Budathoki v Consult Security Pty Ltd and Ors (No.2)

[2020] FCCA 2372

FEDERAL CIRCUIT COURT OF AUSTRALIA

BUDATHOKI v CONSULT SECURITY PTY LTD & ORS (No.2) [2020] FCCA 2372

Catchwords:
INDUSTRIAL LAW – Application for relief arising from earlier liability judgment – consideration of matters relevant to the fixing of pecuniary penalties.

Legislation:

Fair Work Act 2009 (Cth), ss.44, 45, 90, 117, 323, 536, 545, 546, 547, 550, 557.

Cases cited:

Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Ors (2015) 258 CLR
Trade Practices Commission v CSR Ltd (1991) ATPR 41‑076
Kelly v Fitzpatrick [2007] 166 IR 14
Fair Work Ombudsman v NSH North Proprietary Limited trading as New Shanghai Charlestown [2017] FCA 1301
Ross v Paea trading as Bombora Café [2020] FCA 766
Bobridge v Choppair(No.2) [2018] FCA 700

Applicant: YADU BUDATHOKI

First Respondent: CONSULT SECURITY PTY LTD

Second Respondent: CONNIE PRIVITELLI

Third Respondent: JEZ PRIVITELLI

File Number: MLG 2213 of 2019

Judgment of: Judge Burchardt

Hearing date: Not applicable

Date of Last Submission: 17 August 2020

Delivered at: Dandenong

Delivered on: 3 September 2020

REPRESENTATION

Counsel for the Applicant: Mr Nyland

Solicitors for the Applicant:	Fitzroy legal Service
Counsel for the First Respondent	No Appearance

Solicitors for the First Respondent : No Appearance

Counsel for the Second Respondent: Not applicable

Solicitors for the Second Respondent:	Self-Represented
Counsel for the Third Respondent	No Appearance

Solicitors for the Third Respondent : No Appearance

THE COURT DECLARES THAT:

1. The First Respondent contravened s.44 of the Fair Work Act 2009 (Cth) (“the FWA”) by:

   (a)failing to pay the Applicant accrued annual leave and annual leave loading upon termination in contravention of s.90 FWA

   (b)failing to make a payment in lieu of notice of termination to the Applicant in contravention of s.117 FWA.

2. The First Respondent contravened s.45 of the FWA by failing to:

   (a)pay the Applicant wages on a weekly or fortnightly basis in contravention of clause 19.1 of the Security Services Industry Award 2010 (“the Award”);

   (b)failing to make copies of the Award available to the Applicant in contravention of clause 5 of the Award;

   (c)failing to make contributions to a superannuation fund for the benefit of the Applicant in contravention of clause 20.2 of the Award;

   (d)failing to pay the Applicant penalty rates for night shift work in contravention of clause 22.3 of the Award;

   (e)failing to pay the Applicant the ordinary base rate of pay in contravention of clause 14 of the Award;

   (f)failing to pay the Applicant penalty rates for work completed on Saturdays in contravention of clause 22.3 of the Award;

   (g)failing to pay the Applicant penalty rates for work completed on Sundays in contravention of clause 22.3 of the Award; and

   (h)failing to pay the Applicant penalty rates for work completed on public holidays in contravention of in contravention of clause 22.3 of the Award.

3. The First Respondent contravened s.323 FWA by failing to pay the Applicant wages in full.

4. The First Respondent contravened s.536 FWA by failing to give the Applicant pay slips.

5. The Second Respondent was involved in, within the meaning of s.550 FWA, each of the contraventions of the First Respondent referred to in order 2.

6. The Third Respondent was involved in, within the meaning of s.550 FWA, each of the contraventions of the First Respondent.

THE COURT ORDERS THAT:

1. Pursuant to section 545(1) FWA, the First and Third Respondents, jointly and severally, pay compensation to the Applicant in the amount of $21,560.53 on account of lost wages, such amount to be paid within 30 days.

2. Pursuant to section 545(1) FWA, the first and third respondent pay $1,624.09 to AustralianSuper account No. 1073697749 in the name of Yadu Budathoki in respect of unpaid superannuation.

3. Pursuant to sections 547(2) and 547(3) FWA, the First and Third Respondents, jointly and severally, pay interest to the Applicant of $2,480, such amount to be paid within 30 days.

4. Pursuant to section 545(1) FWA, the Second Respondent is jointly and severally liable to pay the compensation referred to in order 7, to the extent that her liability does not exceed $11,866, such amount to be paid within 30 days.

5. Pursuant to sections 547(2) and 547(3) FWA, the Second Respondent pay interest to the Applicant of $1,365 such amount to be paid within 30 days.

6. Pursuant to sections 546(1) and 546(3)(c) FWA, the First Respondent pay to the Applicant $60,000 penalties, such amount to be paid within 30 days.

7. Pursuant to sections 546(1) and 546(3)(c) FW, the Second Respondent pay to the Applicant $15,000 penalties, such amount to be paid within 30 days.

8. Pursuant to sections 546(1) and 546(3)(c) FWA, the Third Respondent pay to the Applicant $40,000 penalties, such amount to be paid within 30 days.

9. The Applicant has liberty to apply in the event that any of the preceding orders are not complied with.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

MLG 2213 of 2019

YADU BUDATHOKI

Applicant

And

CONSULT SECURITY PTY LTD

First Respondent

CONNIE PRIVITELLI

Second Respondent

JEZ PRIVITELLI

Third Respondent

REASONS FOR JUDGMENT

Introduction

1. On 26 June 2020, I published reasons for judgment in this matter.  In essence, I found all the contraventions of both the Security Services Industry Award 2010 and the Fair Work Act2009 (Cth) alleged against the first respondent to be established. I also found the third respondent fully liable pursuant to section 550 of the Act in respect of the first respondent’s contraventions. I found the second respondent to be liable for the contraventions until she ceased material involvement with the affairs of the first respondent. I also set a timetable for the provision of written submissions.

2. The applicant has, albeit without leave, filed an affidavit of Mr Budathoki attesting to the hardship imposed upon him by the respondent’s failure to pay him the $23,100 that he was underpaid.  The applicant filed detailed submissions on loss and penalty to which I will return.  The third respondent, consistent with his position in this proceeding generally, has filed no materials.  Ms Privitelli has filed an affidavit on 17 August 2020 to which, once again, I shall return.

The Contraventions Established

1. It should be noted that Ms Privitelli, who has been self-represented, has not addressed any submissions to the Court seeking to put in issue the matters asserted in the applicant’s written submissions on loss and penalty.  Rather, her affidavit repeats her assertions that she had always understood that the applicant was hired as a subcontractor.  She expresses what seems to me to be genuine contrition for the difficulties that the underpayments have caused the applicant.  She goes on to give details of her own circumstances, including what is asserted to have been a controlling and intimidating relationship in which she was largely subdued by her former husband, and it goes on to detail her own financial difficulties in terms which are entirely believable.

2. I am satisfied that the findings of fact that I have made in my first judgment support the findings of contraventions set out in paragraphs 1 to 4 of the “precise orders sought” in the applicant’s written submissions.  These are:

   (a)The first respondent contravened section 44 of the Fair Work Act2009 (Cth) by:

   (i)failing to pay the applicant accrued annual leave and annual leave loading upon termination in contravention of section 90 of the Act.

   (ii)failing to make a payment in lieu of notice of termination to the applicant in contravention of section 117 of the Act.

   (b)The first respondent contravened section 45 of the Act by:

   (i)failing to pay the applicant wages on a weekly or fortnightly basis in contravention of clause 19.1 of the Award.

   (ii)failing to make copies of the Award available to the applicant in contravention of clause 5 of the Award.

   (iii)failing to make contributions to a superannuation fund for the benefit of the applicant in contravention of clause 20.2 of the Award.

   (iv)failing to pay the applicant penalty rates for night shift work in contravention of clause 22.3 of the Award.

   (v)failing to pay the applicant the ordinary base rate of pay in contravention of clause 14 of the Award.

   (vi)failing to pay the applicant penalty rates for work completed on Saturdays in contravention of clause 22.3 of the Award.

   (vii)failing to pay the applicant penalty rates for work completed on Sundays in contravention of clause 22.3 of the Award.

   (viii)failing to pay the applicant penalty rates for work completed on public holidays in contravention of clause 22.3 of the Award.

   (c)The first respondent contravened section 323 of the Act by failing to pay the applicant wages in full.

   (d)The first respondent contravened section 536 of the Act by failing to give the applicant pay slips.

3. I also accept, consistently with my earlier judgment, that there is no question that the third respondent was involved in, within the meaning of section 550 of the Act, each of the contraventions of the first respondent.

4. Similarly, in the light of the findings I have made, the second respondent was involved in, within the meaning of section 550 of the Act, each of the contraventions of the first respondent referred to in paragraph (b) above.

The Approach the Court Should Adopt in Relation to Penalties

1. The applicant seeks the imposition of penalties pursuant to section 546 of the Act. There is a plethora of case law on the proper approach to penalties but, more often than otherwise, they quote the short and succinct observations of French J, as his Honour then was, in Trade Practices Commission v CSR Ltd (1991) ATPR 41‑076.

   In Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Ors (2015) 258 CLR at [55], French CJ, Kiefel, Bell, Nettle and Gordon JJ said:

   No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:

   Punishment for breaches of the criminal law traditionally involves three elements:  deterrence, both general and individual, retribution and rehabilitation.  Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV of the Trade Practices Act ... The principal, and I think probably the only, object of the penalties imposed by section 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act.

2. There are a number of matters that have been thought in a general sense to be relevant and reference is often made to the judgment of Tracey J in Kelly v Fitzpatrick [2007] 166 IR 14 at [14]. These include:

   (a)The nature and extent of the conduct which led to the breaches.

   (b)The circumstances in which that conduct took place.

   (c)The nature and extent of any loss or damage sustained as a result.

   (d)Whether there had been similar previous conduct by the respondent.

   (e)Whether the breaches were distinct or arose out of the one course of conduct.

   (f)The size of the business enterprise involved.

   (g)Whether or not the breaches were deliberate.

   (h)Whether senior management was involved in the breaches.

   (i)Whether the party committing the breach had exhibited contrition.

   (j)Whether the party committing the breach had taken corrective action.

   (k)Whether the party committing the breach cooperated with the enforcement authorities.

   (l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and

   (m)The need for specific and general deterrence.

3. It should be noted, however, that these are not a rigid catalogue of matters for attention and each case must be assessed on its own facts.

The Approach to Dealing with Multiple Contraventions

1. I accept the submission advanced by the applicant that the correct approach to deal with multiple contraventions was indeed set out by Bromwich J in Fair Work Ombudsman v NSH North Proprietary Limited trading as New Shanghai Charlestown [2017] FCA 1301 at [36] which is:

   (1) Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.

   (2) Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that section 557 of the Fair Work Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.

   (3) Consider whether there should be a further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.

   (4) Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.

   (5) Consider the overall penalties arrived at, including by reference to those which may be proposed by the Fair Work Ombudsman and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for which each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as necessary.

2. In this case, I have already set out the individual contraventions above. The applicant submits that only the failure to pay wages on a weekly or fortnightly basis in contravention of clause 19.1 of the Award and the failure to pay wages in full in contravention of section 323 of the Act should be grouped together. The respondents make no submission about this aspect of the matter at all.

3. I accept that these two contraventions should be grouped together as a concession against interest by the applicant. While the failure to pay in full does not, in my view, constitute the same mischief as failing to pay in an appropriate periodicity, the contravention of section 323 does, in part, turn upon the periodicity issue and, for that reason, I accept that the concession is properly made.

4. All of the other contraventions are, in my view, discrete in their nature. They do not fall to be grouped together either pursuant to section 557 of the Act or pursuant to the overarching power of the Court to ensure that there is no double penalty imposed.

5. In a sense, it might be said that the various respective failures to pay various award entitlements all arose out of a common course of conduct, namely, to pretend that the Award did not exist.  That, in my view, would not give proper weight to the multiple natures of the various contraventions that are established.

The Specific Matters to Consider

The Nature and Extent of the Conduct Which Led to the Breaches and the Loss and Damage Sustained as a Result

1. Here, the applicant, who is a recent immigrant to this country and disadvantaged, both in the sense of his command of English language and his understanding of his rights as an employee, was engaged by the first respondent through the actions of the third respondent as an employee.  Although the third respondent misrepresented this to the second respondent, telling her that the engagement was that of an independent contractor, the fact is that Mr Budathoki was an employee at all times.  He, in fact, sought to regularise certain aspects of his employment from a relatively early stage.  He was demanding pay slips before Ms Privitelli ceased her involvement with the company.  Once she left, he was demanding his pay, increasingly unavailingly as time went by.  As I have found in my earlier judgment, it is reasonable to infer, and I do, that both Mr Privitelli and Ms Privitelli knew at least of the existence of the Award.  Mr Privitelli deliberately chose to ignore any knowledge that he might have had or, alternatively, failed to make any appropriate inquiries.

2. Even if one were to put the matter at its highest, from the point of view of the respondents, the fact is that Mr Budathoki’s employment infracted almost every aspect of the industrial instruments and law that applied to the employment, as is made all too clear by the long list of individual contraventions already determined.  The bargaining position between the parties was grossly one-sided.  I will return to the degree of culpability of Ms Privitelli in due course.

3. It should also be noted that, although the sums underpaid are in total $23,184.64, in respect of the first and third respondents, and $11,866 in respect of the second respondent, these are not small sums to a man in Mr Budathoki’s circumstances.  He has deposed to the difficulties that this has caused him and, even if this evidence were not to hand, I would be prepared to make inferences that the loss of this sort of amount of money had a significant effect on him.  It should be noted that a very substantial proportion of the amounts not paid do not relate to underpayments and the like, but simply to an abject failure on the part of the first and third respondents to ensure that he was paid at all.

The Involvement of Senior Management and the Size and the Scope of the Respondents’ Activities

1. This is not, on any view of the matter from what one can learn, a large business operation.  The first respondent appears to have had very few employees from time to time.  Ms Privitelli was the sole director at all material times, but I accept that the company was run by Mr Privitelli and not her.  While, in one sense, they were senior management, they were captains on what was a very poorly crewed vessel.

Contrition and Corrective Action

1. Ms Privitelli has expressed what appears to me be to genuine, albeit rather lately expressed, contrition.  Up until shortly before the proceedings, she was actually accusing Mr Budathoki of serious misconduct himself.  Nonetheless, the tenor of her most recent affidavit is something that counts to her credit.

2. Mr Privitelli has expressed no contrition whatsoever and has totally failed to participate in the proceeding or cooperate in any way.  None of the respondents have taken any corrective action whatever, and Mr Budathoki has still not been paid any of the monies that he is owed.

The Need for Specific and General Deterrence

1. Ms Privitelli is no longer involved in the business and only now works as an employee herself in relatively averagely paid employment.  The need for specific deterrence in her case must be limited.  She appears to have learnt her lesson. 

2. The need for specific deterrence for the first and third respondents is, in my view, high.  The first respondent continues to operate and, on Ms Privitelli’s evidence, which I accept, the third respondent continues to be active in the industry.  It is important to bring to his attention in a material way the undesirability of the sort of conduct shown in this case.

3. Furthermore, general deterrence is also important.  Mr Budathoki is a particularly disadvantaged sort of employee, and the security industry is notorious for difficulties with underpayment, and the respondent is a typical small two-dollar company operating, as it were, in the margins.  Employers in such circumstances need to be made aware of the undesirability of the sort of conduct that this case has shown.

Prior Conduct

1. There is nothing to suggest that any of the respondents have been engaged in any previous infractions of the Fair Work Act or the Award.

The Range of Penalties That Should be Applied

1. I accept that the conduct of the first and third respondents were serious.  The third respondent has failed to participate in these proceedings despite being made well aware of them.  He has made a number of plainly and patently dishonest assertions.  First of all, he has deliberately misdescribed his former wife’s circumstances, asserting that she was an independent employee when she was, in fact, as he well knew, directly involved in the business.  He has also lied to Mr Budathoki about the payment of Mr Budathoki’s unpaid wages.

2. I also accept, as the applicant submits, that the second respondent’s contraventions were less serious. She was not involved in the failure to pay wages between July and September 2018, and it is clear from the materials as a whole and her sworn evidence that she was always under the impression that the applicant was employed as an independent contractor. Nonetheless, she was plainly involved, as already determined, within the meaning of section 550 and she simply ignored Mr Budathoki’s requests for pay slips.

3. Calibrating all these matters together, and before applying what is described as the final application of the totality principle, I would accept the applicant’s submissions that the conduct of the first and third respondents should be assessed at 75 per cent of the applicable maximums.  With respect to the second respondent, I think that the applicant’s range of 40 per cent is too high.  The materials show Ms Privitelli doggedly seeking to respond to Mr Budathoki on the footing that he was independent contractor, even though this was an erroneous conclusion, albeit understandable in the circumstances in which that is what she had been told by Mr Privitelli was the case.  I think that the appropriate range for the second respondent is 30 per cent of the applicable maximums.

The Totality Principle

1. The totality principle requires the Court to, as it were, consider the net effect of the proposed orders and to take a step back and consider whether, in all the circumstances, the proposed penalties are appropriate.  It has been said that these should not be crushing in their outcome, although it should also be noted that mere impecuniosity does not mean that orders have to be tailored to suit the incapacity of a respondent to pay.  I note that Ms Privitelli has described her circumstances as being difficult and I pay regard to that, but that does not mean that she should escape a responsibility that is otherwise properly apportioned to her by the proper application of the law. 

2. The maximum penalties payable by the first respondent for each contravention is $63,000.  The maximum penalty for each of the second and third respondents is $12,600.  Given the multiplicity of the contraventions, the applicable maximums are enormous, amounting to many hundreds of thousands of dollars for the first respondent, and well into six figures on behalf of the second and third respondents.

3. In circumstances where the employment itself lasted only from February to September 2018, a period of slightly over 7 months, in my view, penalties at this level of severity are simply out of all proportion to the conduct of the respondents, notwithstanding the egregious nature of the conduct of the first and third respondents in particular.  In fixing penalties against the first respondent, I am conscious that its operation appears to be arguably open to question.  The utility of imposing fines and penalties in hundreds of thousands of dollars is, in my view, open to serious question.  In all the circumstances, I think that a penalty of $60,000 should be imposed for the contraventions of the first respondent.  This is a sum which will, if paid, bring forcibly home to Mr Privitelli the lack of desirability of the sort of conduct in which the first respondent engaged.  It is also not set at a level which is so crushing that the company will simply inevitably be wound up.

4. In the circumstances of Mr Privitelli, with all its aggravating features, I think that a total penalty of $40,000 should be paid.  I know nothing of his particular circumstances beyond Ms Privitelli’s assertions that he continues to operate the business successfully, whether directly through the corporate structure or otherwise.  For the same reasons I have expressed in relation to the first respondent, I think that that is an appropriate overall outcome.

5. In respect of the second respondent, Ms Privitelli, I think that a penalty of $15,000 is an appropriate penalty in all the circumstances. This reflects her reduced culpability (paragraph 27 above) and her circumstances (paragraph 28).

Superannuation

1. It should be noted that, unlike the recent decision of Perram J in Ross v Paea trading as Bombora Café [2020] FCA 766, in this case the claim for payments of superannuation are made directly pursuant to the Award itself. In these circumstances, I will make orders that the respondents pay to a superannuation fund nominated by the applicant the relevant superannuation monies (see Bobridge v Choppair(No.2) [2018] FCA 700 per Bromberg J).

Interest

1. I accept that the applicant is entitled to interest as he seeks, and orders will be drawn to reflect that.  I do not propose to fix a payment by reference to the penalty interest rate or the like.  That, in my view, in current circumstances, represents an undue reward.  I fix the rate of interest at six per cent, being four per cent above that generally commercially now available. I have effected the necessary calculations and rounded the figures to $2,480 and $1,365 respectively.

To Whom Should Payment of the Penalties be Made

1. In my view, the penalties should be paid to the applicant.  He is the one who has suffered the direct consequences of the contraventions that the Court has now dealt with and, given his general circumstances, in my view, it is appropriate that the payments be made to him.

Declarations

1. The applicant has sought declarations in respect of the conduct of the respondents. In the circumstances of this case it is in my view appropriate to make the declarations sought, as they make clear in a way that orders would not, the extent and nature of the contravening conduct.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate: 

Date: 3 September 2020