Reconsideration of penalty
32 In re-exercising the discretion to impose penalties, I must consider the undisturbed factual findings of the primary judge in the Substantive Judgment but reach my own view as to the appropriate penalty: Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243; [2018] FCAFC 73 at [246].
33 The only purpose for imposing a penalty is deterrence, both specific to the contravening party and generally to any other who may think to contravene the Act: Australian Building and Construction Commission v Pattinson (2022) 274 CLR 450; [2022] HCA 13 at [15]-[16] (Kiefel CJ, Gageler , Keane , Gordon , Steward and Gleeson JJ).
34 As for the discretion to impose penalties, the High Court in Pattinson said at [10] and [46]-[47]:
The Full Court's critical error was that it was distracted by a concern, drawn from the criminal law, that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a "notion of proportionality", in the sense in which the Full Court used that term, in a civil penalty regime. Further, and relatedly, their Honours were misled by the view that the Act required that the maximum penalty be reserved for only the most serious examples of the offending comprehended by s 349(1), and that this principle could prevent the court from imposing the maximum penalty even though a penalty in that amount might reasonably be considered to be necessary to deter future contraventions of a like kind. Nothing in the text, context or purpose of s 546 requires that the maximum penalty be reserved for the most serious examples of misconduct within s 349(1). What is required is that there be "some reasonable relationship between the theoretical maximum and the final penalty imposed". That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others.
…
It does not follow, as the Full Court suggested and as the CFMMEU argued in this Court, from the rejection of the Full Court's "notion of proportionality" that s 546 must be taken to require the imposition of a penalty approaching the maximum in relation to any and every contravention by a recidivist offender. It is important to recall that an "appropriate" penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a "one-off" result of inadvertence by the contravenor rather than the latest instance of the contravenor's pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law on the part of a union official, or where the official responsible for a deliberate breach has been disciplined by the union. In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors of the kind adverted to by French J in CSR. For example, where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
(Footnotes omitted)
35 As adopted by Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301 at [36], the approach required when determining an appropriate penalty is as follows:
(1) Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2) Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3) Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4) Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5) Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
36 As for the relevant factors that inform the exercise of discretion, the plurality in Pattinson distilled at [18]-[19]:
In CSR, French J listed several factors which informed the assessment under the Trade Practices Act 1974 (Cth) of a penalty of appropriate deterrent value:
The assessment of a penalty of appropriate deterrent value will have regard to a number of factors which have been canvassed in the cases. These include the following:
1. The nature and extent of the contravening conduct.
2. The amount of loss or damage caused.
3. The circumstances in which the conduct took place.
4. The size of the contravening company.
5. The degree of power it has, as evidenced by its market share and ease of entry into the market.
6. The deliberateness of the contravention and the period over which it extended.
7. Whether the contravention arose out of the conduct of senior management or at a lower level.
8. Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.
9. Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention."
It may readily be seen that this list of factors includes matters pertaining both to the character of the contravening conduct (such as factors 1 to 3) and to the character of the contravenor (such as factors 4, 5, 8 and 9). It is important, however, not to regard the list of possible relevant considerations as a "rigid catalogue of matters for attention"27 as if it were a legal checklist. The court's task remains to determine what is an "appropriate" penalty in the circumstances of the particular case.
(Footnotes omitted)
37 The primary judge categorised the contraventions as the First, Second and Third Contravention. It is not contentious that these contraventions cannot be grouped as a single contravention in accordance with s 557 of the Act, but that they can be grouped together as a single course of conduct at common law.
38 Willis Bros contended that all the contraventions should be viewed as a continuous course of conduct, by reason of Mr Willis' determination that Mr Ruttley was unable to continue his role due to his silicosis diagnosis, without any evidence of this being so, which led to injury (Second Contravention), and ultimately the termination of his employment (First and Third Contravention). Mr Ruttley contended that the First and Third Contravention should be grouped together as both are concerned with the adverse action of terminating his employment. Mr Ruttley submitted that the First and Third Contraventions, and the Second Contravention are distinct in nature and time and should not be further grouped.
39 I am satisfied that the First and Third Contraventions concern the same conduct, namely the termination of employment, and therefore should be grouped together as a single course of conduct. The Second Contravention, however, is a distinct act. As found by the primary judge, Mr Willis formed the view that Mr Ruttley was unable to continue in his role by reason of his diagnosis of silicosis. Mr Willis then formed an intention to remove Mr Ruttley from the business and acted upon that intention. The act of forming the view that Mr Ruttley was unable to continue in his role, and the act of terminating his employment, are separate actions. While it is clear that the primary judge considered that Mr Willis formed a motive to terminate Mr Ruttley's employment at the time of deciding that he was unable to continue in his role, the identification of motive is not sufficient to establish that the contraventions form a single course of conduct: Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 [2010] FCAFC 39 at [39] (Middleton and Gordon JJ).
40 I do not consider that Willis Bros would be penalised twice for the same conduct if the Second Contravention were treated as distinct from the First and Third Contraventions.
41 As for the appropriate penalty, Mr Ruttley submitted that a total of $47,250.00 (being 75% of the maximum) should be ordered with respect to the First and Third Contraventions. Mr Ruttley further submitted that $8,400.00 (being 40 penalty units) should be ordered for each of the actions taken by Mr Willis with respect to the Second Contravention, being:
(a) Disconnecting Mr Ruttley's work phone and cancelling his fuel card on 14 January 2020;
(b) Suspending his QBCC allowance on 21 February 2020;
(c) Requiring the return of his work vehicle on 3 March 2020; and
(d) Failing to pay leave entitlements from 16 March 2020 while he was on personal leave.
42 That means that the total penalty for the Second Contravention would be $33,600.00 which Mr Ruttley submitted is reflective of the individual significance of each action, which had a material impact on him, and reflects that the cumulative effect was not so great as the effect of the termination of employment, which should attract a higher penalty.
43 Accordingly, Mr Ruttley submitted the total penalty for all the contraventions should be $80,850.00 without further reduction. The factors which he submitted are relevant, such that a high penalty is warranted, include:
The contraventions were deliberate.
The adverse action was not a "one off" event but formed a culmination of actions by Mr Willis over a period of months designed to remove him from the business.
Mr Willis has shown no remorse, and Willis Bros' director and CFO were prepared to lie at trial.
Although Mr Ruttley was awarded compensation in the Substantive Judgment, due to the lack of record-keeping by Willis Bros, the primary judge was unable to identify the exact quantity of accrued sick and annual leave owing to Mr Ruttley. The primary judge awarded the equivalent of four weeks' pay in circumstances where her Honour accepted Mr Ruttley's evidence but was unable to calculate outstanding entitlements, which he submitted is significantly likely to have undercompensated him.
Mr Ruttley's silicosis and mental illness were sustained during and because of his longstanding and loyal employment, in circumstances where he was first injured at work (by reason of his silicosis diagnosis) and secondly punished for that injury which in turn caused his mental illness.
44 Willis Bros submitted that, if all the contraventions are found to constitute a single course of conduct, the appropriate penalty is $25,200 (being 40% of the maximum). In the alternative, Willis Bros submitted that as the First and Third Contraventions comprise the same conduct, an appropriate penalty is $25,200 (being 40% of the maximum), and for the Second Contravention the appropriate penalty is $18,900 (being 30% of the maximum).
45 Willis Bros submitted the following factors are relevant to the consideration of the appropriate penalty:
Mr Ruttley and Mr Willis worked together for approximately 20 years, and Mr Ruttley is still a shareholder of the company, not just an employee. There was no animosity between the parties before November 2018.
Mr Ruttley expressed concern about the ramifications to Willis Bros, namely the potential financial impact, due to the number of employees who were diagnosed with silicosis.
Willis Bros experienced a loss in the 2018/2019 financial year due to silicosis within the industry, which continued throughout 2018 and 2019. Mr Ruttley agreed that during that period there were a number of redundancies in the company and that financial pressure might have dictated the disposal of company assets, such as vehicles.
The loss suffered by Mr Ruttley is minimal, in circumstances where he has been awarded compensation and damages, and secured new employment from 26 August 2020, having not sought employment elsewhere, other than with his brother Simon, and not until approximately 3-4 weeks before commencing his new role. Further, Mr Ruttley conceded that due to his silicosis diagnosis he would be unable to work for Willis Bros past 5 May 2021.
Willis Bros has not engaged in similar conduct previously, therefore the need for deterrence is low.
Willis Bros is a relatively small business, employing 16 employees. Willis Group has 22 employees.
46 The conduct of Mr Willis was grave. Indeed, the primary judge described it as "egregious and unjust". I agree with that characterisation.
47 As is clear in Pattinson at [80] (Edelman J), a penalty is not to be imposed based on what the contravening party "deserves" or what "fits the contravention", the seriousness of the conduct is only relevant in determining what penalty is necessary to achieve the object of deterrence. As such, a large penalty can be imposed for a somewhat minor offence, and a small penalty could be appropriate for a serious offence based on what is considered necessary to deter: Pattinson at [75]-[79] (Edelman J).
48 In Construction, Forestry, Maritime, Mining and Energy Union v Richard Crookes Constructions Pty Ltd [2022] FCA 992, Wigney J observed at [164]:
A contravention which is deliberate, concealed and carried out by senior management is likely in many cases to suggest that a higher penalty is necessary to provide effective deterrence, both specific and general: see, for example, Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR ¶40-091 at 17, 896; Pattinson at [57]. The fact that a contravention was deliberate, concealed and carried out by senior management does not, however, indicate that a higher penalty is necessary simply because such a penalty is necessary to ensure that the contravener gets his, her or its "just deserts".
49 The central consideration is to ensure that the penalty imposed "is not such as to be regarded by [the] offender or others as an acceptable cost of doing business": Pattinson at [17] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). Therefore, consideration must be had as to what penalty is sufficient to discourage non-compliance with the Act by Willis Bros, and by others who might engage in similar conduct in the future.
50 It is relevant to have regard to the sections of the Act which were contravened. Section 340 is concerned with ensuring that the rights of workers are protected. The provision is breached where first, a person has a workplace right, or has or has not exercised, proposed to exercise or not to exercise, or was prevented from exercising a workplace right; second, conduct occurred against that person that constitutes adverse action; and third, the adverse action was taken because the person has a workplace right, or exercised or has not exercised, proposed to exercise or not to exercise a workplace right.
51 Section 351 is concerned with ensuring that an employee is not subject to discrimination in the workplace. It is breached where first, an employer takes adverse action against an employee; and second, where that adverse action was based on, inter alia, physical or mental disability.
52 The importance of both provisions cannot be understated. They are enshrined in the legislation to protect the rights of employees and prevent them from being subject to discrimination. Accordingly, I find that breaching these provisions is serious, and is likely to attract a higher penalty to achieve effective deterrence.
53 The primary judge found that Mr Willis, the majority shareholder and managing director of Willis Group, although not a director of Willis Bros since 2012, was the controlling mind behind Willis Bros (Substantive Judgment at [209]). Mr Willis made the decisions which led to the contraventions under the Act. The conduct, having been undertaken by senior management, suggests that a higher penalty should be imposed to achieve effective deterrence.
54 Furthermore, the conduct of Mr Willis was found to be deliberate which again suggests that a higher penalty is necessary to achieve effective deterrence.
55 It can be accepted that the conduct occurred in circumstances where the stone and masonry industry was under particular strain because a number of employees, not only within Willis Bros but nation-wide, were diagnosed with silicosis. I accept that this would have caused heightened tension for senior management. However, it is manifestly clear that the actions taken towards Mr Ruttley were ill-conceived, as there was no evidence at that time that warranted a decision by Mr Willis that Mr Ruttley was unable to continue his duties.
56 I also accept that Willis Bros has not previously contravened the Act, which weighs against the need for a high penalty, and that it is a relatively small company that has experienced financial loss by reason of silicosis in the industry.
57 On the other hand, there is no evidence of any remorse or apology from Mr Willis which might indicate that he or Willis Bros is unlikely to repeat the conduct in the future. While the absence of contrition is not an aggravating factor leading to an increase in a penalty, it certainly does not assist in it being tempered. BHP Steel (AIS) Pty Ltd v Construction, Forestry, Mining and Energy Union [2001] FCA 336 at [10] (Kiefel J, as her Honour then was).
58 As to Mr Ruttley being awarded compensation and damages, first the compensation award was unable to be accurately calculated due to Willis Bros lack of record keeping. Second, the award of damages further demonstrates the seriousness of conduct committed by Mr Willis. I do not regard these awards as assisting in lowering the pecuniary penalty to be imposed, such that it mitigates the need for deterrence.
59 Overall, the balance of the considerations suggest that relatively substantial pecuniary penalties are warranted to achieve specific and general deterrence. I consider the following penalties to be appropriate in these circumstances:
(1) A pecuniary penalty of $47,250.00 (being 75% of the maximum) in respect of the First and Third Contravention. This was the most serious contravention of, objectively, important provisions of the Act.
(2) A pecuniary penalty of $34,980 (being 55% of the maximum) in respect of the Second Contravention. This contravention, while somewhat less serious, still comprised reckless and ill-conceived actions by senior management in breach of an objectively important provision of the Act.
60 Thus, the pecuniary penalties imposed total $82,230.00. In applying the principle of totality, the total penalty is not oppressive or disproportionate to the need to achieve the object of deterrence. The balance of factors discussed above warrant the imposition of that penalty, in circumstances where the object of specific and general deterrence is the ultimate consideration.
61 Section 546(3) of the Act provides that the Court can order that a pecuniary penalty, or part of the penalty, be paid to the Commonwealth, a particular organisation, or a particular person. Mr Ruttley submitted that, in accordance with Sayed v Construction, Forestry, Mining and Energy Union (2016) 239 FCR 336; [2016] FCAFC 4 (Tracey, Barker and Katzmann JJ), the penalty should be awarded to him.
62 At [46] of the Penalty Judgment, the primary judge decided the following:
I respectfully adopt what was said in Sayed (supra) that policy considerations speak loudly in the current case to justify the payment of the penalty to the individual affected by the contraventions who commenced and maintained the current proceedings. Had he not pursued the matter is it unlikely that the respondent would have been pursued. The [appellant] would have escaped sanctions for deliberately contravening the FW Act the outcome of which sends a message to other employers who chose to contravene the Act. Further the [respondent] would not have received compensation for the unlawful termination of his employment and distress caused to the applicant by the respondent's conduct in removing him from the business.
63 Willis Bros took no issue with this aspect of the Penalty Judgment. Accordingly, I respectfully agree with, and adopt the reasoning of, the primary judge in that regard. The pecuniary penalty ought to be paid to Mr Ruttley.