Fair Work Ombudsman v Bishnu Laxmi Ganesha Trading Pty Ltd and Ors

[2018] FCCA 487

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v BISHNU LAXMI GANESHA TRADING PTY LTD & ORS [2018] FCCA 487

Catchwords:
INDUSTRIAL LAW – Awards – breach of award – contravention of FW Act – breach admitted – pecuniary penalty – penalty to be paid to the Commonwealth.

Legislation:

Fair Work Act 2009 (Cth)

Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7

Applicant: FAIR WORK OMBUDSMAN

First Respondent: BISHNU LAXMI GANESHA TRADING PTY LTD (ACN 164 883 032)

Second Respondent: SEAN PINNELL

Third Respondent: SAJANA PAUDEL

Fourth Respondent: BINAYA SAPKOTA

File Number: BRG 369 of 2017

Judgment of: Judge Vasta

Hearing date: 7 February 2018

Date of Last Submission: 7 February 2018

Delivered at: Brisbane

Delivered on: 7 February 2018

REPRESENTATION

Counsel for the Applicant: Mr Prain

Solicitors for the Applicant: Fair Work Ombudsman

There being no appearance by or on behalf of the First, Third or Fourth Respondent.

Counsel for the Second Respondent: Ms Bakker

Solicitors for the Respondent: HW Litigation

ORDERS

THE COURT DECLARES THAT:

1. That the Second Respondent was involved, within the meaning of section 550 of the Fair Work Act 2009 (Cth) (FW Act) in the First Respondent's contravention of subsection 716(5) of the FW Act by failing to comply with the Compliance Notice.

THE COURT ORDERS THAT:

1. Pursuant to subsection 546(1) of the Fair Work Act 2009 (“FW Act”) that:

   (a)The First Respondent pay pecuniary penalties in the sum of $97,000.00 in respect of the following contraventions:

   (i)subsection 716(5) of the FW Act by failing to comply with the compliance notice issued on 11 November 2016;

   (ii)subsection 535(1) of the FW Act by failing to make and keep for seven years employee records as prescribed by regulations 3.33(1) and 3.33(2) of the Fair Work Regulations 2009 (Cth) (FW Regulations) during the period 30 January to 8 February 2016;

   (iii)subregulation 3.44(1) of the FW Regulations by failing to ensure that records required to be kept in relation to the Ms Murai and Ms Noda (Employees) were not false or misleading;

   (iv)subsection 536(1) of the FW Act by failing to provide the Employees with pay slips during their respective employment periods, other than one pay slip each for the period 31 March 2016 to 14 April 2016;

   (v)subsection 536(2) of the FW Act by failing to comply with subregulation 3.46(5)(b) of the FW Regulations; and

   (vi)section 44 of the FW Act by failing to provide the Employees with a Fair Work Information Statement at any stage prior to or during their employment.

   (b)The Second Respondent pay pecuniary penalties in the sum of $4,625.00 in respect of his involvement in the First Respondent's contraventions at Order 2(a)(i) above;

   (c)Third Respondent pay pecuniary penalties in the sum of $10,600.00 respect of her involvement in the First Respondent's contraventions at Orders 2(a)(i), (ii) and (vi) above; and

   (d)Fourth Respondent pay pecuniary penalties in the sum of $8,000.00 respect of his involvement in the First Respondent's contraventions at Orders 2(a)(iii), (iv) and (v) above.

2. Pursuant to subsection 546(3)(a) of the FW Act that any pecuniary penalties ordered to be paid by the First, Third and Fourth Respondent be paid to the Commonwealth within 60 days of the Court's order.

3. Pursuant to subsection 546(3)(a) of the FW Act that any pecuniary penalties ordered to be paid by the Second Respondent be paid to the Commonwealth within 90 days of the Court's order.

4. Pursuant to subsection 545(1) of the FW Act that the Second Respondent:

   (a)within two months of the date of this order, register with the Applicant's "My Account" portal and complete the profile including the Award options;

   (b)within a further month after the period in paragraph 4(a) above, provide to the Applicant his "My Account" registration number; and

   (c)within a period of two months, register with the Applicant's Online Learning Centre at and complete all education courses designed for employers and provide the Applicant with evidence of completion of those courses within a further one month.

5. The Applicant has liberty to apply on seven days' notice in the event that any of the preceding orders are not complied with.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 369 of 2017

FAIR WORK OMBUDSMAN

Applicant

And

BISHNU LAXMI GANESHA TRADING PTY LTD (ACN 164 883 032)

First Respondent

SEAN PINNELL

Second Respondent

SAJANA PAUDEL

Third Respondent

BINAYA SAPKOTA

Fourth Respondent

REASONS FOR JUDGMENT

(Ex tempore)

1. By application filed in this Court on 26 April 2017, the Applicant, Fair Work Ombudsman, has sought the making of declarations and the imposition of pecuniary penalties to each of the four Respondents.  They are, firstly, the company Bishnu Laxmi Ganesha Trading Pty Ltd as the First Respondent, Sean Pinnell, the Second Respondent, Sajana Paudel, the Third Respondent and Binaya Sapkota, the Fourth Respondent.

2. The First Respondent was a company that ran a business offering massages.  The company had two directors and shareholders.  They are the Second Respondent and the Third Respondent.  The Fourth Respondent was employed as a manager.  I accept that the Second Respondent had an arm’s length relationship with how the business was run and did leave most of the business running to the Fourth Respondent as a manager.

3. The business employed two employees; a Ms Mari and a Ms Noda.  Both of those were persons on working visas and were obviously somewhat vulnerable.  The payments that were given to those two employees did breach many sections of the Fair Work Act 2009 (Cth).

4. There were underpayments of minimum wage entitlements, there was underpayment of Saturday penalty rates, there was underpayment of Sunday penalty rates, there was underpayment of public holiday penalty rates and sundry other entitlements.

5. The two employees were only employed for a period of three months; that is, from 30 January 2016 to 29 April 2016. Both of those employees contacted the Fair Work Ombudsman with complaints as to underpayments. It turns out that during that period Ms Mari was underpaid a total of $7,708.84 and Ms Noda a total of $5,133.69; in total, $12,842.53. 

6. The Fair Work Ombudsman was able to make that calculation and issued a compliance notice to rectify that amount of payment.

7. Before doing so it was obvious to the company and its directors and manager that the Fair Work Ombudsman was investigating this matter and was specifically interested in the payments made to these two employees.

8. On 10 November the Fair Work inspector told the two directors and the manager that a compliance notice would be issued.

9. The response from the Second Respondent was an email in effect saying that he would be seeking some legal advice about these “ridiculous charges”. The notice was duly given on 11 November 2016 asking for compliance by 28 November 2016. 

10. It seems that on 25 November, some three days before the compliance notice was due, that the Second Respondent did contact the inspector and, through him, obviously, the Fair Work Ombudsman and, in effect, said that he had no money to pay the compliance notice.  He told the officer that he (the officer) did not understand the concept of drawing blood from a stone.  The second Respondent was told that he needed to provide proof of the financial hardship.  That conversation followed two other conversations with the other two Respondents.

11. Because the inspector had had a series of conversations, the inspector sent an email to all three Respondents on the 25th which is contained Annexure BS20.  That email read as this:

    “Thank you for speaking with me yesterday and today.  In summary, you have all told me that you will not be able to comply with payments outlined in the compliance notice by close of business today due to financial hardship.  A non compliance letter will be issued on Monday 28 November 2016.  I drew your attention to page 7 of the compliance notice which outlines employer rights and obligations under this compliance notice.  Per paragraph 33 in circumstances where the employer does not comply with the compliance notice the Fair Work Ombudsman may commence legal action against the employer and/or individuals involved in the contraventions to recover any outstanding moneys and to seek civil penalties.  Civil penalties may also be sought for non compliance with this compliance notice.  I have told you today the Fair Work Ombudsman will not commence legal action against the company or individuals involved in the contraventions before the close of business on Friday 2 December 2016.  This will provide you some time to explore all options to make payments to the employees and/or to provide to me all financial records and documents including:

    The last 12 months of bank statements;

    Profit and loss statements;

    Balance sheets;

    Any other financial records/documents that demonstrate the financial hardship you are claiming.

    At Sean’s (the second Respondent’s) request, I have also attached a Fair Work Ombudsman Small Claims Guide which has some generic information on page 20 about enforcement procedures after a court judgment.  Please note that enforcement procedures can vary in different courts.  This guide is for general information only.  I suggest you each seek independent legal advice if you need a legal opinion about your current circumstances.  Please contact me with any questions.  As a reminder, I will not be in on these particular days.”

12. None of the Respondents did provide any of those materials to show the financial hardship, however, on 6 December 2016 each of the employees were paid a sum of $2,400.00 each.  That means that the total outstanding is still $8,042.53.

13. The Fair Work Ombudsman did bring the action against all four entities, the three real entities and the company.  In the investigations, it showed that there was a training period between 30 January and 8 February for which the employees should have received pay but they received no pay.  This period was falsely recorded in the records of the business as to ensure that the company would be able to justify the non-payment of wages during this period. 

14. The records were also false in that they did not show the correct commencement period of the two employees.

15. It also was uncovered during these investigations that payslips were not issued except for one occasion, and one occasion only, and on the occasion in which the payslips were issued the content was deficient in that there had not been a nominated superannuation account to which the appropriate superannuation was to be paid. 

16. It also was seen, in the investigation that the company had failed to give a Fair Work information statement.

17. In keeping with what I have accepted as the role of the second Respondent, the Fair Work Ombudsman had alleged that the third Respondent was complicit in the breach of the record keeping matter regarding the training period; that the Second and Third Respondent were complicit in the failure to pay the compliance notice; that the Fourth Respondent was complicit in the failure to issue the payslips; that the Fourth Respondent was also complicit in the non-appearance as to the superannuation account on that payslip; and the Third and Fourth Respondents were complicit in the failure to give the Fair Work information statement.

18. The matter was mentioned before me. The Third and Fourth Respondents did appear.  They have subsequently claimed that they have been made bankrupt. 

19. They did not contest the matter, neither did the company and with regard to the First, Third and Fourth Respondents I gave a default judgment late last year. 

20. The Second Respondent did not contest that he had been involved in the breach by failing to comply with the compliance notice and today’s matter has only been to set an appropriate penalty for his complicity in that breach and to set appropriate penalties for the company and the third and Fourth Respondents in relation to their respective breaches of the FW Act.

21. In looking at this matter, it has been claimed, by the solicitor representing the second Respondent, that this was not a serious breach because, when one looked at what the behaviour was that led to the issuing of the compliance notice, it was behaviour by the company for a three month period only and that the amount of money concerned was rather small in that it was just under $13,000.00.

22. What has to be said about that is two things; firstly, the money is not insignificant.  If it were so insignificant then there should have been no trouble at all for the company and for the directors to have been able to pay that money when it was asked for. 

23. The other point is this.  What is illustrated by the breaches that led to the compliance notice was this; that the first employee was supposed to have been paid, for the three months work that she did, a total of $12,540.76.  She was underpaid $7,708.84 meaning that she was only paid 39 per cent of what she was entitled to be paid.

24. The second employee was entitled to be paid $8,768.77. She was underpaid to the extent that the company only paid her 41 per cent of what it was that she was entitled to be paid over that three month period. 

25. This means that this company, over the three month paid, was saving itself, on average, 60 per cent of what it should have been paying to what it did actually pay.  In other words, it was giving itself a huge advantage over its competitors.

26. It also needs to be borne in mind that these two employees were vulnerable, having come here to the country on working visas.  They are entitled to be protected under Australian workplace law and to not be taken advantage of in the way they have been by this company. 

27. That amount of money, for which they were underpaid, would be extremely sizable to those particular employees.  Therefore, I cannot agree with any submission that attempts to minimise the conduct of the company. 

28. It was also submitted that it was not a case of the Second Respondent ignoring the notice. The submission is made that the second Respondent sought to try and cooperate with the Fair Work Ombudsman at all times and ensure that the Fair Work Ombudsman knew that he could not pay the money.

29. The problem with that is that this money was due and owing to the employees during the period 30 January 2016 to 29 April 2016.  That means that this company, and therefore, its shareholders and its directors, had use of that $12,842.53, to which they were not entitled to have, for some seven months before the compliance notice was due. 

30. That means that for seven months, they could have done all sorts of things with that amount of money because they should not have had it in their possession in the first place. 

31. It does not seem to me that any submission that the Respondents have hit hard financial times should be of any great moment or any great factor in mitigation.  It may be that they hit bad financial times, but they should not have had this money at any time to begin with.

32. I do take into account that the second Respondent is a first-time offender; that he has been party to a statement of agreed facts; that he has attended to court; and that he has at all times attempted to comply with the orders of this Court. 

33. But these breaches of the FW Act are serious. I have had regard to all of the factors that I need to take into account. I especially am cognizant of all the factors outlined by Judge Mowbray in Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7 (“the Pangea Case”). And whilst such is a useful guide, it is not a checklist to be ticked off with regard to setting penalties so that one can arrive at it in a mathematical way.

34. To my mind, it is important for the principles of general deterrence and specific deterrence to be paramount in this case. 

35. With regard to the First Respondent, for the failing to provide the employees with a fair work information statement, I am of the view that such a breach in their case, the appropriate penalty is one of $18,000.00.

36. With regard to the failing to keep the records as regarding the starting time, the maximum penalty there is $27,000.00. I am of the view that an appropriate penalty for that breach is $10,000.00.

37. For the failing to provide the payslips, the maximum penalty is $27,000.00. I see no reason why the maximum ought not be imposed. It is within the worst case because of the provision of only one payslip, and that payslip being incorrect. When one looks at this aspect, I am of the view that it is in the worst category, and I impose the maximum.

38. For the failure to, on the payslip, specify the name and number of a fund to which the superannuation contributions would be required to make, I have taken that somewhat into account in setting the penalty for the previous matter.  I impose a penalty of $3,000. 

39. For failing to ensure that the record was not false or misleading as far as the commencement date, that is somewhat covered by the previous matter.  However, I will impose a penalty of $5,000.00 for that matter. 

40. The most serious matter is the failure to comply with the compliance notice.

41. I am of the view that a penalty of $25,000.00 for the company is appropriate. 

42. So that gives a total of $97,000.00 in penalties for the First Respondent. 

43. With regard to the Third Respondent, I impose penalties that are commensurate with what I have imposed on the company.  I ought say I have given no discount at all for because there has been no cooperation whatsoever, and it is a default judgment. 

44. For the failure to provide the fair work information statement, I impose a penalty on the Third Respondent of $3,600.00. 

45. For the failing to keep the employee records, I impose a penalty of $2,000.00. 

46. And for the failure to comply with the compliance notice, I impose a penalty of $5,000.00. 

47. That is a total, then, of $10,600.00 for the Third Respondent. 

48. For the Fourth Respondent, I impose a penalty with regard to the failure to the two payslips matters.  The first payslip, I impose a penalty of $5,400.00; for the second contravention, I impose a penalty of $600.00. 

49. For the record-keeping penalty, I impose a penalty of $2,000.00. 

50. That is a total of $8,000.00 for the Fourth Respondent. 

51. With regard to the Second Respondent, with regard to the failure to comply with the compliance notice, I impose the penalty of $5,000.00. 

52. However, for all of the matters to do with the cooperation, I will temper that amount somewhat.  The Fair Work Ombudsman has submitted that a discount of five per cent is appropriate.  I am of the view that such a discount is appropriate, but given all the circumstances, I would assess that as it should be a discount of seven and a half per cent, which means that the penalty will be a penalty of $4,625.00.

I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date:  14 May 2018