Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union [2008] FCAFC 170 | Case summary

Federal Court of Australia (Full Court)|2008-10-08|Before: Lander JJ, Gray J

Introduction 49 Jacqueline Baker is a financial member of the respondent ("the LHMU") and a former employee of the appellant trading as the Meridien Lodge. Ms Baker became an employee of the appellant when it purchased the Meridien Lodge business. She had worked at the Meridien Lodge as an employee of the previous owner of the business from 1 April 2000 until December 2005. She continued thereafter to work at the Meridien Lodge until her position became redundant and her employment was terminated by the appellant on 21 May 2007. 50 A dispute arose between Ms Baker and the appellant as to the payments to which she was entitled on the termination of her employment. Ultimately the LHMU applied pursuant to s 719 of the Workplace Relations Act 1996 (Cth) ("the WRA") to the Industrial Relations Court of South Australia for orders imposing penalties on the appellant for alleged breaches of "applicable provisions" as defined by s 717 of the WRA. The provisions relied upon were certain clauses of a notional agreement preserving State awards that is taken to have come into operation on 27 March 2006, being the date of commencement of Schedule 1 to the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ("the Work Choices Act"). The State award relevantly preserved was the Motels (South Australia) Award ("the Award"). 51 When the application came on for hearing before an Industrial Magistrate the appellant did not appear. The learned Magistrate adjourned the matter to 18 December 2007 on the basis that if the appellant did not appear on that date he would give summary judgment. The appellant did not appear when the matter came before the Magistrate again on 18 December 2007. After hearing submissions from the LHMU on the issue of the amount by which the appellant had underpaid Ms Baker on the termination of her employment, the Magistrate ordered the appellant to pay to Ms Baker the additional sum of $8,804 inclusive of interest within 14 days. His Honour then adjourned the matter to 8 February 2008 "for decision and penalty". He ordered that a copy of the transcript be forwarded to the appellant and indicated that the appellant could make submissions touching on the issue of the imposition of penalties. 52 The appellant did not make submissions on penalty. On 8 February 2008 the Magistrate published short reasons for judgment and made the following orders: 1. The following penalties are imposed upon the respondent: (a) In respect of the breach of cl 32(j) of the Motels (South Australia) Award ("the award") (failure to pay accrued annual leave on termination) a penalty of $5500. (b) In respect of the breach of cl 38(a)(iii) of the award (failure to make payment in lieu of notice of termination) a penalty of $4000. (c) In respect of the breach of cl 40(e)(iii) of the award (failure to pay severance pay on redundancy)a penalty of $9500. 2. The total amount of penalty being $19000 be paid within 28 days of this order as follows: (a) The respondent to pay to the worker, Mrs Jacqueline Baker, the sum of $2000. (b) The respondent to pay to the applicant, the Liquor Hospitality and Miscellaneous Union, the sum of $4000. (c) The respondent to pay to the Consolidated Revenue Fund the sum of $13000.

Reasons for Judgment of the Industrial Magistrate 53 The Magistrate concluded from the failure of the respondent to make submissions to the court after having the opportunity to consider the transcript of the hearing on 18 December 2007 that its breaches of the "applicable provisions" were deliberate and that it was appropriate for penalties to be imposed. 54 His Honour accepted as a general proposition that each application should be determined on its own facts and merits but also that penalties should be consistent. For this latter reason he considered it appropriate to have regard to the determinations of the Federal Magistrates Court, particularly as jurisdiction to hear matters of the present kind had only comparatively recently been conferred on the Industrial Relations Court of South Australia. 55 The Magistrate identified certain mitigating factors including that Ms Baker was unpaid only over a period of about seven months, that some amount had been paid in respect of the breaches and that the appellant had received erroneous advice in respect of its obligation to make termination payments to Ms Baker. 56 His Honour thereafter noted that he had been referred to the decision of Coles v Elsen Bros Pty Ltd [2007] FMCA 1838 and observed that the matter before him had substantial similarities with that case albeit that there were some differences. As the following extract from his Honour's reasons for judgment reveals, the Magistrate then proceeded to determine the quantum of the penalties to be imposed by him by direct reference to the quantum of the penalties imposed in Coles v Elsen: … I note that the aggregate underpayment in that matter was $12,600 compared to $8,544.and there were also, effectively, three award breaches. In that matter the largest underpayment was $8,550 for unpaid, accrued annual leave. In this matter it was less; $2,934. The penalty imposed by the Federal Magistrate was $14,500. The applicant has suggested a penalty in the order of $6,000. This is twice as much as the underpayment itself but is roughly proportionate to that in the Coles decision. I would allow a lesser amount of $5,500. The next was the amount owed in lieu of notice which in Coles attracted a penalty of $11,000 with respect to an underpayment of $2,400. The penalty sought here is $6,000 all up with respect to an underpayment of $1,406. In my view one of $4,000 is more appropriate. The largest outstanding entitlement in this matter was the worker's claim for severance pay in the sum of $4,965. I am of the view that a penalty of $9500 is appropriate here although the applicant sought $12,000. In all I fix the total penalty at $19,000, a sum which in aggregate is not disproportionate to the head sentence imposed in Coles and I note that in that matter the worker had been waiting for a considerably longer period than here to be paid, albeit the respondent was allowed a reduction of 20% on account of certain admissions. The total penalty is therefore $19,000. I do not consider that a discount for contrition, cooperation or admission of the breaches is appropriate. The respondent has with one or two exceptions ignored all court process and provided no basis upon which I might adopt a view more favourable to it. The Magistrate's reasons for judgment included no reasons in support of order 2 of the orders made by him on 8 February 2008 (see [52] above).

Consideration 57 In Coles v Elsen Wilson FM cited extensively from the reasons for judgment of Tracey J in Kelly v Fitzpatrick [2007] FCA 1080. In Kelly v Fitzpatrick Tracey J had imposed penalties under s 178 of the WRA as in force prior to the commencement of the Work Choices Act and, in respect of a short period of time only, under that section as amended by the Work Choices Act and renumbered s 719. The passages from Kelly v Fitzpatrick cited in Coles v Elsen were the following: In Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mowbray FM identified "a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty". Those considerations were derived from a number of decisions of this Court. I gratefully adopt, as potentially relevant and applicable, the various considerations identified by him. They were: - The nature and extent of the conduct which led to the breaches. - The circumstances in which that conduct took place. - The nature and extent of any loss or damage sustained as a result of the breaches. - Whether there had been similar previous conduct by the respondent. - Whether the breaches were properly distinct or arose out of the one course of conduct. - The size of the business enterprise involved. - Whether or not the breaches were deliberate. - Whether senior management was involved in the breaches. - Whether the party committing the breach had exhibited contrition. - Whether the party committing the breach had taken corrective action. - Whether the party committing the breach had cooperated with the enforcement authorities. - The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and - The need for specific and general deterrence. … Another factor which must be taken into account in the fixing of pecuniary penalties for multiple breaches of statutory stipulations is the totality principle. This principle is designed to ensure that the aggregate of the penalties imposed is not such as to be oppressive or crushing. Different views have been expressed as to the manner in which the principle ought properly to be applied. On one view the starting point should be the determination of an appropriate total penalty. That figure would then be divided by the number of breaches to produce a penalty for each breach: see CPSU v Telstra Corporation Limited (2001) 108 IR 228 at 230[7]. The orthodox position, however, which I consider should be adopted, is that the starting point is the determination of appropriate penalties for each contravention of the statutory norm. The aggregate figure is then considered with a view to ensuring that it is an appropriate response to the conduct which led to the breaches: see Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53. See also Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 at [145] per Jessup J. This approach was recently described, in the criminal context from which the totality principle is derived, as "the orthodox, but not necessarily immutable, practice" adopted by sentencing courts: see Johnson v R (2004) 205 ALR 346 at 356[26] per Gummow, Callinan & Heydon JJ. 58 It is important not to overlook that the list of considerations identified in the passage from Kelly v Fitzpatrick cited above is a non-exhaustive list of considerations that may, but may not, be relevant and applicable in any particular case. As Buchanan J, sitting as a member of the Full Court, observed in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [91] after referring to the list of factors identified in Kelly v Fitzpatrick: Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. 59 We do not suggest that the Magistrate in the present case treated the list of considerations as a rigid catalogue. Indeed, it does not appear that his Honour had direct regard to other than a limited number of the considerations identified in Kelly v Fitzpatrick as potentially relevant and applicable to the task upon which he was engaged - or, indeed, that the respondent sought to place evidence before his Honour touching on many of these considerations. 60 The difficulty in sustaining the penalties imposed by the Magistrate is that it is not apparent from his Honour's reasons for judgment that he had appropriate regard to the circumstances in which the contravention occurred or the need to sustain public confidence in the statutory regime which imposes the obligations. While general guidance as to the appropriate level of penalty may be obtained by looking at the amounts of penalties imposed in comparable cases, it remains necessary in every case for the court to give careful consideration to the circumstances of the particular case, and where more than one penalty may be imposed, the totality principle. This was made clear in Australian Ophthalmic Supplies v McAlary-Smith at [12] where Gray J observed: Much of the argument put by counsel for the appellant involved a detailed comparison between the facts of this case and the facts of two other cases in which lower penalties had been imposed in respect of award breaches. … This was a fundamentally wrong approach. Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case. His Honour went on to refer with approval to the statement made by Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295 that "[t]he facts of the instant case should not be compared with a particular reported case in order to derive therefrom the amount of penalty to be fixed." In Australian Ophthalmic Supplies v McAlary-Smith Graham J at [56]-[57] and Buchanan J at [87] also expressed approval of the observations of Burchett and Kiefel JJ in the NSW Frozen Foods case. 61 As to the last of the considerations identified in Kelly v Fitzpatrick, namely the need for specific and general deterrence, in Finance Sector Union v Commonwealth Bank of Australia (2005) 224 ALR 467 at [72] Merkel J observed: … It may be that breaches by unions and employers of industrial legislation from time to time have been accepted as part of the give and take of industrial disputation. However, in recent years industrial legislation has increasingly codified and prescribed what is acceptable, and what is unacceptable, industrial conduct. The legislature has, over time, also moved to increase the penalties that may be imposed in respect of unlawful industrial conduct. In my view, any light handed approach that might have been taken in the past to serious, wilful and ongoing breaches of the industrial laws should no longer be applicable. As is apparent from the penalties that I have imposed, I have not accepted that such an approach, which was urged by CBA (which contended that either no penalty or only a nominal penalty was appropriate), is applicable in the present case. 62 Although the penalty imposed by Merkel J in Finance Sector Union v Commonwealth Bank of Australia was reduced on appeal to the Full Court, no criticism was made by the Full Court of the above observations of his Honour (see Commonwealth Bank of Australia v Finance Sector Union (2007) 157 FCR 329). We consider it appropriate to endorse them. See also McIlwain v Ramsey Food Packaging Pty Ltd (No 4) (2006) 158 IR 181 at [108] and Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia Services Union of Australia v Telstra Corporation Ltd [2007] FCA 1607 at [18]). 63 We additionally observe that the Magistrate's decision to order that the penalties imposed be paid as to $2,000 to Ms Baker, as to $4,000 to the respondent and as to $13,000 to the Consolidated Revenue Fund was not uncontroversial. His Honour ought to have provided reasons for making this order. 64 In Gibbs v City of Altona (1992) 37 FCR 216 at 223-224 Gray J observed: … A question also arose as to what order should be made as to the recipient of the penalties. Section 356 of the Act empowers the Court to order payment into the Consolidated Revenue Fund or to a particular organisation or person. The usual order, when the proceeding is not brought by an inspector appointed under the Act, is for payment to the person or organisation applying for the penalty. The reasons for this are canvassed in Vehicle Builders' Employees' Federation of Australia v. General Motors-Holden's Pty. Ltd (1977) 32 F.L.R. 100 at 111-114 and Seymour v. Stawell Timber Industries Pty. Ltd (1985) 9 F.C.R. 241 at 245-246 in the judgment of Northrop J. In the present case, the applicant has brought the proceeding on behalf of the Union, to enforce the Award for the benefit of the Union and its members. Had the applicant brought the proceeding in his personal capacity, and at his own expense, it would have been appropriate to order that the penalties be paid to him. It is unlikely that the applicant has become responsible personally for the costs of the proceeding and more likely that those costs will be met by the Union. In the circumstances, it is appropriate that the Union should be the recipient of the penalties. (emphasis added) 65 The approach adopted by Gray J in Gibbs v City of Altona has been followed in a number of other cases (see, for example, CFMEU v Coal and Allied Operations Pty Ltd (No 2) [1999] FCA 1714 at [17] and [18]; Australian Nursing Federation v Flinders Medical Centre [2002] FCA 1534; Seven Network (Operations) Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2001] FCA 672 at [8] and Shanka v Employment National (Administration) Pty Limited (2001) 114 FCR 379 at [77]-[87]). 66 However, in CPSU, The Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at [22]-[28] Finkelstein J queried the appropriateness of "the usual order" in every case. His Honour observed: The unions ask for what is sometimes referred to as "the usual order", namely that the penalty be paid to them: Gibbs v The Major, Councillors and Citizens of the City of Altona (1992) 37 FCR 216, 223. The power to make such an order is to be found in s 356 of the Workplace Relations Act, which provides that where a penalty is imposed it may be ordered to be paid into the Consolidated Revenue Fund or to a particular organisation or person. There is nothing new in a statute that provides for the payment of a penalty to a person other than the Crown. English criminal law has long drawn a distinction between informations that could only be brought in the name of the Crown and those that could be brought by a subject. The latter class of action was usually referred to as a "popular action": Blackstones Commentaries vol 3 at 160. The person who was entitled to bring a "popular action" was known as a "common informer". By the time of Henry VIII the number of statutes conferring upon informers the right of action to recover penalties had become very large. In fact they gave rise to a ruthless group of persons aiming to make easy profits. The statutes became very unpopular. The courts of equity reacted against them by refusing to order discovery or require the defendants to give evidence. Eventually the number of actions by informers became so numerous it was necessary to place some restraint upon them. First, time limitations were fixed for the bringing of certain classes of action under penal statutes. Then the Common Informers Act 1951 abolished most common informer actions in England. It cannot be doubted that employer and employee organisations play a legitimate and important role in seeing that there is compliance with the provisions of the Workplace Relations Act. For example, an individual employee will rarely have the ability to fund a proceeding for a contravention. If unions do not bring such proceedings, contraventions will go unpunished. Perhaps the "usual" order is to be explained on the basis that often an industrial organisation brings proceedings for a contravention of the Workplace Relations Act to protect the legitimate interests of its individual members. In such a case it is appropriate for the organisation to receive the penalty, to defray its actual costs and to provide some compensation for the time lost by its staff. In this regard it should be noted that, apart from exceptional cases, a party to a proceeding in a matter arising under the Workplace Relations Act is not entitled to recover costs: see s 347. However, there is no reason to make "the usual order", if that will result in a windfall to an organisation. Proceedings for pecuniary penalties are not to be used for profit: cf Municipal Officers Association of Australia v City of Bayswater (1987) 22 IR 45, 51; Seymour v Stawell Timber Industries Pty Ltd (1985) 13 IR 289, 311. An appropriate order (if there be enough funds) would allow the unions a sufficient sum to meet their costs and expenses, including the expense of staff time. The balance (if any) should be paid into the Consolidated Revenue Fund. I will hear argument on the proper amount to be paid to the unions. … 67 Finkelstein J's above observation concerning a 'windfall' to an organisation is not itself uncontroversial. In Finance Sector Union v Australia and New Zealand Banking Group Limited [2002] FCA 1035 at [16] Wilcox J observed: In CPSU Finkelstein suggested that such an order should not be made if it is likely to result in a "windfall to the organisation". I am not sure I agree with that; the rationale of the practice is that it tends to encourage a "common informer" to police the relevant legislation: see Vehicle Builders' Employees' Federation of Australia v General Motors-Holden Pty Ltd (1977) 32 FLR 100 at 113. That rationale is likely to be defeated if the common informer is not to be allowed to make a profit. 68 In National Tertiary Education Industry Union v Central Queensland University [2008] FCA 481 at [50] Logan J expressed his agreement with the above observation of Wilcox J, while in McIlwain v Ramsey Food Packaging Pty Ltd at [103] Greenwood J had expressed approval of the observation of Finkelstein J. 69 In our view, neither the total penalty actually imposed in this case, nor the amount of the penalty likely to be imposed on reconsideration of that penalty, is sufficient to give rise to concerns about a "windfall". We understand a 'windfall' in this context to involve an unexpected and relatively large financial benefit. Within an organisation such as the respondent, the true cost of bringing a legal proceeding is likely to prove substantial if the time of all staff involved is appropriately accounted for and other costs, possibly including overheads, identified. Before a penalty could constitute a 'windfall' in the relevant sense it would need to exceed the total amount of that cost by a significant margin. For this reason, and because we did not hear full argument on the appropriateness of the observation of Finkelstein J in the CPSU case, we do not consider that we should express a concluded view on whether, in a case in which it would otherwise be appropriate for "the usual order" to be made, such an order should not be made if it would be likely to result in a windfall to the applicant. 70 On the issue of the appropriateness of ordering that all, or part, of any penalty be paid to the individual affected by the conduct so penalised when that individual is not the applicant, we endorse the remarks of Greenwood J in McIlwain v Ramsey Food Packaging at [108] that: …the imposition of a penalty under the Act is designed fundamentally to serve the public interest in acting as a deterrent to the particular Respondents and others generally from engaging in conduct of the kind the subject of the findings. In circumstances where an order has been made for compensation for both economic loss and a non-economic component concerning the disturbance, dislocation and loss of secure employment suffered by the individuals, there seems to be no good policy reason why the individuals should additionally have the benefit of an order for the payment to them of the penalty. …

Conclusion 71 In the circumstances it is unnecessary for us to rule on whether the appellant should have leave to further amend its amended notice of appeal. 72 In our view it is regrettably necessary for this matter to be remitted to the Industrial Relations Court of South Australia for the issue of the amount of the penalty or penalties to be imposed on the appellant to be determined afresh. In our view it would be appropriate for the Senior Judge of that court to give consideration to relisting the matter before a Magistrate other than the Magistrate whose decision is the subject of this appeal. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Branson and Lander.

Associate: Dated: 8 October 2008 Counsel for the Appellant: Mr R Manuel

Workplace Relations Act 1996(Cth)

Workplace Relations Amendment (Work Choices) Act 2005(Cth)

Conciliation and Arbitration Act 1904(Cth)

The industrial magistrate's judgment 15 The hearing of the proceeding at first instance was conducted on 18 December 2007. Plancor did not appear, but the industrial magistrate considered a letter it had written, either to the court or to the Union. On the same date, the industrial magistrate also dealt with a proceeding, which he said that Ms Baker issued, in which he gave judgment for Ms Baker for the sum of $8,804.01, inclusive of interest. Any reasons for judgment that may have been given in that proceeding were not part of the material placed before this Court. The Union's claim for a penalty was the subject of a reserved judgment, delivered on 8 February 2008. The industrial magistrate's reasons for judgment are published as LHMU v Plancor Pty Ltd t/as The Meridien Lodge [2008] SAIRC 7. 16 At [4]-[6], in the course of recounting the facts and the claims made by Ms Baker, the industrial magistrate referred to Plancor's letter of termination to Ms Baker, dated 9 May 2007, which informed her that she was to receive the total sum of $8,203.21 on the termination of her employment on 21 May 2007. This was expressed to be made up of four weeks' retrenchment pay of $1,659.30, an additional loading because Ms Baker was more than 45 years old of $415.22, accrued annual leave of $2,391.71 and accrued long service leave of $3,736.98. Despite this letter, all that was paid on termination was $4,903.43. Plancor apparently recognised that long service leave entitlements were based on continuous service with Plancor and the previous employer, but asserted that redundancy payments were to be calculated only from 19 December 2005, when Plancor took over ownership of the motel. At [7], the industrial magistrate set out Ms Baker's claims, which were for: 12 weeks' severance pay of $4,965; three weeks' and two days' pay in lieu of notice of $1,406.75; 9.1 weeks' long service leave pay of $4,141.64; and 150.88 hours of accrued annual leave plus 17.5% leave loading of $2,934.05. These claims totalled $13,447.44. At [8], the industrial magistrate recorded that he had given judgment for $8,544.01 (the difference between what was claimed and what had been paid), together with interest, a total of $8,804.01, on 18 December 2007. 17 At [13]-[14], the industrial magistrate elected to treat the alleged breaches of cll 38(a)(iii) and 38(e) of the Award as one breach, because cl 38(e) only operated to extend nominal service if a payment in lieu of notice were made. He therefore regarded the application as one alleging three separate breaches, for which a maximum total penalty of $99,000 was applicable. At [17], his Honour expressed the view that the payment that was made was intended to be a payment in lieu of long service leave, because Plancor did not appear to have disputed that entitlement. At [18], his Honour held that it was "more than clear that where a business has been transmitted to another employer then the period of service with the transmittor will be deemed to be service of the employee with the transmittee for the purpose of calculating any entitlement of the employee to service related periods of notice or severance." His Honour made reference to an offer to settle for less than the amount claimed based on Plancor's own calculation. Otherwise, his Honour said at [20], "there has been no attempt to co-operate with the union." 18 At [22], the industrial magistrate accepted a submission by counsel for the Union that all breaches were deliberate and had not been reconsidered, and that it was appropriate to impose penalties in the absence of further submissions. At [24], his Honour said: I accept that as a general proposition each application will be determined upon its own particular fact situation and merits but also that penalties should be consistent and comparable within the jurisdiction and that therefore it is appropriate that I have regard to the determinations of the Federal Magistrates Court, particularly as the jurisdiction to hear these matters has only comparatively recently been conferred on this court. 19 At [25], his Honour took into account two mitigating factors. One was that the amount owed was unpaid only for a period of about seven months. The other was that Plancor had stated in its letter that it had been advised in error that Ms Baker's entitlements, other than long service leave, were to be calculated from the date of the take over of the business. Plancor had made an offer of $7,500 at the same time. The industrial magistrate noted that this was less than the amount owed, it was not paid, and Plancor did not consent to judgment. Even after judgment, the amount had been unpaid and steps had been taken to recover the amount of the judgment. 20 The industrial magistrate then referred to a judgment of the Federal Magistrates Court of Australia in Coles v Elsen Bros Pty Ltd [2007] FMCA 1838, which he said had substantial similarities to the case before him, but also some differences. At [27]-[32], his Honour said: I think it instructive to refer to that decision. In doing so I note that the aggregate underpayment in that matter was $12,600 compared to $8,544. [sic] and there were also, effectively, three award breaches. In that matter the largest underpayment was $8,550 for unpaid, accrued annual leave. In this matter it was less; $2,934. The penalty imposed by the Federal Magistrate was $14,500. The applicant has suggested a penalty in the order of $6,000. This is twice as much as the underpayment itself but is roughly proportionate to that in the Coles decision. I would allow a lesser amount of $5,500. The next was the amount owed in lieu of notice which in Coles attracted a penalty of $11,000 with respect to an underpayment of $2,400. The penalty sought here is $6,000 all up with respect to an underpayment of $1,406. In my view one of $4,000 is more appropriate. The largest outstanding entitlement in this matter was the worker's claim for severance pay in the sum of $4,965. I am of the view that a penalty of $9500 is appropriate here although the applicant sought $12,000. In all I fix the total penalty at $19,000, a sum which in aggregate is not disproportionate to the head sentence imposed in Coles and I note that in that matter the worker had been waiting for a considerably longer period than here to be paid, albeit the respondent was allowed a reduction of 20% on account of certain admissions. The total penalty is therefore $19,000. I do not consider that a discount for contrition, cooperation or admission of the breaches is appropriate. The respondent has with one or two exceptions ignored all court process and provided no basis upon which I might adopt a view more favourable to it.

The constitution of the court 23 Apparently, the appeal was listed before a Full Court because of some doubt as to whether the IRCSA is a court of summary jurisdiction, for the purposes of s 25(5) of the Federal Court Act. The parties were invited to make submissions on that question. Only the Union made detailed submissions. Both parties agreed that the appeal would have been a suitable one to be dealt with by a single judge, if that were possible. 24 The doubt about whether the IRCSA could be characterised as a court of summary jurisdiction may have arisen because that court consists of both judges and industrial magistrates, by virtue of s 16 of the Fair Work Act. In addition, by virtue of s 9 of the Fair Work Act, the court is a court of record. The definition of "court of summary jurisdiction" in s 26(d) of the Acts Interpretation Act does not focus on the nature of the institution. Instead, it focuses on the nature of the judicial officer constituting the court and the nature of the work being done by the court so constituted. There can be no doubt that an industrial magistrate, assigned pursuant to s 19A(1) of the Fair Work Act, is a magistrate. Section 19A(1) ensures that such a person must have been appointed as a magistrate pursuant to s 5 of the Magistrates Act. Section 19A(4) has the effect of preventing a person from continuing to hold office as an industrial magistrate if that person ceases to hold office as a magistrate under the Magistrates Act. 25 The focus on the nature of the function being performed by an industrial magistrate poses some greater difficulty. This is because the word "summary", as used in the phrases "summary orders" and "summary punishment of offences" is a word of indeterminate meaning. Lawyers are familiar with procedures for summary judgment, which lead to the resolution of cases without the taking of all the usual procedural steps, and without any trial. Summary judgment is given in cases that are so clear that they do not warrant the expenditure of resources that would be involved in following the ordinary procedures. Sometimes the term "summary trial" or "summary conviction" is used in contrast to a trial by jury, or a conviction upon the verdict of a jury. The word "summary" used in s 26(d) of the Acts Interpretation Act does not appear to have the first of these meanings. The initiating party in a case heard by a magistrate ordinarily is required and permitted to prove the elements of his or her claim by evidence, and the party resisting that claim ordinarily has every opportunity to do so by testing the evidence, and producing his or her own evidence. The absence of jury trials is not something confined to courts constituted by justices or magistrates. It may be that what constitutes the making of summary orders or the summary punishment of offences is a process that lawyers recognise instinctively, without being able to define exhaustively. The English language is replete with words and concepts of this kind. For instance, it is easy enough to recognise a dog upon seeing one, but extremely difficult (if not impossible) to formulate an exhaustive definition of a dog. 26 The Full Court in John L Pierce Pty Ltd v Kennedy [2000] FCA 1729 (2000) 104 FCR 225 thought that informality of procedures, relative to the procedures of higher courts, was the key to the meaning of "summary" in s 26(d) of the Acts Interpretation Act. This is implicit in the reasons for judgment of Whitlam J at [23] and expressed in the reasons for judgment of Madgwick J at [28]. The presiding judge, O'Connor J, agreed with both. The case was similar to the present, in that it involved an appeal from the imposition by the Chief Industrial Magistrate of New South Wales of penalties for contraventions of terms of an award made under the WR Act. The Full Court held that the court constituted by the Chief Industrial Magistrate of New South Wales was a court of summary jurisdiction, within the definition found in s 26(d) of the Acts Interpretation Act, and therefore was a court of summary jurisdiction for the purposes of s 25(5) of the Federal Court Act. The appeal could be heard by a single judge. The Full Court expressly distinguished Metropolitan Health Services Board v Australian Nursing Federation [1999] FCA 1513 (1999) 94 FCR 132, in which it had been held that the Industrial Magistrate's Court of Western Australia, making orders for the imposition of penalties for award breaches under the WR Act, was not a court of summary jurisdiction for the purposes of s 25(5) of the Federal Court Act. Subsequently, in Construction, Forestry, Mining and Energy Union and Ors v Clarke [2005] FCA 986 (2005) 144 FCR 226, Nicholson J followed Pierce and distinguished the Metropolitan Health Services case, in relation to a Western Australian Industrial Magistrate's Court, which had imposed penalties for breaches of the WR Act. By that time, the Western Australian legislative provisions governing the Industrial Magistrate's Court had been changed. 27 It seems clear from the inclusion in the definition in s 26(d) of the Acts Interpretation Act of both the phrases "summary orders" and "summary punishment of offences" that the definition of a court of summary jurisdiction is intended to cover the exercise in a summary way of both civil and criminal jurisdiction. The former phrase is apt to cover civil jurisdiction (and somewhat inapt if applied to criminal jurisdiction), whilst the latter clearly refers to criminal jurisdiction. The Full Court in Pierce and Nicholson J in Clarke clearly took the same view. All were dealing with cases involving the imposition of civil financial penalties. 28 Relative informality of procedures is not a test that gives certainty of meaning to the word "summary" in the definition in s 26(d) of the Acts Interpretation Act. In recent times, there has been a tendency for magistrates' courts to model their procedures on those of superior courts, so as to produce more similarity than difference between magistrates' courts and superior courts. If relative informality of procedures is the test, it is certainly satisfied in relation to the IRCSA. The provisions of s 154(1) make clear that the court is to act "without regard to technicalities, legal forms or the practice of courts". Informality is obviously required. One of the complaints of Plancor in the present case is that there was too little formality. On the basis of existing authority, therefore, it would seem that the IRCSA, constituted by an industrial magistrate, making orders for the imposition of penalties pursuant to s 719 of the WR Act, is a court of summary jurisdiction for the purposes of s 25(5) of the Federal Court Act, and the appeal could have been heard by a single judge. 29 It seems that the question whether an appeal is from a court of summary jurisdiction must be determined on a case by case basis. The focus of the definition in s 26(d) of the Acts Interpretation Act on the nature of the judicial officer constituting the primary court, and on the nature of the task of that court, carries with it the possibility that a court like the IRCSA may be a court of summary jurisdiction when constituted in a particular way and dealing with particular types of cases, but not when otherwise constituted and dealing with other kinds of business. It is unfortunate that no more definite test can be formulated, having regard to the form of the definition in s 26(d) of the Acts Interpretation Act and the authorities on that definition. To the extent to which the question may be answered in an instinctive way, by reference to a lawyer's understanding of summary orders or summary punishment for offences, instinct suggests that, in a case of this kind, the IRCSA, constituted by an industrial magistrate, is a court of summary jurisdiction. On the application of this test, the conclusion again is that this appeal could have been heard by a single judge.

A course of conduct 32 Plancor contended that the IRCSA wrongly applied s 719(2) of the WR Act, when it came to the conclusion that the total maximum penalty it could impose was $99,000. The argument is that s 719(2) required the court to treat all of the alleged breaches as a single breach, because they arose out of a course of conduct by Plancor. 33 The course of conduct provision cannot be applied in this way. By its specific terms, s 719(2)(a) relates to two or more breaches "of an applicable provision". An applicable provision is defined relevantly in s 717(a)(iv) as being "a term" of a collective agreement. This meaning is confirmed by the concluding words of s 719(2), which signify that the multiple breaches must "be taken to constitute a single breach of the term." It is only multiple breaches of a single term, arising from a course of conduct, that are required to be treated as a single breach of that term. In particular cases, there might be a dispute as to what amounts to a "term" of an instrument, particularly when provisions are segmented by means of numbering and lettering. There can be no such argument in the present case. The terms of the Award on which the Union relied clearly imposed separate obligations. When reference was made in the claim to two separate provisions in the clause numbered 38, the industrial magistrate chose to treat them as a single breach. Whether or not s 719(2) obliged him to do so, it was open to him to do so, as the magistrate had done in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 (2008) 165 FCR 560. 34 The industrial magistrate was therefore correct to adopt as a starting point a total maximum penalty of $99,000. What is missing from his Honour's reasons for judgment, however, is any reference to the application of the totality principle, dealt with at length in Australian Ophthalmic. Having fixed penalties for each of the three breaches separately, the industrial magistrate was then obliged to consider the total of those penalties against the conduct of Plancor, to determine whether the total penalties were proportional to that conduct. This was a step that had particular importance in a case in which the breaches apparently all stemmed from a single decision to treat Ms Baker's length of service as dating only from the time Plancor took control of the motel. The step was not taken, and the industrial magistrate thereby fell into error. That is not to say that the total of the penalties was inevitably to be regarded as too high. Upon consideration of all of the relevant factors, it may turn out that the total was too low, compared to the total maximum of $99,000. The outcome of a further consideration of penalty by an industrial magistrate cannot be predicted, because it is not known what circumstances Plancor might now place before the court by way of mitigation of penalty, or what view the court may take about the crucial element of deterrence. All that can be said at present is that there was error in failing to apply the totality principle, and that that error justifies allowing the appeal and remitting the case to the IRCSA to enable the appropriate penalties to be determined, and consequential orders to be made.

The distribution of the penalty 38 The ancestral provisions of ss 719 and 841 of the WR Act were found in ss 119 and 120 respectively of the Conciliation and Arbitration Act 1904 (Cth) ("the C&A Act") (repealed). For many years, the maximum penalty that could be imposed was $1,000. The history of increases in the maximum rate of penalty is set out in Australian Ophthalmic at [14]. In Vehicle Builders' Employees' Federation of Australia v General Motors-Holdens Pty Ltd (1977) 32 FLR 100 at 113, the Full Court recognised that: each of the persons entitled to institute proceedings under s. 119 of the Act (see s. 119 (2)) can be said to be an appropriate person selected by the legislature to police the legislation. In other words, each has a special interest to institute proceedings, and in our opinion s. 119 (2) has a limiting effect: cf. Commonwealth Crimes Act 1914, s. 13. (Section 13 of the Crimes Act 1914 (Cth) authorises any person to institute a proceeding for a criminal offence against the law of the Commonwealth.) 39 In Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 at 245, Northrop J described a proceeding brought under s 119 as "based on the concept of an action brought by a common informer". His Honour said "Normally in proceedings for a penalty brought by a common informer, any penalty imposed is ordered to be paid to the person who brought the proceedings." In that case, the proceeding had been commenced by a person appointed as an inspector pursuant to the C&A Act. The majority of the Full Court (Northrop and Gray JJ, Keely J dissenting) held that there had been contraventions of a term of an award by the termination of the employment of two apprentices, one of whom was a member of the relevant organisation and the other not. The majority held that the power to order the payment of amounts to which an employee was entitled could be exercised in relation to the apprentice who was a member of the organisation, but not the other apprentice. Counsel for the inspector invited the Court to order, pursuant to s 120 of the C&A Act, that the penalty be paid to the other apprentice. The majority declined to make such an order. At 246, Northrop J expressed the view that the Court had no power to order payment of the penalty to the other apprentice, because the word "person" in s 120 should be construed as limited to the class of persons authorised to sue for penalties under s 119, and the other apprentice was not such a person. In the alternative, as a matter of discretion, his Honour would have refused to make the order sought. At 246, his Honour said: the legislature has made clear the classes of persons who may benefit from an order for payment of moneys due under an award. [The other apprentice] does not come within any of those classes. I consider that it would be wrong for a court to exercise a general power to nullify a particular privilege conferred upon classes of persons by the exercise of a particular power. At 268, I considered that the discretion to make the order should not be exercised in favour of the other apprentice. 40 Seymour is clear authority for the proposition that the power now given by s 841 of the WR Act should not (or perhaps cannot) be exercised to order that a penalty be paid by way of compensation to a person whom the Court cannot otherwise compensate by the exercise of the power now found in s 719(6). It must follow that, where the power in s 719(6) has been exercised, as it was by ordering the payment to Ms Baker, the power to order the payment of any part of the penalty to any person should not (or perhaps cannot) be exercised so as to compensate an employee for loss not otherwise compensable under the statutory provisions. That is what the industrial magistrate appears to have sought to achieve in the present case, by his references to the delay in payment by Plancor to Ms Baker. His Honour did not refer to Seymour, and did not give detailed reasons for his apportionment of the penalty between Ms Baker, the Union and the Consolidated Revenue Fund. The failure to give reasons may be indicative of error, but it is only necessary to say that there was error in ordering the payment of any part of the penalty to Ms Baker. 41 In Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 at 223-224, I relied on the Vehicle Builders' Employees' Federation case and Seymour as the foundation for the view that, when a proceeding is not brought by an inspector appointed under the legislation, the "usual order" is for payment to the person or organisation applying for the penalty. Where the applicant had not brought the proceeding in his personal capacity, but on behalf of an organisation, I took the view that it was more appropriate to exercise the power to order payment of the penalty to the organisation. In expressing this exception, I said: In the present case, the applicant has brought the proceeding on behalf of the Union, to enforce the Award for the benefit of the Union and its members. Had the applicant brought the proceeding in his personal capacity, and at his own expense, it would have been appropriate to order that the penalties be paid to him. It is unlikely that the applicant has become responsible personally for the costs of the proceeding and more likely that those costs will be met by the Union. In the circumstances, it is appropriate that the Union should be the recipient of the penalties. 42 Unfortunately, the references to the applicant's "own expense" and to "the costs of the proceeding" seem to have been taken subsequently as the foundation for the notion that an order that the penalty be paid to the initiating party is made in order to compensate that party for the cost of bringing the proceeding. That is not the view that I intended to express in Gibbs. Nor is it the correct view. Nothing in the reasoning in the Vehicle Builders' Employees' Federation case or Seymour suggests that the legislative intention behind the power to order payment of a penalty to an organisation or person was compensatory. 43 For many years, while the maximum penalty that could be imposed was $1,000, any penalty ordered, even up to the maximum, would have been highly unlikely to compensate the party bringing the proceeding for the costs incurred in doing so. For many years there has been a clear legislative intention, expressed in s 824 of the WR Act and its antecedent provisions, that there is to be no order for costs in a proceeding in a matter arising under the WR Act and its antecedent legislation, save in the circumstances defined specifically. To utilise the power to award payment of a penalty to the party initiating the proceeding as a way of compensating for that party's costs would be to undermine this policy. It cannot be the case that, in choosing to increase the maximum penalty that can be imposed, Parliament intended to substitute a new rationale for the power to order payment of a penalty to a particular organisation or person. 44 The correct view is that the initiating party is normally the proper recipient of the penalty as part of a system of recognising particular interests in certain classes of persons (now specified in s 718 of the WR Act) in upholding the integrity of awards and agreements the subject of penal proceedings. Where a public official vindicates the law by suing for and obtaining a penalty, it is appropriate that the penalty be paid to the Consolidated Revenue Fund. Otherwise, the general rule remains appropriate, that the penalty is to be paid to the party initiating the proceeding, with the Gibbs exception that the penalty may be ordered to be paid to the organisation on whose behalf the initiating party has acted. 45 The notion that the penalty was designed to compensate for the costs of the proceeding has in turn led to the notion that the Court should avoid ordering a payment that would produce a "windfall" to the initiating party. This notion surfaced in CPSU, The Community and Public Sector Union v Telstra Corporation Limited [2001] FCA 1364 (2001) 108 IR 228 at [27]. It is clear from [26] and [28] that Finkelstein J acted on the understanding that the purpose of ordering the payment of the penalty to the organisation initiating the proceeding would be compensatory in relation to the costs and expenses incurred. At [27], his Honour said "Proceedings for pecuniary penalties are not to be used for profit". His Honour then cited two authorities, inviting comparison between those authorities and this proposition. Neither is authority for the proposition. In Municipal Officers Association of Australia v City of Bayswater (1987) 22 IR 45 at 51, French J referred to s 120 of the C&A Act and said: I have not been persuaded that there is any reason that this penalty ought to be paid to the applicants. The applicants' interests in respect of these particular redundancies have not been seriously affected. There is no suggestion that the employees concerned have been in any way under compensated for the redundancies to which they have been subjected. In the circumstances, I will direct that the penalties imposed be paid to the consolidated revenue fund. Despite the placing of the apostrophe after the word "applicants", it is clear that the applicant in that case was a registered organisation. French J should have applied the general rule. His Honour was in error in seeing the purpose of the order as being compensatory. His Honour said nothing about the making of a "profit". The other authority referred to by Finkelstein J was Seymour, in which his Honour referred to the passage in my reasons for judgment at 268. That passage contains a refutation of the proposition that the purpose of an order for the payment of penalty to a person was compensatory. It certainly provides no support for the proposition that proceedings for pecuniary penalties are not to be used for profit. The question of profit simply did not arise. The notion that the order to pay a penalty to the initiating party could produce a windfall is a false notion. If the true purpose of such an order is taken into account, and the order is not regarded as compensatory in any way, any notion of a windfall disappears. 46 For these reasons, the industrial magistrate was in error in ordering that any part of the penalty be paid to the Consolidated Revenue Fund. The appropriate order was that the whole of any penalty imposed be paid to the Union as the party initiating the proceeding in the IRCSA.

Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union

At a glance

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Judgment (5 paragraphs)

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Legislation Cited (8)

Cases Cited (33)

Cited By (34)