Fair Work Ombudsman v Bird

[2011] FMCA 926

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v BIRD [2011] FMCA 926

INDUSTRIAL LAW – Fair Work Ombudsman civil remedy proceedings against director of employer company now in liquidation – lengthy defaults by respondent to plead his response and defence – springing order for judgment on statement of claim – application for reconsideration – no satisfactory excuse shown for defaults – significant admissions of liability for pleaded contraventions – default orders not set aside – future hearing on penalty only.

Evidence Act 1995 (NSW) s.147
Fair Work Act 2009 (Cth) ss.535(1), 536(1), 551
Federal Magistrates Act 1999 (Cth) s.69
Federal Magistrates Court Rules 2001 (Cth) r.13.03B
Workplace Relations Act 1996 (Cth) ss.182(1), 185(2), 719(2), 728, 729
Workplace Relations Regulations 2006 (Cth) regs 19.4, 19.20

Applicant: FAIR WORK OMBUDSMAN

Respondent: RAYMOND JAMES BIRD

File Number: SYG 2717 of 2010

Judgment of: Smith FM

Hearing date: 18 November 2011

Delivered at: Sydney

Delivered on: 18 November 2011

REPRESENTATION

Counsel for the Applicant: Ms J Dennis

Solicitors for the Applicant: Fair Work Ombudsman

Counsel for the Respondent: Mr N Kelvin

Solicitors for the Respondent: Hancocks Solicitors

ORDERS

1. The respondent’s application to vacate the default orders in paragraph 2 made on 1 July 2011 and paragraph 5 made on 5 August 2011 is refused.

2. The Court finds the respondent liable for penalty in relation to the contraventions listed in paragraph 61(a) of the Statement of Claim.

3. The hearing in relation to penalty is adjourned for hearing on 7 March 2012.

4. The respondent must file and serve all affidavits relied upon by him in relation to penalty no later than 16 December 2011.

5. The applicant must file and serve any affidavits in reply and any supplementary written submissions no later than 31 January 2012.

6. The respondent must file and serve any outline of submissions no later than 2 March 2012.

7. Any request to the Court by a party for its witness to attend the hearing by video or audio connection shall file and serve an application for this no later than 3 February 2012, together with an affidavit by the party’s solicitor setting out in relation to each such witness the proposed arrangements which will satisfy s.69 of the Federal Magistrates Act 1999 (Cth), and giving an undertaking to the court to pay all charges, fees and expenses including any additional charges required by the Registry, and – in the case of each videoconference request – attaching a completed FMC ‘request for video conference’ form in relation to each witness.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 2717 of 2010

FAIR WORK OMBUDSMAN

Applicant

And

RAYMOND JAMES BIRD

Respondent

REASONS FOR JUDGMENT

1. This matter is an application by the Fair Work Ombudsman seeking the imposition of pecuniary penalties on Mr Bird, for his involvement in several contraventions by his company Clevedon Australia Pty Ltd, now in liquidation, of its obligations to pay numerous casual employees basic wages and loadings under various State awards, and of its obligations to give them timely pay-slips and to keep adequate records showing compliance with those obligations.  This judgment explains why I have made orders finding him liable on the allegations made by the Ombudsman in its detailed Statement of Claim, and have given directions for a further hearing on penalties.  It revises and explains the background to my reasons which I outlined shortly to the parties when making the above orders.

The history of the matter

1. The matter has a long procedural history, leading to protracted non-compliance by Mr Bird with directions requiring him to identify, with precision, which of the allegations made by the Fair Work Ombudsman he took issue with. 

2. The application was filed on 17 December 2010, and relates to events during 2009 and an investigation which commenced at that time. 

   
   

   It was necessary for the Fair Work Ombudsman to obtain leave to serve the application and Statement of Claim on Mr Bird in New Zealand, since his former solicitor in Sydney did not receive instructions to accept service.  Leave was granted on 18 March 2011, and service was duly effected on Mr Bird in person.  Mr Bird’s solicitor then filed an appearance, and attended the directions listing on 29 April 2011. 

   
   

   I made directions setting a timetable, which included requiring Mr Bird to file a response and defence to the Fair Work Ombudsman’s very detailed pleading before 27 May 2011.  I directed that any mediation be completed by 23 September 2011.

3. However, Mr Bird failed to file a defence, and the Fair Work Ombudsman obtained a special listing in an effort to progress the matter.  At a listing on 1 July 2011, neither Mr Bird nor his solicitor appeared, although they had been notified of the listing and the reason for it.  I therefore made a default order under Federal Magistrates Court Rules 2001 (Cth) r.13.03B, which left the door open for Mr Bird to apply for leave to defend the matter, and directed that there would otherwise be a hearing on an undefended basis on 5 August 2011.

4. Mr Bird did not file an application for leave to defend nor any other document, and gave no indication of any grounds of defence nor any good excuse for ignoring the court’s orders, and did not make himself or his representative available for a mediation within the time specified. 

5. The Fair Work Ombudsman filed bulky affidavits and documents, including affidavits from some of the relevant employees.  He also filed a detailed outline of submissions on liability and penalty.  This material was all served on Mr Bird’s solicitor prior to the appointed default hearing.  I read these documents in Chambers, and was satisfied that the Ombudsman had presented evidence which, prima facie, was sufficient to support the findings of liability sought in the Statement of Claim. 

6. Notwithstanding Mr Bird’s lack of action, Mr Bird’s solicitor appeared on 5 August 2011, having given notice only on the previous day of his intention to do so and to seek an adjournment of the matter.  He applied for a four week adjournment, suggesting that his client now wished to obtain records of his company and prepare a defence.  In effect, he made oral application for leave to defend the matter in relation to liability. 

7. I was not satisfied that Mr Bird had satisfactorily explained his previous defaults, nor that he had, or even genuinely believed that he had, a good defence which he wished to present at a trial.  I was, however, prepared to allow him further time to demonstrate these matters.  I therefore ordered:

   1.The hearing pursuant to order 2 made on 1 July 2011 is adjourned to 18 November 2011 at 10.15am.

   2.The respondent’s application to vacate order 2 made on 1 July 2011 is adjourned to that date.

   3.The respondent must file his proposed Response and Defence, and all affidavits in support, no later than 7 October 2011.

   4.Leave to file a cross-claim is refused.

   5.If there is default in relation to paragraph 3, then the respondent will not be permitted to adduce any evidence, and pursuant to r.13.03B(2) judgment will be ordered in favour of the applicant for the relief claimed in paragraph 61(a) and (b) of the statement of claim. The hearing will be confined to issues of penalty in relation to the declared liabilities.

   6.Pursuant to s.570(2)(b) of the Fair Work Act 2009 (Cth), the respondent must pay the applicant’s costs incurred in relation to the listings on 1 July 2011 and today, fixed in the amount of $1,500.

8. Notwithstanding the guillotine order, Mr Bird failed to file pleadings by way of response and defence within the appointed time.  Nor was proper application made to the court, including for any further extensions of time.  An informal request to re-open the previous order for mediation was made, but Mr Bird was informed that the court regarded that order as spent.  Without any notice, and without leave, Mr Bird then filed on 17 November 2011, the day before the adjourned default hearing, a ‘response’ and ‘defence’, and affidavits by Mr Bird and his solicitor. 

9. Mr Bird therefore needed a discretionary order which would vacate the effect of the two previous default orders, and would give him leave to defend the proceedings on both liability and penalty.  I entertained an oral application to this effect, and received submissions in support from Mr Bird’s solicitor at the commencement of the hearing on

   
   

   18 November 2011.

10. The affidavit of Mr Bird’s solicitor deposed to his difficulties in contacting Mr Bird to obtain necessary instructions.  I accept that he was unable for protracted periods to obtain any instructions, but I do not accept that this was the result of anything other than Mr Bird’s making himself unavailable to give necessary instructions when they were plainly required.  Mr Bird’s affidavit made assertions that he did not have access to records of his business until they were provided by the Fair Work Ombudsman, but did not provide any sufficient excuse for his failure to participate in the court proceedings over many months.  A medical certificate from a general practice clinic was presented suggesting that Mr Bird’s wife suffers from a fluctuating mental illness.  However, this did not provide a sufficient explanation of Mr Bird’s protracted failure to demonstrate genuine interest in defending the proceedings in accordance with the Court’s directions.

11. Moreover, for reasons which I shall now explain, I was not satisfied by examining his proposed defence, and considering the submissions of his solicitor, that Mr Bird has, and genuinely wishes to raise and litigate, evidence or contentions providing any substantial defence to the contraventions alleged by the Fair Work Ombudsman in the Statement of Claim and evidence filed in support.

The contraventions alleged

1. The Statement of Claim, and the evidence now filed to verify its allegations, identifies 25 former employees of Clevedon Australia Pty Ltd who were induced to work on a casual basis to sell gardening tools and other gardening products in temporary stalls at various shopping centres in New South Wales, Queensland and the Australian Capital Territory by promises of being paid a flat rate of $20 per hour.  These employees were all entitled, at least, to award rates of a minimum basic wage, with guaranteed casual loadings and public holiday rates, in accordance with the provisions of three identified awards applicable in their respective three jurisdictions.  The Statement of Claim, based on records of the company obtained from the liquidator of Clevedon Australia Pty Ltd and documentary and sworn evidence from the employees, details periods of employment during 2009 in which these employees were not paid anything for many of the hours worked by them.  Affidavits from several employees set out circumstances in which their complaints of non-payment were frustrated by the responsible personnel employees acting under the directions of Mr Bird. 

2. The calculations alleged in the Statement of Claim, and verified by affidavits of the workplace inspectors from the company’s documents and the records and evidence of the affected employees, show that sixteen employees in NSW, including four juniors, were not paid at least $25,705.49 in relation to statutory minimum rates of pay. 

   
   

   In Queensland, nine employees, including two juniors, were not paid at least $14,989.51, and in ACT two employees (also employed in NSW), one a junior, were not paid at least $1,030.03.  In total, there is evidence of 25 employees being underpaid a total of $41,725.03 in relation to statutory minimum wages.

3. The affidavit evidence of the inspectors attached emails from Mr Bird in which he made promises to investigate and remedy complaints from the employees, but, in effect, frustrated the efforts of inspectors to obtain relevant payroll records.  His emails contain admissions of his awareness and responsibility for some of the arrears of pay to employees.  The affidavits of some of the employees depose to conversations with Mr Bird, also providing prima facie evidence of his direct or indirect supervision of their employment and of the company’s payroll over the periods of the non-payment of wages.

4. As a result of the statutory ‘course of conduct’ provisions of s.719(2) of the Workplace Relations Act 1996 (Cth), the Statement of Claim alleges that the multitude of underpayments of all these employees results in the employer being liable for penalty in relation to eight contraventions of ss.182(1) and 185(2) of that Act and of two clauses of the Retail and Wholesale Industry – Shop Employees – Australian Capital Territory – Award 2000 (“ACT Retail Award”). It alleges that Mr Bird is liable to the imposition of eight penalties at a maximum of $6,600 each, as a person involved in these contraventions pursuant to the provisions of s.728 of the Workplace Relations Act.

5. Based on the evidence of the inspectors’ investigations and their analysis of the company’s employment records when produced by the liquidators of Clevedon Australia Pty Ltd, the Statement of Claim also alleges that there were failures by the employer to keep wage and employee records and to provide pay slips, giving rise to four additional contraventions by the employer carrying penalties under Workplace Relations Regulations 2006 (Cth) Chapter 2 regs 19.4 and 19.20 prior to 1 July 2009, and under ss.535(1) and 536(1) of the Fair Work Act 2009 (Cth) subsequent to 1 July 2009. It is alleged that Mr Bird is a person involved in these failures, by reason of his management position in the company and his actual responsibility and involvement in its personnel practices. I am satisfied that these allegations are also prima facie supported by the evidence filed by the Fair Work Ombudsman.

Mr Bird’s proposed response and defence

1. Mr Bird’s proposed response and defence dispute whether the records of the company produced by the liquidator and now relied upon by the Fair Work Ombudsman are admissible under the Evidence Act 1995 (NSW). They also dispute in general terms the evidence of the employees as to their actual hours of work, where their evidence has been relied upon in default of the existence of proper time-sheets maintained by the company. However, they otherwise admit liability. Thus, his proposed response states:

   Response to applicant’s claims for final orders

   The respondent opposes the making of the following orders sought in the application:

   1.The orders as set out in the applicant’s statement of claim.

   The respondent consents to the making of the following orders sought in the application:

   1.That the respondent pays to the Fair Work Ombudsman $21,725.00.

   Grounds of opposition or further orders …

   1.There are no business records complying with section 147 of the Evidence Act 1995.

   2.Based on his investigations, and to the best his best recollection the respondent verily believes that the Fair Work Ombudsman made enquiries of the former employees at around the same time that the former employees were aware that Clevedon was about to go into receivership.

   3.Ferrier Hodgson, the former receivers, provided to the applicant a data CD containing spreadsheets showing rosters and pay records. The applicant’s solicitors in turn provided a copy of this CD to the respondent.

   4.There are no business records of Clevedon Australia Pty Ltd complying with section 147 of the Evidence Act 1995. The records provided on the CD from Ferrier Hodgson cannot be verified as being the true business records of Clevedon Australia Pty Ltd.

   5.Based on his investigations, and to the best of his recollection, the respondent verily believes that

   (a) the rosters and pay records on the data CD supplied to the applicant were produced at or around the time that the employees became aware that Clevedon was going into receivership;

   (b) the rosters and pay records on the data CD supplied to the applicant do not represent the true rosters and hours worked;

   (c)  the former employees of Clevedon have together overstated their time worked for Clevedon by a total of approximately 1,000 hours.

   6.Clevedon paid all the employees listed in the applicant’s statement of claim at the rate of $18- $20 per hour depending on their age and whether or not they were employed on probation.

   7.The respondent says that Clevedon has underpaid the employees by a total of no more than $21,725.00.

   8.Based on his investigations, and to his best recollection, the respondent verily believes that the applicant’s enquiries into alleged deficiencies in the employee pay records of Clevedon were being expeditiously attended to by Clevedon.

   9.Based on his investigations, and to his best recollection, the respondent verily believes that on 12/01/2010 the former receivers seized all documents, computers and stock of Clevedon.

   10.The respondent has no access to the records seized and allegedly lost by the former receivers of Clevedon.

   11.After the former receivers seized the assets of Clevedon, neither Clevedon nor the respondent were any longer in a position to prepare an adequate response to the ay records matter raised by the applicant.

2. The proposed defence admits all of the key allegations in the Statement of Claim in relation to the identities, employment, and award entitlements of the 25 specified employees.  It disputes in general and unparticularised terms the total extent by which they were underpaid.  It asserts, without particulars of evidence and calculations, that the total amount underpaid to NSW and ACT employees was $16,359, and that the underpayment to Queensland employees was $5,366. 

3. The defence improperly pleads a global non-admission in relation to the record-keeping and pay-slip contraventions.  I am far from satisfied that any good defence is raised in relation to these allegations, and Mr Bird’s response appears to admit the absence of necessary records required to be kept by the company.

4. The defence also admits Mr Bird’s position in the company.  Its global ‘not admit’ response to the other particulars relied upon to establish Mr Bird’s knowing involvement in the contraventions is an inadequate pleading, and its real basis was not able to be explained to me by Mr Bird’s solicitor.  I am left dissatisfied that he has any genuine defence on the merits in relation to his accessorial liability for the contraventions of his company which he admits.  I am not satisfied that there is any prospect that he could avoid prima facie incontrovertible evidence, that at all relevant times he was the sole director and secretary of the company, had day-to-day control and supervision of its affairs, finances, and – in particular – its wages records (such as they were), policies, and practices.

5. In effect, therefore, the defence admits all of the employer’s eight contraventions relating to non-payment of entitlements, and raises an unparticularised dispute as to quantum of underpayments which could go only to mitigation of penalty.  The documents filed by Mr Bird and the submissions made to me by his solicitor, failed to plead or show a genuine defence on the merits available to Mr Bird in relation to his accessorial liability for those contraventions, or in relation to his responsibility for the alleged record and pay-slip contraventions.

6. The contention in the proposed response concerning s.147 of the Evidence Act is obscure and may be misconceived. It was not addressed in the submissions of Mr Bird’s solicitor. The section raises a presumption of regularity in relation to business records produced “wholly or partly by a device or process” such as a computer. I can see no reason why this presumption would not be available to the Fair Work Ombudsman in the present case nor why the authenticity of the records produced by the company’s liquidator are in doubt. Mr Bird’s unexplained dissatisfaction with the extent of the records passing into the possession of the liquidator and thence to the Fair Work Ombudsman does not hold prospect of his being able to adduce evidence raising sufficient doubt about the records actually discovered and relied upon by the workplace inspectors. The presumption under s.147 does not apply to documents produced “in connection with an investigation relating or leading to a criminal proceeding”, but the present proceedings are not criminal proceedings (see Workplace Relations Act s.729, and Fair Work Act s.551).

Conclusion

1. Taking into account the recent documents filed by Mr Bird and the submissions of his solicitor, I was not persuaded that I should set aside the default order I made on 5 August 2011 in terms of r.13.03B(2)(c) and (e).  Mr Bird was represented on that occasion, and could have been under no doubt as to its effect, nor as to my concern about the defaults which had preceded it.  The order took effect on 7 October 2011, upon Mr Bird’s further failure to file a defence.  It had the consequence that judgment was given to the Fair Work Ombudsman for declarations as to the alleged eight non-payment contraventions and four records and pay-slip contraventions, with the quantum of penalties to be decided.

2. After weighing up all the considerations of justice which bear upon procedural discretions of this type, and giving particular attention to the seriousness of civil prosecutions of the present type, I was not persuaded that it is in the interests of justice for me to set aside my default order.  As I have explained above, Mr Bird had not shown that the making of the ‘springing’ or ‘guillotine’ order was unjust or inappropriate when made.  He had not persuaded me that he has now shown acceptable excuses for his long period of default.

3. More significantly, Mr Bird’s proposed defence, in so far as I could discern any arguable merit, amounted to little more than a plea in mitigation.  I was left doubtful, by statements of Mr Bird’s solicitor, whether in fact Mr Bird had the motivation and resources to defend the matter in a trial extending over several days.  I took into account the expenses to both parties of fully reinstating the matter and conducting such a trial, and the relatively insubstantial maximum penalties which are at stake. 

4. I considered that the interests of justice in the present matter were best served by my maintaining the effect of my previous order, and by proceeding upon the basis that his liability to penalties is no longer contestable, but that I should give him further time to prepare for a hearing on the quantum of penalty.  He should be under no misapprehension that further adjournment is likely to be granted.

5. At the penalty hearing, it will be open to Mr Bird to address me in relation to the circumstances of the contraventions shown in the evidence filed by the Fair Work Ombudsman, in so far as it bears on penalty.  It will be open to Mr Bird to present further evidence giving substance to his doubts in relation to that evidence, provided that it goes only to mitigation.  However, I shall necessarily be arriving at penalties without a contested hearing allowing precise findings as to the area of dispute as to the quantum of underpayments of the 25 employees.  This is likely to result in my giving him the benefit of reasonably raised doubts in relation to the surrounding circumstances.  At least, Mr Bird will be able to submit that I should approach the determination of penalties on the basis that his admissions as to underpayments have saved considerable public expense, which would otherwise have been incurred if all of the Ombudsman’s allegations had been exhaustively explored in a trial on liability.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Smith FM

Date: 12 December 2011