Fair Work Ombudsman v Australian Wild Tuna Pty Ltd & Anor
[2016] FCCA 2626
•12 October 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v AUSTRALIAN WILD TUNA PTY LTD & ANOR | [2016] FCCA 2626 |
| Catchwords: INDUSTRIAL LAW – Assessment of pecuniary penalties for admitted contraventions of terms of award, and s.323, s.535, and s.536 of the Fair Work Act 2009 (Cth) (FW Act) – whether different contraventions admitted to be subject to s.557(1) of the FW Act should be further grouped under the “one transaction principle” – method for assessing pecuniary penalty for distinct contraventions that are grouped together under the one transaction principle – considerations that should be taken into account in assessing penalties. |
| Legislation: Conciliation and Arbitration Act 1904 (Cth), ss.119(1), 119(1A) Fair Work Act 2009, ss.12, 13, 45, 323, 323(1)(a), 323(1)(c), 324, 535, 535(1), 535(2), 536, 536(1), 536(2), 539(2), 542, 542(1), 546, 546(1), 546(2), 546(3)(c), 550, 557, 557(1), 559(1) |
| Cases cited: Attorney-General (SA) v Tichy (1982) 30 SASR 84 Contin v The Queen [2012] VSCA 247 Director Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 Quinn v Martin (1977) 31 FLR 25 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | AUSTRALIAN WILD TUNA PTY LTD (ACN 128 760 734 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) |
| Second Respondent: | ANGELO MAIORANA |
| File Number: | SYG 3215 of 2013 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 16 July 2015 |
| Delivered at: | Sydney |
| Delivered on: | 12 October 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Darams |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Counsel for the Respondent: | Ms K Nomchong SC |
| Solicitors for the Respondent: | Shanahan Tudhope Lawyers |
DECLARATIONS MADE BY CONSENT
The first respondent contravened the following provisions of the Fair Work Act 2009 (Cth) (FW Act):
(a)s.45 of the FW Act by virtue of contravening cl.13 of the Ports, Harbours and Enclosed Water Vessels Award 2010 (Award) by failing to pay Jerry Kembuan, Moody Sumanti, Sigit Winarto, and Sri Wenda Kesuma (collectively SNC employees) their minimum hourly rates of pay for all ordinary hours worked;
(b)s.45 of the FW Act by virtue of contravening cl.16 of the Award by failing to pay the SNC employees their wages at least fortnightly;
(c)s.323(1)(c) of the FW Act by failing to pay the SNC employees wages at least monthly;
(d)s.323(1)(a) of the FW Act by failing to pay the SNC employees wages in full;
(e)s.535(1) of the FW Act by failing to make and keep for 7 years employee records of the kind prescribed by the Fair Work Regulations 2009 (Cth) (FW Regulations) in relation to each of the employees identified in paragraph 14 of the Statement of Agreed Facts, being exhibit A in the proceedings (Employees); and
(f)s.536(1) of the FW Act by failing to provide a pay slip within one day of paying an amount to the Employees in relation to the performance of work in relation to each of the Employees.
The second respondent contravened the following provisions of the FW Act by virtue of his involvement, within the meaning of s.550 of the FW Act, in each of the following contraventions of the FW Act by the first respondent:
(a)s.323(1)(c) of the FW Act by failing to pay the SNC employees wages at least monthly;
(b)s.323(1)(a) of the FW Act by failing to pay the SNC employees wages in full;
(c)s.535(1) of the FW Act by failing to make and keep for 7 years employee records of the kind prescribed by the FW Regulations in relation to each of the Employees; and
(d)s.536(1) of the FW Act by failing to provide a pay slip within one day of paying an amount to the Employees in relation to the performance of work in relation to each of the Employees.
DECLARATION
By reason of the contraventions referred to in declarations 1(a) and (b), and the first respondent’s not having paid to the SNC employees their net contractual entitlements, the SNC employees have been underpaid the following amounts (Underpayments):
SNC Employee Underpayments
Jerry Kembuan $11,318.11
Moody Sumanti $7,113.35
Sigit Winarto $12,604.46
Sri Wenda Kesuma $12,445.94
ORDERS
Pursuant to s.546(1) of the FW Act, the first respondent:
(a)pay a pecuniary penalty in the sum of $17,600 for the first respondent’s contraventions of s.45 of the FW Act referred to declaration 1(a);
(b)pay a pecuniary penalty in the sum of $8,000 for the first respondent’s contraventions of s.45 and s.323(1)(c) of the FW Act referred to in declarations 1(b) and (c);
(c)pay a pecuniary penalty in the sum of $8,000 for the first respondent’s contravention of s.323(1)(a) of the FW Act referred to in declaration 1(d); and
(d)pay a pecuniary penalty in the sum of $9,600 for the first respondent’s contraventions of s.535(1) and s.536(1) of the FW Act referred to in declarations 1(e) and (d).
Pursuant to s.546(1) of the FW Act the second respondent:
(a)pay a pecuniary penalty in the sum of $1,600 for his involvement in the first respondent’s contraventions of s.45 and s.323(1)(c) of the FW Act referred to in declaration 2(b);
(b)pay a pecuniary penalty in the sum of $1,600 for his involvement in the first respondent’s contravention of s.323(1)(a) of the FW Act referred to in declaration 2(c); and
(c)pay a pecuniary penalty in the sum of $1,920 for his involvement in the first respondent’s contraventions of s.535 and s.536 of the FW Act referred to in declarations 2(d).
Pursuant to s.546(3)(c) of the FW Act, the first respondent pay the pecuniary penalties referred to in order 4 as follows:
(a)If the sum of the penalties referred to in order 4 is equal to or less than the total outstanding Underpayments after the Deed Administrator (as defined in paragraph 2(b) of the Statement of Agreed Facts) has made a final determination of payments to be made to SNC employees from the Distribution Fund established pursuant to cl.3 of the deed of company arrangement (DoCA) referred to in paragraph 9 of the Statement of Agreed Facts (Initial Outstanding Liability), the penalties be paid to the SNC employees in amounts proportionate to their Underpayments; and
(b)if the sum of the penalties exceeds the Initial Outstanding Liability, any additional amount, being the difference between the Initial Outstanding Liability and the sum of the penalties, the additional amount be paid to the Consolidated Revenue Fund of the Commonwealth pursuant to s.559(1) of the FW Act,.
If the first respondent is unable to locate any of the SNC Employees within the time specified in order 10 then any of the amount payable under order 6 that is payable to such employee as the first respondent is unable to locate be paid to the Commonwealth pursuant to s.559(1) of the FW Act.
Pursuant to s.546(3)(c) of the FW Act, the second respondent pay the pecuniary penalties referred to in order 5 as follows:
(a)If the sum of the penalties referred to in order 5 is equal to or less than the total outstanding Underpayments:
(i)after the Deed Administrator has made a final determination of payments to be made to SNC employees from the Distribution Fund of the DoCA; and
(ii)after the first respondent has paid any sums to the SNC employees pursuant to order 6(a) (Subsequent Outstanding Liability);
the penalties be paid to the SNC employees in amounts proportionate to their Underpayment.
(b)If the sum of the penalties referred to in order 5 exceeds the Subsequent Outstanding Liability referred to in order 8(a), then any additional amount, being the difference between the Subsequent Outstanding Liability and the sum of all penalties awarded, be paid to the Consolidated Revenue Fund of the Commonwealth pursuant to s.559(1) of the FW Act.
If the second respondent is unable to locate any of the SNC Employees within the time specified in order 10 then any of the amount payable under order 8(a) that is payable to such employee as the second respondent is unable to locate be paid to the Commonwealth pursuant to s.559(1) of the FW Act.
The payments required to be made by orders 4, 5, 6, 7, 8, and 9 must be made within 28 days after the date on which these orders are made, or within 28 days after the date on which final payments are made from the Distribution Fund to the SNC employees.
The parties have liberty to apply to vary or discharge orders 5, 6, 7, 8, and 9 if:
(a)the Deed Administrator refuses to make a final determination of the payments to be made to all or any of the SNC employees; or
(b)the Deed Administrator fails to make such final determination within a reasonable time; or
(c)the Deed Administrator fails to make a determination under which the SNC employees are to be paid amounts equal to the Underpayments, or if the amount available to be paid to the SNC employees is insufficient to meet the Underpayment, the deed administrator fails to make a determination to pay to the SNC employees out of the distribution fund amounts proportionate to the SNC employee’s underpayments; or
(d)having made a determination to pay to the SNC employees amounts out of the distribution fund, the Deed Administrator fails to make payments in accordance with the deed administrator’s determination.
The parties otherwise have liberty to apply in relation to the implementation of these orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3215 of 2013
| FAIR WORK OMBUDSMAN |
Applicant
And
| AUSTRALIAN WILD TUNA PTY LTD (ACN 128 760 734 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) |
First Respondent
| ANGELO MAIORANA |
Second Respondent
REASONS FOR JUDGMENT
Introduction
The applicant (FWO) claims orders under s.546(1) of the Fair Work Act 2009 (Cth) (FW Act) that the first respondent (AWT) pay pecuniary penalties for its admitted contraventions of the FW Act, and that the second respondent, Mr Maiorana, pay pecuniary penalties for his admitted involvement in some of AWT’s contraventions of the FW Act.
The basic facts out of which the contraventions arose are not in dispute, and I set these out in the next section of these reasons for judgment. There are, however, a number of preliminary matters I must address before I can consider whether I should impose pecuniary penalties and, if so, the amount of those penalties.
a)First, I must identify the contraventions in question. The contravening conduct in which the respondents admit they engaged or were involved consisted of multiple contraventions of a number of provisions of the FW Act. The parties agree that, under s.557(1) of the FW Act, some of the multiple contraventions are to be treated as one contravention; and the parties agree that some contraventions to which s.557(1) of the FW Act does not apply should also be treated as if they were one contravention. There is a dispute, however, about whether other contraventions to which s.557(1) of the FW Act does not apply should be treated as if they were one contravention.
b)Second, there is a question about the maximum amount of the penalty that is liable to be imposed for each contravention. That question arises because the maximum penalty for contraventions of the FW Act is fixed by statute, but the conduct in question occurred over a period of time in which the statutory provision fixing the maximum penalty was amended.
c)Third, I will need to identify the principles that are relevant to my assessing the pecuniary penalties that I should impose for each contravention.
Background
AWT operated a commercial fishing business it acquired in 2007 from Mr Maiorana’s parents.[1] In the course of that business, AWT operated two fishing vessels, the “Challenge”, and the “Santo Rocco”.[2]
[1] A Maiorana affidavit, 27.03.15, [4]
[2] A Maiorana affidavit, 27.03.15, [5]
Mr Maiorana was a director, but not a shareholder, of AWT.[3] He was responsible for the overall direction, management, and supervision of AWT’s operations in relation to industrial arrangements, setting and adjusting pay rates, and determining wages and conditions of employment.[4] Given these responsibilities, Mr Maiorana admits he was responsible for ensuring AWT complied with its legal obligations under the FW Act.[5]
[3] A Maiorana affidavit, 27.03.15, [3]
[4] Statement of Agreed Facts (SAF), [7]
[5] SAF, [7]
On 8 March 2011 AWT entered into a “Labour Agreement” with the Commonwealth of Australia. That agreement was a “work agreement”, as defined in the Migration Act 1958 (Cth), under which the Commonwealth authorised AWT, as an “Approved Sponsor”, to “recruit, employ or engage the services of people who are intended to be employed or engaged by the Approved Sponsor as holders of” Subclass 457 (Business (Long Stay)) visas (457 visa) for the types of occupations specified in the agreement.[6] These were ship’s engineers, ship’s officers, deckhands, and fishing hands. The Labour Agreement set out the terms and conditions on which AWT had authority to recruit, employ, or engage the services of persons who held 457 visas in the nominated occupations.[7]
[6] Affidavit of N Dodd, annexure ND01, Labour Agreement, recital B
[7] Affidavit of N Dodd, annexure ND01, Labour Agreement, recital F
As contemplated by the Labour Agreement, during different times between May 2011 and June 2013, AWT employed full time nine Indonesian nationals (collectively employees), each of whom held a 457 visa.[8] Each of the employees was a “national system employee” within the meaning of s.13 of the FW Act,[9] and AWT and the employees were bound by the Ports, Harbours and Enclosed Water Vessels Award 2010 MA000052 (Award).[10] The employees were employed either as engineers or deckhands,[11] and they performed work on either or both the Santo Rocco and the Challenge.[12]
[8] SAF, [14], [16]
[9] SAF, [15]
[10] SAF, [43]
[11] SAF, [17]-[25]
[12] SAF, [26]
AWT was obliged to pay the employees amounts specified in the transitional arrangements in Schedule A to the Award. The pay rates were calculated by reference to the relevant transitional minimum wage instrument. These differed according to whether the employee worked on the Challenge or on the Santo Rocco. In the case of work performed on the Challenge, the relevant instrument was the Australian Pay and Classification Scale (Pay Scale) that was derived from the Federal Minimum Wage;[13] and in the case of work performed on the Santo Rocco, the relevant instrument was the Pay Scale that was derived from the NSW Colliers and Small Ships (State) Award AN120365.[14]
[13] SAF, [47]
[14] SAF, [48]
Before December 2012 the Santo Rocco and, before February 2013, the Challenge, undertook approximately five or six fishing voyages every month. The voyages lasted anywhere from three days to thirteen days. During the voyages, the employees worked from 7 to 12 hours in a day.[15] Beginning on 27 December 2012 the Santo Rocco suffered intermittent mechanical problems which affected its ability to conduct fishing operations.[16] On 19 February 2013 the Challenge ran aground in a violent storm, and was rendered unseaworthy.[17]
[15] SAF, [26], [27]
[16] SAF, [28]
[17] SAF, [29]
During 1 July 2012 to 30 June 2013 AWT did not pay the employees their entitlements under the Award in a regular and predictable manner. Instead, AWT made payments of amounts that were insufficient to cover the employees’ entitlements to minimum wage rates as required by cl.13 of the Award, and were not sufficient to cover the employees’ contractual entitlements to wages.[18] In addition, during the same period, AWT deducted an amount of around $786 every month from the salary AWT owed to each employee for health insurance, food, and accommodation. These deductions were not permitted by s.324 of the FW Act.[19]
[18] SAF, [31]
[19] SAF, [30]
On 13 August 2013 an administrator was appointed over AWT pursuant to s.436A of the Corporation Act 2001 (Cth) (Corps Act).[20] On 9 October 2013 AWT executed a deed of company arrangement (DoCA) pursuant to s.450B of the Corps Act. Clause 3 of the DoCA provided that the deed administrator would establish and administer a “distribution fund”. Clause 6 provided that the amount in the distribution fund would be distributed first, by paying the deed administrator for his costs, second, by paying remuneration the deed administrator earned, and, third, by paying amounts to employees for their entitlements as specified in Part 5.6 of Division 6 of the Corps Act.[21]
[20] SAF, [2]
[21] SAF, [8]-[11]
On 22 May 2014 Mr Maiorana arranged for his solicitors to send to the deed administrator a cheque for $126,089.40, which the deed administrator paid into the distribution fund. The deed administrator allocated $108,568 of the distribution fund towards the deed administrator’s actual and anticipated future costs. According to the agreed statement of fact, that left $70,421 in the distribution fund available to be applied under the DoCA.[22] This appears to be an error, because the difference between $126,089.40 and $108,568 is $17,521.40. It may be there is an undisclosed amount or amounts that has or have been taken into account. Nothing, however, turns on this.
[22] SAF, [13]
The admitted contraventions
There are seven admitted classes of contravention of the FW Act by AWT. The first is AWT’s failure to pay to four of the employees (collectively SNC employees) at least the minimum hourly rate to which each was entitled under the Award for ordinary hours worked. The extent of the underpayment for each SNC employee is as follows:[23]
[23] SAF, [55]
Employee
Award entitlement
AWT Payments (gross)
Underpayment of entitlements under Award
Jerry Kembuan
$39,409.04
$32,205.22
$7,203.82
Moody Sumanti
$46,113.00
$36,409.98
$9,703.02
Sigit Winarto
$38,513.38
$26,962.21
$11,551.17
Sri Wenda Kesuma
$33,247.34
$28,662.39
$4,584.95
Total
$157,282.76
$124,239.80
$33,042.16
By failing to pay the amounts it was required to pay under the Award, AWT contravened a term of the Award, and, as a result, contravened s.45 of the FW Act.
The second class of contravention is the failure by AWT to pay each of the SNC employees their contractual entitlements. The contractual entitlements of each of the SNC employees constituted a “safety net contractual entitlement”, as defined in s.12 of the FW Act. The extent of the underpayment for each of the SNC employees is as follows:[24]
[24] SAF, [57]-[62]
Employee
SNC entitlement
AWT Payments (gross)
Underpayment of SNC entitlements
Jerry Kembuan
$43,523.33
$32,205.22
$11,318.11
Moody Sumanti
$43,523.33
$36,409.98
$7,113.35
Sigit Winarto
$39,566.67
$26,962.21
$12,604.46
Sri Wenda Kesuma
$41,108.33
$28,662.39
$12,445.94
Total
$167,721.67
$124,239.80
$43,481.87
Because of s.542(1) of the FW Act, each of the safety net contractual entitlements AWT failed to pay has effect as an entitlement of each employee under the FW Act.[25]
[25] SAF, [61]
The third class of contravention is AWT’s failure to pay wages to each of the SNC employees on a weekly or fortnightly basis, contrary to cl.16 of the Award. AWT, therefore, contravened s.45 of the FW Act.[26]
[26] SAF, [63]-[65]
The fourth and fifth classes of contravention are based on the same facts as the third class of contravention. It is admitted that AWT’s irregular payment of wages to the SNC employees contravened s.323(1)(c) of the FW Act, which requires an employer to pay an employee amounts payable to the employee in relation to work done at least monthly; and it is admitted that AWT’s paying the SNC employees amounts less than the amounts due to each of them under their contract of employment contravened s.323(1)(a) of the FW Act, which requires an employer to pay an employee amounts payable to the employee in relation to work done in full (subject to s.324 of the FW Act).
The sixth and seventh classes of contravention may be dealt with together. AWT admits that, contrary to s.535(1) of the FW Act and the Fair Work Regulations 2009 (Cth) (FW Regulations), it failed to make and keep for seven years prescribed records in relation to the employees. In particular, AWT failed to make and keep documents that record, among other things, the rate of remuneration of each employee, details of any leave take, and of superannuation contributions.[27] AWT also admits it failed to provide payslips to the employees within one day of paying an amount to an employee in relation to the performance of work.[28]
[27] SAF, [73]-[77]
[28] SAF, [79]-[82]
Mr Maiorana admits he was “involved”, within the meaning of s.550 of the FW Act, in:[29]
a)AWT’s contravention of s.323(1)(a) of the FW Act by failing to pay to the SNC employees their wages in full;
b)AWT’s contravention of s.323(1)(c) of the FW Act by failing to pay SNC employees their wages at least monthly; and
c)AWT’s contraventions of s.535 and s.536 of the FW Act,
and, for that reason, is himself taken to have contravened each of s.323(1)(a), s.323(1)(c), s.535(1), and s.536(1) of the FW Act.
[29] SAF, [88]
It would be useful to the matters I will later consider if I reproduce here a slightly modified form of the table contained in the FWO’s written submission that lists the accepted contraventions of the FW Act (Table of Contraventions):[30]
[30] Applicant’s Outline of Submissions on Penalty, [15]
No.
Provision
Description of contravention
1.
Section 45 of the FW Act
Failing to pay SNC employees at least the minimum hourly rate they were entitled to receive under cl.A.2.3 of Schedule A to the Award (by reference to cl.13 of the Award).
2.
Section 542 of the FW Act
Failing to pay the SNC employees their safety net contractual entitlements in relation to remuneration.
3.
Section 45 of the FW Act
Failing to pay the SNC employees their wages on a weekly or fortnightly basis as required by cl.16 of the Award.
4.
Subsection 323(1)(c) of the FW Act
Failing to pay the SNC employees their wages on at least a monthly basis.*
5.
Subsection 323(1)(a) of the FW Act
Failing to pay the SNC employees their wages in full (i.e., without deductions).*
6.
Subsection 535(1) of the FW Act
Failing to make and keep for 7 years employee records of the kind prescribed by the FW Regulations.*
7.
Subsection 536(1) of the FW Act
Failing to provide a payslip within one day of paying an amount to an employee in relation to the performance of work.*
* Mr Maiorana admittedly involved in contravention.
Although this table includes s.542 of the FW Act as a statutory provision that has been contravened by AWT’s not paying the SNC employees their safety net contractual entitlements, that section is an enabling provision. It is not a civil remedy provision, or a provision that otherwise proscribes conduct. Thus, as the FWO herself recognises, there are six classes of contravening conduct to be considered, these being contraventions 1, 3, 4, 5, 6, and 7 identified in the Table of Contraventions. I will in the remainder of these reasons identify the relevant contraventions by these numbers.
Grouping of contraventions
Subsection 546(1) of the FW Act confers jurisdiction on this Court to make an order that a person pay a pecuniary penalty for contravening a civil remedy provision of the FW Act. It provides that this Court “may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision”. The expression “civil remedy provision” is defined in s.539(1) of the FW Act to mean a provision referred to in column 1 of an item in the table contained in s.539(2) of the FW Act. Column 1 of that table includes s.45, s.323(1), s.323(3), s.535(1), s.535(2), s.536(1), and s.536(2) of the FW Act. Thus, the first step in assessing a penalty is to identify the contravention or contraventions of a civil remedy provision or provisions.
The ordinary meaning of the word “contravene” is “[t]o go counter to; to transgress, infringe (a law, provisions, etc.); to act in defiance or disregard of” something.[31] In the context of s.546 of the FW Act, “contravened” implies the existence of provisions that express rules which, in the circumstances specified by the rules, prohibit a person from engaging in particular conduct, or which require a person to engage in particular conduct. A person contravenes a particular provision containing such rule, therefore, if, first, there exist the circumstances the rule specifies must exist before a person is prohibited by the rule from doing something or before the person is required by the rule to do something; and, second, the person does the thing the rule prohibits the person from doing, or the person fails to do that which the rule requires the person to do.
[31] Oxford English Dictionary
There is no necessary correlation between the number of acts or omissions a person takes or makes, and the number of occasions a person contravenes a civil remedy provision as a result of such acts or omissions. That is especially liable to be the case where a person omits to do that which the FW Act obliges the person to do. Typical examples are obligations imposed on employers by awards or other industrial instruments to pay employees wages and other benefits. Such obligations usually accrue periodically over relatively short periods, which means that a contravention occurs on each occasion an employer does not make the payment. In those circumstances, an employer’s failure to meet or meet in full the periodically accruing obligations often arises from a single act, or from a single set of circumstances. For example, the employer might have refused to pay the employee certain amounts because the employer adopted an erroneous interpretation of an award; or, because of unfavourable financial circumstances, the employer has been unable to make the payments in full or at all. Another example is where a provision of the FW Act or an instrument given force by the FW Act gives rise to obligations owed to two or more persons and the person subject to the obligation does an act which involves a breach of each of the obligations owed to each person. The potential disparity between the act or omission that may give rise to a contravention of a civil remedy provision, and the number of contraventions resulting from such act or omission, gives rise to the possibility that the person will be exposed to the imposition of penalties that is disproportionate to the nature and extent of the person’s contravening acts or omissions that constituted or lead to the contraventions of the FW Act.
Section 557(1) - principles
The FW Act recognises, at least to some degree, this potential disparity by providing that, in certain circumstances, multiple contraventions may be treated as a single contravention. The relevant provision is s.557(1) of the Act, which is as follows:
For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a)the contraventions are committed by the same person; and
(b)the contraventions arose out of a course of conduct by the person.
Provisions equivalent to s.557(1) of the FW Act were contained in previous industrial legislation, and their application has been considered in a number of cases. None of the authorities of which I am aware that have applied s.557(1) of the FW Act or its predecessors, however, have explicitly construed or otherwise explicated the meaning of the expression “course of conduct”. The meaning of that expression, therefore, must, at least in the first instance, be ascertained after identifying the circumstances in which it has been held that s.557(1) of the FW Act or its predecessors apply.
A useful starting point is the decision of the Full Federal Court in Quinn v Martin.[32] In that case, a penalty was sought under s.119(1) of the Conciliation and Arbitration Act 1904 (Cth) (CA Act) in relation to the employer’s failure to make payments to two employees in breach of three terms of an award. At that time, the equivalent of s.557(1) of the FW Act was contained in s.119(1A) of the CA Act. The Australian Industrial Court had previously imposed a penalty on the employer for similar breaches of the award but for a different period, finding that those breaches arose out of a course of conduct within the meaning of s.119(1A) of the CA Act. The employer claimed that the second application for the payment of a penalty was incompetent because the breaches of the terms of the award for which the penalties were sought arose out of the same course of conduct for which the employer had already been penalised. The Full Federal Court held that the breaches of each of the three terms of the award for which penalties were sought in the second proceeding arose out of the same course of conduct as the breaches for which penalties were imposed in the first proceeding; and because, in those circumstances, s.119(1A) of the CA Act provided that where two or more breaches arising out of the one course of conduct, the breaches of each of the three terms were to be treated as constituting a “a single breach of” each of those terms, the employer could not be exposed to any additional penalty. The Full Federal Court described the course of conduct it found as follows:[33]
The course of conduct was that the respondent having decided that he would pay to the employees not amounts of money in accordance with the award but such amounts, having some relation to the provisions of the award, but not exceeding what the respondent considered he could afford in prevailing conditions, intimated to the employees in question the amounts he was willing to pay and informed them that unless they accepted such amounts their employment would be terminated and upon their agreement to accept such amounts the respondent paid the same for the work done by the employees.
[32] Quinn v Martin (1977) 31 FLR 25
[33] Quinn v Martin (1977) 31 FLR 25 at page 30
In Industrial Relations Bureau v Hassan[34] it was held that an employer’s failure to pay to a single employee the full amount of wages and overtime for each pay week extending over some five months arose out of a course of conduct and was treated as one breach. In Lynch v Buckley Sawmills Pty Ltd,[35] on the other hand, Keely J, considered the application of s.119(1A) of the CA Act to breaches of obligations under four separate terms of an award the employer owed to four employees. His Honour rejected the submission that the breaches should be treated as one breach under s.119(1A). His Honour, however, did not reject that submission because it found that the breaches did not arise out of the employer’s course of conduct; it was rejected because s.119(1A) applied to breaches of particular terms. In that regard, Keely J said:[36]
The subsection is dealing with breaches of a term of an award and requires that such breaches of a term be treated as constituting a single breach of that term. . . . . However, in my opinion, s.119(1A) is intended to apply only to a case where the court has found two or more breaches of the same term of an award; hence its use of the words “that term” in providing that the breaches shall be treated as constituting a single breach of that term. It would be an inappropriate use of language if the subsection were intended to require that multiple breaches of different terms of an award were to be treated by a court as constituting a single breach of the award.
[34] (1982) 62 FLR 169 (Keely J)
[35] (1984) 3 FCR 503 (Keely J)
[36] (1984) 3 FCR 503 at page 507 (Keely J)
In Lynch, Keely J was of the view that Quinn was “authority for the proposition that s. 119(1A) applies where a respondent fails to comply with a particular term of an award in respect of more than one employee”.[37] In Seymour v Stawell Timber Industries Pty Limited,[38] Gray J (with whom Northrop J agreed) held that identical breaches of the same term of an award, but in relation to more than one employee, could arise out of a “course of conduct” for the purposes of s.119(1A) of the CA Act. His Honour said:[39]
The three cases to which I have just referred do not touch the question whether a separate “course of conduct” exists when an employer is guilty of identical breaches of the same term of an award with respect to more than one employee. In Jarrad v Melbourne and Metropolitan Tramways Board (1978) 21 ALR 201, at 209, it was held that the standing down of a number of employees was to be treated as a single breach. In Townsend v General Motors-Holden's Ltd. (1981) 50 FLR 355, a single penalty was imposed in respect of a failure to give proper notice to two employees of a shut-down. It seems to have been assumed that the two breaches had arisen out of a single “course of conduct”. In Rowe v Capital Territory Health Commission (1982) 62 FLR 383 at 412, it was held that a “course of conduct” did not exist in respect of failure to pay proper wages to two student nurses; the nurses had begun employment in separate years, and were affected by separate decisions of the employer as to the manner in which they would be treated. Keely J expressed the view that, “Any other breaches in respect of student nurses enrolled in the 1980 two-year course would have arisen out of the one course of conduct”. This judgment was upheld by a Full Court on appeal, without discussion of this point: See Rowe v Capital Territory Health Commission (1982) 2 IR 27. In the present case, the breaches with respect to each of the apprentices arose from a single act by the respondent in purporting to dismiss a number of its employees. That act, and any failure to pay any employee which arose from it, is properly described as a course of conduct, for the purposes of s 119(1A). The court is, therefore, obliged to treat the matter as involving one breach.
[37] (1984) 3 FCR 503 at page 508 (Keely J)
[38] (1985) 9 FCR 241
[39] (1985) 9 FCR 241 at page 267 (Northrop J agreeing at page 245)
In Gibbs v City of Altona,[40] Gray J considered the meaning of “term” as used in s.178(2) of the Industrial Relations Act 1988 (Cth) (IR Act), being the successor to s.119(1A) of the CA Act. One issue that troubled his Honour was the relationship between “term of an award”, as that expression appeared in s.178(2) of that Act, and obligations created by the award. His Honour concluded that the expression “term” denoted an obligation created by the award. His Honour said:[41]
The object of s 178(2) appears to be that a party bound by an award and pursuing a course of conduct involving repeated acts or omissions, which would ordinarily be regarded as giving rise to a series of separate breaches, should not be punished separately for each of those breaches. If such a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another. This reasoning leads to the conclusion that each separate obligation found in an award is to be regarded as a “term”, for the purposes of s 178 of the Act. The ascertainment of what is a term should depend not on matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out. For these reasons, I incline to the view that each separate obligation imposed by an award is to be regarded as a “term”, for the purposes of s 178 of the Act. If the different terms impose cumulative obligations or obligations that substantially overlap, it is possible to take into account the substance of the matter by imposing no penalty, or a nominal penalty, in respect of breaches of some terms, but a substantial penalty in respect of others.
[40] (1992) 37 FCR 216
[41] (1992) 37 FCR 216 at page 223
In Blandy v Coverdale NT Pty Ltd ACN 102 611 423 Reeves J held that Gray J’s analysis in Gibbs applied to s.719(2) of the Workplace Relations Act 1996 (Cth), the successor provision to s.178(2) of the IR Act, and the immediate predecessor to s.557(1) of the FW Act. In my opinion, these authorities also apply to s.557(1) of the FW Act, even though s.557(1) applies to contraventions of a civil remedy provision, whereas s.119(1A) of the CA Act and s.178(2) of the IR Act applied to the breach of terms of awards, and s.719(2) of the WR Act applied to breaches of “applicable provisions”. Under s.45 of the FW Act, a person is prohibited from contravening a term of a modern award; and s.539(2) provides that s.45 is a civil remedy provision.
Two firm principles may be drawn from the cases to which I have referred, one negative, and one positive. The negative principle is that s.557(1) of the FW Act does not apply to contraventions of different terms of modern awards, even if such contraventions arise out of a course of conduct, and even if the contraventions affect only one person. The positive principle is that s.557(1) of the FW Act applies to the multiple contravention of the one term of a modern award, even where the contravention may affect two or more persons. These principles may be extrapolated to contraventions of civil penalty provisions that do not involve the contravention of a term of a modern award. Just as s.557(1) of the FW Act does not apply to the contravention of two or more separate terms of an award, so too does it not apply to contraventions of two or more separate civil remedy provisions that do not involve a breach of a term of an award. On the other hand, s.557(1) of the FW Act applies to multiple contraventions of a single civil penalty provision, even though the contraventions may affect two or more persons.
These principles, important as they are, are limited. The judgments to which I have referred do not explicitly consider the meaning of “course of conduct”. From the words themselves, it may be said that “course of conduct” denotes a series of acts that are connected in some way; and given that it is conduct – namely, acts or omissions of a person – that is required to be connected in some way, the required connection must be sought, at least in substantial part, in the state of mind that the person engaging in the conduct has in relation to the conduct. That a contravener’s state of mind is relevant to determining whether conduct he or she has engaged in is a “course of conduct” is supported by the judgment of Nettle J in Berlyn v Brouskos.[42] In that case, his Honour considered the meaning of “course of conduct” as that expression appears in the definition of “stalking” given in s.21A(2) of the Crimes Act 1958 (Vic). His Honour concluded that “course of conduct” for the purposes of that subsection is a course of conduct as prescribed in the California Penal Code, namely, “a pattern of conduct composed of a series of acts over a period of time however short, evidencing a continuity of purpose”.[43]
[42] (2002) 134 A Crim R 111
[43] (2002) 134 A Crim R 111 at [24] and [20]
Although the question whether conduct amounts to a “course of conduct” is to be determined, at least substantially, by reference to the person’s state of mind, proof of that state of mind may, and usually will be inferred from objective matters existing outside that person’s mind. Of importance would usually be whether the relevant conduct consists of an omission, the number of acts or omissions that are claimed to constitute the course of conduct, the time that separates each act or omission from the other, and whether the acts or omissions are similar or dissimilar, and, if dissimilar, whether they are jointly necessary to the achievement of the conduct that constitutes the contravention.
One transaction principle
It should be apparent that s.557(1) of the FW Act does not capture all conduct that could reasonably be regarded as arising out of a course of conduct. In particular, s.557(1) does not cover separate contraventions of different terms of a modern award or different provisions of the FW Act that arise out of a course of conduct. As I have noted elsewhere,[44] however, and as is accepted by the FWO in the case before me, even where s.557(1) of the FW Act does not apply, it may be permissible when assessing a pecuniary penalty to consider whether a person’s multiple contraventions occurred as part of a single course of conduct. It may be permissible under a sentencing principle that is sometimes referred to, and which in these reasons I will refer to as the “one transaction principle”. Owen JA stated that principle in Royer v Western Australia as follows:[45]
At its heart, the one transaction principle recognises that, where there is an interrelationship between the legal and factual elements of two or more offences with which an offender has been charged, care needs to be taken so that the offender is not punished twice (or more often) for what is essentially the same criminality. The interrelationship may be legal, in the sense that it arises from the elements of the crimes. It may also be factual, because of a temporal or geographical link or the presence of other circumstances compelling the conclusion that the crimes arise out of substantially the same act, omission or occurrences.
[44] Cai v Tiy Loy & Co Ltd (No. 3) [2016] FCCA 675 at [39]-[44]
[45] [2009] WASCA 139 at [22]
The principle was stated with clarity by Lockhart J in the context of the imposition of penalties for contraventions of provisions of the Trade Practices Act 1974 (Cth) in Trade Practices Commission v Bata Shoe Company of Australia Pty Ltd:[46]
Guidance is given in the field of sentencing for criminal offences by the well-known principle that where several offences are heard together and arise out of the same transaction it is a sound working rule that the sentences imposed for those offences should be made concurrent; it is inappropriate to sentence consecutively when the offences were all really involved in the same episode . . .
[46] [1980] ATPR 40-161 at 42,277
The one transaction principle was held to be relevant to the assessment of penalties under the Building and Construction Industry Improvement Act 2005 (Cth) which did not contain an equivalent provision to s.557(1) of the FW Act;[47] and in Sayed v Construction, Forestry, Mining and Energy Union,[48] Mortimer J held the principle applied to the assessment of penalties for contraventions of civil remedy provisions to which s.557(1) of the FW Act does not apply. After setting out a passage from the judgment of Wells J in Attorney-General (SA) v Tichy,[49] Mortimer J said:[50]
In fixing a penalty, just as imposing a sentence, the aim is, as Wells J observed, to “mould a just sentence for the conduct” found to have occurred, and where there are “truly two or more incursions into criminal conduct” to punish these incursions separately.
[47] See, for example, Construction, Forestry, Mining and Energy Union v Williams [2009] FCAFC 171 (Moore, Middleton, Gordon JJ); Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39 (Moore, Middleton, Gordon JJ); Sayed v Construction, Forestry, Mining and Energy Union [2015] FCA 338 at [31] (Mortimer J)
[48] [2015] FCA 338 at [31]
[49] (1982) 30 SASR 84 at pages 92-93
[50] [2015] FCA 338 at [34]
There is no generally accepted approach to assessing penalties for multiple contraventions of provisions which fall outside s.557(1) of the FW Act which, nevertheless, may be considered to have arisen out of a course of conduct.[51] In Fair Work Ombudsman vKentwood Industries Pty Ltd (No 3) McKerracher J suggested an approach for assessing penalties under which a penalty is provisionally assessed for each contravention, including multiple contraventions which, because of the application of s.557 of the FW Act, are to be treated as a single contravention, and then to consider whether an adjustment should be made to the provisional assessments, having regard to the one transaction principle.[52] In that regard, is Honour accepted that it was appropriate in the proceeding before his Honour to take a four-step approach to determining an appropriate penalty. The first three steps were as follows: [53]
1.First, each contravention of each separate obligation sourced in the Standard or the NAPSA is a separate contravention of an applicable provision for the purposes of s 719 of the WR Act. However, pursuant to s 719(2), multiple contraventions of the same applicable provision may be treated as a single contravention, if the Court considers them to be part of a single ‘course of conduct’. It is necessary to identify the maximum penalty for each separate contravention.
2.Second, it is necessary then to consider an appropriate penalty to impose in respect of each contravention (whether a single contravention alone or as part of a course of conduct), having regard to all of the circumstances of the case.
3.Next, to the extent that two or more contraventions have common elements, this may be taken into account when considering what is an appropriate penalty for each contravention. The respondents should not be penalised more than once for the same conduct. The penalties imposed by the Court should be an appropriate response to the respondents’ actions.
[51] General Manager of the Fair Work Commission v Thomson (No 4) [2015] FCA 1433 at [8] (Jessup J)
[52] [2011] FCA 579 at [10]
[53] [2011] FCA 579 at [10]
In General Manager of the Fair Work Commission v Thomson (No 4),[54] Jessup J assessed the penalties for multiple contraventions of the Fair Work (Registered Organisations) Act 2009 (Cth) (which does not have an equivalent of s.557(1) of the FW Act) on the assumption there were different approaches to assessing penalties for multiple contraventions of provisions of that Act, and there has never been an authoritative ruling that any single approach is the correct one.[55] His Honour identified three possible approaches. One “has been to impose a penalty in respect of what may appear to be the most serious contravention, and to impose no penalty, or a much reduced penalty, in respect of other contraventions”.[56] His Honour noted, however, that this approach has been viewed as involving “the court turning its back on its statutory obligation to follow a finding of contravention with the determination of what was an appropriate penalty for that contravention, considered as an entity in its own right”.[57]
[54] [2015] FCA 1433 at [8]
[55] [2015] FCA 1433 at [8]
[56] [2015] FCA 1433 at [9]
[57] [2015] FCA 1433 at [9]
A second approach Jessup J identified is to “impose a single penalty in respect of a duality, or multiplicity of contravention”. His Honour noted that although the Full Federal Court in Australian Opthalmic Supplies Pty Ltd v McAlary-Smith[58] expressed no disagreement with the primary judge in that case adopting such an “omnibus approach to the determination of penalties”, his Honour was of the opinion that, by adopting such approach, the “court would be failing to engage directly and specifically with the consequences of the contravention of each statutory norm”.[59]
[58] [2008] FCAFC 8; (2008) 165 FCR 560
[59] [2015] FCA 1433 at [10]
The third approach Jessup J identified is one that his Honour conceived. Under that approach, a “penalty would be imposed in respect of each contravention considered as an entity in its own right, then a further order would be made that, upon payment of one of the penalties in each group within a time limited by the court, the operation of the order imposing penalties in respect of the other contraventions in the same group be permanently stayed”.[60] With respect, there are a number of potential difficulties with his Honour’s approach:
a)First, the approach only gives conditional effect to the one transaction principle. That can be seen in the orders his Honour made. His Honour ordered separate penalties for each contravention which, under the one transaction principle, would be considered as falling within one group, and ordered that if, by the time specified in his Honour’s orders, one of those penalties were paid (the primary penalty), the orders requiring payment of the other penalties (ancillary penalties) for contraventions falling within the same group would be permanently stayed. If, on the other hand, the primary penalties were not paid within the time specified by his Honour’s orders, all ancillary penalties would also become payable. Thus, if the contravener in the case before his Honour were not to pay the amounts of the primary penalties within the time specified by his Honour’s orders, the amount of penalties the contravener would be liable to pay would include the primary and ancillary penalties, which means the contravener would be liable to pay penalties in an amount calculated without reference to the one transaction principle.
b)Second, the amounts of the penalties a contravener will be liable to pay will potentially depend on whether the contravener is willing and able to pay the primary penalties. If the contravener pays the primary penalties, the contravener will in effect be discharged from liability to pay the ancillary penalties. If, on the other hand, the contravener is unable or unwilling to pay the primary penalties, the contravener will become liable to pay both the primary and ancillary penalties. Thus, a contravener’s willingness or ability to pay pecuniary penalties is a determinative factor in the amount of the penalties which a contravener will be liable to pay for contraventions of the FW Act. No case of which I am aware has suggested that a contravener’s willingness or ability to pay a specific amount of a penalty is relevant to assessing the amount of the penalty a contravener should be ordered to pay.
c)Third, although his Honour’s approach appears to respect the necessity of the Court’s having to assess a penalty for each contravention “considered as an entity in its own right”, it does so in a formal way only. His Honour’s approach consists in fixing primary and ancillary penalties. If the contravener pays the primary penalties within the time specified by the order, the contravener is forgiven from having to pay the ancillary penalties. It is difficult to see, however, how substantial effect is given to the necessity of the court having to assess a penalty for each contravention “considered as an entity in its own right” where, on the one hand, ancillary penalties are imposed for distinct contraventions but, on the other, the contravener’s obligation to pay the ancillary penalties is forgiven if the contravener pays the primary penalties, being penalties that have been imposed for different contraventions.
d)Fourth, his Honour did not identify the source of the Federal Court’s jurisdiction to order penalties under s.546 of the FW Act, and yet permanently stay the operation of such order. No express power to make such orders is conferred by the FW Act. That means that the jurisdiction to make such orders must either be implied in the FW Act, or expressed or implied in some other statute or rule of court.
[60] [2015] FCA 1433 at [11]
In my respectful opinion, assuming the one transaction principle applies to the assessment of pecuniary penalties, some discretion should be permitted to the Court when assessing the pecuniary penalties for contraventions that fall within the one transaction principle. And here there are two approaches. One is for the Court to consider and assess each contravention separately, and then make an adjustment to each penalty having regard to the fact that the contraventions arose out of a course of conduct or one transaction. Whether this approach should be taken will depend on matters that include the number of contraventions involved, and the degree of similarity between the facts out of which the distinct contraventions arise. The other approach is the “omnibus approach” that was adopted by the primary judge in Australian Opthalmic Supplies. This approach is likely to be appropriate where there are many contraventions arising out of the one act or omission of the contravener. In my respectful opinion, assuming the one transaction principle applies, and given the reason for which such principle applies, adopting this approach would not involve the Court turning its back on its statutory obligation to follow a finding of contravention with the determination of what was an appropriate penalty for that contravention, considered as an entity in its own right; nor by adopting such approach would the court be failing to engage directly and specifically with the consequences of the contravention of each statutory norm. The approach would be a consequence of the basis on which the one transaction principle applies, namely, that although the conduct consists of multiple contraventions, in substance the multiple contraventions are the manifestation of one substantial contravention.
Totality principle
Finally, it is necessary to refer to a related, but distinct,[61] principle, known as the “totality principle”. Under that principle, a sentencing judge is required “to impose a sentence or sentences which reflect the overall criminality of the offending for which the offender has been convicted”.[62] In R v Holder Street CJ described the principle as follows:[63]
The principle of totality is a convenient phrase, descriptive of the significant practical consideration confronting a sentencing judge when sentencing for two or more offences. Not infrequently a straight-forward arithmetical addition of sentences appropriate for each individual offence considered separately will arrive at an ultimate aggregate that exceeds what is called for in the whole of the circumstances. In such a situation the sentencing judge will evaluate, in a broad sense, the overall criminality involved in all of the offences and, having done so, will determine what, if any, downward adjustment is necessary, whether by telescoping or otherwise, in the aggregate sentences in order to achieve an appropriate relativity between the totality of the criminality and the totality of the sentences.
[61] Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70. At [42], Stone and Buchanan J said: “For the purpose of the present discussion the general principle which appears to be relied upon by the appellant [i.e., the “one transaction” principle] may be accepted, although it is important to distinguish it from the application of the totality principle which is a final check to be applied to ensure that a final, total or aggregate, penalty is not unjust or out of proportion to the circumstances of the case.”
[62] Contin v The Queen [2012] VSCA 247 at [38]
[63] R v Holder (1983) 3 NSWLR 245 at 260
The totality principle has been held to apply to the assessment of pecuniary penalties.[64]
[64] Director Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59 at [41]
Other matters
The one transaction principle and the totality principle are principles that have been applied in the field of criminal sentencing; they have been applied to the assessment of pecuniary penalties by way of analogy. For the reasons I have discussed elsewhere,[65] I propose to proceed in this matter on the assumption that the High Court’s decision in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate[66] does not render irrelevant the application of the one transaction principle and the totality principle to the assessment of pecuniary penalties under s.546 of the FW Act.
What contraventions fall within s.557 or should be considered to form part of a single course of conduct?
[65] Cai v Tiy Loy & Co Ltd (No. 3) [2016] FCCA 675 at [36]
[66] [2015] HCA 46
The Table of Contraventions indicates the parties accept that s.557(1) of the FW Act applies to AWT’s multiple contraventions of each of the two terms of the Award, and hence, s.45 of the FW Act, and AWT’s contraventions of each of s.323(1)(a), s.323(1)(c), s.535(1), and s.536(1) of the FW Act, so that AWT’s contraventions of these provisions should each be taken to constitute a single contravention of a civil remedy provision. That agreement is open on the authorities to which I have referred, and I am satisfied it is appropriate to find, and I do find, that AWT engaged in six contraventions of civil penalty provisions.
The applicant submits,[67] and the respondents agree,[68] that the contraventions based on breach of cl.16 of the Award (Contravention 3) and the contravention of s.323(1)(c) of the FW Act (Contravention 4) should be treated as one contravention. That is, the parties agree that Contraventions 3 and 4 arise out of the one course of conduct or one transaction and, for that reason, they should be treated as one contravention under the one transaction principle. Thus, on the FWO’s approach, I should assess penalties as if AWT engaged in five contraventions of the FW Act.[69] The respondents, on the other hand, submit the contraventions based on breach of cl.A.2.3 of Schedule A to the Award (Contravention 1) and s.323(1)(a) of the FW Act (Contravention 5) should be grouped as one contravention. The respondents also submit that the contraventions based on s.535(1) and s.536(1) of the FW Act (Contraventions 6 and 7 respectively) should be treated as one contravention. On the respondents’ approach, therefore, I should group the penalties into three contraventions, the first being Contraventions 1 and 5, the second being Contraventions 3 and 4, and the third being Contraventions 6 and 7.
[67] Applicant’s Outline Submissions in Penalty, [58]
[68] Respondents’ Submissions on Penalty, [4.4.2]
[69] As I have already noted, although s.542 is listed in the Table of Contraventions it is not a civil remedy provision.
The respondents submit Contraventions 1 and 5 are based on the same facts.[70] In her written submissions, on the other hand, the FWO submits Contravention 1 is materially different from Contravention 5. That is so because “[t]he vice in contravention (1) [is] making a decision, before any work was done, by which the employees were to be paid at a rate lower than the minimum wage in the” Award, and the contravention “is established before any work has commenced”. On the other hand, the vice in Contravention 5 is “a failure to remunerate an employee for every hour worked and at the agreed rate”, and that such contravention “is established once the work is done and the underpayment has been made”.[71] In his oral submissions, counsel for the FWO submitted something different. Counsel submitted the vice in Contravention 5 was the failure to obtain an agreement not to deduct money before hand, whereas the vice in Contravention 1 was underpayment for the work that was undertaken.
[70] Respondents’ Submissions on Penalty, [4.7]
[71] Submissions in Reply on Penalty, [14]
Contraventions 1 and 5 do arise out of the same facts, namely, underpayment of wages. The non-payment that constitutes Contravention 5, however, was accompanied by a feature not present in the other instances of non-payment, namely a decision to withhold amounts of money in breach of s.323(1)(a) without AWT’s attempting to bring itself within any one of the exceptions provided for by s.324 of the FW Act. Contravention 5, therefore, should be assessed as not arising out of the same transaction as Contravention 1.
As for Contraventions 6 and 7, it may be said that s.535 and s.536 of the FW Act are different obligations. On the other hand, however, they overlap; the performance of the obligations imposed by s.536 depends on the performance of the obligation imposed by s.535. Further, the contraventions of both s.535 and s.536 arise out of the one continuing omission for which Mr Maiorana was solely responsible. On balance, I am of the opinion that AWT’s contraventions of s.535 and s.536 of the FW Act arise out of the one transaction, and should be assessed as one contravention.
Thus, the contraventions for which penalties will be assessed are as follows:
Provisions
Description of contravention
Section 45 of the FW Act (Contravention 1)
Failing to pay SNC employees at least the minimum hourly rate they were entitled to receive under cl.A.2.3 of Schedule A to the Award (by reference to cl.13 of the Award).
Section 45 of the FW Act (Contravention 3) and s.323(1)(c) of the FW Act (Contravention 4)
Failing to pay the SNC employees their wages on a weekly or fortnightly basis as required by cl.16 of the Award; and failing to pay the SNC employees their wages on at least a monthly basis.*
Subsection 323(1)(a) of the FW Act (Contravention 5)
Failing to pay the SNC employees their wages in full (i.e., without deductions).*
Subsection 535(1) and s.536(1) of the FW Act (Contraventions 6 and 7)
Failing to make and keep for 7 years employee records of the kind prescribed by the FW Regulations and failing to provide payslips to employees within one day of paying an amount to an employee in relation to the performance of work.*
*Mr Maiorana admittedly
involved in contravention
Maximum penalty
Under s.546(2) of the FW Act, the pecuniary penalty the Court may impose must not, where the person is an individual, be more than “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2)” and, where the person is a corporation, must not be more than “5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2) of the Act”. The maximum penalty units specified in the table in s.539(2) of the FW Act for the contravention of each of s.45 and s.323 of the FW Act is 60 penalty units, and the maximum penalty units for contravention of s.535 and s.536 of the FW Act is 30 penalty units. Thus, the maximum penalty units for which AWT is liable for its contraventions is 300 penalty units for its contraventions of s.45 and s.323 of the FW Act, and 150 penalty units for its contraventions of s.535 and s.536 of the FW Act. The maximum penalty units for which Mr Maiorana is liable is 60 for his involvement in AWT’s contraventions of s.323 of the FW Act, and 30 for his involvement in AWT’s contraventions of s.535 and s.536 of the FW Act.
Under s.12 of the FW Act and s.4(1) of the WR Act, “penalty unit” has the meaning given by s.4AA of the Crimes Act 1914 (Cth) (Crimes Act). Up to 27 December 2012, s.4AA(1) of the Crimes Act defined penalty unit to mean $110. Item 7 of Schedule 3 to the Crimes Legislation Amendment (Serious Drugs, Identity Crime and Other Measures) Act 2012 (Cth) (Amending Act) amended s.4AA to define penalty unit to mean $170. Item 9 of Schedule 3 provided that the amendment made by item 7 of that Schedule applies “in relation to an offence committed after the commencement of this item”. The amendment took effect on 28 December 2012. Also relevant is s.4F(1) of the Crimes Act which provides that, where a provision of a law of the Commonwealth increases the penalty or maximum penalty for an offence, the penalty or maximum penalty as increased applies only to offences committed after the commencement of that provision.
There is a preliminary issue that was not addressed by the parties, but which was considered by Judge Smith in Fair Work Ombudsman v Amritsaria Four Pty Ltd & Anor.[72] The issue is whether the Amending Act, which applies to an offence being committed, applies to contraventions of civil remedy provisions under the FW Act. His Honour concluded that it did; and I respectfully agree with his Honour’s conclusion and reasons for that conclusion.
[72] [2016] FCCA 968 at [47]-[51]
The FWO submits that, although it is clear the increased penalty applies only to offences committed after the commencement of the increase, that does not necessarily exclude the application of the increased penalty to contraventions which are “taken to constitute a single contravention” under s.557(1) of the FW Act, where the contraventions comprising the course of conduct continue on or after 28 December 2012. The FWO submits a number of anomalous outcomes would result if the lower maximum penalty would apply throughout the entire course of the contraventions. The FWO also relies on the decision of the Court of Criminal Appeal of the Supreme Court of New South Wales in R v White.[73] In that case, during the period of the life of a criminal conspiracy, the maximum penalty for the offence of conspiracy to defraud the Commonwealth provided for by s.86A of the Crimes Act was increased. It was held that the crime of conspiracy was one offence, but a continuing offence while in existence; and that the maximum penalty was the increased penalty. Finally, the FWO relies on the decision of Tracey J in Kelly v Fitzpatrick, where his Honour considered it to be a relevant factor when assessing contraventions to which s.719(2) of the WR Act applied (being the predecessor to s.557(1) of the FW Act) that the penalty for contraventions increased during the period for which the contraventions had taken place.
[73] BC9101745 (Gleeson CJ, and Lee and Hunt JJ)
Whether or not the increased penalty applies to any of AWT’s conduct depends on the correct application of Item 9 of Schedule 3 to the Amending Act and s.4F of the Crimes Act. In particular, it depends on whether AWT engaged in any conduct after 27 December 2012 that can be said to have constituted a contravention of a provision of the FW Act; for the increased penalty applies only “in relation to an offence committed after the commencement of this item”. That, in turn, requires a close analysis of the nature and effect of s.557(1) of the FW Act.
Subsection 557(1) of the FW Act provides that, in the circumstances stated in that subsection, two or more contraventions are “taken to constitute a single contravention”. This implies at least three things. First, where s.557(1) of the FW Act applies, the single contravention is taken to have been constituted as soon as the second contravention occurs. Second, the single contravention remains a single contravention no matter how many further contraventions to which s.557(1) applies may occur, or over what period, or in relation to how many persons, such contraventions occur. Third, if there are three or more contraventions to which s.557(1) applies, the third and subsequent contraventions cannot be regarded as contraventions of the FW Act, at least not for the purpose of ordering penalties. That is so because the third and subsequent contraventions will be treated as forming part of the single contravention which, because of s.557(1) of the FW Act, must be taken to have been constituted on the happening of the second contravention. If this analysis is correct, then, for the purposes of Item 9 of Schedule 3 to the Amending Act and s.4F(1) of the Crimes Act, only the second of the contraventions to which s.557(1) of the FW Act applies is relevant to determining when an offence has been committed for the purposes of s.4F(1), and hence, to what contraventions the increased penalty applies.
Applying this analysis to the case before me, the increased penalty would apply to each contravention of each of the provisions of the FW Act that fall within s.557(1) referred to in the Table of Contraventions only if the second of the contraventions occurred on or after 28 December 2012. There is no suggestion that this occurred in relation to any of the admitted contraventions. It follows, therefore, that the maximum penalty that applies to AWT’s admitted contraventions of the FW Act, and Mr Maiorana’s admitted involvement in some of those contraventions, is that which existed immediately before 28 December 2012.
The maximum penalties payable for AWT’s contraventions, and Mr Maiorana’s involvement in some of those contraventions, therefore, are as follows:
Provisions
Description of contravention
Penalty Units (AWT)
Penalty Units (Mr Maiorana)
Section 45 of the FW Act (Contravention 1)
Failing to pay SNC employees at least the minimum hourly rate they were entitled to receive under cl.A.2.3 of Schedule A to the Award (by reference to cl.13 of the Award).
300 ($33,000)
-
Section 45 of the FW Act (Contravention 3) and s.323(1)(c) of the FW Act (Contravention 4)
Failing to pay the SNC employees their wages on a weekly or fortnightly basis as required by cl.16 of the Award; and failing to pay the SNC employees their wages on at least a monthly basis.*
300 ($33,000)
60 ($6,600)
Subsection 323(1)(a) of the FW Act (Contravention 5)
Failing to pay the SNC employees their wages in full (i.e., without deductions).*
300 ($33,000)
60 ($6,600)
Subsection 535(1) and s.536(1) of the FW Act (Contraventions 6 and 7)
Failing to make and keep for 7 years employee records of the kind prescribed by the FW Regulations and failing to provide payslips to employees within one day of paying an amount to an employee in relation to the performance of work
150 ($16,500)
30 ($3,300)
Assessing the penalties - approach
The approach of most courts in assessing penalties for single contraventions of the FW Act is to take into account the factors that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd.[74] These factors are: the nature and extent of the conduct which led to the breaches; the circumstances in which that conduct took place; the nature and extent of any loss or damage sustained as a result of the breaches; whether there had been similar previous conduct by the party committing the breach; whether the breaches were properly distinct or arose out of the one course of conduct; the size of the business enterprise involved; whether or not the breaches were deliberate; whether senior management was involved in the breaches; whether the party committing the breach had exhibited contrition; whether the party committing the breach had taken corrective action; whether the party committing the breach had cooperated with the enforcement authorities; the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and the need for specific and general deterrence.
[74] [2007] FMCA 7. In Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 at [14] Tracey J adopted this same list of factors as “potentially relevant and applicable”.
Although any one or more of these factors may be relevant to the assessment of a pecuniary penalty in any given case, “courts have warned against the use of checklists because they give rise to the risk of transforming the process of instinctive synthesis into the application of a rigid catalogue of matters for attention”.[75] With these reservations in mind, I propose to consider the factors identified in Mason that are relevant to the circumstances of this case.
[75] Australian Building & Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2010] FCA 977; (2010) 199 IR 373 at [10] (Barker J)
I propose to treat each of Contravention 1, Contraventions 3 and 4, Contravention 5, and Contraventions 6 and 7, as a single contravention. I will also consider AWT’s contraventions of Contraventions 3 and 4, Contravention 5, and Contraventions 6 and 7 and Mr Maiorana’s involvement in those contraventions together, because Mr Maiorana was in effect the controlling mind of AWT in relation to the relevant acts and omissions that constitute AWT’s contraventions of the FW Act.
Underpayment and non-payment of wages - evidence
Before I consider the relevant factors in relation to the assessment of penalties for Contraventions 1, 3, 4, and 5, it would be useful to set out the evidence that was adduced about the contraventions, and my findings on the basis of that evidence.
Evidence and findings
Mr Maiorana deposed that on or about 25 December 2012 the Santo Rocco experienced mechanical problems with its engine. That prevented Santo Rocco from engaging in fishing activities between 29 December 2012 and 13 January 2013.[76] The Santo Rocco continued to experience mechanical issues after 13 January 2013. The log books show that, between 25 December 2012 and 13 August 2013, the Santo Rocco spent only 19 days fishing.[77] On 19 February 2013, the Challenge ran into rocks and was rendered unseaworthy.[78] Mr Maiorana deposed that, “[d]ue to these issues, AWT had a much reduced income during the period from 25 December 2012 to August 2013”.[79]
[76] Affidavit of A Maiorana 27.03.15, [10]
[77] Affidavit of A Maiorana 27.03.15, [13]
[78] Affidavit of A Maiorana 27.03.15, [15]
[79] Affidavit of A Maiorana 27.03.15, [16]
From December 2012 AWT continued to meet outgoing fixed expenses.[80] After February 2013, it was unable to make wage payments on any regular basis, however, because it had insufficient cash flow due to AWT’s being “unable to operate Challenge and the Santa Rocco operating intermittently”.[81] Mr Maiorana said he did, however, make payments to the employees to the extent he was able to. He in part used his own money or money that he borrowed from his family, although he has kept no records of the amounts he paid.[82]
[80] Affidavit of A Maiorana 27.03.15, [16]
[81] Affidavit of A Maiorana 27.03.15, [55]
[82] Affidavit of A Maiorana 27.03.15, [29]
Mr Maiorana gave evidence that from July 2012 to December 2012 he had conversations with two employees, Mr Kesuma and Mr Sumanti, about the difficulties AWT’s business was experiencing.[83] Mr Maiorana gave the following evidence:
[83] T56.35
Just dealing with Mr Kesuma first of all, what did you say to him, and what did he say to you in relation to those conversations?---I said I was very sorry that we were behind because of problems with the boat, problems with catching, and that we will try to pay – as soon as we got some money in we would pay him as soon as possible and catch up as fast as possible.
And did you refer to the terms and conditions of their employment in those conversations?---I told them I understand the terms and conditions, and I knew that I was behind, and I knew I was in trouble for it, and I was saying if we catch – get back to – back to normal.
Did you in those conversations ever indicate to them that you would have to terminate their employment?---Yes.
What did you say to them, or what did you say to Mr Kesuma?---I said to Mr Kesuma that if we don’t get the money, for example, with insurance, I would have to terminate everyone’s employment.
I’m just dealing with the - - -?---Mr Kesuma’s employment.
That’s right. I’m just dealing with that period, July through to December at the moment, okay. Did you have any conversations about their employment in that period?---Yes.
And what did you say to Mr Kesuma?---We were behind with the fishing because of breakdowns and I would pay him as soon as possible.
I see. And what, if anything, did Mr Kesuma say to you in relation to these matters?---It being words like, “Boss, as soon as you can, can you please pay us because we have a family.”
I see. All right. Now, in relation to Mr Sumanti, did you have similar conversations with him, or were they different?---No. Very similar.
I see. And did you also indicate to Mr Sumanti that you might have to terminate his employment?---Not at that period.
Mr Maiorana also gave evidence that in the middle of March 2013 he met with the employees. By that time the employees were not working full time. Mr Maiorana deposes he told the employees that because there were no working fishing boats, AWT did not have any income, and Mr Maiorana did not know what was happening with the Challenge. Mr Maiorana said he had lodged an insurance claim, and was waiting for it to be paid out. He said he was hopeful he could resolve that and get back to fishing. Mr Maiorana further said that until that happens “we are not in a position to pay regular wages”, and that “I might have to finish you up”.[84] Mr Maiorana deposes he also said:[85]
If you stay, I can make some payments to you, but I cannot guarantee how much the payments will be or when I will be able to make the payments. You won’t be getting your regular wages. You do not have to stay on these terms. It is up to you. I would like you to stay, while I try and sort this out, but if you would rather not do so, I can terminate your employment. It is your choice.
[84] Affidavit of A Maiorana 27.03.15, [24]
[85] Affidavit of A Maiorana 27.03.15, [24]
Mr Maiorana gave evidence he had conversations with one or more of the employees after he made this announcement. Mr Maiorana says he told Mr Kesuma that as soon as AWT would get its money from the Challenge he would get paid, and that Mr Kesuma said he did not want to return home.[86] Mr Maiorana had a similar conversation with Mr Sumanti.
[86] T57.40
Mr Sumanti gave evidence by affidavit, and was cross-examined. In one of his affidavits, Mr Sumanti said that after July 2012 Mr Maiorana “stopped paying me all of my wages”, and that after November 2012 “my wages were very behind”.[87] Mr Sumanti said he “would ask” Mr Maiorana “if he would pay me”, to which Mr Maiorana responded: “After the next trip I will pay you your money”.[88] Mr Sumanti said he asked Mr Maiorana for his money every time he saw him.[89] On one occasion, Mr Maiorana said he “might as well send you back to Indonesia without paying your wages”.[90] Mr Maiorana denies having a conversation to this effect with Mr Sumanti.[91]
[87] Affidavit of M Sumanti 29.01.15 [3]
[88] Affidavit of M Sumanti 29.01.15 [3]
[89] Affidavit of M Sumanti 29.01.15 [6]
[90] Affidavit of M Sumanti 29.01.15 [6]
[91] Affidavit of A Maiorana 27.03.15, [88]
In evidence given in cross-examination, Mr Sumanti said that in November 2012 the Challenge experienced problems with its refrigeration unit which resulted in fish being ruined;[92] that the Challenger had engine trouble, but that was repaired after obtaining a replacement engine from America;[93] when Mr Sumanti was not paid the correct amount of wages, Mr Maiorana said words to the effect of “I’m sorry, I haven’t got enough money”, or “there’s not enough money coming in. I’ll pay you next week” or “next month”;[94] that Mr Maiorana said he was trying to pay Mr Sumanti’s wages so he could stay in Australia;[95] that Mr Maiorana was waiting for the insurance claim to be paid,[96] and that when the money came in Mr Maiorana would pay Mr Sumanti.[97] Mr Sumanti insisted, however, that Mr Maiorana did say he would send Mr Sumanti back to Indonesia without paying Mr Sumanti’s wages.[98] Mr Sumanti also said that he did not say to Mr Maiorana, and he did not observe any other employee request Mr Maiorana not to finish them up because Mr Sumanti or any other employee did not want to return to Indonesia.[99]
[92] T25.20
[93] T26.15
[94] T27.35-40
[95] T29.10-15
[96] T31.20-25
[97] T32.5
[98] T30.20-30
[99] T32.15-30
Another of the employees, Mr Kesuma, also gave evidence. In his affidavit, Mr Kesuma deposed that, when Mr Maiorana came to the boat once a week, Mr Kesuma asked where his money was. Mr Maiorana said he was waiting for the insurance money, and that he would pay Mr Kesuma when Mr Maiorana is paid the insurance money.[100] Under cross-examination, Mr Kesuma said the Santo Rocco had a lot of mechanical and engine problems in 2012 and 2013;[101] he accepted that “what was happening is that it would have a problem and then it would be out of action for week, and then it would be repaired and come back and it would go out of action and come back”;[102] and that Mr Maiorana apologised when he did not pay the wages in full, although Mr Kesuma said that Mr Maiorana promised he would be paid his wages;[103] and that Mr Maiorana said he would pay Mr Kesuma “as soon as the money comes in”.[104] Mr Kesuma does not remember a meeting in which Mr Maiorana said that because he could not pay regular wages, he might have “to finish you up” in response to which employees requested Mr Maiorana not do that, and that if that occurred “we will have to go back to Indonesia”.[105] Mr Kesuma also could not remember attending a meeting in which Mr Maiorana said words to the effect that “I won’t be able to pay regular wages. You don’t have to stay. It’s up to you. If you want to stay, I will try and sort it out, but if you don’t, then I have to terminate your employment. It’s your choice”.[106] Mr Kesuma said Mr Maiorana “kept trying to make me stay and work for his company”.[107]
[100] Affidavit of S W Kesuma 23.01.15 [7]
[101] T43.15-20
[102] T43.20-30
[103] T43.35-40; T44.20
[104] T44.30-35
[105] T45.40
[106] T46.30-35
[107] T46.35
In the meantime, AWT had lodged a claim on its insurance policy for the damage to the Challenge in February 2013.[108] Mr Maiorana expected AWT would be paid $1.4 million.[109] It appears that Mr Maiorana’s expectation was based on the $1.4 million for which the Challenge was insured (being the insured value of the hull and machinery of the Challenge), and $290,000 (being the costs incurred by AWT in repairing and replacing the Santo Rocco’s engine).[110] The insurer claimed, however, that AWT had breached a number of warranties under the insurance policy.[111] Mr Maiorana agreed to accept a settlement of $800,000. That settlement occurred in June 2013.[112] The $800,000 was subject to a charge held by National Australia Bank (NAB) who directed that the $800,000 be paid into an account that was held by AWT that had been frozen.[113]
[108] Affidavit of A Maiorana 27.03.15, [18]
[109] Affidavit of A Maiorana 27.03.15, [19]
[110] Affidavit of A Maiorana 27.03.15, [18]; Exhibit AM-1, page 56
[111] Affidavit of A Maiorana 27.03.15, [31], [32], Exhibit AM-1, page 64
[112] Affidavit of A Maiorana 14.07.15, [10]
[113] Affidavit of A Maiorana 14.07.15, [10]-[15]
I am satisfied on the basis of this evidence, and I find, that: during the period 1 July 2012 to 30 June 2013 AWT experienced financial difficulties, in substantial part due to recurrent failures in the engine of the Santo Rocco, and the loss of the Challenge; it was these financial difficulties that led to AWT not paying the SNC employees their wages in full; Mr Maiorana represented to the SNC employees that he intended to make up the shortfall from insurance payments he expected AWT would receive in relation to the loss of the Challenge and perhaps from an increase in revenue that would arise from the reemployment of the Santo Rocco; Mr Maiorana intended to make good the shortfall in wages, and he believed he would be able to make up that shortfall; given the period over which Mr Maiorana represented he would be able to make good the shortfall, and the fact that AWT was unable to make good the shortfall, Mr Maiorana did not have reasonable grounds for representing that AWT would be able to make good the shortfall; Mr Maiorana, however, was not reckless in believing, and in representing that he would be able make good the shortfall.
There was a conflict in the evidence about whether in March 2013 Mr Maiorana informed the employees that he would be unable to guarantee their wages, and that it was up to the employees whether they wished to continue, and whether the employees said they did not want to return to Indonesia. Whether this occurred, as deposed to by Mr Maiorana, has no bearing on the assessment of penalty. The respondents do not submit the SNC employees in any sense acquiesced in their not being paid. I am not prepared to find, however, that a meeting to the effect deposed by Mr Maiorana occurred, or that Mr Maiorana said words to the effect he deposes he said at such meeting. I am satisfied that at least as at March 2013 Mr Maiorana believed that AWT would be able to continue to trade, particularly after AWT were to receive payment on its insurance claim. That, in effect, is what he was telling the employees. In those circumstances, it is unlikely he would have informed the employees that it was up to them to decide whether they wished to remain with AWT.
There is one other aspect of the evidence that I should address at this point; and that relates to the cheque for $126,089.40 Mr Maiorana arranged to be sent to the deed administrator on 22 May 2014. In his first affidavit, Mr Maiorana deposed that, “[i]n order to try and alleviate the loss suffered by the Employees, on 22 May 2014, I caused my solicitors . . . to send a letter to the Deed Administrator enclosing a cheque for $126,089.40”.[114] Mr Maiorana further deposed that the amount was calculated by Mr Melotti, “as the amount that I then considered to be owing to the Employees”, and that Mr Maiorana’s intention in sending the cheque to the deed administrator “was that the Administrator would apply those monies to the claims made by the Employees in respect of their unpaid entitlements”.[115] The evidence Mr Maiorana gave in cross-examination was different. The effect of his evidence was that Mr Melotti calculated the $126,089.40 with the administrator.[116]
[114] Affidavit of A Maiorana 27.03.15, [39]
[115] Affidavit of A Maiorana 27.03.15, [40]
[116] T65.20-25
The true purpose for which the $126,089.40 was paid is to be inferred from two letters. The first is a letter dated 16 May 2014 from the solicitors for (I infer) the shareholders of AWT to the deed administrator.[117] The letter raises inquiries in relation to three amounts claimed by the deed administrator as remuneration. The letter also refers to the deed administrator’s recording there were $200,853.18 worth of wages outstanding. The letter noted that, although this was a figure arrived at by the FWO, “our client’s good faith calculations arrived at $14,000”, and “[o]ur client asks for an opportunity to consider the calculations you used to arrive at this amount”. After asking an additional question, the letter states:
In the meantime, noting that on any view of it, a substantial sum is owing to your firm, and as a good faith gesture whilst you are addressing our client’s enquiries, we are instructed to pay as an interim amount $126,089.40. We arrive at this figure by subtracting from $160,000 (the sum advanced to Giuseppe Maiorana by Antonio Maiorana pending the sale of the Chatswood property) less $19,588.50, $7,322.10 and $7,000 for the enquiry amounts pending your response.
[117] Exhibit D. The letter was in fact sent by email on 21 May 2014. See Exhibit AM-1, page 94, first sentence of the letter dated 22 May 2014.
The second letter is one dated 22 May 2014 that was also sent by the solicitors for the shareholders to the deed administrator.[118] It encloses a cheque for $126,089.40, and states:
Although it is a matter for you how such funds are allocated as between creditors and employees, we assume you are aware of the Fair Work Tribunal [sic] mediation on Monday in which the Company is involved. We ask that you inform us urgently what proportion of that sum will be allocated to the employees and what amount to other creditors so the Fair Work Tribunal [sic] can be informed on Monday.
Non-payment of wages in full (Contravention 1)
[118] Exhibit AM-1, page 94
The nature and extent of the conduct that led to the contravention
The contravention in question related to the non-payment of wages in full. That is a serious contravention. The seriousness of that contravention is compounded by the length of the period – twelve months - over which the conduct out of which the contravention arose occurred, and the regularity of the conduct during that period. These factors point to a penalty at the higher end of the scale.
Circumstances in which conduct took place
The contraventions took place in circumstances where AWT was experiencing difficulties that, at least in substantial part, led it into financial difficulties. By itself, that is a mitigating factor. On the other hand, the contraventions occurred in circumstances where Mr Maiorana was regularly representing to the employees they would be paid. That is an aggravating factor because the representations may have induced the employees to continue working in circumstances where they were not assured of being paid in full and, in fact, were not paid in full. It is true Mr Maiorana believed he would be able to pay the shortfall, and that he was not reckless in holding such belief. On the other hand, particularly as time went on, he acted unreasonably in believing AWT would be able to pay the shortfall.
The nature and extent of any loss or damage sustained as a result of the breaches
The SNC employees were underpaid a combined amount of $43,481.87. The lowest underpayment was $7,113.35, and the highest was $12,604.46. These are significant amounts. There is no suggestion the SNC employees have any substantial prospect of recovering any part of these amounts from AWT.
Similar previous conduct
The FWO refers to what it submits is a complaint having been made by an employee that had been resolved by AWT. Mr Maiorana, in his first affidavit, has given detail of that incident in which he says that a person whom AWT had employed for one fishing trip demanded, and Mr Maiorana refused, payment in cash without the deduction of tax.[119] The person subsequently provided to Mr Maiorana his tax file number and bank account details, and Mr Maiorana paid the amount owing to the person. There is no reason for not accepting Mr Maiorana’s evidence on this point.
[119] A Maiorana affidavit, 27.03.15, [81]-[82]
The FWO also refers to a determination of contravention having been issued to AWT in 2012 in relation to an employee, which AWT acknowledges it had received. There is no evidence about whether AWT had rectified the contravention identified.
I will assess the relevant penalty on the assumption that AWT has not previously engaged in similar conduct.
The size of the business enterprise involved and capacity to pay
AWT has limited capacity to pay. The authorities make it clear, however, that this factor carries little weight; [120] and I propose to give it little weight.
[120] See, for example, Jordan v Mornington Inn Pty Ltd (2007) 166 IR 33
Specific and general deterrence
Given AWT is currently the subject to a deed of company arrangement, it may be assumed there is little or no need for specific deterrence. The level of penalty in the circumstances of this case, however, should signal to the community not only the importance of employers complying with their obligations to pay the correct amount of wages; it should also signal the importance of employers complying with such obligations even at times when the employer’s business faces financial stress.
There may well be circumstances where an employer’s business unexpectedly encounters short-term illiquidity, and where it may be disadvantageous both for employer and employee if the employer were to terminate with haste the employment relationship to avoid the risk of failing to comply with a term of an award or some other provision of the FW Act during the period of illiquidity. Such circumstances, however, are not present in the case before me. As I have already noted, AWT’s business was in financial distress over a significant period, and, as time passed, Mr Maiorana unreasonably held the belief that AWT would be able to pay the SNC employees their wages in full. The penalty I should set in these circumstances, therefore, should be such as to deter employers whose business is in some financial distress from in effect passing on to their employees the financial risk of the business by either not obtaining funds that will ensure the employer remains in a position that will enable the employer to comply with applicable awards and provisions of the FW Act, or by not otherwise taking decisive action to prevent employees from continuing to engage in work for which the employees are at risk of not being paid, or not being paid in full.
Deliberateness of breach
Mr Maiorana and, therefore, AWT, were aware of AWT’s obligations to pay wages. In that sense, AWT’s breaches were deliberate. To some extent, the deliberateness of AWT’s conduct is mitigated by what I have held to be Mr Maiorana’s actual belief that AWT would be able to pay the wages in full.
Contrition and corrective action
Mr Maiorana expressed contrition in his affidavit. More relevantly, he expressed contrition to the employees when he was unable to arrange payment of their wages. By itself, however, this carries little weight beyond preventing the Court finding Mr Maiorana intended to exploit the employees.
I accept Mr Maiorana’s evidence that he paid some amounts out of his own pocket, and this is a factor that operates in AWT’s favour. The evidence, however, does not establish the extent to which Mr Maiorana used his own funds. Given the evidence he gave about his current financial position, including AWT’s owing him $260,000, I could not infer that Mr Maiorana contributed significant amounts of his own money to pay employees.
In their written submissions, the respondents rely on the payment of $126,089.40. They submit that the payment of this amount constituted an attempt by the respondents to “have the Employees paid their outstanding entitlements”.[121] I do not accept that submission. The evidence does not establish that this amount was calculated by reference to an estimate of the amounts that were owing to the employees. The letter dated 16 May 2014 sent to the deed administrator to which I have referred in paragraph 75 of these reasons shows the amount was calculated by deducting three disputed amounts from $160,000 which was described as “the sum advanced to Giuseppe Maiorana by Antonio Maiorana pending the sale of the Chatswood property”. There is no evidence about what the $160,000 represents. There is also no evidence about whether the three amounts that had been deducted from the $160,000 were paid to the administrator.
[121] Respondents’ Submissions on Penalty [8.3]
At most, the evidence goes no further than establishing that AWT hoped that the deed administrator would apply some part of the $126,089.40 to pay the outstanding wages. I therefore give little weight to the payment of the $126,089.40.
Assessment
Of all these factors, the most significant are the period over which the contravening conduct occurred, the regularity of AWT’s failure to pay wages in full, and the need for general deterrence. Bearing these and all other factors in mind, I consider that AWT should be ordered to pay a pecuniary penalty of $22,000.
Failure to pay wages on weekly and monthly basis (Contraventions 3 and 4)
The nature and extent of the conduct that led to the contravention
The contravention in question related to the failure to pay wages by the time required by the Award and by s.323(1)(c) of the FW Act. That is a serious contravention. The seriousness of that contravention is compounded by the length of the period – twelve months - over which the conduct out of which the contravention arose occurred, and the regularity of the conduct during that period. These factors point to a penalty at the higher end of the scale.
Circumstances in which conduct took place
The contraventions took place in circumstances where AWT was experiencing difficulties that, at least in substantial part, led it into financial difficulties. That is a mitigating factor, but I place little weight on it.
The nature and extent of any loss or damage sustained as a result of the breaches
As I have already noted, the SNC employees were underpaid a combined amount of $43,481.87. The lowest underpayment was $7,113.35, and the highest was $12,604.46. This does not, however, represent the loss the SNC employees suffered. In the absence of any evidence of loss arising from the late payments, the only loss the SNC employees have suffered is an amount representing the interest on the amounts that had not been paid on time. That would be a small amount.
Similar previous conduct
There is no evidence of similar previous conduct by AWT or by Mr Maiorana.
The size of the business enterprise involved and capacity to pay
As I have already noted, AWT has limited capacity to pay, but I propose to give it little weight.
Mr Maiorana has given evidence about his employment after AWT went into administration. He worked as a truck driver, but he was off work from 19 June 2014 to 26 October 2014 due to injury during which he received workers compensation equal to 80% of his earnings. Mr Maiorana was on leave without pay from 26 October 2014 to 14 January 2015, and after 30 January 2015 has been on workers compensation. Mr Maiorana further deposes he is owed $260,000 by AWT, and that he has no assets other than $4,771 in his bank account, a motorcycle, and superannuation of $59,207.17.[122]
[122] A Maiorana affidavit, 27.03.15, [65]-[71]; Affidavit of A Maiorana 14.07.15, [16]-[22]
The FWO points to evidence which, she submits, casts doubt on Mr Maiorana’s claims of lack of means. In particular, the FWO relies on a number of not insubstantial payments into Mr Maiorana’s account, and to Mr Maiorana’s taking an overseas trip. Mr Maiorana has given evidence explaining his overseas trip (it was to assist his father) but he did not give any evidence to explain the payments made into his bank account.
Notwithstanding the evidence on which the FWO relies, I am satisfied Mr Maiorana does not have available to him anything other than nominal amounts with which to meet an order for the payment of a pecuniary penalty. In my opinion, however, that by itself is not a significant factor in favour of assessing a penalty that would meet Mr Maiorana’s capacity to pay, and I propose to give little weight Mr Maiorana’s limited capacity to pay.
Specific and general deterrence
For reasons I have already given in relation to Contravention 1, it is unlikely AWT will repeat the contraventions and, for that reason, there is no need for the penalty to reflect specific deterrence. Nor is there such a need in the case of Mr Maiorana because there is little prospect he will again commence business. General deterrence, however, is another matter. For the reasons I have given in relation to Contravention 1, the penalty should reflect general deterrence.
Deliberateness of conduct
What I have said in relation to Contravention 1 about AWT’s deliberateness of conduct and contrition applies to Contraventions 3 and 4. As for Mr Maiorana, he at the very least was aware to a near certainty that until such time as matters improved, the employees would not be paid their wages, or their wages in full, by the due dates. To a very limited extent, however, the deliberateness of Mr Maiorana’s conduct is mitigated by what I have held to be his actual belief that AWT would be able to pay the wages in full.
Contrition
What I have said about AWT’s contrition in relation to Contravention 1 applies to Contraventions 3 and 4.
Assessment
Weighing in favour of a penalty being assessed at the higher end of the scale is the serious and systematic nature of the contraventions, and the need for general deterrence. The matters that weigh against a penalty being assessed at the higher end of the scale is the absence of any wilful intention to contravene cl.16 of the Award and s.323(1)(c) the FW Act, and the absence of any damage to the SNC employees specifically arising from AWT not paying wages by the time required by these provisions.
Considering all these factors, I find that AWT should be ordered to pay a pecuniary penalty of $10,000, and that Mr Maiorana should pay a pecuniary penalty of $2,000.
Deductions from wages (Contravention 5)
The nature and extent of the conduct that led to the contravention
The contravention consisted in AWT deducting every month amounts of around $780 from wages owed to SNC employees. The amounts were deducted on account of the provision of food, accommodation, and health insurance. The conduct occurred in relation to four employees over one year.
Circumstances in which conduct took place
Mr Maiorana gave evidence that he believed that AWT was entitled to make the deductions. Mr Maiorana said he based his belief on his reading of cl.4 of Schedule 3 to the Labour Agreement, which provided:[123]
Payments deducted from the primary sponsored person’s salary for accommodation, food, health insurance and work related equipment may not exceed $760 in any month.
The maximum amount deducted from the primary sponsored person’s salary for accommodation, food, health insurance and work related equipment may be increased in each year of the agreement by 3.5 percent.
[123] A Maiorana affidavit, 27.03.15, [46]
Mr Maiorana also gave evidence that he relied on advice by the migration agent AWT had engaged to assist in obtaining 457 visas for employees. Mr Maiorana said the agent gave advice to him to the effect set out in the agent’s email of 2 July 2011 in which the agent said that, [f]ollowing our discussion, the monthly deductions are not to exceed $760”.[124] The FWO did not submit Mr Maiorana did not believe AWT was entitled to make the monthly deductions referred to in the Labour Agreement and the migration agent’s email.
[124] Exhibit AM-2, page 272
I accept Mr Maiorana believed AWT was entitled to deduct the amounts specified in the Labour Agreement and in the migration agent’s email. I find, however, that the belief was unreasonable. The migration agent could not reasonably have been interpreted as advising that AWT could under the FW Act lawfully deduct the amounts referred to in the email. The advice was directed, and directed only, to what was provided in the Labour Agreement.
In any event, whether Mr Maiorana’s belief was reasonable or unreasonable does not much matter, at least not where, as is the case here, the belief was genuinely held. Mr Maiorana’s belief was based on his not directing his mind to the obligations AWT had under the FW Act, or to the necessity of AWT obtaining legal advice about its obligations under the FW Act. Mr Maiorana’s ignorance of the obligations the FW Act imposed on AWT, therefore, although a matter that in the circumstances of this case is a matter on which I rely for finding Mr Maiorana did not deliberately flout s.323(1)(a) of the FW Act, is otherwise not a matter on which AWT or Mr Maiorana can rely as a mitigating factor.
The nature and extent of any loss or damage sustained as a result of the breaches
The FWO did not submit that the goods or services on account of which AWT made the deductions were not supplied to the SNC employees, or that the amounts AWT deducted did not reflect the fair value of the goods and services that were supplied to the SNC employees. Given that the Labour Agreement itself specified a maximum amount that could have been deducted, I infer that the amounts AWT deducted reflected no more than the fair value of the goods and services AWT supplied to the SNC employees.
Specific and general deterrence
For reasons I have already given in relation to Contraventions 1, 3, and 4, it is unlikely AWT or Mr Maiorana will repeat the contraventions of s.323(1)(a) of the FW Act and, for that reason, there is no need for the penalty to reflect specific deterrence. The penalty should, however, reflect general deterrence. The penalty should signal that ignorance by employers of their obligations to comply with s.323(1)(a) of the FW Act is no excuse for not complying with the FW Act. The need for general deterrence may be of particular importance in the case of contraventions of s.323(1)(a). That provision is the modern manifestation of what ought reasonably be regarded as a notorious provision stemming from the Truck Act 1831 (Imp) to ensure that employees’ wages are paid in money, and not in kind.
Other matters
What I have said about AWT’s and Mr Maiorana’s capacity to pay, deliberateness of conduct, and contrition apply to Contravention 5.
Assessment
Weighing in favour of a penalty being assessed at the higher end of the scale is the serious and systematic nature of the contraventions, and the need for general deterrence. The matters that weigh against a penalty being assessed at the higher end of the scale is the absence of any wilful intention to contravene s.323(1)(a) of the FW Act, and the absence of any damage to the SNC employees specifically arising from AWT making the deductions.
Considering all these factors, I find that AWT should be ordered to pay a pecuniary penalty of $10,000, and that Mr Maiorana should pay a pecuniary penalty of $2,000.
Contraventions of s.535 and 536 (Contraventions 6 and 7)
Mr Maiorana deposed that until July 2012 AWT engaged a bookkeeper who provided services for around three hours a week. After July 2012, Mr Maiorana “performed all the administrative functions for AWT”.[125] It appears that the bookkeeper used MYOB.[126] Mr Maiorana further deposed that he has had great difficulty locating AWT’s records. He said he began storing records of AWT’s business as far back as 20 years in one of the two garages owned by his grandfather, but he has been unable to find the boxes after the house had been tenanted.[127] Nor does he identify the type of information the bookkeeper recorded in MYOB or whether Mr Maiorana himself used MYOB to record any financial information. Further, Mr Maiorana does not in terms say he has been unable to access MYOB through the computer the bookkeeper used.
[125] A Maiorana affidavit, 27.03.15, [9]
[126] A Maiorana affidavit, 27.03.15, [60]
[127] A Maiorana affidavit, 27.03.15, [61]
The only finding that is reasonably open on the evidence is that AWT made no attempt to acquaint itself with the obligations s.535 of the FW Act imposed on AWT to maintain records, and that AWT did not, therefore, maintain the records that s.535 obliged it to maintain. Additionally, the evidence leads me to find that AWT made no attempt to acquaint itself with the obligations imposed on it by s.536 of the FW Act to issue pay slips. More serious contraventions of each of s.535 and s.536 cannot be imagined.
The comprehensiveness of AWT’s contraventions of s.535 and s.536 of the FW Act, combined with the need for general deterrence, point to the assessment of a penalty very much at the upper end of the scale. In my opinion, the appropriate penalty is $12,000 for AWT and $2,400 for Mr Maiorana.
Overall assessment – totality principle
The penalties I have so far assessed are as follows:
Provisions
Description of contravention
Penalty (AWT)
Penalty (Mr Maiorana)
Section 45 of the FW Act (Contravention 1)
Failing to pay SNC employees at least the minimum hourly rate they were entitled to receive under cl.A.2.3 of Schedule A to the Award (by reference to cl.13 of the Award).
$22,000
-
Section 45 of the FW Act (Contravention 3) and s.323(1)(c) of the FW Act (Contravention 4)
Failing to pay the SNC employees their wages on a weekly or fortnightly basis as required by cl.16 of the Award; and failing to pay the SNC employees their wages on at least a monthly basis.
$10,000
$2,000
Subsection 323(1)(a) of the FW Act (Contravention 5)
Failing to pay the SNC employees their wages in full (i.e., without deductions).
$10,000
$2,000
Subsection 535(1) and s.536(1) of the FW Act (Contraventions 6 and 7)
Failing to make and keep for 7 years employee records of the kind prescribed by the FW Regulations and failing to provide payslips to employees within one day of paying an amount to an employee in relation to the performance of work.
$12,000
$2,400
TOTAL
$54,000
$6,400
The penalties total $54,000 for AWT, and $6,400 for Mr Maiorana. In my opinion, these amounts, considered as a whole, accurately reflect the nature and severity of the contraventions by AWT and Mr Maiorana of the FW Act, and are not a disproportionate response to those contraventions.
There is a final matter, however, to consider, and that is the fact that the respondents have admitted their contraventions. That is a matter the FWO accepts should be taken into account when assessing penalties. I find that the respondents’ decision not to contest liability reflects genuine contrition, and an “acceptance of responsibility and a willingness to facilitate the course of justice”.[128] I propose to take that matter into account by discounting each of the penalties by 20%. I propose, therefore to assess penalties as follows:
[128] Cameron v R [2002] HCA 6; (2002) 209 CLR 339 at [11] quoted with approval by the Full Federal Court in Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 at [73]
Provisions
Description of contravention
Penalty (AWT)
Penalty (Mr Maiorana)
Section 45 of the FW Act (Contravention 1)
Failing to pay SNC employees at least the minimum hourly rate they were entitled to receive under cl.A.2.3 of Schedule A to the Award (by reference to cl.13 of the Award).
$17,600
-
Section 45 of the FW Act (Contravention 3) and s.323(1)(c) of the FW Act (Contravention 4)
Failing to pay the SNC employees their wages on a weekly or fortnightly basis as required by cl.16 of the Award; and failing to pay the SNC employees their wages on at least a monthly basis.
$8,000
$1,600
Subsection 323(1)(a) of the FW Act (Contravention 5)
Failing to pay the SNC employees their wages in full (i.e., without deductions).
$8,000
$1,600
Subsection 535(1) and s.536(1) of the FW Act (Contraventions 6 and 7)
Failing to make and keep for 7 years employee records of the kind prescribed by the FW Regulations and failing to provide payslips to employees within one day of paying an amount to an employee in relation to the performance of work.
$9,600
$1,920
TOTAL
$43,200
$5,120
Disposition
The parties agree that declarations should be made to the effect of those contained in paragraph 89 of the Statement of Agreed Facts. I propose to make declarations to that effect.
The FWO submits that I should make an order under s.546(3) of the FW Act that the pecuniary penalties should be paid to the SNC employees. The FWO submits, however, that the order that the penalties be paid to the SNC employees be conditional on the deed administrator making a determination of what amounts, if any, out of the distribution fund, should be paid to the SNC employees. The underlying idea is that the pecuniary penalties should be paid to the SNC employees only to the extent the SNC employees do not receive any payment out of the distribution fund sufficient to compensate them in full for the wages that have not been paid to them.
The FWO has submitted draft orders to give effect to that idea. I propose to make orders to the effect submitted by the FWO. I propose, however, to add an additional order reserving to the parties liberty to apply if the deed administrator does not make any determination, or if there is unreasonable delay in the deed administrator making such determination, or, where the amount available will be insufficient to pay the SNC employees in full, if the deed administrator fails to make a determination in which the SNC employees are paid amounts in proportion to the underpayments, or if the deed administrator, having made a determination as contemplated by the orders I propose to make, fails to make the payments in accordance with the determination.
Finally, I propose to make a declaration that the SNC employees have been underpaid the amounts to which I refer in paragraph 14 of these reasons. I propose to do so to identify in the orders the amounts that must be paid to the SNC employees.
I certify that the preceding one hundred and twenty-five (125) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 12 October 2016
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