for specific deterrence;
b. Contraventions were not deliberate and are inadvertent (many of these general factors indicate the lack of deliberateness as set out in paragraph 102 of the Applicant’s closing submissions dated 02 August 2022);
c. The proceedings are confined to one employee;
d. Edyvanes’ Transport was a small family business in a regional area (of approximately 9 employees at the relevant time including its directors); it does not employ a human resource advisor and is not a member of an employer association; it has a low degree of industry influence;
e. Mrs Edyvane is a widowed retiree;
f. The Respondents’ have no prior contraventions or complaints;
g. Edvyane’s Transport was a regional employer, of good reputation, with many long-term employees, contributing positively to their region;
h. Complaints were not made during the course of employment, and the Respondent did not fail to respond to complaints;
i. The Respondents took corrective action in making an adjustment to Long Service Leave prior to the current proceedings, and extensively checked Annual Leave records against concurrent records in an attempt to ensure they had paid Mr Sutton correctly;
j. Mr Sutton was not a vulnerable worker or powerless in the relationship – he is well trained and qualified and there is high demand for livestock transport drivers so they hold significant negotiating power (Mr Sutton in fact left Edvyanes Transport at one point and returned as did other truck drivers).
k. The company took multiple reasonable steps in attempts to comply with the Award including conferring with Accountants and checking with other similar companies, and acted on advice of professionals;
l. The reliance on professionals is especially relevant in the current matter as the Awards are complicated, and difficult to understand and comply with. In particular, uncommonly, there are two Awards which interact in a complex manner. Therefore, the lack of understanding and reliance on professionals is more understandable;
m. Alongside the contraventions, the otherwise generous treatment of Mr Sutton by the Respondents, includes:
i. The attempt to pay Mr Sutton over the Award rate -
A. Mr Sutton’s hourly rate was $30 per hour, compared with RTD Award ordinary rates of between $19.82 and $23.33 per hour (for the relevant period in 2015 to 2019, and depending on applicable classification under the Award). This is the main Award under which Mr Sutton was employed (note that figures from the RTLDO Award were put to Mrs Edyvane in XXN at trial which roll up certain allowances as an alternative to its the default per kilometre rate);
B. His average wage during the July 2015 to July 2019 period was $1381, compared with the minimum weekly wage under the RTD Award of $849.20 and $886.60 (taken at its highest, in June 2019, depending on classification).
ii. the rounding up of hours and payment of all breaks (especially as the Award provides specifically for ‘unpaid’ breaks), and average break durations significantly above Award requirements;
iii. the regular bonuses, amounting to $31,500 as shown in CB 4644 and the Tax Book;
iv. the payments in advance when requested;
v. the bonus paid days off;
n. Mrs Edyvane (in a personal capacity and representing the First Respondent) has repeatedly stated that she just wants to the right thing,20 and exhibits contrition and remorse.
o. The significant generation of costs caused by the Applicant’s errors in bringing the claim for underpayments (the spreadsheet errors) which, if costs are not award for the Respondent, acting as penalty of and in itself.
p.As described in Jess v Cooloola Milk, the added difficulties contending with s 557C (and in particular in this case, significant preparation preparing to respond to s 557C with reference to the withdrawn underpayment claims) weighs against the needed for additional penalties.21
FN 20:Affidavit of Mrs Edyvane, [6] (CB 4102).
FN 21:Jess v Cooloola Milk Pty Ltd [2021] FCCA 1526, [234].
Many of those submissions have already been addressed above. More particularly, I accept that that there is no need for specific deterrence in relation to Ms Edyvane but consider that there continues to be a need for specific deterrence in relation to Edyvane’s.
I consider that the contraventions were deliberate, in the sense that the contraventions were not accidental, or due to an error, but were the result of not having proper regard to the applicable awards and legislation. While Ms Edyvane claimed to have complied with an accountant’s advice, that claim beggars belief.
I accept that the proceedings are confined to one employee. However, the gravamen of the respondents’ case was that they approached the payment of their other employees in exactly the same manner. The fact that only one employee brought these legal proceedings cannot, in the real world, be a positive for the respondents.
I accept that Edyvane’s is a small business. However, as discussed above, that does not excuse its behaviour. Awards and employment legislation apply to small businesses as much as to large businesses. Were it otherwise, the fair work regime would have very little effect, because so many people are employed in small businesses. While the respondents now claim to have a low degree of industry influence, Ms Edyvane said in paragraph 4 of her affidavit affirmed on 24 May 2022 that her husband:
… was one of the founding members of the Livestock Transport Association of Victoria and the Livestock Transport Association of Australia. The Edyvane family was also heavily involved with the livestock transport association and the Company was one of the first transporters to be accredited in livestock transport.
I take it from that passage that, at least until recent times, Edyvane’s did have a profile in the livestock transportation industry.
I accept that Ms Edyvane is now a widowed retiree. However, she was not a widowed retiree when she established the systems that have been found to be so seriously lacking. She was not a widowed retiree in 2009 and 2010 when the Act and Regulations and the awards came into force.
I accept that the respondents have no prior contraventions or complaints.
It is not entirely accurate to say that Edyvane’s was a regional employer. It was based in Pakenham, which has for many years been in the urban fringe. There was no independent evidence of Edyvane’s reputation. I accept that Edyvane’s had many long-term employees. However, I cannot help but suspect that they were not paid their full entitlements either.
I accept that Mr Sutton did not make any complaints during the course of his employment. Following his retirement, Mr Sutton made a complaint about the amount he had been paid out for unused long service leave and annual leave. Edyvane’s made an attempt to remedy the shortfall in long service leave, but the attempt was inadequate. Edyvane’s strenuously resisted any additional payment for unused leave.
I accept that Mr Sutton was not a vulnerable worker, in the sense of being a teenager, or an immigrant on a short term visa with little knowledge of English or the Australian industrial relations system. However, I consider that Mr Sutton was not particularly well educated. There was no evidence that livestock transport workers were in high demand, and that Mr Sutton had significant negotiating power. I do not accept those claims.
As discussed, I cannot accept that the respondents acted on the advice of professionals. No evidence was provided to the court of precisely what the accounting advice was. If Ms Edyvane had acted in accordance with accounting advice, I daresay that it would have been professionally negligent. Alternatively, Ms Edyvane may have misunderstood the advice she was given, or she may have chosen to ignore aspects of the advice she received. It is not open to employers to hide behind so-called “advice” from accountants, or the so-called complexity of awards and the fair work legislation. In any event, I do not accept that the relevant provisions were particularly complex. They are written so that employers can understand them, if they properly turn their minds to them.
The so-called “attempt” to pay Mr Sutton over award rates was certainly no more than an attempt. In fact, Mr Sutton was not paid over award rates, when all the overtime provisions and so on were taken into account. The “bonus paid days off” were, generally, just payment for days when there was no work available. Mr Sutton was a full-time employee, not a casual. As such, he had to be paid for those days. The payments were not a “bonus”. In reality, the respondents paid Mr Sutton what they wished, with no regard to the minimums set by the awards and the legislation.
Contrary to the respondents’ submissions, I do not accept that Ms Edyvane has exhibited contrition and remorse in relation to Mr Sutton. She has expressed some regret in relation to being in her present predicament, but remorse is a different sentiment entirely.
The question of costs is dealt with separately below. Jess v Cooloola Milk Pty Ltd [2021] FCCA 1526 is a very different case. For one thing, Judge Vasta in Jess described the applicant’s claim as “quite dishonest”. No such allegation has been, or could be, made in the present case.
o.specific mitigating facts
In addition, the respondents have put forward a number of specific mitigating facts. Some of them are not facts at all, and were not supported by evidence or were not accepted by the court.
In relation to making and keeping records, the respondents submitted that it was a “minor” contravention to not record leave balances from time to time. This was not minor. It led to very substantial underpayments upon Mr Sutton’s retirement. It was also submitted that some of the contraventions came about because Ms Edyvane is not computer literate, and maintained a legacy record keeping system that “worked”. As the principal judgment showed, the legacy record keeping system did not “work”. It really did not matter whether the records were kept on computer or were handwritten. They simply had to be legible, and have all of the detail the legislation required. The respondents maintained that their advisors did not advise them to update their systems. That is beside the point. It was the respondents’ responsibility to comply with their legal obligations, and get such professional advice as they needed for that purpose.
In relation to making records available, the respondents submitted that the requests were non-specific. That is simply not supported by the evidence. The respondents also submitted that the first request was made directly to the respondents, even though they were legally represented. That did not alter the basic obligation under the legislation.
In relation to the admitted payslips contravention, the respondents submitted that they had always done them in the incorrect way and thought it was okay to continue to do so. This submission is simply staggering.
In relation to long service leave, the respondents relied on the fact that Mr Sutton requested a certain period as long service leave, so he could have knee operations. However, he only made that request because he did not know he was entitled to sick leave for the knee operations. That was because the respondents did not tell him, and because they did not keep the required records that showed his running balance of sick leave.
In relation to annual leave, the respondents submitted that they tried to check the figures. However, as is evidence from the principal judgment, their attempts were inadequate.
In relation to the work diaries, the respondents said that they thought they were following industry practice. If there was such an industry practice, this submission just highlights the need for general deterrence. If there was not such an industry practice, this submission just highlights that the respondents were conducting their business as they pleased, with no regard to the law. The respondents also argued in mitigation that Mr Sutton did not ask for reimbursement. However, that was at least partly because the respondents did not comply with their legal obligation to display the awards.
In relation to the reimbursement for protective clothing, the respondents said that the contraventions was not deliberate because they did not know they had the obligation to reimburse employees for protective clothing. However, as employers, the respondents’ obligation was to find out what their legal obligations were and comply with them. The respondents also argued that, on one occasion, Ms Edyvane offered to Mr Sutton’s wife to reimburse the cost of Mr Sutton’s protective clothing, but Mr Sutton never put in a claim. That argument is a little surprising, in view of the respondents’ claim that they were unaware of the obligation to reimburse for protective clothing. However, Ms Edyvane only claimed to have done that on one occasion, and it seems to have been common ground that Mr Sutton would have purchased protective clothing more than once. However, fundamentally, the awards placed a very clear obligation on employers to reimburse for protective clothing, and to display the awards so that employees would know their rights.
In relation to allowances, the respondents argued that they “attempted” to pay a global allowance. However, they did not. They said they were following an accountant’s advice. However, as discussed, that is very difficult to believe.
Step 4: the appropriate penalty
Mr Sutton submitted that the appropriate penalty range for Edyvane’s and Ms Edyvane would be 55% to 75% of the maximums. The respondents submitted that the penalties should not be set by reference to the maximums, because the penalties for serious offences are so disproportionate to the actual offending. Basically, the maximum penalty for an offence found to be serious is 10 times what it would otherwise be. However, the fact remains that, in the case of Edyvane’s, the offences were serious, and the legislature has determined that such offences should have a very substantial maximum penalty, presumably with the expectation that courts would set substantial penalties for serious offences.
In my view, the penalties for Edyvane’s should be 75% of the maximum. There is a need for both specific and general deterrence in the case of Edyvane’s. The contraventions continued for a long period of time. There was no indication of genuine remorse. Except in relation to the payslips contravention, there was no admission of liability. The admission in relation to payslips did not come until the trial was underway and the admission was obviously unavoidable. The admission on that point is not deserving of any discount. Except in relation to payslips, the questions of liability had to be determined at trial.
The respondents persisted in an argument that their contraventions were not deliberate and were guided by an accountant’s advice. As discussed, that is difficult to believe. Basically, Ms Edyvane was aware of the awards but chose not to read and apply them with the diligence required.
On the other hand, there was only one employee involved in the proven contraventions. The respondents’ case was that all of their other employees were treated the same way, but I proceed on the basis that only one employee was affected by the contraventions.
In relation to Ms Edyvane’s, there is no need for specific deterrence, as she has retired, but otherwise the same considerations apply. I consider that, in Ms Edyvane’s case, a total of 70% of the maximum for each contravention is appropriate.
That means that the penalties would be as follows:
Contravention Penalty Unit Penalty for Edyvane’s Penalty for Ms Edyvane 1. Record-keeping contravention (s.535) $210 $472,500 N/A 2. Make available records (s.535) $222 $499,500 N/A 3. Incorrect payslips (s.536) $210 $472,500 $8,820 4. Display Modern Awards and the NES (s.45) $210 $472,500 $8,820 5. Fail to pay long service leave (s.323) $210 $472,500 N/A 6. Fail to pay annual leave (s.90(2)) $210 $472,500 N/A 7. Fail to reimburse cost of work diaries (s.45) $210 $472,500 $8,820 8. Fail to reimburse cost of protective clothing (s.45) $210 $472,500 $8,820 9. Failure to pay livestock carting allowance (s.45) $210 $472,500 $8,820 10. Failure to pay long-distance operations allowance $210 $472,500 $8,820 Total $4,752,000 $52,920 Step 5: the totality principle
As shown in the above table, the total penalties for Edyvane’s would be $4,752,000 and the total penalties for Ms Edyvane would be $52,920.
The respondents did not provide to the court any material about their financial circumstances. It is thus not possible for the court to determine whether the amounts specified would be crushing in the particular circumstances of this case. While Ms Edyvane has said that she is a widowed retiree, there was no suggestion that she is on an aged pension, or is otherwise in straitened financial circumstances.
In relation to the check that is required by the totality principle, I consider that the aggregate penalty indicated above is excessive for Edyvane’s contravening conduct as a whole, and the appropriate penalty is $960,000, which is about one fifth of the aggregate penalty mentioned above. That is still a substantial amount, as befitting the serious nature of the contraventions, the multiplicity of them, and the lack of genuine remorse. I consider that the aggregate penalty for Ms Edyvane is appropriate, bearing in mind the totality principle.
The penalties will be equally divided between each of the contraventions.
to whom should the penalties be paid
As mentioned above, the respondents submitted that any penalties should be paid to charity, or alternatively, the Commonwealth, rather than Mr Sutton. That course is permitted by s.546(3) of the Act.
In their written submissions on penalty filed on 24 October 2022, the respondents said that:
27.The Respondents’ submit that any penalties should be paid to one of more of the following charities, or alternatively the Commonwealth, rather than the Applicant:
a.The Leukemia Foundation. The Respondent has a long history with this charity having donated money in the past, after Mr Edyvane was diagnosed with Leukemia. Mr Edyvane, before he passed, also had a long-standing relationship with Mr Sutton.
b.Healthy Heads in Trucks and Sheds – an industry relevant charity helping truck drivers with mental health.
c. Till the cows come home – an industry relevant charity rescuing domestic and farm animals, rehabilitation and rehoming of animals.
28.The reason why this should be donated to charity and not paid to the Applicant is because:
a. There is no presumption that penalties are paid to the Applicant – it is a discretion.27 Treating it as a presumption undermines the statute. For example, in AMIEU v Greenmountain Food Processing, Vasta J held:28
Notwithstanding what has been often termed in these courts as “the usual order” and what His Honour, Rangiah J, said in United Voice v MDBR123 Proprietary Limited [2015] FCA 76, I am of the view that considerations other than the trouble, risk and expense of the applicant initiating proceedings are more important in these matters.
It is a deterrent that the Applicant is after, not an exercise to enrich the Applicant. Having the Court maintain the integrity of the industrial relations regime should be the aim of the applicant. Making an order that will deter the respondent from behaving in this way again must be the outcome desired the applicant. Letting all within the industrial relations regime know that the Court will deal seriously with breaches of the FW Act is the result that benefits the applicant greatly.
Those ideals supersede what is “the usual order” or “the usual practice”. It seems to me that ordering that pecuniary penalties imposed for breaches of the law of the Commonwealth, be paid to entities other than the Commonwealth, has the potential to upset the balance achieved by the FW Act. It may be thought that applicants have motivations other than maintenance of the Rule of Law in pursuing civil remedies, if pecuniary penalties are routinely paid to them rather than the Commonwealth.
b.The Applicant brought a ‘scattergun’ claim where approximately half of the claims (depending on how they are grouped) were withdrawn at trial, and other claims failed. Several of these claims lacked a proper basis or were based on flawed calculations. This caused significantly increased in legal costs.
c.The Applicant has already been enriched by, for example, the Long Service Leave payment of $4000 which was not counted towards LSL.
d. The Applicant has been awarded compensation, and non-economic loss has not been claimed in these proceedings.
e.The s 546(3) discretion should not be exercised in a way that provides a substitute for costs which are unavailable under s 570 of the FW Act.29
f. The purpose of ordering penalties, being deterrence, is not diminished by paying those penalties to charity or to the Commonwealth.
FN 27:Murrihy v Betezy.com.au Pty Ltd (No 2) [2013] 221 FCR 118, [116].
FN 28:AMIEU v Greenmountain Food Processing [2015] FCCA 2655, [21]-[23].
FN 29:Collison v Brighton Road Enterprises Pty Ltd T/A the Grosvenor Hotel and Anor (No.2) [2016] FCCA 1798, [94] citing Murrihy v Betezy.com.au Pty Ltd (No. 2) (2013) 221 FCR 118. See also, Victoria University of Technology v Australian Education Union [1999] FCA 1065, [34].
As noted by Judge Vasta in Greenmountain, there is a usual order in matters such as this, and it is that the applicant receives the penalty.
There is also weighty authority against the respondents on this point. The Full Court of the Federal Court explained the position in Sayed v Construction Forestry Mining and Energy Union (2016) 239 FCR 336; (2016) 259 IR 274; [2016] FCAFC 4 as follows:
72.One may begin to understand, therefore, why it is that s 546(3), in Pt 4.1, Div 2, Subdiv B, empowers the Court to order that a pecuniary penalty, or a part of the penalty, be paid to the Commonwealth, a particular organisation, or a particular person. If a proceeding for contravention of s 351(1) is brought by the inspector, the inspector being a public official of the Commonwealth, it may be expected that ordinarily the pecuniary penalty would be paid to the Commonwealth. If a union were to bring the proceeding successfully, for the benefit of its members, it may be expected that the penalty would be paid to the union. If the union brought the proceeding for the benefit of a particular member, there might be payment of the penalty to that member, on the basis he or she is a particular person to whom it should be paid; or part payment to that member and the balance to the union. If a person individually affected by a contravention brought the proceeding, then the penalty may be paid to him or her as a particular person. There is a certain symmetry between the person or entity authorised to prosecute an enforcement proceeding and the person or entity to whom the penalty, if imposed, might be paid. This symmetry is recognised by the Explanatory Memorandum and authority.
73.For example, the Explanatory Memorandum, by para 2157 (set out above) expressly notes that:
Ordinarily, any pecuniary penalty awarded by the court is paid to the applicant or, in the case of proceedings brought by a Commonwealth official such as an inspector, to the Commonwealth (on the basis that the applicant represents the Commonwealth).
74.Paragraph 2158 then goes on to point out that s 546(3) gives the court the flexibility to award the penalty to someone other than the applicant, “where the plaintiff or applicant requests“. The example given is where an inspector brings penalty proceedings against the director of a company that has gone into liquidation and asks the court to pay any penalty to an employee, rather than the Commonwealth, in circumstances where the employee is out of pocket. That example, it might be noted, in passing, comprehends that a particular person may, in a sense, be compensated for being “out of pocket“.
…
96.[Gray J in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; [2008] FCAFC 170] concluded, at [44], that:
The correct view is that the initiating party is normally the proper recipient of the penalty as part of a system of recognising particular interests in certain classes of persons ... in upholding the integrity of awards and agreements the subject of penal proceedings. Where a public official vindicates the law by suing for and obtaining a penalty, it is appropriate that the penalty be paid to the Consolidated Revenue Fund. Otherwise, the general rule remains appropriate, that the penalty is to be paid to the party initiating the proceeding, with the Gibbs ... exception that the penalty may be ordered to be paid to the organisation on whose behalf the initiating party has acted.
…
101.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).
It is extraordinary that a represented litigant, in the face of such authority, would press an argument that the penalties should be paid to charity. It seems to me that the respondents’ contentions in that regard betray an unedifying hostility on their part towards Mr Sutton, and a complete lack of remorse towards him. In accordance with authority, the penalties will be required to be paid to Mr Sutton.
costs
Section 570 of the Act provides:
Costs only if proceedings instituted vexatiously etc.
(1)A party to proceedings … in a court … 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.
(2)The party may be ordered to pay the costs only if:
…
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
…
Mr Sutton sought an order for costs against the respondents on the grounds that their unreasonable acts or omissions caused him to incur significant costs. More particularly, Mr Sutton said in his written submissions filed on 24 October 2022 that:
63. … the Court should be satisfied that the respondents’:
a.failure to make available the employment records of Mr Sutton following multiple requests;
b.production of those records in support of their case shortly before the trial;
c. taking almost every point at trial, and failing to make obvious admissions and concessions; and
d.making no attempt to resolve the proceeding quickly or inexpensively,
amounts to unreasonable acts or omissions that have resulted in Mr Sutton incurring significant costs in this proceeding.
…
66.In this case, many of the arguments put forward by the respondents were hardly arguable. Many if not most of the contraventions were clear, obvious, serious, and protracted.
67.In these circumstances, the discussion in Ryan v Primesafe [2015] FCA 8 at [9], [51], and [66] is relevant. In that case, the Court said that the failure to comply with s 37M of the Access to Justice (Civil Litigation Reforms) Amendment Act 2009 (Cth) should be taken into account in the exercise of the Court’s costs discretion.31 The conduct of the respondents in this proceeding breached their obligations under s 190 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (which is a similar provision to s 37M) because the respondents failed to facilitate the just resolution of the dispute as quickly, inexpensively, and efficiently as possible.
68.As the Court said in Ryan v Primesafe at [66], legislative provisions, such as s 37M and s 190, must be reconciled with access to justice provisions, such as s 570(1). That reconciliation, the Court said, occurs through a focus on the reasonableness of the parties’ conduct, the appropriateness of the Court process undertaken by them, the timeliness of their compliance with Court orders or steps taken in the proceeding and the existence of a substantial legal and factual basis for the claims made and arguments put. These matters point towards the exercise of the Court’s discretion to award costs in Mr Sutton’s favour.
69.In addition, Mr Sutton made an offer to settle this dispute on 8 June 2022 (see the attached letter). The offer was to resolve the dispute on payment of $190,000 consisting of $137,500 in compensation, and $52,500 for costs. In the event that Mr Sutton obtains pecuniary penalties which would take his award in excess of that offer, he should obtain his costs of this proceeding on an indemnity basis from the date of the offer. If he does not obtain such a result, Mr Sutton submits that his costs should be awarded to him on a standard basis by reason of the respondents’ conduct of this proceeding, which falls squarely within the terms of s 570(2)(b).
70.Accordingly, Mr Sutton submits that he should be awarded his costs on an indemnity basis, or alternatively on a standard basis, at an amount to be agreed upon and to be taxed in lieu of such agreement.
FN 31:Specsavers Pty Ltd v The Optical Superstore Pty Ltd (2008) 208 FCR 78; [2012] FCAFC 183, [57], [58].
The respondents opposed any costs order being made in favour of Mr Sutton, and sought a costs order against him for the many claims he made but withdrew on the first day of trial, when confronted with the probability of them failing. In their written submissions filed on 24 October 2022, the respondents’ said:
31.The Applicant made written submissions as to costs in their closing submissions. These should not be accepted as the argument that the provision of records would have “potentially avoided the trial of these proceedings” or “facilitated full and frank negotiations” to resolve and narrow issues cannot be correct because:
a. these records were not accepted as accurate by the Applicant;
b. they records were alleged by the Applicant as “illegible” and “indecipherable”;
c. after records were provided (in accordance with the consent orders in October 2021) pleadings were amended adding additional causes of action;
d.the errors in the Applicant’s calculations (which formed the basis of most of the claims that were withdrawn) are not dependent on the source of data (ie logbooks held by the Applicant or workbooks provided by the Respondent). Even if the times worked were changed from the data contained in the logbooks to the workbooks, these errors would still remain because they are logical and mathematical errors (not data source errors);
e. claims have been withdrawn which do not relate to records, for example working unreasonable hours, or failing to display a roster, presumably on the basis of lack of merit; f. the Applicant continued to deny the accuracy (and in some cases legibility) of the employment records at trial such as the workbooks and the leave records, and persisted with claims contradicted by those records, so it is difficult to see how the provision or non-provision of those records could affect the Applicant’s decision on whether to bring or press certain claims; and/or g. the Applicant and Respondent were already involved in negotiations where records and claims were discussed and adjustments made, including but not limited to mediation, prior to commencing these proceedings.
f.the Applicant continued to deny the accuracy (and in some cases legibility) of the employment records at trial such as the workbooks and the leave records, and persisted with claims contradicted by those records, so it is difficult to see how the provision or non-provision of those records could affect the Applicant’s decision on whether to bring or press certain claims; and/or
g. the Applicant and Respondent were already involved in negotiations where records and claims were discussed and adjustments made, including but not limited to mediation, prior to commencing these proceedings.
32.However, costs related to the withdrawn claims should be ordered in favour of the Respondent because:
a. the Applicant, with respect to several of the claims, instituted the proceedings vexatiously or without reasonable cause (s 570(2)(a));
b. the Applicants unreasonable act or omission caused the Respondent to incur costs (s 570(2)(b));
33. Specifically:
a.significant costs were generated as a result of the error ridden spreadsheet (prepared by the Applicant’s lawyer) – relating to both the claims themselves and analysis of the spreadsheet, and also addressing several legal questions which affected those claims only;
b. approximately half of the claims (depending on how they are grouped) were withdrawn at trial – as they were not determined these claims can be reagitated on new calculations and so the costs in these proceedings have been wasted;
c. the Applicant made two amendments to his Statement of Claim adding claims which were later withdrawn; and d. the Applicant commenced proceedings on several grounds that were hopeless or did not have a proper basis and thus the Applicant acted in a way inconsistent with the overarching purpose.30
FN 30:FCFCOA Act 2021 s 191.
In my view, the respondents’ unreasonable acts or omissions, consisting of not providing records in a timely manner and running arguments that were barely arguable, did cause Mr Sutton to incur costs. In addition, the respondents’ failure to accept the offer of settlement contained in the settlement proposal dated 8 June 2022 was also an unreasonable act or omission in the circumstances of this case.
On the other hand, Mr Sutton did bring many claims that were withdrawn on the first day of the hearing. The respondents were required to do a great deal of work, and no doubt incur a great deal of costs, in providing the detail that led to Mr Sutton withdrawing those claims. Having said that, if the respondents had kept proper records, the task of preparing for trial would have been a lot easier for both sides.
In all the circumstances of this case, I consider that the respondents should pay Mr Sutton’s costs on the scale of this court. While Mr Sutton had the good grace and the good sense to concede matters that he had little prospect of winning, the respondents persisted in running arguments on points that on any reasonable view should have been conceded. The respondents thereby caused Mr Sutton to unreasonably incur costs. It is not appropriate to order indemnity costs in the present case based on the respondents’ rejection of Mr Sutton’s settlement offer, because both sides did vast amounts of work on points that Mr Sutton ultimately abandoned.
There will be orders accordingly.
I certify that the preceding one hundred and thirty-six (136) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 21 December 2022
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