Director, Fair Work Building Industry Inspectorate v Devine Constructions Pty Ltd & Ors [2019] FCCA 2712 (25 September 2019)

Last Updated: 26 September 2019

FEDERAL CIRCUIT COURT OF AUSTRALIA

DIRECTOR, FAIR WORK BUILDING INDUSTRY INSPECTORATE v DEVINE CONSTRUCTIONS PTY LTD & ORS (No.2)

[2019] FCCA 2712

Catchwords: INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – assessing penalty – deterrence.

Legislation: Fair Work Act 2009 (Cth), ss.340, 354, 546, 550(1), 557(1)

Australian Building And Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; (2017) 254 FCR 68 Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (Quest Apartments Case) (No.2) [2017] FCA 163; (2018) 358 ALR 725 Australian Building And Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3; (2018) 262 CLR 157 Australian Building and Construction Commissioner v Forest Meiers Construction Pty Ltd & Anor [2019] FCCA 2663 Construction, Forestry, Mining and Energy Union v Australian Building And Construction Commissioner (Non-Indemnification Personal Payment Case) [2018] FCAFC 97; (2018) 280 IR 28

Applicant:

DIRECTOR, FAIR WORK BUILKDING INDUSTRY INSPECTORATE

First Respondent:

DEVINE CONSTRUCTIONS PTY LTD

Second Respondent:

MICHAEL TUCKER

Third Respondent:

ANDREW BLORE

Fourth Respondent:

WAYNE SENGELMAN

File Number:

BRG 773 of 2015

Judgment of:

Judge Jarrett

Hearing date:

By written submission

Date of Last Submission:

6 August 2019

Delivered at:

Brisbane

Delivered on:

25 September 2019

REPRESENTATION

Counsel for the Applicant:

Mr Duffy QC with Mr Mackie

Solicitors for the Applicant:

Clayton Utz

Solicitors for the Respondents:

ClarkeKann Lawyers

ORDERS

(1) In respect of the first respondent’s contravention of s.340 of the Fair Work Act 2009 (Cth) the subject of declaration 1 made on 11 June, 2019 the first respondent pay a pecuniary penalty of $32,000;
(2) In respect of the first respondent’s contravention of s.354 of the Fair Work Act 2009 (Cth) the subject of declaration 2 made on 11 June, 2019 no pecuniary penalty be imposed upon the first respondent;
(3) In respect of the second respondent’s contravention of s.340 of the Fair Work Act 2009 (Cth) the subject of declaration 3 made on 11 June, 2019 the second respondent pay a pecuniary penalty of $3,000;
(4) In respect of the second respondent’s contravention of s.354 of the Fair Work Act 2009 (Cth) the subject of declaration 4 made on 11 June, 2019 no pecuniary penalty be imposed upon the second respondent;
(5) In respect of the third respondent’s contravention of s.340 of the Fair Work Act 2009 (Cth) the subject of declaration 5 made on 11 June, 2019 the third respondent pay a pecuniary penalty of $3,000;
(6) In respect of the third respondent’s contravention of s.354 of the Fair Work Act 2009 (Cth) the subject of declaration 6 made on 11 June, 2019 no pecuniary penalty be imposed upon the third respondent;
(7) The penalties imposed by orders (1), (3) and (5) hereof be paid in the following way:

• (a) as to 50% thereof, to the Commonwealth of Australia;
• (b) as to 50% thereof, to Craig’s Engineering Pty Ltd.

(8) The penalties imposed by orders (1), (3) and (5) hereof be paid in accordance with order (7) hereof within twenty-eight (28) days of the date of these orders.

FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE

BRG 773 of 2015

DIRECTOR, FAIR WORK BUILKDING INDUSTRY INSPECTORATE

Applicant

And

DEVINE CONSTRUCTIONS LIMITED

First Respondent

MICHAEL TUCKER

Second Respondent

ANDREW BLORE

Third Respondent

WAYNE SENGELMAN

Fourth Respondent

REASONS FOR JUDGMENT

1. In January, 2014 the first respondent contravened ss.340 and 354 of the Fair Work Act 2009 (Cth) by refusing to engage another company, Craig’s Engineering Pty Ltd, to perform certain work described as structural steel work at the Double One 3 Apartments Project situated at 113 Commercial Road, Teneriffe. The second and third respondents, Mr Tucker and Mr Blore were involved in those contraventions for the purposes of s.550(1) of the Fair Work Act and so are to be taken to have also committed the contraventions. These reasons concern the penalties to be imposed upon each respondent for those contraventions.
2. This case bears a striking similarity to the facts of another case I recently dealt with: Australian Building and Construction Commissioner v Forest Meiers Construction Pty Ltd & Anor [2019] FCCA 2663. Much of what I said in that case, both in terms of the law to be applied and the approach to the imposition of appropriate penalties applies here.
3. The contraventions in the present case arise against the following facts:
   1. Devine is a construction company and was the head contractor for the Double One 3 Apartments Project. Mr Tucker, was at all relevant times an employee of Devine and engaged in the position of General Manager. Mr Blore was at all relevant times an employee of the first respondent and was a contracts administrator.
   2. One of the separate packages of work for the project was referred to in the evidence as the “structural steel works”. Devine sought tenders from qualified subcontractors to complete that work. Mr Blore was responsible for the tender process. Mr Tucker was ultimately responsible for deciding to whom the tender would be awarded.
   100. Mr Blore and Mr Lachlan Vigna (another Devine employee) prepared a “comparison spread sheet” for the tender. It was added to from time to time as a “living document” and recorded each particular details about the tender received from each subcontractor that submitted a tender for the work.
   4. On 11 October, 2013 Craig’s Engineering was invited by Devine to tender for the structural steel works.
   5. On 25 October, 2013 Craig’s Engineering submitted a tender for the work.
   6. On 21 November, 2013 representatives of Craig’s Engineering attended a meeting with Mr Blore regarding the tender. The evidence of Mr Lynch from Craig’s Engineering was that during this meeting Mr Blore said, inter alia, “We would like you to do the job but you don’t have an EBA Agreement’.
   7. On 11 or 12 December, 2013 Eamonn Cremin of Devine contacted another company, Steel Construct Australia Pty Ltd and invited that company to discuss a tender for the structural steel works.
   8. On 12 December, 2013 Steel Construct submitted a tender for the works, quoting a price of $103,650.
   9. On 16 December, 2013 Mr Cremin of Devine met with representatives from Steel Construct. During this meeting Mr Cremin conveyed to Steel Construct that if they had an EBA with the CFMEU it “would be an easier option for us”.
   10. On 17 December, 2013 Steel Construct sent a revised quotation to Devine, referring to additional costs to be incurred “with regards to the EBA with CFMEU’’, and stating that Steel Construct wanted to apply 50% of these costs to the project.
   11. The drawings that affected the structural steel works were amended and that required revision of the price submitted by those whom had tendered for the work. Whilst Steel Construct was given a copy of the amended designs and an opportunity to amend their price, Craig’s Engineering was not. That was despite Craig’s Engineering sending e-mails on the matter on 17 December 2013, January, 2014 and 20 January, 2014.
   50. On or about 20 January, 2014 Steel Construct informed Devine that it could engage a crane contractor “Mulherin Rigging” to carry out a particular aspect of the works included in the structural steel works package, namely the site installation works. The relevant person from Steel Construct informed Devine that “they [referring to Mulherin Rigging] have advised me that they have an EBA Agreement with the CFMEU’’. Using Mulherin Rigging for the site installation works increased the price tendered by Steel Construct.
   13. On 22 January, 2014 Mr Blore completed and signed a document entitled “Authority to Let”. The document was signed by Mr Blore and at least two other staff of Devine. The document listed 8 subcontractors in total that had submitted tenders for the structural steel works. Steel Construct was listed at number 1 and Craig’s Engineering was listed at number 5. The document contained a column titled “Comments/Special Conditions” which contained comments referring to whether the contractor was recommended or approved by the “Union” and whether the company was in the process of “signing an EBA”.
   14. On 22 January, 2014 Mr Blore, Mr Cremin and Mr Newitt of Steel Construct attended a “tender interview relevant to Steel Construct’s tender for the Structural Steel Works Tender”. A document entitled “subcontractor tender interview” was produced, which contained the question “Do you have a: EBA, or Australian Workplace Agreement Other’’ and the response “EBA held by site installers Mulherin Rigging”.
   15. On 23 January, 2014 Mr Tucker, on behalf of Devine and following the recommendation of Mr Blore, Mr Paw and Mr Cremin, awarded the structural steel works to Steel Construct.
   16. Sometime later, but before 10 February, 2014 Mr Lynch of Craig’s Engineering had a conversation with Mr Blore regarding the tender. Mr Lynch stated that Mr Blore asked “Has Craig’s signed up to the EBA Agreement” and “We need to get this EBA agreement sorted out before we can go any further”.
   17. In early March, 2014 Mr Blore and Mr Lynch had a further telephone call in which Mr Lynch was told that their tender had been unsuccessful. Mr Lynch asked Mr Blore “Do you need a signed EBA agreement to work on this site?” and Mr Blore responded “Yes”.
   18. On 13 May, 2014 after Steel Construct had commenced performing the works, Mr Newitt of Steel Construct e-mailed Mr Blore asking “Are unions still attending regularly?” and stating “My guys could install quicker than Mulherin for a lot less”.
4. It is significant that earlier in the life of the Double One 3 Apartments Project on 9 July, 2013 Mr Wayne Sengelman (a project manager employed by Devineon the project) had sent an e-mail to all employees of Devine, including Mr Tucker, that was in effect an instruction to not engage contractors unless they had an agreement with the CFMEU.

Consideration

5. As I recorded in my reasons in Forest Meiers, the principal object of pecuniary penalties under s.546 of the Fair Work Act is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners: Australian Building And Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3; (2018) 262 CLR 157 at [116]. A pecuniary penalty for a contravention of the Fair Work Act must be fixed with a view to ensuring that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business. It is important to send a message that contraventions of the Act are serious and not acceptable: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; (2017) 254 FCR 68 at [98]. Retribution, denunciation and rehabilitation have no part to play: Construction, Forestry, Mining and Energy Union v Australian Building and Construction Commissioner (Non-Indemnification Personal Payment Case) [2018] FCAFC 97; (2018) 280 IR 28 at [19].
6. Here there are two contraventions of the Fair Work Act to be considered – contraventions of ss.340 and 354 of the Act. In the circumstances of this case, s.557(1) of the Act is not engaged so as to oblige me to treat the two separate contraventions as one. However, I must take account of the relationship between the contraventions and the facts upon which they are based. Here they are closely connected. I must ensure that Devine, Mr Blore and Mr Tucker are not punished twice for the same contravening conduct. Thus, whilst there are two separate contraventions to be considered, one way of avoiding the evil just mentioned is to impose a penalty for one of the contraventions and no, or a lesser penalty, for the other. The applicant urges me to adopt that course and I intend to do so. It is appropriate in the circumstances of this case.
7. I have set out the facts surrounding the contraventions above.
8. There is no doubt that Devine was faced with a difficult situation arising from the conduct of the CFMEU at this project site. Mr Blore and Mr Tucker both had difficult situations facing them. The relevant conduct took place in an environment in which the CFMEU were making threats of delay and disruption and engaging in coercive conduct.
9. But the purpose of the provisions that feature in this case (particularly s.354) are designed to ensure that parties such as Devine do not wittingly or unwittingly lend assistance to others intent on advancing their own agendas, such as the CFMEU, in a way that contravenes the Fair Work Act. I accept that the conduct of Devine and Messrs Tucker and Blore served to facilitate the conduct of the CFMEU in a way that contravened the Fair Work Act. The contraventions were clear breaches of the general protections provisions of the Fair Work Act and were serious.
10. It is significant that the instruction of Mr Sengelman, the project manager for the project, given by e-mail on 9 July, 2013 instructed staff to ensure that subcontractors were covered by enterprise agreements to which the CFMEU was a party. The actions of Mr Blore and Mr Tucker, and Devine in respect of the structural steel works tender were consistent with that instruction.
11. As I pointed out in Forest Meiers the Fair Work Act contains significant protections designed to level the playing field between industrial participants, that provide for freedom of association and which recognise the choice that employers and employees have to engage with industrial unions. That Craig’s Engineering did not have some form of industrial agreement with the CFMEU was entirely unexceptional and consistent with Craig’s Engineering’s industrial rights. Its choice not to have an agreement with the CFMEU was not something that a principal such as Devine was entitled to take into account when determining the award of a tender as occurred here.
12. The evidence shows that Craig’s Engineering’s price was not the most competitive, but price is not the sole driver when it comes to the choice of an appropriate subcontractor. The offending conduct here prevented Craig’s Engineering’s tender from being considered on it merits. Devine ultimately paid an increased rate to Structural Steel so that company could meet the rates payable in the standard form CFMEU enterprise agreement. I accept the applicant’s submissions that such behaviour is detrimental to the industry and the community at large.
13. Devine is a multi-national construction company. Whilst there is no suggestion that Devine is unable to pay any pecuniary penalty, the size of Devine is important because deterrence is the primary factor in determining penalty. An insignificant penalty for a respondent with vast resources will not carry the requisite deterrent effect.
14. The contraventions involved deliberate acts which resulted in contraventions of the Fair Work Act. The contraventions were not inadvertent, or accidental. The direct and explicit communication between Devine and Craig’s Engineering, in the context of Mr Sengelman’s earlier email instruction and the communication between the respondents and the CFMEU about the requirements that subcontractors be covered by CFMEU enterprise agreements, make that clear.
15. The respondents here have expressed no contrition, remorse or cooperation. Whilst that does not serve to increase the penalty that might be imposed, it does serve to remove the possibility of a discount being applied to take account of that contrition, remorse or cooperation.
16. I accept that the circumstances of this case warrant penalties that meet the objective of general deterrence. That is the primary purpose of penalties in the present context. The penalty: “must be fixed with a view to ensuring that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business”: Australian Building And Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; (2017) 254 FCR 68 at [98]. I accept, as I did in Forest Meiers, that the respondents’ conduct against Craig’s Engineering has the potential to perpetuate a culture of submission in the building and construction industry where economic duress is able to be applied to sub-contractors to force them to become covered by an enterprise agreement that also covers a union. If that potential is realised, the freedom of association provisions in the Fair Work Act will be subverted.
17. The circumstances of this case also require that penalties meet the objective of specific deterrence. Specific deterrence is one of the objects to be promoted by the imposition of a pecuniary penalty. That is perhaps more so in relation to Devine and Mr Blore. Mr Tucker has now retired from active employment.
18. However, I bear in mind what fell from the Federal Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (Quest Apartments Case) (No.2) [2017] FCA 163; (2018) 358 ALR 725 at [47] – [48] that the need for deterrence against a contravenor may weigh less heavily where they have no prior history of contravening the Fair Work Act. There is no evidence before me that any of the respondents have been involved in similar contraventions. That is important and I take it into account.

Penalties

19. The maximum penalties for the contraventions are:
    1. for Devine, $51,000 for each contravention (a total of $102,000);
    2. for each of Mr Tucker and Mr Blore, $10,200 for each contravention (a total of $20,400 each).
20. The applicant submits that the following penalties should be imposed:
    1. in relation to Devine, a pecuniary penalty of between $25,000 to $35,000 for the contravention of s.340 and no penalty for the contravention of s.354;
    2. in relation to each of Mr Blore and Mr Tucker, a pecuniary penalty of $3,000 to $4,000 for the contravention of s.340 and no penalty for the contravention of s.354.
21. The respondents submit that penalties in the low range are appropriate namely:
    1. for Devine: $10,000 in total for the alleged contraventions
    2. for each of Mr Blore and Mr Tucker: $750 each (the total penalty each for the alleged contraventions alleged against each of them).
22. I fix the penalties for the contravention of s.340 of the Act as follows:
    1. for Devine – $32,000;
    2. for Mr Tucker – $3,000; and
    100. for Mr Blore – $3,000.
23. In my view, those penalties are an appropriate response to the offending conduct in this case. The penalties I have fixed upon are, in respect of Devine, a little more than 60% of the maximum penalty and for the personal respondents, a little less than 30% of the maximum. They reflect the objective seriousness of the contraventions – the failure to observe important protections that form part of the Fair Work Act which are designed to keep a level playing field for all participants across industry. They are fixed at such a level that they carry an appropriate deterrent effect generally, but also respond to the particular circumstances of the case at hand. They take into account the different considerations that apply, as between the respondents, for specific deterrence.
24. I cannot accept the respondent’s submission that this is not a case in which the consequences of the conduct alleged were so severe so as to warrant the imposition of significant penalties. I cannot accept that submission because it draws attention away from the objective seriousness of the contraventions at hand and seeks to focus solely upon the consequences of the offending conduct. To accept that submission and focus upon that matter solely, would divert the Court away from its task of fixing a penalty that meets the primary purpose of the imposition of pecuniary penalties for contraventions of the Fair Work Act.
25. The applicant seeks that pursuant to ss.546(3)(a) and 546(c) of the Fair Work Act that the pecuniary penalties be paid to the Commonwealth and to Craig’s Engineering Pty Ltd as to one half each. I accept that such an order is appropriate. The penalties should be paid within twenty eight (28) days of the Court’s order.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Jarrett

Associate:

Date: 25 September 2019