FWA: Unlawful industrial action & half million $ fine

Lend Lease Project Management & Construction (Australia) Pty Ltd v Construction, Forestry, Mining and Energy Union (No 5) [2012] FCA 1144

The very public dispute between the CFMEU and others involving “stop the sham” (alleged sham independent contractors) at the building sites of the Law Courts Project and the Gold Coast University Hospital, has resulted in substantial fines exceeding half a million dollars.

Collier J:

  1. In this case although the parties have reached agreement in respect of both culpability of the respondents and appropriate sanctions, it is ultimately for the Court to determine both the nature and quantum of any penalties to be imposed on the respondents. It is also clear, however, that the Court should give weight to any agreement reached by the parties as to penalties, and should generally give effect to the agreed penalty provided it falls within the appropriate range: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 at 291 and 298; Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 at [129]; White v Construction, Forestry, Mining and Energy Union [2011] FCA 192 at [5]. This is particularly so in light of the support given by the Director to the agreed penalty: cf Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993 at [51] and Hardwick v Australian Manufacturing Workers’ Union (2010) FCA 818 at [13]and [19].
  2. In Australian Building & Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2010] FCA 977 Barker J summarised general principles relevant to imposition of civil penalties in the following terms:

[4] Sentencing (which the imposition of a civil penalty is an instance of) is one of the most, if not the most difficult tasks that judicial officers perform: CFMEU v Williams [2009] FCAFC 171; (2009) 262 ALR 417 (Williams) at [28]. [5] The overriding principle is to ensure that the sentence is proportionate to the gravity of the contravening conduct: Attorney-General (SA) v Tichy (1982) SASR 84 at 92-93. [6] The purpose to be served by the imposition of penalties is at least threefold:

(1) Punishment, which must be proportionate to the offence and in accordance with prevailing standards; (2) Deterrence, both personal (assessing the risk of re-offending) and general (a deterrent to others who might be likely to offend); and (3) Rehabilitation.

See Ponzio v BP Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 (Ponzio), Lander J at [93]-[94]. [7] The task which a sentencing judge is faced with is one of “instinctive synthesis”: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560 (Australian Ophthalmic Supplies), Gray J at [27] and Graham J [55]. Such a process requires that a court take into account all relevant factors and to arrive at a single result which takes due account of them all: see Wong v The Queen [2001] HCA 64; [2001] HCA 64; (2001) 207 CLR 584 at [74][76]; Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 (Markarian), Gleeson CJ, Gummow, Hayne and Callinan JJ at [37]-[39]. The penalty must not be so great as to crush the person upon whom the penalty is imposed or reveal the person as a scapegoat: Ponzio at [93] (Lander J); McDonald v R [1994] FCA 956; (1994) 48 FCR 555 at 563. The maximum penalty is reserved for only the most serious of contraventions: Markarian at [31]. Proportionality and consistency commonly operate as a final check on the penalty assessed: Australian Ophthalmic Supplies at [53].

  1. I respectfully adopt his Honour’s summary as providing an overall guide to the approach of the Court in relation to the imposition of civil penalties.
  2. Further, and more recently, Tracey J in Alfred v Construction, Forestry, Mining and Energy Union [2011] FCA 556 summarised factors which, in his Honour’s view, were relevant to consideration of the penalty upon which the parties in that particular case had agreed. Those factors were as follows (at [70]):

• The nature and extent of the conduct which led to the breaches. • The circumstances in which that relevant 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 or not the breaches were deliberate. • Whether the respondent had exhibited contrition. • Whether the respondent had taken corrective action. • Whether the respondent had co-operated with the enforcement authority. • The need for specific and general deterrence.

  1. In my view this list is a helpful guide to the exercise of the discretion of the Court in the current circumstances in determining an appropriate penalty. With reference to these factors, I now make the following observations concerning appropriate penalties in this case.
  2. First, it is not in dispute that both the Law Courts Project and the GCUH Project are major projects in south-east Queensland, with projected values of approximately $570 million in relation to the Law Courts Project and $1.76 billion in relation to the GCUH Project. Further, the unlawful industrial action was protracted, conspicuously public, and co-ordinated across the two project sites. Hundreds of workers on both sites ceased work on the days I listed earlier in this judgment, causing delays to the critical path of each project (5 days in respect of the Law Courts Project and 8 days in respect of the GCUH Project).
  3. Second, the unlawful industrial action was not taken by the respondents in relation to specific concerns relevant to the particular sites, but rather was taken as part of an industry-wide campaign relating to union claims of sham contracting.
  4. Third, and importantly, the unlawful industrial action was taken despite orders from Fair Work Australia that it should not occur.
  5. Fourth, it is clear that the unlawful industrial action of the respondents caused serious disruption to Lend Lease. It is not in dispute that, as a result, Lend Lease suffered estimated loss and damage totalling $1,210,770.65.
  6. Fifth, it is not in dispute that the contravening conduct of the respondents was deliberate, in pursuit of general and (in the final result in these proceedings) unsubstantiated claims by the unions of sham contracting, and in contravention of orders of Fair Work Australia. This is not a case where, for example, the contravention was inadvertent.
  7. Sixth, it is questionable whether the respondents have demonstrated contrition in respect of the contraventions of the legislation. Rather, in their written submissions they vaguely referred to a “willingness to facilitate justice”. Nonetheless, the respondents have conceded that contraventions of the legislation occurred, and have reached agreement with the applicants – including the Director – in relation to appropriate penalties and injunctive relief. I note that the proceedings were set down for hearing for a combined period of several weeks. The agreement of the parties obviated the need for trials, and the associated expenditure which would have been incurred by all parties.
  8. Seventh, to the extent that the respondents agreed to facts, penalties and other remedial orders, the respondents have demonstrated co-operation with the regulatory authorities in these proceedings.
  9. Eighth, as observed by Lander J in Ponzio at [93] the penalty must recognise the need for deterrence, both personal and general. As his Honour further explained:

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.

  1. As at the date of hearing it appeared that the respondents had an ongoing involvement, not only in the construction industry, but in activity at the sites of both projects. To that extent, specific deterrence in relation to unlawful industrial activity is of particular significance. The continuing involvement of the unions and the individual respondents (being officials of those unions) in the building and construction industry in Australia emphasises the importance of general deterrence in preventing similar contraventions of the legislation.
  2. In this case penalties at different levels are submitted as appropriate for the unions – which are large and well-funded organisations – and the individual respondents. In my view this is a proper approach. I also note that, in reaching agreement, the parties clearly do not consider that the penalties proposed are such as, in the words of Lander J in Ponzio, “to crush the person upon whom the penalty is imposed or … to make that person a scapegoat”.

Penalties: conclusion

  1. These proceedings arise from repeated contraventions of the BCII Act, resulting in substantial damage to Lend Lease, in circumstances where the respondents acted in defiance of orders of Fair Work Australia, for reasons which appeared to be of more relevance to a broad campaign than conditions on the particular sites. The penalties upon which the parties have reached agreement are, in relation to the unions, relatively high, but not so in respect of the individual respondents. Indeed, the penalties proposed in respect of the individual respondents are relatively low when considering the maximum penalties which could be imposed in the circumstances. However I am persuaded that the total amount of the penalties agreed by the parties is within the permissible range, and neither manifestly excessive nor manifestly inadequate having regard to the conduct in question.
  2. The parties have also consented to the penalties imposed on the unions being paid to Lend Lease, and the penalties imposed on the individual respondents being paid to the Commonwealth. In my view an order pursuant to s 49(5) of the BCII Act that the penalties payable by the unions be paid to Lend Lease is appropriate in light of the damage suffered by Lend Lease as a result of the conduct of those respondents. I note that an order in such terms is consistent with the approach taken by the Court in Woodside Burrup Pty Ltd v Construction, Forestry, Mining and Energy Union [2011] FCA 949 at [116] and [149].

Injunctive relief and bank guarantee

  1. The unions are prepared to undertake to refrain from (in summary) organising, engaging in or being involved in unlawful industrial action on or in connection with the GCUH Project and the Law Courts Project until the practical completion of those projects. The individual respondents are prepared to undertake to refrain from (in summary) hindering or obstructing third parties entering the relevant sites. In this context, the parties propose that the CFMEU be restrained from organising, engaging in, or being involved in the unlawful industrial action in respect of the project sites, and that the CFMEU provide a bank guarantee in the sum of $150,000 in favour of Lend Lease as security for compliance by the unions with the terms of the agreed undertakings and injunctive relief.
  2. Prior to the repeal of Ch 5 and Ch 6 of the BCII Act, where a person contravened a civil penalty provision of that Act, the Court had a broad discretion to make orders it considered appropriate, including injunctions: s 49(1)(c) and s 49(3) BCII Act. The power to grant injunctive relief is also granted by s 23 of the Federal Court Act. Following the recent decision in Abigroup Contractors, however, the power of the Court to make orders for injunctive relief as agreed by the parties in this case is uncertain. Accordingly, I will invite the parties to make further submissions in relation to that issue, as well as the undertakings and bank guarantee offered by the respondents.

Brisbane Barrister – David Cormack


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