FEDERAL COURT OF AUSTRALIA Ponzio v D and E Air Conditioning Pty Ltd [2005] FCA 964 GARY PONZIO v D AND E AIR CONDITIONING PTY LTD (ACN 005 488 791) VID 1531 OF 2004 NORTH J 15 JUNE 2005 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 1531 OF 2004 BETWEEN: GARY PONZIO APPLICANT AND: D AND E AIR CONDITIONING PTY LTD (ACN 005 488 791) RESPONDENT JUDGE: NORTH J DATE OF ORDER: 15 JUNE 2005 WHERE MADE: MELBOURNE THE COURT DECLARES, pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth), that the Respondent has contravened s 187AA of the Workplace Relations Act 1996 (Cth) by making a payment or payments to each of: (a) Richard Thorne; (b) Peter Gray; (c) Keith Richardson; (d) David Webster; (e) Evan Panagopoulos; (f) Trevor Rowe; (g) Greg Oakenfull; (h) Anthony Overton; (i) Steven Parke; (j) Warren Boutle; (k) David Baulch; (l) Glenn Craig; (m) Stephen McMahon; (n) Robert Kerr; (o) Chansamone Chanthabouasy; (p) Matthew Ayres; (q) Sean Painter; (r) David Clements; (s) Jason Woodyard; (t) John Poland; (u) Paul Marsh; (v) Anthony Rogers; (w) Michael Horsburgh; (x) Ryan Witchell; (y) David Dawson; (z) Terry Smart; (aa) Andrew Begg; (bb) Rohan Chapman; (cc) Timothy Richards; (dd) Mark Trowbridge; (ee) Matthew Fullerton; (ff) Gregory Mate; (gg) Neville Foots; and (hh) Adam Maclean for a period or periods on 5 August 2003 in which they engaged in industrial action. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 1531 OF 2004 BETWEEN: GARY PONZIO APPLICANT AND: D AND E AIR CONDITIONING PTY LTD (ACN 005 488 791) RESPONDENT JUDGE: NORTH J DATE: 15 JUNE 2005 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Before the Court is an application under s 187AD(1) of the Workplace Relations Act 1996 (Cth) (the Act) in relation to the respondent's contravention of s 187AA(1) of the Act. 2 Section 187AD(1), until 10 August 2004, provided: In respect of contraventions of section 187AA or 187AB, the Court may, if the Court considers it appropriate in all the circumstances of the case, make one or more of the following orders: (a) an order imposing on a person who contravened or is contravening that section a penalty of not more than$10,000; (b) if the person contravened or is contravening section 187AB - an order requiring the person to pay to an employer compensation of such amount as the Court thinks appropriate; (c) injunctions (including interim injunctions), and any other orders, that the Court considers necessary to stop the contravention or remedy its effects; (d) any other consequential orders. 3 Section 187AA(1) provides: An employer must not make a payment to an employee in relation to a period during which the employee engaged, or engages, in industrial action if: (a) the employer or employee was or is a member of an organisation during that period; or (b) the employer was or is a constitutional corporation bound by an award, a certified agreement or an AWA during that period; or (c) the industrial action was taken, or is being taken, in connection with work regulated by an award, a certified agreement or an AWA; or (d) the industrial action was taken, or is being taken, in relation to an industrial dispute; or (e) the industrial action was or is of a kind referred to in paragraph (a), (b) or (c) of the definition of industrial action in subsection 4(1); or (f) the industrial action was taken, or is being taken, in a Territory. 4 The respondent is an airconditioning contractor. It is accepted that it has acted in breach of s 187AA(1) of the Act by paying some employees in respect of periods on 5 August 2004 when those employees were engaged in industrial action as defined in the Act. 5 The parties have filed a statement of agreed facts. Relevantly the statement shows that the background to the industrial action was the death of a labourer, Mr Andrew Schouten, who was killed on 1 August 2003, when a crane he was working near struck overhead power lines in Shepparton. The statement agrees that there was no connection between the work which was being performed on the Shepparton farm and the work being performed by the particular employees, except that the work could be said to be building and construction work. 6 The death of Mr Schouten in Shepparton brought into operation on the next working day the On-Site Fatalities Policy and Procedure of the Construction, Forestry, Mining and Energy Union. This published policy regarding procedures to be undertaken following a death in the industry of a unionised construction worker from an industrial accident provides as follows: When the Victorian Construction Unions (VTHC BIG) have a confirmed death of a unionised construction worker arising out of an industrial accident on site, the following steps will be taken: (i) The immediate needs of the affected family will be the first priority. (ii) The site where the death occurs will immediately stop work and other sites of the same principal contractor will also stop. (iii) Mass meeting on site will be called in the industry and following day(sic) to hear a report on the incident. Then the following will occur: (a) All productive work will stop and a full, thorough safety audit will be conducted by all available safety committee members from the basement to the roof and any OHS problems immediately rectified. Clean up works arising from the audit will be undertaken (as per VBIA) with areas progressively opened to production once listed items have been addressed. (b) In addition the site meetings will take up an agreed minimum amount per worker to be collected by the relevant Shop Stewards. This will be donated immediately to the deceased worker's family via the appropriate union office where a receipt will be issued and shall be displayed on site noticeboards. (c) Any other actions required can be voted on at the site mass meeting. (iv) Industry-wide stopwork action may occur with the mutual agreement of BIG Secretaries, taking into account the nature and circumstances of the incident leading to the death of the worker. 7 As a result of the death of Mr Schouten and the implementation of the On‑Site Fatalities Policy and Procedure, employees of the respondent stopped work on four sites. It seems that on each of those four sites part of the period of stoppage was taken up by a safety audit of the site in conformity with the union policy. However, further stoppages occurred on 5 August 2003 beyond the time necessary for the audit. The details of those stoppages are as follows. 8 First, six employees stopped work on the Concept Blue site, and were paid for eight hours of work. The total amount paid for six-and-a-half hours, which seems to exclude the period taken up by the safety audit, was $658. On this site the respondent was working for Multiplex. 9 Second, at the Victoria Towers site at Southbank, 12 employees stopped work for six-and-a-half hours, and one employee for five-and-a-half hours. They were paid a total of $1,731 for periods in which work did not take place. 10 The third site was at Freshwater Place, also at Southbank. On this project the respondent was engaged by Baulderstone Hornibrook Pty Ltd. Seven employees stopped work but only for two hours. For that stoppage they were paid by the respondent a total of $276. 11 Finally, the fourth site was the Nolan Towers site. The respondent was engaged on this site by Bovis Lend Lease Pty Ltd. Here eight employees of the respondent stopped work for three hours and were paid a total of $507. It seems likely that in relation to the Freshwater Place and Nolan Towers sites the stoppage coincided with the period of the safety audit. 12 Mr O'Grady, who appeared on behalf of the applicant, pointed to a number of relevant considerations which the Court should take into account in this case in imposing a penalty on the respondent. Firstly, by reference to the second reading speech of the Workplace Relations and Other Legislation Amendment Bill 1996, he contended that the policy behind s 187AA of the Act was part of the balance between industrial actors, and that there was a need for that balance to be respected. In support of the application, the applicant filed an affidavit in which he outlined the strong policy reasons for enforcing compliance with provisions of the Act which create this industrial balance. He referred to the findings of the Royal Commission into the Building and Construction Industry (the Cole Royal Commission) in 2002 which, he said, documented a culture of widespread unlawful activity in relation to the receipt of strike pay. He also outlined the role of the Building Industry Taskforce set up as a result of the Cole Royal Commission in seeking to ensure that the culture of disobedience to the law was checked. He said: These proceedings were instituted in direct response to an apparent industry-wide disregard for the rule of law concerning strike pay. 13 Mr O'Grady then observed the seriousness with which the legislature regards breach of these provisions by reference to the maximum penalty of $10,000 provided in the section. He also argued that there was a need in setting penalties in this area to have regard to the principle of general deterrence, and for that purpose relied upon the remarks of Finkelstein J in Community and Public Sector Union v Telstra Corporation Ltd (2001)108 IR 228. There his Honour said, in relation to Telstra's submission that there was no need to impose any penalty because Telstra would not offend again, at [9]: That may be true. But even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct: R v Thompson (1975) 11 SASR 217. 14 It is important to recognise the context in which his Honour made those comments. In particular, in the passage immediately following, he referred to circumstances in which the breach returned a significant profit to the wrongdoer. That is, of course, not to say that general deterrence is not a matter to be considered in each case. It is only to suggest that the application of the principle in each case depends upon the circumstances of the particular case. 15 Then Mr O'Grady pointed to a number of factors which should lead the Court to the conclusion that the breaches involved in this case were significant. They occurred, as he said, at more than one site, namely at four sites. They involved a significant number of employees, that is to say, 34 in all. The agreed facts indicated that the respondent was aware that the payment of strike pay was unlawful and the total amount of wages paid to the 34 employees was in itself a significant sum. 16 Mr O'Grady took the Court to the case of MX Constructions Pty Limited v ADCO Constructions Pty Limited [2004] FCA 193, in which Wilcox J said, at [11], in relation to a submission that no penalty, or only a nominal penalty should be imposed: The legislature has laid down some rules about conduct in the workplace. Sections 170NC and 298K of the Act are important elements in the mosaic of rules which govern workplace relationships. For me to refrain from imposing any penalty, or to impose a mere nominal penalty, would be to trivialise those important provisions. 17 I accept that the Court must avoid acting so as to trivialise the breaches. 18 Mr O'Grady was then invited by the Court to compare the circumstances of this case to a number of other cases which have litigated events in relation to the same day and the same background events and in which, in some cases, no penalty has been imposed. Mr O'Grady was further invited by the Court to specify the general range of penalty appropriate in this instance. He said on an analysis of other like cases, that the penalty should at least exceed $1000. I took that to mean in the circumstances that something in that general vicinity would be a minimum. 19 Mr Naughton, who appeared on behalf of the respondent, pointed to a series of factors which should be taken into account in the mitigation of penalty. First, the respondent had no previous convictions. Next, the respondent did not oppose the application and co-operated with the applicant from the earliest moment in the proceedings. Further, since the events in question, the respondent had complied with the section by resisting making payments to employees engaged in industrial action in circumstances referred to in the agreed statement of facts: 33.1. 3 employees who engaged in industrial action for a period of 8 hours on the Concept Blue site on 6 August 2003; 33.2. 9 employees who engaged in industrial action for a period of 5 hours on the Southern Cross project at 113-149 Exhibition Street, Melbourne, Victoria on 26 July 2004; 33.3. 5 employees who engaged in industrial action for a period of 8 hours on the Royal Domain Tower project at 368 St Kilda Road, Melbourne, Victoria on 24 September 2004; 33.4. 1 employee who engaged in industrial action for a period of 4 hours on the Karingal Shopping Centre project at 330 Cranbourne Road, Frankston, Karingal, Victoria on 25 November 2004; 33.5. 10 employees who engaged in industrial action for a period of 3 hours on the Mayne Pharma project at 1 Lexia Place, Mulgrave Victoria on 8 February 2005; and 33.6. 10 employees who engaged in industrial action for a period of 1˝ hours on the Waterfront City project, North Quay Docklands (Cnr Docklands & Dopel Streets) on 4 April 2005. The agreed statement further attests to the efforts which the respondent has taken since August 2003 to ensure that its strike pay procedure is implemented so as to avoid breaches of the Act. The incidents catalogued above date from 6 August 2003, that is to say, the day after the events in question, until very recently on 4 April 2005. They involved a significant number of employees. On the last two occasions, one in February 2005 and the other in April 2005, they involved 10 employees on each occasion. 20 Further, it was agreed between the parties that the respondent had incurred a cost on the project of $4966 arising from the industrial action, and had incurred the legal costs of between $8000 and $10,000 to date of these proceedings. Additionally, whilst Mr Naughton did not expressly raise the matter, it can be assumed that management of the respondent will have spent time instructing solicitors and gathering material for the purposes of the case. That amounts to an additional consequence to the respondent. Finally, the work on the four sites was completed on time and within budget and hence no third party suffered as a result of the actions in question. 21 Both parties made reference to some cases relevant to a consideration of the appropriate penalty. Whilst some assistance can be gained from them, the discretion to be exercised by the Court in each case depends on the facts of that case. Nevertheless, with that general guidance in mind I turn to consider some of the cases which have been referred to. 22 Mr Naughton relied particularly on the case of Ponzio v Firebase Sprinkler Systems Pty Ltd [2005] FCA 733 (Firebase), which involved a like application to the present. It involved industrial action on the same date and for apparently the same reasons. The matters put in mitigation there, set out particularly at [7], are similar in many instances to those relied upon in the present case. The result in that case was that Merkel J refused to impose any penalty but did grant the declaratory relief sought. His Honour relied on an earlier decision of Finkelstein J in Pine v Seelite Windows & Doors Pty Ltd [2005] FCA 500 (Seelite), which concluded at [10]: Should I impose a penalty on the respondents? No harm has been done to anyone. The contravention was inadvertent. It is unlikely to occur again. The amount of wages involved is insignificant. In these circumstances it would be quite wrong to punish the respondents. Nothing would be achieved by the imposition of a pecuniary penalty. There is no need for a specific deterrent: it is simply not necessary. And if any penalty were imposed it would be so low that it could not act as a general deterrent. 23 Merkel J in Firebase thought that case not relevantly distinguishable from Seelite. In particular it appears that he relied on the unlikelihood of reoffending as a circumstance of special relevance. He did, however, say that that case was exceptional. 24 In Pine v Austress Freyssinet (Vic) Pty Ltd [2005] FCA 583 (Austress), Ryan J imposed a penalty of $800 on the respondent in respect of contraventions of s 187AA which occurred on 5 and 6 August 2003. It concerned industrial action on the Concept Blue site, which is one of the sites presently under consideration. It appears that the Seelite decision, which was decided in April 2005, was not cited to Ryan J. A factual distinction in Austress is that there was a stoppage on 6 August 2003 relating to a dispute about failure of the respondent to pay its employees for the stoppage on the previous day. The present application concerns stoppages on 5 August 2003. 25 Some of the other discretionary matters raised today were raised in that case, and whilst each of these decisions is generally useful in isolating the relevant factors, none of course can determine the outcome in this case. 26 Mr O'Grady placed some reliance on the case of Clarke v Baulderstone Hornibrook Pty Ltd [2003] FCA 1426 (Clarke), in which RD Nicholson J imposed a penalty of $1000 for a breach of s 187AA of the Act. The breach related to a site in Perth in September 2001. Again, many of the discretionary factors were discussed. But the case is sufficiently different to make it an unreliable guide to the present. Two matters, for instance, come to mind. The first is that the background of the present case, which involved the death of a building worker in Victoria leading to stoppages on Victorian sites, is substantially different to the background in Clarke,where the industrial action in question related to industrial claims in the course of enterprise agreement negotiations. Furthermore, the respondent in that case relied on a record of no prior contraventions of the Act and of good character. It emerged however in the course of the proceeding that the Cole Royal Commission had found that the respondent had engaged in such contravening conduct in the past. Although RD Nicholson J indicated that he could not take into account the findings of the Royal Commission and did not do so, he said [19]: My concern with the findings was that they were not disclosed to the Court when the claims of no prior conduct were made. His Honour went on to say: Nevertheless, I give them no weight in arriving at the appropriate penalty. It does seem that his Honour paid some attention to the failure of the respondent to disclose those findings. 27 Finally, Kenny J in Ponzio v BVM Builders Pty Ltd [2005] FCA 238 imposed a penalty of $200 for contravention of s 187AA. This case also concerned the Concept Blue project and a stoppage resulting from the death of Mr Schouten in Shepparton. However, it was not confined to the stoppage on 5 August 2003, but included a stoppage on 6 August 2003. That stoppage related to a dispute over payment for the previous day. In any event, the discussion by her Honour is restricted to the specific facts of the case without reference to the general principles guiding these matters, and little assistance can be derived from the factual conclusion reached in that case. 28 Taking into account the matters raised by both sides and the review of the cases which I have referred to, I, like Merkel J in Firebase, place some special importance on the unlikelihood of the respondent re-offending. If there is no real risk of the respondent re-offending, the policy referred to by Mr O'Grady in favour of ensuring compliance with the law is satisfied with respect to the particular respondent. 29 That, however, does leave for consideration the question of general deterrence. This judgment records that the respondent has incurred legal costs in the region of $8000 to $10,000 and additional costs to it on the project of $4966 as a result of the industrial action. As I have indicated, one can assume that it has also incurred the loss of management time which had to be devoted to the litigation. All of the incidents should be taken together in reviewing the conduct of the respondent, because they occurred on the same day and arose out of the same circumstances. I do not regard the conduct as being at the high end of seriousness. If a penalty were to be appropriate then something in the region of about $1000 might be appropriate. But would that act as a general deterrent to employers? If they contravened the section they would incur the burden of legal costs far in excess of that sum in defending an application such as this. 30 Given the nature of the breaches, the record of the respondent, its subsequent conduct and the amount of disadvantage already suffered, I do not regard the imposition of a penalty as serving the purpose of either particular deterrence or general deterrence. 31 Considering all the matters put to me, the appropriate order in this case is for the Court make the declaration sought, but otherwise to impose no penalty. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North. Associate: Dated: 13 July 2005 Counsel for the Applicant: P O'Grady Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: R Naughton Solicitor for the Respondent: PricewaterhouseCoopers Legal Date of Hearing: 15 June 2005 Date of Judgment: 15 June 2005