Fair Work Ombudsman v Avant-Garde Logistics Solutions Pty Ltd
[2022] FedCFamC2G 879
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Avant-Garde Logistics Solutions Pty Ltd [2022] FedCFamC2G 879
File number(s): MLG 3228 of 2021 Judgment of: JUDGE SYMONS Date of judgment: 26 October 2022 Catchwords: INDUSTRIAL LAW – Fair Work – default judgment entered previously for failure to comply with contravention notices - whether penalty should be imposed and level of penalty to be imposed – whether contravention order breaches should be treated as separate and distinct – primacy of deterrence – where the corporate respondent remains registered and continues to operate and advertise its business – where the individual respondent has not engaged in the proceeding – penalties imposed to reflect the risk that both respondents will engage in similar future conduct Legislation: Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 r 13.06
Fair Work Act 2009 (Cth) ss 546, 550, 557, 712, 716, 717
Cases cited: Australian Building and Construction Commissioner v Pattinson & Anor (2022) 399 ALR 599; [2022] HCA 13
Fair Work Ombudsman v Andary [2021] FedCFamC2G 296
Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No.2) [2020] FCCA 2583
Fair Work Ombudsman v Tester [2021] FCCA 771
Trade Practices Commission v CSR Ltd [1990] FCA 521
Division: Division 2 General Federal Law Number of paragraphs: 56 Date of last submission/s: 21 October 2022 Date of hearing: 21 October 2022 Place: Melbourne Solicitor for the Applicant: Australian Government Solicitor First Respondent: No appearance Second Respondent: No appearance ORDERS
MLG 3228 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: AVANT-GARDE LOGISTICS SOLUTIONS PTY LTD
First Respondent
YAPING LI
Second Respondent
order made by:
JUDGE symons
DATE OF ORDER:
26 October 2022
THE COURT ORDERS THAT:
1.Pursuant to s 546 of the Fair Work Act 2009 (Cth) (“FW Act”), within 28 days of this order, the First Respondent pay a pecuniary penalty of $64,800 to the Consolidated Revenue Fund of the Commonwealth for the four contraventions of s 716(5) of the FW Act identified in the orders made on 10 August 2022.
2.Pursuant to s 546 of the FW Act, within 28 days of this order, the Second Respondent pay a pecuniary penalty of $12,600 to the Consolidated Revenue Fund of the Commonwealth for her involvement in the four contraventions of s 716(5) of the FW Act identified in the orders made on 10 August 2022.
3.The Applicant have liberty to apply on seven days’ notice in the event that the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE SYMONS:
INTRODUCTION
On 14 December 2021, the Fair Work Ombudsman (“FWO”) commenced proceedings against Avant-Garde Logistics Solutions Pty Ltd (“Avant-Garde”) and Ms Yaping Li (“Ms Li”).
On 10 August 2022, the Court entered default judgment for the FWO against Avant-Garde and Ms Li. This decision involved findings that Avant-Garde and Ms Li had failed to comply with procedural rules and orders made by the Court including that they each file and serve a response or defence to the FWO’s application and, in the case of Ms Li, file a notice of address for service. It was also the case that neither respondent appeared on 10 August 2022 when the FWO prosecuted its application for default judgment, and provided no explanation to the Court for their absence. This was in circumstances where on 23 May 2022, Avant-Garde had filed a notice of address for service that identified Mr Sinclair of Erudite Legal as the contact. As at the date of this decision, Mr Sinclair (and Erudite Legal) remained “on the record”.
On 10 August 2022, the Court made declarations in the following terms that reflected the default character of the application:
1.Upon the admissions which the First and Second Respondents are taken to have made by reason of their default:
(a)The First Respondent contravened s 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with each of:
i. the Brown Compliance Notice issued on 26 March 2021;
ii. the Vo Compliance Notice issued on 31 March 2021;
iii.the Tahakura Compliance Notice issued on 31 March 2021; and
iv. the Thakuri Compliance Notice issued on 10 June 2021.
(b)The Second Respondent was involved, within the meaning of s 550(2) of the FW Act, in each of the contraventions by the First Respondent of s 716(5) of the FW Act declared in paragraph 1(a).
In addition to these declarations, the Court made orders that required Avant-Garde, within 28 days, to take steps of the kind that were required under each of the Compliance Notices. In particular, Avant-Garde was ordered to calculate and pay to each of the affected employee, amounts outstanding for entitlements under the modern award (being the Road Transport and Distribution Award 2010) and for superannuation. At the time of writing, Avant-Garde had not complied with this order.
The Court also made orders in contemplation of a penalty hearing. These included (in respect of the respondents) that by 30 September 2022 they file and serve evidence and submissions in relation to penalty. Neither Avant-Garde nor Ms Li filed any material responsive to these orders and when the matter was called on for hearing on 21 October 2022 there was no appearance by or on behalf of either respondent.
In circumstances where the FWO produced evidence of service on both respondents of : (i) the orders made by the Court on 10 August 2022 (entering default judgment) (this occurring on 11 August 2022) and (ii) sealed copies of the evidence and submissions filed by the FWO on the question of penalty (this occurring on 12 September 2022)[1] and where my chambers had sent an email to the first respondent using the email address identified in the notice of address for service dated 23 May 2022 ([email protected]) informing it of the listing date and providing a link to the Teams meeting, I am satisfied that it is appropriate to determine the question of penalty without further recourse to either respondent.
[1] See Affidavit of Ms Caitin Yazidjoglou affirmed 20 October 2022.
There has simply been no communication from or on behalf of Avant-Garde since 24 May 2022 and Ms Li has never engaged in the proceeding, including by filing a notice of address for service. In these circumstances, the Court’s power to make orders on default have again been engaged, including by reason of r 13.06(1)(e) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (“the Rules”), which provides that if a party to a proceeding is absent from a hearing, the Court may, amongst other things, proceed with the hearing generally or in relation to any claim for relief in the proceeding.
THE FWO’s CASE
The FWO relied upon:
8.1its statement of claim filed 14 December 2021;
8.2the affidavit of Caitlin Moira Yazidjoglou affirmed on 29 July 2022 (“Yazidjoglou affidavit”);
8.3the affidavit of Fair Work Inspector Spiliotopoulos sworn 1 September 2022 (“FWI Spiliotopoulos affidavit”);
8.4the affidavit of Sophie Vassallo affirmed 9 September 2022 (“Vassallo affidavit”); and
8.5written submissions filed on 12 September 2022.
The FWO submitted that penalties in the amount of $18,000 for each of the four separate breaches by Avant-Garde of s 716(5) of the FW Act was appropriate and penalties in the amount of $3,500 reflecting Ms Li’s involvement in each of the four contraventions.
This was in circumstances where the maximum penalty that the Court might impose on Avant-Garde for each contravention of s 716(5) of the FW Act was $33,000 (based on a penalty unit at relevant times of $222) and where the maximum penalty the Court might impose on Ms Li for her involvement in each contravention of s 716(5) of the FW Act was $6,660. The penalites sought in each case correspond roughly to 50% of the maximum amount prescribed under the FW Act.
Contraventions and grouping
This proceeding concerns four contraventions of s 716(5) of the FW Act by Avant-Garde as employer and four contraventions of s 716(5) of the FW Act by Ms Li through her involvement in each of those contraventions. The contraventions reflect the failure of Avant-Garde to comply with four contravention notices that were issued in respect of entitlements owing to four different employees of Avant-Garde.
The FWO emphasises the distinct character of the four contraventions – they required Avant-Garde to take action specific to each employee – and submits that they should be treated as discrete contraventions for the purposes of assessing penalty.
In support of this submission the FWO notes firstly (as is the case) that contraventions of s 716(5) do not engage the statutory grouping provision (s 557(1) of the FW Act) and therefore any grouping can only occur on an application of common law course of conduct principles. However, in circumstances where those principles are directed at preventing a respondent from being penalised twice for substantially the same conduct, they have no (or little) work to do where each contravention notice related to a different employee and imposed obligations that were “separate and distinct” (referring to Fair Work Ombudsman v Tester [2021] FCCA 771 (“Tester”) at [14]-[15]).
I accept that not only were the obligations in respect of each employee separate and distinct but that each contravention notice given to Avant-Garde (which in all but two cases occurred on different dates),[2] created a separate opportunity for the respondent to take a particular course of action. I further accept that in circumstances where the obligation (and corporate knowledge) to produce evidence that its failure to comply with the compliance notices arose from the one transaction or decision resided with Avant-Garde, and where no evidence whatsoever has been produced by Avant-Garde on this issue (or more generally), that it is appropriate to assess the question of penalty on the basis that each respondent’s four contraventions of s 716(5) of the FW Act should attract a separate penalty.
[2] 26 March 2021, 31 March 2021 and 10 June 2021.
Principles governing the determination of penalty
As the FWO noted in its submissions, the approach to determining penalty was revisited again recently by the High Court in the decision of Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13. In that case, the majority upheld the Commissioner’s appeal and confirmed that the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the FW Act by the deterrence of further contraventions of the FW Act by those responsible and by (like) others. The Court rejected the approach implicit in the decision of the Full Court (the subject of the appeal) that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The majority held instead that “[t]he power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a ‘notion of proportionality’…in a civil penalty regime”.[3] However the Court did accept that s 546 requires the Court to ensure that any penalty “strikes a reasonable balance between deterrence and oppressive severity”.[4] It was only in this more qualified sense that the term “proportionality” had any role to play.
[3] See Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13 at [10].
[4] Ibid at [41].
The High Court also referred to the several factors identified by French J in Trade Practices Commission v CSR Ltd [1990] FCA 521 which informed the assessment of a penalty of an appropriate deterrent value. This list revealed that both the circumstances of the contravenor and the circumstances of the contravention may be relevant to the assessment of whether the maximum level of deterrence is called for.[5] However, the Court repeated the caution that the list of possible relevant considerations should not be approached as a “rigid catalogue of matters for attention” and instead the task of the court remains to determine what is an “appropriate” penalty in the circumstances of the particular case.[6]
[5] Ibid at [57].
[6] Ibid at [18] and [19].
Deterrence
In the particular context of the compliance notice regime, the FWO took the Court to the decision of Tester in which Judge Jarret (as his Honour then was) said at [28]-[29]:
[28]As has been said many times now, the failure to comply with a compliance notice properly issued by the applicant pursuant to s 716(2) of the Act is serious. The efficacy of such notices will be eroded or negated if recipients perceive that a failure to comply carries no meaningful consequences.
[29]Given the importance of a Fair Work Inspector’s power to issue compliance notices and that compliance with such notices avoids the need for litigation or the imposition of any penalties, I accept, as I have done in the past, that penalties for non-compliance should be set at a level which demonstrates that there are serious consequences for failing to comply with a compliance notice. Deterrence of others from refusing or failing to comply with compliance notices is singularly important. A penalty must be set such that it is not seen by others as just the cost of doing business. It must be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations.
The FWO emphasised the significance of the compliance notice as a tool in the armoury of Fair Work Inspectors which facilitated an administrative resolution of apparent contravening conduct (with the safeguard of allowing a recipient to challenge the contravention notice[7]) and that, when complied with, avoided the need for litigation or the imposition of penalties. Reflecting this, the FWO submitted that penalties for non-compliance should be set at a level which would deter other parties from failing to comply with compliance notices by making non compliance an “economically irrational choice”.
[7] See s 717(1) of the FW Act
As far as the need for deterrence in the particular circumstances of this case, the FWO made submissions that distinguished between Avant-Garde and Ms Li.
In relation to Avant-Garde, the FWO invited the Court to have regard to the following features of its conduct.
First, that despite almost 18 months having passed since the Brown Compliance Notice (the first notice issued) fell due on 17 April 2021, Avant-Garde had failed to take any of the actions required by each of the four Compliance Notices. The ongoing non-compliance was said to significantly increase the objective seriousness of each of its contraventions. The lack of compliance occurred prior to and coextensively with these proceedings and despite the fact that orders were made in August 2022 that required Avant-Garde to (in effect) take the original steps required under each Contravention Notice. The FWO submitted that this continued attitude of non-compliance warranted significant censure.
Second, the business operated by Avant-Garde, “Apex Logistics Solutions”, is still operational and Avant-Garde remains a registered company with the potential to operate further businesses either in the removalist industy, or otherwise. In support of this submission, during the hearing on 21 October 2022, the FWO, through its representative, Mr Rawson and taking advantage of the benefits that attend a hearing conducted by Teams technology, screen-shared (and then tendered) an operational website belonging to “Apex Logistics Solutions”.[8] The website promoted a removalist service, furniture assembling, bulky goods delivery and cleaning service and included a “Request a free quote/service request form” facility.
[8] Appearing at apexlogistics.net.au.
In relation to Ms Li, the FWO drew the Court’s attention to the decision of Fair Work Ombudsman v Andary [2021] FedCFamC2G 296 at [69] in which this Court considered that in circumstances where the respondent had taken no part in proceedings after the issue of a compliance notice, and it was unkown whether the respondent had any plans to return to business in the fast food industry, the need for specific deterrence in that case did not “loom large”. Despite this, the Court acknowledged the need to point out to the respondent “its significant disapproval of his conduct to act as a personal deterrence from him being cavalier in respect of his obligations as an employer, if he ever considers resuming some form of similar enterprise in future”.
In the case of Ms Li, although she was no longer a director of Avant-Garde (her directorship ceased on 14 May 2022), it was significant (in terms of appropriately acknowledging and mitigating future risk) that:
First, Ms Li was (at least as at 8 September 2022) still the director of Tools for Success Pty Ltd.[9]
[9] See annexure “SV-01” to the Vassallo affidavit.
Second, Ms Li has filed no evidence about whether she continues to reside in Australia or has any plans to undertake further business in Australia.
Third, Ms Li was a director of a company that had previously been investigated for non-compliance with Commonwealth workplace laws and continues to retain the responsibilities of company directorship. In this regard, the FWO produced evidence that on 3 August 2020 it issued a letter of caution to Tools for Success Pty Ltd for contraventing s 712(3) of the FW Act by failing to comply with a Notice to Produce Records or Documents.[10]
[10] See annexure “SS-06” to the FWI Spiliotopoulos affidavit.
Fourth, Ms Li, including through her historical involvement with at least four companies in addition to Avant-Garde,[11] has demonstrated a “strong entrepreneurial bent” which creates an additional imperative for specific deterrence.
[11] See annexure “SS-12” to the FWI Spiliotopoulos affidavit.
Nature, extent and circumstances of the conduct
The giving of the four Compliance Notices occurred in circumstances where the FWO had commenced an investigation into Avant-Garde in around October 2019.
As a result of the investigation, FWI Spiliotopoulos formed a belief that four employees of Avant-Garde (Messrs Ethan Brown, Aaron Tahakura, Viet Vo and Dinesh Thakuri) had been underpaid a number of entitlements pursuant to the Road Transport and Distribution Award 2010 relating to payment of casual minimum wage, Saturday rate of pay and casual overtime.
The four Compliance Notices required that Avant-Garde take steps to calculate and rectify the underpayment of the affected employee and to produce reasonable evidence that such steps had been taken. As at the time of writing, there was no evidence before the Court that Avant-Garde took (or attempted to take) any of the steps required by the Compliance Notices.
The FWO submits that Ms Li, as director at all relevant times, had overall management and control of Avant-Garde and was responsible for ensuring that it had complied with the Compliance Notices. The directorial control continued until 14 May 2022 when Ms Li ceased her directorship. The lack of compliance extended across this period.
Nature and extent of loss
Under this heading, the FWO identified the economic loss accruing to each of the employees by reason of their ongoing loss of entitlements.
The FWO also identified as a relevant loss what it described as the frustration of “the statutory objectives of the FW Act”. In this respect it was submitted that Avant-Garde’s failure to comply with each of the Compliance Notices had caused the FWO to allocate time and public resources dealing with this proceeding which would not have been required, had this not occurred.
The FWO noted that the power of a Fair Work Inspector to issue a compliance notice was introduced into the FW Act as an alternative to commencing court proceedings. Sections 716(4A) and (4B) operate such that if a person complies with a compliance notice, no civil remedy proceedings can be brought against that person in respect of the underlying contravention and the person is not taken to have admitted the contravention or to have been found to have committed the contravention.
However in this case, the failure of Avant-Garde to comply with the Compliance Notices, and Ms Li’s involvement in this failure, left the FWO with no other option than to commence these proceedings at the public’s expense.
Involvement by Ms Li in the contravening conduct
The FWO submitted that at all material times, Ms Li was the directing will and mind of Avant-Garde. This (it was said) was because Ms Li was a director of Avant-Garde and as such, was responsible for the overall operation and control of Avant-Garde and the business which employed the affected employees. It is also the case that each of the Compliance Notices was sent to Ms Li, addressed to her at the registered office of Avant-Garde.
Deliberateness of the contravening conduct
The FWO submitted that in the circumstances identified above, it was clear that the respondents were aware of each of the Compliance Notices, as well as the action that was required to respond to them such that their conduct in failing to comply could only be characterised as deliberate.
Corrective action, cooperation and contrition
The FWO submitted that neither respondent had exhibited any contrition nor taken any corrective action to remedy the contraventions in this proceeding.
Further to this, the FWO noted (as was the case) that an application for default judgment was made (and allowed) which reflected the lack of participation in the proceeding by both respondents and in spite of the concerted efforts of the FWO to communicate with them about the proceeding generally and regarding their non-compliance with orders of the Court dated 24 May 2022 specifically.[12] In the case of Ms Li the lack of engagement was especially prounounced as she did not involve herself at any time in the proceeding. The FWO submitted that this failure to engage with proceedings demonstrated a disregard by the respondents of their legal obligations owed both to the affected employees and to the Court. It also operated as a strong indicator that the respondents did not take this matter seriously and that they were not contrite.
[12] See Yazidjoglou affidavit at [9]-[11].
Financial circumstances of the respondents
A further consequence of the failure of the respondents to participate in the proceeding and to comply with orders of the Court requiring the production of material directed at the question of penalty is that the Court remains entirely uninformed as to the financial circumstances of the respondents.
The FWO submited that in these circumstances, where the respondents had the ability to control what material came before the Court and were given (ample) opportunities to participate in the proceedings, they must now bear the consequences of this inaction. In support of this approach, the FWO took the Court to the decision of Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No.2) [2020] FCCA 2583 at [69].
The FWO submitted that insofar as the Court is required to ensure that any penalty does not operate with oppressive severity, the Court should proceed on the basis that, by reason of the respondents’ forensic choice, any evidence that could have been adduced would not have advanced their case.
Penalty recommendation
The FWO submitted, having regard to all of the considerations identified above, that penalties in the amounts referred to at [9] and with a 10% discount applied in recognition of the totality principle, would be just and appropriate and would provide the necessary deterrant effect in the circumstances of this case. The net effect of this submission was that the FWO sought penalties against Avant-Garde in the amount of $64,800 and against Ms Li in the amount of $12,600.
CONSIDERATION
In approaching this matter I am reminded that the purpose, primarily, of the imposition of a civil penalty is one of deterrence and that the only constraint on the dollar value to assign to any such penalty is that it strike a reasonable balance between achieving that deterrent effect and being the instrument of oppressive severity.
In the circumstances of this case where neither respondent has participated in the proceeding nor filed material directed at the question of penalty, the question of deterrence assumes special significance. There is simply no material before the Court that explains, exculpates or mitigates the conduct engaged in by Avant-Garde and Ms Li and which underscores their respective contraventions.
There is a need for general deterrence in this case to promote the message that a failure to comply with a notice given under s 716(2) of the FW Act has consequences that ultimately can be as grave as those which would apply had the more direct path to prosecution been taken. This recognises the important role of the compliance notice in the administration of the FW Act as a means of avoiding the drain on resources that invariably attends litigation.
Of greater significance in this case is the need to send a message to the particular contravenors that their conduct operates at the more serious end of the spectrum and warrants this Court’s strong disapproval.
The circumstances of the contraventions themselves are relevantly indistinguishable from those which occur in all cases involving a failure to comply with a compliance notice, in the sense that the very essence of the contravention is a failure to take the steps specified in the compliance notice by the time specified in the notice; attention is largely diverted from the underlying breaches. To my mind this reinforces the primary role of deterrence which must necessarily be responsive to circumstances that exist outside of the contravention itself.
In the case of the first respondent, Avant-Garde, I am especially concerned with the following matters that I consider elevate the need for specific deterrence. In the first place, beyond the contraventions themselves, Avant-Garde (as at the time of judgment) had still failed to take any of the actions required by the Contravention Notices and despite the issue and maintenance of these proceedings, the entry of default judgment and the orders of the Court made on 10 August 2022. This was so in circumstances where, despite the mechanism being available, Avant-Garde had not sought to contest the Contravention Notices and where (albeit belatedly), it had retained a solicitor to represent its interests in this proceeding. It is a matter that weighs heavily that Avant-Garde remains registered and continues to operate a business that advertises a number of services “to the world at large” and invites its audience to obtain a quote for such services.
As far as the second respondent, Ms Li, is concerned I accept that I am entitled to proceed on a worst case scenario concerning her risk profile and the need for deterrence. In this respect I proceed on the basis that she is a person who has demonstrated a proclivity for enterprise and that at least one of her businesses attacted the attention of the workplace regulator. I also proceed on the basis that the matters attributed to Ms Li as a consequence of the default judgment and deemed admissions, carry through for the purpose of assessing penalty. In particular, I proceed on the basis that Ms Li was, in fact, the person with overall management and control of Avant-Garde and responsible for securing its compliance with the Compliance Notices.
In fixing penalty I further accept that there is no evidence in this case of any contrition, cooperation or corrective action taken on the part of either respondent.
In all of these circumstances I consider it appropriate to fix a penalty for Avant-Garde in the amount of $64,800 and in the case of Ms Li in the amount of $12,600. As noted above, at [14], in doing so I have recognised that the failure to comply with each of the four Contravention Notices warrants separate censure.
The final task for the Court is to step back and consider whether, in aggregate, the penalty imposed on each respondent is proportionate to the mischief to which it is directed (that of deterrence) but is not otherwise liable to operate with oppression.
In this regard, the lack of engagement by both respondents has the result that the Court has no information about matters that might otherwise inform this evaluation. In particular, the Court has no information about the fiscal health of either respondent. However, it is not insignificant that there was evidence placed before the Court and not controverted by Avant-Garde that its business was still being presented to members of the public as a going concern and inviting custom. It is difficult in these circumstances to meaningfully apply considerations of proportionality so as to be satisfied that any penalty is not crushing. However, and although there is no scientific methodology reflected in this figure, I accept that a discount of 10% would, as the FWO submits, be appropriate in the circumstances of this case.
CONCLUSION
I accordingly make the orders set out at the commencement of these reasons.
I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons. Associate:
Dated: 26 October 2022
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