Fair Work Ombudsman v Annangrove Road Pty Ltd (in liq) (No 2)
[2024] FedCFamC2G 854
•10 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Annangrove Road Pty Ltd (in liq) (No 2) [2024] FedCFamC2G 854
File number(s): SYG 786 of 2023 Judgment of: JUDGE LAING Date of judgment: 10 September 2024 Catchwords: INDUSTRIAL LAW – assessment of a pecuniary penalty for contravention of s 716(5) of the Fair Work Act 2009 (Cth) – first respondent in liquidation – where default judgment occurred following the second respondent’s non-engagement with proceedings – penalty determined – associated order made regarding distribution Legislation: Corporations Act 2001 (Cth) s 471B
Fair Work Act 2009 (Cth) ss 3, 90, 539, 545, 546 and 716
Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 13.06
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 399 ALR 599
Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Non-Indemnification Personal Payment Case) [2018] FCAFC 97; (2018) 264 FCR 155
Fair Work Ombudsman v 85 Degrees Coffee Australia Pty Ltd [2024] FCA 576
Fair Work Ombudsman v Aisha & Umma Enterprises Pty Ltd [2023] FedCFamC2G 382
Fair Work Ombudsman v Annangrove Road Pty Ltd (in liq) [2024] FedCFamC2G 65
Fair Work Ombudsman v Carers Portland [2023] FedCFamC2G 620
Fair WorkOmbudsman v Cobra Security Services Pty Ltd [2024] FedCFamC2G 336
Fair Work Ombudsman v Double Hao International Pty Ltd [2024] FedCFamC2G 343
Fair Work Ombudsman v Hu (No 3) [2020] FCA 936
Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No.2) [2019] FCCA 2144
Fair Work Ombudsman v Pure Telecom Pty Ltd [2024] FedCFamC2G 664
Fair Work Ombudsman v Rika Foods North Melbourne Pty Ltd [2023] FedCFamC2G 379
Fair Work Ombudsman v Taing [2024] FedCFamCG2 270
Fair Work Ombudsman v Territory Tough Pty Ltd [2024] FedCFamC2G 743
Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290; (2016) 68 AILR 102–690
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4; (2016) 239 FCR 336
Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076
Division: Division 2 General Federal Law Number of paragraphs: 42 Date of last submission/s: 26 July 2024 Date of hearing: 19 July 2024 Place: Sydney Solicitor for the Applicant: Mr T Ahmed, Fair Work Ombudsman First Respondent: No appearance Second Respondent: No appearance ORDERS
SYG 786 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: ANNANGROVE ROAD PTY LTD (IN LIQUIDATION) (ACN 635 386 293)
First Respondent
ALFREDO GUALTERIO
Second Respondent
ORDER MADE BY:
JUDGE LAING
DATE OF ORDER:
10 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.Pursuant to s 546(1) of the Fair Work Act 2009 (Cth), the Second Respondent pay a pecuniary penalty of $4,000 to the Commonwealth for the contravention declared in Order 3 of the orders made on 29 January 2024, within 28 days of this Order.
2.Within 60 days of receipt of the pecuniary penalty (or any part thereof) referred to in Order 1 above, the Applicant is to pay 64% of the amount to Mr Tuan Liem Nguyen and 36% of the amount to Ms Gee Ann Austria.
3.The Applicant has liberty to apply on seven days’ notice in the event that Order 1 above is not complied with.
4.The proceedings insofar as they concern the First Respondent are dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE LAING:
INTRODUCTION
Before the Court is an application by the Fair Work Ombudsman (FWO) for orders under s 546 of the Fair Work Act 2009 (Cth) (FW Act) requiring the second respondent (Mr Gualterio) to pay a pecuniary penalty. The penalty is sought in respect of a contravention of s 716(5) of the FW Act regarding non-compliance with a compliance notice (Compliance Notice).
PROCEDURAL HISTORY
The procedural history in this matter is set out to some extent in my judgment dated 29 January 2024: Fair Work Ombudsman v Annangrove Road Pty Ltd (in liq) [2024] FedCFamC2G 65 (Default Judgment).
The FWO commenced these proceedings through an Application and Statement of Claim filed on 12 May 2023. It was subsequently discovered that the first respondent (Annangrove Road) had gone into liquidation. Proceedings against it were accordingly stayed pursuant to s 471B of the Corporations Act 2001 (Cth). The FWO has sought an order dismissing the proceedings insofar as they concern Annangrove Road.
The FWO sought default judgment in relation to Mr Gualterio, which was granted on 29 January 2024 after non-appearances by Mr Gualterio at listed interlocutory hearings and non-compliance by Mr Gualterio with procedural orders. Orders were made on that occasion including the following declaration:
3.Upon admissions taken to have been made by the second respondent by reason of the default of the second respondent, a declaration be made that the second respondent was involved, within the meaning of s 550(2) of the Fair Work Act 2009 (Cth) (FW Act), in the first respondent’s contravention of s 716(5) of the FW Act by failing to comply with a compliance notice issued to the first respondent on 28 July 2022.
Further orders were made setting the matter down for a hearing on the question of penalty and providing a regime for further evidence and submissions. No material in this regard has been filed by Mr Gualterio.
PRINCIPLES
The principles regarding imposition of penalties were considered by the High Court in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 399 ALR 599 (Pattinson). There, it was stated that “the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act” at [9] per Kiefel CJ, Gageler J (as his Honour then was), Keane, Gordon, Steward and Gleeson JJ. The “real task” of the Court was therefore described as “fixing the penalty which it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions of the Act” (at [71]).
A number of potentially relevant considerations have been identified in cases such as Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076 at [42]; Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Non-Indemnification Personal Payment Case) [2018] FCAFC 97; (2018) 264 FCR 155 at [20] and Mason v Harrington Corporation Pty Ltd [2007] FMCA 7. However, it is to be borne in mind that such recitations of potentially relevant considerations are not to be used as if they “were a legal checklist”: Pattinson at [19]. The Court’s task is to determine the appropriate penalty or penalties by reference to the particular circumstances of each case.
MAXIMUM PENALTY
Pursuant to ss 539(2) and 546(2)(a) of the FW Act, the maximum penalty that the Court may impose is $6,660 for contravention by Mr Gualterio of s 716(5) of the FW Act. Although the maximum number of penalty units has increased since the commencement of these proceedings, that increase is inapplicable to the present case, taking into account the transitional provisions in the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth).
It has been held that the maximum, whilst a relevant consideration, does not constrain the exercise of discretion under s 546 beyond requiring “some reasonable relationship between the theoretical maximum and the final penalty imposed”: Pattinson at [10]. This “relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others”: Pattinson at [10].
PENALTY
Material relied upon
In addition to the admissions taken to have been made by reference to the pleadings, the FWO relied upon the following evidence on the question of penalty:
(a)Affidavit of Tauseef Ahmed affirmed on 6 July 2023 (First Ahmed Affidavit);
(b)Affidavit of Tauseef Ahmed affirmed on 30 October 2023 (Second Ahmed Affidavit);
(c)Affidavit of Tauseef Ahmed affirmed on 29 November 2023 (Third Ahmed Affidavit);
(d)Affidavit of Tauseef Ahmed affirmed on 5 January 2024 (Fourth Ahmed Affidavit);
(e)Affidavit of Tauseef Ahmed affirmed on 29 January 2024 (Fifth Ahmed Affidavit);
(f)Affidavit of Fair Work Inspector Amey Jambekar affirmed on 13 June 2024 (FWI Jambekar Affidavit); and
(g)Affidavit of Tauseef Ahmed affirmed on 16 July 2024 (Sixth Ahmed Affidavit).
No material was filed on behalf of Mr Gualterio.
Service of the relevant documents
In the Default Judgment, I set out the reasons why I was satisfied that Mr Gualterio was on notice of these proceedings and had been effectively served with the relevant documents.
The Sixth Ahmed Affidavit confirms that copies of the orders made on 29 January 2024 as well as the FWO’s submissions and further affidavit evidence on the question of penalty have been served upon Mr Gualterio. Attempts have also been made to contact Mr Gualterio. No communication from Mr Gualterio has been received by the FWO in response.
I am satisfied that Mr Gualterio was appropriately served with the relevant documents in this matter. There was no appearance for Mr Gualterio at the listed hearing. That non-appearance followed a history of Mr Gualterio’s lack of engagement with this matter. In these circumstances, I determined that it was appropriate to proceed with the penalty hearing in the absence of Mr Gualterio pursuant to r 13.06(1)(e) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
Circumstances surrounding the contravention and subsequent action
As Mr Gualterio has not chosen to rely upon any evidence, there is limited material before the Court regarding the circumstances surrounding the contravention.
As set out in the Default Judgment, Mr Gualterio was the sole director and company secretary of Annangrove Road and was responsible for ensuring that Annangrove Road complied with its legal obligations under the FW Act. In or around June 2022, the FWO commenced an investigation into Annangrove Road’s compliance with Commonwealth workplace laws. Based upon the investigation, a Fair Work Inspector formed a belief that:
(a)Ms Gee Ann Austria was employed by Annangrove Road for the period between 19 December 2020 and 14 June 2021 (Austria Employment Period);
(b)Mr Tuan Liem Nguyen was employed by Annangrove Road for the period between 1 September 2020 and 13 June 2021 (Nguyen Employment Period);
(c)the Restaurant Industry Award 2020 (Award) covered and applied to Annangrove Road in respect of the employment of Ms Austria and Mr Nguyen (together, the Employees);
(d)at all relevant times during their employment with Annangrove Road, the Employees were:
(i)properly classified as Level 6 - Cook grade 5 (tradesperson), as defined in Schedule A to the Award; and
(ii)full-time employees, within the meaning of clause 9 of the Award;
(e)at the end of the Austria Employment Period, Ms Austria had a total of 73.48 hours of accrued, but untaken annual leave;
(f)at the end of the Nguyen Employment Period, Mr Nguyen had a total of 118.90 hours of accrued, but untaken annual leave; and
(g)the Employees did not receive payments of any accrued, but untaken, annual leave when their employment ended.
By reason of the above, the Fair Work Inspector formed a reasonable belief that Annangrove Road contravened s 90(2) of the FW Act, by failing to pay each of the Employees the full amount that would have been payable to them had they taken their accrued annual leave when their employment ended (Contraventions). The Fair Work Inspector therefore served Annangrove Road with the Compliance Notice requiring that certain action be taken by Annangrove Road to remedy the direct effects of the Contraventions by 6 September 2022. Reasonable evidence of this was required to be provided to the FWO by 13 September 2022, including proof that full payment had been made to the Employees.
Annangrove Road failed to take the action required under the Compliance Notice within the time frames stipulated, or at all. Mr Gualterio had actual knowledge of the Compliance Notice and was an intentional participant in Annangrove Road’s failure to comply.
Some messages are in evidence. They appear to be between Mr Gualterio and one of the Employees prior to the Compliance Notice being issued. In the messages, Mr Gualterio proffers excuses for not making payments by reference to a “financial crisis” and “lockdown”. From this, I infer that Mr Gualterio may have been suggesting that the business had been impacted by the pandemic lockdowns and associated restrictions that occurred (inter alia) in 2021.
I accept that many businesses were impacted by the COVID-19 pandemic. It is possible that Annangrove Road was so impacted and that Mr Gualterio had some difficulty in making payments. However, there is insufficient evidence before me to make any finding in this regard. This is in circumstances where Mr Gualterio has declined to participate meaningfully in these proceedings.
There is therefore no evidence capable of demonstrating mitigating circumstances surrounding the non-compliance or lack of engagement. Whilst Mr Gualterio has at times suggested an intention to make payment to the Employees, on the evidence before me this does not appear to have occurred: First Ahmed Affidavit at [10] and Annexures TA-2 and TA-4,
The need to ensure compliance with minimum standards
(a)The FWO has observed that the need to ensure compliance with minimum standards is an important consideration for reasons that include the following:
(b)one of the stated principal objects of the FW Act is to provide a guaranteed safety net of fair, relevant and enforceable minimum standards for employees: s 3(b) of the FW Act;
(c)it is important for the FWO to be able to exercise compliance powers effectively. Companies’ failure to comply with compliance notices undermines this framework and the ability for employees’ rights to be protected; and
(d)the penalties available for non-compliance demonstrate the importance placed upon compliance with minimum obligations under the FW Act.
The failure to comply with a statutory notice is serious. The efficacy of statutory notices would be hindered or made redundant if the recipients perceive that failure to comply will not carry meaningful consequences: Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No.2) [2019] FCCA 2144 at [40].
I accept these submissions and have taken them into account in determining the appropriate penalty.
Nature and extent of loss
The FWO submitted that loss has been suffered by the Employees by reason of Mr Gualterio’s involvement with Annangrove Road’s failure to comply with the Compliance Notice. This was said to have denied the Employees the benefit of the amounts that should have been paid on account of their outstanding entitlements. It was submitted that had Annangrove Road complied with the Compliance Notice, Ms Austria would have been paid $2,796.41 and Mr Nguyen would have been paid $4,949.15.
As was considered recently in Fair Work Ombudsman v Double Hao International Pty Ltd [2024] FedCFamC2G 343 (Double Hao International) at [103] (Judge Forbes), some caution must be exercised in considering the weight to be given to alleged underpayments in the context of considering penalties for non-compliance with a compliance notice. However, it is open to the Court to infer that employees have potentially suffered loss and to take this into account in considering the gravity of Mr Gualterio’s conduct.
The FWO also submitted, and I accept, that the non-compliance with the Compliance Notice has resulted in the FWO instituting proceedings at the cost of public funds. Failure to comply with a compliance notice undermines the public benefit of the compliance regime provided for under the FW Act, including the ability to avoid litigation and its associated costs. It is appropriate to take into account the wasted time and public resources used to enforce compliance in determining penalty: Double Hao International at [102].
Deterrence
It has been repeatedly emphasised in penalty cases that general deterrence must serve a purpose that ensures that any penalty imposed is not seen as “the cost of doing business”: see for example Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290; (2016) 68 AILR 102–690 at [27]. Penalties must be set at a level which demonstrates that there are serious consequences for non-compliance, to deter others from failing to comply. The efficacy of the statutory regime would be significantly undermined if recipients perceive that a failure to comply carries no meaningful consequences.
The FWO has submitted that the Cafés and Restaurants industry is a priority to them, having regard to the significant dispute and enforcement rates associated with that industry. The evidence before me indicates that in the July 2020 to December 2023 period, the industry accounted for the highest proportion of FWO disputes: FWI Jambekar Affidavit at [16] and Annexure AJ-7. In the same period, the industry is indicated to have on average been involved in 17.8% of all compliance notices issued by the FWO. Whilst there are some limitations in this evidence, I accept that industry specific issues have been recognised as informing the need for general deterrence in other cases: see for example Fair Work Ombudsman v Aisha & Umma Enterprises Pty Ltd [2023] FedCFamC2G 382 at [42]-[44] and [52] (Judge Symons), Fair Work Ombudsman v Rika Foods North Melbourne Pty Ltd [2023] FedCFamC2G 379 at [55]-[56] (Judge Riley) and Fair Work Ombudsman v 85 Degrees Coffee Australia Pty Ltd [2024] FCA 576 at [40] (Bromwich J).
In any event, I accept the significant role that the need for general deterrence plays in determining penalties. The penalty imposed in this matter should be sufficiently high to impress upon those in positions of responsibility the importance of complying with their legal obligations, and in particular the need to comply with statutory notices from the FWO.
I also accept that there is a need for specific deterrence in this case. Mr Gualterio was the sole director of Annangrove Road and was responsible for ensuring that Annangrove Road complied with the Compliance Notice: ASOC at [4(c)]. Mr Gualterio has been a director and/or secretary of numerous companies since 1998, including Restaurant Voss Pty Ltd and Alvaro Management Pty Limited, in respect of which he appears to be currently a director: FWI Jambekar Affidavit at [13] and Annexure AJ-5. No evidence has been adduced by Mr Gualterio indicating any contrition or enhanced appreciation of his obligations under the FW Act. There is no indication that the Employees have been paid the amounts specified in the notice. It is possible that Mr Gualterio will continue to or again have responsibility regarding staff and compliance issues. There is some risk that he may not honour such obligations in the future.
Although Mr Gualterio has engaged in occasional correspondence with the FWO and some, limited, interaction with the Court (including through appearing at a directions hearing, signing proposed consent orders and sending some correspondence), I accept the FWO’s submission that he has otherwise failed to engage in these proceedings. This is despite numerous endeavours by the FWO to communicate with Mr Gualterio in relation to the proceedings: First Ahmed Affidavit at [6] and [7] and Annexures TA-2 to TA-6; Second Ahmed Affidavit at [10] to [17] and Annexures TA-5; Third Ahmed Affidavit at [11] to [18] and Annexures TA-5 to TA-12; Fourth Ahmed Affidavit at [9] to [14] and Annexures TA-1 to TA-6; and Fifth Ahmed Affidavit at [7] and Annexure TA-1. Despite these endeavours, and the Court’s orders, Mr Gualterio has not gone so far as taking the basic, preliminary step of filing a Notice of Address for Service in these proceedings.
I accept the FWO’s submission that Mr Gualterio’s approach, towards the FWO as a regulator and towards the Court, demonstrates a disregard for his obligations under the FW Act and warrants a penalty that is fixed at a meaningful level.
Determination of penalty
The FWO submits that a penalty in the high range of $4,662 to $5,328 would be appropriate (being 70% to 80% of the maximum penalty available).
The FWO submitted that although the penalty imposed must not be crushing or oppressive, it must nevertheless bear relativity to the seriousness of the conduct engaged in by Mr Gualterio. The FWO observed that there was no evidence suggesting that such penalties would be crushing or oppressive to Mr Gualterio.
I accept that a penalty at the higher end of the maximum permitted is warranted in this case. This is taking into account, inter alia, the need for deterrence as well as Mr Gualterio’s lack of engagement in these proceedings or follow through on his representations that he would arrange for payment to be made to the Employees. These matters combine to indicate a level of disregard on the part of Mr Gualterio for the compliance regime.
However, I am mindful that there is no evidence that Mr Gualterio has engaged in any prior contraventions. Taking into account all of the circumstances in this matter, I consider that a penalty in the amount of $4,000 would be appropriate (which is slightly over 60% of the maximum).
ASSOCIATED ORDERS SOUGHT
In written submissions filed in advance of the penalty hearing, the FWO suggested that it would be appropriate for orders to be made pursuant to s 546(3) of the FW Act for the Employees to receive the benefit of any penalty. This was noting that Annangrove Road was in liquidation. The FWO suggested it be ordered that the penalty be paid to the Commonwealth, and then for any payment received to be thereafter paid to the Employees in specified allocations.
At the hearing, I queried this proposed order, which had not been supported by detailed submissions. I noted that I was conscious of some recent decisions of this Court in Fair WorkOmbudsman v Cobra Security Services Pty Ltd [2024] FedCFamC2G 336 at [85]-[194] (Judge Forbes), Fair Work Ombudsman v Carers Portland [2023] FedCFamC2G 620 (Judge Blake) and Fair Work Ombudsman v Taing [2024] FedCFamC2G 270 (Judge Mansini). To my mind, those cases tend against treating the compliance notice regime as an indirect mechanism of seeking compensation for contraventions that are the subject of a compliance notice. There appears to be some concern that, on a more global level, such an approach may have the potential to undermine the purposes of the FW Act enforcement framework more generally.
In response, the FWO explained that it is only in limited types of cases that such an order is sought. The present was submitted to be such a case due to Annangrove Road going into liquidation. Reliance was placed upon Judge Cameron’s recent decision in Fair Work Ombudsman v Pure Telecom Pty Ltd [2024] FedCFamC2G 664, in which his Honour took a different view to that which has been expressed in some of the judgments considered above. In any event, it was observed that those cases concerned a different provision of the FW Act. I accept that this is so, even if the concern about treating the compliance regime as a substitute for seeking compensation may have broader application.
In any event, the FWO submitted that it did not contend that the purpose of the proposed order was compensatory. The FWO relied upon Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4; (2016) 239 FCR 336, in which the Full Court (Tracey, Barker & Katzmann JJ) found that penalties are not compensatory, and, in considering the relationship between ss 545 and 546(3), found that the fact that a compensation order had also been made did not control the exercise of the s 546(3) power with respect to the recipient of the penalty (at [98]-[105]). Reference was made to other cases in which courts have been willing to make comparable orders to the order sought in these proceedings: Fair Work Ombudsman v Hu (No 3) [2020] FCA 936; see also, recently, Fair Work Ombudsman v Territory Tough Pty Ltd [2024] FedCFamC2G 743 at [61]-[71] (Judge Liveris).
Having regard to the above, and, in particular, the approach recently taken by Judge Liveris, I have been persuaded that it would be appropriate in the circumstances of this case to make an order of the type sought by the FWO.
CONCLUSION
For the foregoing reasons, I will make orders requiring that Mr Gualterio pay a pecuniary penalty in the amount of $4,000, as well as associated orders regarding payment that have been sought by the FWO.
I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Laing. Associate:
Dated: 9 September 2024
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