Pecuniary penalty- annual leave loading
22 Section 546 permits the making of pecuniary penalty orders if considered appropriate and where the Court is satisfied that a person has contravened a civil remedy provision. Section 45 is relevant: a person must not contravene a term of a modern award. The Republic contravened the Clerks Award by failing to pay the annual leave loading to which Mr Scarati was entitled on each occasion when he took annual leave between 13 August 2014 and 31 December 2019.
23 The only evidence about the taking of annual leave is somewhat imprecise. Mr Scarati, in an affidavit made on 3 November 2023, states that "on average" he took four weeks annual leave each year between 2014 and 2020. A total of 24 weeks for that six-year period. I note there is an agreed hourly calculation for those years as an attachment to the submissions of Mr Harrington filed 6 December 2023, but unhelpfully the calculation does not identify the periods within each year when leave was taken, nor whether Mr Scarati took his leave in one entitlement or in several tranches. It also differs in the time periods during which leave was taken: the adopted period commences on 13 August 2014 and then proceeds in financial years to 31 December 2019. On this evidence the only finding that is open is that the Republic failed to pay the leave loading once in each of those six years.
24 By s 546(2), for a body corporate, the maximum pecuniary penalty is "5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table at s 539(2)", which for a contravention of s 45 is 600 penalty units for a serious contravention and 60 penalty units otherwise. No submission is made that the Republic's conduct amounts to a serious contravention: s 557A.
25 The Republic admits that it is a National System Employer as defined in the FW Act, a Foreign State for the purposes of the Foreign States Immunity Act 1985 (Cth) (FSI Act) and may sue and be sued under Australian law. The effect of s 12 of the FSI Act is that, as an employer, the Republic is not immune in this employment proceeding. No argument was put to me that it is not a body corporate, for the purposes of the FW Act. Indeed, sub silentio counsel for each party have assumed that a Foreign State body politic is a body corporate within the meaning of s 546(2). There is authority that an Australian body politic is a body corporate within the meaning of the provision: Construction, Forestry, Mining and Energy Union v State of Victoria (No 2) [2013] FCA 1034 (Bromberg J). Although an appeal to the Full Court from that decision was upheld, his Honour's reasoning on this point was confirmed, albeit in obiter reasoning, by Buchanan and Griffiths JJ (Kenny J agreed generally at [29]): Victoria v Construction, Forestry, Mining, and Energy Union [2013] FCAFC 160; 218 FCR 172, at [161]-[175]. I add that Rares J reasoned in PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2011] FCAFC 52; 192 FCR 393 at [210]-[212], that a Foreign State is amenable to regulatory proceedings, including civil penalties, then sought pursuant to s 76 of the Trade Practices Act 1974 (Cth), although that case concerned a separate entity within the meaning of s 22 of the FSI Act. In any event, as I have noted, the Republic did not submit that civil penalties cannot be imposed on it: rather that the quantum should be more modest than Mr Scarati seeks.
26 Mr Scarati seeks imposition of the maximum civil penalty for this breach which he calculates at $63,000. That figure is derived by aggregating each breach and simply multiplying 60 penalty units by five at the rate of $210. That is not correct because it does not adjust for variations in the prescribed amount of a penalty unit over time. Also, it implicitly accepts that each failure to pay the annual leave loading arose out of the same course of conduct amounting to a single contravention: s 557.
27 Dealing first with the relevant amount of penalty units as notified pursuant to s 4AA of the Crimes Act 1914 (Cth), the rates were: 1 January 2014 to 30 July 2015- $170, 31 July 2015 to 30 June 2017- $180, 1 July 2017 to 30 June 2020- $210. The correct approach requires identification of each separate contravention, then a decision whether to deal with each contravention independently or by aggregation consistently with s 557, ensuring there is no overlap between separate contraventions, and finally determination of the appropriate penalty for each contravention or group: see generally the approach of Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd [2017] FCA 1301.
28 As to the course of the Republic's conduct, s 557 provides that two or more contraventions, relevantly of s 45, are taken to constitute a single contravention if committed by the same person and if they arose out of the same course of conduct. Identification of the course of conduct requires a focus on the legal and factual elements of multiple contraventions to avoid imposing multiple penalties for the same conduct: Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1 at [39] and [41] (Middleton and Gordon JJ); Fair Work Ombudsman v Construction, Forestry, Maritime, Mining and Energy Union (the Hutchinson Ports Appeal) [2019] FCAFC 69 at [179]-[183] (Rangiah J).
29 Justice Thomas in the LJ upheld the alternative contention of Mr Scarati that the Clerks Award applied to his employment pursuant to which he was entitled to be paid an annual leave loading of 17.5%. It was not paid because the Republic contended that the employment was not covered by the Award. It held to that position despite the decision of the Full Court in Republic of Italy (Minister of Foreign Affairs and International Cooperation - Adelaide Consulate) v Benvenuto [2018] FCAFC 64; 261 FCR 19, which was published on 24 April 2018, wherein White J held (Allsop CJ and Besanko J agreeing) that the Clerks Award applied to the employment of a consular official by the Republic in Australia. Somewhat perplexingly, before Thomas J, the Republic submitted that Benvenuto was wrongly decided and should not be followed, which submission his Honour swiftly dismissed for the obvious reason that Full Court decisions bind trial judges of this Court: LJ [137]-[152].
30 Whilst factually the course of conduct was non-payment of the same Award entitlement on each occasion that Mr Scarati took annual leave between 2014 and 2020, the legal complexion differs. I regard non-payment before 24 April 2018 as less serious to non-payment thereafter. In the latter period, no element of ignorance as to the content of the legal obligation may be relied upon. The appropriate course is to divide and separately consider the factual course of conduct before and after 24 April 2018.
31 Recently, I summarised the general principles applicable to the imposition of civil penalties in an analogous statutory context: Australian Competition and Consumer Commission v Airbnb Ireland UC [2023] FCA 1633 at [19]-[22]. Pecuniary penalties are imposed for the public purpose of promoting compliance with the relevant statutory regime. Deterrence, specific and general, is the objective, not retribution or rehabilitation: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; 274 CLR 450 at [14], [16], [39] [40], [43], [45] and [55] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). The statutory maximum requires no more than a reasonable relationship with the ultimate penalty as one that is appropriate for the contravening conduct. The penalty should not be of such severity as to be oppressive.
32 In a frequently cited decision, French J listed factors to be considered in the overall assessment in Trade Practices Commission v CSR Ltd [1990] FCA 762 and which the Full Court (Allsop CJ, White and O'Callaghan JJ) synthesised as relevant to the FW Act in Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner [2018] FCAFC 97; 264 FCR 155 at [20]:
[T]he nature, character and seriousness of the conduct; the loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and, any co-operation with the regulator and contrition.
33 This is not, however, a rigid or exhaustive checklist: Pattinson at [19].
34 Mr Harrington submits that the failure to pay the leave loading was conscious, deliberate and inconsistent with Benvenuto. Mr Tierney concedes that the conduct was "inherently serious", accepts that Thomas J found the entitlement was not paid over an extended period and that the record-keeping of the Republic was inadequate to ensure compliance with the Clerks Award. In mitigation, however, it is submitted in favour of the Republic that the damage suffered by Mr Scarati was relatively modest, he was not otherwise underpaid in accordance with the Award, the contravention related to conduct against a single employee and there are no aggravating factors, such as an attempt to disguise the underpayment, fraud or dishonesty.
35 Whilst those matters put in favour of the Republic may be accepted, it cannot be gainsaid (as submitted for Mr Scarati) that: the contravention occurred over a six-year period, the letter of demand sent before commencement of the proceeding did not result in the making of the payments, the immunity defence relied on was untenable, no offer was made to simply pay the unpaid entitlements (even after the proceeding was commenced), the breach had not been remedied by the time of the penalty hearing, no apology has been provided to Mr Scarati and there is no evidence of contrition and remorse. The defence of this proceeding, particularly the maintenance of defences that Thomas J determined to be without merit is indicative of the culture within the Republic that compliance with the requirements of Australian employment law is not a matter which is taken seriously.
36 I accept Mr Scarati's submission that specific deterrence is a critical consideration in this case in that the Republic is a sophisticated State that must understand its obligation to comply with local employment laws. I further accept that its conduct demonstrates indifference to the legal entitlements of Mr Scarati. In my view specific deterrence far outweighs the need for general deterrence.
37 Taking these matters into account, I determine that the appropriate pecuniary penalty for failure to pay the annual leave loading is:
(a) For the period August 2014 to June 2018, approximately four years, calculated as a single course of conduct, and by applying a penalty of $80, as not exceeding the statutory maximum penalty unit that applied in those years: $24,000;
(b) For the period July 2018 to December 2019, approximately two years, calculated as a single course of conduct but which was more serious after publication of the decision in Benvenuto in April 2018, and by applying a penalty of $150, as not exceeding the statutory maximum penalty unit that applied in those years: $45,000:
(c) Resulting in a total penalty for these contraventions of $69,000.
38 Mr Scarati seeks a further order that the penalty be paid to him as provided for at s 546(3). The usual course is to order that any penalty imposed is to be paid to the successful applicant: Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4 at [101] (Tracey, Barker and Katzmann JJ). The Republic did not submit to the contrary and I consider this to be appropriate.