Fair Work Ombudsman v Adadn Pty Ltd
[2021] FCCA 756
•15 April 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Fair Work Ombudsman v ADADN Pty Ltd [2021] FCCA 756
File number(s): BRG 623 of 2020 Judgment of: JUDGE JARRETT Date of judgment: 15 April 2021 Catchwords: INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – amount of penalty – failure to comply with order of Fair Work Commission. Legislation: Fair Work Act 2009 (Cth), ss 3(e), 14, 382, 387, 392, 394, 405, 539, 545(1), 545(2), 546(1), 547(2), 550(1), 550(2), 559(2)
Federal Circuit Court Act 1999 (Cth), ss 16, 76
Federal Circuit Court Rules 2001 (Cth), rr 4.03, 4.04, 6.01, 13.03A(2), 13.03A(2)(b)(iii), 13.03B(2)(c)
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Fair Work Ombudsman v Port Douglas Investments As Trustee For The Theo Sourlos Family Trust & Anor [2018] FCCA 488
Fair Work Ombudsman v Soma Kitchen Pty Ltd (No 2) [2020] FCCA 2583
Fair Work Ombudsman v Wedderburn Petroleum Pty Ltd (No. 2) [2015] FCCA 2750
Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290
Mayberry v Kijani Investments Pty Ltd t/as Trustee for the Dawe Investments Trust Subway Wallsend trading as Subway [2011] FCA 1238
Number of paragraphs: 44 Date of last submission/s: 9 April, 2021 Date of hearing: 9 April, 2021 Place: Brisbane Counsel for the Applicant: Mr McKechnie Solicitor for the Applicant: Office of the Fair Work Ombudsman The First Respondent: No appearance The Second Respondent: No appearance ORDERS
BRG 623 of 2020 BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: ADADN PTY LTD ACN 619 272 374
First Respondent
STEVE DURMAZ
Second Respondent
ORDER MADE BY:
JUDGE JARRETT
DATE OF ORDER:
15 APRIL 2021
THE COURT DECLARES THAT:
1.Based on the admissions which the first respondent is deemed to have made by reason of its default, pursuant to rule 13.03A(2) of the Federal Circuit Court Rules 2001 (Cth), the first respondent contravened s.405 of the Fair Work Act 2009 (Cth) by contravening a term of an order made by the Fair Work Commission on 7 May, 2020 pursuant to s.392 of the Fair Work Act 2009 (Cth); and
2.Based on the admissions which the second respondent is deemed to have made by reason of his default, pursuant to rule 13.03A(2) of the Federal Circuit Court Rules 2001 (Cth), the second respondent was, for the purposes of s.550(1) of the Fair Work Act 2009 (Cth) involved in the contravention by the first respondent of s.405 of the Fair Work Act 2009 (Cth) referred to in declaration 1 hereof.
THE COURT ORDERS THAT:
3.Judgment be, and hereby is, entered for the applicant against the first respondent and the second respondent pursuant to rule 13.03B(2)(c) of the Federal Circuit Court Rules 2001 (Cth) by reason of the first and second respondents default.
4.Pursuant to s.545(2) of the Fair Work Act 2009 (Cth), within 28 days of the date of these orders the first respondent pay:
(a)the sum of $34,590.00 to the applicant; and
(b)the sum of $2,052.00 to Mr Jose Hilario’s nominated superannuation fund.
5.Pursuant to s.547(2) of the Fair Work Act 2009 (Cth) that the first respondent pay interest to the applicant at the applicable pre-judgment rate on the amount in order 4(a) above within 28 days of the date of these orders.
6.The applicant distribute the amounts referred to in orders 4(a) and 5 above to Mr Jose Hilario within 28 days of receipt.
7.Pursuant to s.546(1) of the Fair Work Act 2009 (Cth):
(a)the first respondent pay a pecuniary penalty of $45,000.00 to the Commonwealth within 28 days of this order; and
(b)the second respondent pay a pecuniary penalty of $8,000.00 to the Commonwealth within 28 days of this order;
in respect of the contraventions of s.405 of the Fair Work Act 2009 (Cth) the subject of the declarations 1 and 2 herein.
REASONS FOR JUDGMENT
JUDGE JARRETT:
A person to whom an order made under Part 3-2 of the Fair Work Act (which deals with unfair dismissal) applies must not contravene a term of that order: s.405 of the Fair Work Act 2009 (Cth).
On 7 May, 2020 a Deputy President of the Fair Work Commission made orders pursuant to s.392 of the Fair Work Act (which is found within Part 3-2 of that Act) against the first respondent that required it to pay to Mr Jose Hilario, a former employee of the first respondent, the gross amount of $34,590.00 and to pay into Mr Hilario’s nominated superannuation fund, superannuation contributions of $2,052.00. The payments were to be made by 28 May, 2020. The payments were not made.
This proceeding concerns the first respondent’s contravention of s.405 of the Fair Work Act constituted by its failure to comply with the order of the Fair Work Commission I have just recited. It also concerns the second respondent’s involvement in the contravention.
This proceeding was commenced on 1 December, 2020 by an application and statement of claim. The first respondent was served with the initiating documents on 7 December, 2020. They were mailed to the registered address of the first respondent. The second respondent was personally served with the initiating documents on 10 December, 2020.
BACKGROUND
The first respondent employed Mr Hilario on a full-time basis as a carpenter between 20 June, 2017 and 27 September, 2019. His employment was terminated by the first respondent and on 2 October, 2019 Mr Hilario lodged an application for an unfair dismissal remedy in the Fair Work Commission pursuant to s.394 of the Fair Work Act in respect of the termination.
On 7 May, 2020 the Fair Work Commission found that:
(a)Mr Hilario was protected from unfair dismissal within the meaning of s.382 of the Fair Work Act;
(b)the termination was harsh, unjust or unreasonable within the meaning of s.387 of the Fair Work Act;
(c)reinstatement of Mr Hilario was inappropriate; and
(d)an order for payment of compensation was appropriate in the circumstances.
Consequently, the Fair Work Commission ordered that the first respondent pay Mr Hilario compensation of $34,590.00 and superannuation contributions of $2,052.00 by 28 May, 2020.
The order was provided to the first respondent by the Fair Work Commission on 7 May, 2020 by email. The first respondent’s appeal rights have been exhausted.
The first respondent did not make the required payments to Mr Hilario by 28 May, 2020 or at all and it did not otherwise comply with the order. The Commission’s order was subsequently amended on 16 June, 2020 and a copy given to the first respondent.
From May to July, 2020 the applicant conducted an investigation into the first respondent after receiving a request for assistance from Mr Hilario. On 10 July, 2020 a Fair Work Inspector had a conversation with the second respondent. The second respondent said that the first respondent could not make the payments required by the Commission’s order. Soon thereafter on 16 July, 2020 the Fair Work Inspector sent a letter to the respondents in relation to the first respondent’s failure to comply with the order. The letter recorded the inspector’s finding that the first respondent had contravened the Fair Work Act. The letter required the first respondent to make the payments ordered by the Fair Work Commission by 30 July, 2020.
The respondents took no action on the demand and so, on 21 August, 2020 the Fair Work Inspector sent a final reminder letter to the respondents. The letter required a response by 31 August, 2020. None was forthcoming.
This proceeding was commenced and served upon the respondents as I have set out above. On 12 February, 2021 I made orders for the respondents to file a notice of address for service and a response and defence in the proceedings. Neither respondent complied with those orders. There has been no engagement by the respondent with the proceeding.
DEFAULT JUDGMENT
The applicant applies for default judgment.
Rule 13.03B(2)(c) of the Federal Circuit Court Rules 2001 (Cth) permits the Court to give judgment against a respondent who is in default in a proceeding which was commenced by an application supported by a statement of claim for the relief that:
(a)the applicant appears entitled to on the statement of claim; and
(b)the Court is satisfied it has the power to grant.
An order for default judgment under FCCR 13.03B(2)(c) can be made where there is a basis for the relief sought by the applicant on the face of the statement of claim. There is no requirement for proof by way of evidence of the applicant’s claim. However, where discretionary relief is claimed, the Court may receive evidence relevant to the exercise of its discretion.
On the evidence before me, I find that neither respondent has:
(a)satisfied the applicant’s claim;
(b)filed a notice of address for service in accordance with FCCR 6.01;
(c)filed a response and any defence in accordance with FCCR 4.03 and 4.04 ;
(d)complied with an order of the Court in the proceeding in accordance with FCCR 13.03A(2)(b)(iii), being the February orders to file a notice of address for service and a response and defence in the proceedings; and
(e)defended the proceedings with due diligence.
I find that the respondents are in default for the purposes of FCCR 13.03A(2) and that the discretion to give judgment for the applicant in the proceedings has been enlivened.
The statement of claim alleges the facts I have set out above concerning Mr Hilario’s employment with the first respondent, the termination of his employment and the facts leading to the Fair Work Commission order. It alleges non-compliance with that order. It also alleges that:
(a)the first respondent is and was a national system employer within the meaning of s.14 of the Fair Work Act; and
(b)the second respondent:
(i)was the sole director and secretary of the first respondent;
(ii)was responsible for the overall operation, management and control of the first respondent;
(iii)was the person responsible for ensuring that the first respondent complied with its legal obligations under the Fair Work Act;
(iv)had actual knowledge of the Fair Work Commission order and that the Fair Work Commission order applied to the first respondent;
(v)had actual knowledge that the first respondent contravened a term of the Fair Work Commission order; and
(vi)was an intentional participant in the first respondent’s failure to comply with the Fair Work Commission order.
The facts alleged by the applicant in the statement of claim establish that the first respondent failed to comply with an order of the Fair Work Commission. That is a contravention of s.405 of the Fair Work Act.
Section 405 of the Fair Work Act is a civil remedy provision as prescribed by s.539 of the Fair Work Act. The applicant is able to apply to the Court for orders in relation to contraventions of a civil remedy provision. She has standing to bring this proceeding.
Relevantly, the statement of claim seeks the following relief:
(a)declarations that:
(i)the first respondent contravened s.405 of the Act by contravening a term of the Fair Work Commission order; and
(ii)the second respondent was involved, within the meaning of s.550(2) of the Act, in the first respondent’s contravention of s.405 of the Act;
(b)an order pursuant to s.545(2) of the Act, that the first respondent, within 28 days of the Court’s orders, pay:
(i)the sum of $34,590.00 to the applicant; and
(ii)the sum of $2,052.00 to the employee’s nominated superannuation fund;
(c)an order pursuant to s.547(2) of the Act that the first respondent pay interest to the applicant at the applicable pre-judgment rate on $34,590.00 within 28 days of the Court’s orders;
(d)an order that the applicant distribute the amounts ordered to be paid to Mr Hilario to him within 28 days of receipt; and
(e)an order pursuant to s.546(1) of the Act that the first and second respondents pay pecuniary penalties to the Commonwealth in respect of the contraventions within 28 days of the Court’s orders.
Pursuant to s.545(1) of the Fair Work Act, the Court may make any order it considers appropriate if it is satisfied that a person has contravened a civil remedy provision of the Fair Work Act. The orders that the Court may make include:
(a)declarations, pursuant to s.16 of the Federal Circuit Court Act 1999 (Cth);
(b)pecuniary penalties, pursuant to s.546(1) of the Fair Work Act;
(c)an order awarding compensation for loss that a person has suffered because of a contravention of the Fair Work Act, as provided in s.545(2) of the Fair Work Act;
(d)an order for an amount of interest in relation to an amount that a person was required to pay under the Fair Work Act, as provided in s.547(2) of the Fair Work Act and s.76 of the FCC Act; and
(e)an order for an employer to pay an amount to the Commonwealth, where the employer is unable to locate employees it is ordered to pay an amount to, as provided in s.559(2) of the Fair Work Act.
Pursuant to s.76 of the FCC Act, the Court may order interest at such rate, and for such period, as the Court sees fit. The applicant submits that it would be appropriate for interest to be applied for the period 1 December, 2020 being the date that the proceedings were commenced, to the date default judgment is entered. I accept that submission.
I am satisfied that the applicant has an entitlement to the relief sought in the statement of claim. I am satisfied that the Court has power to grant the relief sought by the applicant in the statement of claim. The applicant has established that the discretion to grant judgment has arisen on the facts set out above. As a matter of discretion, I am satisfied that it is appropriate to give judgment against the respondents pursuant to FCCR 13.03B(2)(c).
Accordingly, I will make declarations and orders to the following effect:
(a)Order that judgment be entered for the applicant against the first respondent and the second respondent pursuant to rule 13.03B(2)(c) of the Federal Circuit Court rules 2001 (Cth) and for that purpose:
(b)Declare that:
(i)the First Respondent contravened s.405 of the Fair Work Act by contravening a term of an order made by the Fair Work Commission on 7 May, 2020 pursuant to s.392 of the Fair Work Act 2009 (Cth); and
(ii)the Second Respondent was involved, within the meaning of s.550(1) of the FW Act, in the contravention by the First Respondent of s.405 of the Fair Work Act 2009 (Cth) referred to in the preceding declaration);
(c)Further order that:
(i)pursuant to s.545(2) of the Act, the first respondent, within 28 days of the Court’s orders, pay:
(A)the sum of $34,590.00 to the applicant; and
(B)the sum of $2,052.00 to Mr Hilario’s nominated superannuation fund;
(ii)pursuant to s.547(2) of the Act that the first respondent pay interest to the applicant at the applicable pre-judgment rate on the amount in paragraph 25(c)(i)(A) above within 28 days of the Court’s orders;
(iii)he applicant distribute the amounts referred to in paragraphs 25(c)(i)(A) and (c)(ii) above to Mr Hilario within 28 days of receipt; and
(iv)pursuant to s.546(1) of the Act:
(A)the first respondent pay a pecuniary penalty in respect of the contravention; and
(B)the second respondent pay a pecuniary penalty in respect of the contravention.
It remains to assess the penalties to be imposed upon the respondents for the contravention set out above.
PENALTIES
Specific and general deterrence is the primary objective for the imposition of civil penalties: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at 506, [55]; 513, [79]. The “principal object” of deterrence is achieved where a penalty has the necessary “sting or burden” to secure the specific and general deterrent effects that are the raison d’etre of its imposition: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [116].
The maximum penalty that the Court may impose in respect of the contravention in this case is $63,000.00 in respect of the first respondent and $12,600.00 in respect of the second respondent.
A contravention of s.405 of the Fair Work Act occurs when there are successful proceedings in the Fair Work Commission and then a failure to comply with an order of the Fair Work Commission with an accompanying exhaustion of appeal rights. Thus, in the circumstances of the present case, there has already been an adjudication of the rights of the employer and employee concerning the underlying complaint by the employee against the employer.
The first respondent’s failure to comply with the Fair Work Commission order demonstrates a wilful disregard of the Fair Work Commission’s authority and integrity. That is significant because it “signifies a refusal to accept the umpire’s decision. It should not go unpunished”: Mayberry v Kijani Investments Pty Ltd t/as Trustee for the Dawe Investments Trust Subway Wallsend trading as Subway [2011] FCA 1238 at [20]. Deliberate defiance of an order of the Fair Work Commission is a serious matter. In Fair Work Ombudsman v Port Douglas Investments As Trustee For The Theo Sourlos Family Trust & Anor [2018] FCCA 488 the Court observed at [43] that the overriding consideration in determining penalty was the “deliberate defiance of an order of the Fair Work Commission”. It further observed at [46]:
The Court must, in imposing penalty, make a very loud statement that the Fair Work Commission must be respected. Section 405 must be a section by which the Court shows its absolute displeasure at any disrespect shown by any party towards the Fair Work Commission.
Further, in Fair Work Ombudsman v Wedderburn Petroleum Pty Ltd (No. 2) [2015] FCCA 2750 at [41], the Court accepted the applicant’s submissions that “the potential ramifications for the enforcement of minimum standards of allowing unilateral refusal to comply with the umpire’s decision to go without sanction warrants consideration of a significant penalty.” I accept that proposition.
In this matter, the Fair Work Commission order has still not been complied with (more than 9 months after it was made) despite the first respondent having multiple opportunities to comply and to rectify its noncompliance.
The applicant submits that one of the principal objects of the Fair Work Act is “…protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms”: s.3(e) of the Act. She submits that the respondents’ conduct undermines this fundamental object. I accept those submissions. I also accept that leaving the contravention unaddressed would send a message to employers that compliance with a Fair Work Commission order is optional and would further undermine the accessible and effective procedures available for the resolution of disputes.
The second respondent was the sole director, secretary and operative and controlling mind of the first respondent and was responsible for ensuring that the first respondent complied with the Fair Work Commission order. This is a matter in which the senior management of the first respondent was intricately involved in the contravention. I accept that penalties should be imposed at a meaningful level to reflect the second respondent’s involvement in, and authorisation of, the first respondent’s contravention.
Mr Hilario has not received the benefit of the action that the first respondent was required to take in relation to the Fair Work Commission order. He has not been paid the compensation of $34,590.00 to which he is entitled or his superannuation contributions of $2,052.00. These are not trifling amounts.
There is no evidence currently before the Court from the first respondent relating to the size of the business or its financial circumstances.
The evidence shows that the first and second respondents’ engagement with the applicant during her investigation was limited. They did not cooperate with the applicant during this proceeding.
I accept that the first and second respondents have shown no contrition and have not acknowledged the loss suffered by Mr Hilario. The Respondents have also demonstrated a complete lack of respect to the applicant as the regulator and the Fair Work Commission.
Contraventions of orders made by statutory bodies vested with the function to make such orders undermines the workplace relations regimes as a whole and displays a disregard for statutory obligation. It is necessary that any penalty fixed for the present contraventions must be fixed at such a level that it is not seen by others as just “the cost of doing business”: Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 at [27]. In order to be useful as a general deterrent, a penalty “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”: Fair Work Ombudsman v Soma Kitchen Pty Ltd (No 2) [2020] FCCA 2583 at [53].
Specific deterrence is also important in the present case. Whilst I note that there is no evidence that either respondent has been found to have contravened the Fair Work Act in the past and this appears to be the first time either respondent has been before the Court for contravening the Fair Work Act, nonetheless, the first respondent is still registered and has demonstrated a disregard for its obligations under Commonwealth workplace laws by failing to comply with the Fair Work Commission Order and failing to engage with the applicant during the investigation. There is a need to impress upon the respondents that the Court will not tolerate the contravening conduct, and penalties in this matter therefore ought to be imposed at a meaningful level.
The applicant recommends that the following penalties are appropriate:
(a)in respect of the first respondent, a penalty of $50,400.00 being 80% of the applicable maximum penalty; and
(b)in respect of the second respondent, a penalty of $10,080.00 being 80% of the applicable maximum penalty.
The penalties imposed must not be crushing or oppressive and they must be proportionate to the offending behaviour and the seriousness of the conduct engaged in by the first respondent and the second respondent. Maximum penalties are reserved for the most serious of contraventions.
Having regard to the matters I have referred to above, I assess the penalties for each respondent as follows:
(a)in respect of the first respondent, a penalty of $45,000.00; and
(b)in respect of the second respondent, a penalty of $8,000.
I will make orders accordingly.
I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Jarrett delivered on 15 April, 2021. Associate:
Dated: 15 April 2021
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