The High Court has remitted a proceeding concerning a civil breach of federal industrial relations law to the Full Court of the Federal Court of Australia to consider whether to order an individual defendant to pay the penalty personally. The defendants, a building industry union and an employee of that union, admitted to breaching s346 of the Fair Work Act 2009, which prohibits coercing someone into taking industrial activity, by organising a blockade of cement supplies to a government building site in order to put pressure on the builders to hire a representative of the union. In proceedings brought by the predecessor to the Australian Building and Construction Commission, the Federal Court imposed a civil penalty of $60,000 for the union and $18,000 for the employee. The amount of penalty was not disputed before the High Court.

The issue that went to the High Court was the ‘non-indemnification’ order that accompanied the civil penalty on the employee. In 2016, Mortimer J ordered that the union ‘must not directly or indirectly indemnify’ the employee against his $18,000 penalty ‘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.’ That order was quashed on appeal by the Full Court of the Federal Court, which held that the Federal Court had no power to make it. The High Court (Kiefel CJ, Gageler J and Keane, Nettle & Gordon JJ) unanimously agreed with the Full Court. The plurality applied seven statutory interpretation considerations to conclude that s545(1), which authorises making ‘any order the court considers appropriate’ when imposing a civil penalty only authorises preventative, remedial or compensatory orders (such as requiring that money be spent to train employees not to be breach prohibitions), not penal orders (see [103]-[108]) and that Mortimer J’s order was penal because it maintained ‘the sting or burden’ of the civil penalty (see [111]-[114]). The plurality also held that there was no power to make a penal order under the general power to make extra orders in s23 of the Federal Court Act ([109]) or to impose a civil penalty on a third party ([133]). Chief Justice Kiefel reached the same conclusion ([23]-[33]) and Gageler J observed that he was persuaded by the arguments of the other four judges ([51].)

However, after the appeal hearing, the Court asked the parties to make further written submissions on whether the Federal Court had the power to impose a different order, a ‘personal payment’ order on the employee barring him from seeking or accepting an indemnity from the union in relation to his $18,000 civil penalty. A majority (Kiefel CJ, Keane, Nettle and Gordon JJ, with Gageler J dissenting) held that the Federal Court had such a power under s546 (which empowers the Federal Court to impose a civil penalty.) At [118], the plurality held that s546 includes ‘implied power to do everything necessary for the effective exercise of the power to impose a pecuniary penalty; and thus implied power to make such further orders as are reasonably required for, or legally ancillary to, the accomplishment of the deterrent effect that the penalty is calculated to achieve’ (e.g. orders that a penalty be paid on terms or if another order is not followed.) ‘Parity of reasoning’ means that civil penalties imposed (as here) on two parties according to their share of responsibility can be accompanied by orders preventing each from indemnifying or contributing to the other ([119]-[120]). The plurality rejected arguments that such orders would be unenforceable in inferior courts, as they could nevertheless be enforced in a superior court using contempt powers ([121]-[122] and see [131] on practical problems of enforcement) and that the Fair Work Act lacks provisions expressly authorising personal payment orders that appear in other federal statutes ([127]-[128]). Chief Justice Kiefel reached a similar conclusion at [39]-[48]. Justice Gageler dissented, holding that reading s546 in this way stretched the implication that a power includes further powers required to make it effective ‘too far… when it is sought to be applied to imply an ancillary power to make an order having the purpose and effect of increasing, beyond that which would exist in the absence of the ancillary order, the punitive impact of the penal order for which the statute conferring the primary power makes express provision.’ ([53]).

Although the Court agreed with the Full Court’s order quashing Mortimer J’s non-indemnification order, the majority nevertheless allowed the appeal because the Full Court failed to consider whether or not to make a personal payment order in its place. The matter was remitted to the Full Court to consider whether to make such an order (taking into account the full court’s separate holding that Mortimer J denied procedural fairness to the union when she used its annual report to conclude that the union was using member-paid funds as a means to act unlawfully.) The Court made no order for costs on the non-indemnification orders (a condition of granting special leave to the Commission) and ordered the Commission to pay the defendants’ costs on the personal payment orders.