Fair Work Ombudsman v Benny842 Pty Ltd
[2022] FedCFamC2G 1009
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Benny842 Pty Ltd [2022] FedCFamC2G 1009
File number(s): MLG 219 of 2022 Judgment of: JUDGE MANSINI Date of judgment: 1 December 2022 Catchwords: INDUSTRIAL LAW –FAIR WORK – Application for pecuniary penalties following default judgment – café and restaurant industry – where first respondent employer failed to comply with compliance notice and second respondent director admitted involvement – where default judgment declared contraventions of s.716(5) and s.550 of the Fair Work Act 2009 (Cth) – where first respondent has not appointed another director and did not cooperate or participate in proceedings – where second respondent formerly director now bankrupt and partly cooperated in the Court’s proceedings – compliance notice and compliance with Court’s orders of 25 August 2022 remain outstanding – consideration of relevant factors – penalties determined. Legislation: Fair Work Act 2009 ss.545(1), 546(1), 547(2), 550(2), 716(5).
Restaurant Industry Award 2020.
Cases cited: Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654.
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13.
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25.
Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8.
CFMMEU v ABCC [2018] FCAFC 97.
Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53.
Markarian v The Queen [2005] HCA 25.
Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076.
Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 61.
Division: Division 2 General Federal Law Number of paragraphs: 62 Date of hearing: 7 November 2022 Place: Melbourne Counsel for the Applicant Mr Barney Adams Solicitor for the Applicant: HWL Ebsworth Lawyers First Respondents: No appearance Second Respondent: Appeared in person Table of Corrections 9 December 2022 At paragraph 58, the amount $13,200 has been replaced with $13,320. 9 December 2022 At paragraph 58, the amount $1,998 has been replaced with $2,397.60. ORDERS
MLG 219 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: BENNY842 PTY LTD
First RespondentSHANE DHARMATILAKE
Second Respondent
order made by:
JUDGE MANSINI
DATE OF ORDER:
1 December 2022
THE COURT ORDERS THAT:
1.Pursuant to s.546(1) of the Fair Work Act 2009 (Cth) (Act):
(a)the First Respondent pay a pecuniary penalty of $13,320 for the contravention of s.716(5) of the Act; and
(b)the Second Respondent pay a pecuniary penalty of $2,397.60 for his involvement in the First Respondent’s contravention of s.716(5) of the Act.
2.Pursuant to s.546(3)(a) of the Act, the pecuniary penalties ordered against the Respondents set out in Orders 1(a) and 1(b) herein, are to be paid to the Consolidated Revenue Fund of the Commonwealth within 90 days.
3.The Fair Work Ombudsman have liberty to apply on 7 days’ notice in the event that any of the preceding orders are not complied with.
4.There be no order as to costs.
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
As CorrectedJUDGE MANSINI
INTRODUCTION
Before the Court is an application for the imposition of penalties for contraventions of the Fair Work Act 2009 (Cth) (Act).
By default judgment of 25 August 2022, the First Respondent was declared to have contravened s.716(5) of the Act by failing to comply with a compliance notice. The Second Respondent was declared to have been involved in the First Respondent’s contravention within the meaning of s.550(2) of the Act (Default Judgment).
These reasons address the remaining question of the appropriate pecuniary penalty(ies) (if any).
Factual context
The factual context to the matter is outlined in the Default Judgment and is not repeated here. The following paragraphs are most pertinent to the question presently before the Court.
The Applicant is the Fair Work Ombudsman (FWO).
The First Respondent is Benny842 in its capacity as trustee of the Benny842 Family Trust and was, at all relevant times, the proprietor of a burger restaurant which traded as “Burger Boss” in Highett in the state of Victoria.
The Second Respondent, a Mr Shane Dharmatilake, was, at all relevant times, the sole director and company secretary of the First Respondent. Upon becoming an undischarged bankrupt on 8 December 2021, the Second Respondent automatically ceased being the director and company secretary of the First Respondent. A replacement director has not been appointed and it is unlikely that a replacement director will ever be appointed.
The compliance notice subject of the contraventions declared in the Default Judgment was issued on 10 December 2020, following an investigation of a former employee’s complaint to the FWO that he had been underpaid various entitlements owed in the course of his employment with the First Respondent. The issuing FWO inspector had formed a reasonable belief that the First Respondent had contravened various terms of the Restaurant Industry Award 2020 (Restaurant Award) (in relation to entitlements to minimum adult rate of pay, overtime pay, weekend and public holiday penalty rates) and the National Employment Standards in the Act (NES) (in relation to entitlement to payment of annual leave on termination). By the compliance notice the First Respondent was required to take a range of actions to calculate and rectify underpayments and to make a record of those matters. In its compliance notice the FWO specified the time for production of reasonable evidence of compliance with the actions specified therein including proof of payment was by 29 January 2021.
On 24 January 2022, proceedings were commenced by way of application and a statement of claim (originating documents). The originating documents and a cover letter from the Applicant’s solicitor were served on the Second Respondent personally on 15 February 2022.
Other than a statement of agreed facts which was filed on 19 July 2022, there was no material in opposition filed by the First or Second Respondent. On 20 July 2022, the Applicant filed an application in a proceeding for default judgment which was heard by another Judge of this Court (judgment being reserved) on 25 July 2022.
Subsequently, on 10 August 2022, a further hearing was convened essentially on account of the facts before the Court that although the First Respondent remained registered the Second Respondent was in bankruptcy whose trustee was not aware of any future director being appointed to the First Respondent yet the Second Respondent had signed the statement of agreed facts, leaving open questions of the “controlling mind” of the First Respondent and the views of the Second Respondent’s trustee in bankruptcy.
On 25 August 2022, by the Default Judgment, the Court constituted by another Judge was satisfied that there was no impediment to the Court proceeding to deal with the application in respect of the First or Second Respondent or that precluded the Second Respondent from entering into the statement of agreed facts. The Court declared that:
2.Upon the admissions that the First Respondent is taken to have made, consequent upon its default pursuant to r.13.04(2) of the Rules, the First Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (‘Act’) by failing to comply with a compliance notice dated 10 December 2021 (‘Compliance Notice’).
3.Upon the admissions that the Second Respondent is taken have made pursuant to the Statement of Agreement Facts filed in this proceeding on 19 July 2022, the Second Respondent was involved, within the meaning of section 550(2) of the Act, in the contravention, by the First Respondent, of section 716(5) of the Act.
Also on 25 August 2022, the Court ordered that:
4. Pursuant to section 545(1) of the Act, the First Respondent take the steps that were required by the Compliance Notice, within 28 days of the Court's Order, by:
(a)calculating and paying to [the employee] the outstanding amounts it was required to pay to [the employee] pursuant to the Compliance Notice;
(b)calculating and paying to [the employee’s] nominated superannuation fund any additional superannuation contributions required by clause 22.2 of the Restaurant Industry Award 2020 (‘Restaurant Award’) in respect of the outstanding entitlements referred to in Order 4(a) above;
(c)preparing and producing to the Applicant, a schedule outlining its calculations of the outstanding entitlements and additional superannuation contributions required to be paid to [the employee], as set out in Orders 4(a) and 4(b) above;
(d)providing evidence that the outstanding entitlements and additional superannuation contributions were paid as set out in Orders 4(a) and 4(b) above;
5.Pursuant to section 547(2) of the Act, the First Respondent pay to [the employee], within 28 days, interest, calculated at the Federal Court of Australia’s pre-judgment interest rate applying at the date of the Court's Order, on the amount owed to [the employee] pursuant to Order 4(a) above.
6.The Applicant serve a copy of the Court's Orders on the First Respondent within 14 days of the Court's Orders.
7.The proceeding be adjourned to 7 November 2022 at 10.30 am for a further hearing in respect of the Applicant’s claim for penalties to be imposed on:
(a) the First Respondent for the contraventions declared at Order (2) above; and
(b)the Second Respondent for the contraventions declared at Order (3) above.
8.The Applicant file and serve affidavit evidence and submissions relating to penalty by no later than 20 days prior to the date of the hearing fixed pursuant to Order (7) above.
9.The First Respondent and Second Respondent each file and serve any affidavit evidence and submissions relating to penalty by no later than 10 days prior to the date of the hearing fixed pursuant to Order (7) above.
10.The Applicant file and serve any reply evidence or submissions by no later than 5 days prior to the date of hearing fixed pursuant to Order (7) above.
11. The parties have liberty to apply.
On 3 November 2022, the parties were notified that the penalty hearing would proceed before the Court as presently constituted. The matter proceeded to hearing on the question of penalty on 7 November 2022. The Applicant was represented by a solicitor. The First Respondent did not enter an appearance. The Second Respondent appeared as a self-represented litigant.
As at the date of the hearing, the First Respondent had not taken the action required by the compliance notice as required by the order of the Court made on 25 August 2022 or at all.
Materials relied upon
In relation to penalty, the Applicant relied on the Court Book which was comprised of:
(a)Application (filed 24 January 2022);
(b)Statement of claim (filed on 24 January 2022);
(c)Statement of agreed facts (filed on 19 July 2022);
(d)Affidavit of Barney Spencer Adams (filed 20 July 2022);
(e)Affidavit of Fair Work Inspector Hannah Biedka (filed 18 October 2022); and
(f)Outline of submissions on penalty (filed 18 October 2022).
At the time of the penalty hearing, it remained the case that neither Respondent had filed material in accordance with the directions of the Court or at all.
APPROACH TO DETERMINATION OF PENALTIES
The Court’s power to impose pecuniary penalties in respect of the established contravention resides in s.546(1) of the Act.
Section 546(1) permits the Court to impose a pecuniary penalty “that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision”. By the Default Judgment, that state of satisfaction exists.
It falls to determine what level of penalty (if any) is appropriate as against the First Respondent and the Second Respondent in light of their respectively established contraventions.
The present case involves a single contravention by the First Respondent, being a corporation, which attracts a maximum penalty of $33,300. The Second Respondent was also declared to have engaged in a single contravention by his involvement which for an individual attracts a maximum penalty of $6,660: ss.546(2) and s.539(2).
The FWO submitted a recommended penalty range of between 50-60% for each of the separate contraventions. That is, it recommended a penalty as against the First Respondent within the range of $16,650 to $19,980 and as against the Second Respondent within the range of $2,997 and $3,596.40.
Factors relevant to the Court’s discretion
As recently affirmed by the High Court of Australia, the purpose of a civil penalty under the regime provided by the Act is primarily, if not wholly, protective in the promotion of the public interest in compliance with the provisions of the Act and in (general and specific) deterrence of further contraventions.[1] An “appropriate” penalty being one that “strikes a reasonable balance between oppressive severity and the need for deterrence in a particular case”.[2]
[1] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [15]-[16] (Pattinson )citing the plurality in (the Agreed Penalties Case) and French J in Trade Practices Commission v CSR Ltd [1990] FCA 762.
[2] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [41].
The task of assessing what amount to impose involves the selection of a figure taking into account all factors relevant to the particular case.[3] The oft cited decision of French J in Trade Practices Commission v CSR Ltd[4] listed those factors relevant to an overall assessment of penalty, restated by the Full Court in CFMMEU v ABCC:
..the nature, character and seriousness of the conduct; the loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and, any co-operation with the regulator and contrition.[5]
[3] Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 611, [75] (Gaudron, Gummow and Hayne JJ); Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357, 373-375, [37] (Gleeson CJ, Gummow, Hayne and Callinan JJ); Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68, 84, [55] (Allsop CJ, Davies and Wigney JJ); Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25, 36 [44] (Jagot, Yates and Bromwicgh JJ) as cited by Snaden J at [26] in Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654.
[4] [1990] FCA 762; [1991] ATPR 41-076 at [42].
[5] [2018] FCAFC 97 at [20].
This is not an exhaustive list. Further, each case warrants an “idiosyncratic” approach and a careful analysis of all relevant circumstances - as was stated in Australian Ophthalmic Supplies:
Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.[6]
[6] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J).
I consider the present matter in light of those well-established principles.
Nature of the contravening conduct
At the heart of both contraventions is the failure to comply with the compliance notice given on 10 December 2020: the First Respondent, for its non-compliance with the compliance notice, and the Second Respondent for his involvement in that non-compliance having been responsible to ensure that the First Respondent complied with its obligations under the Act at the relevant times. Compliance with the compliance notice required the First Respondent to prepare certain calculations and take the specified remedial action by 22 January 2021 and to provide reasonable proof of this to the FWO by 29 January 2021.
The contraventions occurred notwithstanding the FWO’s various efforts to notify the Respondents of the compliance notice, the due date for compliance and of the likely consequences of a failure to comply with the compliance notice. Those efforts included communication by telephone and by email.
In April 2021, the Second Respondent raised concerns with an FWO inspector about the First Respondent’s ability to pay what was owed under the compliance notice but provided no evidence (in response to repeated requests) of the financial circumstances. The Second Respondent also gave assurances he would take the necessary steps required to comply with the compliance notice in April 2021 but this did not occur.
The First Respondent was afforded ample opportunities to engage with the FWO or to rectify compliance before the proceedings commenced. The First Respondent’s continued failure to comply with the compliance notice demonstrates a serious disregard for its obligations under the Act and the authority of the FWO as a regulator of Commonwealth workplace laws.
For his part, the Second Respondent in his role as director of the First Respondent was in a position to ensure compliance with the compliance notice at the time of its issue – and indeed was responsible to do so. The Second Respondent did not become bankrupt, with the consequence of automatic removal from his director role, until almost one year after the compliance notice was issued.
The subject matter of the compliance notice (underpayment of wages over a period of some 4 months involving various alleged contraventions of the Award and the NES) is now significantly aged and remains unrectified and undefended in this Court. The circumstances which gave rise to the compliance notice should also be taken into account in determining penalty in this case.
Loss
At the time of this penalty judgment, it has been 2 years since the cessation of the former employee’s employment and 22 months since the First Respondent was required to take action under the compliance notice.
The precise quantum of the entitlements the former employee was owed but not paid is unknown on account of the First Respondent’s failure to comply with the compliance notice. There has now been a considerable period of time in which the former employee and FWO’s attempts to resolve the matter without recourse to litigation has been essentially frustrated by the Respondents’ conduct.
Having regard to the FWO’s investigation and in the absence of any defence to the allegations underlying the compliance notice, it is apparent that the former employee is owed entitlements which have been outstanding since before the compliance notice issued in December 2020.
The failure to comply with the compliance notice has also occasioned loss by necessitating the need for the FWO to investigate and expend resources in pursuit of this proceeding including preparation and filing of evidence and appearances before this Court.
These losses are all matters to be taken into account in consideration of penalty in the present case.
Deliberateness
The Second Respondent has admitted that he was aware of the compliance notice and the consequences of failure to comply. The decision of the Second Respondent not to ensure the First Respondents’ compliance with the Notice (at least for the period date to date, whilst still in a position to do so) was deliberate.
Having regard to the Second Respondent’s admission, and without any defence on the part of the First Respondent, I am of the view that the First Respondent’s non-compliance with the compliance notice was intentional and deliberate.
Size of the business and financial circumstances
The FWO accepted that the First Respondent is no longer trading and that it had been operating as a restaurant in a “COVID-19” environment in the state of Victoria, which operating restrictions likely had an adverse impact on the viability of the business. As the Second Respondent later became bankrupt (almost one year after the time for compliance with the compliance notice was due) it is apparent that he has experienced financial difficulties. In the Default Judgment, another Judge of this Court considered and determined there was no impediment on account of the fact to these proceedings.
Further the Respondents have not availed of the opportunities provided to them (by the FWO and this Court) to provide evidence of the financial circumstances that are said to underscore the non-compliance with the remedial actions in the compliance notice or of their financial difficulties at all.
In any event, regardless of the size of the business or its financial circumstances, this does not excuse an employer of its obligations to comply with workplace laws.
Corrective action, cooperation with the FWO and contrition
Since the commencement of these proceedings, the Respondents have been properly served with the relevant applications and orders but failed to file a notice of address for service; response or defence; and otherwise failed to defend these proceedings with due diligence.
On account of the Second Respondent’s admissions in the statement of agreed facts, some cost and complexity of the proceedings was spared and this is a matter that warrants some consideration. It may also be acknowledged that the Second Respondent having been removed as a director of the First Respondent since December 2021, is presently unable to ensure compliance of the First Respondent. But there was a substantial period of almost one year prior to the Second Respondent’s bankruptcy wherein he was responsible to and did not ensure that the necessary action was taken in order to meet the requirements of the compliance notice.
Further there has been no cooperation with the compliance notice and the First Respondent has not cooperated in these proceedings at all. For completeness, although the First Respondent lacks “a controlling mind”, there is a second shareholder who could have appointed another director to facilitate such compliance and engage in these proceedings.
Compliance with minimum standards
A further and an important consideration in this case is the need for compliance with the statutory framework. The statutory framework concerning compliance notices is an important mechanism for an FWO inspector to deal with non-compliance with minimum entitlements in the Act as an alternative to commencing litigation. It also provides a means of early resolution and rectification without penalty.
The failure to comply with a statutory notice issued by the FWO is serious, and I accept that such conduct ultimately undermines the Act’s enforcement framework and the safety net of entitlements it is designed to protect.
Deterrence
General deterrence
The First Respondent operated in the restaurant industry for the period between July 2018 and June 2022.
The FWO produced evidence that the café and restaurant industry is the source of a high number of disputes which underpin its compliance function (at 9.7% of all disputes completed by the FWO in the financial years ending 2019 to 2022).
Whether that figure represents the proportion of disputes raised with the FWO by individual employees or where the FWO has elected to focus its resources, it may be accepted that general deterrence is important in the café and restaurant industry where there is evidence of regular instances of non-compliance with minimum wages and conditions and an apparently high proportion of employers prepared to disregard the FWO’s enforcement processes.
In this respect, it is essential that the penalty for each contravention here is set at a level of sufficient severity as to encourage other employers in the café and restaurant industry to ensure such compliance and that the enforcement process and penalties are not perceived as just another “cost of doing business”.
Specific deterrence
This is a case where there is a need for specific deterrence, particularly in circumstances where the First Respondent has failed to participate in the proceeding and its remaining shareholder has failed to attend to appointment of a director which would enable it to do so. The First Respondent remains registered which underscores the importance of specific deterrence from future contraventions. That it does not presently trade and currently has no director or intention to appoint a director is no basis to alter this conclusion.
The circumstances of this case also warrant specific deterrence in relation to the Second Respondent, albeit I am satisfied the need is to a lesser degree. The Second Respondent is currently bankrupt. Although the Applicant contended that he suffers from certain ailments and has returned to employment as a chef and is not presently able to be appointed as a director, taking these submissions at their highest, it is at least conceivable that he may return to running a café or restaurant business at some point in the future.
THE APPROPRIATE PENALTY
This is not a case where the two contraventions can be “grouped” or treated as multiple contraventions, being separate and distinct contraventions by the First Respondent of s.716(5) and by the Second Respondent of s.550(1) of the Act.
In light of his particular circumstances, the FWO submitted that the Second Respondent would appropriately have a 10% discount applied. It contended there is no basis for a discount on penalty as against the First Respondent.
When all of the above factors are considered, I am satisfied that it is appropriate to impose a pecuniary penalty on the First Respondent for its contravention of s.716(5) and on the Second Respondent for his contravention of s.550(1) of the Act.
In arriving at the penalties to be applied in each case, I apply weight toward the degree of engagement and cooperation (in the case of the Second Respondent) and the absence of any engagement or cooperation (in the case of the First Respondent) and the need for general and specific deterrence in the restaurant industry. I also place weight on the fact that the Respondents’ conduct appears to have deprived a former employee of their due and deserved entitlements and frustrated the former employee from understanding the quantum and being able to pursue the rectification of those entitlements. However, in the particular circumstances of this case and in the absence of evidence of any prior history of contraventions, I consider that the FWO’s recommended penalties of 50 to 60% of the maximum in each case are excessive even when regard is had to the 10% discount recommended to be applied to the Second Respondent.
The Court will impose a penalty of 40% on each of the First and Second Respondents. And, in light of his (albeit limited) cooperation, current inability to ensure compliance by the First Respondent and my conclusion at to the lesser need for specific deterrence, will apply a 10% discount to the penalty of the Second Respondent. That is a penalty of $13,320 as against the First Respondent and $2,397.60 as against the Second Respondent. I consider penalties fixed in these amounts to be proportionate to the seriousness of the contravening conduct engaged in by each Respondent.
In the absence of any evidence as to the precise debt owed to the former employee and given the outstanding matter of compliance with the Court’s order of 25 August 2022 which required calculations to be prepared in this respect, I do not regard this as an appropriate case to order that payment be made to the former employee. I will order that the penalty be paid by the First and Second Respondents into the Consolidated Revenue Fund of the Commonwealth within 90 days. It is a matter for the FWO and the Respondents to agree whether that amount may be paid in instalments.
The FWO will have liberty to apply to the Court on 7 days’ notice in the event that these orders are not complied with.
CONCLUSION
I have determined that orders should be made specifying the quantum of penalties to be paid in accordance with my reasoning set out above.
There will be no order as to costs.
I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 1 December 2022
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