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Limelight Articles

Limelight 02/18

No power for courts in Fair Work penalty proceedings to make non-indemnification orders against third parties

Authors, Joel Zyngier , Martin Stirling

Courts have power to order personal payment of pecuniary penalties, including prohibiting a person from seeking or accepting indemnity 

Australian Building and Construction Commissioner v Construction, Forestry, Mining & Energy Union & Anor [2018] HCA 3 

Introduction 

 In a decision published on 14 February 2018[1], the High Court of Australia held that Courts have power under section 546(1) of the Fair Work Act 2009 (Cth) (FW Act) to order a party to personally pay a pecuniary penalty. This includes an order prohibiting the party from seeking or accepting indemnity or a contribution from another person/entity (personal payment order).

However, the High Court also held that a Court is not empowered to prohibit a third party indemnifying a party the subject of pecuniary penalty orders.

Courts may infrequently exercise the power to impose personal payment orders. Further, it seems likely that the exercise of this power would generally be limited to cases involving certain trade unions known for their disregard of penalties, and their officials. Nevertheless, there is scope for such orders to be made against parties wishing to seek or accept indemnity from other sources.

Facts

The Fair Work Building Industry Inspectorate (FWBII) brought Federal Court proceedings alleging that the Construction, Forestry, Mining & Energy Union (CFMEU)  and Joseph Myles (Myles), an “organiser” employed by the CFMEU, contravened section 348 of the FW Act on 16 and 17 May 2013 at a construction site in Maribyrnong.

In the proceedings, the CFMEU and Myles admitted that Myles had organised and participated in a worksite blockade at the site. The blockade had the consequence of spoiling large quantities of wet concrete. Myles engaged in the conduct because he was aggrieved that a CFMEU delegate was not appointed on the site, and in order to coerce the joint venturers to appoint a CFMEU delegate.

In doing so, Myles (and through him, the CFMEU) admitted they had contravened section 348 of the FW Act, which prohibits the coercion of a person to engage in industrial activity. Section 348 is a “civil remedy provision” for which a maximum penalty may be imposed.

During the proceedings, the federal government replaced FWBII with the Australian Building and Construction Commissioner (ABCC).

First instance decision

Justice Mortimer of the Federal Court imposed substantial pecuniary penalties on the CFMEU and Myles under section 546(1) of the FW Act[2]. Section 546(1) of the FW Act provides that a relevant Court:

… may, on application, order a person to pay a pecuniary penalty that the Court considers is appropriate if the Court is satisfied that the person has contravened a civil remedy provision.

On application by the ABCC, her Honour also made an order to prevent the CFMEU from indemnifying Myles against the penalties imposed on him (non-indemnification order). The non-indemnification order was to the general effect that:

The CFMEU must not directly or indirectly indemnify Myles against the penalties imposed on him, in whole or in part, whether by agreement, or by making a payment to the Commonwealth, or by making any other payment or reimbursement, or howsoever otherwise

Her Honour held the power to make such an order lies in section 545(1) of the FW Act, which provides that a relevant Court:

…may make any order the Court considers appropriate if the Court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.

Appeal

 The CFMEU and Myles appealed on the question of whether a Court has the power to make non-indemnification orders under section 545(1) of the FW Act.

The Full Court of the Federal Court (Allsop CJ, North and Jessup JJ) allowed the appeal, holding that neither section 545(1) of the FW Act nor section 23 of the Federal Court of Australia Act 1976 (Cth) provides the necessary power to make non-indemnification orders.

The ABCC appealed the decision and also raised as an argument that section 546(1) of the FW Act conferred power to require a contravener to personally pay a penalty.

 High Court

 The majority (Keane, Nettle and Gordon JJ) agreed that section 545(1) did not provide the necessary power to make non-indemnification orders. This because the section is directed at the contravener of a civil remedy provision; it does not carry any express or implied power to make orders against another party or person. Chief Justice Kiefel and Justice Gageler reached the same conclusion in separate judgments.

As to section 546(1) and the power to require a contravener to personally pay a penalty, the majority examined the principal purpose of such penalties, being a specific deterrent towards the contravener and a general deterrent towards other potential contraveners. On this basis, their Honours held that the express power was accompanied by an implied power to ensure a contravener received the full “sting or burden” of a penalty; otherwise, the purpose of the section could be rendered nugatory. Chief Justice Kiefel reached a similar conclusion in her separate judgment and Justice Gageler dissented.

The majority found that the implied power enabled a Court to order a contravener pay a penalty personally and not seek or accept indemnity from another person.

For other reasons, the High Court quashed the Full Federal Court’s decision, but remitted it to for fresh consideration of the imposition of penalties on the CFMEU and Myles, including whether a personal payment order may be appropriate.

Enforcement and the relevance of penal notices

 The majority also considered the potential practical difficulties with enforcing a personal payment order. Specifically, the challenges with monitoring when a person might seek or accept indemnity for a penalty from another person. In doing so, the majority held that penal notices could also be ordered to be served on the likely indemnifying party. A penal notice informs the person served with the order that he/she will be liable to imprisonment, sequestration of property or punishment for contempt if the person disobeys the order.

In the present case, it was held that service of the penal notice on the CFMEU would be sufficient to put it on notice that not only had the personal payment order been made, but also that it was prohibited from knowingly interfering with its performance. The High Court also noted that discovery orders may be obtained against trade unions in contempt proceedings.

Implications

The principles established by the High Court are not limited to cases involving unions and their officials. They are equally applicable to any party upon whom a pecuniary penalty is imposed for contravention of a civil remedy provision of the FW Act.

An order for a party to pay a penalty does not automatically come with a requirement they pay the penalty personally or be prohibited from seeking or accepting indemnity. A Court would need to specifically make an additional order for personal payment of the penalty.

We do not expect such orders would often be sought in civil penalty proceedings. It is likely only the ABCC or Fair Work Ombudsman would have any interest in who pays a penalty (contrasted with an employee claimant, whose sole concern is generally just receiving payment).

Further, we expect courts will infrequently exercise the discretion to make a personal payment order. For example, we would expect such orders to be made only in instances where there is demonstrable contempt by a party for the imposition of penalties, well known cases of indemnification for penalties by an identified third party (e.g. a trade union), or repeated contravention over time of FW Act civil remedy provisions. That is, it is likely courts will only make personal payment orders where there is a good, evidence-based reason for doing so.

Date: 20 February 2018

[1] Australian Building and Construction Commissioner v Construction, Forestry, Mining & Energy Union & Anor [2018] HCA 3
[2] Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (No 2) [2016] FCA 436

 

This publication constitutes a summary of the information of the subject matter covered. This information is not intended to be nor should it be relied upon as legal or any other type of professional advice. For further information in relation to this subject matter please contact the author.