Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 (20 February 2008)

Last Updated: 17 March 2008

FEDERAL COURT OF AUSTRALIA

Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8

INDUSTRIAL LAW – award – breach – penalty – breaches of three awards – breaches of several terms of each award – breaches in relation to several employees – after application of course of conduct provision, 22 contraventions, falling into 11 categories – whether aggregate of penalties imposed by magistrate excessive – application of totality principle


Conciliation and Arbitration Act 1904 (Cth) s 119(1D)(a)(i) (repealed)
Crimes Act 1914 (Cth) s 4AA(1)
Industrial Relations Act 1988 (Cth) s 178(4)(a)(ii) (repealed)
Industrial Relations Reform Act 1993 (Cth) (repealed)
Trade Practices Act 1974 (Cth)
Workplace Relations Act 1996 (Cth) ss 4(1), 178(1) (repealed), 178(2) (repealed), 178(4) (repealed), 178(6) (repealed), 179A(1) (repealed), 719(4)(b)


Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 approved
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited (No. 4) [2006] FCA 21 [2006] ATPR 42-101
Construction, Forestry, Mining & Energy Union v Coal & Allied Operations Pty Ltd (No 2) [1999] FCA 1714 (1999) 94 IR 231 cited
Construction, Forestry, Mining and Energy Union v Hamberger [2003] FCAFC 38 (2003) 127 FCR 309 cited
CPSU, The Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 1364 (2001) 108 IR 228 considered
Dinsdale v R [2000] HCA 54 (2000) 202 CLR 321 cited
Flattery v The Italian Eatery T/as Zeffirelli’s Pizza Restaurant [2007] FMCA 9 cited
Hadgkiss v Sunland Construction (Qld) Pty Ltd [2006] FCA 1566 cited
House v R [1936] HCA 40; (1936) 55 CLR 499 followed
Johnson v R [2004] HCA 15 (2004) 205 ALR 346 cited
Kelly v Fitzpatrick [2007] FCA 1080 (2007) 166 IR 14 cited
Markarian v R [2005] HCA 25 (2005) 228 CLR 357 discussed
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 cited
Mill v R [1988] HCA 70; (1988) 166 CLR 59 cited
McDonald v R [1994] FCA 956; (1994) 48 FCR 555 cited
NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 followed
Pearce v R [1998] HCA 57 (1998) 194 CLR 610 cited
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 (2007) 158 FCR 543 cited
Textile Clothing & Footwear Union of Australia v Lotus Cove Pty Ltd [2004] FCA 43 cited
Trade Practices Commission v CSR Limited [1991] ATPR 41-076 cited
Veen v R (No. 2) [1988] HCA 14; (1988) 164 CLR 465 cited
Wong v R [2001] HCA 64 (2001) 207 CLR 584 cited



































AUSTRALIAN OPHTHALMIC SUPPLIES PTY LTD (ACN 005 419 107) v LYNDA MCALARY-SMITH (AN INSPECTOR PURSUANT TO SECTION 84(2) OF THE WORKPLACE RELATIONS ACT 1996)
VID 481 OF 2007

GRAY, GRAHAM AND BUCHANAN JJ
20 FEBRUARY 2008
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 481 OF 2007

ON APPEAL FROM THE INDUSTRIAL DIVISION OF THE MAGISTRATES’ COURT OF VICTORIA

BETWEEN:	AUSTRALIAN OPHTHALMIC SUPPLIES PTY LTD (ACN 005 419 107) Appellant
AND:	LYNDA MCALARY-SMITH (AN INSPECTOR PURSUANT TO SECTION 84(2) OF THE WORKPLACE RELATIONS ACT 1996) Respondent

JUDGES:	GRAY, GRAHAM AND BUCHANAN JJ
DATE OF ORDER:	20 FEBRUARY 2008
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The orders made on 20 February 2008 be set aside, pursuant to O 35 r 7(1) of the Federal Court Rules.

2. There be substituted for the orders made on 20 February 2008 orders in the following terms:

1. The appeal be allowed.

2. The orders made by the Magistrates’ Court of Victoria at Melbourne, Industrial Division, on 19 April 2007 be set aside.

3. There be substituted for the orders made by the Magistrates’ Court of Victoria at Melbourne, Industrial Division, on 19 April 2007 orders in the following terms:

1. Pursuant to s 178 of the Workplace Relations Act 1996 (Cth), penalties totalling $66,000 be imposed upon the appellant for a total of 22 breaches of the Shop, Distributive and Allied Employees’ Association – Victorian Shops Interim (Roping-In No. 1) Award 2003; the Shop, Distributive and Allied Employees’ Association – Victorian Shops Interim Award 2000; and the National Training Wage Award 2000.

2. Payment of the penalties be made within 14 days to Consolidated Revenue.

_________________________

JUSTICE GRAY

_________________________

JUSTICE GRAHAM

__________________________

JUSTICE BUCHANAN




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 481 OF 2007

ON APPEAL FROM THE INDUSTRIAL DIVISION OF THE MAGISTRATES' COURT OF VICTORIA

BETWEEN:	AUSTRALIAN OPHTHALMIC SUPPLIES PTY LTD (ACN 005 419 107) Appellant
AND:	LYNDA MCALARY-SMITH (AN INSPECTOR PURSUANT TO SECTION 84(2) OF THE WORKPLACE RELATIONS ACT 1996) Respondent

JUDGES:	GRAY, GRAHAM AND BUCHANAN JJ
DATE:	20 FEBRUARY 2008
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

GRAY J:

The nature and history of the proceeding

1 This appeal is concerned with the application of the principle of totality, or proportionality, to civil penalties imposed on the appellant pursuant to s 178 (now repealed and replaced by s 719) of the Workplace Relations Act 1996 (Cth) ("the WR Act") in respect of contraventions of Awards. The appeal is from a judgment of the Magistrates’ Court of Victoria at Melbourne, Industrial Division, given on 19 April 2007. The learned magistrate ordered the appellant to pay a total of $88,000 into Consolidated Revenue. The contraventions were found to have occurred during the period from 27 February 2003 to 6 May 2004, in respect of a number of employees of the appellant.

2 The appellant is a corporation, trading under the name "Merringtons", as a retailer of optometric and ophthalmic services at over 50 outlets throughout Australia. Its business has been in operation for more than a century.

3 In September 2003, the then Department of Employment and Workplace Relations gave notice to the appellant concerning its award obligations. On 12 December 2005, the respondent, an inspector appointed pursuant to s 84(2) of the WR Act, filed in the Industrial Division of the Magistrates’ Court of Victoria at Melbourne a complaint against the appellant. The complaint alleged a number of contraventions of the Shop, Distributive and Allied Employees’ Association – Victorian Shops Interim (Roping-In No. 1) Award 2003, the Shop, Distributive and Allied Employees’ Association – Victorian Shops Interim Award 2000 and the National Training Wage Award 2000, all Awards made under the WR Act, in respect of several employees of the appellant. The appellant filed a written response on 9 February 2006, and further and better particulars of that response on 26 April 2006. Among other things, the appellant denied that the Awards the subject of the complaint applied to the employees concerned, and contended that the correct applicable industrial instrument was the Manufacturing Industry Sector Minimum Wage Order – Victoria 1997, and that pursuant to that industrial instrument there had been no underpayment. Directions were made that the parties file affidavit material prior to the hearing of the case. The appellant did not file any affidavit material.

4 On the day of the hearing of the complaint, counsel for the appellant informed the court that the appellant would not contest the allegations made against it, but would not consent to the orders sought by the respondent. The effect of this was to put the respondent to proof of every element of the complaint. The matter proceeded before the magistrate in this manner.

5 On 16 October 2006, the magistrate found that all of the elements of the complaint had been proved. Her Honour made orders pursuant to s 178(6) of the WR Act (now repealed and replaced by the similar provision in s 719(6) of the WR Act) for the payment of amounts underpaid to six employees of the appellant. The amounts totalled $22,918.51, including $5,353.65 interest pursuant to s 179A(1) of the WR Act (now repealed and replaced by s 722(1) of the WR Act). The magistrate adjourned to a date to be fixed questions of penalty.

6 On 7 February 2007, the magistrate heard submissions on behalf of the parties as to the appropriate penalties. On 19 April 2007, her Honour made orders, imposing penalties totalling $88,000 on the appellant for a total of 22 breaches of the three Awards. Payment to Consolidated Revenue was required to be made within 60 days.

7 The notice of appeal was filed in this Court on 29 June 2007, pursuant to an order of North J on 26 June 2007, enlarging the time for appeal to that day. This was the second application for an enlargement of time to appeal, North J having dismissed the first such application so far as it related to the notice of appeal then proposed, but having granted leave to file a further proposed ground of appeal.

The grounds of appeal

8 The grounds of appeal are expressed in the notice of appeal in the following terms:

The Magistrates’ Court erred in law in the exercise of its discretion in that:-

(a) it failed to take into account a relevant matter, namely that the
penalties imposed should not be so great as to be oppressive; and

(b) the penalties imposed were, in all the circumstances of the case,
excessive.

9 There was no substance in the first of these grounds. There was no material, either before the magistrate or before this Court, which might have suggested that penalties totalling $88,000 would be oppressive to a corporation conducting a business of the size of that conducted by the appellant. There was no material as to the financial circumstances, or other circumstances relevant to oppression, of the appellant. It is difficult to imagine that a penalty of the magnitude imposed could have been crushing for the appellant. At the hearing of the appeal, the focus was on the proposition that the penalties imposed were excessive. It was not disputed that this ground of appeal was capable of raising the issue of the application of the principle of totality, or proportionality, in the imposition of penalties.

10 The grounds of appeal recognise the obvious fact that the amount of the penalties imposed was the result of the exercise of the magistrate’s discretion. It is therefore necessary for an appeal court to approach the matter on the basis that the appeal can be allowed only if the exercise of the discretion has miscarried. It is not sufficient that the appeal court would have exercised the discretion differently, if it had been exercising it at first instance. The principles are enunciated in the well-known passage from House v R [1936] HCA 40; (1936) 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ. The passage is set out in [83], in the reasons for judgment of Buchanan J, which I have read in draft form. I need not repeat it. In substance, the appeal court can intervene only if the court at first instance has acted on a wrong principle, taken into account irrelevant considerations, made mistakes of fact or failed to take into account relevant considerations. In such circumstances, the appeal court can set aside the exercise of the discretion and either exercise the discretion itself or remit the matter to the court of first instance for the exercise of the discretion afresh.

11 It is now necessary to examine the arguments put as to whether the penalty was excessive.

Comparison with other cases

12 Much of the argument put by counsel for the appellant involved a detailed comparison between the facts of this case and the facts of two other cases in which lower penalties had been imposed in respect of award breaches. The two cases, both judgments of the same Federal Magistrate, are Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 and Flattery v The Italian Eatery T/as Zeffirelli’s Pizza Restaurant [2007] FMCA 9. This was a fundamentally wrong approach. Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case. See the passage from the judgment of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 at 295, set out in the reasons for judgment of Buchanan J at [87].

13 Penalty decisions in other cases can be of value in demonstrating that there is a range of penalties generally considered appropriate to a particular type of case. The individual circumstances of the case at hand must then be examined, in order to determine at what point in the appropriate range the penalty should be set. This does not involve a comparison with the facts of other cases.

14 The problem in an area such as the present is that there have been too many changes to the level of the maximum penalty over a relatively short period, the changes have been of too great a magnitude, and there have been too few cases decided, for it to be said that there is an appropriate range established. There is a history of legislative provisions relating to penalties for breaches of awards in which different maxima have been set, depending upon whether there was a breach of a term that provided that contravention of it was taken to be a separate breach on each day on which the contravention continued, and depending even on the nature of the court by which the penalty was imposed. Taking the absolute maximum 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) prior to its repeal and replacement by s 178(4)(a)(ii) of the Industrial Relations Act 1988 (Cth), and thereafter until 30 March 1994, was $1,000. Following the coming into operation of Act No. 98 of 1993, the relevant maximum became $5,000, up to the coming into operation of the WR Act. The maximum penalty was again increased on the commencement of the WR Act to $10,000. By a further amendment, operating after the breaches the subject of this appeal had occurred, the provision now found in s 719(4)(b) of the WR Act 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) as having the meaning given to it by s 4AA of the Crimes Act 1914 (Cth). By s 4AA(1), a penalty unit is $110, making the total current maximum $33,000. Two cases, both judgments of the same Federal Magistrate, are not a sufficiently large sample to establish an accepted range of penalties for contraventions of Awards, or for contraventions of any particular type. As a consequence, it was necessary for the magistrate in the present case, and it is necessary for this Court, to proceed on the basis that there is no established tariff, or appropriate range of penalties.

Contrition

15 One argument on which counsel for the appellant relied was that the magistrate had failed to take into account, or to give any weight to, the fact that the appellant had demonstrated contrition. The only fact relied on to demonstrate contrition was that the appellant had paid the amounts owing to the employees whose underpayments were the subject of the contraventions prior to the magistrate’s consideration of penalties. This fact involved no demonstration of contrition on the part of the appellant at all. Under the terms of the order made on 16 October 2006, the appellant had 30 days in which to make those payments. It did no more than to comply with its legal obligation to obey the order.

16 If the appellant had wished to demonstrate contrition, it might have seen fit to accept the advice of the Department of Employment and Workplace Relations, given from September 2003 onwards, that the appellant had been underpaying some of its employees since 27 February 2003. The appellant did not accept that advice. Even at the stage of the hearing of this appeal, counsel for the appellant was still arguing on its behalf that the appellant had good grounds for applying the Manufacturing Industry Sector Minimum Wage Order – Victoria 1997, instead of the three Awards in respect of which it had not contested the respondent’s allegations that it was in breach. If the appellant had wished to demonstrate its contrition, it might have told the magistrate that it accepted that it was in default of its award obligations with respect to the named employees, and admitted the case brought by the respondent against it. The appellant did no such thing. It merely indicated that it would not contest the allegations, but put the respondent to her proof of each and every element of them. If the appellant had wished to demonstrate contrition, it would have been in a position to tell the magistrate in the course of the hearing on 7 February 2007 that it had done more than merely comply with the obligation to obey the order to make payments to the named employees. It would have indicated to the magistrate that it had carried out a complete audit, to ensure that it had not been underpaying any of its employees in respect of its award obligations, and had remedied any defaults that the audit had revealed. The appellant did no such thing. It was silent as to its compliance with the three Awards in all respects other than those in which it had been found not to have complied. If the appellant had wished to demonstrate its contrition, it might have been in a position to inform the magistrate, in the course of its counsel’s plea in mitigation, of systems that had been put in place to ensure that it would not default in its obligations under awards in the future. The appellant did no such thing. In response to the question from the magistrate, "What can you say about what’s been done to ensure future compliance?" counsel for the appellant had to seek instructions. He said:

My client tells me and my instructing solicitor has told me over the luncheon adjournment that there is two agreements in place in this industry at the moment. There’s collective agreements in place at the moment and my client is engaged in or is looking at bringing the employees under one or other of those agreements. My client at present operates or has control of - I shouldn’t say control of, a market share of approximately 4 or 5 per cent and they’ve investigated the position and the other major controllers in the industry have collective agreements in place and my client is looking to adopt that course, Your Honour.

17 Far from being an indication that the appellant had put in place measures to ensure future compliance, this was an indication that the appellant was seeking to find a way of not having to comply, apparently by imposing on its employees some form of collective agreement that would provide them with benefits less than those of the awards. In the circumstances, it is hardly surprising that the magistrate did not make a finding that the appellant had demonstrated contrition. Indeed, it is hardly surprising that the magistrate did make a finding that the case was one in which the need for specific deterrence was high.

The application of the principle of totality or proportionality

18 The magistrate’s process of reasoning on penalties may be summarised as follows. Her Honour made a number of findings. Her Honour found the contraventions to be broad-ranging and to reveal a disregard for the appellant’s award obligations. The contraventions covered ordinary rates of pay, as well as penalty rates for overtime, evening work, Saturday and Sunday and public holidays, rates for sick leave, annual leave and annual leave loading, payment-out of accrued and pro rata annual leave on termination and payment in lieu of notice of termination. Her Honour described the underpayments as "significant". She referred to the long history of the matter and to attempts to procure voluntary compliance over a period of 18 months, which were unsuccessful. Her Honour dealt with the failure to make good the underpayment until orders were made by the court, which she acknowledged were made without opposition. Her Honour drew attention to the fact that the former employees concerned had been required to make affidavits in preparation for the trial. Due to the appellant’s late notice of its lack of opposition, the former employees incurred an emotional burden of witness conferences and the expectation of being called to give evidence.

19 The contraventions occurred over a range of stores over the period from 27 February 2003 to 6 May 2004. They continued throughout the period of employment of the respective employees. The appellant is a large, national retail operation with a long history. No similar previous conduct was alleged. The appellant "strenuously resisted" efforts to secure voluntary compliance through education, the provision of information about the awards, and discussion and correspondence, both directly with the appellant and with its legal advisers. Her Honour concluded that the appellant had an "industrial strategy" involving a deliberate attempt to avoid its award obligations. The contraventions occurred with the knowledge of senior management. The appellant failed to cooperate with authorities, failed to comply with directions to file affidavits, refused to agree on facts to avoid the need for witnesses to give evidence, and did not communicate its intention not to oppose findings of breach until close to the trial. It would not consent to orders that it make payments, including payments of interest, although it did not oppose the making of those orders.

20 Her Honour described the appellant as having refused to acknowledge any contravening conduct. She drew attention to the appellant’s failure to confirm that it was now meeting all award obligations and to the fact that it had resisted attempts on the part of the Office of Workplace Services to monitor the extent of its compliance with its industrial obligations since the orders were made on 16 October 2006. There was no evidence of remorse or contrition.

21 As well as the high need for specific deterrence, her Honour found, on the basis of affidavit material, that there was a high need for general deterrence. Applying s 178(2) of the WR Act (now repealed and replaced by s 719(2) of the WR Act), which provides that where two or more breaches of a term of an award by the same person arose out of a course of conduct by that person, the breaches are to be taken to constitute a single breach, her Honour identified 22 contraventions of the three awards. On the basis of a concession made by the respondent, her Honour found that these 22 contraventions fell into 11 categories of breaches. Her Honour then said:

The totality principle requires a consideration of the overall conduct of the Defendant rather than a focus on the specific number of breaches.

22 After determining that the jurisdiction of the Magistrate’s Court of Victoria was not limited to its usual $100,000, but that it could impose penalties up to $220,000 for the 22 contraventions, her Honour said:

Taking in [sic] account the factors above I consider that a penalty of 80% of the maximum for each category of breach is warranted in all the circumstances. The total aggregate penalty will therefore be $88,000.

23 In his reasons for judgment at [95]-[97], Buchanan J sets out the authorities that have dealt with the manner in which the totality principle should be applied. I respectfully agree that the approach taken by Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53 is to be preferred to that of Finkelstein J in CPSU, The Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 1364 (2001) 108 IR 228. What the magistrate was required to do in the present case was to determine an appropriate level of penalty for each contravention, as if it were a separate offence, and then to look at the aggregate of those penalties in the light of the overall conduct of the appellant, to form a view as to whether that aggregate was out of proportion to that overall conduct.

24 Her Honour went about the task in a different way. Having acknowledged the totality principle, she then appears to have applied it at the beginning of the process, by grouping the 22 contraventions into 11 categories of breaches. She did not revisit the application of the principle in relation to the aggregate that she determined in her conclusion. Unlike Buchanan J, but like Graham J, I do not think that the magistrate erred in regarding $8,000 as an appropriate penalty for each of the categories of contravention. There were 11 categories, but in reality there were 22 contraventions. In turn, those contraventions involved many other contraventions, but each of the 22 was treated as a single breach because the contraventions within it arose out of a course of conduct. There were many aggravating factors. The single mitigating factor was the lack of relevant prior conduct alleged against the appellant. In these circumstances, it could not be said that 80 per cent of the maximum penalty for each category of breach was outside of the appropriate range. It may have been at or near the top of that range, but it fell within it.

25 In my view, the magistrate did err in her conclusion, when she did not revisit the application of the principle of totality or proportionality. What her Honour ought to have done was to ask whether the figure of $88,000 was out of proportion to the appellant’s overall conduct. The absence of this step in her Honour’s reasoning leads to the conclusion that the exercise of her discretion miscarried.

The appropriate penalty

26 This means that the Court should either exercise the discretion itself, or remit the matter for determination of the appropriate penalties. Neither party suggested that remittal was appropriate. Remittal would only lead to the incurring of further costs, in a situation in which there is no power in a court to award costs. Provided that the members of the Court can agree on the appropriate penalty, this Court should exercise the discretion itself.

27 In determining the appropriate penalty for myself, I take a different approach from that taken by Buchanan J. His Honour at [112] has applied an approach that fixes a penalty for each category of breach at a figure that results in an aggregate sum that, in his Honour’s view, does not offend against the totality principle. My approach is more like that of Graham J, who, at [78] and [80], has accepted the magistrate’s aggregate of $88,000, but has determined by the application of the totality principle an appropriate overall penalty. In other words, Graham J and I proceed by what the High Court has called "instinctive synthesis". See Markarian v R [2005] HCA 25 (2005) 228 CLR 357 at [37], where the majority approved what was said by Gaudron, Gummow and Hayne JJ in Wong v R [2001] HCA 64 (2001) 207 CLR 584 at [74]- [76].

28 My instinctive reaction to the aggregate penalty imposed by the magistrate in this case is that it is excessive. In my view, having regard to all of the circumstances of the case, the appropriate penalty is in the vicinity of $65,000. Because the other members of the Court have agreed, by different processes of reasoning, on a figure of $66,000, I am prepared to agree with that figure, as being within that vicinity. The appeal should be allowed, the order of the Magistrates’ Court of Victoria at Melbourne, made on 19 April 2007, should be set aside. There should be substituted for that order an order that the appellant pay penalties totalling $66,000. In view of the fact that the appellant has now had plenty of time to make provision for the payment, payment into Consolidated Revenue should be required within 14 days of the making of the order.

I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray.

Associate:

Dated: 20 February 2008

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 481 OF 2007

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	AUSTRALIAN OPHTHALMIC SUPPLIES PTY LTD (ACN 005 419 107) Appellant
AND:	LYNDA MCALARY SMITH Respondent

JUDGES:	GRAY, GRAHAM AND BUCHANAN JJ
DATE:	20 FEBRUARY 2008
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

GRAHAM J

29 This case concerns the imposition by a Magistrate sitting in the Industrial Division of the Magistrates’ Court of Victoria (the ‘Magistrates’ Court’) on 19 April 2007 of penalties on an employer for breaches of certain terms of certain Awards in relation to 6 of its employees, in accordance with s 178 of the Workplace Relations Act 1996 (Cth) (‘the Act’) as it was in the period from February 2003 to May 2004.

30 In a 59 page ‘CLAIM BY AN EMPLOYEE/OTHER AGAINST AN EMPLOYER/OTHER’ form filed 12 December 2005 in the Magistrates’ Court (the ‘Claim’), the respondent, as an inspector appointed pursuant to s 84(2) of the Act, sought extensive declaratory and other relief from the appellant.

31 In paragraph 2 on page 20 of the Claim the respondent alleged that the appellant was and had since 17 February 2003 been ‘bound by the Shop, Distributive and Allied Employees’ Association – Victorian Shops Interim (Roping-in No. 1) Award 2003 (the Roping In Award)’.

32 Paragraphs 3 – 6 on page 21 of the Claim then provided as follows:

‘3. The Roping In Award was made by the Australian Industrial Relations Commission and commenced operation from 17 February 2003.

4. The Roping In Award provides (amongst other things) that, subject to that which is otherwise provided for in the Roping In Award, the provisions of the Shop, Distributive & Allied Employees’ Association – Victorian Shops Interim Award 2000 (the Shops Award), as varied from time to time, shall apply (clause 4).

5. The Shops Award provides (amongst other things) that the National Training Wage Award 1994 shall apply in respect of the Shops Award and where it refers back to the award, that shall be read as referring back to the Shops Award (subclause 10.5.1).

6. Clause 6 of the National Training Wage Award 2000 (the Training Wage Award) provides that it supersedes the National Training Wage Award 1994.’

33 The Claim proceeded in paragraph 7 to allege that at all relevant times the appellant:

‘a. operated a number of retail shops for the purposes of selling optometry goods and services to customers from the general public; and

b. employed Joanne Eghnatios, Nancy Conte, Derith O’Brien, Ann-Maree Menzies, Jennifer Sharpe and Kim Haslam (the employees) to work in those retail shops.’

34 Paragraph 281 on pages 54 – 58 of the Claim recorded 56 prayers for relief in which a number of declarations were sought to the effect that the appellant had breached the terms of one or other of the Awards by underpaying Joanne Eghnatios, Nancy Conte, Ann-Maree Menzies, Jennifer Sharpe, Kim Haslam and/or Derith O’Brien. The imposition of penalties for numerous breaches of the Awards was sought, as were a number of orders pursuant to s 178(6) of the Act requiring the appellant to pay the employees who had been underpaid the relevant amounts of the respective underpayments. A total of $17,564.86 plus interest was claimed.

35 The imposition of penalties was sought in respect of the breaches set out at paragraphs 16, 20, 24, 28, 36, 41, 45, 49, 54, 57, 60, 67, 71, 75, 79, 83, 87, 95, 99, 103, 107, 111, 115, 120, 131, 135, 139, 143, 147, 151, 159, 163, 167, 171, 175, 179, 183, 186, 193, 203, 207, 211, 215, 219, 223, 226, 233, 237, 244, 248, 252, 256, 260, 264, 268, 271 and 279 of the Claim under the heading ‘Details of Breaches’.

36 On 16 October 2006 the Claim came before the Magistrates’ Court constituted by Magistrate Hawkins. After granting leave to the respondent to tender affidavit material previously filed, a number of orders were made pursuant to s 178(6) of the Act for the payment of various amounts to the employees of the appellant mentioned above who had been underpaid. Orders were also made for the payment by the appellant of amounts by way of interest on such amounts pursuant to s 179A(1) of the Act.

37 The learned Magistrate proceeded to order that the question of penalty be adjourned to a date not before 1 February 2007, which ultimately became 7 February 2007.

38 On that day counsel for the appellant, Mr M P Pirrie, informed the learned Magistrate that all the employees had by then been paid their entitlements and the amounts which had been ordered to be paid by way of interest. At page 42 of the transcript for 7 February 2007 the following was recorded:

Mr Pirrie: ‘... The affidavit material [which the appellant had intended to provide], Your Honour, was not delivered because my client was taking advice in relation to the material and its position. Its position at the end of the day was give it up, it’s all too hard. It did so, Your Honour ...’ (emphasis added)

39 After hearing submissions from counsel for the appellant and also Mr P M O’Grady, counsel for the respondent, the learned Magistrate reserved her decision and adjourned the matter to 19 April 2007.

40 On 19 April 2007 her Honour delivered her reasons for decision and made the following orders:

‘1. Pursuant to s.178 of the Workplace Relations Act 1996 penalties totalling $88,000 be imposed upon the Defendant for a total of 22 breaches of the Shop, Distributive and Allied Employees’ Association – Victorian Shops Interim (Roping In No. 1) Award 2003 ("Roping In Award"); the Shop, Distributive and Allied Employees’ Association – Victorian Shops Interim Award 2000 ("Shops Award"); and the National Training Wage Award 2000 ("Training Wage Award").

2. Payments of the penalties in order one to be made within 60 days to Consolidated Revenue.’

41 The learned Magistrate’s reasons for decision concluded as follows:

‘32. Taking in[to] account the factors above I consider that a penalty of 80% of the maximum for each category of breach is warranted in all the circumstances. The total aggregate penalty will therefore be $88,000.

33. I will order that this pecuniary penalty be paid into Consolidated Revenue.’

42 In her reasons for decision she recorded that on 16 October 2006 she had made findings of 22 breaches of the relevant awards (at [2], [4] and [22]). At [3] she listed some 65 contraventions which gave rise to 22 relevant breaches after taking into account the ‘course of conduct’ (see s 178(2) of the Act).

43 Section 178 of the Act relevantly provided:

‘178(1) Where ... [a] person bound by an award ... breaches a term of the award ..., a penalty may be imposed ... by a court of competent jurisdiction [which included the Magistrates’ Court in this case].

(2) ... where:

(a) 2 or more breaches of a term of an award ... are committed by the same ... person; and

(b) the breaches arose out of a course of conduct by the ... person;

the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term [hence 65 contraventions constituted only 22 breaches in the circumstances of this case].

...

(4) The maximum penalty that may be imposed under subsection (1) for a breach of a term of an award ... is:

...

(b) where the penalty is not imposed by the Court [referring to the Federal Court of Australia] - $10,000 for a body corporate or $2,000 in other cases.’

44 Because the 22 breaches involved ‘some degree of overlap’ the learned Magistrate identified 11 categories of breach in respect of which penalties ought to be imposed. They were identified by reference to the following prayers for relief in paragraph 281 of the Claim, at [23] of the learned Magistrate’s reasons for decision:

‘• (d) and (f) – ordinary weekday hours

• (h), (j) and (l) – evening weekday hours

• (n), (p) and (r) – Saturday hours

• (t) and (v) – Sunday hours

• (x) – overtime hours

• (z), (bb), and (dd) – double overtime hours

• (ff) – public holiday hours

• (hh) – sick leave

• (jj) and (ll) – annual leave and annual leave loading

• (nn) and (pp) – Payment out of annual leave and pro rata annual leave on termination

• (rr) – payment in lieu of notice on termination.’

45 Whilst the learned Magistrate ultimately ordered that penalties totalling $88,000 be imposed upon the appellant for a total of 22 breaches of the relevant awards, the total of $88,000 was made up of 11 separate amounts of $8,000 each, applied to the 11 categories of breach set out above.

46 In approaching the question of penalty for the 22 established breaches by reference to the 11 categories which her Honour identified, she appears to have had in mind the principle enunciated by McHugh, Hayne and Callinan JJ in Pearce v The Queen [1998] HCA 57; (1998) 194 CLR 610 at [40] namely:

‘40 To the extent to which two offences of which an offender stands convicted contain common elements, it would be wrong to punish that offender twice for the commission of the elements that are common. No doubt that general principle must yield to any contrary legislative intention, but the punishment to be exacted should reflect what an offender has done; it should not be affected by the way in which the boundaries of particular offences are drawn. Often those boundaries will be drawn in a way that means that offences overlap. To punish an offender twice if conduct falls in that area of overlap would be to punish offenders according to the accidents of legislative history, rather than according to their just deserts.’

47 To illustrate the position, a combined penalty of $8,000 was imposed for the breaches of:

(a) clause 4 of the Roping In Award and clauses 14 and 18.1.1 of the Shops Award,

(b) clause 4 of the Roping In Award, clause 18.1.1 of the Shops Award and clause 11.14 of the Training Wage Award, and

(c) clause 4 of the Roping In Award, clause 18.1.1 of the Shops Award and clause 11.4 of the Training Wage Award,

referred to in the prayers for relief set out in subparagraphs (h), (j) and (l) of paragraph 281 of the Claim, which were described by the learned Magistrate as falling within the ‘evening weekday hours’ category.

48 Similarly, a combined penalty of $8,000 was imposed in respect of the breaches of:
(a) clauses 4 and 6(i) of the Roping In Award and clause 14 of the Shops Award, and

(b) clauses 4 and 6(i) of the Roping In Award and clause 11.4 of the Training Wage Award
referred to in the prayers for relief set out in subparagraphs (t) and (v) of paragraph 281 of the Claim, which were described by the learned Magistrate as falling within the ‘Sunday hours’ category.

49 Finally, by way of illustration, a penalty of $8,000 was imposed in respect of the breach of clause 4 of the Roping In Award and clause 33.1 of the Shops Award, referred to in the prayer for relief set out in subparagraph (hh) of paragraph 281 of the Claim, which was described by the learned Magistrate as falling within the ‘sick leave’ category.

50 In relation to the ‘total aggregate penalty’ of $88,000 imposed by the learned Magistrate her Honour said at [24]:

‘24 The totality principle requires a consideration of the overall conduct of the Defendant rather than a focus on the specific number of breaches.’

51 The grounds of appeal recorded in the Notice of Appeal filed 29 June 2007 do not take issue with the imposition of the separate penalties in respect of the 22 breaches of the Awards by reference to the 11 identified categories.

52 Furthermore, no challenge was made to the individual penalties imposed in respect of the 11 categories.

53 In Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 (‘Ponzio’) at [93]-[94] Lander J summarised the purpose of imposing penalties for breaches of the Act as follows:

‘93 There are three purposes at least for imposing a penalty: punishment; deterrence; and rehabilitation. The punishment must be proportionate to the offence and in accordance with the prevailing standards of punishment: R v Hunter (1984) 36 SASR 101 at 103. Therefore the circumstances of the offence or contravention are especially important. The penalty must recognise the need for deterrence, both personal and general. In regard to personal deterrence, an assessment must be made of the risk of re-offending. In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217. In some cases, although hardly in this type of contravention, rehabilitation is an important factor.

94 The individual or personal circumstances of the contravenor must be taken into account as also any relevant matter in mitigation. For a contravention of these sections the minimum penalty which addresses punishment and deterrence, both personal and general, will be appropriate. Where one act may involve a number of contraventions, as in this case, it would be generally inappropriate to impose separate penalties because almost inevitably that would offend against the totality principle as known to the criminal law. ...’

54 The ultimate control on the judicial sentencing discretion is the requirement that the sentence be proportionate to the gravity of the offence committed. In pursuit of other sentencing purposes, a judge may not impose a sentence that is greater than is warranted by the objective circumstances of the crime. Both proportionality and consistency commonly operate as final checks on a sentence proposed by a judge (per McHugh J in Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 (‘Markarian v The Queen’) at [83]; see also Veen v The Queen (No. 2) [1988] HCA 14; (1988) 164 CLR 465 at 472).

55 The acceptance of the role of instinctive synthesis in the judicial sentencing process is not opposed to the concern for predictability and consistency in sentencing that underpins the rule of law and public confidence in the administration of criminal justice. The synthesising task is conducted after a full and transparent articulation of the relevant considerations including an indication of the relative weight to be given to those considerations in the circumstances of the particular case (per McHugh J in Markarian v The Queen at [84]).

56 In addressing consistency, it is important to note what Burchett and Kiefel JJ said in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 at 295, namely:

‘A hallmark of justice is equality before the law, and, other things being equal, corporations guilty of similar contraventions should incur similar penalties: Trade Practices Commission v Axive Pty Ltd [(1994) ATPR |P41-368] (at 42,795). There should not be such an inequality as would suggest that the treatment meted out has not been even-handed ... However, other things are rarely equal where contraventions of the Trade Practices Act are concerned. In the present case, differing circumstances, size, market power and responsibility for the contraventions, as well as other factors, complicate any attempt to compare the penalties imposed on the appellant with those imposed on the other corporations.

Another form of comparison is not appropriate. 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. The point was well made by Spender J in Trade Practices Commission v Annand and Thompson Pty Ltd [(1987) ATPR |P40-472] (at 48,394) when he said:

"Each case must, of course, be viewed on its own facts and facts may be infinite in their variety."

It follows, as his Honour also said, that "[t]he quantum of penalties imposed in other cases can seldom be of very much direct assistance".’

57 The observations of Burchett and Kiefel JJ were cited with approval by Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited (No 4) (2006) ATPR |P42-101 (‘Safeway No. 4’) at [72].

58 The appellant’s case was that the several penalties taken together were excessive, the learned Magistrate having failed to have regard to whether or not the penalties imposed, taken collectively, were ‘so great as to be oppressive’. The Grounds of Appeal were expressed as follows:

‘The Magistrates’ Court erred in law in the exercise of its discretion in that:-

(a) it failed to take into account a relevant matter, namely that the penalties imposed should not be so great as to be oppressive; and

(b) the penalties imposed were, in all the circumstances of the case, excessive.’

59 In coming to the determination of appropriate penalties to be imposed, the learned Magistrate referred to a number of decisions of this Court which set out a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does, the amount of that penalty (at [7]).

60 In the recent decision of Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 (‘Kelly v Fitzpatrick’) his Honour identified various considerations which were potentially relevant at [14] as follows:

‘• The nature and extent of the conduct which led to the breaches.

• The circumstances in which that conduct took place.

• The nature and extent of any loss or damage sustained as a result of the breaches.

• Whether there had been similar previous conduct by the respondent.

• Whether the breaches were properly distinct or arose out of the one course of conduct.

• The size of the business enterprise involved.

• Whether or not the breaches were deliberate.

• Whether senior management was involved in the breaches.

• Whether the party committing the breach had exhibited contrition.

• Whether the party committing the breach had taken corrective action.

• Whether the party committing the breach had cooperated with the enforcement authorities.

• The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and

• The need for specific and general deterrence.’

61 The matters upon which the learned Magistrate focussed her attention in this case were:

• Nature and Extent of the Conduct (at [8]-[12])

• Size of the company (at [13])

• Similar previous conduct (at [14])

• Deliberateness of the breaches (at [15])

• Involvement of senior management (at [16])

• Cooperation with the enforcement authorities (at [17])

• Corporate contrition and corrective action (at [18])

• Deterrence (at [19]-[20])

• Discretion and total penalty (at [21]-[24])

62 In relation to the size of the company the learned Magistrate observed that the appellant was a ‘large, national retail operation with a long history’ (at [13]). Earlier at [1] her Honour described the appellant as a company which traded as ‘Merringtons’, being a ‘major player in the provision of retail optometric and ophthalmic services throughout Australia’, a national organisation with over 50 stores which had been in operation for 107 years.

63 Favourably to the appellant, the learned Magistrate recorded that the appellant had not engaged in any previous conduct of a similar nature (at [14]).

64 The appellant has not submitted that the learned Magistrate failed to take into account considerations that she should have taken into account or that she took into account considerations that she should not have taken into account or that she misdirected herself in relation to those matters which she did take into consideration.

65 It is evident from the learned Magistrate’s observations that she did not consider the breaches which had been established to be ‘trifling matters’. Her findings included:

• the contraventions were ‘broad ranging’ (at [8])

• the contraventions revealed ‘a disregard for the [appellant’s] award obligations’ (at [8])

• the appellant had failed to pay important entitlements falling within the 11 categories referred to above (at [8])

• the underpayments were significant (at [9])

• attempts had been made to secure voluntary compliance by the appellant with its obligations over a period of 18 months but these had proved to be unsuccessful (at [9] and [12])

• the appellant strenuously resisted the efforts of the respondent to secure voluntary compliance by the appellant with its award obligations (at [15])

• the appellant failed to make good the underpayments until ordered to do so by the Court, it being acknowledged that such underpayments had since then been remedied (at [10])

• the contraventions occurred over a range of different stores operated by the appellant (at [12])

• the breaches occurred over a period of approximately 15 months (at [12])

• the appellant’s industrial strategy involved a deliberate attempt to avoid its award obligations (at [15])

• the contraventions occurred with the knowledge of the appellant’s senior management (at [16])

• the appellant demonstrated a profound failure to cooperate with the authorities (at [17])

• the appellant demonstrated no evidence of remorse or contrition for its actions (at [18])

• the need for specific deterrence was high (at [19])

• former employees who had been underpaid were subjected to the emotional burden of having to prepare themselves to give evidence at the trial (at [11])

The totality principle

66 The totality principle is designed to ensure that the aggregate of the penalties imposed is not such as to be oppressive or crushing (per Tracey J in Kelly v Fitzpatrick at [30]).

67 In Safeway No 4 Goldberg J said:

‘82. The "totality" principle requires the Court, after determining an appropriate ... penalty for specific ... contraventions in accordance with proper principles, to review the total of the ... penalties and consider "whether the aggregate is ‘just and appropriate’". ... The totality principle finds its genesis in the criminal law but it has also been applied in the context of fixing penalties for contravention of the [Trade Practices] Act: Trade Practices Commission v Allied Mills Industries Pty Ltd [1981] FCA 133; (1981) 37 ALR 256 at 258; [Australian Competition and Consumer Commission] v McMahon [Services Pty Ltd (2004) ATPR |P42-031] at [90]. ...

83. ... I have ... borne in mind the totality principle. That is, I have ensured that having determined an appropriate penalty for each contravention, I have, as a check considered whether the aggregate is appropriate for the various acts of contravening conduct involved: McDonald v The Queen [1994] FCA 956; (1994) 48 FCR 555 and Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) ATPR 41-562 at 43,817.’

68 In Mill v The Queen [1988] HCA 70; (1988) 166 CLR 59 (‘Mill’) at 62-63 Wilson, Deane, Dawson, Toohey and Gaudron JJ adopted a statement from Thomas, ‘Principles of Sentencing’ in relation to the totality principle in the following terms:

‘The effect of the totality principle is to require a sentencer who has passed a series of sentences, each properly calculated in relation to the offence for which it is imposed and each properly made consecutive in accordance with the principles governing consecutive sentences, to review the aggregate sentence and consider whether the aggregate is "just and appropriate". The principle has been stated many times in various forms: "when a number of offences are being dealt with and specific punishments in respect of them are being totted up to make a total, it is always necessary for the court to take a last look at the total just to see whether it looks wrong["]; "when ... cases of multiplicity of offences come before the court, the court must not content itself by doing the arithmetic and passing the sentence which the arithmetic produces. It must look at the totality of the criminal behaviour and ask itself what is the appropriate sentence for all the offences".’

69 In Johnson v R [2004] HCA 15; (2004) 78 ALJR 616 (‘Johnson’) at [22] Gummow, Callinan and Heydon JJ indicated that application of the totality principle was not confined simply to cases where an aggregation of sentences might otherwise impose a crushing burden.

70 Gummow, Callinan and Heydon JJ also emphasised at [26] 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’.

71 It seems to me that in a case such as that presently before the Court, where there had been numerous breaches, the starting point should have been to determine appropriate penalties for each contravention of the statutory norm, due regard being had to the apparent degree of overlap. This is precisely what the learned Magistrate did. The aggregate figure should then have been considered with a view to ensuring that it provided an appropriate response to the conduct which led to the breaches (see per Tracey J in Kelly v Fitzpatrick at [30]; per Jessup J in Ponzio at [145]-[147]; per Goldberg J in Safeway No. 4 at [82]-[83]; per Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53 and per Wilson, Deane, Dawson, Toohey and Gaudron JJ in Mill at 62-63).

72 Given the several findings of the learned Magistrate in this case in relation to the seriousness of the breaches of the relevant awards, I do not consider that the learned Magistrate’s imposition of a penalty of $8,000 for each separate category into which the 22 breaches were grouped demonstrated that her discretion, in that regard, miscarried.

73 What does stand out, however, is that her Honour’s statement of the requirements of the totality principle, as recorded at [24] of her reasons, did not sufficiently address what was required of her. Having determined, as appropriate, that penalties of $8,000 for each of the 11 categories, into which the 22 breaches fell, should be imposed, the learned Magistrate should then have viewed the total of $88,000 and asked herself ‘whether the aggregate was just and appropriate?’

74 The learned Magistrate’s reasons for decision suggest that she failed to address this question. In the circumstances, it can be said that she erred in the exercise of her discretion in respect of the imposition of pecuniary penalties under the Act. As Dixon J, as his Honour then was, Evatt and McTiernan JJ said in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505:

‘... If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.’

See also Ponzio at [70] and [127] in respect of the application of House v King to cases such as the present.

75 House v The King was a case where the High Court was called upon to disturb a sentence of three months’ imprisonment with hard labour imposed upon the appellant for a bankruptcy offence. At 505 and 507 their Honours applied the principles which they had enunciated by saying:

‘In the present case we think we are unable to interfere with the sentence imposed by his Honour Judge Lukin if we apply the principles we have stated.

...

... we do not think that we can say that the sentence, although severe, was unreasonable or clearly unjust, and there is no other ground for saying that it arose from error of fact or of law, or failure to take into account any material consideration, or from giving undue weight to any circumstance or matter.’

76 In the present case there can be no doubt as to how the learned Magistrate reached the result embodied in her orders. It is not necessary to make a determination on the facts as to whether her orders were simply ‘unreasonable or plainly unjust’.

77 Given the failure by the learned Magistrate to properly consider the totality principle in respect of the aggregate penalty of $88,000, this Court may exercise its discretion in substitution for that of the learned Magistrate.

78 Accepting as correct the numerous findings made by the learned Magistrate in respect of the considerations which she took into account as relevant to the determination of the amounts of the penalties to be imposed, I consider that the question whether the aggregate of $88,000 was just and appropriate should be answered in the negative. Applying an ‘instinctive synthesis’ approach, as explained by McHugh J in Markarian v The Queen, I would incline to the view that the aggregate figure was an inappropriate response to the conduct which led to the 22 breaches of the relevant Awards.

79 The breaches were plainly serious and, to use the vernacular, the appellant was brought ‘kicking and screaming’ to the proper discharge of its legal obligations. It was however a ‘first offender’ and the breaches were all of a generally similar nature.

80 In my opinion an appropriate response to the conduct which led to the breaches, and one which would be just and appropriate, would be the imposition of a total penalty of $66,000. Such a penalty should be paid promptly, given the passage of time since the learned Magistrate gave her decision.

81 I would set aside the orders made by the learned Magistrate on 19 April 2007 and substitute therefor the following orders:

‘1. Pursuant to s.178 of the Workplace Relations Act 1996 penalties totalling $66,000 be imposed upon the Defendant for a total of 22 breaches of the Shop, Distributive and Allied Employees’ Association – Victorian Shops Interim (Roping In No. 1) Award 2003 ("Roping In Award"); the Shop, Distributive and Allied Employees’ Association – Victorian Shops Interim Award 2000 ("Shops Award"); and the National Training Wage Award 2000 ("Training Wage Award").

2. Payment of the penalties in order 1 be made within 14 days to Consolidated Revenue.’

I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham.

Associate:

Dated: 14 February 2008

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 481 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	AUSTRALIAN OPHTHALMIC SUPPLIES PTY LTD Appellant
AND:	LYNDA MCALARY SMITH Respondent

JUDGES:	GRAY, GRAHAM AND BUCHANAN JJ
DATE:	20 FEBRUARY 2008
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

BUCHANAN J:

82 On 19 April 2007 the appellant was ordered, by a Magistrate sitting in the Industrial Division of the Magistrates Court of Victoria, to pay $88,000 into Consolidated Revenue by reason of 22 breaches of the Shop, Distributive and Allied Employees’ Associations – Victorian Shops Interim (Roping In (No 1)) Award 2003; the Shop Distributive and Allied Employees’ Association – Victorian Shops Interim Award 2000; and the National Training Wage Award 2000. The penalties were imposed pursuant to s 178 of the Workplace Relations Act 1996 (Cth) (‘the WR Act’) as it was in force in 2003. The grounds of appeal relied upon before this Court were expressed as follows:

‘1. The Magistrates’ Court erred in law in the exercise of its discretion in that:-

(a) it failed to take into account a relevant matter, namely that the penalties imposed should not be so great as to be oppressive; and

(b) the penalties imposed were, in all the circumstances of the case, excessive.’

83 The present is an appeal against the exercise of a judicial discretion. In order to substitute a different result on the appeal, as we were invited to do by the appellant, it would be necessary to be satisfied that an error had been committed in the exercise of that discretion. The test to be employed is that stated in House v R [1936] HCA 40; (1936) 55 CLR 499 at 505:

‘It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.’

84 At the initial hearing in the Magistrates Court, on 16 October 2006, the appellant indicated, apparently for the first time, that it would not resist the allegations brought against it. 65 failures to comply with the awards were thereupon found established. They related to allegations of underpayment of wages totalling $17,564.86, and other breaches, with respect to six employees of the appellant. By reason of the operation of s 178(2) of the WR Act many of the contraventions, which arose in a ‘course of conduct’, were required to be treated as a single breach, or single breaches, of relevant terms of the award. As a result there were 22 contraventions established in respect of which a penalty might be imposed.

85 The learned Magistrate reached her conclusion as to the total amount of the penalties to be imposed by finding that the 22 contraventions fell into 11 categories and that the character of the contraventions justified ‘a penalty of 80% of the maximum for each category of breach’ in circumstances where the maximum penalty which might be imposed at the time of the contraventions was $10,000 in the case of a body corporate. That approach ($8,000 with respect to each category) yielded the total aggregate penalty of $88,000.

86 As the grounds of appeal suggest, the primary contention by the appellant was that the penalties imposed were too great. The appeal was argued almost exclusively by reference to penalties fixed by Mowbray FM in two cases decided by him earlier this year in the Federal Magistrates Court of Australia (‘the FMCA’) (Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 and Flattery v The Italian Eatery t/as Zeffirelli’s Pizza Restaurant [2007] FMCA 9). Using the penalties in those cases as a yardstick it was argued that the penalties fixed in the present case were ‘outside the range’ of appropriate penalties for similar offences.

87 In my view this approach was misconceived. It is by the facts of the present case that the question whether the penalty fixed was excessive must be judged. In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 Burchett and Kiefel JJ, in a passage which has, in my view, equal force in the present case, said (at 295):

‘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.’

88 The learned Magistrate approached the task of assessing the penalties to be imposed by giving attention to ‘a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty’. She used, for that purpose, a list of factors identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd. The list of factors identified by Mowbray FM was drawn from similar lists in decisions of this Court in cases involving breaches of the requirements of the Trade Practices Act 1974 (Cth) and the WR Act (see Trade Practices Commission v CSR Limited [1991] HCA 7; [1991] ATPR 52,135 at 52,152 – 52,153; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 at 291 - 292; Construction, Forestry, Mining & Energy Union v Coal & Allied Operations Pty Ltd (No 2) [1999] FCA 1714; (1999) 94 IR 231 at [7] – [8]; and Textile Clothing & Footwear Union of Australia v Lotus Cove Pty Ltd [2004] FCA 43 at [46] – [47].

89 In a recent judgment Tracey J adopted this same list of factors as ‘potentially relevant and applicable’ (see Kelly v Fitzpatrick [2007] FCA 1080). The list of factors is as follows:

‘• The nature and extent of the conduct which led to the breaches.

• The circumstances in which that conduct took place.

• The nature and extent of any loss or damage sustained as a result of the breaches.

• Whether there had been similar previous conduct by the respondent.

• Whether the breaches were properly distinct or arose out of the one course of conduct.

• The size of the business enterprise involved.

• Whether or not the breaches were deliberate.

• Whether senior management was involved in the breaches.

• Whether the party committing the breach had exhibited contrition.

• Whether the party committing the breach had taken corrective action.

• Whether the party committing the breach had cooperated with the enforcement authorities.

• The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and

• The need for specific and general deterrence.’

90 Similar lists appear in other recent authorities (e.g. 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].

91 Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. There is no suggestion in the present case that the learned Magistrate made any relevant error in her identification of the matters which she should consider in fixing penalties.

92 In her consideration of the circumstances of the contraventions with which she was dealing the learned Magistrate came to the conclusion, by reference to a number of the matters to which she gave attention that ‘the need for specific deterrence in this case is high’. That conclusion was reached despite the fact that the appellant is a large organisation with a long history with no alleged prior record of similar conduct. It is not necessary to discuss in any detail the various matters she referred to. They included lack of co-operation with the Office of Workplace Services, the involvement of senior management and the appearance of an ‘industrial strategy [which] was a deliberate attempt to avoid ... award obligations’. No argument was put that the learned Magistrate had mistaken the facts upon which these findings were based or that it was not reasonably open to her to make them for any other reason.

93 A finding of a ‘high’ need for specific deterrence was bound to lead to a substantial penalty. However, the learned Magistrate correctly appreciated the need to avoid any form of double punishment for the same conduct. Accordingly, she grouped the 22 established contraventions into categories of breaches and fixed penalties for the categories of breaches rather than individual contraventions, so as to accommodate ‘some degree of overlap’. Her approach of avoiding double punishment for common matters in overlapping contraventions was in accordance with authority. In Pearce v R [1998] HCA 57; (1998) 194 CLR 610 McHugh, Hayne and Callinan said (at [40])

‘To the extent to which two offences of which an offender stands convicted contain common elements, it would be wrong to punish that offender twice for the commission of the elements that are common. No doubt that general principle must yield to any contrary legislative intention, but the punishment to be exacted should reflect what an offender has done; it should not be affected by the way in which the boundaries of particular offences are drawn. Often those boundaries will be drawn in a way that means that offences overlap. To punish an offender twice if conduct falls in that area of overlap would be to punish offenders according to the accidents of legislative history, rather than according to their just deserts.’

This passage was re-affirmed in Johnson v R [2004] HCA 15; (2004) 205 ALR 346 at [27] – [34].

94 She also correctly appreciated the necessity to apply the totality principle. It is widely accepted as a conventional sentencing principle that in the event of multiple penalties the ‘totality’ principle should be applied to ensure that the final result is not unjust. In her decision the learned Magistrate stated: ‘the totality principle requires a consideration of the overall conduct of the Defendant rather than a focus on the specific number of breaches’. With respect, this observation seems to me to be misdirected in part at least. There can be no doubt that consideration of the overall conduct is a factor to be taken into account in the application of the totality principle but it may be more accurate to say that the totality principle requires consideration of the overall penalty which is imposed for the conduct in question.

95 There has been some discussion in judgments of this Court about the way in which the principle should be applied. In CPSU, The Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 1364; 108 IR 228 (‘CPSU v Telstra’) Finkelstein J said (at [7]) of the totality principle:

‘The principle is that in imposing a penalty for a number of offences it is necessary to ensure that the penalties in aggregate are just and appropriate.  One way the totality principle can be given effect is to determine what is an appropriate total penalty and then divide that penalty by the number of offences to produce a penalty for each separate offence.  The problem with this approach is that it may result in quite inappropriate individual penalties.  In a criminal case when one is sentencing a person to a term of imprisonment, this problem can be avoided.  In that type of case the most appropriate method of sentencing for multiple offences and avoiding imposing inadequate sentences for each individual offence, is to arrive at the appropriate head sentence by cumulation or concurring orders.  This will ensure that the total sentence is not too high or crushing.  On the other hand, when the penalty is only pecuniary, the ability to manipulate individual sentences is not available.  Thus it will be necessary to resolve upon the appropriate total penalty, dividing that penalty by the number of individual contraventions and record that amount as the penalty for each contravention, whether or not the sum produced might be regarded as an inappropriate individual penalty.’ (emphasis added)

96 That approach differed from the approach which had been stated by Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53:

‘The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved:  McDonald v The Queen [1994] FCA 956; (1994) 48 FCR 555.  But that does not mean that a court should commence by determining an overall penalty and then dividing it amongst the various contraventions.  Rather the totality principle involves a final overall consideration of the sum of the penalties determined.  In Mill v The Queen [1988] HCA 70; (1988) 166 CLR 59 the High Court accepted the following statement as correctly describing the totality principle:

"The effect of the totality principle is to require a sentencer who has passed a series of sentences, each properly calculated in relation to the offence for which it is imposed and each properly made consecutive in accordance with the principles governing consecutive sentences, to review the aggregate sentence and consider whether the aggregate is 'just and appropriate'.  The principle has been stated many times in various forms:  'when a number of offences are being dealt with and specific punishments in respect of them are being totted up to make a total, it is always necessary for the court to take a last look at the total just to see whether it looks wrong'; 'when ... cases of multiplicity of offences come before the court, the court must not content itself by doing the arithmetic and passing the sentence which the arithmetic produces.  It must look at the totality of the criminal behaviour and ask itself what is the appropriate sentence for all the offences'."

As Spender J pointed out in McDonald v The Queen (supra, 556):

‘Implicit in that statement is that the sentence for each offence should be 'properly calculated in relation to the offence for which it is imposed’.

It is explicit in this statement that a sentencer or penalty fixer must, as an initial step, impose a penalty appropriate for each contravention and then as a check, at the end of the process, consider whether the aggregate is appropriate for the total contravening conduct involved:  McDonald v The Queen (supra, 563) per Burchett and Higgins JJ.’ (emphasis added)

97 In Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 Jessup J expressed his preference for the approach taken by Goldberg J (at [145]) as did Tracey J in Kelly v Fitzpatrick (at [30]). I respectfully agree that the approach stated by Goldberg J is the correct approach to this issue.

98 The first ground of appeal might be thought to raise an issue about whether the totality principle was properly applied because in Kelly v Fitzpatrick Tracey J described the totality principle as follows (at [30]):

‘This principle is designed to ensure that the aggregate of penalties imputed is not such as to be oppressive or crushing.’

99 The grounds of appeal do not suggest the penalty was crushing. That would require an evidentiary foundation which is not present. The term is also more appropriate to refer to personal consequences (such as a term of imprisonment) than the imposition of a pecuniary penalty on a corporation.

100 The term ‘crushing’, for example was used by Burchett and Higgins JJ in McDonald v R [1994] FCA 956; (1994) 48 FCR 555 as follows (at 563):

‘When the court comes to apply the principle of totality, in a particular case where the prisoner has not previously been sent to gaol, the authorities (see Thomas, pp 59-60) support the view that the accumulation of sentences now to be imposed ought not to result, unless there is no alternative, in a total which is a crushing first period of imprisonment.’

When Finkelstein J used the term in CPSU v Telstra in the passage I set out above he also was referring to the effect of a term of imprisonment.

101 However, the contention that the learned Magistrate failed to ensure that the penalty was not oppressive requires examination. The learned Magistrate’s conclusion about the penalties to be imposed was expressed in the following way:

‘Taking in account the factors above I consider that a penalty of 80% of the maximum for each category of breach is warranted in all the circumstances. The total aggregate penalty will therefore be $88,000.’

No mention was made of any final check of the total aggregate penalty by reference to the totality principle. Taken together with what might be seen arguably as a misdirected focus in her earlier remarks about the totality principle, this raises a question whether, in the end, the principle was correctly applied.

102 The totality principle is a guide to sentencing practice. It must be adapted to the circumstances. It is designed to avoid injustice in the overall result. It is not a principle which suggests that a penalty should necessarily be reduced from an aggregate total fixed for multiple offences. Rather, it involves a final check to ensure that a total or aggregate penalty is not, in all the circumstances, excessive. It may not be. There was no evidence about the likely effect of any particular level of penalty upon the appellant. I find it difficult to see the first ground of appeal in the present case therefore (even if it does refer to the totality principle) in a different category from an allegation that the penalty was excessive or as raising any different considerations from the second ground. Clothing it in language suggesting failure to take account of relevant matters does nothing to alter its basic character of a challenge to quantum.

103 I do not think it necessary, therefore, to express any firm view about the way the learned Magistrate described the totality principle or to draw any conclusions from the fact that she did not expressly refer to it again when fixing penalties. It is obvious that she did not regard the penalty she imposed as excessive. It is upon that issue that the appeal really turns.

104 To suggest, as the second ground of appeal does, that a penalty is excessive, may not sufficiently identify the nature of the case which must be made out if an appeal on quantum alone is to succeed. It is necessary to show that the penalty fixed is outside the legitimate range within which, in the circumstances of the case, a judicial discretion might properly be exercised. For that reason it must, in my view, be open to conclude that a penalty is manifestly excessive or manifestly inadequate. Expressing the matter that way also draws attention to the fact that the error involved is disclosed by the penalty itself, rather than by any explanation of its amount.

105 To reach a conclusion that a penalty is manifestly excessive (or manifestly inadequate) it is not necessary to identify any particular error in the reasoning process which leads to the final result. It will usually be the case that specific identification of such an error is not possible.

106 In Dinsdale v R [2000] HCA 54; (2000) 202 CLR 321 Gleeson CJ and Hayne J said at [6]:

‘Manifest inadequacy of sentence, like manifest excess, is a conclusion.  A sentence is, or is not, unreasonable or plainly unjust; inadequacy or excess is, or is not, plainly apparent.  It is a conclusion which does not depend upon attribution of identified specific error in the reasoning of the sentencing judge and which frequently does not admit of amplification except by stating the respect in which the sentence is inadequate or excessive.  It may be inadequate or excessive because the wrong type of sentence has been imposed (for example, custodial rather than non-custodial) or because the sentence imposed is manifestly too long or too short.  But to identify the type of error amounts to no more than a statement of the conclusion that has been reached.  It is not a statement of reasons for arriving at the conclusion.  A Court of Criminal Appeal is not obliged to employ any particular verbal formula so long as the substance of its conclusions and its reasons is made plain.  The degree of elaboration that is appropriate or possible will vary from case to case.’ (emphasis added)

107 Kirby J (with whom Gaudron and Gummow JJ agreed) said (at [59]):

‘As on appeal from discretionary decisions, it will sometimes not be possible to identify, with exactness, an error of the foregoing kind; yet the result that is challenged may be so manifestly unreasonable or plainly wrong that the appellate court will be able to infer that, in some unidentified way, there has been a failure to exercise the power properly. In appellate review of sentencing, it will commonly be the case that the appellate court's authority to intervene will derive from a conclusion that the resulting order is so disproportionate to the matter to which it relates as to afford the foundation for concluding that, in some way, the exercise of the powers of the primary judge has miscarried.’ (emphasis added)

108 There is no doubt that the penalty fixed in the present case was a very high one. On the approach adopted by the learned Magistrate, of concentrating on 11 categories of breaches rather than 22 contraventions, it approaches the maximum penalty prescribed by the legislature. It suggests, for that reason, that the case must be able to be fairly regarded as approaching a worst possible case in order for the penalty to be sustained. In Markarian v R [2005] HCA 25; (2005) 228 CLR 357 the majority judgment said (at [31]):

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‘It follows that careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick.  That having been said, in our opinion, it will rarely be, and was not appropriate for Hulme J here to look first to a maximum penalty, and to proceed by making a proportional deduction from it.  That was to use a prescribed maximum erroneously, as neither a yardstick, nor as a basis for comparison of this case with the worst possible case.’ (emphasis added)

109 In oral submissions counsel for the appellant suggested that because, between the initial hearing and the hearing of submissions on the question of penalty, underpayments to specific employees had been made good, with interest, any prejudice suffered by employees had been cured. I understood the submission to suggest that this was a mitigating factor. In my view no weight need be given to the circumstance that the appellant, when finally it offered no resistance to the allegations against it, complied with the legal requirement it had earlier breached.

110 On the appeal the appellant also relied upon the fact that its business of very long standing which operated throughout Australia in over 50 stores had no alleged prior history of breach of the WR Act. It argued, accordingly, that whatever view is taken of a suggested lack of co-operation with the authorities and the other matters referred to by the learned Magistrate the case was not one approaching a worst possible case. I think there is some force in this argument. The learned Magistrate found that the need for specific deterrence in the case was high and that there was also a high need for general deterrence. These are important matters to bear in mind. However, there was no discussion by the learned Magistrate of how she regarded the contraventions in the present case as comparing to a worst possible case. It does not seem to me that they do approach such a case as closely as the penalties fixed suggest, even though the contraventions were clearly serious ones. Making every allowance which I can for the advantage possessed by the learned Magistrate and accepting the approach which she took of imposing penalties by reference to categories of breaches, in my view, whether the evaluation of penalty is approached by reference to each category or as an overall figure, neither a penalty of $8,000 (compared to a maximum of $10,000) or a total penalty of $88,000 was justified for a ‘first offence’. In my view, therefore, the appeal should be upheld.

111 There is no reason why the Court should not substitute its own view of an appropriate penalty, using the findings made by the learned Magistrate as a foundation.

112 The appellant suggested that 25 – 35% of the maximum penalty only was justified on the facts of the case. In my view that gives inadequate weight to the factual findings made. These were serious and apparently unrepented breaches. They warrant a firm indication that they should not be repeated. Although any re-assessment is necessarily arbitrary I would, bearing in mind the findings made by the learned Magistrate, fix a penalty of $6,000 for each category of breach, resulting in an aggregate penalty of $66,000 which I am satisfied, in the circumstances found, does not offend against the totality principle.

113 I agree that the penalty should be paid within 14 days.

I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan .

Associate:

Dated: 14 February 2008

Counsel for the Appellant:	Mr M Pirrie
Solicitor for the Appellant:	Frenkel Partners
Counsel for the Respondent:	Mr P O’Grady
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	8 November 2007
Date of Judgment:	20 February 2008