Fair Work Ombudsman v Am Retail Solutions and Anor (No.3)

[2010] FMCA 208

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v AM RETAIL SOLUTIONS & ANOR (No.3) [2010] FMCA 208

INDUSTRIAL LAW – Practice and procedure – employers’ documents obtained during attendance by Workplace Inspectors at premises – whether demand for production of Workplace Inspector’s authority – whether evidence was improperly obtained – discretion to admit improperly obtained evidence.

Evidence Act 1995 (Cth), s.138
Workplace Relations Act 1996 (Cth), s.169

Bunning v Cross (1978) 141 CLR 54
Workplace Ombudsman v AM Retail Solutions & Anor [2009] FMCA 1046
Fair Work Ombudsman v AM Retail Solutions & Anor (No.2) [2010] FMCA 135
Parker v Comptroller-General of Customs [2007] NSWCA 348
R v Camilleri (2007) 68 NSWLR 720
R v Dalley (2002) 132 A Crim R 169

Applicant: FAIR WORK OMBUDSMAN

First Respondent: AM RETAIL SOLUTIONS (ACN 103 251 038)

Second Respondent: ADIL MAGAR

File Number: SYG 3333 of 2008

Judgment of: Smith FM

Hearing date: 16 March 2010

Delivered at: Sydney

Delivered on: 16 March 2010

REPRESENTATION

Counsel for the Applicant: Mr P Newall

Solicitors for the Applicant: FCB Lawyers

Counsel for the Respondents: Mr A Narayan

Solicitors for the Respondents: Law Partners

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 3333 of 2008

FAIR WORK OMBUDSMAN

Applicant

And

AM RETAIL SOLUTIONS (ACN 103 251 038)

First Respondent

ADIL MAGAR

Second Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. This judgment addresses an issue in the course of the hearing of this matter, in relation to which evidence and submissions were received on a voir dire, responding to an objection taken by Mr Magar to the tender of evidence by the Fair Work Ombudsman.  The general nature and previous course of these proceedings can be found in my previous interlocutory judgments (see Workplace Ombudsman v AM Retail Solutions & Anor [2009] FMCA 1046, and Fair Work Ombudsman v AM Retail Solutions & Anor (No.2) [2010] FMCA 135).

2. Mr Magar takes objection to the tender of numerous documents contained within exhibit MS1 to the affidavit of Marcel Smithers of 12 January 2010, which has otherwise been received in evidence subject to the present objection. Ms Smithers is a Fair Work Inspector, who had principal carriage of the investigation within the office of the Fair Work Ombudsman and its predecessor. The objection covers all documents copied at tabs 33, 34, 35, 36, 37 and 38 of that exhibit. These comprise copies of various employee records of Mr Magar’s company, AM Retail Solutions Pty Ltd, which came within a notice to produce prepared pursuant to s.169(2)(b)(iv) of the Workplace Relations Act 1996 (Cth).

3. The notice was signed by Ms Smithers in her then maiden name, was addressed to Mr Magar as director of the company, and was dated 8 May 2008.  It required production of the specified documents on the same day at the address which was the company’s head office.  Evidence from Ms Smithers and her colleagues depose to serving it on employees or agents of the company on that date, when the inspectors personally attended those premises.  The company’s records were then produced from a cupboard.  After further exchanges with Mr Magar’s brother Mark, and with the company’s solicitor, Mr Lalic, the inspectors were permitted to copy, on the premises, those records which were agreed to fall within the notice to produce.  

4. These employee records are of major importance, to say the least, to the Fair Work Ombudsman’s present application.  They include rostering and wage records upon which Ms Smithers has identified most of the employer’s contraventions alleged by the Fair Work Ombudsman, and upon which she has calculated underpayments to numerous employees. There is some alternative evidence of underpayments only from a handful of these employees.  Mr Magar is alleged to have been a person involved in all these contraventions, inter alia, based upon his involvement in the company’s possession and use of these records. 

5. Prior to 8 May 2008, the production of the company’s relevant employee records had, on the evidence before me, been a matter of extensive exchanges in writing, by telephone, and in personal meetings between Ms Smithers and employees or agents of the company, including Mr Mark Magar and Mr Lalic.   This included the previous service through correspondence of several notices to produce, which the company might have appeared to have attempted to evade.  The previous communications culminated in a letter dated 6 May 2008, in which Mr Lalic said that he had been instructed that none of the employment records could be produced, because they were all held within a computerised system, which “our client has been attempting to obtain access to”, but “these attempts have been unsuccessful”.  Mr Lalic’s letter said:

   In the event the technician successfully retrieves the data, we will write to you again. You may be minded to issue a further notice to produce, which our client can respond to.

6. It appears, however, that the Workplace Inspectors had information suggesting that there were relevant hard copy records held in the company’s office, and it was with that knowledge in mind that four inspectors attended the office on 8 May 2008 with the new notice to produce. 

7. Ms Smithers’ affidavit of 12 January 2010 sets out parts of the conversations occurring on that occasion with an employee, Mr Chen, then with Mr Mark Magar, and then with Mr Lalic.  The latter two are relevant to the present issue:

   45.    A short time later a male person entered the office.  We had a conversation to the following effect:

   Me:“Mark Magar?”

   Mark Magar:     “Yes.”

   Me:“Marcel Winterford from the Workplace Ombudsman.  I must advise you that anything you do or say may be used as evidence in a court, you have been offered a record of interview with the Ombudsman and anything you do or say may be used in court.”

   Mark Magar:     “I am just on the phone with my solicitor David Lalic.  What right do you have to be here?”

   Me:“We are here to investigate breached of section 819 of the Workplace Relations Act.”

   Mark Magar:     “I am going to call the police.  I am recording everything you say while you are here.”

   Me:“We have not given you permission to record us. We are here to inspect records in respect of the employees of AM Retail and speak with your employees in respect of breaches of section 819 of the Workplace Relations Act.”

   Mark Magar:     “You cannot take any records with you and you cannot go anywhere until the police arrive.  I will be taking personal action against you.”

   Me:“You are making a threat against a Commonwealth official.”

   Mark Magar then received a phone call, which he later told me was from his solicitor, Mr Lalic.  Mark Magar then said “My Solicitor is going to come to the office to speak with you”.

   46.    A short time later Mr Lalic arrived at the office.  We had a conversation to the following effect:

   Mr Lalic:“Please show me the authorisation that allows you to be here.”

   Me:“Under section 169 of the Workplace Relations Act a Workplace Inspector is entitled to enter a premises where we believe that there are documents relevant to determining whether an award or term of the Australian Fair Pay and Conditions Standard is being complied with. While on the premises we are entitled to inspect and make copies of documents produced to us. We also have the power to interview any persons while on the premises.”

   Mr Lalic:“Where is your Registrar’s notice?”

   Me:“You are confused with the right of entry provisions of the Workplace Relations Act. Workplace Inspectors are not required to get a Registrar’s notice. Section 169 of the Workplace Relations Act entitles us to enter the premises.”

   I then showed Mr Lalic a copy of the NTP.  Shortly after this Mr Lalic, Mark Magar and Mr Chan left the room.  Mr Lalic, Mark Magar and Mr Chan then returned to the office.  After a brief discussion, Mr Lalic confirmed that Inspector Craig and myself could make copies of the relevant documents on the premises and Inspector Craig and myself undertook this process in the presence of Mark Magar.

8. More extensive evidence of these events has been received today from Ms Smithers, and from the other three Workplace Inspectors in relation to these events.  Their evidence suggests that nobody has a perfect recollection of the actual words spoken on that occasion, and there is no evidence that they made contemporaneous notes.  Mr Mark Magar has not sworn an affidavit about these events.  In oral evidence, he claimed to have a recording of what was said in the conversation with him.  However, the contents of any recording has not been tendered by either party, and I am not satisfied that his version is supported by contemporaneous evidence. 

9. However, Mr Magar’s evidence of the conversations was not substantially inconsistent with Ms Smithers’ recollections of events set out above.  Mr Magar agreed with Ms Smither’s recollection that he said to her: “I am just on the phone with my solicitor, David Lalic.  What right do you have to be here?”  Mr Magar also claimed to have suggested that she was trespassing, and I find that words to this effect were probably also said by Mr Magar to Ms Smithers. 

10. On Ms Smithers’ evidence, and consistently with the evidence of all other witnesses, Mr Magar’s demand to know “what right do you have to be here”, and Mr Lalic’s request “please show me the authorisation which allows you to be here”, were both made in the context of her discussions with Mr Magar, his discussions with his solicitor on the phone, and Mr Lalic’s discussions personally with Ms Smithers, in which they discussed and queried the statutory powers of a Workplace Inspector to enter premises and seize or copy documents without prior notice to the employer.  It appears that Mr Lalic was under an impression that the legislation did not confer that power on a Workplace Inspector, and for that reason doubted Ms Smithers’ authority to enter and search. 

11. Eventually, Mr Lalic was persuaded by her that such a power was in fact given to inspectors by s.169 of the Workplace Relations Act 1996 (Cth) as it stood at the relevant time. It is clear that he then, on instructions, agreed to the copying of such of the located employee records as were covered by the notice to produce, provided that the originals did not leave the premises of the company. The Inspectors then proceeded to do that copying under his supervision, over what was presumably a lengthy period.

12. Mr Lalic subsequently sent a letter to Ms Smithers dated 13 May 2008:

    Dear Marcel

    Re: Adil Magar – AM Retail Solutions Pty Limited

    We refer to our letter to you dated 6 May 2008 and your further Notice to Produce issued to Adil Magar of A.M. Retail Solutions Pty Limited (‘AM Retail Solutions’) on 8 May 2008 returnable 11am on 8 May 2008.

    We confirm that you served the Notice to Produce on an employee of AM Retail Solutions and AM Retail Solutions granted you access to the business premises of AM Retail Solutions.  We confirm you obtained documents in response to your Notice to Produce issued 8 May 2008.

    We confirm Mark Magar attended the business premises of AM Retail Solutions and discussed the Notice to Produce and the documents produced with you.

    Mr Magar was not aware of the existence of the documents produced in response to the Notice to Produce.  It was our client’s understanding that all of the company’s documents were maintained in the MYOB system.  It was our client’s intention to obtain access to the MYOB system and produce all of the relevant documents from the MYOB system directly to you.  We confirm that Mr Magar has made enquiries with MYOB in relation to the production of the documents and the MYOB system’s failure in our client’s offices.  We have enclosed a copy of an email from MYOB to our client in relation to this issue dated 6 May 2008.

    In any event, we confirm that documents have been produced in response to the Notice of Produce dated 8 May 2008.  We assume that the documents produced satisfy the Notice to Produce in its entirety.

    Should you wish to discuss the matter further, please contact the writer.

13. It is notable that in that letter no complaint is made by Mr Lalic that the proceedings on 8 May had been attended by any illegality or irregularity. Specifically, there is no protest recorded in correspondence or other contemporaneous record that the Workplace Inspectors, and Ms Smithers in particular, had failed to comply with the requirement of s.169(10). This provides:

    If an inspector proposing to enter, or being on, premises is required by the occupier to produce evidence of authority, the inspector is not entitled to enter or remain on the premises without producing to the occupier the inspector’s identity card.

14. In my opinion, the right to require production of “evidence of authority” should be construed broadly, but with an understanding of the language and objects of the provision.  It provides the only safeguard given to a person who is the subject of the exercise of invasive statutory powers of entry, search, and seizure.   However, the reference to “produce evidence of authority” in conjunction with the requirement to produce “the inspector’s identify card” shows clearly that it confers a right to establish the identify of a person as a person holding the statutory office of Workplace Inspector.  The section does not require the inspector “to produce evidence of authority” in the sense of produce, demonstrate or show the statutory power of the inspector which he or she intends to rely upon when entering premises in the exercise of powers under s.169, nor to produce a warrant or other specific authorisation or notification for the exercise of those powers on the occasion of the attendance.

15. It was in the later sense, that Ms Smithers and her colleagues understood Mr Magar and Mr Lalic to be challenging her ‘authority’ when she attended on the company’s premises on 8 May 2008. She then responded by taking them to the terms of s.169 which gave powers to an inspector, such as herself, which were not dependent upon any warrant or other documents issued by a third party, and were not dependent upon prior notice. It is clear that Mr Magar and Mr Lalic were persuaded by what she said, and consented to the identification and copying of the relevant documents. If Ms Smithers was correct in her understanding of their challenges, then no impropriety in relation to s.169(10) could be found.

16. Weighing up all the evidence on this issue, I am not satisfied, on the balance of probabilities, that Ms Smithers or any of the other inspectors present on that occasion was requested explicitly, or in words to the effect, to “produce evidence of authority” in the sense of evidence which could be satisfied by the production of an inspector’s identity card.  I arrive at that conclusion for several reasons. 

17. One reason is that I accept that all officers in fact had in their possession on that day, and at least one of them had around their neck visible to everybody, such an identity card.  I am very satisfied that if a request, even oblique, had been made to produce an identity card, there would have been no hesitation on the part of any of these officers in doing so.  I accept their evidence that they consciously reminded themselves that they should be in possession of their identity cards immediately before attending, and were fully prepared to produce them upon any request for production.

18. Secondly, the background circumstances leading to their attendance at the premises on that day suggest to me that Ms Smithers correctly understood that her identity as a Workplace Inspector was not challenged and was not in doubt on that date.  Her official identity had previously been asserted to the company and to Mr Magar and Mr Lalic over several months, without any challenge.  As I understand the evidence, Ms Smithers had personally met or spoken with both men and other agents and employees of the company.  It is clear that they recognised her as soon as they met her on this occasion, and I consider it unlikely that it entered their minds to demand inspection of her identity card.   Since it appears to me that they both had previously accepted that she was a duly appointed Workplace Inspector, it is more likely than not that when they saw her on this occasion they continued to assume the regularity of her appointment. 

19. The evidence about the exact words spoken to Ms Smithers is open to various interpretations.  However, considering the evidence in the context of the conversations which occurred at that time, in my opinion, it points more towards the demands to be shown “authority” or “right” of Ms Smithers to demand immediate production of documents being of the nature which she understood, rather than otherwise.  On the evidence from all witnesses, what was concerning Mr Mark Magar and his solicitor on this occasion, was the statutory source of powers of a Workplace Inspector to do what they were demanding without notice and specific authorisation, rather than their appointments as Workplace Inspectors. 

20. For all these reasons, I am therefore not satisfied that there has been any “…contravention of an Australian law or impropriety within the meaning of s.138(1) of the Evidence Act”.  The direction of that section for such evidence “not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained and the way in which the evidence was obtained” therefore does not arise. 

21. However, if I am incorrect in this finding of fact, I have considered the exercise of the discretion to admit improperly obtained evidence.

22. Section 138(3) provides:

    (3)Without limiting the matters that the court may take into account under subsection (1), it is to take into account:

    (a)the probative value of the evidence; and

    (b)the importance of the evidence in the proceeding; and

    (c)the nature of the relevant offence, cause of action or defence and the nature of the subject‑matter of the proceeding; and

    (d)the gravity of the impropriety or contravention; and

    (e)whether the impropriety or contravention was deliberate or reckless; and

    (f)whether the impropriety or contravention was contrary to or inconsistent with a right of a person recognised by the International Covenant on Civil and Political Rights; and

    (g)whether any other proceeding (whether or not in a court) has been or is likely to be taken in relation to the impropriety or contravention; and

    (h)the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law. 

23. I was referred by counsel for both parties to several cases which have explained the operation of s.138. They included the judgments of the NSW Court of Appeal in Parker v Comptroller-General of Customs [2007] NSWCA 348 at [54]-[65] and [119]-[127], R v Dalley (2002) 132 A Crim R 169 in particular at [93], and R v Camilleri (2007) 68 NSWLR 720 at [27]-[35]. In the first of these judgments, as in other cases, reference was made to the distinction made by the High Court in Bunning v Cross (1978) 141 CLR 54 between evidence obtained by investigators in knowing breach of the law, or where they may be reckless as to whether or not it has been lawfully obtained, and where the breach of the law is innocent and the alleged offence is serious. In the latter situation, the cases suggest that there should be substantial countervailing considerations before the evidence should be rejected, particularly if it is of high probative value. In Parker (supra) at [60], it was suggested that these considerations were now reflected in paragraphs (d), (e) and (f) of s.138(3):

    60 This factor is reflected in paragraphs (d), (e) and (f) of s 138(3). Accordingly, a deliberate or reckless disregard of legal constraints, involving a contravention of an internationally recognised human right or fundamental freedom, will undoubtedly weigh against admission. On the other hand, if the contravention were accidental or inadvertent and involved no serious contravention of an internationally recognised right, that would tend in favour of admission.

1. In the present case, I consider that these considerations point towards admitting the present evidence, as do those identified in paragraphs (a), (b) and (c).  The evidence of the present employer’s records in relation to payments to the employees are of obvious probative value, and, at this stage in the trial, it does not appear to be challenged by Mr Magar.  Indeed, I am would at present characterise the evidence as being of critical importance to the success of the principal application.   It may be that some alleged contraventions could survive the exclusion of these records, but I am doubtful whether even this is the case, on my present understanding of the allegations which are the subject of the trial. 

2. The prosecution of the alleged contraventions, which are the subject matter of the proceedings, is of very significant public importance. On the allegations presented to the Court, there were numerous and significant underpayments of employee entitlements by the employer. It is alleged that the contraventions show a course of conduct over several years involving serious breaches of an employer’s responsibility to pay numerous employees their entitlements under law, in circumstances which might be open to an assessment that there was an exploitation of employees in a vulnerable situation over that period of time. The employer has gone into liquidation, but it is alleged that Mr Magar was a person involved in all of the contraventions so as to attract accessorial liability under s.728 of the Workplace Relations Act. Of course, I have not yet completed the receiving of evidence in support of these allegations, and have yet to receive any evidence by way of defence. However, on a very provisional view of the matter, the present proceedings, in my opinion, appear to have high public importance.

3. In the circumstances of the present matter, all the above considerations point in favour of the exercise of a discretion to admit the evidence, notwithstanding any improper failure to produce evidence of authority in breach of s.169(10) of the Workplace Relations Act.

4. The other side of the balance, is particularly pointed to by the consideration in paragraph (d), that is “the gravity of the impropriety or contravention”. A breach of s.169(10) necessarily is a matter of great seriousness, even if innocent. This provision provides to a person affected, in effect, the only contemporaneous protection against abuse of power under this Commonwealth statute. It is notable that the section confers sweeping powers of entry, search and seizure on an administrative officer, without any protections such as the issuing of warrants or authorities by or under the supervision of a different administrative or quasi-judicial officer. The powers of a Workplace Inspector are obviously far reaching and are the subject of few protections. Any failure to produce evidence of authority must, therefore, cause concern, and provide a weighty reason to exclude any evidence tainted by that impropriety.

5. However, as I have explained above, on established authorities, this consideration must also be weighed with consideration (e): “whether the impropriety or contravention was deliberate or reckless”. In the present case, I am satisfied that any impropriety did not involve a deliberately flouted or ignoring of the protection provided by s.169(10). The powers under s.169 were, in fact, exercised by a duly appointed Workplace Inspector, and she, and her colleagues, were fully prepared to produce their identify cards. Any failure to do so arose from innocent misunderstanding of the nature of the requests made by Mr Magar and Mr Lalic. In this respect, I would accept Ms Smithers’ evidence as to her state of mind, as deposed in paragraph 12 of her second affidavit. I find that she probably held a similar understanding in relation to her conversations with Mr Magar, including those recalled in his oral evidence. The contrary was not put to her in cross-examination. I therefore, in all the circumstances, would not find that there was in the present case a deliberate or reckless or otherwise seriously culpable defiance of the duty of an Inspector under s.169(10) of the Workplace Relations Act.

6. In all those circumstances, the authorities support the exercise of the discretion to admit the evidence, notwithstanding the points I have made in relation to paragraph (d).

7. In relation to s.138(3)(f) no inconsistency with the International Covenant on Civil or Political Rights was pointed to in submissions, and nor was the relevance of s.138(3)(g) pointed to.

8. Paragraph (h) would also not seem to have particular pertinence as pointing against the admission of the evidence, i.e. “the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law.”  The present is not a case where the contested evidence has come into existence as a result of the alleged impropriety or contravention of statute.  The identified employee records were in existence in the employer company’s office long before the arrival of the Workplace Inspectors on this occasion.  If there was impropriety on 8 May 2008, it might be regarded as resulting in that evidence becoming available to the prosecution for tender today.  However, there is no evidence suggesting that it would not have become available on another day, for example, after a repeated attendance at the premises and the production of authority on a different occasion.  Mr Magar does not contend that the records were due for destruction or would otherwise have ceased to exist.

9. Weighing up all the relevant considerations, including the mandatory considerations under s.138(3), in my opinion the considerations pointing in favour of allowing the documentary evidence seized from the search of the premises on 8 May 2008 clearly outweigh the undesirability of admitting evidence that was obtained improperly, if it was. I am therefore satisfied, if s.138(1) applies, that the balance identified in that section should be decided in favour of admitting the evidence.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate:  Michael Abood

Date:  30 March 2010