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Employment Law Symposium of the Law Society of Western Australia
Civil Penalty Contraventions
Justice John Gilmour
30 November 2011
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History of Legislative Provisions
If we look at the maximum penalty that could be imposed by this Court on a body corporate, the sum fixed by s 119(1D) (a) (i) of the
Conciliation and Arbitration Act 1904 (Cth) was $1,000 prior to its repeal and replacement by s 178(4) (a) (ii) of the Industrial Relations Act 1988 (Cth) and after that until 30 March 1994. The relevant maximum became $5,000 when the Industrial Relations Reform Act 1993 (Cth) (No 98 of 1993) was introduced. This continued until the coming into operation of the Workplace Relations Act 1996 (Cth) which saw the maximum penalty increasing again, to $10,000.
By a further amendment s 719(4) (b) of the Workplace Relations Act 1996 (Cth) was inserted expressing the penalty for a body corporate as being a maximum of 300 penalty units. A penalty unit is defined
in s 4(1) of the Act as having the meaning given to it in s 4AA of the Crimes Act 1914 (Cth). Section 4AA (1) stipulates that a penalty unit is $110, making the total maximum $33,000.
This represents an increase in the maximum penalty of 230 percent in just two years and more than 3000% since 1994. The legislature's
tendency to consistently increase penalties is an important starting point in understanding civil penalty provisions, but also acts
as a warning when considering penalties handed down in earlier cases.
Purpose of Imposing Penalties
In Australian Building and Construction Commissioner v Construction, Forestry, Mining & Energy Union (No 2) [2010] FCA 977; (2010) 199 IR 373 Barker J discussed the underlying purpose of imposing penalties. His honour's analysis was upheld by the Full Court on an appeal
matter in McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29. Barker J stated (at [6]) that:
The purpose to be served by the imposition of penalties is at least threefold:
(1) punishment, which must be proportionate to the offence and in accordance with prevailing standards;
(2) deterrence, both personal (assessing the risk of re-offending) and general (a deterrent to others who might be likely to offend);
and
(3) rehabilitation.
There is a very helpful discussion of these elements concerning the imposition of penalties by Lander J in Ponzio v BP Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543.
Proportionality
Firstly, the punishment must be proportionate to the offence as well as being in accordance with the prevailing standards of punishment:
R v Hunter (1984) 36 SASR 101 at 103. It is obviously very important that judges consider the circumstances of the offence or contravention.
Deterrence
Secondly, when imposing penalties the need for both personal and general deterrence must be considered. When considering personal
deterrence, a judge will need to make an assessment of the accused person's risk of re-offending. In relation to general deterrence,
it is important to note that there is an assumption that an appropriate penalty will act as a deterrent to others who might be likely
to offend: Yardley v Betts (1979) 22 SASR 108. Based on this assumption when considering the penalty that should be imposed, a judge will need to consider penalties of a nature
which would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. The penalty
should be high enough to deter others from contravening the section but not so high as to crush the person upon whom the penalty
is imposed, nor should it be used to make that person a scapegoat. Depending on the nature of the contravention in some cases general
deterrence will be one of the judge's paramount considerations when fixing the penalty: R v Thompson (1975) 11 SASR 217.
When considering the purpose of imposing the penalty, the individual or personal circumstances of the contravener must be taken into
account as well as any relevant matter in mitigation. Justice Barker has suggested that for a contravention the minimum penalty which addresses punishment and deterrence, both personal and general, will be appropriate.
Approach to determining penalties
In Fair Work Ombudsman v Kentwood Industries Pty Ltd [2011] FCA 579, McKerracher J applied a four step approach to determining the appropriate penalty as follows:
1. Each contravention of each separate obligation is a separate contravention so it is necessary to identify the maximum penalty for
each separate contravention.
2. It is necessary then to consider an appropriate penalty to impose with respect to each contravention (whether a single contravention
alone or as part of a course of conduct), having regard to all of the circumstances of the case.
3. To the extent that two or more contraventions have common elements, this may be taken into account when considering the appropriate
penalty for each contravention. The respondents should not be penalised more than once for the same conduct and the penalties imposed
should be an appropriate response to the respondents' actions.
4. Having fixed an appropriate penalty for each separate contravention, group of contraventions or course of conduct, a final review
of the aggregate penalty is necessary to determine whether it is an appropriate response to the conduct which led to the contraventions.
I will develop this last point further below.
The overriding principle is to ensure that the sentence is proportionate to the gravity of the contravening conduct.
Factors Judges Consider in Determination of Penalties
When determining what penalties to impose the following list of factors has been considered by judges in previous cases:
(a) the nature and extent of the conduct which led to the contraventions;
(b) the circumstances in which that conduct took place;
(c) the nature and extent of any loss or damage sustained as a result of the contraventions;
(d) whether there has been similar previous conduct by the respondent;
(e) whether the contraventions were properly distinct or arose out of the one course of conduct;
(f) the size of the business enterprise involved;
(g) whether or not the contraventions were deliberate;
(h) whether senior management was involved in the contraventions;
(i) whether the party committing the contraventions has exhibited contrition;
(j) whether the party committing the contraventions has taken corrective action;
(k) whether the party committing the contraventions has co-operated with the enforcement authorities;
(l) the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee
entitlements; and
(m) the need for specific and general deterrence.
See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 (at [14]); Stuart-Mahoney v Construction, Forestry, Mining and Energy Union [2008] FCA 1426; (2008) 177 IR 61 (at [40]) and John Holland Pty Ltd v Maritime Union of Australia (No 2) [2010] FCA 110; (2010) 192 IR 431 (at [27]); McDonald v Australian Building & Construction Commissioner [2011] FCAFC 29 (at [15]); Construction, Forestry, Mining and Energy Union v Hamberger [2003] FCAFC 38; (2003) 127 FCR 309 at [51]; Hadgkiss v Sunland Construction (Qld) Pty Ltd [2006] FCA 1566 at [11].
Whilst the summary is a convenient checklist, it does not restrict the matters which the Court may take into account in the exercise
of its discretion. In Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 Buchanan J observed that such a checklist could be useful, provided that it is not transformed into a "rigid catalogue of matters for attention." His Honour also noted that the Court's task is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions
have occurred and the need to maintain public confidence in the statutory regime that imposes the obligations (at [580]).
Comparison with other Cases
Determining penalties is not a matter of precedent. There is no tariff. Regard must be had in fixing a penalty to the individual circumstances
of a case and should not be determined by a line by line comparison with another case. In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 at 295 Buchanan J said:
"The facts of the instant case should not be compared with a particular reported case in order to derive therefrom the amount of the
penalty to be fixed. Cases are authorities for matters of principle; but the penalty found to be appropriate, as a matter of fact,
in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case."
This proposition was supported in (No. 2) [2010] FCA 977; (2010) 199 IR 373 at [11] per Barker J and upheld by the Full Court on appeal in McDonald v Australian Building and Construction Commissioner .
Judges have emphasised that it would be inappropriate to compare penalties fixed across cases, particularly given that:
1. there have been too many changes to the level of the maximum penalty over a relatively short period;
2. the changes have been too great in scale; and
3. there have been too few cases decided for it to be said that there is an appropriate range of penalties established.
However, consideration of penalty decisions in other cases may be of value in demonstrating that there is a range of penalties generally considered appropriate to a particular type of case. This does not however, detract from the importance of
considering the individual circumstances of the case at hand in order to determine what penalty is to be fixed within an appropriate
range.
In considering whether or not an appropriate range has been established, judges have exercised caution. For example, in Fair Work Ombudsman v Conn [2010] FMCA 828 Gray J stated that two cases, both judgments of the same federal magistrate, were not a large enough sample to establish an accepted
range of penalties for contraventions of Awards, or for contraventions of any other type for that matter. In this appeal, his Honour
found that it was necessary for the magistrate at first instance and for the Appeal Court to proceed on the basis that there was
no appropriate range of penalties.
The application of the principle of totality or proportionality
The totality principle is a guide to sentencing practice that is predominantly designed to avoid injustice in the overall result when
fixing penalties. In applying the totality principle the starting point should be to determine the appropriate penalty for each contravention
that has occurred, with consideration being given to the apparent degree of overlap. In considering whether the contraventions arose
from the one course of conduct, even if embodying multiple breaches, the Court can have regard to whether there is an interrelationship
between the legal and factual elements of the contraventions.
In Construction, Forestry, Mining and Energy Union v Cahill (2010) 194 IR 461 at 465 Moore J stated that:
"Rather, it is a question answered by evaluating the differences and similarities in the Acts to determine whether, ultimately, they
are or are not a manifestation of singular criminality."
However, identifying a single motive for commission of separate offences will rarely be sufficient to establish the same criminality
in separate and distinct offending acts.
Once this stage is complete, the aggregate figure should then be considered with a view to ensuring that it provides an appropriate
response to the conduct which led to the breaches.
It is important to note that this principle does not suggest that a penalty should necessarily be reduced from an aggregate total
fixed for multiple offences. Rather, it involves a consideration of "whether the aggregate is 'just and appropriate." It requires
a final check be undertaken to ensure that the total or aggregate penalty is not oppressive or crushing with regard to the circumstances.
However, the Full Court bench (Gummow, Callinan and Heydon JJ) in Johnson v The Queen [2004] HCA 15 indicated that the application of the totality principle was not confined simply to cases where an aggregation of sentences might
otherwise impose a crushing burden. Justices Gummow, Callinan and Heydon emphasised that judges of first instance "should be allowed
as much flexibility in sentencing as is consonant with consistency of approach and as accords with the statutory regime under which
the sentencing is effected."
Instinctive Synthesis
In general a sentencing court will, after weighing all of the relevant factors, reach a conclusion that a particular penalty is the
one that should be imposed. There are many conflicting and contradictory elements which bear upon sentencing a person. It has been
recognised that the task of the sentencer is to take account of all of the relevant factors and to arrive at a single result which
takes due account of them all. That is what is meant by saying that the sentencer's task is to arrive at an "instinctive synthesis."
This expression is not used to cloak the task of the sentencer in some mystery, but rather to make plain that the sentencer is called
on to reach a single sentence which balances many different and at times conflicting features.
Instinctive Synthesis has been compared with the two stage approach to sentencing. The latter approach involves the determination
of an "objective" sentence which is then "adjusted" by some mathematical value given to one or more features of the case, such as
a plea of guilty or assistance to authorities. In considering these key features, there will be increments to or decrements from
the objective sentence. This approach has been said to depart from principle because it fails to take into account the fact that
there are many contributing factors which bear upon the sentencing of an offender. Attributing a particular weight to some factors
while ignoring the significance of others factors may not be the best approach.
In R v Thomson Spigelman CJ reviewed the state of the authorities in Australia that deal with the "two-stage" approach of arriving at a sentence
from which it is clear that the weight of authority in the intermediate appellate courts in Australia is against adopting two-stage
sentencing and favours the instinctive synthesis approach.
In R v Gallagher (1991) 23 NSWLR 220, Gleeson CJ expressed his difficulty with this approach stating that:
"It must often be the case that an offender's conduct in pleading guilty, his expressions of contrition, his willingness to co-operate
with the authorities, and the personal risks to which he thereby exposes himself, will form a complex of inter-related considerations,
and an attempt to separate out one or more of those considerations will not only be artificial and contrived, but will also be illogical."
By comparison applying the instinctive synthesis approach involves a full and transparent articulation of the relevant considerations,
including what weight is to be given to each consideration in the circumstances of a particular case. Additionally this approach
conforms to the need for predictability and consistency in sentencing. These underpin the rule of law and public confidence in the
administration of justice.
Factors Taken into Account when Assessing Penalty
Size and financial resources of the respondent
The size and financial resources of a business should not impact on their obligations to comply with industrial relations law. The
size of the business is not relevant in absolving industrial participants from their obligations to comply with the law.
Justice Tracey said in Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14:
"No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees,
rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing
an appropriate monetary sanction. Such a sanction must be imposed at a meaningful level."
Similarly, a respondent's financial situation should have no impact on assessment of penalty. In PKIU v Vista Paper Products Pty Ltd [1994] IRCA 133; (1994) 127 ALR 673 Wilcox CJ penalised both a company in receivership and its bankrupt controlling director, saying that:
"While this evidence suggests that both Vista and Mr McNamee may have difficulty in paying penalties, I do not think I should allow
it to deflect me from imposing whatever penalties are otherwise appropriate."
Deliberateness of the breaches
If the breaches were in fact deliberate, a harsher penalty may be imposed on the respondents.
Maximum Penalties
In Markarian v R (2005) 228 CLR 357 the High Court discussed the importance of considering the maximum penalties in the context of fixing penalties.
It was said that careful attention needs to be given to maximum penalties because:
1. the legislature has legislated for them;
2. they invite a comparison between the worst possible case and the case before the Court; and
3. they provide a yardstick to balance with other relevant factors.
What is clear is that recent increases to penalties by the legislature mean that any light handed approach that may have been taken
in the past to serious, wilful and ongoing breaches of industrial laws is no longer appropriate.
Ensuring Compliance with Minimum Standards
The Court require to set the penalty in a range that reinforces the fundamental importance of compliance with the employment standards set out in Australia's
industrial laws.
Mitigating Factors
I will not attempt to deal with this comprehensively but rather illustrate a number of relevant matters.
Co-operation with regulatory authorities
In Fair Work Ombudsman v Australian Shooting Academy Pty Ltd [2011] FCA 1064 Logan J found that the following were mitigating factors:
- a timely acknowledgement of liability on the part of each respondent with a substantial saving to the Executive Government of the
cost of the prosecuting the civil penalty proceeding;
- a saving in terms of disruption of the lives of those whom one might apprehend would necessarily have had to give evidence for the
Fair Work Ombudsman in the proceeding; and
- a saving in terms of publically provided judicial resources.
Deterrence
In Fair Work Ombudsman v Drivecam Pty Ltd & Ors [2011] FMCA 600 Federal Magistrate Emmett had regard to the fact that the respondents were first time contraveners and were unlikely to contravene
again.
Contrition
In Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 453 Lander J stated that the fact that the respondent had not previously breached that part of the Act and cooperated from an early stage
of the proceeding was evidence of remorse and contrition. Similarly, in Fair Work Ombudsman v Drivecam Pty Ltd & Ors [2011] FMCA 600 Federal Magistrate Emmett had regard to the fact that the respondent's co-operated with the applicant and did not resist the application
as well as the fact that the respondents were first time contraveners. This conduct was described as being evidence of remorse and
contrition and was considered by the Federal Magistrate to be a mitigating factor.
In Fair Work Ombudsman v Australian Shooting Academy Pty Ltd [2011] FCA 1064 Mr Murphy proposed to cause the Australian Shooting Academy to send (via the Fair Work Ombudsman) to each of the employees concerned
a letter of apology. Logan J said that this was not only evidence of contrition but that it could also have a healing effect for
individual grievances impacting particular employees.
In Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 the fact relied upon to demonstrate contrition was that the appellant had paid amounts owing to employees whose underpayments were
the subject of contraventions prior to the magistrate's consideration of penalties. Justice Gray found that this behaviour did not
demonstrate contrition on the part of the appellant, particularly since the appellant took this step to comply with the legal requirements
it had earlier breached as a last step. Compliance with the law is not contrition.
Paper presented by The Hon. Justice John Gilmour of the Federal Court of Australia to an Employment Law Symposium of the Law Society
of Western Australia on 30 November 2011 in Perth. The author wishes to acknowledge the assistance of his associate Ms Safiyya Khan
in the preparation of the paper.
McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29
McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29
Fair Work Ombudsman v Drivecam Pty Ltd & Ors [2011] FMCA 600, see Construction, Forestry, Mining and Energy Union v Cahill (2010) 194 IR 461at 473 per Middleton and Gordon JJ.
Kelly v Fitzpatrick 166 IR 14 at [30] per Tracey J
Markarian v The Queen 228 CLR 357 per McHugh J at [84]
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