100314931

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION

APPLICANT

 -v-

 CARL ANTHONY PERROT & SANDRA LEE PERROTT TRADING AS C & S PERROTT

RESPONDENTS

CORAM MAGISTRATE G CICCHINI IM

DATE WEDNESDAY, 7 AUGUST 2002

FILE NO/S M 18 OF 2002

CITATION NO. 2003 WAIRC 07370

_______________________________________________________________________________

Result Penalties imposed, pre-judgement interest awarded and application for costs refused

Representation

Claimant Ms E Peak of counsel

Respondents Mr O Moon as agent

_______________________________________________________________________________

Supplementary Reasons for Decision

1         On 17 July 2002 I published reasons in this matter.  I found all but one of the alleged breaches proved.  I also found that the Claimant’s member was underpaid an amount of $6822.95.  In consequence, the Claimant seeks that I make orders in relation to pre-judgment interest, costs and penalties.

2         There were 52 proven breaches.  Of those, 51 related to specific underpayments.  The other related to a failure to produce time and wages records.  The Claimant calls for the imposition of a $100.00 penalty with respect to each underpayment breach and a $500.00 penalty for the time and wages records breach.  It has been put to me that the penalties sought are proportionate to the Respondents’ conduct and that penalties of that order would provide both a personal and general deterrent effect.  It has also been submitted that the underpayments did not result from ignorance but rather from the Respondents being knowingly involved in their commission.  It is argued that even if it could be said that the breaches were occasioned by ignorance of the law, that such does not constitute a mitigating factor.  As to the time and wages records, the Claimant says that the breach is particularly serious.  It submits that the Respondents’ failure to comply in that regard has rendered difficult, if not impossible, the Claimant’s ability to consider and determine whether there has been any other breaches of the Award.  In that way it operates to potentially conceal other breaches.  That breach alone stands out from the others and is deserving of special consideration. 

3         The Claimant seeks that all penalties be made payable to it.

4         On the issue of interest I have been asked to make an order for the payment of pre-judgment interest on the total amount found to have been underpaid in accordance with the formula set out in regulation 54 of the Industrial Magistrates’ Courts (General Jurisdiction) Regulations 2000.

5         As to the issue of costs the Claimant seeks to recover the same on the grounds that the Respondents have frivolously or vexatiously defended these proceedings.  It is argued that in the light of the authorities there was no possible prospect of success.  Indeed, it is submitted that such a view is supported by the Respondents’ conduct in conceding crucial issues very late in the hearing of the matter.  It is argued further that, in any event, the length of the hearing was considerably increased by virtue of the Respondents’ attitude in these proceedings.  The Claimant seeks $6800.00 by way of costs plus disbursements fixed in the sum of $293.40.

6         Mr Moon, for the Respondents contends that the penalties sought are extremely excessive particularly having regard to the circumstances of the case.  He says that there was no deliberate breach of the Award.  He also submits that the breaches resulted in part from the Claimant’s own conduct.  He rejects the Claimant’s contention that penalties imposed be paid to the Claimant.  He says that such would be inappropriate having regard to the Claimant’s position as to costs.  It is submitted that the Claimant would be double dipping in the event of it succeeding on the frivolous or vexatious defence issue.  The Respondents reject that the proceedings were frivolously or vexatiously defended.  They maintain that their view that the Claimant’s member was a subcontractor was legitimately held.  They contend that their view was fostered and encouraged by the Claimant’s conduct.

7         I will deal with the outstanding issues separately.

Penalties

8         Although the Sentencing Act 1995 has no particular application to this matter, I am nevertheless of the view that sections 6,7 and 8 can be looked at to provide a guide as to the types of considerations to be undertaken when imposing penalties under section 83(2)(a) of the Industrial Relations Act 1979.

9         A consideration of the particular breach in each instance is the starting point.  In that regard it is important to consider the underpayment arising therefrom.  Further it is important to consider whether the underpayment arose as a result of a wilful defiance of the law or rather as a result of ignorance or ineptitude.  In my view each breach that led to underpayment did not result from a wilful defiance of the law but rather resulted from the prevailing industry practise in setting wages rates.  Although inappropriate it nevertheless arose out of ignorance.  The penalties imposed should accordingly reflect that.  The breaches, which occurred over about a five-month period, resulted in a total underpayment of $6822.95.

10     In considering the appropriate penalty with respect to each breach that led to underpayment it is important to have regard to the totality principle.  The Court must have regard for the overall consequences of the Respondents’ actions and the circumstances in which they were committed together with the totality of the underpayment.  Further, it is clear that the totality of the penalty should be one so as not to be crushing upon the Respondents.  Nevertheless, the penalty should reflect the seriousness of the Respondents’ conduct tempered by the mitigating factors including the Respondents’ lack of prior record of breach.

11     Having regard to those principles it becomes evident that what the Claimant seeks is excessive.  To accede to the Claimant’s submission would result in a crushing total penalty, particularly having regard to the nature of the breaches and the quantum involved in each breach.  I take the view that with respect to each of the underpayment breaches the appropriate penalty is one of $35.00.  The total penalty payable by the Respondents in regard to those breaches will accordingly be $1785.00.

12     The remaining breach, which is constituted by the failure to provide time and wages records stands out as requiring separate consideration.  I agree that it is a serious breach.  Having said that I have regard to the fact that there is no record of any similar prior conduct.  In those circumstances I take the view that a penalty amounting to one quarter of the maximum penalty is appropriate.  A penalty of $250.00 is imposed in relation to that breach.

13     The penalties payable by the Respondents amounts to $2035.00.

14     In my view the penalty should be paid to the Claimant.  The Industrial Relations Act 1979 facilitates self-policing.  In that regard this legislation is not dissimilar to the Mining Act 1918 which encourages the parties to take action in a self policing process and rewards those who assist in achieving the integrity of the system.  In my view the penalty ought to be paid to the Claimant.

Pre-judgment Interest

15     The Claimant is entitled to recover pre-judgment interest.  The calculation in relation to the same is to be found in regulation 54(2) of the Industrial Magistrates’ Courts (General Jurisdiction) Regulations 2000.  Using the formula set out in sub-regulation (2), the interest payable calculates to be $1310.00.  I set out the calculations hereunder:

• Judgment amount        $6822.95
• Date midway between dates when breaches

 occurred (3/1/2001 – 11/5/2001)     12 March 2001

• Number of days between midway point and

 date of order (7/8/2002)        467 days

• Divide number of days by 365 (467 ÷ 365)     1.28
• Multiply number above by 0.15

 (1.28 × 0.15)         0.192

• Multiply the figure above by the judgment

 amount ($6822.95 × 0.192)       $1310.00

Costs

16     Ms Peak, submitted when this matter was last before me that the Claimant ought to be awarded costs in the sum of $5200.00.  The application for costs was opposed, however the claim for payment of disbursements in the sum of $293.40 incurred by the Claimant was not contested.  In written submissions filed 24 July 2002, the Claimant increased its claim for costs to $6800.00.

17     The issue of costs in this matter is governed by section 83(3) of the Industrial Relations Act 1979 which provides:

“In proceedings under this section costs shall not be given to any party to the proceedings for the services of any legal practitioner or agent of that party unless, in the opinion of the industrial magistrate’s court, the proceedings have been frivolously or vexatiously instituted or defended, as the case requires, by the other party.”

18     The Claimant argues that these proceedings have been frivolously or vexatiously defended in that the defence was so obviously untenable that it could not succeed.  The Claimant argues that, given the evidence of the Respondents, they must have always been aware that Mr Hayes was an employee.  That is so notwithstanding the taxation arrangement between Mr Hayes and the Respondents.  It is argued further that the documentary evidence before the Court shows that advice received by the Respondents suggested that the Claimant would succeed in its claim.  Notwithstanding that the Respondents chose to continue in their defence of the claim.  The Claimant says that there was not factual basis to support the defence raised.  That was the position from the outset and continued during the hearing.  It argues that the defence was so manifestly groundless and so manifestly faulty that it did not admit of argument.  Additionally, the Respondents’ claims in relation to overpayments were frivolously and vexatiously brought.

19     The Claimant argues that the matter is unlikely to have proceeded to hearing if the Respondents admitted that Mr Hayes was an employee.

20     The Respondents reject the Claimant’s contention.  They argue that costs ought not be awarded except in extreme cases.  The Respondents point to the decisions in Brailey v Mendex Pty Ltd t/as Mair and Co 73 WAIG 26 and Pisconeri v Laurens and Munns 78 WAIG 4931 to support their contention in that regard.

21     Mr Moon for the Respondents submits that unlike in Pisconeri (supra), the defence raised in this matter was not ill founded or recklessly pursued; nor was it bedevilled by poor representation.  It is argued that the payment of an “all in” rate as promoted by the Claimant gave rise to a genuine and legitimate belief that the Respondents had not acted contrary to the Award.  Further, the ongoing disputation between Doric and the Claimant on the Burswood job led the Respondents to conclude that there was no requirement on their part to pay site allowance.

22     In determining whether or not the Respondents frivolously or vexatiously defended the claims, it must be borne in mind that the Claimant has not been wholly successful.  Indeed, the Respondents successfully resisted one of the claims made.  The evidence in relation to that issue was inextricably mixed with evidence going to other issues in dispute.  Further, although it is undeniable that the pivotal issue in the matter was that of whether Mr Hayes was an employee, it nevertheless is the case that the Respondent raised other issues.  Those issues included promissory estoppel and set-off.  In my view such issues were not clear cut either in fact or in law.  They were open to argument.  The fact that the Respondents did not succeed on those issues does not, of itself, expose the Respondents to costs.  In the circumstances it cannot be said that the defence raised by the Respondents was manifestly groundless.  Accordingly, I am of the opinion that the Respondents did not frivolously or vexatiously defend these claims.

23     In view of my comments the question of quantum falls away, as does the issue of whether the Claimant is entitled to recover profit costs for the services of Ms Peak.  However, given the fact that I raised that issue as to whether the cost of an in-house solicitor could be recovered, I intend to comment on that issue in any event.

24     During submissions on 17 July 2002 I indicated that I had some concern as to whether the Claimant could recover profit costs for the services of Ms Peak.  My reservations in that regard arose out of the decision of the Full Court of the Supreme Court of Western Australia in Dobree and Others v Hoffman (1996) 18 W.A.R. 36.  The Full Court in that matter decided to disallow the costs of a legal firm claimed for the work they did for themselves in defending legal proceedings brought against them.  However Ms Peak has brought to my attention the decision of His Honour White J. of the Supreme Court of Western Australia in Bank of Western Australia v O’Neil Library No 990018, delivered on 22 January 1999.  In that matter His Honour dealt with the issue based on a factual circumstance more in keeping with this matter.  In that matter His Honour decided that the costs of a certificated practitioner employed on a salary basis by the plaintiff could be recovered.  His Honour held that costs recoverable are the “money paid or liabilities incurred for professional legal services”: Cachia v Hanes and Another (1994) 179 C.L.R. 403 at 409.  His Honour said that it was clear that the plaintiff bank “pays money and incurs liability” for professional legal services.

25     Had I found in favour of the Claimant on the issue of “frivolous or vexatious” costs may well have been awarded for the services of the certificated practitioner employed by the Claimant.