Wall v Kingbuilt Homes Pty Ltd & Anor (No.2)

[2019] FCCA 3423

FEDERAL CIRCUIT COURT OF AUSTRALIA

WALL v KINGBUILT HOMES PTY LTD & ANOR (No.2) [2019] FCCA 3423

Catchwords:
INDUSTRIAL LAW – Ruling on appropriate declarations and penalties to be imposed – Court having found 2 contraventions of applicable industrial obligations – ruling on costs application.

Legislation:

Fair Work Act 2009 (Cth), ss.117, 119

Cases cited:

Wall v Kingbuilt Homes Pty Ltd & Anor [2019] FCCA 2355

Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Minister (Non-Indemnification Personal Payment Case) [2018] FCAFC 97

Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) v Milin Builders Pty Ltd [2019] FCA 1070

Applicant: LOCHLIN WALL

First Respondent: KINGBUILT HOMES PTY LTD
(ACN 112 472 027)

Second Respondent: PHILLIP KING

File Number: MLG 3576 of 2018

Judgment of: Judge Burchardt

Hearing date: 4 October 2019

Date of Last Submission: 4 October 2019

Delivered at: Melbourne

Delivered on: 29 November 2019

REPRESENTATION

Counsel for the Applicant: Mr Hooper

Solicitors for the Applicant: Simon Parsons & Co

Counsel for the Respondent: Mr Burt

Solicitors for the Respondent: Bona Fide Lawyers

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 3576 of 2018

LOCHLIN WALL

Applicant

And

KINGBUILT HOMES PTY LTD (ACN 112 472 027)

First Respondent

PHILLIP KING

Second Respondent

REASONS FOR JUDGMENT

Introductory

1. On 4 September 2019, I issued judgment in this case.  I determined that, contrary to the position espoused by the respondents, the applicant was entitled to notice payment based on his full rate of pay and to

   
   

   a redundancy payment.  I made orders for those payments to be made.

2. The parties filed written submissions in relation to the issues of penalty and costs, and I gave the parties a further opportunity to put any further oral submissions on 4 October 2019, which the parties have done.

3. For the reasons that follow, I am going to impose penalties at 10 (notice) and 35 (redundancy) per cent of the applicable maximums.  The first respondent will be liable both for the failure to pay notice pay and the redundancy payment.  The second respondent will not be the subject of penalty in relation to the notice payment, for reasons to which I shall come.  Additionally, I propose to make one declaration only, namely, that the applicant’s termination of employment took place by reason of redundancy.

4. It will be apparent that reasons for judgment are based on, and should be read in conjunction with, the earlier judgment given in September 2019.

The Contraventions

1. It is readily apparent that there have been contraventions of the Act in relation to the non-payment of the notice required by s.117 and the redundancy pay required to be paid by s.119 of the Fair Work Act 2009 (Cth) (“FW Act”). There is no issue but that the first respondent contravened in each instance.

2. At the hearing before the Court on 4 October 2019, counsel for the respondents submitted that, while the second respondent, Mr King, who is, as it were, the controlling mind of the first respondent, was involved with the contravention in relation to redundancy, it was not pleaded against him that he was involved in the failure to pay notice.  Counsel for the applicant submitted that the Court had a discretion to make the necessary finding of involvement.  I think it is fair to say that the submission made by counsel for the respondents is correct.

3. At paragraphs 20-23 of the Statement of Claim, the failure to pay redundancy pay is pleaded.  At paragraphs 24 and 25, the contravention of the legislation is spelt out.  At paragraphs 27-30, the failure to pay notice is pleaded against the respondent.  At paragraphs 31 and 32, under the heading “Second Respondent’s Involvement in Failing to Pay Redundancy – Accessorial Liability”, the second respondent’s involvement is pleaded in terms, but only to the failure to pay redundancy.  In the prayer for relief, under paragraphs F-I inclusive, relief was sought against the second respondent in relation to the redundancy in terms.  No such prayer for relief was pleaded against the second respondent in relation to the issue of notice.

4. Accordingly, in these circumstances, in my view, the respondents, looking at the Statement of Claim as pleaded, would reasonably have thought that no claim was pressed against the second respondent in relation to the failure to pay notice.  True it is that I have found that the second respondent was the mind and will of the company, and the company failed to pay notice.  Nonetheless, these are proceedings for a civil penalty.  They are serious matters.  They count to the second respondent’s reputation in a general way and will stand, if orders are made, against him as a matter of public record.

5. In my view, in circumstances where the applicant made what was plainly a conscious decision not to pursue the second respondent for accessorial liability pursuant to s.550 of the FW Act in relation to the notice payment, it is far too late now, after judgment has been first given, let alone the pleadings and evidence having closed before that, to allow any amendment of the sort implied by counsel for the applicant.

6. The next question is whether, as counsel for the respondents perhaps rather faintly submitted, the contraventions should be treated as a single course of conduct. In my view, this is not appropriate. The failure to pay notice required by the FW Act is a completely different matter from a failure to pay redundancy. It is quite possible for there to be a termination of employment without notice in circumstances where redundancy does not arise. The character of the payments is so different that to treat them as one course of conduct is totally inappropriate.

7. Furthermore, the origin, so to speak, of the two failures to comply was different.  In the failure to pay notice, it arose from an erroneous assumption on the respondents’ part that, first, the notice payment should not be calculated on the applicant’s full rate of pay and, second, because they were not entitled to set off a so-called goodwill payment.  This was a witting decision, taken, albeit erroneously, on those facts.  The redundancy payment arose because the respondents simply refused to countenance it and did not think Mr Wall was redundant, whereas

   
   

   I found that he was.  The Court always has to make an evaluation in these circumstances of whether the conduct engaged in by the respondents should properly be grouped into what various smaller groups or groupings.  In the circumstances I have described, it is not appropriate to group as the respondents seek.

The Matters to be taken into Consideration in Respect of Penalty

1. In Construction, Forestry, Maritime, Mining and Energy Union
   v Australian Building and Construction Minister (Non-Indemnification Personal Payment Case) [2018] FCAFC 97 (“Australian Building”), the Full Court of the Federal Court said relevantly at [19]-[20]:

   “[19]    … Of particular significance is the recognition that deterrence (general and specific) is the principal and indeed only object of the imposition of a penalty — to put a price on contravention that is sufficiently high to deter repetition by the contravener and others who might be tempted to contravene the Act (Authorities omitted): Retribution, denunciation and rehabilitation have no part to play.

   [20]    Relevant factors in the overall assessment of penalty were helpfully listed by French J in CSR. They have been adopted in many cases. For present purposes, they can be restated as follows: the nature, character and seriousness of the conduct; the loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and, any co‐operation with the regulator and contrition.”

2. The calibration of these various matters, which are not an exhaustive catalogue, requires a process often described as instinctive synthesis.

3. Mr Wall had given the respondents good service over a protracted period of time, namely, 10 years.  He had been the number 2 in the organisation as it grew from 3 to over 30 employees.  It is apparent from the materials taken as a whole that he retained a genuine sense of commitment to the company at all times until the very last period of his employment, when it was perceived by him to be coming to an end.  He had developed a close friendship with Mr King, and, indeed,

   
   

   Mr King confirmed during the hearing in response to a question from the Court that things have now gone horribly wrong.

4. Because of the increase in size of the business, the abilities that

   
   

   Mr Wall had brought to bear were plainly thought not to justify his remaining in his second in charge role.  As I indicated in the first judgment, he was essentially pushed sideways but still kept at a senior level within the organisation.  Looking at the matter now, after the dust has fully and finally settled, the conclusion I would draw is that, in a fast-moving and dynamic period of the first respondent’s operation,

   
   

   Mr Wall was really essentially shunted to one side and ignored.  As indicated in the earlier judgment, he never received a position description, although others had.  Some of his responsibilities were re-allocated to employees previously subordinate to Mr Wall.  This must have been, and no doubt was, hurtful to him.

5. Contrary to the submissions for the applicant, however, the conduct of Mr King was not, as I find, gratuitously mean spirited.  He had offered to keep Mr Wall in employment at his same salary and conditions in what was plainly regarded (by both of them) as a lesser role as a senior salesman.  I think this was reflective more of thoughtlessness on

   
   

   Mr King’s part than any kind of malicious intent.

6. Where the conduct of the respondents is, however, open to criticism is that, when the Defence was first filed, they sought to put into play alleged misconduct on Mr Wall’s part.  This was only abandoned when Mr Wall filed quite substantial tranches of affidavit material from employees of the first respondent demolishing any such assertions.  This endeavour to portray Mr Wall in a bad light was, in the scheme of things, unattractive and inappropriate, but I should point out that I will be reconsidering what should be done about this in relation to the question of costs, and it would not be appropriate to impose two penalties on the respondents for the same conduct.

7. The seriousness of the contraventions lies in between the parties’ positions. The applicant posits that it should be assessed as towards the higher end of the range and the respondents submit there should be effectively no penalty at all. Both of these submissions are wide of the mark. In my view, the failure to pay Mr Wall notice is at the lower end of the scale. It rested upon a somewhat uncharitable, albeit correct, assumption by Mr King that Mr Wall would not, in fact, be utilising the various ancillary benefits that his contract entitled him to during the notice period. This was, of course, as a matter of fact correct, but only because Mr Wall’s services were dispensed with in a summary way and his various ancillary benefits ceased. This would tend to suggest that the contravention was somewhat more serious. Against this, however, the respondents paid the applicant a goodwill ex gratia payment so that the ultimate underpayment of the notice was small. It is important that employers comply with the FW Act and are reminded of the provisions contained in it. It is important that other employers are aware of this as well. Calibrating these matters together, I would assess the failure to pay notice as being of the order of 10 per cent of the applicable maximum.

8. The redundancy payment is another matter.  While, as I have said,

   
   

   I think that, and I believe I emphasised this in the first judgment, the redundancy happened in the sense in part simply because the events, as it were, overtook Mr Wall’s position, the reality is that it was

   
   

   Mr King’s determination to demote Mr Wall into a sales position that really caused the redundancy to take place.

9. Mr Wall’s refusal to work under an employee that he had previously supervised was, as I have said in the first judgment, entirely reasonable.  It was, in any event, a substantial alteration to the alternate position to direct special projects as it had been represented to Mr Wall in the first place.  Once the controversy arose, and indeed Mr King was on notice that Mr Wall at least thought that he was redundant, the decision not to pay him and to fight the matter to judgment (the latter, of course, being something the respondents were entitled to do and which attracts no penalty) was entirely witting.  Put shortly, the respondents took their chance with the correctness of their position and were wrong.  They should have realised this.  In my view, the failure to pay redundancy pay should be assessed at 35 per cent of the applicable maximum.

Loss and Damage Caused

1. The loss in terms of notice was not particularly great, but that of redundancy was.  I am going to make the declaration that the applicant seeks to the effect that his employment was caused by redundancy, which should at least ameliorate the difficulty he has thus far faced in this regard.

Circumstances in which the Conduct Took Place

1. These matters have in fact already been canvassed above.  Sending

   
   

   Mr Wall on annual leave, then requiring him to come to the meeting at which his employment was moving rapidly towards termination, was not in my opinion a very attractive course of conduct.  However, having said that, my impression is that the relationship between

   
   

   Mr Wall and Mr King had previously been such that these matters were not the result of any kind of sinister or callous thinking on Mr King’s part but rather reflected ad hoc responses to the march of events.

The Size of the Contravenor

1. The employer is neither enormous nor tiny.  It is a medium-sized firm.  The conduct was deliberate to the extent that I have described it as such, nonetheless, the events took place rapidly and amidst a busy backdrop for the respondents’ activity as a whole.

The Degree of Involvement of Senior Management

1. Mr King is the mind and will of the company, but in a company of this size, this is perhaps a factor attracting slightly less emphasis than would otherwise be the case.

The Culture of the Organisation as to Compliance Contravention

1. From the materials as a whole, this medium-sized company has in the past had a relatively unsophisticated approach to human resource matters.  Much of the difficulties in this case emerge from that lack.  The employer has expressed through counsel to the Court an acceptance of the Court’s judgment and one would infer fairly in the respondents’ favour that they would take the failings of this case properly on board.

Cooperation with the Regulation and/or Contrition

1. The regulator has not been involved in this case so that criterion is irrelevant.  No contrition has been expressed at any time by the respondents.  The lack of such contrition, of course, does not in any way make the conduct more serious.  It only means that the respondent does not get the benefit of any contrition it might otherwise had expressed.

Specific and General Deterrence

1. As earlier indicated, this is the primary focus of these matters.  In my view, it is unlikely that there will be a need to deter the respondents from further conduct.  I think they have learnt their lesson.  Nonetheless, general deterrence is an important consideration.  As the Full Court of the Federal Court observed in Australian Building at [22], “the overwhelming importance of deterrence as the protective purpose of the penalty does not exclude the need to determine a penalty which is proportionate to the contravening conduct”.  Relevant here is the fact that small employers cannot assume that contraventions should be, as it were, downgraded to suit the capacity of the employer to pay.  Furthermore, small to medium-sized employers, such as this one, need to understand clearly that the obligations to pay notice and redundancy are important and must be complied with.

Conclusion and Penalty

1. As indicated, in my view, applying the instinctive synthesis that is required, the notice of penalty should be fixed at 10 per cent of the applicable maximum and the redundancy contraventions should be fixed at 35 per cent in respect of both the respondents.  It is appropriate that the level be the same for each as it was Mr King’s conduct that essentially produced the final result.

The Totality Principle

1. The totality principle requires the Court, as it were, to stand back at the end of this process of reasoning and to establish that the overall result is indeed an appropriate one.  It must not be crushing or oppressive.  In my opinion, bearing in mind that no evidence at any moment has been provided as to the financial circumstances of either of the respondents, the amounts I propose to order are indeed appropriate.

Declarations

1. The applicant has sought a number of declarations but if I understand the matter correctly, the only declaration that is truly pressed is

   
   

   a declaration to the effect that the applicant’s termination of employment arose by reason of redundancy, which is factually correct and which may assist him in his dealings with the Australian Taxation Office.  In my opinion, it is appropriate to make such a declaration.  Otherwise, the declarations indicated by the applicant are, in my view, unnecessary as to which see Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) v Milin Builders Pty Ltd [2019] FCA 1070 at [78]-[79].

Costs

1. The applicant seeks costs on the basis set out at paragraph 41 of the initial Outline of Submissions.

2. Firstly, the applicant seeks costs to be agreed or in the alternative taxed in relation to the matter overall, on the basis that:

   a)the respondents had no tenable defence to the applicant’s claims for the notice to be paid at the full rate of pay or that he should be paid redundancy as per the NES; and

   b)the respondents’ failure to pay the notice and redundancy moneys was an act or omission that caused the applicant to unreasonably incur the costs of litigating to recover the moneys.

3. In my view, putting the matter albeit shortly, the applicant’s submission cannot be sustained.  The fact is that the respondents would reasonably have assumed they had an argument in relation to the goodwill payment.  It was plainly made as a gesture to the applicant as at the time of his termination and there was no compulsion upon the respondent to make it.  Furthermore, the argument about the redundancy was, while unsuccessful, not hopeless or absurd.  As I have found in the first judgment, the circumstances in which the redundancy arose were confusing and fluid to an extent to all the players involved.

4. The reason that the applicant succeeded was, in fact, primarily on the basis that he himself had not articulated and which his counsel effectively disdained in his oral submissions in any event. The overarching scheme is that each party bears their own costs (s.570 of the FW Act) unless they have effected some unreasonable act or omission. Running their case to judgment, which is what the respondents did here, was not in the circumstances of the case, in my view, so unreasonable as to grant a costs order generally.

5. Where the applicant is on much stronger grounds is in relation to his alternative claim for the costs incurred in having to oppose the respondents’ allegation that his employment was terminated for unsatisfactory conduct.  These claims were abandoned when the amended Defence was filed and before that occurred, the applicant had to take a number of steps which are set out at paragraph 42 in his written submissions.  In my view, the applicant should have those costs and they should be on an indemnity basis.  The respondents should have known that this aspect of the Defence, as well as being hurtful, was utterly untenable.  They will have to pay the price accordingly.

1. I will direct the parties to draw up an appropriate declaration and orders to reflect these reasons for judgment.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.

Associate: 

Date: 29 November 2019