Wellington v Offermans Partners (No 2)
[2021] FCCA 1846
•10 August 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Wellington v Offermans Partners (No 2) [2021] FCCA 1846
File number(s): BRG 285 of 2020 Judgment of: JUDGE JARRETT Date of judgment: 10 August 2021 Catchwords: INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – amount of penalty – contravention of s.323(1) of the Fair Work Act 2009 (Cth).
INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – Fair Work Act 2009 (Cth) – costs.
Legislation: Bankruptcy Act 1966 (Cth)
Fair Work Act 2009 (Cth), ss. 323, 323(1), 325, 570, 570(2)(b)
Cases cited: Australian Building and Construction Commissioner v CFMMEU [2020] FCA 549
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
CFMMEU v ABCC (2018) 264 FCR 155
Commonwealth of Australia v Director of the FWBII (2015) 258 CLR 482
Construction, Forestry, Mining and Energy Union and Others v Clark (2008) 170 FCR 574
FWO v Jetstar Airways Ltd [2014] FCA 33
Saxena v PPF Asset Management Ltd [2011] FCA 395
Sayed v CFMEU [2016] FCAFC 4
Number of paragraphs: 38 Date of last submission/s: 19 March 2021 Date of hearing: By written submission Place: Brisbane Counsel for the Applicant: Mr Mackie Solicitor for the Applicant: B&G Law Counsel for the Respondent: Mr Spence Solicitor for the Respondent: Mackey Wales Law ORDERS
BRG 285 of 2020 BETWEEN: RYAN WELLINGTON
Applicant
AND: OFFERMANS PARTNERS
Respondent
ORDER MADE BY:
JUDGE JARRETT
DATE OF ORDER:
10 AUGUST 2021
THE COURT ORDERS THAT:
1.Pursuant to s.546(1) of the Fair Work Act 2009 (Cth) the respondent pay a pecuniary penalty of $8,500.00 to the applicant within 28 days of this order, in respect of the contravention of s.323(1) of the Fair Work Act 2009 (Cth) the subject of declaration 1 made on 29 January, 2021.
2.Otherwise all outstanding applications are dismissed.
REASONS FOR JUDGMENT
JUDGE JARRETT:
In his principal proceedings against his former employer, the applicant claimed:
(a)that the deduction of $3,200 from his final pay was unlawful under s.323(1) of the Fair Work Act 2009 (Cth); and
(b)that he was entitled to be reimbursed $3,188.00 for an expense he incurred on or about 7 July, 2018, both contractually and pursuant to ss.323 and 325 of the Act.
The hearing of the application occurred on 29 January, 2021 and judgment was delivered that day. I determined that the respondent had contravened s.323(1) of the Act by making the deduction from the applicant’s final pay as set out above and that the applicant was entitled to the claimed reimbursement pursuant to contract, but not pursuant to the Fair Work Act. I ordered the respondent to pay to the applicant $6,621.32 in respect of his claim and interest.
I directed the parties to file and serve any further evidence upon which they wished to rely on the question of costs and penalty. I directed written submissions in support of the orders sought by each party. The parties agreed that the outstanding issues of penalties and costs should be dealt with without a further oral hearing.
These reasons relate to the questions of penalties and costs. I have taken into account the further evidence filed by the parties and their written submissions.
The maximum penalty that might be imposed upon the respondent for the one contravention that I found proved is $63,000. The applicant submits that:
(a)a mid-range penalty of 50% of the $63,000 maximum ought be imposed in respect of the s.323(1) contravention and the applicant seeks that the penalties be payable to him; and
(b)he ought to have his costs of the proceedings:
(i)on the standard basis from commencement of proceedings until 11.00am on 19 August, 2020; and
(ii)on an indemnity basis from 19 August, 2020 onwards; or alternatively
(iii)50% of the his costs (assessed on an indemnity basis) from 7 October, 2020 onwards; or in the further alternative
(iv)standard costs from 7 October, 2020 onwards.
The respondent argues that the penalty sought by the applicant is excessive, is disproportionate to the contravening conduct and is not within a range supported by the authorities. The respondent submits that the “appropriate penalty range” for a single contravention of s.323(1) of the Act is between 1% and 18.5% of the maximum available penalty of $63,000. The respondent seems to submit that the penalty that is necessary to deter repetition of the conduct that occurred in this case is between 1% and 10% of the maximum penalty.
As to costs, the respondent submits that the applicant should pay the respondent’s costs on an indemnity basis from 19 January, 2021 because the applicant rejected a Calderbank offer to settle all matters for $15,000 which is in excess of the amount he was awarded in compensation and was an unreasonable act for the purposes of s.570(2) of Act. Alternatively, he argues that the applicant should pay the respondent’s costs on the Federal Circuit Court scale of costs from 19 January, 2021.
CONSIDERATION
The background to the proceedings and the findings I made are set out in the reasons I delivered ex tempore. I will not repeat them except where necessary.
Deterrence, both specific and general, is the “principal and indeed only” objective of pecuniary penalties under the Fair Work Act: Commonwealth of Australia v Director of the FWBII (2015) 258 CLR 482 at 506 [55]; CFMMEU v ABCC (2018) 264 FCR 155 at 167 [19]; Australian Building and Construction Commissioner v CFMMEU [2020] FCA 549 at [26]. Retribution, denunciation and rehabilitation have no part to play.
The penalty in this case must be set at a level such that it would be likely to act as a deterrent to similar contraventions by like-minded persons. It must have the necessary “sting or burden” to secure “the specific and general deterrent effects that are the raison d’être of its imposition”: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [116].
Making an unlawful deduction from an employee’s pay is, by itself, a serious matter and the protection of employees from such conduct is important: FWO v Jetstar Airways Ltd [2014] FCA 33 at [54].
The contravening conduct occurred subsequent to the respondent terminating the employment of the applicant by way of redundancy on 31 March, 2020. The purpose of the deduction was to off-set certain training costs of $3,200 incurred by the respondent which it considered should be reimbursed to it. The employment contract between the parties spelled out the circumstances in which the payment could be recouped by the respondent if the applicant’s employment was terminated. Those circumstances were spelled out in clear terms.
The respondent’s directors argued that they genuinely believed that the respondent was entitled to withhold the deducted amount. But it is difficult to accept that they did hold such a genuine belief because the respondent’s directors are professional men in private practice (one is an accountant, the other a lawyer with accounting qualifications) and are both registered liquidators. Both are also registered trustees for the purposes of the Bankruptcy Act 1966 (Cth). Mr Brennan is also a solicitor. They are not professionally unsophisticated gentlemen.
The circumstances as to when such a deduction would be authorised were clearly spelled out in the contract. An objective interpretation of clause 23.8 of the employment agreement shows that the deduction made by the respondent was not authorised. If the applicant’s employment was terminated voluntarily or for serious misconduct within 12 months of the respondent paying the training or education costs, clause 23.8 of the employment agreement provided for a deduction of any training costs from the amount due to the applicant upon termination of his employment. The terms of the contract did not provide that all or any training costs were to be repaid or reimbursed in the event that the employment was terminated by reason of redundancy. The applicant disputed that the deduction was authorised when his employment was made redundant. On the evidence there had been similar disputes in the past.
The respondent was not entitled to deduct the training costs from the applicant’s final payment when his employment was terminated by reason of redundancy and, in any event, the training costs had been paid by the respondent more than 12 months prior to the applicant’s employment ending.
I am satisfied that the respondent, via its directors knew that from the time of its termination of the applicant’s employment that it was likely that the deduction was not in accordance with the contract with the applicant, because clause 23.8 only applied to a payment made more than 12 months prior to the termination of the employee’s employment. The consequences of clause 23.8 of the contract being engaged were clear and did not cover the applicant’s situation.
There is no evidence of any past contravention of the Act by the respondent or its directors. I have approached this application on the basis that this is the first time the respondent has been found to have contravened the Act.
It is uncontroversial that the respondent is not a large employer and does not employ a dedicated human resource professional. The evidence is that on 20 November, 2020 it employed 7 people, although that number may have varied since that time. Its turnover has declined dramatically since the onset of the COVID-19 pandemic, although why that might be is not clear. Whilst small businesses have the same obligation as larger employers to meet minimum employment standards and penalties at a meaningful level should be imposed, the size of the respondent is a relevant consideration so as to ensure that any proposed penalty is not crushing or oppressive.
Both Mr Offermans and Mr Brennan go to great pains to point out in their evidence filed for the purposes of assessing penalty that they have limited experience in dealing with the Fair Work Act. However, that evidence and the submissions based upon it are not to the point. That is because they both give evidence that they considered carefully whether the amount deducted from the applicant’s final payment was able to be legitimately deducted.
The behaviour of the respondent was deliberate in the sense that the respondent’s evidence shows that the respondent’s directors reviewed clause 23.8 before making a decision to make the deduction. Their evidence is that they considered the deduction was authorised by clause 23.8. But as I found, it was not. And it was not a difficult decision to reach. The text of the clause is plain and simple. To suggest otherwise is disingenuous. No knowledge of the Fair Work Act was needed to determine whether the deduction was authorised, just basic skills in construing a contract, something in respect of which lawyers are trained.
On the evidence, the respondent has previously had issues surrounding the reimbursement of past employees’ training costs. Despite that and the clear words of the clause, the respondent sailed on its course only to be dashed upon the rocks of its own conviction that it was correct. Whilst I do not consider that the respondent set out to deliberately contravene the Fair Work Act, its actions constituting the contravention were considered and deliberate.
There is no evidence of any contrition or corrective action, although the evidence shows that the respondent has now paid the applicant the judgment sum.
The respondent continues to operate its business, under the control of Mr Brennan and Mr Offermans.
PENALTY - CONCLUSION
Taking the above factors into account, particularly the deliberate nature of the contraventions and the need for specific and general deterrence, I am satisfied that a penalty of $8,500 is appropriate.
I accept that the penalty ought to be payable to the applicant in accordance with the Full Court’s comments in Sayed v CFMEU [2016] FCAFC 4 at [101] that “...the power conveyed by s.546(3) is ordinarily to be exercised by awarding any penalty to the successful applicant”.
COSTS
Costs may only be awarded under s.570 of the Act. Both parties pin their hopes for a costs order on satisfying the requirements of s.570(2)(b) so as to enliven the Court’s discretion to make an order for costs. Relevantly, s.570 provides:
570 Costs only if proceedings instituted vexatiously etc.
(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) 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:
(a)…
(b)the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs;
As the parties point out, this subsection requires the Court to first determine whether a party engaged in any “unreasonable act or omission” that “caused the other party to incur the costs” and to then determine whether or not it will exercise its discretion to award costs.
The threshold set by s.570(2) of the Act is high, in that the Court’s discretion to award costs should only be exercised in a clear case: Saxena v PPF Asset Management Ltd [2011] FCA 395 at [5]-[6]: Construction, Forestry, Mining and Energy Union and Others v Clark (2008) 170 FCR 574 at [29].
The applicant submits that the respondent engaged in three acts that enagage s.570(2)(b), namely:
(a)first, it ought to have simply paid the sums of $3,200.00 and $3,188.00 in respect of the applicant’s claims, instead of denying all liability by the letter of its solicitors dated 14 April, 2020;
(b)second, it ought to have made sensible admissions in its defence; and
(c)third, it ought to have accepted the applicant’s offer to compromise his claims in the sum of $20,000.00 dated 17 August, 2020.
As to these matters, the applicant submits:
6.4 The first two issues involve the same problem - the respondent’s position was untenable. As observed by the Court in its decision, the respondent’s denial of liability was based on legal arguments that simply had no merit. These included:
(1) that clause 23.8 was not limited to costs incurred in the past 12 months despite express and unambiguous words to the effect;
(2) that clause 23.4 could not apply to a reimbursement;
(3) that the applicant did not “spend” any money because he incurred a debt;
(4) that the applicant’s contractual entitlements were overridden by a workplace policy that had no contractual force;
(5) that s.323(1) did not apply to notice periods or leave payments, despite the wording of note 2 and the Full Court decision in Qantas Airways Limited v Flight Attendants’ Association of Australia [2020] FCAFC 227;
(6) that no liability existed because Mr Brennan considered that an MPA was not a course that the respondent would “generally consider to be eligible for approval’;
(7) that clause 23.4 was subject to pre-authorisation from the respondent (despite the clause not containing any such requirement);
(8) that the decisions in Ravbar and Hall meant that the applicant could not discharge his burden of proof without corroboration;
(9) that s.325 was limited by the Truck Act 1831 (UK); and
(10) that the respondent received no benefit from the MPA course because the applicant only completed one module of the course before his dismissal.
6.5 The above positions were not reasonable. The promotion thereof significantly increased costs, not only by providing the basis for the defence itself, but by requiring the applicant to go to the expense of addressing each point.
6.6 The factual position put forward by the respondent was also deficient in that:
(1) it was apparent from cross-examination that the respondents had no proper basis to deny that the applicant provided Mr Brennan with the expense form for the Reimbursement as alleged in the Statement of Claim. Its witnesses swiftly admitted in cross-examination that the form was not remarkable and could have simply been lost; and
(2) more significantly, the evidence of Mr Brennan in cross-examination differed considerably and materially from his affidavit evidence.
6.7 Although the applicant’s claim that the failure to pay the Reimbursement was also a FW Act contravention was unsuccessful, it was not unsuccessful because of any argument raised by the respondent. In any event, the applicant’s contractual claim for that sum was successful. If the respondent had simply adopted the approach of the Court, either in its Defence or in April 2020, the hearing of 29 January 2021 would have been avoided.
The parties exchanged a number of offers in this matter. On 12 August, 2020 the respondent served a notice of offer of compromise by which the respondent offered to pay the sum of $3,200 to the applicant. On 17 August, 2020 the applicant served a notice of offer of compromise by which the applicant offered to accept the sum of $20,000 from the respondent. On 19 January, 2021 the respondent made an offer on a “without prejudice save as costs” basis by which the respondent offered to pay the sum of $15,000 to the applicant which was open until 27 January, 2021. On 25 January, 2021 the applicant made an offer on a “without prejudice save as costs” basis by which the applicant offered to accept payment of the sum of $30,000 from the respondent.
The applicant further submits:
6.12 In addition to the above matters, the applicant refers to the following factual matrix:
(1) the applicant attempted, by letter dated 7 August 2020, to reduce costs by having the interpretation of clause 23.8 and application of s.324 determined by the Court as a separate issue on the basis that it was a pure question of law, the resolution of which would “halve the issues in dispute .. .if not assist with the resolution of the matter in general;
(2) the respondent rejected that approach by letter dated 12 August 2020 on the basis that the application of s.324 was central to the case and required hearing of the evidence. As the parties could not reach agreement on the issue, the applicant did not pursue this course because a contested application posed the risk of undoing the costs savings being sought, particularly as the Court’s general attitude to determining separate issues was not known;
(3) the applicant again attempted to reduce costs by serving a ‘Notice to Admit Facts’ relating to the enrolment and completion of the applicant’s JCU studies. The respondent disputed four of the five facts set out in that Notice in circumstances that did not appear either reasonable or internally consistent. This resulted in the applicant needing to annex a number of documents to his evidence in chief relating to him undertaking the various studies;
(4) as stated at paragraphs 4.6 and 4.17 above, at all material times the respondent must have known (or at least ought to have known) that clause 23.8 did not authorise the Deduction;
(5) when the applicant became aware (via the discovery process) that the respondent had not paid the for the ARITA Course within the 12 months prior to the Deduction, it wrote to the respondent (on 7 October 2020) advising that the debate over the interpretation of clause 23.8 was irrelevant, and inviting immediate payment of the Deduction of $3,200.00. No response was received; and
(6) the applicant could have significantly complicated the claim by including Mr Brennan and Mr Offermans as individual respondents, or by attempting to “double up” the deduction by claiming that it related to some award or NES entitlement and then seek contraventions in respect of ss.44 and 45 of the FW Act.
The respondent submits that the applicant should pay 50% of the respondent’s costs on the Federal Circuit Court scale up until 19 January, 2021 as a result of the applicant’s unsuccessful contravention claims case against the respondent in relation to the reimbursement. The respondent further submits that the applicant should pay the respondent’s costs on an indemnity basis from 19 January, 2021 because the applicant rejected a ‘Calderbank v Calderbank’ offer to settle all matters for $15,000 which is in excess of amount he was awarded in compensation and was an unreasonable act for the purposes of s 570(2) of FW Act. Further, or in the alternative, the applicant should pay the respondent’s costs on the Federal Circuit Court scale of costs from 19 January, 2021.
The respondent submits:
123. … that the applicant should pay 50 % of the respondent’s costs on a standard basis from the commencement of the claim until 19 January 2021.
124. This is because the on applicant’s own version of the facts, it was clear that the pleaded claim for a contravention of ss 323 and 325 of the FW Act in relation to the Reimbursement was doomed to fail because the respondent had not required the applicant to “spend, or pay to the employer or another person, an amount of the employee’s money or the whole or any part of an amount payable to the employee in relation to the performance” within the meaning of s 325 of the FW Act. The respondent had also not failed to pay the applicant “amounts payable to the employee in relation to the performance of work” pursuant to s 323 of the FW Act.
125. As such, while the applicant pursued a further claim regarding a breach of contract in the OAA, it is submitted that its success in this claim does not ameliorate the consequences of the claim that had no prospects of success.
126. Further to this, the applicant unreasonably pursued this claim in the FCC proceedings, in circumstances where it could have utilised the small claims procedure in the FW Act for the Reimbursement claim, therefore reducing the costs that the respondent was required to incur in being successful in defending the alleged contraventions.
127. It is therefore submitted that this part of the applicant’s claim was instituted without reasonable cause within s 570(2)(a) of the FW Act: Australian Workers Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23; (2013) 232 FCR 428.
Unreasonable rejection of offer of settlement
128. It is further submitted that the applicant’s rejection of the Calderbank v Calderbank offer of $15,000 was unreasonable conduct in circumstances where:
a. the compensation claimed was significantly less than the $15,000;
b. the alleged contraventions of ss 323 and 325 of the Act were doomed to fail;
c. the Fair Work jurisdiction is (generally) a no costs jurisdiction;
d. the offer was made prior to the applicant being required to incur further costs in filing the OAA and proceeding to a hearing; and
e. the compensation awarded to the applicant is significantly less than the $15,000 offered on 19 January 2021.
COSTS – CONCLUSIONS
In my view, it was unreasonable of the respondent to defend the applicant’s claims on the basis that it did. The applicant was successful in both of his claims although he did not establish that the failure to reimburse him as he was entitled to be reimbursed under the contract was a breach of the Fair Work Act. Nonetheless, he was successful in his claims. As I have indicated above, the basis upon which the respondent sought to defend those proceedings turned out to be erroneous and clearly so.
The parties exchanged offers. I think it was unreasonable for the applicant to fail to accept the respondent’s offer made on 19 January, 2021 of $15,000. That sum was well in excess of the amount claimed by the applicant in the proceedings even taking into account interest. It would have gone some way to meeting his costs. As it is, it is slightly in excess of the amounts recovered by the applicant in respect of his claim and penalty.
In my view, no order for costs for either party is warranted in the present proceedings. Although both parties have established that there are aspects of the way in which the other side has conducted the case which might be said to be unreasonable, as a matter of discretion it seems to me that given that there was unreasonableness on the part of each of the parties, no order for costs is appropriate.
The competing applications for costs will be dismissed.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Jarrett delivered on 10 August, 2021. Associate:
Dated: 10 August 2021
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