THE BRAGDON ORDERS SOUGHT
161 In addition to imposing penalties, the applicant submitted the Court should make orders of a similar nature to those made by Flick J in Director of the Fair Work Building Industry Inspectorate v Bragdon (No 2) [2015] FCA 998. The orders sought would require Mr Myles to fund any penalties imposed on him out of his own personal funds and would preclude the CFMEU, or anyone else, paying the penalty for him or providing funds towards its payment. Such orders, the applicant submitted, would operate to deter Mr Myles from contravening the Fair Work Act in the future, as well as deterring any other union officers minded to engage in similar contravening conduct, by raising the spectre of personal financial responsibility for penalties imposed as a result of that conduct.
162 The orders sought in this proceeding are not identical to those made by Flick J in Bragdon. Having imposed a penalty of $20,000 on Mr Bragdon, Flick J ordered:
The First Respondent personally [ie Mr Bragdon] must pay the pecuniary penalty the subject of Order 1, and is not to seek or receive reimbursement (in whole or in part) of any monies from the Third or Fourth or Fifth Respondents (or any related entity), or to cause or occasion such penalty to be paid, either directly or indirectly, by the Third or Fourth or Fifth Respondents (or any related entity).
163 Similar orders were made against another individual union officer, the second respondent. The third, fourth and fifth respondents were unions and, while the Court imposed a penalty on the third respondent (the CFMEU), no prohibitory orders were made restraining the union parties from paying or contributing to, directly or indirectly, the penalties imposed on the individual union officers.
164 Here, the applicant seeks a different form of orders. He seeks orders against Mr Myles, but he also seeks prohibitory orders against the union. The orders sought are relevantly as follows:
14. The second respondent must pay the penalties the subject of orders 10-12 above (Penalties) from his own personal funds, and must not, directly or indirectly, whether before or after the payment of the Penalties:
(a) procure, cause, encourage, seek, induce or incite any other person (individual or corporate, including in particular the first respondent) to pay to him or for his benefit any monies referable to the payment of the Penalties (whether in whole or in part), whether by way of reimbursement or otherwise; and
(b) accept or receive any monies referable to the payment of the Penalties (whether in whole or in part), whether by way of reimbursement or otherwise, from any other person (individual or corporate, including in particular the first respondent).
15. The first respondent must not, directly or indirectly, whether before or after the payment of the penalties by the second respondent the subject of orders 10-12 above:
(a) procure, cause, encourage, seek, induce or incite any other person (individual or corporate) to pay to the second respondent or for his benefit any monies referable to the payment of the Penalties (whether in whole or in part), whether by way of reimbursement or otherwise; and
(b) pay to the second respondent any monies referable to the payment of the Penalties (whether in whole or in part), whether by way of reimbursement or otherwise.
165 For reasons I develop below, I have concluded it is appropriate to make an order of the kind sought by the applicant in paragraph 15 of his proposed orders, but not an order of the kind sought in paragraph 14.
166 The applicant submits that, in other regulatory schemes, there are express provisions which manifest a policy objective of preventing a related third party from indemnifying an individual upon whom a penalty is imposed. For example, s 77A of the Competition and Consumer Act 2010 (Cth) provides:
77A Indemnification of officers
(1) A body corporate (the first body), or a body corporate related to the first body, must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer of the first body:
(a) a civil liability;
(b) legal costs incurred in defending or resisting proceedings in which the person is found to have such a liability.
Penalty: 25 penalty units.
(2) For the purposes of subsection (1), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings.
Definitions
(3) In this section:
civil liability means a liability to pay a pecuniary penalty under section 76 for a contravention of a provision of Part IV or Part V.
officer has the same meaning as in the Corporations Act 2001.
167 Another example can be found in s 199A(2)(b) of the Corporations Act 2001 (Cth), which provides:
When indemnity for liability (other than for legal costs) not allowed
(2) A company or a related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer or auditor of the company:
…
(b) a liability for a pecuniary penalty order under section 1317G or a compensation order under section 961M, 1317H, 1317HA or 1317HB;
…
168 In my opinion, the existence of these legislative prohibitions in other regulatory schemes, which share some of the features of the regulatory scheme in the Fair Work Act, supports the proposition that orders of this kind can be seen, objectively, as advancing the purposes of general and specific deterrence.
169 The applicant submits that the form of orders it seeks in this proceeding is clearer than that in Bragdon, and avoids some of the difficulties noted by Jessup J in the Mitcham Rail Case. That was, as I have noted earlier, also a case involving Mr Myles as one of the individual contraveners. As a matter of discretion, Jessup J expressed the opinion that there were practical issues with "the enforcement of an order in the terms proposed", in particular because the applicant "made quite clear that [he] had no intention of monitoring the doings of Mr Myles and the Union" so as to ensure the CFMEU did not reimburse Mr Myles, or otherwise pay his penalty for him (at [37]). Jessup J concluded at [38] that:
Where Mr Myles would source the funds to meet any penal obligation imposed on him is not, in my view, a matter with which the court should concern itself.
170 In reaching that conclusion, his Honour expressly noted at [39] that he did not cast any doubt upon the power to make such orders.
171 Nor were the respondents' submissions on the issue in this proceeding initially couched in terms of power. On the morning of the penalty hearing, however, the respondents filed an amended written submission which sought to challenge the power of the Court to make an order of the kind made by Flick J in Bragdon. Their submissions filed in accordance with the Court's orders had not made that submission. In answer to a question, senior counsel informed the Court that the power of the Court to make such orders formed part of the appeal by the CFMEU against Flick J's orders in Bragdon.
172 The Full Court's decision in Bragdon v Director of the Fair Work Building Industry Inspectorate [2016] FCAFC 64 was published the day before the date on which the parties had been notified the decision in this proceeding would be handed down. As a result, delivery of judgment was postponed so that the Court could consider the Full Court's reasons. That consideration appears at [178] to [195] below.
173 The respondents' argument with respect to power in this matter rested on a contention that the only source of the Court's power to make orders in relation to payment of penalties for contraventions such as those in issue in this proceeding lies in s 546(1), read with the limits in s 546(2) and (3). The respondents submit the more general power conferred on the Court by s 545(1) (which I have set out at [14] above) does not extend to making the kind of orders made by Flick J. They point, as an example, to the asserted consequence that, in reliance on s 545(1), the Court could avoid the maximum penalties specified in s 546(2).
174 The limitations which the respondents' contentions seek to place around the words "may make any order the court considers appropriate" in s 545(1) are significant. I see no basis in the text, context or purpose of s 545 for such limitations. The presence and text of s 545(2) tends against the kind of limits suggested by the respondents. Clearly, as between the more specific power in s 546(1) relating to the imposition of pecuniary penalties limited to certain maximum amounts, and the location of that limited power straight after the more plenary power in s 545(1), together with note 1 to s 545(1), a limit will be implied into the power in s 545(1) so that its exercise cannot cut across the clear intention manifested by parliament in s 546(1) and (2) to authorise the Court to order pecuniary penalties be paid only within a certain monetary range. Further, s 546(5) expressly contemplates that orders may be made which are additional to, and separate from, an order imposing a pecuniary penalty. Other textual features also suggest a wide power capable of supporting an order prohibiting indemnification. The court can make an order under s 545(1) of its own initiative: s 545(4)(a). The power expressly extends to injunctions and an order prohibiting indemnification shares some of the characteristics of an injunction.
175 It is well settled that discretionary powers conferred upon courts to make orders in response to a breach of statute are not to be construed narrowly by reference to matters extraneous to the statutory scheme. A statutory power to order compensation, for example, is not to be construed as subject to common law limitations on damages where those limitations do not arise from the statute itself and may not accord with its objects and purposes: Murphy v Overton Investments Pty Ltd [2004] HCA 3; 216 CLR 388 at [44]-[45] per the Court; Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 at [17] per Gaudron J, [38] per McHugh, Hayne and Callinan JJ, [103] per Gummow J, and [152] per Kirby J.
176 The power in s 545(1) is wide and may support a wide range of orders: Australian Licenced Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd [2011] FCA 333; 193 FCR 526 at [421] per Barker J. For example, it may support an order compelling an employer to develop and comply with a program specifying what it will do to ensure it complies with the Fair Work Act: Automotive, Foods, Metals, Engineering, Printing and Kindred Industries Union v Thornton Engineering Australia Pty Ltd [2009] FCA 1584; 191 IR 315 at [7] per North J. While a power of that kind must be exercised in accordance with the purposes for which it was conferred (see, eg, Samsung Electronics Company Ltd v Apple Inc [2011] FCAFC 156; 217 FCR 238 at [44] per the Court), I can see nothing in the text or context of s 545(1), including the specific power to impose penalties in s 546(1), to indicate that it should be construed to exclude the possibility that a court might make orders of the kind I have made in this proceeding.
177 A single judge of this Court should follow a conclusion of law reached by another single judge of this Court unless persuaded the conclusion is plainly wrong: BHP Billiton Iron Ore Pty Ltd v National Competition Council [2007] FCAFC 157; 162 FCR 234 at [83]-[86] per Greenwood J, Sundberg J agreeing at [1]; Saeed v Minister for Immigration and Citizenship [2009] FCAFC 41; 176 FCR 53 at [38]-[40] per the Court (I note that Saeed was subsequently overruled by the High Court, but not in relation to this point: Saeed v Minister for Immigration and Citizenship [2010] HCA 23; 241 CLR 252). By "plainly wrong", what is meant is that the error must be "manifest", or at least "so clear as to enable a later court to say that the point is not reasonably arguable": SZEEU v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCAFC 2; 150 FCR 214 at [148] per Weinberg J (emphasis in original), Allsop J agreeing at [190]; and see Saeed [2009] FCAFC 41; 176 FCR 53 at [39], citing Weinberg J's statement with approval. In my opinion, that is especially so where the point deals with a question of powers of this Court: see, eg, Citigroup Pty Ltd v Mason [2008] FCAFC 151; 171 FCR 96 at [7].
178 The Full Court in Bragdon did not determine that Flick J had no power to make the orders sought, and indeed the obiter remarks by the Full Court do not appear to doubt that the Court has power to make such orders. Rather, their Honours focussed on discretionary considerations. Both as a matter of statutory construction and as a matter of comity and practice, then, I take the approach that s 545(1) would authorise the kind of orders sought by the applicant in the present proceeding, and made by Flick J in Bragdon.
179 I turn to consider the discretionary matters raised by the Full Court and to explain why, in my opinion, they do not preclude an order prohibiting indemnifications of the kind I have made.
180 The appeal in Bragdon was determined on the basis of error in the trial judge's findings as to liability: see Bragdon [2016] FCAFC 64 at [53]-[54]; [64]-[65]; [75]-[76]; [78]. In obiter, the Full Court said (at [82]) it would not have upheld the CFMEU challenge to the trial judge's penalties as manifestly excessive. The Full Court then said (at [83]) that there was "one feature of the penalty orders made by the primary judge which should be separately mentioned", and turned to discuss the orders I have reproduced at [162] above.
181 At the discretionary level, their Honours expressed reservations about the orders the trial judge had made. It seems to me those reservations fall into three categories.
182 First, the Full Court was not persuaded that an earlier Full Court decision (Australian Building Construction Employees' and Builders Labourers' Federation v Minister of State for Industrial Relations [1982] FCA 131; 43 ALR 189 (the Australian Building Case), in particular at 214) should be seen as supporting the making of such orders in the circumstances of Bragdon, instead characterising the Australian Building Case as a "special" case. At [86] the Full Court said:
The purpose of the order was apparently to address statements of open defiance of the Court's authority, to the effect that stoppages of work would effectively compel someone other than the union to make, or appear to make, payments of the fine. The case was a special one in that respect and, despite the apparent encouragement of the Full Court that the approach was a "model", the practice has not become established.
183 Second, like Jessup J in the Mitcham Rail Case (to which their Honours referred with approval), the Full Court considered there were practical difficulties about orders in the form made by the trial judge. Those difficulties were the ones identified by Jessup J, relating to the supervision of how an individual might obtain funds to pay a penalty imposed on that individual for contravention of the Fair Work Act: at [87]-[88].
184 Third, the Full Court added two other matters to the practical difficulties identified by Jessup J in the Mitcham Rail Case. It drew a parallel with the High Court's decision in Lamb v Cotogno [1987] HCA 47; 164 CLR 1, saying at [91]:
For similar reasons, the deterrent aspect of industrial penalties is not removed (even if it might be eroded) by the prospect that the penalty will ultimately be paid, or reimbursed, by a union. The individual wrongdoer is the person liable in law for the payment of a penalty, and to the consequences for non-payment.
185 Then, the Full Court also referred to the "wider context" and said at [92]:
An unpaid fine becomes recoverable as a debt (FW Act, s 546(4)). As a debt, it might normally be satisfied by a third party if debt recovery proceedings were commenced, or if a judgment debt set the matter on a course towards bankruptcy. The orders involved no express prohibition on third parties, even the other appellants, making payments of the penalty. We doubt that the Commonwealth could refuse a tender of payment from a third party with respect to either the penalty or a debt. If the penalty was paid, or a claimed debt was satisfied, the Commonwealth would be in no position to claim, or even accept, personal payment again under the orders.
186 I accept the force of the observations made by Jessup J in the Mitcham Rail Case and endorsed by the Full Court in Bragdon. Identifying the source used by an individual to pay a penalty is fraught with difficulty. No such difficulty attends an order against another party prohibiting indemnification, especially where that party is a registered organisation, the financial accounts and transactions of which are open to scrutiny.
187 Further, I consider the Australian Building Case offers some support for the approach I take, on both the question of power and that of discretion. There was no doubt expressed by the Full Court in that case that the power to make the order existed. There, the power of the Court could be traced either to s 31 of the Federal Court of Australia Act 1976 (Cth) or s 23 of that Act. The latter power is not excluded by s 545(1) of the Fair Work Act and may be available if, contrary to my opinion, s 545(1) did not authorise the making of such an order: see, generally, Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; 195 CLR 1 at [27] per Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ. Further, the conduct of the respondents in this case reveals, as I have found, a contumelious disregard for the law. Their respective histories of contraventions confirm that characterisation. In that sense, there are some parallels with the conduct under consideration by the Full Court in the Australian Building Case, even if the Full Court found the circumstances of Bragdon offered no such comparison.
188 The principles and their application in Lamb do not tend against an order of the kind I have made. In Lamb, the High Court recognised the objective of exemplary damages as being "to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again": at 9, quoting XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd [1985] HCA 12; 155 CLR 448 at 471 per Brennan J. It also recognised other purposes for exemplary damages such as general deterrence, assisting to discourage revenge by victims, and marking the court's condemnation of the defendant's behaviour, an objective the High Court saw as not excluded because an insured defendant would not pay the exemplary damages sum himself or herself: at 9-10. In my opinion, the Court's reasons at 10 reveal an acceptance that there is no effect given to the principle of specific deterrence with an insured driver. However, the Court in Lamb was concerned with the award of damages in tort, where the general objective is compensatory (in both general and aggravated damages) and the more punitive objective of exemplary damages is exceptional. In those circumstances, while the Court was concerned to identify some kind of punitive purposes served by exemplary damages, because those damages were of an exceptional nature in the cause of action, it mattered much less than principles of specific deterrence which were not addressed.
189 That is not the case in the jurisdiction exercised by this Court under the Fair Work Act in the present proceeding. The operation of specific deterrence is, as I have explained above, one of the two principal purposes of the imposition of penalties, the other being general deterrence. The Court is concerned to encourage and facilitate compliance with the regulatory scheme, and to avoid repetition of the same or similar unlawful conduct in the future.
190 If no regard is paid to how individuals such as Mr Myles may, in reality, be indemnified by their unions for their unlawful conduct, then the objectives of specific deterrence are diminished almost to the point of disappearance. It may well be the case that reputational concerns were one of the matters which the High Court in Lamb had in mind when it referred to the impact of the Court marking out its condemnation of a defendant's behaviour. That Mr Myles has any reputational concern in relation to the accumulation of court-imposed penalty orders is not apparent from the evidence in this case, including Mr Myles' history of contraventions. Mr Myles certainly gave no evidence demonstrating any such concerns. I consider that the effectiveness of an exercise of judicial power to impose penalties is significantly impaired where the reality is that the contravener is likely to be entirely indemnified from the consequences of the order. While there was no direct evidence of whether the CFMEU would or intended to pay any penalty imposed on Mr Myles, I am satisfied on the balance of probabilities that will occur if orders of the kind sought by the applicant are not made. The respondents' arguments proceeded on the basis that the CFMEU should not be prevented, directly or indirectly, from taking that course of action. The assumption underlying that submission is that there would be indemnification, otherwise the time spent opposing such an order would make no sense. As for Mr Myles, the impunity with which he knowingly engaged in contraventions of the Act, as to which I have made findings above, demonstrates that he was not concerned about the possibility of bearing personal financial responsibility for the consequences.
191 Not only can an order of the kind I have made have a deterrent effect on Mr Myles in relation to his future conduct, in my opinion it is capable of having a deterrent effect on the CFMEU. That is because, if indemnification of officials or other agents of the CFMEU for unlawful industrial action may be prevented by court orders, those responsible for decision making in the union may have cause to think about the penalties to which their own officials may be exposed when they consider engaging in conduct that may be unlawful. Such orders are also capable of having a general deterrent effect on other individuals and unions for the same reason.
192 Next, the existence of s 546(4) does not deprive an order of the kind I have made of its effect. If an order prohibiting the union from paying another respondent's penalty was made, the effect of the prohibition in the order would need to be recognised by (in this case) the Commonwealth. For the Commonwealth to accept payment from the union in those circumstances could make the Commonwealth complicit in a breach of a court order. That is so whether or not regard is had to the conversion of the penalty by operation of s 546(4) into a debt. The purpose of s 546(4) is to aid enforcement in circumstances where a penalty is not paid at all. As I have previously noted, it does not have the effect of removing its character as a penalty: Milardovic v Vemco Services Pty Ltd (Administrators Appointed) (No 2) [2016] FCA 244 at [11]; see also Australian Securities and Investments Commission v Hawley [2008] FCA 1423; 250 ALR 57 at [11] per Perram J. The penalty imposed on Mr Myles could not be enforced against the union. However, if an order of the kind made in this case exists, the penalty can be enforced against Mr Myles unless he makes arrangements other than having the union pay his penalty for him. He is, as I set out below at [202], free to make other arrangements but he will have to take responsibility himself for making those other arrangements.
193 Finally, it does not appear that the Full Court's attention was drawn to the existence of statutory schemes such as those in s 77A of the Competition and Consumer Act and s 199A of the Corporations Act. Those provisions would be affected by the same kind of arguments I have discussed above. Yet clearly none of those arguments could preclude these prohibitions from being effective. Similarly to s 546(4) of the Fair Work Act, s 1317G(2) of the Corporations Act provides that a penalty imposed under that Act:
… is a civil debt payable to ASIC on the Commonwealth's behalf. ASIC or the Commonwealth may enforce the order as if it were an order made in civil proceedings against the person to recover a debt due by the person. The debt arising from the order is taken to be a judgment debt.
194 But a company that paid a penalty imposed on its officer under the Corporations Act could hardly plead as a defence to the prohibition in s 199A(2)(b) of the Act that it was simply paying the officer's debt and not indemnifying the officer against liability for the penalty. So it must be with the exercise of a general power such as that in s 545(1) to make an order of the same kind.
195 There is no doubt that the discretionary considerations (covering the "practical difficulties" of such orders) raised by Jessup J in the Mitcham Rail Case and repeated by the Full Court in Bragdon remain, although in my opinion they are diminished in the current proceeding by the fact that only a prohibitory order is made against the CFMEU. The prohibitory order is capable of being effective to preclude the CFMEU from using its funds, and its members' funds, to pay Mr Myles' penalty. However, it will not preclude Mr Myles findings another source of funds to pay the penalty. Only the applicant's proposed personal order against him is aimed at achieving that outcome.
196 In my opinion, given the history of contraventions by the CFMEU and by Mr Myles, in order to give any real effect to the principles of specific deterrence, it is appropriate to make some kind of additional order, over and above the imposition of penalties. There are three factors which have emerged as consistent themes in these reasons. First, the contumelious disregard for the restrictions the law imposes on industrial activities shown by those who control the CFMEU as a registered organisation and by individual union officials such as Mr Myles. Second, the repeated use of coercive and intimidatory behaviour in order to secure industrial outcomes the CFMEU desires. Third, the access the CFMEU has to large amounts of funds to pay penalties, predominantly sourced from members' contributions on an annual basis and cumulatively over many years, so that little or no adverse financial impact appears to be felt by orders the courts make. Another way to characterise the respondents' attitude, as it appears from the evidence, is that the 'cost of doing industrial business' is precisely the prism through which the payment of penalties is seen.
197 Lest these remarks seem overly one-sided, I repeat my findings at various points in these reasons that no evidence as to contrition or remorse has, so far as I can see, ever been tendered in any of these penalty proceedings against the CFMEU, and there was certainly no evidence of that kind in this proceeding. There is no evidence of organisational consciousness of wrongdoing or evidence about changing culture, attitudes and behaviour within the CFMEU. There is no evidence of internal disciplinary mechanisms imposed on individual officers, nor evidence of any kind of adverse consequence experienced by officials such as Mr Myles by reference to their unlawful behaviour.
198 Indeed, the inference I draw is that the CFMEU is willing to pay the penalties of its individual officers can only suggest ongoing condonation of their unlawful conduct.
199 As I have noted at [143] above, a registered organisation such as the CFMEU can only behave in the way it does because individuals within the union decide that action should be taken. The CFMEU is legally represented and has access to legal advice. Both the organisation and its officials who lead the contravening conduct seem, on the evidence before me, to be uninterested in whether the conduct is lawful or not, provided they consider the industrial outcome to be sufficiently important. The CFMEU, and its individual officers such as Mr Myles, operate very much on an 'end justifies the means' basis.
200 The need for an individual to take responsibility for conduct found to be unlawful, and for that responsibility not to be transferred, lies behind provisions such as s 77A of the Competition and Consumer Act. Where corporate entities are principal actors, it is one of the few mechanisms by which individual behaviour may be changed or affected and the compliance objectives of regulatory schemes advanced.
201 Accordingly, I have made a prohibitory order against the CFMEU. The terms of the order differ somewhat from paragraph 15 of the orders proposed by the applicant, which I have set out at [164] above, but its effect is the same. The purpose of the order mirrors the legislative purpose of parallel provisions such as those I have discussed in other regulatory regimes. I do not consider such a power needs to be expressly given to the Court for it to be available. The terms of s 545(1), properly construed, are ample to include such a power. The order is made against a party to the proceeding and is made expressly to serve the purposes of specific and general deterrence, which have central roles to play in regulatory schemes.
202 I recognise such an order does not preclude Mr Myles from raising the funds to pay the penalty imposed on him from other sources. As Jessup J recognised in the Mitcham Rail Case at [38], Mr Myles is free to do that. He may have generous relatives or friends who are prepared to assist him. Some of his colleagues may wish to hold a fundraiser for him. However he seeks to raise the money, he will not have the comfort and convenience of using the money of CFMEU members contributed to their union to fund its lawful activities, as opposed to unlawful ones. Raising funds other than by asking the union to write a cheque (or to make an electronic transfer) is likely also to involve more time and effort for Mr Myles. It may put him out a little. It may be embarrassing to ask others to help him out of a situation for which he has no one to blame but himself. That, in itself, may give him cause to think more carefully about the consequences of breaking the law.