FEDERAL COURT OF AUSTRALIA Comcare v Linfox Australia Pty Ltd [2015] FCA 61 Citation: Comcare v Linfox Australia Pty Ltd [2015] FCA 61 Parties: COMCARE v LINFOX AUSTRALIA PTY LTD (ACN 004 718 647) File number: VID 1354 of 2013 Judge: FLICK J Date of judgment: 12 February 2015 Catchwords: INDUSTRIAL LAW – failure to take reasonably practicable steps to ensure safety of employee – quantification of penalty to be imposed PRACTICE AND PROCEDURE – agreed statement of facts – power to make a declaration – power to quantify penalty Legislation: Occupational Health and Safety Act 1991 (Cth) Cases cited: Australian Competition and Consumer Commission v BAJV Pty Ltd [2014] FCAFC 52 Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 Australian Competition and Consumer Commission v Digital Products Group Pty Ltd [2006] FCA 1732, (2007) ATPR 42-144 Australian Competition and Consumer Commission v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 Australian Competition and Consumer Commission v Pirovic Enterprises Pty Ltd (No 2) [2014] FCA 1028 Australian Competition and Consumer Commission v Real Estate Institute of Western Australian Incorporated [1999] FCA 18, (1999) 161 ALR 79 Australian Competition & Consumer Commission v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135 Australian Competition and Consumer Commission v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne) [2015] FCA 25 BMW Australia Limited v Australian Competition and Consumer Commission [2004] FCAFC 167, (2004) 207 ALR 452 Comcare v Commonwealth of Australia [2007] FCA 662, (2007) 163 FCR 207 Comcare v Commonwealth of Australia [2012] FCA 1419, (2012) 132 ALD 480 Comcare v John Holland Pty Ltd [2014] FCA 1191 Comcare v Post Logistics Australasia Pty Ltd [2012] FCAFC 168, (2012) 207 FCR 178 Comcare v Transpacific Industries Pty Ltd [2012] FCA 90 Comcare v Transpacific Industries Pty Ltd [2014] FCA 1420 DP World Sydney Limited v Maritime Union of Australia (No 2) [2014] FCA 596 Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72, (2004) ATPR 41-993 NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 Rural Press Limited v Australian Competition and Consumer Commission [2003] HCA 75, (2003) 216 CLR 53 Trade Practices Commission v CSR Limited (1991) ATPR 41–076 Date of hearing: 5 February 2015 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 31 Counsel for the Applicant: Mr P Rozen Solicitor for the Applicant: Thomson Geer Counsel for the Respondent: Mr G Livermore Solicitor for the Respondent: K & L Gates IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION VID 1354 of 2013 BETWEEN: COMCARE Applicant AND: LINFOX AUSTRALIA PTY LTD (ACN 004 718 647) Respondent JUDGE: FLICK J DATE OF ORDER: 12 FEBRUARY 2015 WHERE MADE: SYDNEY THE COURT DECLARES: On 14 October 2011, Linfox Australia Pty Ltd contravened clause 2(1) of Schedule 2 of the Occupational Health and Safety Act 1991 (Cth) by reason of it having breached s 16(1) of the said Act in that it failed to take all reasonably practicable steps to protect the health and safety at work of its employees by: a. failing to conduct an adequate hazard identification of the task of unloading Ikea cardboard pallets from a shipping container; b. failing to conduct an adequate risk assessment for the task of unloading Ikea cardboard pallets from a shipping container; c. failing to develop a specific operating procedure for the task of unloading Ikea cardboard pallets from shipping containers; d. failing to prohibit its employees from entering the shipping containers during unloading operations while the forklift operator was in the container and the forklift was operational; e. failing to provide an appropriate forklift for the task of unloading the Ikea cardboard pallets because the guard on the mast was too high; f. failing to inform and instruct its employees in the special dangers and risks associated with unloading Ikea cardboard pallets in shipping containers that differed from the dangers and risks associated with the other work performed by Linfox; g. failing to instruct and train its employees in a specific operating procedure for the task of unloading the Ikea cardboard pallets from shipping containers; and h. failing to supervise its employees in a manner that enabled them to perform their work of unloading the Ikea cardboard pallets from shipping containers safely. AND THE COURT ORDERS THAT: 1. The Respondent is to pay the Commonwealth a pecuniary penalty of $90,000. 2. The Respondent is to pay the costs of the Applicant. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA new south wales DISTRICT REGISTRY GENERAL DIVISION VID 1354 of 2013 BETWEEN: COMCARE Applicant AND: LINFOX AUSTRALIA PTY LTD (ACN 004 718 647) Respondent JUDGE: FLICK J DATE: 12 FEBRUARY 2015 PLACE: SYDNEY REASONS FOR JUDGMENT 1 In September 2011 Linfox Australia Pty Ltd ("Linfox") entered into a Service Agreement with Ikea Distribution Services Australia Pty Ltd ("Ikea"). 2 Pursuant to the terms of that Agreement, Linfox agreed to provide warehousing services to Ikea at premises located at Murtha Street, Arndell in the State of New South Wales. 3 In October 2011 an accident occurred on those premises. In very summary form, that accident occurred whilst a contractor of Linfox (Mr Mark Grimmond) was driving a forklift. The forklift collided with a Linfox employee (Mr Darren Southam). Mr Southam suffered serious injuries, being: multiple facial fractures; a fracture of the jaw bone; disruption to the supra-orbital nerve; teeth damage; and severe facial lacerations. The accident occurred whilst Mr Grimmond was unloading the Ikea pallets from within a shipping container. Mr Southam was inside the shipping container at the time of the accident. His head was crushed between the load on the forklift and the inside wall of the shipping container. 4 In December 2013 Comcare filed an Originating Application seeking a declaration that Linfox contravened s 16 of the Occupational Health and Safety Act 1991 (Cth) (the "1991 Act"). A pecuniary penalty was also sought, together with an order for costs. Linfox admitted that it was a "non-Commonwealth licensee" and an "employer" within the meaning of s 5 of the 1991 Act. 5 On 9 July 2014 the proceeding was listed for hearing for four days commencing on 2 February 2015. 6 Comcare's preparation of its case for hearing, however, did not progress smoothly. Some of the witnesses to the October 2011 accident were not prepared to complete affidavits. Subpoenas for their attendance at the hearing had to be issued and ultimately orders for substituted service had to be made. 7 Such difficulties as may otherwise have been experienced during the hearing were, however, avoided by agreement being reached between the parties shortly before the hearing as to the facts of central relevance; the form of declaratory relief which the parties considered appropriate and agreement as to the range within which a penalty was to be assessed. 8 The Agreed Statement of Facts was admitted at the hearing as an exhibit. Comcare also filed an affidavit of one of its inspectors; Linfox filed two affidavits. There was limited cross-examination of one of the Linfox deponents (Mr Alastair Turner), a National Operations Manager. Mr Turner was the Site Manager at the Arndell site at the time of the accident. Declaratory relief 9 Clause 2(1) of Part 1 of Schedule 2 of the 1991 Act provides as follows: If a court considers that a person has breached one of the following provisions, or was involved in such a breach, it must make a declaration that the person has contravened this subclause … Section 16 is one of those provisions set forth in cl 2(1). Section 16 provides as follows: An employer must take all reasonably practicable steps to protect the health and safety at work of the employer's employees. The use of the term "must" in cl 2(1) denies to the Court any discretionary power to refrain from making a declaration if a contravention is made out. 10 The form of declaration proposed by the parties is as follows: On 14 October 2011, Linfox Australia Pty Ltd contravened clause 2(1) of Schedule 2 of the Occupational Health and Safety Act 1991 (Cth) by reason of it having breached section 16(1) of the said Act in that it failed to take all reasonably practicable steps to protect the health and safety at work of its employees by: a. failing to conduct an adequate hazard identification of the task of unloading Ikea cardboard pallets from a shipping container; b. failing to conduct an adequate risk assessment for the task of unloading Ikea cardboard pallets from a shipping container; c. failing to develop a specific operating procedure for the task of unloading Ikea cardboard pallets from shipping containers; d. failing to prohibit its employees from entering the shipping containers during unloading operations while the forklift operator was in the container and the forklift was operational; e. failing to provide an appropriate forklift for the task of unloading the Ikea cardboard pallets because the guard on the mast was too high; f. failing to inform and instruct its employees in the special dangers and risks associated with unloading Ikea cardboard pallets in shipping containers that differed from the dangers and risks associated with the other work performed by Linfox; g. failing to instruct and train its employees in a specific operating procedure for the task of unloading the Ikea cardboard pallets from shipping containers; and h. failing to supervise its employees in a manner that enabled them to perform their work of unloading the Ikea cardboard pallets from shipping containers safely. 11 Declarations, it is considered, may be made upon the basis of agreed facts and are frequently (for example) made in the context of proceedings alleging contraventions of trade practices legislation: e.g., Australian Competition and Consumer Commission v Real Estate Institute of Western Australian Incorporated [1999] FCA 18, (1999) 161 ALR 79; Australian Competition and Consumer Commission v Digital Products Group Pty Ltd [2006] FCA 1732, (2007) ATPR 42-144 per Tracey J; Australian Competition and Consumer Commission v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 at [50] to [54] per Wigney J; Australian Competition and Consumer Commission v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne) [2015] FCA 25 at [56] to [62] per Murphy J. In the present statutory context, declarations have also been made upon the basis of an admitted contravention of occupational health and safety legislation: e.g., Comcare v Post Logistics Australasia Pty Ltd [2012] FCAFC 168 at [26], (2012) 207 FCR 178 at 187 per Rares, Cowdroy and Griffiths JJ. 12 But "close attention" should be given "to the form of proposed declarations, particularly those 'by consent'": Rural Press Limited v Australian Competition and Consumer Commission [2003] HCA 75 at [90], (2003) 216 CLR 53 at 91 per Gummow, Hayne and Heydon JJ. At "the very least", a declaration "should disclose the basis on which" a contravention has occurred: cf. BMW Australia Limited v Australian Competition and Consumer Commission [2004] FCAFC 167 at [35], (2004) 207 ALR 452 at 465 per Gray, Goldberg and Weinberg JJ. The declaration should "contain sufficient indication of how and why the relevant conduct is a contravention of the" Act: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [77] per Gordon J. 13 The facts as admitted and the admission on the part of Linfox as to a contravention of s 16 of the 1991 Act, it is respectfully concluded, provide an appropriate foundation for the granting of declaratory relief, and declaratory relief in the form proposed. The power to impose a penalty and the discretion conferred 14 The source of the power to impose a penalty is to be found in clause 4(1) of Part 1 of Schedule 2 of the 1991 Act. That clause provides as follows: If a court has declared, under subclause 2(1), a contravention of that subclause by a person because the person breached, or was involved in the breach of, a provision listed in that subclause, the court may order the person to pay the Commonwealth a pecuniary penalty. Clause 4(2) sets forth a table of provisions and provides that the pecuniary penalty that may be imposed is not to exceed that amount listed in respect to those contraventions there listed. Section 16 is one of the provisions listed in that table. 15 In the present case, the power to impose a penalty is enlivened by making a declaration of a contravention of s 16 of the 1991 Act. 16 The power to impose a penalty is a discretionary power – cl 4(1) providing that "the court may order the person to pay … a pecuniary penalty". 17 Although the legislation does not list factors relevant to the exercise of the discretion (cf. Comcare v Commonwealth of Australia [2012] FCA 1419 at [95], (2012) 132 ALD 480 at 497 per Griffiths J), the discretion is to be exercised having regard to the relevant objects and purposes of the 1991 Act: Comcare v Post Logistics Australasia Pty Ltd [2012] FCAFC 168 at [59], (2012) 207 FCR 178 at 199 per Rares, Cowdroy and Griffiths JJ. 18 General principles which inform the exercise of the discretion have been helpfully summarised by Madgwick J in Comcare v Commonwealth of Australia [2007] FCA 662, (2007) 163 FCR 207 at 228 as follows: [120] … (i) the penalty must be such as to compel attention to occupational health and safety generally, to ensure that workers whilst at work will not be exposed to risks to their health and safety; (ii) it is a significant aggravating factor that the risk of injury was foreseeable even if the precise cause or circumstances of exposure to the risk were not foreseeable; (iii) the offence may be further aggravated if the risk of injury is not only foreseeable but actually foreseen and an adequate response to that risk is not taken by the employer; (iv) the gravity of the consequences of an accident does not of itself dictate the seriousness of the offence or the amount of penalty. However the occurrence of death or serious injury may manifest the degree of the seriousness of the relevant detriment to safety; (v) a systemic failure by an employer to appropriately address a known or foreseeable risk is likely to be viewed more seriously than a risk to which an employee was exposed because of a combination of inadvertence on the part of an employee and a momentary lapse of supervision; (vi) general deterrence and specific deterrence are particularly relevant factors in light of the objects and terms of the Act; (vii) employers are required to take all practicable precautions to ensure safety in the workplace. This implies constant vigilance. Employers must adopt an approach to safety which is proactive and not merely reactive. In view of the scope of those obligations, in most cases it will be necessary to have regard to the need to encourage a sufficient level of diligence by the employer in the future. This is particularly so where the employer conducts a large enterprise which involves inherent risks to safety; (viii) regard should be had to the levels of maximum penalty set by the legislature as indicative of the seriousness of the breach under consideration; (ix) the neglect of simple, well-known precautions to deal with an evident and great risk of injury, take a matter towards the worst case category; (x) the objective seriousness of the offence, without more may call for the imposition of a very substantial penalty to vindicate the social and industrial policies of the legislation and its regime of penalties. These principles have been applied in other decisions of this Court: e.g., Comcare v Transpacific Industries Pty Ltd [2014] FCA 1420 at [27] per Mansfield J. These factors "provide a useful foundation or starting point for an assessment of a civil pecuniary penalty": Comcare v Post Logistics Australasia Pty Ltd [2012] FCAFC 168 at [69], (2012) 207 FCR 178 at 202 per Rares, Cowdroy and Griffiths JJ. See also: Comcare v John Holland Pty Ltd [2014] FCA 1191 at [63] to [79] per Siopis J. 19 As with many discretionary powers, any attempt to identify considerations relevant to the exercise of such powers necessarily produces a list of considerations which is not exhaustive. Of those considerations relevant to the exercise of the present discretionary power, one factor which has received specific attention is the importance of a penalty acting as a deterrent: Comcare v Post Logistics Australasia Pty Ltd [2012] FCAFC 168, (2012) FCR 178 at 203. Rares, Cowdroy and Griffiths JJ there observed: [75] … A penalty has the consequence of providing a salutary reminder of the importance of observing the obligations specified in the Act to both the contravenor and other potential contravenors: …. The imposition of a penalty shifts the economic calculus in favour of taking necessary steps to ameliorate the risk of OH&S incidents generally. That case, it may be noted, also involved an injury occasioned by a forklift. The penalty initially imposed by the primary Judge of $80,000 was re-assessed by the Full Court and increased to $120,000. But what "must always be kept at the forefront of the penalty assessment process" is the need to ensure the safety of employees at work: Comcare v Transpacific Industries Pty Ltd [2012] FCA 90 at [38] per Barker J. 20 In the present proceeding the maximum penalty that may be imposed is $242,000. 21 Although the discretion as to the weight to be given to considerations of relevance to the exercise of the discretion and the quantum of any penalty to be imposed must forever remain with the Court, the quantification of any penalty is not an exact science and the Court may have regard to any agreement between the parties as to quantum: cf. NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 290-292 per Burchett and Kiefel JJ. In Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72, (2004) ATPR 41-993 Branson, Sackville and Gyles JJ referred to NW Frozen Foods and further observed (inter alia): [51] … Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court's view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range. 22 One "rationale", it was there said, "for giving weight to a joint submission on penalty is said by the Court to be the savings in resources for the regulator and the Court": [2004] FCAFC 72 at [53]. See also: Australian Competition & Consumer Commission v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135 at [81] to [82] per Gordon J. The same considerations indicate that the same approach should be adopted in the present statutory context when parties make a joint submission as to the quantification of penalty: Comcare v Commonwealth [2012] FCA 1419 at [100] to [103], (2012) 132 ALD 480 at 499 to 501 per Griffiths J; Australian Competition and Consumer Commission v Avitalb Pty Ltd [2014] FCA 222 at [17] per Griffiths J. 23 Although regard may thus be had to the agreement between the parties, it is important constantly to recall that the Court exercises an independent discretion as to the quantum of any penalty to be imposed and does not act as "a mere rubber stamp": Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Incorporated [1999] FCA 18 at [1], (1999) 161 ALR 79 at 80 per French J (as his Honour then was); Australian Competition and Consumer Commission v Pirovic Enterprises Pty Ltd (No 2) [2014] FCA 1028 at [14] per Flick J. The quantum of the penalty to be imposed 24 Comcare's written Submissions Concerning Penalty and Other Orders states that the parties are in agreement that the penalty to be imposed "ought to be within the range of $60,000 - $90,000". 25 Given the agreed position between the parties, it is respectfully concluded that the penalty ought to be $90,000. In the absence of agreement, it may well have been the case that consideration would have been given to imposing a penalty higher than $90,000. But, on balance, it is considered that a penalty of $90,000 is within the "permissible range" and that the Court ought to endorse the joint approach of the parties. 26 A number of factors contribute to the conclusion that the penalty should be at the very upper limit of that agreed between the parties, namely: the foreseeability of injury arising simply by reason of a person being within a shipping container whilst it was being unloaded by another person operating a forklift. The unloading of pallets from the Ikea containers, it was jointly agreed, gave rise to difficulties different to the unloading of containers from other suppliers and an increased risk to the safety of employees. The Ikea containers, for example, were loaded in a manner which made the pallets difficult to lift and remove without damaging the product; the failure on the part of Linfox to address more quickly a foreseeable risk of injury – it being admitted that for a period of approximately six weeks prior to the date of the accident, Linfox employees had from time to time entered Ikea shipping containers to assist forklift drivers in the unloading of pallets. Mr Turner was unaware of employees entering Ikea containers; but a supervisor (Mr Fifita) was aware. Notwithstanding a previously acknowledged foreseeability of injury (or the risk of injury) where employees are in close proximity to those operating forklifts, these factors assume greater significance by reason of the fact that: no formal hazard identification or risk assessment had been conducted by Linfox into the task of emptying the Ikea containers prior to the accident. The conduct of Linfox, it is considered, can properly be characterised – to employ the language of Madgwick J – as "systemic failure…". Also of central relevance is: the objective of deterrence, both specific to Linfox and more generally. A penalty of $90,000 in the present proceeding goes some way to shifting "the economic calculus in favour of taking necessary steps to ameliorate the risk of OH&S incidents generally". 27 One further factor which also supports the conclusion that the penalty should be at the very upper limit of that agreed between the parties is: the ease with which Linfox addressed the risk to employees. A risk assessment was undertaken a few days after the accident and a Safe Work Practice issued in November 2011 which specifically addressed the process to be followed when unloading Ikea containers. Having recognised the hazard and assessed the risk level, the risk assessment stated (inter alia) that "no person [was] to enter container whilst forklift is operating in the container. 3 metre exclusion zone all areas". A Safe Work Quick Guide dated 12 November 2012 now provides (inter alia) that an employee should "never ... stand inside a container that has MHE (forklift, pallet jacks etc.) operating inside". An "MHE" is a reference to "material handling equipment". Other contraventions on the part of Linfox, it was correctly and jointly submitted, assume only "limited relevance" in the present proceeding. Left to one side has been any consideration as to whether the contravention of s 16 (which Linfox has accepted) caused the injury to Mr Southam. 28 In concluding that the penalty should be at the very upper limit of that agreed between the parties, consideration has nevertheless also been given to: the agreement reached between the parties, that agreement avoiding the prospect of a potentially difficult hearing (cf. Trade Practices Commission v CSR Limited (1991) ATPR 41–076 at 52,152–52,153 per French J; Australian Competition and Consumer Commission v BAJV Pty Ltd [2014] FCAFC 52 at [39] per Rares, Jessup and Flick JJ). Although the agreement between the parties in the present proceeding may have occurred only shortly before the hearing, the "co-operation" of Linfox remains of relevance (DP World Sydney Limited v Maritime Union of Australia (No 2) [2014] FCA 596 at [30]); and the steps taken by Linfox subsequent to the accident. Consideration has also been given to: the fact that prior to the accident there were in place published Safe Working Procedures which identified the risks associated with "Loading & Unloading Product From Container" and "Safety Rules" stating that an employee was to "Stay at least 2 metres clear from moving mobile equipment". This "2 metre rule" was a rule emphasised at various "toolbox meetings" prior to the accident. Although the Risk Assessment conducted in October 2011 extended the "exclusion zone" from 2 metres to 3 metres and specifically precluded employees from entering a container whilst a forklift was operating, the risks associated with operating forklifts was – it was correctly submitted on behalf of Linfox – a risk previously acknowledged and addressed. Such factors have been taken into account. But they do not, it is concluded, warrant any lesser penalty being imposed. CONCLUSIONS 29 A declaration should be granted in the form proposed. 30 A penalty should be imposed in the sum of $90,000. The agreement between the parties as to the quantum of an appropriate penalty has assisted the conclusion that the sum of $90,000 is "within the range" of that which should be imposed. 31 There is no reason why costs should not follow the event. THE COURT DECLARES: On 14 October 2011, Linfox Australia Pty Ltd contravened clause 2(1) of Schedule 2 of the Occupational Health and Safety Act 1991 (Cth) by reason of it having breached s 16(1) of the said Act in that it failed to take all reasonably practicable steps to protect the health and safety at work of its employees by: a. failing to conduct an adequate hazard identification of the task of unloading Ikea cardboard pallets from a shipping container; b. failing to conduct an adequate risk assessment for the task of unloading Ikea cardboard pallets from a shipping container; c. failing to develop a specific operating procedure for the task of unloading Ikea cardboard pallets from shipping containers; d. failing to prohibit its employees from entering the shipping containers during unloading operations while the forklift operator was in the container and the forklift was operational; e. failing to provide an appropriate forklift for the task of unloading the Ikea cardboard pallets because the guard on the mast was too high; f. failing to inform and instruct its employees in the special dangers and risks associated with unloading Ikea cardboard pallets in shipping containers that differed from the dangers and risks associated with the other work performed by Linfox; g. failing to instruct and train its employees in a specific operating procedure for the task of unloading the Ikea cardboard pallets from shipping containers; and h. failing to supervise its employees in a manner that enabled them to perform their work of unloading the Ikea cardboard pallets from shipping containers safely. AND THE COURT ORDERS THAT: 1. The Respondent is to pay the Commonwealth a pecuniary penalty of $90,000. 2. The Respondent is to pay the costs of the Applicant. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. Associate: Dated: 12 February 2015