Tjorpatzis v E J Love and Co Pty Ltd
[2017] FCCA 211
•10 February 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TJORPATZIS v E J LOVE & CO PTY LTD & ANOR | [2017] FCCA 211 |
| Catchwords: INDUSTRIAL LAW – Penalties – whether breaches constituted a single course of conduct – whether breaches were deliberate – whether specific and general deterrence warranted. |
| Legislation: Fair Work Act 2009, ss.90, 323, 546(3), 557 |
| Cases cited: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 Construction, Forestry, Mining and Energy Union (CFMEU) v Cahill (2010) 269 ALR 1; (2010) 194 IR 461; [2010] FCAFC 39 Construction, Forestry, Mining and Energy Union v Williams (2009) 262 ALR 417; (2009) 191 IR 445; [2009] FCAFC 171 Community and Public Sector Union v Telstra Corp Ltd (2001) 108 IR 228; [2001] FCA 1364 Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216; (1992) 42 IR 255 Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 Mason v Harrington Corp Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70 Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153; (2014) 243 IR 244; [2014] FCAFC 62 Tjorpatzis v EJ Love & Co Pty Ltd [2016] FCCA 2735 |
| Applicant: | ARTHUR TJORPATZIS |
| First respondent: | E J LOVE & CO PTY LTD ACN 005 438 817 |
| Second respondent: | GRAHAM EDWARD LOVE |
| File number: | MLG 312 of 2016 |
| Judgment of: | Judge Riley |
| Hearing date: | 13 and 14 September 2016 |
| Date of last submission: | 5 December 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 10 February 2017 |
REPRESENTATION
| Counsel for the applicant: | Joseph D’Abaco |
| Solicitors for the applicant: | Portfolio Law |
| Counsel for the respondents: | Brian G Mason |
| Solicitors for the respondents: | McDonald Murholme |
ORDERS
The first respondent pay the applicant $27,000 in respect of the underpayment of commissions.
The second respondent pay the applicant $5,400 in respect of the second respondent’s accessorial liability for the first respondent’s underpayment of commissions.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 312 of 2016
| ARTHUR TJORPATZIS |
Applicant
And
| E J LOVE & CO PTY LTD ACN 005 438 817 |
First respondent
And
| GRAHAM EDWARD LOVE |
Second respondent
REASONS FOR JUDGMENT
Introduction
This matter concerns the penalties, if any, to be imposed for certain contraventions of the Fair Work Act 2009 (“the Act”). In a judgment published in the matter of Tjorpatzis v EJ Love & Co Pty Ltd [2016] FCCA 2735 (“the liability judgment”):
a)the first respondent was found to have contravened:
i)s.323(1) of the Act by failing to pay the correct amount of commissions to the applicant; and
ii)s.90(2) of the Act by failing to pay the applicant the correct amount for his accrued annual leave upon cessation of employment; and
b)the second respondent was found to have accessorial liability for the second respondent’s failure to pay the applicant the correct commissions.
Orders were made on 28 October 2016 that:
4.By 25 November 2016, the first respondent pay:
a.to the applicant the amount of $73,920.84 plus interest in accordance with law, less any applicable deduction of taxation; and
b.in favour of the applicant the amount of $6,437.51 plus interest in accordance with law to the REI Super superannuation fund.
The parties agreed that the question of penalties, if any, should be dealt with by way of written submissions. The applicant filed an outline of submissions on 11 November 2016. On 24 November 2016, the respondents filed an outline of submissions and an affidavit of the second respondent sworn on 24 November 2016. The applicant filed a reply to the respondents’ outline of submissions on 5 December 2016.
There was no cross-examination of the second respondent in relation to his affidavit sworn on 24 November 2016. I accept the evidence contained in that affidavit. It is to the effect that the first respondent has paid the amounts ordered to be paid on 28 October 2016 and that the second respondent:
… will review the workforce and employment arrangements of the First Respondent and will seek to remedy any issues of the nature raised by the Applicant’s proceedings.
The parties agreed that the maximum penalty that could be imposed on the first respondent, which is a corporation, in respect of each contravention was 300 penalty units or $54,000. The parties agreed that the maximum penalty that could be imposed on the second respondent, who is a natural person, in respect of his single contravention was 60 penalty units or $10,800.
The applicant argued that the first respondent should receive:
a)a penalty of 50% of the maximum for the underpayment of commissions contravention, being a penalty of $27,000; and
b)a penalty 20% of the maximum for the underpayment of annual leave contravention, $10,800
making a total of $37,800.
The applicant argued that the second respondent should receive a penalty of 50% of the maximum for his contravention, being a total penalty of $5,400.
The respondents argued that:
a)the first respondent should receive no penalty;
b)alternatively, the first respondent’s two contraventions should be determined to result from a single course of conduct under s.557 of the Act, and the first respondent should receive a penalty in the range of 0% to 10% of the maximum, being $0 to $5,400;
c)alternatively, if the two contraventions are determined to not be the result of a single course of conduct, the first respondent should receive a penalty in the range of:
i)0% to 10% of the maximum for the underpayment of commissions contravention, being a penalty of $0 to $5,400;
ii)0% to 5% of the maximum for the underpayment of annual leave contravention, being a penalty of $0 to $2,700,
making a total of $0 to $8,100;
d)the second respondent should receive no penalty; and
e)alternatively, the second respondent should receive a penalty of between 0% and 5% of the maximum, being a penalty of $0 to $540.
Approach to determining penalty
In general, the proper approach to determining penalty in cases such as this is as follows. The first step for the court is to identify each separate contravention involved.
Where there are multiple contraventions, the second step is to consider whether any of the various contraventions constituted a single course of conduct, such that multiple breaches should be treated as a single breach.
The third step is for the court to consider the extent, if any, to which two or more contraventions have common elements. A person should not be penalised more than once for the same conduct.
The penalty imposed by the court should be an appropriate response to the contravenor’s conduct.[1] This is a separate process from the application of the totality principle.[2]
[1] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [46] (Graham J).
[2] Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70 at [41]-[46] (Stone and Buchanan JJ).
The fourth step is for the court to consider the appropriate penalty for each breach, treating multiple breaches arising from a course of conduct as a single breach, and taking into account any common elements shared by the various breaches.
The fifth step is for the court to apply the totality principle.
This requires the court to consider the aggregate penalty overall, and determine whether it is an appropriate response to the conduct which resulted in the breaches.[3] The court in this step makes an “instinctive synthesis”.[4]
[3] See Kelly v Fitzpatrick (2007) 166 IR 14 at [30]; [2009] FCA1080 (Tracey J) (Kelly); Ophthalmic, supra at [23] (Gray J), [71] (Graham J) and [102] (Buchanan J).
[4] Ophthalmic, supra at [27] (Gray J) and [55] and [78] (Graham J).
A convenient checklist of the factors that the court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corp Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is as follows, (with paragraph letters inserted):
(a)The nature and extent of the conduct which led to the breaches.
(b)The circumstances in which that conduct took place.
(c)The nature and extent of any loss or damage sustained as a result of the breaches.
(d)Whether there had been similar previous conduct by the respondent.
(e)Whether the breaches were properly distinct or arose out of the one course of conduct.
(f)The size of the business enterprise involved.
(g)Whether or not the breaches were deliberate.
(h)Whether senior management was involved in the breaches.
(i)Whether the party committing the breach had exhibited contrition.
(j)Whether the party committing the breach had taken corrective action.
(k)Whether the party committing the breach had cooperated with the enforcement authorities.
(l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
(m) The need for specific and general deterrence.
The court must, of course, be mindful of the caution expressed by Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [91] as follows:
Checklists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. There is no suggestion in the present case that the learned magistrate made any relevant error in her identification of the matters which she should consider in fixing penalties.
The court will consider the circumstances of the case under the various headings suggested by Mowbray FM, and then consider whether any other matters are relevant.
Step 1: identifying the breaches
The breaches are summarised above and described in more detail in the liability judgment.
Step 2: single course of conduct
The first respondent underpaid the applicant’s commissions every month for about six years. The applicant accepted that the underpayment of commission breaches should be treated as a single course of conduct.
Step 3: grouped breaches
The respondents argued that the underpayment of commissions and the underpayment of accrued annual leave on cessation of employment should be grouped as a single breach pursuant to s.557 of the Act. That was said to be because both underpayments arose from the single decision that the applicant’s superannuation could be deducted from his commissions rather being required to be paid in addition to them. The underpayment of accrued annual leave on cessation of employment was the result of a calculation made on the erroneous basis that the applicant’s superannuation could be deducted from his commissions.
The applicant opposed that approach being taken, arguing that it misunderstood s.557(1) of the Act. That subsection 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 applicant also referred to Gibbs v Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216; (1992) 42 IR 255 at 223 where Gray J discussed a precursor of s.557 of the Act and said:
The object of s 178(2) appears to be that a party bound by an award and pursuing a course of conduct involving repeated acts or omissions, which would ordinarily be regarded as giving rise to a series of separate breaches, should not be punished separately for each of those breaches. If such a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another. This reasoning leads to the conclusion that each separate obligation found in an award is to be regarded as a “term”, for the purposes of s 178 of the Act. The ascertainment of what is a term should depend not on matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out. For these reasons, I incline to the view that each separate obligation imposed by an award is to be regarded as a “term”, for the purposes of s 178 of the Act.
That passage was cited with approval by the Full Court of the Federal Court in Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153; (2014) 243 IR 244; [2014] FCAFC 62. That case considered s.557 of the Act, and held, in essence, that it only permitted grouping of breaches of any particular civil remedy provision, and not grouping of breaches of a number of different civil remedy provisions. That is in accordance with a straightforward reading of s.557 of the Act. That section says:
… 2 or more contraventions of a civil remedy provision referred to in subsection (2) are … taken to constitute a single contravention [in certain circumstances] (emphasis added)
Both authority and statute make it clear that it is not permissible to treat contraventions of different civil remedy provisions as a single breach, even if they did form part of a single course of conduct or result from a single decision.
In the present case, the underpayment of commissions was a breach of s.323(1) of the Act, which is a civil remedy provision. That provision is referred to in s.557(2)(g) of the Act. Consequently, pursuant to s.557 of the Act, multiple breaches of s.323(1) of the Act can be grouped together as a single contravention.
The underpayment of accrued annual leave on cessation of employment was a breach of s.90 of the Act. That section falls with Part 2-2 of the Act, being the National Employment Standards. They are referred to in s.557(2)(a) of the Act. Consequently, pursuant to s.557 of the Act, multiple breaches of s.90 of the Act can be grouped together as a single contravention.
However, there is no statutory warrant to group together as a single breach contraventions of s.323(1) of the Act and s.90 of the Act.
Step 4: the appropriate penalty for the breaches
a. the nature and extent of the conduct which led to the breach
The first respondent, on the instructions of the second respondent, contrary to law, deducted superannuation from the commissions payable to the applicant, and paid him accrued annual leave upon cessation of employment on the resulting erroneous basis. The underpayments of commissions continued for about six years. If the applicant had not brought the proceedings that resulted in the first judgment, the applicant would have lost $73,920.84 in commissions and annual leave and $6,437.51 in superannuation.
b. The circumstances in which that conduct took place
The first respondent employed the applicant as a real estate agent for about 23 years. At the time the breaches commenced, the applicant and the second respondent had a dispute about the impact of changes to the superannuation law. The applicant continued working with the first respondent, although the dispute was not resolved. The respondents’ view of the impact of the changes to the superannuation law was incorrect.
c. The nature and extent of any loss or damage sustained as a result of the breaches
This has been discussed previously.
d. Whether there had been similar previous conduct by the respondent
There is no evidence that the respondents have been found liable by a court for any previous contraventions. However, the applicant alleged, and the respondents at least implicitly acknowledged, that the first respondent paid commissions to its other real estate agents on the same erroneous basis over the same time period.
e. Whether the breaches were properly distinct or arose out of the one course of conduct
Apart from s.557 of the Act, the respondents also relied on general sentencing principles to argue that the underpayments of commission and annual leave arose from a single course of conduct. The applicant did not address this aspect of the respondents’ submissions.
The respondents referred to Construction, Forestry, Mining and Energy Union (CFMEU) v Cahill (2010) 269 ALR 1; (2010) 194 IR 461; [2010] FCAFC 39, where Middleton and Gordon JJ said:
39.As the passages in Construction, Forestry, Mining and Energy Union v Williams (2009) 191 IR 445 explain, a “course of conduct” or the “one transaction principle” is not a concept peculiar to the industrial context. It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry. 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.
40.Construction, Forestry, Mining and Energy Union v Williams (2009) 191 IR 445 did not suggest otherwise. In Construction, Forestry, Mining and Energy Union v Williams (2009) 191 IR 445, the issue was not whether the trial judge had in fact considered whether the offences were to be characterised as arising from a single course of conduct, but whether the trial judge erred in his approach to that question. The trial judge concluded that the conduct should not be viewed as a single course of conduct because although Mr Mates (who was also a party in that case) “in a sense” had engaged in a single course of conduct, his Honour found that the conduct had two elements which s 43 of the Act recognised as separate and which were qualitatively distinct in the impact his Honour presumed they had on the third party. The appellants submitted in Construction, Forestry, Mining and Energy Union v Williams (2009) 191 IR 445, and the Full Court accepted, that the trial judge erred in his approach to the question of the single course of conduct. In particular, the Full Court concluded that the trial judge should not have treated the fact that the conduct had two elements which s 43 of the Act recognised as separate as a disentitling factor in deciding if the two offences were properly to be characterised as arising from the one transaction or a single course of conduct.
41.As noted above (see [39]), the principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, the Court must ensure that the offender is not punished twice for the same conduct. In other words, 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: Johnson v The Queen (2004) 204 ALJR 616 at [3] – [4] and [34] and Attorney-General (SA) v Tichy (1982) 30 SASR 84 at 92 – 93. It is a tool of analysis (Attorney-General (SA) v Tichy (1982) 30 SASR 84 at 93) which a Court is not compelled to utilise: Royer v Western Australia [2009] WASCA 139 at [21]-[34] and [153]-[156].
42.A Court is not compelled to utilise the principle because, as Owen JA said in Royer v Western Australia [2009] WASCA 139 at [28], “[d]iscretionary judgments require the weighing of elements, not the formulation of adjustable rules or benchmarks”. The exercise of the sentencing discretion does not fall to be exercised in a vacuum. It is a matter of judgment to be exercised according to the facts of each case and having regard to conflicting sentencing objectives: see McHugh J in AB v The Queen (1999) 198 CLR 111 at [14]. For the same reasons, and contrary to the appellants’ submissions, even if offences are properly characterised as arising from the one transaction or a single course of conduct, a judge is not obliged to apply concurrent terms if the resulting effective term fails to reflect the degree of criminality involved. Or, in the case of fines, a judge is not obliged to start from the premise that if there is a single course of conduct, the maximum fine is, in the present case, $110,000 for the CFMEU and $22,000 in the case of Mr Mates.
In Construction, Forestry, Mining and Energy Union v Williams (2009) 262 ALR 417; (2009) 191 IR 445; [2009] FCAFC 171. Moore, Middleton and Gordon JJ said:
14.It is convenient at this stage to review the authorities concerning how and why a court might address, during the sentencing process, whether acts of the accused or the defendant which have resulted in a conviction of a number of offences, were part of the one course of conduct.
15.As Lord Diplock said in Director of Public Prosecutions (UK) v Merriman [1973] AC 584 at 607, “[w]here a number of acts of a similar nature committed by one or more defendants were connected with one another, in the time and place of their commission or by their common purpose, in such a way that they could fairly be regarded as forming part of the same transaction or criminal enterprise” they should be regarded as one activity or one offence.
16.What then is the position in Australia? One starting point is the judgment of the Full Court in Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; 171 IR 455. … Buchanan and Stone JJ contemplated that in the sentencing process this question of whether there was a course of conduct to be penalised as one offence even if embodying multiple breaches, was a question separate from, and it appears anterior to, whether the overall penalty should be adjusted applying the totality principle.
17.This issue was also separately addressed by Owen JA, Buss JA and Miller JA in Royer v Western Australia [2009] WASCA 139. In Western Australia, the “one course of conduct” is described as the “one transaction principle”. Owen JA explained its operation in the following passage:
[21] … Over the years [the one transaction principle] has been, and continues to be, formulated in different ways. The variety of the available formulations does little to provide definitive guidance to sentencing officers having to apply the “rule” to the factual circumstances of an individual case. That having been said, there is universal recognition in the authorities on two points. First, the “rule” is not a rule at all. It is one of many sentencing principles the object of which is to guide a judicial officer in the proper exercise of the sentencing discretion. Secondly, even if offences are properly to be characterised as arising from the one transaction, a judge is not obliged to apply concurrent terms if to do so would result in an effective term that fails to reflect the degree of criminality involved: see, for example, Amoore [14].
[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. (emphasis added)
…
[24]Because of the wide variety of circumstances in which the principle can arise it is not always easy to reconcile the way it has been applied in individual cases. But what can be detected in each case is an examination of the closeness of the interrelationship and the danger of double jeopardy in so far as punishment (not criminal liability) is concerned. In this respect, I think it is worth repeating what Wells J said in Attorney-General v Tichy (1982) 30 SASR 84, 92-93:
It is both impracticable and undesirable to attempt to lay down comprehensive principles according to which a sentencing judge may determine, in every case, whether sentences should be ordered to be served concurrently or consecutively. According to an inflexible Draconian logic, all sentences should be consecutive, because every offence, as a separate case of criminal liability, would justify the exaction of a separate penalty. But such a logic could never hold. When an accused is on trial it is part of the procedural privilege to which he is entitled that he should be made aware of precisely what charges he is to meet. But the practice and principles of sentencing owe little to such procedure; what is fitting is that a convicted prisoner should be sentenced, not simply and indiscriminately for every act that can be singled out and brought within the compass of a technically identifiable conviction, but for what, viewing the circumstances broadly and reasonably, can be characterised as his criminal conduct. Sometimes, a single act of criminal conduct will comprise two or more technically identified crimes. Sometimes, two or more technically identified crimes will comprise two or more courses of criminal conduct that, reasonably characterized, are really separate invasions of the community’s right to peace and order, notwithstanding that they are historically interdependent; the courses of criminal conduct may coincide with the technical offences or they may not. Sometimes, the process of characterization rests upon an analysis of fact and degree leading to two possible answers, each of which, in the hands of the trial judge, could be made to work justice. The practice of imposing either concurrent or consecutive sentences cannot avoid creating anomalies, or apparent anomalies, from time to time. What must be done is to use the various tools of analysis to mould a just sentence for the conduct of which the prisoner has been guilty. Where there are truly two or more incursions into criminal conduct, consecutive sentences will generally be appropriate. Where, whatever the number of technically identifiable offences committed, the prisoner was truly engaged upon one multi-faceted course of criminal conduct, the judge is likely to find concurrent sentences just and convenient.
[25]… There will be instances in which it is obvious that the interrelationship of multiple offences is so intimate that they can only be said to arise from a single course of criminal conduct. In those instances injustice can only be avoided by imposing concurrent terms. Not to do so would inevitably result in the offender being punished more than once for the same criminality.
18.His Honour later said, in relation to the operation of this principle and the totality principle:
[28]The sentencing discretion does not fall to be exercised in a vacuum. Discretionary judgments require the weighing of elements, not the formulation of adjustable rules or benchmarks: AB v The Queen [1999] HCA 46; (1999) 198 CLR 111 [15] (McHugh J). Sentences are imposed for a specific offence (or offences) committed by an individual offender. But the sentencing process operates in a general policy framework to which both the common law and statute have contributed. Within the confines of the policy framework and the dictates of the common law and statute sentencing is essentially a matter of judgment to be exercised according to the facts of an individual case. …
…
[30]Against that general background how is the one transaction principle to be understood and applied? Save for the instances in which the interrelationship between multiple offences is so close that injustice can only be avoided by concurrency of terms, the answer will usually emerge from considerations of proportionality to or with the criminality of the offender’s conduct viewed in its entirety. Looked at in this way, the one transaction principle and the totality principle are closely connected. A sentencing judge is obliged to impose an effective term that she or he judges to be appropriate for the overall criminality of the offender’s conduct. Even where, on a strict and literal understanding of the one transaction principle, it might be said that the concurrency of terms can be justified, the need for proportionality might demand cumulative or partly cumulative terms.
[31]A relatively recent illustration of the connection between the two notions is to be found in Johnson v The Queen [2004] HCA 15; (2004) 78 ALJR 616. The particulars to the ground of appeal contended that the court below had erred both in “failing to order total concurrence in circumstances where the same actus reus gave rise to separate offences, thus misconstruing and/or misapplying the ‘one transaction’ rule of sentencing” and in “imposing an overall effective sentence which infringed the totality principle of sentencing”. The main import of Johnson is that it resolved the doubt as to whether, when the totality principle required adjustment to the length of multiple sentences, it was to be achieved by lowering individual terms or by using a combination of accumulation and concurrency. The Court indicated that either method could be employed. But in the context of this appeal Johnson is important for two other reasons. First, Gleeson CJ adopted the passage from Tichy that I have set out. Secondly, Gummow, Callinan and Heydon JJ repeated a passage from Pearce [40] which stresses the importance of proportionality in the context of sentencing for interrelated offences … (Original emphasis.)
In the present case, it seems to me to be proper to treat the first respondent’s breaches as a single course of conduct. The second breach, concerning the annual leave, flowed inevitably from the first breach, concerning the commissions. There was one decision by the first respondent that resulted in breaches of two legal obligations. But the offence, so to speak, was a single act. In such circumstances, I consider that it is appropriate to treat the first respondent’s breaches as arising from a single course of conduct.
f. The size of the business enterprise involved
The first respondent runs six real estate offices, and employs numerous people at each site. (There were other assertions made in the respondents’ written submissions. However, they were not supported by evidence. I disregard them.)
g. Whether or not the breaches were deliberate
The breaches in this case were the result of a misapprehension on the second respondent’s part in relation to the first respondent’s legal obligations. However, the underpayments were deliberate in the sense that they were the result of a conscious decision. The underpayments did not occur through inadvertence or typographical error.
h. Whether senior management was involved in the breach
Senior management, being the second respondent, was responsible for the breaches.
Whether the party committing the breach has exhibited contrition, corrective action and co-operation with enforcement authorities
The respondents fought the liability issue all the way through a two day hearing. There was no evidence of any apology to the applicant. Since the liability judgment, the first respondent has paid the underpaid amounts that it was ordered to pay. The respondents have accepted the liability judgment. The second respondent has said on oath that he:
… will review the workforce and employment arrangements of the First Respondent and will seek to remedy any issues of the nature raised by the Applicant’s proceedings.
Apart from that, the respondents have not exhibited contrition. Enforcement authorities were not involved in this proceeding.
j. The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements
This case was not about minimum entitlements.
k. The need for specific and general deterrence
In relation to specific deterrence, Gray J observed in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170 at [37] that:
… Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur. …
In relation to general deterrence, Lander J noted in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 at [93]:
… In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty…(citations omitted)
Similarly, in Community and Public Sector Union v Telstra Corp Ltd (2001) 108 IR 228 at 230-231; [2001] FCA 1364, Finkelstein J said:
… even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ….
The applicant argued that specific deterrence was required in this case because the respondents continue to trade and argued that general deterrence was necessary as a warning to other employers.
The respondents argued that there was no need for specific deterrence in this case because the respondents had accepted the liability judgment, had paid the amounts owed and will review their practices to ensure there is full compliance with the Act. Interestingly, the second respondent’s affidavit did not say that the review would ensure full compliance with the Act. It only said that the review would ensure there were no issues of the nature raised by the applicant’s proceedings.
In relation to general deterrence, the respondents said that the underpayments were simply the result of a mistake.
I consider that there is some need in this case for both general and specific deterrence. The respondents’ breaches were the result of a deliberate although mistaken decision. Obviously, the respondents should have obtained professional advice and complied with it. The respondents are continuing to trade. They need to be more careful in the future. Other employers need to know that it is not sufficient to say that a mistake was made. The obligation is on the employer to ascertain the correct rates of pay and pay them.
Other issues
I do not consider that there are any other relevant issues in this case.
Step 4: the appropriate penalty
Taking into account all of these matters, I consider that appropriate penalties are as follows:
a)for the first respondent:
i)in respect of the underpayment of commissions, a penalty of 50% of the maximum, being $27,000; and
ii)in respect of the underpayment of accrued annual leave upon cessation of employment, a penalty of zero; and
b)for the second respondent, a penalty of 50% of the maximum, being $5,400.
The principal circumstances leading to the first respondent’s penalty for the underpayment of commissions are that:
a)the underpayment was the result of a deliberate decision that was contrary to law;
b)the first respondent failed to obtain and comply with accurate professional advice about the applicant’s entitlements;
c)the applicant was employed by the first respondent for 23 years;
d)the underpayments of commissions continued for about six years;
e)the underpayments of commissions were substantial, amounting to more than $60,000;
f)senior management was involved in the breach;
g)the respondents fought liability through to a two day hearing;
h)although they have complied with the court’s orders, there is no evidence of an apology to the applicant; and
i)there is a need for general and specific deterrence;
In these circumstances, it does not seem to me that a low or no penalty would be at all appropriate. That range would be appropriate where, for example, there was an entirely inadvertent breach that had been corrected as soon as it was discovered and there was an admission of liability.
In relation to the penalty for the accrued annual leave upon cessation of employment, it seems to me that the breach arose more or less automatically from the earlier and erroneous decision to not pay the correct commissions. It did not involve any additional dereliction of duty, so to speak. Consequently, it does not seem to me to be appropriate to impose any additional penalty for it.
In relation to the penalty for the second respondent, the circumstances leading to the penalty for the underpayment of commissions are the same as for the first respondent with the addition that the second respondent was the driving force in the decision to not pay the correct amounts. As stated previously, it is not sufficient to say that a mistake was made.
Step 5: the totality principle
In relation to the check that is required by the totality principle, I consider that the total penalties indicated above are appropriate for the whole of the contravening conduct engaged in by the respondents.
Payment of penalties
The applicant sought orders that any penalties be paid to him pursuant to s.546(3) of the Act. The respondents did not object to that course. It seems to me, in all the circumstances of this case, to be appropriate.
There will be orders accordingly.
I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of Judge Riley.
Date: 10 February 2017
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