Hansen v Mt Martha Community Learning Centre Inc

REASONS FOR JUDGMENT 1 On 15 October 2015, I gave judgment in this proceeding - Hansen v Mt Martha Community Learning Centre Inc [2015] FCA 1099 - reserving the question of the penalty to be imposed on the first respondent ("the respondent") for its contravention of cll 26.8.2 and 26.8.3 of the Neighbourhood Houses and Learning Centres Workplace Agreement 2007. I have now received written submissions from the parties on that question. 2 Rather than lay out the terms of those submissions, I propose to identify what appear to me to be the significant areas of difference exposed by them. 3 The first matter concerns the stage at which the respondent was on notice that it was obliged to pay annual leave loading on the termination of the applicant's employment. As I pointed out in my reasons of 15 October, on 11 August 2014 - some five weeks before the termination - Mr Murphy was advised by Jobs Australia that the applicant's entitlements on termination would include annual leave loading: [2015] FCA 1099 at [111]. The respondent submits that the failure to pay the loading in a timely way was the result of "an oversight by the First Respondent's bookkeeper (not senior management)". That statement is partly true, but the advice of 11 August 2014 was given to senior management directly and if, as seems to have been the case, that advice was not promptly passed on to the bookkeeper (who did not give evidence), this can only have been the result of an "oversight" by senior management. 4 It is submitted on behalf of the respondent that - … the underpayment was rectified a few days after the Applicant alleged, in her Reply, and for the first time (with reliance on the Reply to make this new allegation not being opposed by the First Respondent), that clauses 26.8.2 and 26.8.3 of the industrial agreement had been breached …. Again, while literally true, this submission masks an important circumstance. In her original Statement of Claim, filed on 18 February 2015, the applicant alleged that the respondent had failed to comply with a series of provisions of the Neighbourhood Houses and Adult Community Centres Collective Agreement 2010, including a provision which entitled her to the payment of annual leave loading on termination. It transpired that that was not the agreement by which the respondent was bound in relation to the applicant's employment. It was only in her Reply, filed on 19 April 2015, that the applicant referred to, and made the relevant allegation under, the correct agreement. While that was not the appropriate place for the allegation, the respondent took no objection to the form of the applicant's pleading. The point of present relevance is that the respondent knew from about the third week in February 2015 that the applicant alleged that she had not been paid the loading which was her due. 5 The next matter concerns the size and financial circumstances of the respondent. It was submitted on behalf of the respondent that it was "a small, not-for-profit enterprise". That submission, which was not put in issue, factually, by the applicant, must be accepted. But it was submitted on behalf of the applicant, remarkably in my respectful assessment, that "the size and financial resources of a business is not relevant". Counsel relied on the judgment of Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14 for the proposition that "a penalty will normally be imposed at a meaningful level". In that case, his Honour said (166 IR at 21, [28]): No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction "must be imposed at a meaningful level": see Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd [2001] ATPR 41-815 at [13]. So much may be accepted, but what constitutes an "appropriate monetary sanction", or the imposition of a penalty at "a meaningful level", can rarely be determined without at least some consideration of the size of the relevant contravener, as Tracey J himself accepted in Kelly (see 166 IR at 18-19 [14] and 20 [21]). The authorities in this area of the law were recently discussed by the Full Court in Australian Competition and Consumer Commission v BAJV Pty Ltd [2014] FCAFC 52 at [39]-[41]. 6 In an associated submission on behalf of the applicant, it was put that "a respondent's financial situation is irrelevant to the assessment of a penalty", for which the judgment of Wilcox CJ in Printing and Kindred Industries Union v Vista Paper Products Pty Ltd (1994) 127 ALR 673 was said to be authority. Far from amounting to such an authority, however, his Honour's judgment in that case contained the following passage (127 ALR at 686): In determining what monetary penalty to impose on an offender it is usual for a court to take into account the offender's capacity to pay. A monetary sum that would constitute a reasonable penalty to a person of average income might be unduly oppressive if imposed on an impecunious person. Otherwise, I am unable to discern where in Vista there was anything that might justify this submission made on behalf of the applicant. 7 The final matter concerns what might broadly be described as contrition. It was submitted on behalf of the respondent that it had "taken full responsibility for the error which led to the contravention and has thereby exhibited contrition". My attention was drawn to the following exchange in the cross-examination of Mr Murphy at trial: The other relatively minor matter, Mr Murphy, is the question of annual leave loading. And if I could take you to page 105 of the book?---Yes. Do you concede that the centre didn't pay her her annual leave [loading] as it should have when she was terminated?---There was an error made and we quickly fixed it as soon as we became aware of it. But you concede that at the time of termination, you should have paid the annual leave loading and you didn't?---That's true. You concede that?---There was an error made. The bookkeeper did not realise that she was - that there was entitlement. Did you - - -?---Normally annual leave loading is done at Christmas time. Everyone gets their annual leave loading because that's the time that people normally take their holidays. And Pauline always does the calculation then. She didn't do it on the occasion when we terminated Jo. She didn't calculate it on the final holiday pay. I went back and checked that and she advised me that no, she had made an error and she hadn't done it. And I asked her to remedy it immediately. To the extent that contrition involves the sincere recognition that a wrong had been done to the applicant, the above evidence satisfies the requirement, in my view. 8 It was argued on behalf of the applicant, however, that "the mere fact that a respondent has paid the amounts owing prior to the consideration of penalties does not constitute contrition", relying in this respect on Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560. The proposition for which the applicant argued cannot be gainsaid, but the facts of the present case are a far cry from anything to which that proposition, or the judgments in Australian Ophthalmic, would have relevance. In that case, the relevant underpayments were made good only after the employer concerned had lost the case on the merits and in compliance with a court order in that behalf: see 165 FCR at 564-565 [15]. Graham J was moved to describe the situation as one in which the employer "was brought 'kicking and screaming' to the proper discharge of its legal obligations": 165 FCR at 577 [79]. By contrast, in the present case the respondent made the relevant payment as soon as it was realised that underpayment there had been. It is true that this came some time later than it should have, and occurred subsequent to the applicant's pleading in reply, but this case could never be characterised as an attempt to defend the indefensible. 9 Otherwise, the parties, in their submissions, drew my attention to the range of considerations conventionally associated with the fixation of penalties in a case such as the present. I need not canvass them. Of particular importance is the need for deterrence, both specific and general. I consider that there is some need for specific deterrence in this case. While I accept the submissions made on behalf of the respondent that it took its obligations as an employer seriously, there is cause for concern that this approach may not have been carried through to what may be described as the small ticket items in an employee's entitlements, or to those items which become relevant only on isolated occasions. There is a suggestion in the respondent's defence to this part of the applicant's case that the relevant entitlement fell between the cracks because it lay outside the routine procedures of the respondent's personnel administration. In my view, if this case provides a reminder that the ability to comply with industrial awards and agreements should never be compromised by the architecture of such procedures, it will have served a useful purpose. A penalty of some order is, in my view, required in that context. 10 A penalty which constitutes a specific deterrence in the way I have indicated will also, in my view, satisfy the need for general deterrence. I recognise the need for such a deterrence, as there undoubtedly are a great many small employers in Australian industry with about the same payroll as the respondent. They should note the importance which the court attaches to compliance with legislated standards. 11 Of the other circumstances which have influenced my thinking on the matter of penalty, foremost are the size of the respondent, the "relatively minor" (to adopt the phrase of counsel for the applicant in his cross-examination of Mr Murphy, set out above) nature, and quantum, of the contravention, the fact that the contravention was inadvertent rather than intentional or reckless, the promptness and voluntariness with which the underpayment was rectified once Mr Murphy became aware of it, the isolated nature of the contravention and (associatedly) the previous unblemished record of the respondent. 12 The maximum penalty that might be imposed on a corporation for a contravention of this kind, committed at the time when this contravention was, is $51,000. 13 In my view, the appropriate penalty to be imposed on the respondent for its contravention of cll 26.8.2 and 26.8.3 of the agreement of 2007 is $5,000. 14 It was submitted on behalf of the applicant that the penalty should be paid to her pursuant to s 546(3)(c) of the Fair Work Act 2009 (Cth). I can see no particular reason for the applicant to derive a benefit in this way. She was paid the loading which was her due, and the time within which she was out of pocket was relatively short. It is true that she has prosecuted her own cause in this proceeding, but, as will be clear from my reasons of 15 October 2015, the statutory bases of her claim, other than the one upon which she succeeded, were conspicuously unmeritorious. I shall order that the penalty be paid to the Commonwealth. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.