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Full Court throws out orders prohibiting unions indemnifying officials against penalties

in Employment Law by Slater and Gordon on
Full Court throws out orders prohibiting unions indemnifying officials against penalties

A Full Court of the Federal Court on 21 December 2016 unanimously upheld the CFMEU’s appeal against a decision prohibiting it from paying a civil penalty on behalf of its Victorian organiser Joe Myles in a case brought by Fair Work Building and Construction (FWBC). Slater and Gordon represented Myles and the CFMEU.

In 2014, the FWBC (now the ABCC) instituted proceedings in the Federal Court alleging that in 2013 Myles and the CFMEU had breached the Fair Work Act by preventing Boral concrete trucks from delivering to a John Holland site.

The FWBC case was eventually settled once parallel contempt proceedings brought by Boral in the Victorian Supreme Court had been discontinued as part of the settlement of the Boral litigation in 2015. Slater and Gordon also acted in the Boral litigation.

In her decision fixing the penalties to be paid for the agreed contraventions of the Fair Work Act, Justice Mortimer made an order that the CFMEU:

must not directly or indirectly indemnify the second respondent [Myles] against the penalties … in whole or in part, whether by agreement, or by making a payment to the Commonwealth, or by making any other payment or reimbursement, or howsoever otherwise.

Similar orders have been routinely sought by the FWBC in cases against unions and union officials.

The CFMEU and Myles appealed against this order, along with a number of other aspects of Justice Mortimer’s decision. One of those was a denial of procedural fairness by the judge in finding that more severe penalties were warranted because the 2014 financial report of the Victoria/Tasmania Divisional Branch of the Construction and General Division of the CFMEU contained this revenue line entry: “Operating grant receipts”.

Justice Mortimer inferred that this meant “receipts from public funds”, and drew the further inferences that: first, the CFMEU would pay any penalty imposed on it or its officials with money taken “from the public purse”; and, second, that Myles and the CFMEU had broken the law knowing that the CFMEU would do this. This, she found, “compounded” their wrongdoing.

Had the CFMEU been given notice that the judge intended to draw these inferences from the bare reference to “operating grant receipts”, it could have put on evidence to the contrary. However, there was no opportunity for the CFMEU to do so. The parties had been given no notice that these findings would be made. The FWBC had adduced the financial report for the limited purpose of proving that the CFMEU would be able to pay a penalty.

The appeal was heard by Chief Justice Allsop, and Justices North and Jessup.

In relation to the indemnity order, the Chief Justice held that

The order purports to order a party to refrain from doing an act which was not said to be unlawful and to control how that party uses its own property. … Such an imposition on the freedom of a person or organisation to conduct his, her or its own affairs, being intimately bound up with the penalty itself, should find its source of power in clear and express words of the statute.

Therefore, in the absence of any such “clear and express” provision in the Fair Work Act, Justice Mortimer did not have power to make the indemnity order. Similarly, Justice Jessup found that

the legislature must be taken to have set the limits of the deterrent orders which would be available to the court, with such inherent limitations as they had. In my view, it is not within the power of the court … to devise for itself a more effective deterrent than that for which the statute provides.

As to whether Justice Mortimer had denied procedural fairness to Myles and the CFMEU by making adverse findings without notice of what she apprehended to be evidence of misuse of public funds, Justice Jessup found that

there was evidence available to the appellants contrary to the two findings … The evidence on which the primary Judge relied was buried (I do not believe that to be too harsh a metaphor) in a lengthy and complex financial report which was tendered specifically for other reasons. … the appellants were entitled to take counsel at his word, and to conduct their defences by reference to the premise that the financial report would be used only for the purposes stated.

Similarly, the Chief Justice found that this

was a matter of some gravity and, with respect to the primary judge, should have been raised with the parties for it to be relied upon. Thus, I accept the submission that there was a denial of procedural fairness in this respect.

Justice North agreed with the judgments of Chief Justice Allsop and Justice Jessup. As such, both the appeal against the indemnity prohibition order and the denial of procedural fairness were successful.

The ABCC has filed an application in the High Court for special leave to appeal the decision of the Full Court.

CFMEU v ABCC [2016] FCAFC 184