Director of the Fair Work Building Industry Inspectorate v Giovanni Italiano

[2013] FCCA 530

FEDERAL CIRCUIT COURT OF AUSTRALIA

DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE v GIOVANNI ITALIANO [2013] FCCA 530

Catchwords:
INDUSTRIAL LAW – contravention – penalty – agreed statement of facts – agreed penalty.

Legislation:
Fair Work Act 2009 ss.12, 13, 14(1), 44(1), 61, 87(1), 87(2), 90(2), 535(1), 526(1), 545(1), 545(2)(b), 546(1), 550
Fair Work (Building Industry) Act 2012 ss.4(1), 16
Building and Construction General Onsite Award 2010 cls.19.1(a), 20.1, 21.2, 25, 38.2(a), 38.2(b)

Cases cited:
Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665; (2008) ASAL 55-176; (2007) ATPR 42-138; [2006] FCA 1427
Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8
Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993; [2004] FCAFC 72
Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412

Applicant: DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE

Respondent: GIOVANNI ITALIANO

File number: PEG 274 of 2012

Judgment of: Judge Riley

Hearing date: By way of written submissions

Date of last submission: 24 May 2013

Delivered at: Melbourne

Delivered on: 18 June 2013

REPRESENTATION

Advocate for the Applicant: Jeremy King

Solicitors for the Applicant: Director of the Fair Work Building Industry Inspectorate

Advocate for the Respondent: Derek Chia

Solicitors for the Respondent: Chan Galic Barristers & Solicitors

Having regard to the admissions made by the respondent in the statement of agreed facts and admissions filed in this proceeding:

DECLARATION:

Pursuant to s.545(1) of the Fair Work Act 2009 the respondent has contravened s.44(1) of the Fair Work Act 2009.

ORDERS:

1. Pursuant to s.546(1) of the Fair Work Act 2009, the respondent pay a pecuniary penalty of $1,800 in respect of the contravention of s.44(1) of the Fair Work Act 2009, such penalty to be payable by 31 January 2014.

2. Pursuant to s.545(1) and s.545(2)(b), the respondent pay Mr Gerges compensation in the sum of $7,500 for loss suffered by Mr Gerges as a result of the contravention of s.44(1) of the Fair Work Act 2009.

3. The compensation amount be payable by way of instalments, directly to Mr Gerges, as follows:

   (a)$500 payable by 1 May 2013;

   (b)$1000 payable by 1 June 2013;

   (c)$1000 payable by 1 July 2013;

   (d)$1000 payable by 1 August 2013;

   (e)$1000 payable by 1 September 2013;

   (f)$1000 payable by 1 October 2013;

   (g)$1000 payable by 1 November 2013; and

   (h)$1000 payable by 1 December 2013.

4. The compensation of $7,500 be reduced by any payment made to Mr Gerges under the Australian Government’s General Employee Entitlements and Redundancy Scheme.

5. There be no order as to costs.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

PEG 274 of 2012

DIRECTOR OF FAIR WORK BUILDING INDUSTRY INSPECTORATE

Applicant

And

GIOVANNI ITALIANO

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter concerns a contravention of the Fair Work Act 2009 and the compensation and penalties to be imposed for that contravention.  The parties filed a statement of agreed facts and a minute of proposed consent orders. The parties agreed that the court should declare that the respondent had contravened the Act and they agreed on the amount of the penalties that they submitted were appropriate in this case.  The parties put forward somewhat different reasons in support of the proposed orders.

2. Essentially, the respondent was the director of a company that employed a Mr Gerges.  When Mr Gerges resigned, the company did not pay him the $7,824.71 that he was owed for unused annual leave.  The respondent was involved in that failure.

3. The proposed orders and declarations were as follows:

   1.Pursuant to ss 545(1) of the Fair Work Act 2009 (FW Act), the Court declares that Mr Italiano has contravened ss 44(1) of the FW Act.

   2.Pursuant to ss 546(1) of the FW Act, the Court orders that a pecuniary penalty of $1800 be imposed on Mr Italiano in respect of the contravention of ss 44(1) of the FW Act, such penalty to be payable by 31 January 2014.

   3.Pursuant to ss545(1) and 545(2)(b), the Court orders that Mr Italiano pay the Applicant (on behalf of Mr Gerges) compensation in the sum of $7,500 for loss suffered by Mr Gerges as a result of the contravention of ss44(1) of the FW Act.

   4.The Court orders that the compensation amount at order 3 shall be payable by way of instalments, directly to Mr Gerges, as follows:

   a.      $500 payable by 1 May 2013;

   b.      $1000 payable by 1 June 2013;

   c.      $1000 payable by 1 July 2013;

   d.      $1000 payable by 1 August 2013;

   e.      $1000 payable by 1 September 2013;

   f.       $1000 payable by 1 October 2013;

   g.      $1000 payable by 1 November 2013; and

   h.      $1000 payable by 1 December 2013.

   5.The compensation amount of $7,500 at order 3 is to be reduced by any payment made to Mr Gerges under the Australian Government’s General Employee Entitlements and Redundancy Scheme.

   6.     There shall be no order as to costs.

4. Following an enquiry by the court, the parties clarified that they actually proposed that the compensation be payable directly to Mr Gerges and not to the applicant.

5. The agreed facts set out below, being paragraphs 6 to 55, are taken verbatim from the document filed by the parties.

Agreed facts

The FWBII

1. The DWFBII is:

   a)a statutory appointee of the Commonwealth appointed by the Minister for Employment and Workplace Relations by written instrument pursuant to s.16 of the Fair Work (Building Industry) Act 2012 (Cth) (FWBI Act);  and

   b)a person with standing and authority to bring these proceedings.

P&P Italiano Holdings Pty Ltd (and Directors)

1. P & P Italiano Holdings Pty Ltd (the corporation) was at all relevant times:

   a)registered under the Corporations Act 2001 (Cth) and liable to be sued in its own name;

   b)a trading corporation and, consequently, a “constitutional corporation” within the meaning of s 12 of the Fair Work Act 2009 (the FW Act) and, so far as it employs or employed an individual, a “national system employer” within the meaning of s 14(1) of the FW Act;

   c)the trustee of the P & P Italiano Family Trust;

   d)in that capacity, carrying on the business of brick and block laying on commercial and residential sites;

   e)trading under the registered business name P & P Italiano Limestone Works;

   f)trading under the business name P & P Italiano Limestone Contractors; and

   g)a building industry participant within the meaning of the FWBI Act.

2. The address of the registered office of the Corporation was at all material times Versaci’s Unit 5, 14-16 Sundercombe Street, Osborne Park WA 6017.

3. The business name P & P Italiano Limestone Works:

   a)was registered to the Corporation; and

   b)had as its principal place of business and address for service of documents Unit 7/84 Distinction Rd Wangara WA 5065.

4. Rocco Marsico (“Mr Marsico”) was at all material times a director of the Corporation.

5. The Respondent, Giovanni (John) Italiano (“Mr Italiano”) was at all material times a director of the Corporation.

6. On 20 September 2012 liquidators were appointed in respect of the Corporation.

B. Mr Hany Gerges and his employment

1. On 15 December 2008, the Corporation employed Hany Wagih Fekry Gerges (“Mr Gerges”) as a bricklayer in the on-site building, engineering and civil construction industry, under a written contract of employment (“the 2008 Contract”).

2. The terms of the 2008 Contract were contained in a letter from Mr Marsico to Mr Gerges dated 13 July 2008. The 2008 Contract was for employment for a period of four years.

3. The letter referred to the employing entity as “P & P Italiano Limestone Contractors Pty Ltd ATF the P & P Italiano Family Trust”. No such corporation exists or existed at any material time.

4. The letter indicated that Mr Marsico was a director of the employing entity.

5. Mr Marsico and Mr Italiano were, and led Mr Gerges to believe that they were, responsible for carrying on the business of Mr Gerges’ employer under the 2008 Contract.

6. Mr Gerges commenced working for the Corporation under the 2008 Contract on 3 January 2009.

7. On 10 February 2011, the Corporation employed Mr Gerges as a bricklayer in the on-site building, engineering and civil construction industry, under a second written contract of employment (“the 2011 Contract”).

8. The terms of the 2011 Contract were contained in a letter from Mr Marsico to Mr Gerges dated 10 February 2011.  The 2011 Contract was for employment for a period of four years.

9. The letter referred to the employing entity as “P & P Italiano Limestone Contractors Pty Ltd ATF the P & P Italiano Family Trust of Unit 7, 84 Distinction Road, Wangara WA 5065”. No such corporation exists or existed at any material time.

10. The letter indicated that Mr Marsico was a director of the employing entity.

11. Mr Marsico and Mr Italiano were, and led Mr Gerges to believe that they were, responsible for carrying on the business of Mr Gerges’ employer under the 2011 Contract.

12. Under the 2011 Contract the employee rate of pay was a base salary of $60,424 per annum for a 38 hour week.

13. Mr Gerges’ employment pursuant to each of the 2008 Contract and the 2011 Contract was covered by the Building and Construction General Onsite Award 2010 (“the Award”).

14. Mr Gerges fell within the CW/ECW 3 classification under the Award.

15. Mr Gerges was a “national system employee” within the meaning of s 13 of the FW Act and a building industry participant within the meaning of ss 4(1) of the FWBI Act.

16. Mr Gerges’ employment under the 2008 Contract and the 2011 Contract was continuous.

17. In the course of his employment under the 2008 Contract and the 2011 Contract, Mr Gerges was required to work five days per week on construction work at construction sites located within a 50km radius of the Perth GPO.

18. During the period of his employment under the 2008 Contract and the 2011 Contract, Mr Gerges took a total of twenty days’ (152 hours’) paid annual leave.

19. Mr Gerges terminated his own employment. Mr Gerges’ last day of work for the Corporation was 4 July 2011.

20. As at the termination of his employment, Mr Gerges had 227.95 hours of untaken annual leave.

21. When Mr Gerges’ employment ended, the Corporation was required (in accordance with the provisions of the FW Act particularised below) to pay him $7,824.71, being the amount that would have been payable to him had he taken the period of untaken annual leave.

C. Provisions of legislation and the Award relating to payment of leave

1. Subsection 44(1) of the FW Act provides, and at all material times provided, that an employer must not contravene a provision of the National Employment Standards. The National Employment Standards are constituted by Divisions 3 to 12 of Part 2-2 of the FW Act (see s 61 of the FW Act).

2. Subsection 87(1) of the FW Act relevantly provides, and at all material times relevantly provided, that for each year of service with his or her employer, an employee is entitled to four weeks of annual paid leave. Subsection 87(2) provides that an employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

3. Subsection 90(2) of the FW Act provides, and at all material times provided, that if, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.

4. Clause 38.2(a) of the Award, as in force on 4 July 2011, provided that an employee under the Award, before going on annual leave, must be paid, in advance, the amount which they would have received for working ordinary time hours if they had not been on leave.

5. Clause 38.2(b) of the Award, as in force on 4 July 2011, provided that, in addition to the payment prescribed in clause 38.2(a) of the Award, an employee must receive during a period of annual leave a loading of 17.5% calculated on the rates, loadings and allowances prescribed by (relevantly to Mr Gerges’ employment):

   a)clause 19.1(a)—Minimum wages;

   b)clause 21.2—Industry allowance;

   c)clause 20.1—Tool and employee protection allowance (applicable to Mr Gerges by reason of the matter pleaded at paragraph [19] above);

   d)clause 25—Fares and travel patterns allowance (applicable to Mr Gerges by reason of the matter pleaded at paragraph [29] above).

6. Clause 38.2(b) of the Award further provides that the loading will also apply to proportionate leave on lawful termination.

D.Contravention of ss.41(1) of the FW Act

1. Upon the termination of Mr Gerges’ employment, the Corporation did not pay him $7,824.71 for untaken annual leave and did not pay him any amount for untaken annual leave.

2. By reason of the matters pleaded at paragraphs [34 to 39] above, the Corporation contravened ss. 44(1) of the FW Act.

E. Involvement of Italiano in the contravention of ss.44(1) of the FW Act

1. At all times from at least February 2011 onwards, Mr Italiano:

   a)was responsible for dealing with matters relating to Mr Gerges’ employment on behalf of the Corporation; and

   b)directed Mr Gerges to perform work in the course of his employment; and

   c)was in a position to cause the Corporation to pay to Mr Gerges outstanding entitlements due to him.

2. On or about 1 June 2011, Mr Gerges gave notice of his intention to terminate his employment with the Corporation by informing Mr Italiano of that fact. At Mr Italiano’s request, Mr Gerges continued to work for the Corporation until 4 July 2011.

3. At all times from 4 July 2011 onwards, Mr Italiano knew that Mr Gerges’ employment by the Corporation had ended on 4 July 2011.

4. At all times from at least 19 March 2012 onwards, Mr Italiano knew that Mr Gerges’ had not been paid the amount owing to him in respect of annual leave on the termination of his employment:

   a)By letter dated 28 February 2011 (but sent on or about 28 February 2012) and addressed to “Italiano P & P Family Trust T/A P & P Italiano Limestone Contractors”, Jo Washington-King (“Ms Washington-King”), then an ABC Inspector in the Office of the Australian Building and Construction Commissioner, wrote to the Corporation, advising that she had determined that the Corporation had contravened ss 44, 535(1) and 536(1) of the FW Act, and requiring the Corporation to rectify the contraventions by paying Mr Gerges the amount owing to him. Ms Washington-King estimated the amount owing to Mr Gerges as $4,022.89; and

   b)On 19 March 2012, Ms Washington-King spoke to Mr Italiano by telephone. During the course of the conversation, Mr Italiano acknowledged that the Corporation had failed to make payment to Mr Gerges in respect of annual leave on the termination of his employment, and undertook to arrange for the Corporation to do so.

5. The contravention of ss 44(1) of the FW Act by the Corporation is ongoing. The amount owed to Mr Gerges remains unpaid.

6. At all times from at least 19 March 2012 onwards Mr Italiano has omitted to cause the Corporation to pay to Mr Gerges the amount owed to him.

7. By reason of the matters pleaded at paragraphs [42] to [47] above, Mr Italiano was knowingly concerned in, was a party to and/or aided, abetted, counselled or procured, the contravention of ss 44(1) of the FW Act by the Corporation, and was thus “involved in” that contravention within the meaning of s 550 of the FW Act.

F. Appropriate declarations

1. The respondent admits the following contravention on the basis of the agreed facts set out above and agree that the court should make the following declaration:

   Pursuant to ss 545(1) of the FW Act, a declaration that Mr Italiano has contravened s 44(1) of the FW Act by reason of being involved in the contravention, within the meaning of section 550 of the FW Act.

G. Appropriate penalties

1. Pursuant to ss.546(1) of the FW Act, the parties submit that penalties should be imposed by the Court (for contravention of ss44(1) of the FW Act) as follows:

   a)$1800 against Mr Italiano for his contravention of ss.44(1) of the FW Act, payable by 31 January 2014;

2. Pursuant to ss545(1) and 545(2)(b) of the FW Act an order awarding compensation payable by Mr Italiano to the Applicant (on behalf of Mr Gerges) in the sum of $7500 for loss suffered by Mr Gerges as a result of the contravention. Such order to be paid by way of the following instalments:

   a)$500 payable by 1 May 2013

   b)$1000 payable by 1 June 2013

   c)$1000 payable by 1 July 2013

   d)$1000 payable by 1 August 2013

   e)$1000 payable by 1 September 2013

   f)$1000 payable by 1 October 2013

   g)$1000 payable by 1 November 2013

   h)$1000 payable by 1 December 2013

3. The amount of $7,500 provided for in paragraph [51] is to be reduced by any payment made to Mr Gerges under the Australian Government’s General Employee Entitlements and Redundancy Scheme.

4. The Applicant to assist the Respondent in any application under the Australian Government’s General Employee Entitlements and Redundancy Scheme with respect to the wages of Hany Gerges, irrespective of the success of such application.

5. The parties further submit that the above penalties in all the circumstances are appropriate and within the permissible range.

6. There shall be no order as to costs.

Declarations

1. There has been authority in the past to the effect that it is not appropriate for a court to make declarations based on admissions.  However, there is more recent authority that in certain cases it is appropriate for the court to make declarations in such circumstances. 

2. In particular, in Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665; (2008) ASAL 55-176; (2007) ATPR 42-138; [2006] FCA 1427, Kiefel J, at paragraphs 52 to 59, considered the rationale for the previous approach taken by the courts. Her Honour came to the view that the previous approach may no longer be warranted, particularly in public interest cases such as this, and particularly if the declarations are preceded by a statement that they are made upon admissions.

3. In all the circumstances of this case, I am satisfied that it is appropriate to make the declarations sought by the applicant on the basis of the admissions made by the respondents, provided that the declarations are preceded by an appropriate preamble.   Those declarations are:

   Pursuant to s.545(1) of the Fair Work Act 2009, the respondent has contravened s.44(1) of the Fair Work Act 2009.

Court’s approach when the parties have agreed on penalty

1. When the parties have agreed on penalties, the court is by no means bound to impose the agreed penalties.  The court should itself consider the permissible range of penalties in all of the circumstances of the case.  If the agreed penalties fit within the permissible range, it would be appropriate for the court to make orders imposing those penalties.

2. This was explained in Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993; [2004] FCAFC 72 at [53] to [60], albeit in the context of a trade practices case. Those paragraphs are as follows:

   53. The following propositions emerge from the reasoning in NW Frozen Foods[1]:

   [1] [1996] FCA 1134; (1996) 71 FCR 285

   (i)     It is the responsibility of the Court to determine the appropriate penalty to be imposed under s 76 of the TP Act in respect of a contravention of the TP Act.

   (ii)     Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another.

   (iii     There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravenor have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed.

   (iv)    The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise (such as the ACCC’s views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more "subjective" matters.

   (v)     In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so.

   (vi)    Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court’s view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range.

   54 Five further points should be made.

   55 First, the rationale for giving weight to a joint submission on penalty is said by the Court to be the savings in resources for the regulator and the Court, as well as the likelihood that a negotiated resolution will include measures designed to promote competition. As Jeremy Thorpe points out, a related advantage is that the savings in resources can be used by the regulator to increase the likelihood that other contraveners will be detected and brought before the courts. This has the effect of increasing deterrence which is one of the principal justifications, if not the only justification for imposing civil penalties under the TP Act or the Sites Act: J Thorpe, "Determining the Appropriate Role for Charge Bargaining in Part IV of the Trade Practices Act" (1996) 4 Comp & Cons LJ 69, at 72-74. Of course the arguments in favour of negotiated settlements have to take account of the fact that it is the Court that bears the ultimate responsibility for determining the appropriate penalty.

   56 Secondly, the sixth proposition drawn from the reasoning in NW Frozen Foods does not mean, in our opinion, that the Court must commence its reasoning with the proposed penalty and limit itself to considering whether that penalty is within the permissible range. A Court may wish to take that approach. However, it is open to a Court, consistently with the reasoning in NW Frozen Foods, first to address the appropriate range of penalties independently of the parties’ proposed figure and then, having made that judgment, determine whether the prepared penalty falls within the range.

   57 Thirdly, as has been noted, the appellant in NW Frozen Foods admitted contravening the TP Act and had reached agreement with the ACCC upon the facts to be put before the Court. There was no suggestion that the admissions or statement had been tailored or modified to reflect the difficulties faced by the ACCC in proving its case. The Full Court therefore acted on the basis of clear admissions and a detailed statement of agreed facts setting out how the contraventions had occurred. Accordingly, the decision is consistent with the views expressed by the New Zealand High Court in Milk Corporation. Those views are, with respect, correct in principle.

   58 Fourthly, as the Full Court in Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [2002] ATPR 41-851, has pointed out, the regulator should always explain to the Court the process of reasoning that justifies a discounted penalty. In that case, the ACCC and two contravenors produced an agreed statement of facts, supplemented by affidavit evidence, but they disagreed as to the appropriate penalty. The trial Judge had previously imposed agreed penalties on other offenders, which the Full Court apparently thought were somewhat low (at 44,543 [51]), and had taken these penalties into account in determining the appropriate penalties to be imposed on the two remaining contravenors. The Full Court made the following observations (at 44,549 [56]):

   "[w]here the Commission proposes to the Court an agreed penalty which is calculated taking into account a substantial discount from what would otherwise be considered the appropriate penalty so as to reflect a degree of co-operation, it would be desirable that the Commission disclose the process by which the discounted penalty has been arrived at. In particular, it would be of assistance to the Court, particularly where there are other proceedings pending, to hear submissions on the range of appropriate penalties and the discount which it is proposed should be allowed to take into account the level of co-operation afforded by the offender. Had that been done in the present case, the learned primary judge would have been able to form a view as to the appropriate range of penalty absent co-operation and have then been in the position to calculate an appropriate discount to take into account the exceptional level of co-operation afforded by QIS [one of the offenders]. It is only in this way that a comparison could properly be made between the penalty payable where the offender had offered a high level of co-operation and the penalty payable where the level of co-operation was of a lesser magnitude."

   59 These observations are consistent with the approach in NW Frozen Foods. The Full Court in Ithaca Ice was plainly aware of the reasoning in NW Frozen Foods, since it considered the factors discussed in that case as relevant to the quantum of penalty. It follows that a court considering an "agreed" penalty is entitled to expect the regulator to explain the basis on which a discount from the otherwise appropriate penalty has been calculated having regard to the contravenor’s co-operation and, for that matter, other relevant factors. (For endorsement of this approach, see Australian Law Reform Commission, Principled Regulation: Federal Civil and Administrative Remedies in Australia (ALRC 95, 2002), pars 30.81 ff.)

   60 Fifthly, there is nothing in NW Frozen Foods that is inconsistent with any of the following propositions:

   (i) The Court, if it considers that the evidence or information before it is inadequate to form a view as to whether the proposed penalty is appropriate, may request the parties to provide additional evidence or information or verify the information provided. If they do not provide the information or verification requested, the Court may well not be satisfied that the proposed penalty is within the range.

   (ii) If the absence of a contradictor inhibits the Court in the performance of its duties under s 76 of the TP Act, s 13 of the Sites Act, or similar legislation, it may seek the assistance of an amicus curiae or of an individual or body prepared to act as an intervenor under FCR, O 6 r 17.

   (iii)If the Court is disposed not to impose the penalty proposed by the parties, it may be appropriate, depending on the circumstances, for each of them to be given the opportunity to withdraw consent to the proposed orders and for the matter to proceed as a contested hearing.

Maximum penalty

1. The maximum penalty for the respondent’s breach $6,600.

Approach to determining penalty

1. The proper approach to determining penalty in cases such as this is as follows. 

2. The first step for the court is to identify the contraventions involved.  In this case, there was only one contravention, consisting of failing to pay the applicant for his unused annual leave when his employment ended.

3. The second step is for the court to consider an appropriate penalty to impose in respect of that breach.  The penalty imposed by the court should be an appropriate response to the contravenor’s conduct.[2]

   [2] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [46] (Graham J) (unreported, Full Court of the Federal Court of Australia, 20 February 2008, Gray, Graham and Buchanan JJ).

4. A convenient checklist of the factors that the court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is as follows:

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

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

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

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

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

   (f)The size of the business enterprise involved.

   (g)Whether or not the breaches were deliberate.

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

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

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

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

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

   (m) The need for specific and general deterrence.

5. The court must of course be mindful of the caution expressed by Buchanan J in Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [91] as follows:

   Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. There is no suggestion in the present case that the learned Magistrate made any relevant error in her identification of the matters which she should consider in fixing penalties.

6. The court will firstly consider the circumstances of the case under the various headings suggested by Mowbray FM, and then consider whether any other matters are relevant.

Step 1: identifying the breaches

1. As stated above, the respondent breached s.44(1) of the Fair Work Act 2009.

Step 2:   the appropriate penalty for the breach

The nature and extent of the conduct which led to the breach

1. Mr Gerges’ employment ended on 4 July 2011.  At that time, the respondent had been in charge of the day to day affairs of the company for about five months, since February 2011. The contravention consisted of one breach, being the failure to pay Mr Gerges for his unused annual leave.

The circumstances in which that conduct took place

1. The respondent submitted, and the applicant did not dispute, that:

   a)at that time, the other director of the company had ceased to concern himself with the debts of the company;

   b)the company’s financial situation was dire; and

   c)the other director had left little or no paperwork to enable the respondent to calculate the amount owing to Mr Gerges.

The nature and extent of any loss or damage sustained as a result of the breaches

1. Mr Gerges, if the breaches had not been discovered, would have lost $7,824.71 that he was entitled to as payment for annual leave he had accrued but not taken at the time his employment ended.  That is a substantial sum.

Whether there had been similar previous conduct by the respondent

1. There was no suggestion that there had been any similar conduct by the respondent in the past.

Whether the breaches were properly distinct or arose out of the one course of conduct

1. There was only one contravention.

The size of the business enterprise involved

1. The applicant accepted that the respondent’s business was a small firm operating only in the area of Greater Perth in Western Australia. Nevertheless, there is ample authority that such circumstances are no excuse for contraventions of laws providing for workplace entitlements.  Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [28]:

   No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level”: see Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd [2001] ATPR 41-815 at [13].

2. Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at [27]:

   Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s considerations of penalty. …

Whether or not the breaches were deliberate

1. The respondent claimed, and the applicant did not dispute, that the breach was at least partly due to the other director not leaving proper records.

Whether senior management was involved in the breach

1. The respondent is a director of the company.

Whether the party committing the breach has exhibited contrition, corrective action and co-operation with the authorities

1. The respondent admitted liability at mediation, which occurred two weeks before the trial was due to take place and after the applicant had filed extensive affidavit material.  The respondent has cooperated in joining with the respondent in filing an agreed statement of facts. 

2. Before reaching an agreement at mediation to pay Mr Gerges compensation, the respondent had twice agreed to pay Mr Gerges compensation but did not do so.  The respondent has now paid the first two instalments of the compensation in accordance with the agreement reached at mediation.

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

1. Clearly, the respondent in this case has not complied with minimum standards of employee entitlements.

The need for specific and general deterrence

1. In relation to specific deterrence, Gray J observed in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170 at [37] that:

   Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur.

2. In relation to general deterrence, Lander J noted in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 at [93]:

   In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217.

3. Similarly, in Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at 230-231, Finkelstein J said:

   … even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ….

4. Neither party made any express submissions about specific deterrence.  The applicant said that general deterrence had a special role because of the evidence of delay and broken promises regarding compensation.  I take that as a submission on specific deterrence.  The applicant also submitted that the penalties should be at a meaningful level to deter others who might be inclined to commit similar contraventions.

Other issues

1. The respondent submitted that he was now working for wages and would pay any amount ordered from his own earnings.

The amount of the penalty for the breach

1. The parties proposed that the court impose a compensation order of $7,500 coupled with a penalty of $1,800.  The penalty is about 27% of the statutory maximum for the contravention in question.

1. I consider that disposition to be within the range.  There will be orders accordingly.

I certify that the preceding eighty-seven (87) paragraphs are a true copy of the reasons for judgment of Judge Riley.

Date:  18 June 2013