Fair Work Ombudsman v B2D Pty Ltd and Anor

[2020] FCCA 1442

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v B2D PTY LTD & ANOR [2020] FCCA 1442

Catchwords:
INDUSTRIAL LAW – Application for breaches of civil remedy provisions of the Fair Work Act 2009 – employer failed to pay wages and provide appropriate wage slips – Fair Work Ombudsman issued notice to produce records of wage payments – respondents produced material that is alleged to be misleading and deceptive – respondents failed to take any steps in the proceedings – proceedings undefended – matters to be considered.

Legislation:

Fair Work Act 2009 (Cth), ss.3, 535, 536, 539, 545, 547, 550, 687, 701, 712,

716, 718A

Federal Circuit Court of Australia Act 1999 (Cth), s. 16

Federal Circuit Court Rules 2001 (Cth), rr. 13.03A, 13.03B

Cases cited:

Speedo Holdings BV v Evans (No.2) [2011] FCA 1227

Taylor v Taylor [1979] HCA 38; (1970) 143 CLR 1

Applicant: FAIR WORK OMBUDSMAN

First Respondent: B2D PTY LTD

Second Respondent: LAKSHMI KUMAR

File Number: ADG 355 of 2019

Judgment of: Judge Brown

Hearing date: 4 May 2020

Date of Last Submission: 4 May 2020

Delivered at: Adelaide

Delivered on: 4 June 2020

REPRESENTATION

Counsel for the Applicant: Gillian Walker

Solicitors for the Applicant: Office of the Fair Work Ombudsman

Counsel for the First Respondent: No appearance

Solicitors for the First Respondent: No appearance

Counsel for the Second Respondent: No appearance

Solicitors for the Second Respondent: No appearance

ORDERS

The Court notes that:

A.There was no appearance by or on behalf of the Respondent at the hearing. 

B.The Court is satisfied that service of the application was effected on the First Respondent on 14 February 2020 and on the Second Respondent on 13 February 2020 and 23 April 2020. 

C.These Orders are made in the absence of the Respondent and they are at liberty to make such an application as they may be advised pursuant to Rule 16.05 of the Federal Circuit Court Rules 2001. 

D.The Applicant is considering its position in relation to pursuing orders for pecuniary penalties.

The Court declares that:

1. The First Respondent, pursuant to section 550 of the Fair Work Act 2009 (Cth) (“the Act”), contravened the following:

   (a)Section 716(5) of the Act by failing to comply with the Compliance Notice;

   (b)Section 535(1) of the Act by failing to make and keep employee records prescribed by regulation 3.33 of the Fair Work Regulations 2009;

   (c)Section 536(1) of the Act by failing to give payslips within one working day of payment;

   (d)Section 718A of the Act by producing the Tomiczek Documents to Inspector Maunder on 15 January 2019, in response to the December Notice to Produce, knowing that those documents were false or misleading.

2. The Second Respondent was involved, within the meaning of section 550(2) of the Act, in the contraventions by the First Respondent of sections 716(5), 535(1) (save for those which relate to Mr Wong), 536(1), and 718A of the Act.

The Court orders that:

1. Pursuant to Rule 1.06 of the Federal Circuit Court Rules 2001, the Court dispenses with compliance with these Rules. 

2. The First Respondent pay, within 28 days of this order:

   (a)Pursuant to section 545(1) of the Act $16,004.20 to the Consolidated Revenue Fund of the Commonwealth of Australia; and

   (b)Pursuant to section 547(2) of the Act, interest on the above amount calculated for the period from 8 October 2019 to the date of payment, and at the rate prescribed in paragraph 3 of the Federal Court’s interest on Judgments Practice Note.

3. The Applicant will:

   (a)Within a further 14 days of receiving the above amounts, distribute the above amounts to the Employees as identified below (or, in the event that only a portion of the amount is paid, in accordance with the percentages below):

Employee	Amount	Proportion of total
Ms Vincent	$5,926.30 plus interest	37.1%
Ms Luscombe	$1,187.72 plus interest	7.4%
Mr Wong	$3,735.40 plus interest	23.3%
Ms Tomiczek	$5,154.78 plus interest	32.2%

(b)If the Employees cannot be located within a further 60 days of the Applicant receiving the above amounts, retain the above amounts in the Consolidated Revenue Fund of the Commonwealth of Australia.

1. The Applicant is to notify the Respondents at their last known address of the Orders made today within 7 days.

2. Further consideration of the matter is adjourned to 1 October 2020 at 9.30am for directions.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT ADELAIDE

ADG 355 of 2019

FAIR WORK OMBUDSMAN

Applicant

And

B2D PTY LTD

First Respondent

LAKSHMI KUMAR

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. These proceedings arise pursuant to the provisions of the Fair Work Act 2009 (Cth).[1]  The applicant in these proceedings is the Fair Work Ombudsman.[2]  The first respondent is B2D Pty Ltd and the second respondent is Lakshmi Kumar, the sole and managing director of the first respondent. 

   [1]  Hereinafter referred to as “the FWA” or “the Act”

   [2]  Hereinafter referred to as “the FWO”

2. The matter concerns various alleged contraventions of the Act by the respondents, relating to their failure to pay sufficient wages to four of their employees who were employed on a casual basis, among various other alleged contraventions relating to maintaining employee records and distributing payslips on time.

3. The respondents have chosen not to take part in these proceedings, leading the applicant to file an application in a case to have default judgment entered in its favour.  In these circumstances, the court must consider the legal principles applicable to undefended proceedings.

Background

1. The first respondent operated an unlicensed café and restaurant trading as Fair Espresso Central Market, located at Shop1A in Victoria Square in Adelaide, South Australia.  The company employed the four employees, that are the subject of these proceedings, on a casual basis. 

2. One of the objects of the FWA is to ensure that employees in Australia receive regulated minimum awards of pay and are fairly and transparently treated in their workplaces, without exploitation.[3] The FWO is a statutory appointment under the Act,[4] who is mandated to monitor compliance with the FWA. 

   [3] See FWA at section 3(b) & (c)

   [4] Ibid at section 687(1)

3. In addition, the FWO has a responsibility to educate, advise and assist, both employers and employees, in respect of obligations arising under the Act and, if necessary, commence proceedings, in appropriate courts, to enforce the FWA.

4. Pursuant to section 701 of the Act, the FWO is also a fair work inspector. The Act confers upon such inspectors a number of powers in order to ensure compliance with provisions of the Act. Amongst other things, inspectors can enter working premises and require the production of employee records.[5]

   [5] Ibid at section 712(1)

5. In addition, the FWO, as a consequence of its status as a fair work inspector, has statutory authority to bring proceedings under the Act and seek the imposition of penalties, if breaches of the FWA are established.[6]

   [6] Ibid at section 539(2)

6. At some point, the FWO came to be notified that the respondents had allegedly failed to pay the four employees in question wages that they were entitled to.  As a result, they commenced these proceedings on their behalf to recover the owed amounts.

The conduct of the proceedings to date

1. The applicant commenced these proceedings by way of an application filed on 8 October 2019, which was supported by a statement of claim.  The application was served on the first respondent by express post to its Registered Office, located at Unit 2, 1 Luhrs Road, Payneham South, South Australia 5070, which was recorded as being delivered on 9 October 2019.  Additionally, the application was served on the second respondent personally on 8 October 2019, by Fair Work Inspectors, at La Caldera Charcoal Grill Restaurant and Bar in Toorak Gardens, South Australia.  The second respondent was, at the time, working in the restaurant. 

2. Furthermore, the applicant had some email correspondence with Ms Kumar, on 1 October 2019, regarding its intention to commence these proceedings.  Ms Kumar replied to the applicant’s email dated 1 October 2019 stating that she could not pay the owed amounts and did not have sufficient funds to obtain legal advice.  She asked the applicant to advise her how to move forward.[7]  

   [7]  See affidavit of Ian Chan filed 10 February 2020 at annexure IC-5

3. The applicant responded urging Ms Kumar to seek legal advice and directed her towards various services that could assist her both legally and financially.  Ms Kumar responded, reiterating she did not have the funds to obtain legal advice and also could not obtain legal aid due to her lack of permanent residency.  She further indicated that the company had been declared bankrupt.[8]

   [8]  Ibid at annexure IC-6

4. The applicant continued to directly advise Ms Kumar of the first hearing date, in this court, listed on 20 November 2019 and that she needed to attend or have someone attend on her behalf.  Ms Kumar again pointed out her lack of funds but conceded that she was personally liable for the debts of the company as sole director, while also indicating she would likely not attend the hearing and did not oppose any judgment that may be handed down.[9]  The applicant, to date, has received no further correspondence from Ms Kumar. 

   [9]  Ibid at annexure IC-7

5. In lieu of the hearing on 20 November 2019, orders were made in chambers on 19 November 2019 requiring the respondents to file and serve a notice of address for service by 27 November 2019 and to file a response by 11 December 2019.  Needless to say, neither of these were filed.  Both the applicant and the court emailed the second respondent advising her of the orders made and the date of the next hearing on 3 February 2020. 

6. On the first hearing date in court in February, the respondents failed to attend.  In these circumstances, orders were made requiring the applicant to file and serve an application in a case and supporting affidavits for orders against the respondents by reason of their default, and the matter was set down for undefended hearing on 4 May 2020 to determine the application. 

7. The applicant filed its application for default judgment on 10 February 2020.  On 5 February 2020, the applicant sent a copy of the orders made on 3 February 2020 to Ms Kumar via her email address and, on 7 February, sent a copy by registered post to the first respondent at its Registered Office.  The applicant thereafter made various attempts to serve the application for default judgment on the respondents, including sending the application by post to the first respondent’s registered address and receiving it back, unopened and marked ‘return to sender.’[10]

   [10]  See affidavit of Ian Chan filed 23 April 2020 at [12]

8. Furthermore, the applicant sent the application via email to Ms Kumar’s email address, as well as to process servers with instructions to serve Ms Kumar personally.  The process servers undertook the following steps on 23 March 2020:[11]

   ·Attended the first respondent’s registered address and found the premises vacant, with mail in the letterbox clearly addressed to the first respondent;

   ·Spoke with neighbours who stated that a male and female of Indian appearance lived there but had left a few months prior;

   ·Attended the first respondent’s principal place of business at the La Caldera Charcoal Restaurant and Bar, in Toorak Gardens, and found it had closed down due to renovations being undertaken;

   ·Spoke with a neighbouring business who stated that the restaurant closed down in November of 2019.

   [11]  Ibid at [15]

9. On 22 April 2020, the applicant proceeded to send another copy of the application and accompanying documents, by post, addressed to Ms Kumar, to the registered address of the first respondent.  

10. Finally, the applicant, through a Movement Record Check with the Department of Home Affairs, ascertained that the second respondent had departed Australia on a Graduate Work Stream Visa on 16 January of this year.  It was also discovered that Mr Ramachandran, who was discovered to be the sole shareholder of the first respondent and who had been sent the initiating application on 12 November 2019 without a response, had departed Australia on 11 November 2019.[12]

    [12]  Ibid at [20]

11. The respondents, obviously, did not appear on the hearing date.  In all the circumstances, I have no doubt that the respondents were aware of, at least, the substantive proceedings themselves.  I am also satisfied that the applicant has taken all reasonable steps to notify the respondents of these proceedings and what is required from them to take part in them. 

12. As a result of being satisfied that the applicant had exhausted all avenues of service available to it, I made an order, on 4 May 2020, for substituted service on both respondents. 

13. It is a significant thing for proceedings to be determined in the absence of one of the parties, particularly proceedings which potentially include the imposition of a pecuniary penalty on the absent party.  The court has an obligation to ensure that the parties to proceedings before it have an opportunity to participate in those proceedings.  Before a person can be adversely affected by judicial order, he or she must be afforded an adequate opportunity to be heard.[13] 

    [13]  See Taylor v Taylor [1979] HCA 38; (1970) 143 CLR 1

The principles applicable to default judgment

1. The court cannot compel a respondent to engage in litigation.  It is however obliged to give a respondent the opportunity to put evidence before the court and, if he or she wishes to do so, contest any evidence relied upon by the applicant.  In this particular case, the respondents have chosen not to participate in the proceedings in any meaningful way.  I have no documents from them before me. 

2. A respondent, whether by intransigence, disinterest or manipulation cannot succeed in denying an applicant a just resolution, according to law, of his or her application, by choosing not to take part in a proceeding.  In these circumstances, the court has mechanisms to resolve applications in the absence of a party, if it is satisfied it is appropriate to do so. 

3. In this particular case, I am satisfied that the respondents are aware of the nature of the applicant’s application, particularly in respect of the central issue arising in it, which concerns the underpayment of the particular employees concerned.  The applicant had several responses from Ms Kumar that indicated she was aware of the proceedings and, while she indicated uncertainty as to whether she was required to take part, she did indicate she would not oppose any judgment made against her, seemingly out of a belief that she would be unable to pay the owed amounts regardless of orders being made requiring her to do so. 

4. Ultimately, I am satisfied that the respondents have elected not to formally put their position in respect of the issues in this case.  On the other hand, the applicant has exhaustively put its position in respect of the matter. 

5. Rule 13.03A(2) of the Federal Circuit Court Rules 2001[14] sets out the circumstances in which a respondent is taken to be in default.  It includes the following:

   ·the respondent has not satisfied the applicant’s claim;

   ·has not complied with an order in the proceedings;

   ·has not produced a document;

   ·has not defended the proceedings with due diligence.

   [14]  Hereinafter referred to as “the FCC Rules”

6. The powers of the court, when a respondent is found to be in default, are set out in Rule 13.03B(2) as follows:

   “(2)  If a respondent is in default, the Court may:

   (a)order that a step in the proceeding be taken within the time limited in the order; or

   (b)if the claim against the respondent is for a debt or liquidated damages—grant leave to the applicant to enter judgment against the respondent for:

   (i)     the debt or liquidated damages; and

   (ii)    if appropriate—costs; or

   (c)if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings—give judgment against the respondent for the relief that:

   (i)     the applicant appears entitled to on the statement of claim; and

   (ii)    the Court is satisfied it has power to grant; or

   (d)give judgment or make any other order against the respondent; or

   (e)make an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order.”

7. In Speedo Holdings BV v Evans (No.2)[15] Flick J identified some principles, which are to be applied by the court, when considering whether to enter a judgment against a defaulting respondent.  They can be summarised as follows: the power is discretionary; and it must necessarily be utilised cautiously.

   [15]  Speedo Holdings BV v Evans (No.2) [2011] FCA 1227 at [20]–[21]

8. In all the circumstances of this case, I am satisfied that the respondents have failed to defend the proceedings with due diligence.  In particular, they have failed to file a response to the action as they were ordered to on 19 November 2019.  They have not attended at court for the hearing, nor have they filed any affidavit evidence in respect of the matter. 

9. Therefore, I am satisfied that it is appropriate to proceed to determining the applicant’s application on the basis of the pleadings contained in its statement of claim, which are un-contradicted.  The only issue left to be considered, for the court to make an order for default judgment pursuant to Rule 13.03B(2)(c), as the applicant seeks, is whether the applicant appears entitled to the relief sought in the statement of claim. 

10. This will require an analysis of the case pleaded by the applicant, in its statement of claim filed on 8 October 2019, which has been provided to the respondents.  Its pleadings set out the amounts owed to the four employees identified and are directed against the respondents as their employer.

The legal provisions applicable and relevant findings

1. In its statement of claim, the applicant alleges the respondents breached sections 716(5), 718A, 535(1), and 536(1) of the FWA. Inspector Maunder, after conducting an investigation, formed the reasonable belief that the respondents had contravened terms of the Restaurant Industry Award 2010 by failing to pay the four employees their entitled wages, and served the respondents with a compliance notice pursuant to section 716 of the FWA, requiring them to remedy this by 19 June 2019.

2. Section 716 of the Act empowers a Fair Work Inspector to issue a notice to any specified employer requiring compliance with the terms of any modern award applicable to the terms and conditions of employees employed by that employer, if it is believed, on reasonable grounds that there has been non-compliance with the relevant award.  Failure to comply with such a notice is categorised as a civil remedy provision to which Part 4-1 of the Act applies.

3. The respondents failed to pay the amount by the required date and therefore, in my view, contravened section 716(5) of the FWA. Furthermore, the respondents have failed to produce any evidence to explain why they did not do so.

4. Section 718A provides that a person must not produce information to the FWO that is considered false or misleading. It provides as follows:

   “(1) A person must not give information or produce a document to the Fair Work Ombudsman, an inspector, or a person referred to in subsection  712AA(2), (the official) exercising powers or performing functions under, or in connection with, a law of the Commonwealth if the person knows, or is reckless as to whether, the information or the document:

   (a)  is false or misleading; or

(b)  for information--omits any matter or thing without which the information is misleading.”

1. Pursuant to a notice issued to the respondents to produce records relating to Ms Tomiczek’s employment, the respondents provided Inspector Maunder with cash receipts that purported to show when various cash amounts had been paid to Ms Tomiczek. However, since these amounts were never paid to the employee and the receipts contained signatures for Ms Tomiczek that were in fact not hers, as the applicant contends, the applicant submits that they are false and misleading and in breach of section 718A.

2. While I do not have the cash receipts before me, their effect is detailed in the applicant’s statement of claim[16] and I am satisfied that what they purport to say contradicts the applicant’s evidence that Ms Tomiczek has not received those amounts on the days noted, or at all. Therefore, I am satisfied the respondents have breached section 718A.

   [16]  See statement of claim filed 8 October 2019 at [10]

3. Section 535(1) & (2) of the FWA provides that an employer must keep records relating to its employees in a form prescribed by regulation. Again failure to comply with section 535 is categorised as a civil remedy provision.

4. Section 536(1) of the FWA provides as follows:

   “An employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work.”

5. I am satisfied that the respondents have breached sections 535(1) and 536(1), as they appear to have failed to provide certain payslips to the relevant employees and keep relevant records as to their rates of pay and hours worked. This is evident from the failure to respond in any meaningful way to the various notices to produce that were issued to them.

6. Regarding the second respondent’s liability, I am satisfied that she was the sole director and secretary of the first respondent at the time of the various contraventions.[17]  Further, I am satisfied that she was aware of these contraventions, considering she was the sole director and did not deny such awareness in her, admittedly limited, correspondence with the applicant.  She also admitted that she is personally liable for debts of the company due to her being the sole director, in her email dated 19 November 2019.[18] Therefore, I am satisfied Ms Kumar was involved in the contraventions pursuant to section 550(2) of the FWA and is liable.

   [17]  See affidavit of Ian Chan filed 10 February 2020 at annexure IC-1

   [18]  Ibid at annexure IC-7

7. Therefore, I am satisfied that the applicant appears to be entitled to the relief sought in their statement of claim pursuant to rule 13.03B(2)(c) of the FCC Rules. 

8. This court has the power to make declarations pursuant to section 16 of the Federal Circuit Court of Australia Act 1999 (Cth). The applicant submits that the court should make declarations of the breaches found above in order to act as a general deterrence of this kind of conduct and enforce the court’s disapproval of such conduct.[19]  The declarations would also serve the public interest in maintaining minimum employment entitlements and the truthful engagement with FWO inspectors.  For those reasons, I will make the declarations sought by the applicant. 

   [19]  See outline of submissions filed 11 May 2020 at [26]

9. This court has the power to make any order it considers appropriate if satisfied that a person has contravened a civil remedy provision of the FWA, pursuant to section 545 of the Act. I propose to make an order that the respondents, having breached the civil remedy provisions outlined above, pay to the applicant the sum of $16,004.20, which reflects the sum of the amounts owed to the four employees.

10. Pursuant to section 547(2) of the FWA I will further order that the respondents pay to the applicant a sum reflecting the interest accumulated on the owed sum between 8 October 2019, the date these proceedings commenced, up to the date on which payment is eventually made, as the applicant seeks.[20] 

    [20]  Ibid at [25]

11. I note that the applicant is considering its position in relation to pursuing pecuniary penalties for the various breaches and to this end, I will direct that the matter be adjourned until 1 October 2020 on which date consideration will be given to the issue. 

12. For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.

I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of Judge Brown.

Associate: 

Date: 4 June 2020