Association of Professional Engineers, Scientists and Managers Australia v Bulga Underground Operations Pty Ltd

Relevant principles 12 The principles that must be applied when determining the appropriate pecuniary penalty for contraventions of civil penalty provisions, including those under the Fair Work Act, are well-settled. They were summarised in the following terms by the Full Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68; [2017] FCAFC 113 at [98]-[107]: Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is primarily, if not wholly, protective in promoting the public interest in compliance: Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076 at 52,152 [42]; Commonwealth v Director, FWBII at [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ). The principal object of a pecuniary penalty is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene; both specific and general deterrence are important: Chemeq at [90]; Ponzio at [93]. A pecuniary penalty for a contravention of the law must be fixed with a view to ensuring that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [66]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at 265 [62]-[63]. In relation to general deterrence, it is important to send a message that contraventions of the sort under consideration are serious and not acceptable: Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406 at 418 [32]. The question whether a pecuniary penalty involves an element of punishment remains somewhat controversial: see the discussion in Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2016] FCA 453; 242 FCR 389 at [76]; ACCC v ANZ at [78]-[83]; Construction, Forestry, Mining and Energy Union v Australian Building and Construction Commissioner [2016] FCAFC 184; 341 ALR 383 at [8], referring to NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 296-7; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 at 241; Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (1978) ATPR 40-091 at 17,896; Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [2001] FCA 1716; (2002) ATPR 41-851 at 44,543 [50]. To a certain extent, that debate appears to be more semantic or philosophical than real. It is sufficient to say that, accepting that the primary purpose of imposing a pecuniary penalty is to protect and deter, that purpose is achieved by imposing a punishment in the form of a pecuniary penalty: ACCC v ANZ at [83]. The fixing of a pecuniary penalty involves the identification and balancing of all the factors relevant to the contravention and the circumstances of the defendant, and making a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty. While there may be differences between the criminal sentencing process and the process of fixing a pecuniary penalty (cf. Commonwealth v Director, FWBII at 491 [56]-[57]), the fixing of a pecuniary penalty may to an extent be likened to the "instinctive synthesis" involved in criminal sentencing: TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at 294. Instinctive synthesis is the "method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case": Markarian v The Queen (2005) 228 CLR 357 at 378 [51] (per McHugh J). Or, as the plurality put it in Markarian (at 374 [37], per Gleeson CJ, Gummow, Hayne and Callinan JJ) "the sentencer is called on to reach a single sentence which … balances many different and conflicting features". Like the exercise of imposing a sentence for an offence, the process of fixing an appropriate pecuniary penalty should not be approached as a mathematical exercise involving increments to or decrements from a predetermined range of sentences: Wong v The Queen (2001) 207 CLR 584 at 611-612 [74]-[76]. In fixing the amount of a civil penalty, reference is frequently made to the lists of factors or considerations identified by Santow J in Australian Securities and Investments Commission v Adler (No 5) [2002] NSWSC 483; (2002) 42 ACSR 80 at 114-115 [126] and French J in Chemeq at 534 [99]. Those lists of relevant considerations, which have been approved and elaborated on by many subsequent decisions of this Court, were not, and plainly were not intended to be, exhaustive. Nor was it suggested that each of the factors referred to in the respective lists was necessarily relevant or important in every case. These lists of factors should not be treated as a rigid catalogue or checklist of matters to be applied in each case; the overriding principle is that the Court should weigh all relevant circumstances: Australian Securities and Investments Commission v GE Capital Finance Australia [2014] FCA 701 at [72]. In general terms, the factors that may be relevant when fixing a pecuniary penalty may conveniently be categorised according to whether they relate to the objective nature and seriousness of the offending conduct, or concern the particular circumstances of the defendant in question. The factors relating to the objective seriousness of the contravention include: the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the defendant is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention. The factors that concern the particular circumstances of the defendant, particularly where the defendant is a corporation, generally include: the size and financial position of the contravening company; whether the company has been found to have engaged in similar conduct in the past; whether the company has improved or modified its compliance systems since the contravention; whether the company (through its senior officers) has demonstrated contrition and remorse; whether the company had disgorged any profit or benefit received as a result of the contravention, or made reparation; whether the company has cooperated with and assisted the relevant regulatory authority in the investigation and prosecution of the contravention; and whether the company has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law. Where the defendant is a body corporate, the size of the body does not of itself justify a higher penalty than might otherwise be imposed: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 at 559-561 [89]-[92]. The size of the corporation may, however, be particularly relevant in determining the size of the pecuniary penalty that would operate as an effective deterrent. The sum required to achieve that object will generally be larger where the company has vast resources: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265; (2005) 215 ALR 301 at 309 [39]; Australian Competition and Consumer Commission v Apple Pty Limited [2012] FCA 646 at [38]. Careful attention must also be given to the maximum penalty for the contravention. That is so for at least three reasons: first, because the legislature has legislated for the maximum penalty and it is therefore an expression of the legislature's policy concerning the seriousness of the prescribed conduct; second, because it permits comparison between the worst possible case and the case that the Court is being asked to address; and third, because the maximum penalty provides a "yardstick" which should be taken and balanced with all the other relevant factors: Markarian at 372 [31] (per Gleeson CJ, Gummow, Hayne and Callinan JJ). Even where the maximum penalty for the contravention is high, and the amount necessary to provide effective deterrence is large, the amount of the penalty should be proportionate to the contravention and should not be so high as to be oppressive: Stihl Chainsaws at 17,896; NW Frozen Foods at 293.

The appropriate penalty 24 There is no doubt that the Court has a discretion whether or not to impose a penalty for a contravention of a civil penalty provision such as s 323 of the Fair Work Act. There is no principle that a Court must, in all cases of proven breach, impose a penalty: Victoria University of Technology v Australian Education Union (1999) 91 IR 96; [1999] FCA 1065 at [33]. 25 This is not a case, however, where it would be appropriate not to impose any penalty in respect of Bulga's contravention. In all the circumstances a penalty should be imposed, albeit a fairly modest one. 26 It may be accepted that the contravention largely arose out of what turned out to be an incorrect view or belief taken by certain management staff at Bulga concerning the determination of the base rate of pay of staff employees for the purpose of calculating long service leave entitlements under the Long Service Leave Act. That view or belief was ultimately set out in correspondence signed by Mr Charlie Spence, the Operations Manager of Bulga, in March 2018. It was essentially that an employee's base rate of pay could be equated with the employee's Notional Base Salary as defined in the Agreement and the employee's individual employment contract. 27 Even putting the evidence of Mr Paterson to one side, there is nothing to suggest that Bulga's position, as set out in the correspondence signed by Mr Spence, was not based on a genuine or honestly held view or belief concerning the operation and relevance of certain provisions of the Agreement when it came to determining an employee's base rate of pay for the purposes of the Long Service Leave Act. 28 It may also be accepted that the view or belief of Mr Spence, and perhaps other management staff, and the position taken by Bulga as reflected in the relevant correspondence, was not entirely untenable or unarguable. It is also perhaps understandable that management at Bulga arrived at that position given that various clauses in the Agreement appeared to specifically provide that the Notional Base Salary was to be used to calculate payments on termination of employment, including in respect of untaken annual leave and long service leave. 29 It does not follow, however, that the position taken by Bulga and its conduct in arriving at, and maintaining its position in relation to, the determination of employees' base rate of pay was necessarily entirely reasonable. 30 What is particularly unclear on the evidence is exactly what, if anything, Mr Spence, Mr Paterson or anyone else at Bulga did to check, verify or confirm the correctness of the position that it had taken concerning the calculation of employee entitlements under the Long Service Leave Act. There is merit in the Association's submission that Mr Paterson's evidence does not assist much in that regard. Indeed, Mr Paterson's evidence was, at least in some respects, vague and rather opaque. While Mr Paterson referred to a "genuine belief" held at an "organisational level" at Bulga, he does not explain: exactly who held that belief, perhaps beyond Mr Spence and Mr Paterson himself; when that belief was first formed; the precise basis upon which the belief was formed; whether any meetings, discussions or deliberations took place amongst relevant management at Bulga concerning the position which had been taken; nor whether any internal or external legal advice was sought in relation to the "organisational level" belief. Nor does Mr Paterson explain who formed the "considered interpretation" of the Long Service Leave Act, or the basis of that interpretation or even what that interpretation was or involved. 31 The characterisation of the issue concerning the correct calculation of employees' long service leave entitlements upon termination as "disputed and disputable" does not greatly assist in the particular circumstances of this case. While the position taken by Bulga may not have been entirely untenable or unarguable, nor was it a position which, upon close analysis, was particularly clear or strong, let alone unassailable. Moreover, it is difficult to avoid the conclusion that Bulga perhaps gave the issue insufficient attention and consideration. There is nothing to suggest that Bulga gave any detailed consideration to any opposing view concerning the operation of the relevant provisions of the Long Service Leave Act in the circumstances, even when the opposing view of the Association was clearly articulated in January and March 2018. 32 Had the issue concerning the operation of the relevant provisions of the Long Service Leave Act and the correct approach for determining an employee's base rate of pay been given detailed consideration and attention, or had legal advice been sought, Bulga's initial views or beliefs would most likely have been disabused or set straight. In particular, it would appear that those at Bulga who had considered the issue must have given insufficient attention to the actual terms of the Long Service Leave Act and had instead focussed on the terms of the Agreement. Had the terms of the Long Service Leave Act been closely considered, or had legal advice been sought, it is difficult to avoid the conclusion that Mr Mayhew and others may well have had their entitlements correctly calculated without having had to commence proceedings in this Court. 33 That, of course, is not to say that Bulga's contravention was flagrant, wilful or deliberate. There is nothing to suggest that Bulga intentionally underpaid Mr Mayhew's entitlements, in the sense that it knew it would be underpaying him and persisted with that course. Nor, indeed, would it even be correct to characterise this as a case where Bulga has simply "taken the odds" for its own financial benefit: cf Construction, Forestry, Mining and Energy Union v Hail Creek Coal Pty Ltd (No 2) [2018] FCA 480 at [16]-[17]. There is no evidence to suggest that Bulga necessarily appreciated that there was a risk that its belief or view concerning the calculation of entitlements under the Long Service Leave Act was wrong. The available inference, however, is that if it did not appreciate that there was a risk that its belief may be wrong, that was essentially because it gave the matter insufficient consideration and attention and did not seek appropriate advice. 34 In all the circumstances, it cannot be accepted that Bulga acted entirely reasonably in arriving at, and maintaining its belief or view concerning, the calculation of employee entitlements under the Long Service Leave Act. While the proper calculation of employee entitlements upon termination under the Long Service Leave Act may, in the circumstances, have been disputed and disputable, the evidence, such as it was, did not suggest that Bulga went to any great lengths to appropriately consider, verify or seek professional advice in relation to the stance it had taken in relation to that dispute. Had it done so, it may well have avoided underpaying Mr Mayhew and thereby contravening s 323 of the Fair Work Act. 35 It is, in these circumstances, appropriate for a penalty to be imposed. 36 There are, however, a number of circumstances which compel the conclusion that the penalty to be imposed should be fairly modest and towards the bottom of the available range. 37 First, and most significantly, this is not a case where specific deterrence is a particularly weighty consideration in fixing the penalty. Indeed, specific deterrence is of little significance in the circumstances of this case because there is little or no risk that Bulga will reoffend. It no longer has any employees and is therefore unlikely in the future to ever have to again calculate employee entitlements under the Long Service Leave Act. It is also relevant to note again in this context that Bulga's contravention was not knowing or intentional, but occurred in the context of a genuine, but as it turned out, erroneous belief about the correct way to calculate entitlements under the Long Service Leave Act. Now disabused of that belief, it is unlikely to reoffend: Flight Centre at [64]. It also follows that the fact that Bulga is a large and well-resourced company has limited relevance or significance. 38 Second, as has already been noted, the contravention was not relevantly flagrant, wilful or deliberate. Bulga did not set out to underpay its employees or breach s 323 of the Fair Work Act. Nor was there anything surreptitious or covert about Bulga's conduct. While senior management were involved in the contravention, that is of limited relevance or significance given the finding that the contravention was not flagrant, wilful or deliberate. 39 Third, the fact that the contravention was not flagrant, wilful or deliberate means that general deterrence is of less weight in fixing the appropriate penalty. 40 Fourth, the contravention in respect of which Bulga is being penalised is a single contravention relating to a single employee. While Bulga calculated the entitlements of other employees on the same basis, Bulga has not been found to have contravened s 323 of the Fair Work Act in relation to the other employees. The Association's submission that the contravention was systematic must, in those circumstances, be rejected. 41 Fifth, Bulga has a good record when it comes to compliance with industrial laws and instruments. There is no evidence to suggest that it has been found to have previously contravened the Fair Work Act or other industrial laws. 42 Sixth, the approach and stance that Bulga adopted in this proceeding minimised the cost and inconvenience to the Association and Mr Mayhew of having to seek redress in this Court. The parties mostly agreed on the facts and, aside from some short oral evidence, the hearing was essentially confined to legal argument concerning the proper construction of the relevant provisions of the Long Service Leave Act and the application of those provisions to the agreed facts. 43 Seventh, Bulga agreed on the amount of compensation and interest payable to Mr Mayhew and promptly paid that compensation to him. Perhaps more significantly, it has taken positive steps to ensure that other former employees whose entitlements were underpaid as a result of the erroneous position taken by it in relation to the calculation of benefits under the Long Service Leave Act have now, or will have, their correct entitlements paid to them. 44 Eighth, while the amount by which Mr Mayhew was underpaid ($8,904.45) was not an insignificant amount, that must be considered in the context of the overall amount of entitlements paid to him ($256,109.26). As has already been noted, Mr Mayhew has now been compensated in respect of the underpayment and there is no ongoing loss or damage. 45 In all the circumstances, it would be appropriate to characterise this contravention as falling towards the lower end of the spectrum in terms of the seriousness of contraventions of s 323 of the Fair Work Act. There are also a number of significant mitigating factors to which reference has already been made. As noted earlier, the maximum penalty for a contravention of s 323 by a corporation is $54,000.00. Weighing up all the relevant factors and considerations, the appropriate penalty to impose on Bulga in respect of its contravention, pursuant to s 546(1) of the Fair Work Act, is a pecuniary penalty of $10,000.00. 46 It was common ground that it would be appropriate for the penalty to be paid to the Association pursuant to s 546(3)(c) of the Fair Work Act.

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