Were the penalties manifestly excessive?
51 The appellants also argue that the penalties imposed were manifestly excessive. In support of this argument, the appellants argue that the maximum penalty provided by law should not have been imposed in a case where the contravention was not deliberate, was a first offence, and where it was not apparent that workers had suffered actual pecuniary loss. They also argue that the primary judge took into account an irrelevant consideration insofar as he regarded the appellants' failure to consult in relation to the issue of privatisation as an aspect of the contravention.
52 In relation to the appellants' latter argument, the Unions respond that his Honour's reasoning in respect of penalty was not affected by the judge's perception that the failure to consult in relation to privatisation was a material aspect of the contravention. But reference to his Honour's reasons in relation to penalty shows that the appellants' argument in this regard must be accepted. The primary judge said in [2010] FCA 652 at [55]:
The only consultation that occurred before a final decision was made was inhouse managerial consultation, not consultation with workers. There was no consultation with workers about where they might end up, where they wanted to end up, let alone about the process by which such a decision would be made, and let alone, strictly, about the proposal to privatise itself.
53 In our respectful opinion, it is apparent from this passage and from [104] of his Honour's reasons in respect of the contravention (set out at [20] of these reasons), that the learned primary judge did proceed upon this consideration in gauging the culpability of the appellants by reference to their failure to consult in relation to "the proposal to privatise itself".
54 This consideration did, however, affect his Honour's exercise of his discretion, both in relation to the imposition of the maximum penalty in each case, and to decline to ameliorate the overall result by reference to what has been called the totality principle. In this regard, his Honour said at [2010] FCA 652 at [59]-[63] and [76]:
It is very important, as was, with respect, rightly emphasised by counsel on behalf of the QR respondents, not to reach such a conclusion with the wisdom of hindsight. I have endeavoured, as best I can, not to do that in making that observation as to blindness, closing eyes to the obvious. Rather, what I have tried to do, is to look at the matter in prospect.
Looked at in prospect, what I see is this: the phenomenon of privatisation, partial or otherwise, is not unknown in railways. I gave examples by reference to statutes here and abroad of that. More generally, privatisation itself is hardly novel in contemporary Australian experience. All of us can remember Qantas as a publicly owned organisation, and the same with the Commonwealth Bank and Telstra, to give examples. In each of those, be they in railways or otherwise, though, privatisation involves radical change, a radical break with the past.
Having regard to the history of QR Limited, which I set out at some length in the principal judgment, and it necessarily embraces each subsidiary, the partial privatisation of railways was a radical break with the past in this State. Even having regard to the announcement made by the Premier on 8 December 2009, and certainly by the time the people resources team recommendations were adopted, what was occurring was an effective doubling of QR Passenger and the wholesale abolition or creation of thousands and thousands of positions. All of that was very evident in prospect. It is not hindsight to regard what occurred here as a closing of eyes to the obvious.
The annual report of QR Limited offers a reminder about how radical the change proposed was, in the description of "Employment" on page 47:
As a major Australian corporation, QR employs over 15,000 people at more than 500 locations across the country, from Cairns to Perth.
Then the following is stated:
With a growing national footprint and more than 1,500 positions located outside our home state of Queensland, QR offers excellent employment and development opportunities for its people. More than 75 % of QR's people are employed in operations, trades, and construction, and in businesses where there are strong growth opportunities. These include resources sector, general freight, and the passenger market.
Ultimately, QR aspires to be the employer of choice in the transport industry and the broader job market. It offers an outstanding range of professional opportunities across 300 job categories. You can drive a twokilometre long coal train, be at the cutting-edge of engineering design, or in a frontline customer service role on QR's suite of Traveltrains.
During 2008/09, QR's recruitment centre processed more than 34,000 applications for over 2,000 positions and reduced our fill-time rate to 31 days. The centre reduced reliance on recruitment agencies and resulted in savings for the organisation. QR is witnessing rejuvenation across its ranks while ensuring retention of its renowned operational and technical excellence. This is illustrated by the fact that one third of QRs employees - some 5,000 people - have been with the company for one to four years. At the other end of the spectrum, and where company loyalty is strongly evident, about half have been with QR for 20 years or more.
It is that employment, that organisation that has been broken up by the privatisation. It is truly radical change, and it is obvious change, change that, in my respectful opinion, was obviously intended to be the subject of the type of consultation for which the QR agreements provide. Not to appreciate that is to close one's eyes to the obvious. The changes are radical across the whole group. They are radical for QR Limited as well as for each subsidiary.
…
Having regard to all that I have mentioned, my opinion is that each individual contravention calls for the maximum penalty. It is hard to imagine a worse case in terms of fundamental change in this organisation.
55 In our respectful opinion, the primary judge erred in treating the "fundamental change" involved in privatisation as a basis for putting this case in the category of "worst imaginable cases". This is especially so given that his Honour rejected the Unions' submission that the appellants had acted in bad faith in failing to consult as required.
56 In relation to the application of the totality principle, his Honour said at [2010] FCA 562 at [79]-[80]:
Having so derived the maximum penalty, I then turn to the totality principle. As to that, I prefer an approach evident in the judgment of Goldberg J in a case ACCC v Australian Safeway Stores Pty Ltd (No 4) [2006] ATPR 42-101 where his Honour said at [82] and [83]:
The "totality" principle requires the court, after determining an appropriate … penalty for specific … contraventions in accordance with proper principles, to review the total of the … penalties and consider "whether the aggregate is just and appropriate". … The totality principle finds its genesis in the criminal law but it has been applied in the context of fixing penalties for contraventions of the [Trade Practices] Act … I have … borne in mind the totality principle. That is, I have ensured that having determined an appropriate penalty for each contravention, I have as a check considered whether the aggregate is appropriate for the various acts of contravening conduct involved.
I turn to the question as to whether, having regard to the totality principle, what I should do in respect of the aggregate penalties, in respect of each of the corporations concerned. In my opinion, this change is so radical, the breach so comprehensive, and the occasion for consultation so obvious that anything less, even considered in aggregate, than an aggregate of the maximum penalties would not do justice to the circumstances of the case and the need to ensure public confidence in adherence to industrial bargains. For that reason, the penalties that I propose to impose by order on these respondents will be the aggregate maximums that I have mentioned earlier in the reasons.
57 Having concluded that the primary judge's discretion miscarried in relation to the imposition of an appropriate pecuniary penalty, the question arises as to whether the matter should be remitted to the primary judge for the reassessment of penalty. The Unions urged this course on the basis that his Honour had the benefit of seeing the appellants' officers give evidence and so is better situated to gauge their culpability. That seems to us to be a slim basis on which to prolong the matter and put the parties to further expense. Accordingly, it falls to this Court to exercise the discretion anew.
58 The contravention was serious; but, for the reasons given above, we consider that the primary judge erred in placing this case in the category of the worst kind of contravention.
59 The principal mitigating factors are:
the absence of dishonesty or deliberate breach on the part of the appellants;
the circumstance that this was the first offence for each of the appellants;
60 The principal aggravating factors are that:
the breach was heedless of the rights of employees;
the breach involved the contravention of twenty (20) agreements affecting the industrial rights of 10,300 employees.
61 In relation to the penalty appropriate to each contravention, we consider that a figure of $20,000 appropriately reflects a balance of the principal mitigating and aggravating factors.
62 Once the appropriate level for each of the contraventions has been assessed, it is necessary to consider the aggregate of those to form a view as to whether that aggregate is so out of proportion to the overall misconduct of the appellants as to constitute an unjust result: see Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [23]; McIver v Healey [2008] FCA 425 at [30]-[31].
63 By reference to these considerations of totality, we would reduce the overall penalty for each appellant by one quarter to give effect to the totality principle recognising that the multiple contraventions were the consequence of a single course of conduct.