Wellington v Offermans Partners (No 2)

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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:

  1. 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.

  2. 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.

  3. 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…

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Details
Case
[2021] FCCA 1846
Decision Date

CaseChat Overview and Summary

Jarrett J of the Federal Court of Australia considered an application by Wellington (the applicant) against Offermans Partners (the respondent) concerning alleged contraventions of the Fair Work Act 2009 (Cth). The dispute centred on the respondent's unlawful deduction of $3,200 from the applicant's final pay, purportedly to offset training costs, despite the applicant's employment being terminated by redundancy.

The court was required to determine the appropriate penalty for the contravention and to consider an application for costs. Specifically, the court had to assess whether the respondent's actions constituted an "unreasonable act or omission" for the purposes of section 570(2)(b) of the Fair Work Act, which governs the court's discretion to award costs. The respondent argued that the applicant should bear the respondent's costs on an indemnity basis from a certain date, or alternatively on the Federal Circuit Court scale, due to the applicant's rejection of a settlement offer.

In relation to the penalty, Jarrett J found that deterrence, both specific and general, was the primary objective. The court noted that making an unlawful deduction from an employee's pay is a serious matter. Despite the respondent's directors, who were legally and financially qualified, claiming a genuine belief in their entitlement to withhold the funds, the court found this difficult to accept given the clear terms of the employment contract. The contract stipulated that training costs could only be recouped if employment was terminated voluntarily or for serious misconduct within 12 months of the training costs being paid, not in cases of redundancy. Consequently, a penalty of $8,500 was imposed, payable to the applicant.

Regarding costs, the court examined the respondent's submission that the applicant's rejection of a $15,000 Calderbank offer was an unreasonable act. However, the applicant argued that the respondent's own conduct, including its untenable legal arguments and denial of liability, constituted unreasonable acts that caused the applicant to incur costs. The court found that the respondent's positions, which were based on legally flawed interpretations of the contract and legislation, were not reasonable and significantly increased the costs of the proceedings. The court also noted deficiencies in the respondent's factual assertions. Ultimately, the court found that the respondent's unreasonable acts and omissions had caused the applicant to incur costs, and it exercised its discretion to award costs in favour of the applicant.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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.