Chan v Guan
[2020] FCCA 2937
•30 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CHAN v GUAN & ORS | [2020] FCCA 2937 |
| Catchwords: INDUSTRIAL LAW – Unpaid wages – Health Professionals and Support Services Award 2010 – contravention of the Fair Work Act 2009 (Cth) – consideration of matters relevant to penalty.pecuniary penalty – contraventions of the Paid Parental Leave Act 2010 (Cth) – determination of penalty – claim for interest – late admission of liability by the respondents – costs – orders made. |
| Legislation: Fair Work Act 2009 (Cth) ss.45, 82, 323, 546, 547, 570 Paid Parental Leave Act 2010 (Cth) s.13, 72 Health Professionals and Support Services Award 2010 |
| Cases cited: Advanced Health Invest Pty Ltd t/a Mastery Dental Health Clinic v Mei Chan [2020] FWCFB 585 Fair Work Ombudsman v NoBrace Centre Pty Ltd (in Liquidation) [2019] FCCA 2979 Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301 Fair Work Ombudsman v Zillion Zenith International Pty Ltd and Anor [2014] FCCA 433 High Court in Commonwealth Bank of Australia v Director, Fair Work Industry Building Industry Inspectorate 258 CLR 482 Mason v Harrington Corporation Pty Ltdt/as Pangaea Restaurant & Bar [2007] FMCA 7 National Tertiary Education Union v Royal Melbourne Institute of Technology (2013) 234 IR 139 |
| Applicant: | MEI KUEN CHAN |
| First Respondent: | QI (KELVIN) GUAN |
| Second Respondent: | JUN ZHANG |
| Third Respondent: | ADVANCED HEALTH INVEST PTY LTD TRADING AS MASTERY DENTAL CLINIC ABN 99 157 936 073 |
| File Number: | SYG 1659 of 2019 |
| Judgment of: | Judge Humphreys |
| Hearing date: | 23 October 2020 |
| Date of Last Submission: | 23 October 2020 |
| Delivered at: | Parramatta |
| Delivered on: | 30 October 2020 |
REPRESENTATION
| Solicitors for the Applicant: | Mr Clarke - Justice Avenue |
| Counsel for the Respondents: | Mr Fantin |
| Solicitors for the Respondents: | Access Legal Solicitors |
ORDERS
Judgment for the applicant in the amount of $48,846.16.
The first, second and third respondents pay interest pursuant to s 547 Fair Work Act 2009 (Cth) (“the Act”).
Costs for the applicant fixed at $6,400.
The third respondent contravened sections 45 and 323 of the Act (2014 Contraventions)
The first respondent was involved in the 2014 contraventions pursuant to s 550 of the Act.
The third respondent contravened s 323 of the Act (2018 Contravention).
The first and second respondents were involved in the 2018 contravention pursuant to s 550 of the Act.
A declaration that the third respondent failed to pay paid parental leave to the applicant in contravention of s 72(2) of the Paid Parental Leave Act 2010 (Cth).
The third respondent pay a civil penalty of $20,655.00 in respect of the 2014 Contraventions
The third respondent pay a civil penalty of $25,515.00 in respect of the 2018 Contravention
The first respondent pay a civil penalty of $4131.00 in respect of the 2014 Contraventions
The first respondent pay a civil penalty of $5103.00 in respect of the2018 Contravention
The second respondent pay a civil penalty of $3402.00 in respect of the 2018 Contravention.
Liberty to apply on three days’ notice, should the parties be unable to agree on the relevant amount of interest payable.
The pecuniary penalties are to be paid to the applicant pursuant to
s 546(3)(c) of the Act within 28 days of these orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PARRAMATTA |
SYG 1659 of 2019
| MEI KUEN CHAN |
Applicant
And
| QI (KELVIN) GUAN |
First Respondent
| JUN ZHANG |
Second Respondent
| ADVANCED HEALTH INVEST PTY LTD TRADING AS MASTERY DENTAL CLINIC ABN 99 157 936 073 |
Third Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings involve claims by the applicant against the first respondent, who is the sole shareholder and director of the third respondent, and the second respondent, who is the wife of the first respondent.
The third respondent operates as a dental clinic in two locations, one in Hurstville and one in Hornsby. There are eight dentists employed by the company, with the second respondent being the senior dentist at the Hornsby clinic.
In an affidavit dated 4 October 2019, the applicant states that she commenced employment with the third respondent as a casual dental assistant in Hurstville in July 2013 on a wage of $12 per hour. From 23 September 2013, this increased to $15 per hour because the applicant was also doing receptionist duties at Hurstville. From 29 December 2013 the applicant was paid $16.50 per hour as she was working as a receptionist and training new staff.
In March 2014 the applicant was promoted to the position of practice manager/receptionist at the Hornsby dental clinic operated by the third respondent but working under the direction of the second respondent on a wage of $15 per hour plus 5% commission of the monthly revenue of the clinic.
In July 2015, the second respondent agreed to increase the applicant’s commission from 5% to 5.5%.
On 17 June 2017, the applicant alleges that she told the second respondent that she was pregnant and intended to take maternity leave. The applicant commenced maternity leave in January 2018 and gave birth to her daughter on 12 February 2018. It is alleged that the applicant applied for parental leave payment tentatively through Centrelink, and was told that it would be paid by her employer in the regular pay cycle from April 2018. When the applicant sought such payments she received no response from the respondents.
On 18 September 2018, the applicant alleges that she was summarily dismissed by the first and third respondents’. The applicant subsequently brought proceedings against the third respondent under s 394 of the Fair Work Act 2009 (Cth) (“the Act”) for unfair dismissal. Those proceedings were concluded in early 2020 in favour of the applicant.
In July 2019 the applicant commenced proceedings in this Court alleging underpayment of wages by reference to the Health Professionals and Support Services Award 2010 (“the Award”) together with non-payment of commission incentives totalling $48,846.16. These underpayments amount to breaches of the Act.
The matter had a troubled history with the Court being forced to make various orders, only some of which, were complied with by the respondent in relation to the preparation of the matter for hearing. One hearing date earlier this year was required to be vacated due to pandemic health restrictions in relation to face-to-face hearings. Orders were also necessary in order for the third respondent, a corporation, to be legally represented.
The matter was finally listed for hearing on 23 October 2020 for determination as to liability in relation to the allegations of breaches of the Act.
The day prior to the hearing, the Court was advised that the amount claimed by way of underpayment both wages and conditions, had now been paid to the applicant. Accordingly, the applicant did not seek declarations and orders in relation to the non-payment of wages and commission. At the hearing, the matter was restricted to a number of matters, being the assessment of civil penalties to be imposed, whether not claim for interest should be awarded to the applicant and whether a declaration should be made as to whether there was a breach of the Paid Parental Leave Act 2010 (Cth). It was agreed between the parties that the Court should order by consent, an amount of $6400 in costs.
Accordingly, this judgement is restricted to the consideration of those issues that remain in dispute between the parties.
The Amount of Civil Penalty to be Imposed
The Court has a broad discretion as to penalty. Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301 at [36] summarised how the discretion is to be approached as follows:
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 s 557 of the FW 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 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 FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
The Court will consider each of those five steps
Step One
The following are the contraventions that have been identified and admitted:
a.A contravention of s 45 and s 323(1) of the Act by failing to pay the applicant the minimum wage due to her between July 2013 and July 2014.
b.A contravention s 323 of the Act in failing to pay the applicant commission in accordance with the Commission Agreement.
Steps Two and Three
At the time of the first contraventions, the maximum penalty that can be imposed on an individual was $10,200. The maximum penalty that can be imposed on a corporation was $51,000. In relation to the second contravention, the maximum penalty for an individual was $12,600 and $63,000 for a corporation. This was due to an increase in the penalties between the first and second contraventions.The Court is satisfied, that each of the two contraventions should be treated separately for the assessment of penalty, subject to the principal of totality and should not be grouped together as they involve quite separate issues.
Step Four
The purpose of a civil penalty is primarily, if not wholly, that of promoting the public interest in compliance with the laws that have been contravened and it does not engage principles of retribution or rehabilitation; see Fair Work Ombudsman v NoBrace Centre Pty Ltd (in Liquidation)(ACN 121 556 447) (No 2) [2019] FCCA 2970 (“NoBrace”) per Kelly J at [65]. As these principles of retribution or rehabilitation are not involved in the determination of a civil penalty, this intensifies the focus of a civil penalty determination point issues of specific and general deterrence; see NoBrace at [66].
In Mason v Harrington Corporation Pty Ltdt/as Pangaea Restaurant & Bar [2007] FMCA 7, Mobray FCM set out what is a now well settled set of factors relevant in assessing a pecuniary penalty. They are as follows:
1. the nature and extent of the conduct which led to the breaches,
2. the circumstances in which the conduct took place,
3. the nature and extent of any loss sustained as a result of the breaches,
4. whether there has been similar previous conduct by the respondent,
5. whether the breaches were properly distinct or arose out of one course of conduct,
6. the size of the business enterprise involved,
7. whether or not the breaches were deliberate,
8. whether senior management was involved in the breaches,
9. whether the party committing the breach had exhibited contrition,
10. whether the party committing the breach had taken corrective action,
11. whether the party committing the breach had cooperated with enforcement authorities,
12. the need to ensure compliance with minimum standards by provision of an effective means for the investigation and enforcement of fully entitlements,
13. the need for specific and general deterrence.
On behalf of the applicant, it was submitted that each of the contraventions fell within the mid-range of seriousness.
In terms of the nature and extent of the conduct which led to the contraventions, the applicant submitted that the conduct arose because the respondents did not concern themselves with the provisions of the Award, benefiting the applicant, while taking advantage of aspects of it suited them, for example, casual engagement. Indeed when the respondents determined the applicant was worthy of retention, they chose to reward her by a series of turnover based commission arrangements rather than by promoting her or increasing her weekly wage.
In terms of the circumstances in which the conduct took place, it was submitted the applicant was in no position to obtain payment of amounts rightfully due to her. The first respondent was a successful businessman running a profitable enterprise.
In terms of the nature and extent of any loss or damage sustained as a result of the contraventions, the applicant was denied her wage due to her in her first year of employment and in 2018 while on maternity leave, and was unilaterally denied any income whether by agreement for commissions, or otherwise.
In relation to whether there has been similar previous conduct by the respondents, it is common ground between the applicant and the respondents that there had been no previous contraventions. Accordingly, the respondents should be dealt with as first offenders.
As to whether the contraventions were properly distinct or arose out of one course of conduct, it was submitted that the 2013 – 2014 contraventions should be considered separately to, and distinct from, the 2018 commission contraventions as they arose from different circumstances and involve different levels of culpability being, underpayment as opposed to non-payment.
In terms of the size of the business enterprise involved, it is common ground that this was a dentistry practice, based over two locations employing eight dentists in total, including the second respondent with a turnover of approximately $3 million per annum and generating a net profit of $300,000 per annum.
In terms of whether or not the contraventions were deliberate, the applicant contends that the 2018 contraventions were clearly deliberate and aimed at punishing the applicant for her perceived misbehaviour. The 2013-2014 contraventions were negligent and wilful in the sense that the respondents happily obtained the benefit of a superior performance, employing an inexperienced person in a casual capacity, without honouring their obligations to her.
In terms of whether senior management were involved in the contraventions, the first respondent is the sole owner and director of the third respondent. Accordingly, the contraventions occurred with the knowledge of the highest levels of management within the business.
In terms of whether the party committing the contraventions has exhibited contrition, taking corrective action or cooperated with enforcement authorities, the applicant notes that an admission of liability and the payment of the amount claimed in the sum of $48,846.16 occurred on Thursday, 22 October 2020, being the day before the matter was set down for a substantive hearing on liability. It was submitted that the respondents have delayed and frustrated the progress of the hearings at every step. Numerous Court hearings have been required to secure even partial compliance by the respondents with various Court orders.
In terms of the need to ensure compliance with minimum standards of employee entitlements, it was submitted that the minimum standards were not observed or heeded by the respondents. Compliance with minimum standards is vital to creating an even playing field for employers within the same industry; see Fair Work Ombudsman v Zillion Zenith International Pty Ltd and Anor [2014] FCCA 433.
In terms of the need for specific and general deterrence, it was submitted that there is a need for both general and specific deterrence, particularly in relation to the first respondent, given his central involvement in the running of the business. It was submitted that the involvement of the second respondent was much less, and accordingly any penalty should be ameliorated towards the bottom of the mid-range. Specific deterrence was also required in relation to the third respondent, being the company that employed the applicant. The need for general deterrence is also manifest as stated by the High Court in Commonwealth Bank of Australia v Director, Fair Work Industry Building Industry Inspectorate 258 CLR 482 at [55];
“…the purpose of a civil penalty… is primarily if not wholly protective in promoting the public interest in compliance”.
In relation to the basis for any overall discount due to cooperation, Counsel for the applicant submitted that this should be set at somewhere between 10% to 15% of any penalty that might otherwise be determined.
Counsel for the respondents noted that the conduct of the first and third respondents had not been in accordance with model litigant guidelines. It was submitted that the objective seriousness, taking into account the belated payment and admissions was somewhere in the low to mid-range of objective seriousness. The payment, although at the 11th hour, had saved the Court the time and expense of a contested hearing and accordingly, there was a utilitarian discount that the respondents were entitled to. Counsel for the respondents noted that for a period of time, when commissions were taken into account, the applicant was paid more than the minimum wage that she would be entitled to. It was submitted that that the applicant was in control of the pay of the third respondent in relation to its employees and she should have been aware of what she was entitled to. It was submitted that the involvement of the second respondent was far less and accordingly, any penalty in relation to her, should be appropriately reduced. There was less of a need for specific deterrence in relation to her than perhaps the other two respondents.
The Court notes quite properly, that Counsel for the respondents did take issue with many of the submissions made by the applicant’s legal representative. In terms of the objective seriousness of the contraventions, the Court is satisfied that they fall within the mid-range of seriousness. The Court accepts that the involvement of the second respondent is markedly less, and this should be appropriately reflected in the penalties imposed. The Court notes the size of the small business, however, as pointed out by superior Courts on a number of occasions, capacity to pay is not a factor which should assume significant portents in the setting of penalties and rather, a pecuniary penalty should reflect appropriately the contraventions, together with a need for specific and general deterrence. The Court is satisfied that the contraventions took place with the knowledge of senior management of the third respondent and were deliberate. Given that there has been no previous contraventions that have been brought to the knowledge of the Court, the Court is of the view that a penalty which is 45% of the maximum in relation to each of the contraventions, is appropriate in relation to the first and third respondents and that a penalty of 30% of the maximum is appropriate in relation to the second respondent. These penalties should be further reduced by 10% to reflect the subjective circumstances set out above.
The Court notes that for the first contravention, the maximum penalty for each breach was 60 penalty units for the first and second respondents and 300 penalty units for the third respondent. Each penalty unit was set at $170, meaning, that the maximum penalty for the first and second respondent was $10,200 and for the third respondent $51,000.
For the second contravention, the amount of penalty unit had increased to $210, thus, the maximum penalty increased to $12,600 for the first and second respondents and $63,000 for the third respondent. The Court proposes the following penalties:
1st Contravention
(2014)
Maximum Penalty
Penalty set
Less 10%
1st Respondent
$10,200
$4590
$4131
3rd Respondent
$51,000
$22,950
$20,655
2nd Contravention
(2018)
Maximum Penalty
Penalty set
1st Respondent
$12,600
$5670
$5103
2nd Respondent
$12,600
$3780
$3402
3rd Respondent
$63,000
$28,350
$25,515
Accordingly the Court orders that the first respondent pay a pecuniary penalty in relation to both contraventions in the amount of $9234, the second respondent an amount of $3402, and the third respondent an amount of $46,170.These amounts are to be paid to the applicant pursuant to s 546(1) of the Act within 28 days of the date of these orders.
Claim for Interest
The applicant also seeks interest up to the date of judgement pursuant to s 547 of the Act.
Section 547 of the Act is as follows:
(1) This section applies to an order (other than a pecuniary penalty order) under this Division in relation to an amount that a person was required to pay to, or on behalf of, another person under this Act or a fair work instrument.
(2) In making the order the court must, on application, include an amount of interest in the sum ordered, unless good cause is shown to the contrary.
(3) Without limiting subsection (2), in determining the amount of interest, the court must take into account the period between the day the relevant cause of action arose and the day the order is made.
Usually, interest thus follows the event in terms of the orders made. In National Tertiary Education Union v Royal Melbourne Institute of Technology (2013) 234 IR 139 at [154] per Gray J, the Federal Court ordered no interest on the compensation, due to the fact that the employee had effectively received pre-payment of much of the compensation claimed. This has not occurred in the current case. On behalf the respondents, it was submitted that the amounts claimed and now paid to the applicant, effectively covered her for amounts of overtime, public holidays and weekends that were not already paid. However, it remains that the applicant has not received the benefit of that money for some years. The Court is not satisfied, that good cause has been shown as to why interest should not be paid.
Accordingly, the Court orders that the first, second and third respondents pay interest pursuant to s 547 of the Act. Liberty is granted to the parties to apply on three days’ notice should they be unable to agree on the relevant amount of interest payable so that the Court can make a determination in this regard.
Contravention of the Paid Parental Leave Act 2010
The applicant seeks a declaration that the third respondent, being the corporate entity, contravened s 72(2) of the Paid Parental Leave Act 2010 (Cth).
Counsel for the respondents objected to this declaration on the basis that, it was asserted from the bar table, that the amount of paid parental leave received by the third respondent was in fact repaid to the Department after a letter of demand was received from them. No documentary evidence was provided to support this assertion, although a letter indicating there may have been an overpayment was referred to the Court.
In affidavit material filed with the Court, the respondents asserted that the applicant did not give written notice of maternity leave and was not working from January 2018. However, in the same affidavit, it is asserted that the applicant was working from January to May 2018 and was therefore not entitled to receive paid parental leave from April to August 2018. The applicant notes that this issue was raised and considered by the Full Bench of the Fair Work Commission in Advanced Health Invest Pty Ltd t/a Mastery Dental Health Clinic v Mei Chan [2020] FWCFB 585 at [45], where the Full Bench rejected the contention that the parental leave was unauthorised.
The applicant notes that the respondents do not address or deny that the third respondent received a payment from the Department of Human Services for an amount of paid parental leave for payment to the applicant. This was not paid until January 2019 although the applicant asked for this payment to occur in June and again in August 2018. The third respondent did not notify the Secretary of the Department of the applicant’s alleged return to work under s 82 of the Paid Parental Leave Act 2010 (Cth). Further, an entitlement to paid parental leave is not dependent upon “written notice” from the employee under s 13 of the Paid Parental Leave Act 2010 (Cth).
It is asserted that the applicant did work on occasions at the request of the first and second respondent in April May 2018 but she was never paid for these attendances. No records of any payment for this period have been produced.
The Court is reasonably satisfied based on the totality of the material before it that there has been a breach of the paid Paid Parental Leave Act 2010 (Cth). Whether or not the money has been repaid is not a matter that the Court considers to be germane to the issue of whether or not there was a breach of the Act. Accordingly, the Court makes the declaration that the third respondent contravened s 72(2) of the Paid Parental Leave Act 2010 (Cth).
Costs
The court notes that it has all been agreed between the parties that costs in the amount of $6400 should be paid by the first and third respondents jointly and severally pursuant to s 570(2) of the Act. This is on the basis that the second respondent took no active part in the proceedings. This amount relates to costs thrown away by the late admission of liability by the respondents.
Conclusion
Accordingly, the Court is satisfied that pursuant to s 570(2)(b) of the Act, the conduct of the first and third respondents has been unreasonable in denying liability up until the day before the hearing.
I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of Judge Humphreys
Associate:
Date: 30 October 2020
0