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[2009] FCA 1417
Federal Court of Australia
2009-12-03
Jagot J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 On 18 August 2009 I declared that the respondent, Rail Corporation of New South Wales (RailCorp), breached cl 22.1 of the New South Wales, Rail Infrastructure Corporation and State Rail Authority of New South Wales Enterprise Agreement (the 2005 agreement) with respect to 22 positions at Town Hall Railway Station (Australian Rail, Tram and Bus Industry Union v Rail Corporation New South Wales [2009] FCA 894). The question of penalty in respect of these breaches remains outstanding. 2 It was common ground between RailCorp and the applicant, the Australian Rail, Tram, Bus and Industry Union (the Union), that cl 22.1 of the 2005 agreement is an "applicable provision" within the meaning of s 719(1) of the Workplace Relations Act 1996 (Cth). It follows that the Court (being an "eligible court") may impose a penalty on RailCorp in accordance with Div 2 of Pt 14 of the Workplace Relations Act. Under s 719(4) the maximum penalty that may be imposed on a corporation in respect of a breach of an applicable provision is 300 penalty units or $33,000. However, s 719(2) provides that: (2) Subject to subsection (3), where: (a) 2 or more breaches of an applicable provision are committed by the same person; and (b) the breaches arose out of a course of conduct by the person; the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term. 3 RailCorp submitted that, on the facts of this case, no penalty should be imposed in respect of any of the breaches. Alternatively RailCorp submitted s 719(2) applied so that the breaches in respect of each of the 22 positions must be treated as a single breach. The Union took issue with both contentions. It submitted that the breaches called for the imposition of a substantial penalty which should be paid to it in accordance with s 842 of the Workplace Relations Act.
RAILCORP'S "NO PENALTY" CASE 4 RailCorp supported its primary position, that no penalty should be imposed, by submissions as follows: (1) The imposition of a penalty for breach of an applicable provision is discretionary (Victoria University of Technology v Australian Education Union (1999) 91 IR 96; [1999] FCA 1065 at [33]). (2) RailCorp genuinely misunderstood the operation of cl 22 of the 2005 agreement and its interaction with cl 3.10 of the State Rail Authority of New South Wales Enterprise Agreement 2002 (the 2002 agreement). This is evidenced by the course of correspondence between RailCorp and the Union. (3) RailCorp's interpretation of the operation of cl 22 of the 2005 agreement and its interaction with cl 3.10 of the 2002 agreement was arguable, even if proved to be wrong by reason of the principal decision in this proceeding. The 2005 agreement contains many ambiguities and difficulties. (4) Although RailCorp and the Union had long been in dispute about cl 22, their communications related to the filling of positions as required by cl 22.4 and not the making of a decision as required by cl 22.1. The breaches found in this case involve cl 22.1 only. Moreover, the communications show that RailCorp did not simply ignore the Union's position. It engaged in processes as contemplated by the 2005 agreement, including the active management of vacant positions. (5) The Union did not suggest that RailCorp's breaches were wilful in the sense that RailCorp acted in knowing defiance of its obligations. At worst it is said by the Union that RailCorp did not do all it could and should have done to ascertain the true nature of its obligations under cl 22. (6) The breaches of cl 22.1 should be seen as administrative in character. They relate to the failure to make a decision about the continuation of authorised positions. However, even if decisions had been made, the situation at Town Hall Railway Station may have been the same. Clause 22.1 vested in RailCorp a unilateral power to decide whether a vacant position should continue as an authorised position or not. In theory, RailCorp could have decided that none of the 22 positions in question were to continue as authorised positions. (7) RailCorp's motives were to ensure that it did not fill vacant positions which might thereafter be discontinued as part of ongoing structural reforms. RailCorp rightly saw this as unfair to employees and inappropriate. It is for this reason that it made ad hoc decisions about positions as and when they became vacant. (8) RailCorp has not previously been found to be in breach of any industrial agreement. (9) RailCorp had expressed its remorse for the breaches and put in place procedures to ensure ongoing compliance with the provisions of the Rail Corporation New South Wales Collective Agreement 2008 (the 2008 agreement) equivalent to cl 22 of the 2005 agreement. 5 RailCorp compared the circumstances of the present case to those in Australian Liquor Hospitality & Miscellaneous Workers Union v Broadlex Cleaning Australia Pty Ltd (1997) 78 IR 464 and Australasian Meat Industry Employees' Union v Australia Meat Holdings (1998) 82 IR 76 in which no penalty was imposed where the breaches arose by reason of a genuinely held and arguable, but incorrect, interpretation of an industrial agreement. 6 I do not consider these submissions consistent with the relevant principles having regard to a proper understanding of the facts of the case. The principles are not in dispute. As the Union submitted, they are conveniently summarised in Martin v Fresho Foods Pty Ltd (No 2) (2009) 180 IR 300; [2009] FMCA 191 at [12]-[19] and I do not need to repeat them. Applying those principles to the facts of the present case highlights a number of matters of significance. 7 In RailCorp's favour, it has an unblemished record. It was also common ground that the breaches of cl 22.1 of the 2005 agreement cannot be seen as wilful in the sense of undertaken in knowing breach of the obligations imposed by the clause. Further, I accept that RailCorp believed that its construction of cl 22 of the 2005 agreement and part of cl 3.10 of the 2002 agreement was correct. 8 Despite these factors, it is also apparent that cl 22 of the 2005 agreement, providing a clearly defined method by which positions were to be identified and filled on station establishments, was an important part of the bargain that RailCorp and the Union struck. The clause was the subject of extensive negotiation. It represented a compromise between the Union's acceptance of RailCorp's management prerogatives and RailCorp's acceptance of the Union's interest in maintaining employment for its members. RailCorp's breaches undermined the central obligations imposed by cl 22 of the 2005 agreement. RailCorp's position was that so long as RailCorp defined an area as "under review" it never had any obligation to take the first step under cl 22.1, being the making of a decision about the continuation of a vacant position within four weeks. Because RailCorp never took the first step under cl 22.1, the balance of the clause (and thus, in substance, the clause in its entirety) was rendered nugatory at least insofar as station operations were concerned. Instead of conducting itself as required by cl 22, RailCorp, as the evidence of Gregory Greenhalgh disclosed, filled vacant positions on an ad hoc basis according to its requirements from time to time and its view of the importance of the particular position that had become vacant. 9 RailCorp maintained its stance in the face of repeated allegations by the Union of breaches of cl 22 at Town Hall Railway Station. As the Union submitted, the communications between the parties cannot be construed as RailCorp submitted. The obligation to fill positions imposed by cl 22.4 was dependent on RailCorp starting the process by making a decision under cl 22.1. By not making a decision, RailCorp never accrued an obligation to fill the position. The substantive effect of RailCorp's view of the operation of cl 22 was to give it a unilateral discretion to cover, advertise and fill positions as and when it saw fit and within any time period it saw fit. This outcome was wholly at odds with the substance of the bargain RailCorp struck with the Union in cl 22 of the 2005 agreement. This ad hoc approach depending on the particular nature of the vacant position remained RailCorp's position for the whole of the life of the 2005 agreement. As the Union submitted, there is no evidence that RailCorp took legal advice on this approach. Moreover, and contrary to RailCorp's submissions, there is no evidence that RailCorp's own industrial experts gave it advice that its interpretation of cl 22 was correct. There is evidence that RailCorp genuinely held a particular view of the operation of cl 22 of the 2005 agreement but that is not the same as evidence that it sought or received advice supporting its view. 10 For these reasons, and again as the Union submitted, the breaches of cl 22.1 cannot reasonably be described as administrative or technical in character. The breaches of cl 22.1 went to the heart of the clause binding RailCorp to deal with vacant positions in a particular way. 11 Further, while it may be accepted that RailCorp considered it inappropriate to fill positions if a later restructure removed the positions altogether, that fact does not lead to an inference that RailCorp's motivation was the best interests of employees and not its own interests. If it had been in RailCorp's interest to decide whether a vacant position should continue as an authorised position within four weeks of it becoming vacant then RailCorp would have acted to do so irrespective of cl 22.1. Given the repeated claims by the Union (which may be inferred to have been acting in the interests of its members, being RailCorp's employees) it may safely be inferred that RailCorp's management of vacant positions suited its own purposes. This inference is supported by Mr Greenhalgh's evidence. RailCorp's approach manifestly gave RailCorp the maximum degree of flexibility by allowing it to deal with each position as and when it became vacant and on an ad hoc basis. Clause 22, however, restricted RailCorp's flexibility by requiring it to make a decision up front about the existence of the position. Further, unless the position was to be abolished altogether, the clause imposed substantive obligations on RailCorp to fill the position in a particular manner and within a particular time. 12 RailCorp is a large organisation with significant resources available to it and responsibilities owed to a great many employees. In the face of the terms of an agreement which it described as complex and ambiguous, this large organisation with significant resources available to it adopted a position about the meaning of an important provision of an industrial agreement the effect of which was to vest in RailCorp a unilateral discretion to cover, advertise and fill positions as and when it saw fit and within any time period it saw fit. RailCorp maintained this position for the entire life of the 2005 agreement despite both repeated allegations by the Union that RailCorp had failed to comply with the clause in question and a change in the factual position which occurred when the employees rejected RailCorp's proposal for station reform in mid 2006. RailCorp's position meant that, over a lengthy period of time and in respect of 22 separate positions at Town Hall Railway Station, RailCorp breached cl 22.1 of the 2005 agreement. The evidence of Clyde Livingstone, the station manager of Town Hall Railway Station, supports an inference that the breaches played a real part in the constantly high levels of vacancies at that station and the associated difficulties Mr Livingstone said he experienced in effectively running that station. 13 These facts indicate that declining to impose any penalty on RailCorp in respect of the breaches would be inappropriate. It would be inconsistent with the fundamental requirements for proportionate punishment for breaches, specific deterrence of RailCorp from future breaches, and general deterrence of others in a similar position to RailCorp from committing breaches of industrial agreements in the future, albeit recognising the rehabilitative steps RailCorp has now implemented in order to avoid future breaches. For the reasons given above RailCorp's breaches cannot be characterised as merely administrative or technical, albeit they are by no means in or approaching the worst category of case. Specific deterrence remains a relevant objective. Despite the steps RailCorp has taken to ensure future compliance with the equivalent provision in the 2008 agreement of cl 22 of the 2005 agreement, the facts described above disclose that, when confronted with allegations of breach of an important provision that it saw as ambiguous and difficult to understand, RailCorp's approach to compliance was not adequate. General deterrence is almost always important, although a penalty must be proportionate to the gravity of the particular breach in question. 14 It follows that I do not accept RailCorp's submissions that it should not be subject to any penalty in respect of the 22 breaches of cl 22.1 found.
RAILCORP'S "SINGLE BREACH" ARGUMENT 15 As noted, the parties disagreed about the application of s 719(2) of the Workplace Relations Act to the breaches in respect of each of the 22 positions identified in the declaration made on 18 August 2009. The parties did not address the fact that I found multiple breaches in respect of some of the 22 positions. I infer that they did not do so because they implicitly recognised that RailCorp's treatment of a particular position over time should be understood as arising out of a course of conduct by RailCorp with respect to that position. Accordingly, and consistent with the way in which this matter was run by the parties, I treat all breaches of cl 22.1 found in respect of a particular position as a single breach of cl 22.1. The question is whether I also should treat all breaches of cl 22.1 in respect of the individual positions in question as breaches which arose out of a course of conduct by RailCorp so that those 22 breaches shall be taken to "constitute a single breach" of cl 22.1. 16 RailCorp submitted that I should do so as all of the breaches related to cl 22.1 of the 2005 agreement. All arose out of RailCorp's mistaken belief that part of cl 3.10 of the 2002 agreement continued in force and qualified RailCorp's obligations under cl 22 of the 2005 agreement. All related to positions rather than individual employees. All were a consequence of one course of "multifaceted conduct" (Klousia v TKM Investments Pty Ltd [2009] FMCA 208 at [75] citing Wells J in Attorney-General (SA) v Tichy (1982) 30 SASR 84 at 92-3, Gibbs v Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216, Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 citing Quinn v Martin (1977) 16 ALR 141 at 143-145; Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 at 244 and 266-267, and Textile Clothing and Footwear Union of Australia v Southern Cross Clothing Pty Ltd [2006] FCA 325 at [28]). According to RailCorp, the facts in Jordan v Mornington Inn Pty Ltd (2007) 166 IR 33; [2007] FCA 1384 (affirmed in Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; [2008] FCAFC 70) are distinguishable. In that case the employer applied duress to employees on separate occasions. 17 The Union submitted that s 719(2) was inapplicable. RailCorp bore the onus of establishing the applicability of that section (Australasian Meat Industry Employees' Union v Meneling Station Pty Ltd (1987) 16 IR 245, affirmed in Meneling Station Pty Ltd v Australasian Meat Industry Employees' Union (1987) 18 FCR 51). The facts in Jordan areindistinguishable. Heerey J (the judge at first instance in Jordan) at [91] observed that "the statutory provisions are not directed to a continuing state of affairs, but rather conduct which answers a particular description. If there are episodes of conduct distinct in time or place, albeit related and engaged in with the same purpose, there will be separate contraventions. To take an example discussed in argument, if an employer on each morning of a week threatened to assault an employee if he did not sign an AWA, there would be a contravention on each day". 18 The Union also referred to the observations of the Full Court in Jordan at [58] that it would have been open to Heerey J to conclude that there was a single course of conduct but he was not obliged to do so. The Full Court recognised that other factors "suggested that the contraventions should be treated separately and as equally serious. The contraventions occurred on different days. They each involved conduct which, viewed in isolation, was of the same character and significance as the individual events concerning other employees. The fact that Mr Barry persisted, in circumstances where Ms Thompson was obviously distressed, gives support to the idea that the repeat contraventions could be regarded progressively more seriously rather than less seriously". 19 According to the Union the critical factual reference established by s 719(2) is the nature of the conduct and not the reason for it. RailCorp's approach, focusing on the reason for the breaches, is not contemplated by the language of s 719(2). 20 The 2005 agreement was certified on 19 July 2005. It remained in force until 2 October 2008. From not later than 18 January 2006 the Union repeatedly advised RailCorp that RailCorp was breaching cl 22 of the 2005 agreement with the consequence that authorised positions were not being filled as required. After initially communicating to the Union in its letter of 27 January 2006 that all authorised positions would be filled in accordance with cl 22, RailCorp appears to have adopted the view that cl 22 was subject to part of cl 3.10 of the 2002 agreement. This position is reflected in RailCorp's facsimile of 20 December 2006 and was maintained thereafter. 21 According to Mr Greenhalgh, after the employees rejected the station reform proposal in June 2006, RailCorp considered all vacant positions to be at risk of future abolition unless RailCorp specifically determined that the position should continue. Mr Greenhalgh said that decisions to fill positions were thus made on an ad hoc basis by reference to the requirements of the particular position which had become vacant. He said these decisions were made "at senior HR management level". This evidence is consistent with the facts relating to the 22 positions in respect of which I found breach of cl 22.1 of the 2005 agreement. The positions in question are all at Town Hall Railway Station. They became vacant at different times throughout the life of the 2005 agreement (from January 2006 through to March 2008). Some of the positions were advertised. Others were not. Some were ultimately filled. Others were not. 22 These facts make it difficult to accept that the breaches arose out of "a course of conduct" by RailCorp. It may be accepted that RailCorp held a view about the meaning of cl 22 of the 2005 agreement. Undoubtedly it relied on that view as authorising the actions it took (or did not take) when positions became vacant. But the fact that RailCorp held a view does not mean that the actions it took at different times over a period of two to three years in respect of different positions may be described as arising out of "a course of conduct". Not only were the positions different. They became vacant at different times. They were treated differently by RailCorp depending on RailCorp's approach to the particular position at the time it became vacant. This is demonstrated by Mr Greenhalgh's evidence of RailCorp's ad hoc approach and the factual summary in [100]-[105] and [119]-[170] of my principal reasons for judgment. 23 For these reasons I do not accept that s 719(2) applies to the breaches found in respect of the 22 positions identified in the declaration made on 18 August 2009. By its actions RailCorp committed separate breaches of cl 22.1 with respect to those positions.
DETERMINING THE APPROPRIATE PENALTIES 24 The parties agreed that if s 719(2) did not apply, nevertheless, the principle of totality requires a penalty to be determined for each breach and, thereafter, an assessment of the total penalty to be made in light of the overall contravening conduct. The total penalty must be proportionate to the overall conduct (Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 at [23] and Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 171 FCR 357; [2008] FCAFC 170 at [34]). 25 In determining the appropriate penalty for each breach it is necessary to take into account all of the surrounding circumstances and consequences of the breaches and the position of RailCorp. I have identified the surrounding circumstances above. I have also identified the fact that RailCorp is a large organisation with many employees. It must have been subject to numerous industrial agreements. Despite this, neither RailCorp nor its statutory predecessors have been previously found in breach. This is a significant factor weighing in RailCorp's favour. I am also satisfied that RailCorp has taken steps to ensure that it is able to meet its obligations under the provisions of the 2008 agreement equivalent to cl 22 of the 2005 agreement. Further, I accept that RailCorp takes its industrial obligations seriously. Although I have found RailCorp to be in breach of cl 22.1 of the 2005 agreement and do not consider that its approach to compliance with cl 22 was adequate in all of the circumstances, I nevertheless recognise that RailCorp believed it was entitled to act as it did. RailCorp also devoted substantial resources to managing vacant positions. It did not do so in accordance with its obligations in respect of the 22 positions identified, but it did not simply ignore vacant positions. 26 I have considered but rejected formulating different penalties having regard to the nature of any particular position or the length of time over which it remained vacant. First, I am not able to determine the relative importance of positions and understand Mr Livingstone's evidence about the resulting management difficulties he has experienced to be a consequence of none of the positions having been filled as cl 22 required. Second, cl 22.1 required a decision about the continuation of each position as it became vacant within a period of four weeks. Each breach was committed by reason of RailCorp's failure to make the required decision within the required time. The Union's allegations of breach were made throughout the period of RailCorp's contravening actions. RailCorp's conduct in respect of later breaches, accordingly, was no more or less serious than its conduct in respect of earlier breaches. 27 Taking into account the maximum penalty and all of the factors to which I have referred above (including specific and general deterrence) I consider that each breach should attract a penalty towards the lower end of the scale in the sum of $5000. If this penalty were to be imposed for each of the 22 breaches, RailCorp would be subject to a total penalty of $110,000. I consider a total penalty of $110,000 disproportionate to RailCorp's overall culpability. In terms of RailCorp's overall culpability I consider that the total penalty should not exceed $70,000. Application of the totality principle thus requires each penalty to be reduced. As mathematical precision is neither necessary nor appropriate I have determined the penalty for each breach to be $3100. The penalties should be paid to the Union as sought. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.
Associate: Dated: 3 December 2009 Counsel for the Applicant: Ms C Howell
Australian Rail, Tram and Bus Industry Union
Rail Corporation of New South Wales
[2009] FMCA 208
[2009] FMCA 191
[2007] FMCA 7
(1982) 30 SASR 84
(1997) 78 IR 464
(1998) 82 IR 76
(1987) 16 IR 245
(2008) 165 FCR 560
(1992) 37 FCR 216
(2007) 166 IR 33
(2009) 180 IR 300
(1987) 18 FCR 51
(2008) 168 FCR 383
(2008) 171 FCR 357
(1977) 16 ALR 141
(1985) 9 FCR 241
(1999) 91 IR 96