Cotis v Pow Juice Pty Ltd

[2007] FMCA 140

FEDERAL MAGISTRATES COURT OF AUSTRALIA

COTIS v POW JUICE PTY LTD [2007] FMCA 140

INDUSTRIAL LAW – Prosecution of civil penalty – breach of Award – underpayment of employees – breaches admitted – same course of conduct – totality principle – pecuniary penalties imposed.

Annual Holidays Act 1944 (NSW)
Conciliation and Arbitration Act 1904 (Cth), s.119(1A)
Corporations Act 2001 (Cth), s.436A
Crimes Act 1914 (Cth), s.4AA
Workplace Relations Act 1996 (Cth), ss.167(2), 170LK, 170LT, 170MB(2), 178(4), Part VIII , Div.2 of Part VIB,
Workplace Relations Amendments (Work Choices) Act 2005 (Cth), ss.192, 717, 718, 719, 841, cls.1, 2, 3 and 6 of Sch.7

Australian Workers Union v Johnson Matthey (Aust) Ltd [2000] FCA 728 Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v DMG Industries Pty Ltd [2000] FCA 1492
Amieu v Menelang Station (1987) 16 IR 245
BHP Steel (AIS) Pty Ltd v Construction, Forestry, Mining and Energy Union (CFMEU) [2000] FCA 1908
Community and Public Sector Union v Telstra Corp Ltd [2001] FCA 1364
Clothing & Allied Trade Union of Australia v Snugglerite Industries Pty Ltd (1990) 34 IR 124

Construction Forestry, Mining and Energy Union v Coal and Allied Operations Pty Ltd (No2) [1999] FCA 1714
Finance Sector Union v Commonwealth Bank of Australia (2005) 147 IR 462

Gibbs v Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216
Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503
Masters v Highway One Transport Pty Ltd (1990) 33 IR 1
Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd (1994-95) 127 ALR 673
Quinn v Martin (1977) 16 ALR 141
Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241
Textile Clothing and Footwear Union of Australia v Lotus Cove Pty Ltd [2004] FCA 43
Trade Practices Commission v CSR Ltd [1991] ATPR 52
Transport Workers Union of Australia v Glynburn Contractors (Salisbury) Pty Ltd (1951) 37 IR 313

Applicant: INSPECTOR KATE COTIS (OFFICE OF WORKPLACE SERVICES)

Respondent: POW JUICE PTY LIMITED (ACN 118 547 863)

File Number: SYG1466 of 2006

Judgment of: Lloyd-Jones FM

Hearing date: 30 and 31 August;
25 and 26 October 2006

Delivered at: Sydney

Delivered on: 16 February 2007

REPRESENTATION

Counsel for the Applicant: Mr A Hatcher

Solicitors for the Applicant: Clayton Utz

Advocate for the Respondent: Mr B Thompson

Solicitors for the Respondent: EI Legal Pty Ltd

ORDERS

1. The respondent to pay the Commonwealth of Australia the following penalties for breaches of the pre-reform Certified Agreement, being the Pulp Juice Bars Operations Pty Ltd Enterprise Agreement 2004-2005, by failing to pay employees in accordance with the following provision of that agreement:

   (a) $9,000 for the breach of clause 3.2;

   (b)  $9,000 for the breach of clause 3.5;

   (c)  $4,500 for the breach of clause 3.7(2);

   (d)  $9,000 for the breach of clause 4.1(7);

   (e)  $9,000 for the breach of clause 4.4(1);

   (f)   $9,000 for the breach of clause 5.7(1).

2. Payment of the penalties in order (1) be made within 60 days.

3. Entry of order (2) be deferred for 14 days or such further time as ordered by the Court.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG1466 of 2006

INSPECTOR KATE COTIS (OFFICE OF WORKPLACE SERVICES)

Applicant

And

POW JUICE PTY LIMITED (ACN 118 547 863)

Respondent

REASONS FOR JUDGMENT

The Proceedings

1. This is an application for penalty for breach of the Workplace Relations Act 1996 (Cth) as amended by the Workplace Relations Amendments (Work Choices) Act 2005 (Cth) (the amended Act is to be referred to as “the Workplace Relations Act”) filed in the Sydney Registry of the Federal Magistrates Court of Australia on 19 May 2006.

2. The application is brought under s.718(1) of the Workplace Relations Act for imposition of a penalty pursuant to s.719(1) of the Workplace Relations Act for breach of applicable provisions binding upon the respondent.

3. The respondent, Pow Juice Pty Limited (ACN 21 118 547 863) (“Pow Juice”), a registered proprietary company limited by shares, purchased the business assets of Pulp Juice Bars Operations Pty Ltd (“Pulp Juice”) to operate three juice bars at Warriewood, Sydney International Airport and the MLC Centre in the Sydney CBD.

4. The applicant, Inspector Kate Elizabeth Cotis, is employed by the Commonwealth of Australia in the Office of Workplace Services. She was responsible for investigations into Pow Juice, as an inspector under the Workplace Relations Act.

5. The applicant claims that the respondent breached a transmitted pre-reform Certified Agreement, being the Pulp Juice Bars Operations Pty Ltd Enterprise Agreement 2004-2005 (“the Pulp Agreement”).  It did so by failing to pay employees in accordance with that agreement.  In the alternative, that the respondent could have paid its employees under a Notional Agreement Preserving State Award (“NAPSA”) containing provisions of a Shop Employees (State) Award (“SESA”) and the Annual Holidays Act 1944 (NSW), taken together with a preserved Australian Pay and Classification Scales (“APCS”), containing rate provisions and casual loadings derived from the SESA. However, that it did not do so.

6. The applicant seeks an order pursuant to s.719(1) of the Workplace Relations Act that the Court impose a penalty on the respondent for such breaches. In addition, it also seeks orders pursuant to s.719(6) of the Workplace Relations Act that the respondent pay the employees who were underpaid as a result of such breaches, the amount of the underpayments.

7. On 30 August 2006, this matter was set down for hearing to determine liability and penalty.  At that time, the respondent advised the Court that it elected to admit the breaches and sought an adjournment of 24 hours in order to file formal documentation outlining the admissions.  Breaches relating to 22 employees of Pow Juice were admitted, but the respondent made no admission regarding the specific terms of the Pulp Agreement which were breached.

8. The applicant submits that those breaches related to six provisions of the Pulp Agreement, with the dates of the breaches extending from the pay week ending 26 March 2006 to the pay week ending 6 August 2006.

9. On 31 August 2006, under payment orders were made in accordance with s.719(6) of the Workplace Relations Act, that the respondent pay 14 identified employees various outstanding wages within 14 days of the order. The hearing was adjourned to 25 and 26 October 2006 to determine whether a penalty should be imposed, and if so, what the quantum of the penalty should be.

10. For the purposes of this application, the following material was tendered and admitted into evidence:

    a)The affidavit of Kris Sabatino, licensed commercial agent, sworn 20 May 2006;

    b)The affidavit of Kate Elizabeth Cotis, affirmed 31 July 2006 (first affidavit of Ms Cotis);

    c)The affidavit of Kate Elizabeth Cotis, affirmed 20 September 2006 (second affidavit of Ms Cotis);

    d)Exhibit “A1” – Pow Juice payroll advice 1 April 2006 to 6 June 2006;

    e)Exhibit “A2” – letter from K Cotis to B Thompson dated 16 May 2006;

    f)Exhibit “A3” – letter from D Stewart to Commissioner Lawson dated 1 May 2006;

    g)Exhibit “A4” – ASIC historical company extract dated 27 October 2006;

    h)The affidavit of Andre Warren Dowling, sworn 7 July 2006 (first affidavit of Mr Dowling);

    i)The affidavit of Andre Warren Dowling, sworn 18 August 2006 (second affidavit of Mr Dowling);

    j)The affidavit of Andre Warren Dowling, sworn 20 October 2006 (third affidavit of Mr Dowling);

    k)Exhibit “R1” – further admissions to breaches dated 31 August 2006;

    l)Exhibit “R2” – media releases – Office of Workplace Services dated 22 May 2006;

    m)Exhibit “R3” – email from R Tapoo to [email address deleted] dated 5 April 2006;

    n)Exhibit “R4” – letter with annexures from GHK Green Krejci Pty Ltd to Pow Juice Pty Ltd dated 24 October 2006.

    A number of other affidavits were filed in these proceedings but have not been relied on by the parties.  The above documents have been referred to.

Background

1. The purchase of the Pulp Juice business assets and the transmission of the business involved the following:

   a)On 17 March 2006, an administrator was appointed to Pulp Juice under s.436A of the Corporations Act 2001 (Cth).

   b)On 24 March 2006, Pulp Juice (administrator appointed) entered into an agreement with the respondent, for the respondent to purchase Pulp Juice’s business.

   c)The transmission of Pulp Juice’s business to the respondent actually occurred on 25 March 2006.  This was two days prior to the commencement of the Workplace Relations Amendments (Work Choices) Act.

   d)The respondent began employing persons on that day to perform work in the business in the Warriewood and Sydney Airport Juice Bars.  The respondent employed a number of persons to work in the business, who had, immediately before transmission of the business, been employed by Pulp Juice to work in the business.

   e)Pow Juice became the successor, transmittee or assignee of the whole or part of a business of an employer party to a Certified Agreement under Division 2 of the pre-reform Workplace Relations Act. The Certified Agreement ceased to apply to the old employer and became binding upon the new employer on and from 27 March 2006.

   f)Under the Workplace Relations Act, a Certified Agreement continues in force as a “pre-reform Certified Agreement” unless replaced by a Collective Agreement or an Australian Workplace Agreement (“AWA”) made under the Workplace Relations Act, or unless terminated in accordance with relevant preserved provisions of the pre-reform Workplace Relations Act. The Certified Agreement therefore continued to operate and bind the respondent from 27 March 2006.

2. On or after 27 March 2006, employees commenced employment with the respondent and were at the relevant times bound by either:

   a)the Pulp Agreement by virtue of s.170MB of the pre-reform Workplace Relations Act as that provision operated prior to the commencement of the Workplace Relations Act, as a consequence of the operation of the sale agreement between Pulp (administrator appointed) and Pow Juice dated 24 March 2006; or

   b)a NAPSA derived from the SESA.

3. Mr Andre Warren Dowling, who had been retained by Pow Juice as a consultant, indicated in his evidence that he had informed the transmitted employees that Pow Juice intended to offer AWAs under the Workplace Relations Act as soon as was legally possible. He also informed them that until such time, they would be paid an above award single hourly rate.

4. During the relevant period, Pow Juice employed and remunerated each of the employees under Pow Juice “interim AWAs”, which had not been lodged with the Office of the Employment Advocate under the Workplace Relations Act.

5. On 10 April 2006, the New South Wales office of the Office of Workplace Services commenced an investigation into the conduct of Pow Juice, which initially focussed on claims reported in newspapers that certain employees of Pow Juice may have been paid less than their lawful entitlement under instruments deriving from the Workplace Relations Act. The investigation was conducted by Kate Elizabeth Cotis, a duly appointed Workplace Inspector, pursuant to s.167(2) of the pre-reform Workplace Relations Act.

Legislative provisions

1. The principal objectives of the Workplace Relations Act are set out in Part 1, s.3. They include the following:

   3.  …

   (c)  providing an economically sustainable safety net of minimum wages and conditions for those whose employment is regulated by this Act;

   …

   (f)    ensuring compliance with minimum standards, industrial instruments and bargaining processes by providing effective means for the investigation and enforcement of:

   (i)   employee entitlements; and

   (ii)  the rights and obligations of employers and employees, and their organisations…

   These objectives identify the significance of compliance with and enforcement of minimum standards of wages and conditions established under the Workplace Relations Act. Part 14 (Compliance of the Workplace Relations Act) under which these proceedings are brought substantially gives effect to the above objectives.

2. This application is brought under s.718(1) of the Workplace Relations Act in relation to breaches of “applicable provisions” by Pow Juice. The application seeks the imposition of penalty(s) under s.719(1) of the Workplace Relations Act and orders under s.719(6) for payments to employees of amounts not paid under the relevant “applicable provisions”. The “applicable provisions” are, for the purposes of ss.718 and 719, terms of the Pulp Agreement.

3. The Pulp Agreement:

   a)was entered into pursuant to s.170LK of the pre-reform Workplace Relations Act, as it was prior to the 27 March 2006 commencement of the principal provisions of the Workplace Relations Act. It was made under Division 2, Part VIB of the pre-reform Workplace Relations Act;

   b)was certified by Commissioner Raffaelli of the Australian Industrial Relations Commission on 20 February 2004 under s.170LT of the pre-reform Workplace Relations Act;

   c)applied to Pulp Juice and its employees working in its juice bar business; and

   d)has not been the subject of any variation since it was made.

4. Section 170MB(2) of the pre-reform Workplace Relations Act provided, inter alia, that upon a constitutional corporation (“the new employer”) becoming the successor, transmittee or assignee of the whole or part of a business of an employer party to a Certified Agreement under Division 2 (“the old employer”), the Certified Agreement ceases to apply to the old employer and becomes binding upon the new employer.

5. Consequently, by force of s.170MB(2) of the pre-reform Workplace Relations Act, the agreement became binding on the respondent on and from 25 March 2006. Under the Workplace Relations Act (as operating from 27 March 2006), a Certified Agreement continues in force as a “pre-reform Certified Agreement” (Workplace Relations Act, Schedule 7, cls.1 and 2) unless replaced in respect of any employees by a Collective Agreement or AWA made under the Workplace Relations Act, or unless terminated in accordance with the relevant preserved provisions of the pre-reform Workplace Relations Act: Workplace Relations Act, Schedule 7, cl.3. The agreement therefore continued to operate and bind the respondent from 27 March 2006.

6. Clause 6 of Schedule 7 of the Workplace Relations Act provides, inter alia, that Part 14 applies to a pre-reform Certified Agreement as if it were a Collective Agreement. Sections 718 and 719 fall within Part 14 of the Workplace Relations Act. Thus, an application for penalty and associated remedies may be made with respect to any breaches of the agreement by the respondent.

7. A penalty under s.719, and payment orders under s.719(6), may be ordered by an “eligible court”, which includes the Federal Magistrates Court: Workplace Relations Act, s.717.

Finding of contravention

1. On 30 August 2006 and for the purposes of this proceeding, the respondent informed the Court that it admitted to breaches of the terms of the transmitted pre-reform Certified Agreement, being the Pulp Agreement, in relation to the following persons currently or previously employed by it.  The number of breaches in respect of each employee as determined by the Office of Workplace Services (also see [25] below), is contained in brackets next to each name:

   a)Chloe Chapman (6);

   b)Michael Dalton (7);

   c)Adam Tucker (6);

   d)Peter Kavanagh (5);

   e)Dean Omeros (9);

   f)Ingelese Clasen (2);

   g)Scott Tucker (2);

   h)Sharna Howlet (16);

   i)Tearoa Harmony Brooks (4);

   j)Tien Nguyen (3);

   k)Jennanya Montgomery (8);

   l)Jessica Taprell (1);

   m)Hannah Rose Maguire (10);

   n)Monika Lumsden (3);

   o)Natalie Lumsden (3);

   p)Jade Teasel (1);

   q)Ian McKelvey (6);

   r)Sam Gaukrodger (6);

   s)Jessica Ireland (1);

   t)Andry Raharto (1);

   u)Ella Parker (4);

   v)Georgia Dawson (4).

2. The respondent further admitted that each breach of the Pulp Agreement constitutes a breach committed by it of applicable provisions binding upon it, for the purposes of s.719(1) of the Workplace Relations Act.

3. The number of breaches committed by the respondent listed at [23] above amounts to a total of 106 breaches, with underpayments arising from the breaches totalling $5,019.95. I have now had the opportunity to examine in detail the document “Schedule: Category of Breach” contained in the second affidavit of Ms Cotis.(pp.273-281) I am satisfied that the breaches fall within the six categories as set out below.

4. The breaches of the Pulp Agreement were contraventions of the following provisions:

   a)Clause 3.2: failure to pay employees the correct ordinary-time rate of pay.

   b)Clause 3.5: failure to pay employees weekend penalty rates, namely 25% on Saturdays and 50% on Sundays;

   c)Clause 3.7(2): failure to pay wages owing in the required time.

   d)Clause 4.1(7): failure to pay the minimum of three hours for each shift when the employee worked for less than three hours.

   e)Clause 4.4(1): failure to pay overtime penalty rates.

   f)Clause 5.7(1): failure to pay penalty rates for working on public holidays, namely the rate of double time and one half.

5. On 31 August 2006, I made orders pursuant to s.719(6) of the Workplace Relations Act for the respondent to effect back payment of wages to 14 employees who remained underpaid as at that date.

6. As a consequence of the admissions made by the respondent, I am satisfied that s.719(1) of the Workplace Relations Act has been breached by the respondent and I find accordingly.

7. I note that the application by Pow Juice for registration as a proprietary company was filed on 27 February 2006 and that date is recorded as the registration date. The company’s first date of trading appears, on the material before the Court, to be 25 March 2006. No issue of previous breaches was raised. Consequently, s.719(3) does not arise.

Legislative provisions in respect to penalty

1. Section 719(5) of the Workplace Relations Act provides that, in the case of a body corporate such as the respondent, the maximum penalty for a breach an applicable provision is 300 penalty units. Section 4(1) defines “penalty unit” as having the meaning given by section 4AA of the Crimes Act 1914 (Cth). That section relevantly provides that in a law of the Commonwealth, unless a contrary intention appears, a “penalty unit” is $110. Thus, in this case, the maximum penalty for a breach of an applicable provision is $33,000.

2. The provisions of the pre-reform Workplace Relations Act concerning compliance with and enforcement of Certified Agreements (as well as awards and other orders) are contained in Part VIII. An equivalent of s.178(4) (or any other part of Part VIII of the pre-reform Workplace Relations Act) is not found in the Workplace Relations Act, Schedule 7, clause 2.

3. Clause 6 of Schedule 7 of the Workplace Relations Act makes clear that Part 14 (which is concerned with enforcement of applicable provisions, including Collective Agreements) is to apply to pre-reform agreements as if they were Collective Agreements. Section 719(4) of the Workplace Relations Act, which relevantly specifies that the maximum penalty applicable here is $33,000, is contained in Part 14.

4. The federal Parliament had expressly stated its intention that the penalty provisions of the Workplace Relations Act are to apply to breaches of terms of pre-reform Certified Agreements.

5. Section 719(2) of the Workplace Relations Act is of significance when assessing the applicable maximum penalty or penalties available in the case of multiple breaches. It provides:

   (2)     Subject to subsection (3), where:

   (a)   2 or more breaches of an applicable provision are committed by the same person; and

   (b)   the breaches arose out of a course of conduct by the person;

   the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term.

   Section 719(3) of the Workplace Relations Act, which concerns situations where a court has already penalised the person for an earlier breach of the applicable provision, does not apply here. Equivalent provisions to s.719(2) were s.178(2) of the pre-reform Workplace Relations Act and s.119(1A) of the preceding Conciliation and Arbitration Act 1904 (Cth).

1. Under s.841 of the Workplace Relations Act, any pecuniary penalty imposed by the Court, other than a penalty for an offence, may be ordered to be paid in part or whole to the Commonwealth or to a particular organisation or person.

Single course of conduct — operation of s.719(2)

1. Section 719(2) of the Workplace Relations Act requires that where two or more breaches of an applicable provision (here a term of Pulp Agreement) are committed by the same person and arise out of a course of conduct by that person, they are to be treated for the purposes of s.719 as constituting a single breach of a term.

2. If the respondent wishes to establish that multiple breaches of an applicable provision arises out of a course of conduct by it and is therefore a single breach, then unless there is clear and unequivocal evidence of such a course of conduct, it is encumbered upon the respondent to lead evidence in support before this Court can be satisfied: Amieu v Menelang Station (1987) 16 IR 245.

3. The principles to be applied in determining whether s.719(2) operates in this matter are established in a number of decisions considered under s.178(2) of the pre-reform Workplace Relations Act.

4. In Gibbs v Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 at 223, Gray J states:

   The object of s 178(2) appears to be that a party bound by an award and pursuing a course of conduct involving repeated acts or omissions, which would ordinarily be regarded as giving rise to a series of separate breaches, should not be punished separately for each of those breaches.  If such a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another.  This reasoning leads to the conclusion that each separate obligation found in an award is to be regarded as a “term”, for the purposes of s 178 of the Act.  The ascertainment of what is a term should depend not on matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out.  For these reasons, I incline to the view that each separate obligation imposed by an award is to be regarded as a “term”, for the purposes of s 178 of the Act.  If the different terms impose cumulative obligations or obligations that substantially overlap, it is possible to take into account the substance of the matter by imposing no penalty, or a nominal penalty, in respect of breaches of some terms, but a substantial penalty in respect of others.

5. Following His Honour’s reasoning in Gibbs v Mayor, Councillors and Citizens of the City of Altona, I find that the admitted breaches in this matter involved a failure to pay employees in accordance with the provisions of the Pulp Agreement (an Australian Industrial Relations Commission approved substitution for an industrial award) in six clearly identifiable and distinct categories.  There were breaches of six separate terms of the Pulp Agreement and cannot be treated as a single breach for the purpose of penalty.

6. In Masters v Highway One Transport Pty Ltd (1990) 33 IR 1 at 4, O’Loughlin J states:

   …In this case, there were separate provisions of the award in relation first, to the rate of pay, secondly, to overtime and finally, to the keeping of records – and all three provisions were continuously breached.  Each of the three provisions was a “term” as that word is used in s 178(2).  Hence the repetitive acts of underpayment can properly be described as “two or more breaches of a term” arising out of a “course of conduct” on the part of the respondent.  That being the case, the last few words of the subsection can be called in aid of the respondent so that those repetitive breaches are taken “to constitute a single breach of the term”.  But those same repetitive breaches of “the term” that related to the rate of pay are separate and apart from the repetitive breaches of “the term” that related to the failure to pay overtime; each failure to pay overtime was a breach of the same term and can also be taken “to constitute a single breach of the term”; but that second mentioned term was different from the term that related to the correct rate of pay…

7. I believe that Masters v Highway One Transport Pty Ltd further clarifies that in this case, separate provisions of the industrial instrument (Pulp Agreement) have been breached.  Also that they must be treated as separate and cannot be consolidated as a single breach.  However, this raises the question whether, although separate, the provisions have an overlapping obligation.  Mr Hatcher, counsel for the applicant, submits that this only arose with respect to one of the six provisions – the late payment provision.  It arose to the extent that the respondent failed to make a weekend penalty payment in the relevant pay period.  This resulted in a dual breach of the weekend penalty obligation and a late payment obligation.  In a sense, one could regard the late payment breach as overlapping with the others.  For the remaining five breaches, there is no overlap and they were clearly separate obligations.

8. A repeated breach of the same provision of an industrial instrument over a period of time may enliven the operation of s.719(2). In this case, with respect to its employees, the respondent’s breach of the weekend penalty provision was over a number of weeks and I believe should be treated as one breach. I rely on Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 at 266 where Northrop, Keely and Gray JJ state:

   …Section 119(1A) of the Act requires that, where the court finds that two or more breaches by the same person of a term of an award have been committed and those breaches appear to the court to have arisen out of the course of conduct by that person, those breaches shall, for the purposes of s 119, be treated as constituting a single breach of that term.  Mr Ginnane conceded that breaches of the provision of the award requiring that payment be made on a particular day each week, which occurred in successive weeks, were to be regarded as breaches arising out of a course of conduct by the respondent.  In my view, that concession is correct.  It accords with the decision in Quinn v Martin (1977) 31 FLR 25, especially at 31; Industrial Relations Bureau v Hassan (1982) 62 FLR 169, especially at 172; and Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503.

9. A further consideration in respect of the operation of s.719(2) is if an industrial instrument is breached in the same way across a number of different employees effectively performing the same work: Clothing and Allied Trade Union v Snugglerite Industries Pty Ltd (1990) 34 IR 124 at 216. Having considered that case and the evidence before the Court, I believe that I am required to treat the breaches of a single provision of the industrial instrument in respect of up to 22 different employees, as constituting a single breach of that provision. Only one penalty can be imposed for the breach of that individual provision.

10. The final aspect concerning the operation of s.719(2) is whether the count should apply the principle of totality so that the respondent is not multiply penalised for breaches which have an interlocking relationship and arise out of a single action: BHP Steel (AIS) Pty Ltd v Construction, Forestry, Mining and Energy Union (CFMEU) [2000] FCA 1908 at [8]; Transport Workers Union of Australia v Glynburn Contractors (Salisbury) Pty Ltd (1951) 37 IR 313 at 314. Neither counsel made significant submissions on this issue nor pressed for its acceptance or rejection. I am satisfied that six separate breaches have been identified and that six separate penalties should be applied. With one exception identified at [42] above, there is no clear interlocking relation arising out of a single action that would justify the application of the principle of totality so that there should be a set-off in terms of penalties applied to one breach as against another. In the case identified at [42] above, I believe that there is a partial overlap and that there is justification for a partial reduction in the penalty to apply to the breach of that provision. Clause 3.5 of the Pulp Agreement: failure to pay employees weekend penalty rates, namely 25% on Saturday and 50% on Sundays.(see [26(b)] above)

11. The argument promoted by the respondent was that the implementation of the Work Choices amendment created a void or hiatus in the operation of the pre-reform Workplace Relations Act because information, material and forms required to implement, in particular, AWAs under Work Choices, had not been gazetted or made publicly available. Further, workplace agreements could not be made for at least seven days after 28 March 2006 because of new notice requirements under the amended Act.

12. This did not create a void as the Pulp Agreement remained operative during the period and would have been the appropriate industrial instrument, even if the amendments to the Workplace Relations Act did not become effective until a later date. Prior to the amendments and in the absence of an approved AWA, the Pulp Agreement would have applied. I do not accept the respondent’s submission that during the period that workplace agreements could not be made, employers had no choice but to rely on interim common law arrangements if they wanted to provide consistent employment arrangements across their business. I do not accept the argument that this forced a course of action which resulted in a single interlocking set of circumstances that would enliven the principle of totality. At all stages, the respondent’s default position was to follow the Pulp Agreement. Its failure to do so must result in breaches of the provisions of that industrial instrument.

Penalty

1. There are a large number of Federal Court decisions with a non-exhaustive range of considerations which can be taken into account when determining whether a specific mode of conduct warrants the imposition of a penalty and the relative quantum: Trade Practices Commission v CSR Ltd [1991] ATPR 52, 135 at 52, 152 – 52, 153; Construction Forestry, Mining and Energy Union v Coal and Allied Operations Pty Ltd (No2) [1999] FCA 1714 per Bronson J at [7] – [8] which was followed and applied in Australian Workers Union v Johnson Matthey (Aust) Ltd [2000] FCA 728 and Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v DMG Industries Pty Ltd [2000] FCA 1492; Textile Clothing and Footwear Union of Australia v Lotus Cove Pty Ltd [2004] FCA 43 at [46] – [47]. Six identified terms of the Pulp Agreement have been breached on at least 106 occasions. The provisions breached are set out at [26] above and the individual breaches at [23] above.

2. The other general consideration applicable to the assessment of penalty is the magnitude of the penalties which have been fixed for breaches.  The maximum penalty has been significantly increased in the last two years from $10,000 to $33,000, an increase of 230%.  Mr Hatcher submits that the Parliament has signalled that it regards contraventions of industrial instruments, such as the agreement here, as a serious matter.  It established significant penalties in relation to such contraventions and the Court needs to deal with the imposition of penalty(s) in a serious manner.  In particular, to make clear to others that such conduct is not acceptable and not to be tolerated.

3. My attention was drawn to a comment by Merkel J in respect of the recent significant increase in penalties in Finance Sector Union v Commonwealth Bank of Australia (2005) 147 IR 462 at [75]:

   It may be that breaches by unions and employers of industrial legislation from time to time have been accepted as part of the give and take of industrial disputation.  However, in recent years industrial legislation has increasingly codified and prescribed what is acceptable, and what is unacceptable, industrial conduct.  The legislature has, over time, also moved to increase the penalties that may be imposed in respect of unlawful industrial conduct.  In my view, any light handed approach that might have been taken in the past to serious, wilful and ongoing breaches of the industrial laws should no longer be applicable.

4. Another significant element of penalty is the deterrent effect.  In Finance Sector Union v Commonwealth Bank of Australia, His Honour made the following observation at [60]:

   Once again, I see the most important factor in relation to penalty as general deterrence.  Seeking to achieve any end by unlawful means should be deterred.  That is particularly so where the end is itself unlawful.  The changing rules of industrial regulation can be set at naught if the Court does not act strongly to discourage and deter the parties from flagrantly and deliberately breaching terms of freely made industrial agreements, merely because their own self interest later dictates against compliance with those terms.

   The breaches in this case were not technical in nature, but were substantial and caused detriment to the employees.  There is a need in the circumstances for deterrents which may include both general and special deterrents.  General deterrence is the issue of a penalty which would deter others from engaging in similar conduct.  Special deterrence is to deter the respondent itself from repeating such conduct.

5. Mr Hatcher assisted the Court in the preparation of detailed written submissions addressing matters relevant to the assessment of penalty in this case.  These are set out below at [53] to [59].  Mr Thompson, counsel for the respondent, took a different approach to the issue of penalty and did not directly address the points raised by Mr Hatcher.  I will return to Mr Thompson’s submissions.  In Mr Hatcher’s submissions, the relevant considerations in this case were identified.  I adopt those submissions to the extent that they effectively identify the issue, but the relative weight that each item carries remains my assessment.

6. Although the respondent has made admissions in Exhibit “R1”which dispensed the need for a hearing as to whether breaches had occurred, it only did so on 31 August 2006.  That is, on the second day set aside for that hearing.  Before that time, it had refused to make any admissions to the Court, despite being invited to do so by the applicant at first directions on 16 June 2006.  The consequence of the admissions being made at the last-minute was that:

   a)the applicant, and the Office of Workplace Services, was put to the inconvenience and expense of having to fully prepare for a hearing on whether breaches of applicable provisions had occurred, including preparing, filing and serving a very extensive affidavit and engaging legal representation for the two days set aside for the hearing; and

   b)the two days set aside by the Court for the hearing of the matter on 30 and 31 August 2006 were thrown away.

   Accordingly, while the respondent is entitled to some degree of reduction on penalty by virtue of its admissions, that reduction should not be a significant one.

7. The admitted breaches of the agreement were committed intentionally or recklessly by the respondent, and may be regarded as contumelious.  This is clearly demonstrated by the following:

   a)The rates and conditions of employment which were applied to the employees upon the Pulp business transmitting to the respondent (and continued to apply until such time as employees left their employment or became parties to an effective AWA) were not derived from any conceivably relevant industrial instrument. The rates, said to be “AWA rates” or “Work Choices Rates”, were simply a construct of the respondent. There was no basis under either the Workplace Relations Act or the pre-reform Act for the respondent to believe that an AWA could be effective without the written agreement of the relevant employee and without the agreement being lodged with the Office of the Employment Advocate.

   b)The breaches of the agreement admitted to by the respondent continued:

   i)after the respondent, through its manager Mr Dowling, demonstrated awareness of the existence of the agreement in a radio interview on 10 April 2006 and in an interview with the applicant on 11 April 2006;

   ii)after the applicant had e-mailed the respondent a copy of the agreement on 11 April 2006;

   iii)after the Shop Distributive and Allied Employees Association (the relevant union) wrote to the respondent on 11 April 2006 informing it that the agreement applied to the respondent’s Warriewood shop;

   iv)after the applicant, on 20 April 2006, issued a breach notice to the respondent, which stated that it had determined that the agreement applied to employees of the respondent, that the respondent was in breach of the agreement, that the respondent was required to take immediate action to ensure that the agreement was complied with now and in the future, and that proof of rectification of any underpayments was to be provided within 21 days;

   v)after the respondent, on 26 April 2006, made an admission to the Australian Industrial Relations Commission that the agreement had application to its employees where such employees were not party to an AWA; and

   vi)after the applicant instituted proceedings in this Court on 19 May 2006.

   c)The respondent did not appear at any time to have taken steps to bring its remuneration arrangements in line with the provisions of the agreement in relation to applicable employees.  Its breaches of the agreement appear to have ceased only because employees ceased to be covered by the agreement – either because they became a party to an AWA or because their employment with the respondent terminated.

8. The respondent did not fully co-operate with investigation carried out by the applicant and the Office of Workplace Services. In particular, notices for the production of documents issued under the Workplace Relations Act were either not fully complied with or not complied with in the time period required.

9. Full rectification of underpayments to employees occurred only after the Court made orders for payments to be made, consistent with the respondent’s admissions, on 31 August 2006.  While the respondent did make some rectification payments to some employees prior to this time, a number of employees received no rectification payment at all until the Court issued the payment order.

10. Nearly all the employees the subject of breaches were either juveniles, or young adults.  Three of these employees were only 15 years old. They can therefore be regarded as generally vulnerable and at risk of exploitation in their employment.

11. The amounts of the underpayments arising from the admitted breaches totalled $5,019.95 over the 22 employees.  While, superficially, this may not appear to be a large amount, however:

    a)The employees only worked on part-time or casual bases.  For the most part, they were on junior rates of pay and the breaches extended only over a relatively short period of time.

    b)As a proportion of the total amounts owing to the employees under the agreement, the underpayments were significant.  For 8 of the 22 employees, the underpayments were in excess of 25% of the total monies owing to them under the agreement; and for another 6 the figure was over 10%.

    c)In the context of the business as a whole, the capacity of the respondent to profit from the underpayments was therefore substantial.

    d)It is likely that but for the early intervention of the Office of Workplace Services, the contravening conduct would have continued for longer, or perhaps indefinitely, with far larger underpayments to employees accruing.

12. The respondent has not previously been found under s.719 of the Workplace Relations Act to have committed any breach of applicable provisions, the Act or the pre-reform Act. However, it is relevant that the respondent was only registered as a company on 27 February 2006.

1. Mr Thompson took an unusual approach to the submission on penalty by initially confirming that the respondent made a general admission of underpayment in relation to 22 employees, but then stated that the respondent made no admission regarding specific terms of the Pulp Agreement which were breached.  The respondent also specifically denied that clause 3.7(2) of the Pulp Agreement had been breached.  No further submissions were made in respect of breaches of the Pulp Agreement.

2. Mr Thompson then focussed on the circumstances of the breach. 

   
   

   I believe that Mr Dowling planned to introduce AWAs at the time that the Workplace Relations Act was being substantially amended by the Workplace Relations Amendments (WorkChoices) Act. During the transitional period, it was not possible to introduce new AWAs and the respondent had to revert to the provision of the Pulp Agreement. However, Mr Dowling elected to introduce “interim AWAs” despite notification and advice from the Office of Workplace Services that the “interim AWAs” could not be used. Mr Dowling persisted and Mr Thompson’s submission attempts to explain and justify his approach.

3. Mr Thompson made a number of oral submissions which Mr Hatcher objected to on the basis that they were not confined to the evidence before the Court.  Mr Thompson addressed me what was used to establish the loaded rate of pay in the “interim AWAs”.  Although I allowed Mr Thompson to proceed, I indicated that this was irregular and that I would only give the material very limited weight.  Other than providing a broader explanation of the development of the “interim AWAs”, I give it no weight in respect of the issue before the Court.

4. The Work Choices amendments came into effect on 27 March 2006 and have been the subject of extensive publicity.  Although the legislation involved a degree of devolution of industrial regulation, away from centralised tribunals to employers and employees themselves, the legislation still contains important minimum standards of employment.  It is clear from the objects of the amended Act that the minimum standards are complied with.  In a more devolved and deregulated industrial relations environment, it becomes more important that employers themselves, as well as other participants in industry, comply with their obligations and are responsible for their conduct in that context.  The respondent appears in its submissions to be attempting to excuse its conduct, at least in the initial period, because it was not legally possible for the organisation to have access to AWAs.  The submission seems to proceed on the basis that the organisation had an inalienable right to issue an AWA as the sole arrangement for employment of its staff.

5. Employers and employees can reach genuine agreement, which can be given effect, provided the Workplace Relations Act is complied with. An employer does not have rights contrary to the Act, the wishes of the employee or the requisite procedures.Mr Dowling in his evidence indicated to the Court that he had been retained as a consultant to administer the business operations of Pow Juice.  The current director, secretary and owner of all the shares in Pow Juice is Ms Cherilyn Coad.  Ms Coad did not give evidence in these proceedings so her role in the daily operation of the company is not entirely clear.  Mr Dowling indicated that he had been involved in the management of other juice bars and was retained because of that expertise.  Although Mr Dowling did not precisely state his qualifications and experience, he did say in his evidence that he had been involved in the food and catering industry in Europe before coming to Australia.  He was also able to inform me of the nature of the payroll software used by the organisation.  It did emerge from Mr Dowling’s evidence that an essential strategy in the Pow Juice business plan was to have all its employees retained on AWAs.

6. Mr Dowling also gave evidence that he had retained the services of Mr Robert Norman Thompson of Enterprise Initiatives to assist with the introduction of AWAs for all its employees.  Mr Thompson prepared an affidavit for these proceedings but was unavailable to give evidence on the hearing days.  An objection was raised to the affidavit being admitted into evidence and it was rejected.  Mr Dowling made reference in his evidence and in cross-examination to material prepared for Pow Juice by Enterprise Initiatives.  It appears that a document entitled “Welcome”, which was distributed to employees either at a meeting at the Administrator’s office on 27 March 2006 or by Mr Dowling on 27 March 2006 when he attended the Juice Bars where they worked, was prepared with the assistance of Enterprise Initiatives.(second affidavit of Ms Cotis, pp.77-78)  Direct evidence was given that the “Welcome” document had attached to it a “Work Choice Rates”, which was also prepared by Enterprise Initiatives.(second affidavit of Ms Cotis, p.79)

7. In an interview between Ms Cotis and Elizabeth Mail of the Office of Workplace Services and Mr Dowling of Pow Juice on 11 April 2006, Mr Dowling claimed at the time of the transmission of business that he was not aware of the Certified Agreement.(second affidavit of Ms Cotis, pp.127-130)  However, Mr Dowling stated that he had discussed the transmission of business obligation with his lawyers.  They informed him of the existence of the Certified Agreement but advised him that Pow Juice would not be a party to the Certified Agreement.  Mr Dowling indicated that his lawyers and Mr Robert Thompson confirmed that the transmission of business obligations did not apply.  On 20 April 2006, the Office of Workplace Services issued a “Breach Notice – Summary of Alleged Non-Observance” to Ms Coad, Director of Pow Juices Pty Ltd which stated:

   Whilst OWS is continuing its investigation into this matter it has been determined that the “Pulp Juice Bars Operations Pty Ltd Enterprise Agreement 2004-2005” (the Agreement) continues to apply to former employees of Pulp Juice Bars Pty Ltd now employed by Pow Juice Pty Ltd at the following places of employment: (second affidavit of Ms Cotis, annexure M, pp.139(a) and (b))

8. Despite this formal notification, there was no attempt by Pow Juice to revert to the provisions of the Certified Agreement in respect of the relevant employees at any subsequent stage in the relevant period, which is the subject of these proceedings.  At the end of his evidence, Mr Dowling, in response to my questions, confirmed that the payroll system used by Pow Juice was commercially available software and that it could be loaded with pay rates covering a wide range of circumstances.  However, it does not appear that any attempt was made to load the pay rates contained in the Certified Agreement.  Instead, Pow Juice persisted with the “interim AWA rates” which were incorrect.  It adopted a process of adjusting all payments manually and also made a subsequent payment.

9. Mr Hatcher submits that the Court is entitled to take into account the respondent’s financial circumstances and capacity to pay in assessing the penalty.  Difficulty in paying penalties should not prevent the Court from imposing penalties which are otherwise appropriate: Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd (1994) 127 ALR 673 per Wilcox CJ. This case considered the imposition of a penalty for breach of industrial relations legislation. His Honour said at 686.10:

   Mr McNamee's claim that Vista was unable to find the funds necessary to reinstate the dismissed employees as from 10 July 1991 requires consideration. I should say that Mr Rothman objected to the admission of evidence about Vista's (or Mr McNamee's) financial position. He said it was irrelevant. But I ruled that it was relevant, at least in relation to the quantum of any penalty to be imposed on the respondents. In determining what monetary penalty to impose on an offender it is usual for a court to take into account the offender's capacity to pay. A monetary sum that would constitute a reasonable penalty to a person of average income might be unduly oppressive if imposed on an impecunious person.

   Although the financial circumstances of the respondent are relevant to the imposition of penalty, His Honour made an important qualification in Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd at 688.3:

   In fixing the amount of the daily penalties, I have not overlooked the evidence given by Mr McNamee that suggests both he and Vista are now in a parlous financial position. Mr McNamee said a meeting of his creditors had been called to consider a deed of arrangement, under Part X of the Bankruptcy Act 1966. His counsel, Mr Newlinds, tendered the Statement of Affairs prepared for that meeting. It shows a substantial excess of liabilities over assets. Most of the liabilities are for moneys said to be due under guarantees given by Mr McNamee. After the hearing, while judgment was reserved, Mr Newlinds informed me by letter that Mr McNamee had presented a debtor's petition in bankruptcy. Presumably the creditors' meeting rejected his proposal and he is now bankrupt.

   While this evidence suggests that both Vista and Mr McNamee may have difficulty in paying penalties, I do not think I should allow it to deflect me from imposing whatever penalties are otherwise appropriate. It is too early to say what will be the final position in relation to either the company or Mr McNamee. If the company is successful in its challenge to the validity of the security, it seems there is every prospect of its meeting its obligations. As to Mr McNamee, much will depend on the ability of the principal debtors, whose debts he has guaranteed, to meet their obligations. Mr McNamee's affairs have not yet been independently investigated, so far as I know. It is sometimes a mistake to take a Statement of Affairs at face value. If the situation of either respondent proves as bad as suggested, relief is available under the relevant legislation.

   If the circumstances require a substantial penalty to be imposed, the financial difficulty itself will not deter the imposition of a penalty.

10. A second case which supports this approach is Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503 at 508 per Keely J:

    In respect of each of those four breaches the maximum penalty that can be imposed is $1,000.  As to the amount of the penalties to be imposed I take into account, in mitigation of penalty, the fact that there is no evidence that the respondent has ever previously breached this award or any other award.  I also have borne in mind the evidence as to the financial difficulty of the respondent at the material times.  Mr Strahan submitted that in assessing penalty the court should take into account that the breach was not contumelious and that the managing director of the respondent had a bona fide belief that, by reason of the arrangements made on 22 March 1983, the respondent was not obliged to comply with the terms of the award in relation to the workers.  It should be noted that Mr John Buckley did not expressly state in his evidence that he had such a bona fide belief although he did say in evidence that on 22 March 1983 he had “in mind that we had to keep within the guidelines of the law”.  Furthermore, there is no evidence before the Court that the respondent sought or obtained legal advice before acting as it did on 22 March 1983.  In this connection it is important that the respondent – and other employers bound by the award or by other awards under the Act – understand the importance of complying with an award and it follows that any decision taken by them which is regarded as affecting their obligations to comply with particular provisions of an award or the award generally should only be taken after careful consideration.  They must not be left under the impression that in times of financial difficulty they can breach an award made under the Act either with impunity or in the belief that no substantial penalty will be imposed in respect of a breach found by a court to have been committed.

11. Mr Hatcher’s submissions acknowledge evidence of Pow Juice’s financial difficulty; however, there is ambiguity in the material before the Court.  The respondent tendered a profit and loss statement and a balance sheet.  However, neither document was verified by those who produced it or by an independent body.  Mr Dowling asserts that the contents are broadly accurate.  The balance sheet shows the total equity remaining in the business as at 31 September 2006 to be $47,649.(third affidavit of Mr Dowling, p.26)  While the profit and loss statement shows, for the trading period of 1 April 2006 to 31 August 2006, a loss of $5,011 on an income of $282,000.(third affidavit of Mr Dowling, p.25)  Mr Dowling claims that the loss may largely be accounted for by legal costs incurred as a result of these proceedings.

12. Mr Hatcher drew the Court’s attention to the ambiguity which emerged from an item listed as “Royalties of $31,020” under “Direct Costs” in the profit and loss statement.  I agree with Mr Hatcher that no adequate explanation was given about what this payment represented.  During cross-examination, Mr Dowling stated that the payment was to a third party juice company called Kick Juice, who Mr Dowling described as a franchisor.  There was reference to joint buying power but there is no evidence of the relationship between Pow Juice and Kick Juice.  The inference was made that this arrangement may disguise flow of income out of the business.  I am not satisfied that any satisfactory explanation was provided about the relationship between the two entities or the nature of the payment.

13. A second ambiguity arises from the contents of Exhibits “R3” and “A4”.  Exhibit “R3” is an email from Mr R Tapoo, sent Wednesday, 5 April 2006 addressed to Andrew [Dowling] on the subject “AWA for Pow Juice Pty Ltd”.  At this date, Mr Tapoo was working for Enterprise Initiatives but had subsequently moved to the Office of the Employment Advocate.  On 5 April 2006, Mr Dowling was provided with an AWA for Pow Juice and amended in accordance with the new Work Choices legislation.  The email states:

    This is in addition to the earlier AWA pack emailed to you yesterday by our Alison Grant for your other company, Andylsar Pty Ltd.

14. Mr Hatcher submits that prior to the tender of Exhibit “R3” on the morning of 26 October 2006 (second day of final hearing), there had been no disclosure that Mr Dowling was involved in the business of Andylsar, or any other operative business except for Kick Juice, and that relationship is unclear.  Mr Dowling initially gave evidence that he was the manager of Kick Juice but this was subsequently denied.  Exhibit “A4”, a Historical Company Extract of Andylsar Pty Ltd, indicates that its registered office is 72 Kalinda Drive, Baulkham Hills, the same address at which Pow Juice also operates.  The previous principle place of business was 70-77 Hospital Road, Bulli, which Mr Dowling identified as his residential address.  The current director of Kick Juice is Ms Cherilyn Coad (who is also director of Pow Juice) while Mr Dowling is identified as a previous director.  Ms Coad was the previous and is now the current secretary, as well as the current owner of all the shares, with Mr Dowling having previously owned at least some of the shares in the business.  Mr Hatcher submits that there has not been a full disclosure of the business structures of the respective companies and how they co-operate.  There is a reasonable basis to draw an inference that Pow Juice was operated by Ms Coad and Mr Dowling in conjunction with other businesses and there seems to be an arrangement by which income flows to the other businesses.  I note these ambiguities but can only find that the full financial position of Pow Juice has not been disclosed.

15. Exhibit “R4” is a letter with annexures from GHK Green Krejci Pty Ltd, Chartered Accounts, which indicates that Pow Juice faced a demand for a payment of $211,500.24, “being the amount outstanding on the completion of the purchase of the MLC Business and the amount due for the completion of the sale of the SIA Business by close of business Friday 27 October 2006”.  The letter also states that “failure to do so will result in the immediate termination of the Business Sale and Licence Agreement (and any extensions of that Agreement)”.  Mr Hatcher submits that the impact this demand would have on the financial viability of the business is also ambiguous, in that the weight that can be given to this is limited as the applicant was not allowed an opportunity to carry out enquiries or cross-examine Mr Dowling on this point.  However, Mr Hatcher indicated that it appears that the deadline for payment had been extended twice and that the debt had been called in once.  These demands were avoided by way of a regulated agreement.  Mr Dowling said in cross-examination that he would arrange finance to pay the amounts owing, and that he would seek to speak to the administrator about the matter.  I agree with Mr Hatcher that as was the case in Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd, it is possible that the respondent here faces a serious financial situation; however it is equally possible that the respondent would be able to work through the problem as it had in the past and continue to trade.

16. Mr Thompson submits that the breaches occurred in exceptional circumstances and that this point should be given significant weight.  He submits that the respondent purchased Pow Juice on the eve of the commencement of the Work Choices legislation.  Also, that in the weeks prior to the commencement, Mr Dowling had used AWAs in other organisations which he was associated with.  He had wanted to use AWAs here for all existing and new employees.  Mr Thompson claims that the purchase was complicated because an administrator was involved and the transaction required difficult and complex arrangements, rather than being a straightforward vendor-purchaser transaction.  Mr Thompson further claims a great deal of difficulty in accessing the records of the administrator.  Pow Juice was not a business in existence for a long time and it did not have the benefit of in-house advisers and administrators.  Mr Thompson submits that in the initial period, Mr Dowling was taking over a brand new business and faced with managing the business and keeping it afloat.

17. The Court acknowledges that the Warriewood outlet was not in a position to continue trading, resulting in the loss of approximately seventeen employees.  Fixtures, equipment and goodwill were written off.  Mr Thompson submits that cash flow constraints and the lack of equity severely limited the retention of external assistance during this transition period.  Mr Thompson also drew the Court’s attention to a media comment by the Federal Government, that it would show leniency during the introduction of the Work Choices legislation.  The Federal Government also called two six-month moratorium periods so that employers were not unnecessarily prosecuted if they did not understand the new legislation and regulations.

18. I accept that Mr Thompson’s clients tend to be small business owners who may take over new businesses from administration.  They may also tend to have limited capital and cash-flow while trying to introduce more efficient and cost-effective methods to the new businesses.  Again, this was at a time of significant changes in the legislation controlling industrial relations.  When fixing penalty, I have taken all these factors into consideration and set the amount accordingly.  Although the initial weeks of transmission were subject to the introduction of the new legislation and a level of confusion did exist, I am satisfied that as at 11 April 2006, Mr Dowling had been made aware that either the Pulp Agreement or the SDA Award applied.(see [54(b)] above)  Despite clear notification, the respondent continued to pay employees under “interim AWAs” and made subsequent manual adjustments to all payments.  The business, although small, had a payroll system devised by a widely recognised software supplier and that system was capable of performing the necessary payroll function.  No evidence was given to suggest that the company did not have the resources to pay wages in accordance with the pay scale in either the Pulp Agreement or the relevant award.

1. These proceedings were commenced by the filing of the original application on 19 May 2006.  An affidavit of service, sworn by Kris Sabatino, a licensed commercial agent, indicates that the respondent was served on 19 May 2006 at 5.05pm with a copy of the application and the first affidavit of Ms Cotis.  However, it was not until 30 August 2006 that the respondent finally accepted the breaches.  The “Admissions of Breaches Applicable Provisions by the Respondent” (Exhibit “R1”) was submitted to the Court on 31 August 2006.  Orders setting down the dates for final hearing on liability and penalty were made at a directions hearing on 16 June 2006.  With the respondent admitting the breaches at the very last minute, the applicant was put to the additional legal expense of preparing for the hearing on liability.  In the final assessment of penalty, I will reduce the total penalty by 25% for Pow Juice’s acknowledgement of its breaches.  This reduction would have been greater had the concession been made earlier.

2. Following the principle in Community and Public Sector Union v Telstra Corp Ltd [2001] FCA 1364 at [7] per Finkelstein J, I set the aggregate penalty at $49,500 after a reduction of the maximum available penalty by 75%. The Workplace Relations Act provides for a separate penalty for breach of each term of an industrial instrument, which is set at $33,000. In this matter, six individual terms have been breached at $33,000 each, with a maximum total of $198,000. The 22 employees involved are all either juveniles or young adults, and three are 15 years of age. All the breaches involved some type of underpayment of significant amount. Most undertook the work on part-time or casual bases, predominantly on junior rates of pay, and were generally vulnerable and at risk of exploitation in their employment. After 11 April 2006, the industrial instrument which applied to these employees was clearly known to the respondent. Yet the respondent was reckless in failing to ensure the relevant instruments were complied with; I do not accept that after this date, the respondent was unaware of what the requirements of those instruments were. In consideration of the business transmission coinciding with the introduction of the Work Choices legislation, the financial position of the venture and the composition of the employees involved, I believe that the penalty should represent a significant deterrence without being oppressive. I therefore reduce the maximum penalty by 50%. Due to the admissions made by the respondent, I will reduce it by a further 25% in recognition of the avoidance of litigation to establish liability.

3. I apportion the total of $49,500 in the following way.  With the exception of clause 3.5 of the Pulp Agreement to which a reduction should apply, the remaining breaches should warrant equal penalty and I allocate $9,000 to each.  In the case of clause 3.5, where there is an overlap as discussed at [42] and [45] above, this warrants a further reduction to $4,500.

4. Section 841 of the Workplace Relations Act provides that:

   841   Application of penalty

   A court that imposes a pecuniary penalty under this Act (other than a penalty for an offence) may order that the penalty, or a part of the penalty, be paid:

   (a)     to the Commonwealth; or

   (b)     to a particular organisation or person.

   As Ms Cotis is an officer of the Commonwealth and made this application in that capacity, it is appropriate that the penalty be paid to the Commonwealth.  I will give Pow Juice a period of 60 days in which to pay the penalty, bearing in mind the submission by its counsel in respect of its financial position.  I will allow a period of 14 days for the respondent to make any submissions on the time for payment and whether payment may be made in instalments.  If no submissions are filed within this 14 day period, then an order for the time for payment will be entered with the total penalty to be paid within 60 days from the date of this judgment.

Conclusion

1. The quantum of the under payment in this case is identified as over $5,019 for the 22 employees affected.  Approximately $3,500 of the total was not rectified until this Court made orders on 31 August 2006.  Whilst they may not appear to be large amounts, the underpayments and the circumstances were of significance.  The employees in question were not employed full time in high paying positions.  They were working only on part time or casual bases and were not receiving large amounts of remuneration.  Therefore, in comparison to the amounts they were entitled to under the relevant industrial instrument, the underpayments were significant.  Over the weeks in which the contraventions occurred, some of the underpayments were low; however, the highest underpayment was in the order of 74%.  Others were 54%, 33% and 26.5%.  For 8 of the 22 employees, the amounts underpaid were in excess of 25% of the total monies owed to them.  This was not the subject of any contradiction nor was it challenged in cross-examination.  The employees at the relevant time were either children or young adults, some of whom were working in their first job.  As a vulnerable group of employees, they were clearly persons who would not have been experienced in workplace matters or their rights under the law, and persons who were potentially capable of being taken advantage of.  This is to be contrasted with a workforce who might have been employed for many years, possibly belong to a union and who would have fair knowledge of their rights and be able to stand up for themselves.  The vulnerability of this group, and the notion that young adults and children were deprived of their legal entitlement, was of significance when I determined the quantum of the special deterrent.

2. However, I believe that there are a number of matters that must count in favour of the respondent in mitigation of the penalty.  The respondent did make admissions which avoided the need for a hearing on whether the breaches had occurred and I have reduced the penalty amount.  Mr Dowling in cross-examination did volunteer an apology on behalf of the company for its conduct.  This apology was not actually in the respondent’s submissions or in evidence and did contain a number of qualifications.  Even so, I gave the respondent some benefit for the apology.  I also acknowledge that there was a period in which some doubt existed about the new legislation and also because of the Federal Government’s announcement that there would be some leniency in relation to Work Choices.  There was publicity which indicated that a moratorium would apply to complex compliance issues during the transition period.  I am not satisfied that the issue in this case necessarily comes within that moratorium.  However, I will give the respondent the benefit of the doubt that difficulties did exist during the initial period of introduction.  Therefore, up until the first default notice on 19 April 2006, I will make no penalty.  After that date, the requirement for payment to all employees of Pow Juice was clear and set out in the Pulp Agreement.  The failure to revert to those provisions until the new AWA regime became available has not been explained by Pow Juice.  The breaches persisted even after repeated communication from the Office of Workplace Services.

I certify that the preceding eighty-three (83) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.

Associate: 

Date:  15 February 2007