The High Court has handed down a decision which has the potential to place considerable pressure on union officials engaging in repeated unlawful conduct exposing them to civil penalties under the Fair Work Act 2009 (Cth)(FW Act).

In Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union & Anor [2018] HCA 3 (ABCC v CFMEU), the High Court found that when the Federal Court or Federal Circuit Court orders an individual to pay a pecuniary penalty under section 546 of the FW Act, it may also order that the penalty be paid personally by the individual.

Therefore, the individual is not able to seek or accept indemnity from another party, such as a union of which the individual is a member or officer.

Why is the decision in ABCC v CFMEU important?

The decision is important for a number of reasons:

  1. It confirms that individuals can be ordered to personally pay any pecuniary penalty and not seek or accept an indemnity for the penalty from, for example, their employer.
  2. It demonstrates the willingness of the courts to deter serial contraveners of civil remedy provisions in the FW Act. However, it is possible that the circumstances of even a one-off breach of the FW Act may be so flagrant as to justify a personal payment order.
  3. It demonstrates that if courts use the power to make orders that pecuniary penalties be paid personally, it could curb some unlawful behaviour on the part of union officials. The High Court noted the resources of the CFMEU and its ability to meet the fines regularly imposed upon it. The ability of its officials to personally pay fines is likely to be far more limited, which may well achieve the deterrence objective sought by the Federal Court at first instance in this case.

The High Court also noted the ability of the ABCC to use notices to produce in an attempt to discover if there have been breaches of a personal payment order.

ABCC v CFMEU: The background of the case

The Australian Building and Construction Commissioner (ABC Commissioner) brought proceedings against the CFMEU and the Vice President of its Construction and General Division, Joseph Myles.

The case concerned conduct on the part of Mr Myles in organising and participating in a blockade of the entrance to a building site, preventing wet concrete from being delivered and causing the cancellation of work scheduled to be performed in connection with the concrete pour. This action was taken in support of a demand by the CFMEU and Mr Myles that there be a CFMEU delegate on the site, in circumstances where another union was party to an enterprise agreement and had a delegate on site.

The CFMEU and Mr Myles admitted that they had contravened section 348 of the FW Act. Section 348 prohibits the taking or organising of action against another person with the intention of coercing a person to engage in industrial activity.

The decisions of the Federal Court

The decision to be made by the Federal Court at first instance related to penalty only because of the admissions made by the CFMEU and Mr Myles. Justice Mortimer, at first instance, made declarations of contravention and imposed pecuniary penalties on both the CFMEU and Mr Myles.

In considering the penalty to be imposed, her Honour considered that both the CFMEU and Mr Myles had previously engaged in conduct of a similar nature on multiple occasions. Further, it was apparent that the CFMEU’s large asset and income base were regarded by the union and Mr Myles as providing a ‘cushion’ from the effects of their unlawful behaviour. Her Honour concluded that:

“there is a conscious and deliberate strategy employed by the CFMEU and its officers to engage in disruptive, threatening and abusive behaviour towards employers without regard to the lawfulness of that action, and impervious to the prospect of prosecution and penalties. An alternative inference - that the CFMEU weighs up the cost of engaging in such action (that is, likely prosecution and imposition of penalties) and nevertheless concludes it is a collateral cost of doing its industrial business - reflects no better on the organisation or its officials”[1]

Having regard to this and the principal consideration of deterrence when imposing penalties, her Honour ordered the CFMEU to pay a pecuniary penalty of $60,000 and Mr Myles to pay a pecuniary penalty of $18,000.

Mortimer J also made an order, referred to as a non-indemnification order, that the CFMEU could not directly or indirectly indemnify Mr Myles for the penalty.

Her Honour identified the source of the power to make the non-indemnification order as section 545(1) of the FW Act.

That decision was appealed to the Full Court of the Federal Court, which upheld the appeal. The Full Court found that there was no power under section 545 of the FW Act to make a non-indemnification order.

The High Court decision

The majority of the High Court (Keane, Nettle and Gordon JJ, and Kiefel CJ in a separate judgment; Gageler J dissenting) found that a Court does have power to order that an individual ordered to pay a pecuniary penalty as a result of breaching a civil remedy provision must personally pay the penalty.

However, the High Court found that the power to make such an order arises from section 546 of the FW Act (not section 545 as Justice Mortimer had found). In the majority’s view, the ability of a Court to make a personal payment order is implied in section 546 – the Court can make such orders as are reasonably required or necessary to achieve the objective specifically provided by the statute (here, deterrence of the type of conduct engaged in by Mr Myles and the CFMEU).

The High Court found that while section 546 of the FW Act authorises a Court to make an order for personal payment, that power does not extend to the making of non-indemnification orders against the CFMEU as ordered by Justice Mortimer at first instance. That is because the Court’s power under section 546 to order payment of a pecuniary penalty is directed at the contravener only. Therefore, any orders made which are ancillary to that power must be directed to the contravener, in this case Mr Myles.

The High Court dismissed the argument from Mr Myles and the CFMEU that a personal payment order ‘adds to the penal outcome authorised’ by section 546.[2] Keane, Nettle and Gordon JJ found that to the contrary, a personal payment order “assists in accomplishing the calculated level of sting or burden of the pecuniary penalty and thereby assists in achieving the penal outcome authorised by the section.”[3] Or, as the Chief Justice put it, “to make the payment by Mr Myles a reality for him and for the CFMEU.”[4] Such an order enables the Court to achieve the purpose of a pecuniary penalty, being general and specific deterrence.

The High Court considered the criticism of personal payment orders on the basis that they can be difficult to enforce. While it acknowledged such concerns as legitimate, it found that difficulties of enforceability do not determine whether such orders can be made. The majority of the High Court also expressed the view that there were several features in a case of this kind which suggested enforcement through contempt laws would not be particularly difficult. These features included the assumed willingness of the ABCC to instigate contempt proceedings and seek discovery of union records.[5]

Having determined that the Federal Court erred at first instance in making a non-indemnification order under section 545 of the FW Act, and that the Federal Court on appeal erred in simply setting aside the non-indemnification order, the High Court remitted the matter back to the Full Federal Court to determine whether a personal payment order should be imposed in this case.