Fair Work Ombudsman v Blue Impression Pty Ltd
[2017] FCCA 810
•28 April 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v BLUE IMPRESSION PTY LTD & ORS | [2017] FCCA 810 |
| Catchwords: INDUSTRIAL LAW – Contraventions of Fair Work Act 2009 – question of whether the third respondent is accessorily liable –wilful blindness. |
| Legislation: Fair Work Act 2009 (Cth) ss.45, 550, 557, 793 |
| Cases cited: Fair Work Ombudsman v South Jin Proprietary Limited [2015] FCA 1456 Giorgianni v The Queen[1985] HCA 29 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | BLUE IMPRESSION PTY LTD ACN 151 494 763 |
| Second Respondent: | SZE TENG WONG |
| Third Respondent: | EZY ACCOUNTING 123 PTY LTD ACN 105 317 691 |
| File Number: | MLG 2721 of 2015 |
| Judgment of: | Judge O'Sullivan |
| Hearing dates: | 16 & 17 February 2017 |
| Date of Last Submission: | 17 February 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 28 April 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Tracey |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Counsel for the Third Respondent: | Mr Champion |
| Solicitors for the Third Respondent: | Canaan Lawyers |
ORDERS
THE COURT DECLARES THAT:
The third respondent was involved in each of the following contraventions, admitted by the first respondent, in relation to Mr Jian Hong Zheng pursuant to s.550 of the Fair Work Act 2009 (Cth) (“FW Act”):
(a)section 45 of the FW Act by failing to pay the minimum hourly rate of pay in accordance with clauses 13.2 and 17 of the Fast Food Industry Award 2010 (“Modern Award”);
(b)section 45 of the FW Act by failing to pay the evening loading in accordance with subclause 25.5(a)(i) of the Modern Award;
(c)section 45 of the FW Act by failing to pay the Saturday loading in accordance with subclause 25.5(b) of the Modern Award;
(d)section 45 of the FW Act by failing to pay the Sunday loading in accordance with subclause 25.5(c)(ii) of the Modern Award;
(e)section 45 of the FW Act by failing to pay the public holiday penalty rate in accordance with subclause 30.3 of the Modern Award;
(f)section 45 of the FW Act by failing to provide rest breaks and meal breaks in accordance with clause 27.1 of the Modern Award between 15 December 2014 and 31 December 2014; and
(g)section 45 of the FW Act by failing to pay the special clothing allowance in accordance with subclause 19.2(b)(ii) of the Modern Award.
THE COURT ORDERS THAT:
The proceedings be adjourned for a penalty hearing on a date to be fixed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2721 of 2015
| FAIR WORK OMBUDSMAN |
Applicant
And
| BLUE IMPRESSION PTY LTD ACN 151 494 763 |
First Respondent
| SZE TENG WONG |
Second Respondent
| EZY ACCOUNTING 123 PTY LTD ACN 105 317 691 |
Third Respondent
REASONS FOR JUDGMENT
The functions of the Fair Work Ombudsman (“FWO”) include promoting compliance with the Fair Work Act 2009 (Cth) (“FW Act”). One of the ways the FWO does this is, when contraventions of workplace legislation are identified, to secure voluntary compliance.
In 2014, the FWO identified contraventions of the FW Act at a business running a Japanese fast food chain. The business involved sought assistance from its accountant to remedy those issues. Unfortunately, the problems didn’t end there, and there were further contraventions of the FW Act by the same business.
These reasons concern the question whether that accounting firm is liable (as an accessory) for its involvement in what are now admitted contraventions of the FW Act by the business to whom it provided payroll services.
The FWO (the applicant) commenced these proceedings against Blue Impression Pty Ltd ACN 151 494 763 (the “first respondent”) and two other respondents, Sze Teng Wong (the “second respondent”) and Ezy Accounting 123 Pty Ltd ACN 105 317 691 (“Ezy”) by application and statement of claim filed on 9 December 2015.
The first respondent, inter alia, operates a Japanese fast food restaurant with outlets located in Doncaster, Melbourne in the Queen Victoria Building, and Southland Shopping Centres in the State of Victoria.
These proceedings arise out of the FWO’s investigation into a request for assistance made by Mr Jian Hong Zheng (the “Employee”) in respect of his employment with the first respondent. The Employee was a Taiwanese national on a subclass 417 working holiday visa, employed by the first respondent on a casual basis and his employment with the first respondent was governed by the Fast Food Industry Award 2010 (the “Award”).
The second respondent, Ms Wong, was responsible for the day to day operation of the first respondent’s Melbourne Queen Victoria Building site where the Employee worked. The FWO alleges that Ezy, an accounting firm, was involved in and accessorially liable for several of the first respondent’s contraventions of the FW Act in relation to the Employee.
Ezy, established in 2003, is a tax and accounting business located in Box Hill. Mr Eric Lau is the director of Ezy which, along with his wife Ms Lina Hii and Ms Sharon He, provided services to the first respondent and worked with the second respondent when doing so.
The first and second respondents have made full admissions of contraventions of the FW Act and entered into a statement of agreed facts with the FWO on 17 May 2016 and 23 June 2016 respectively. The determination of any penalty to be imposed against those respondents has been adjourned pending the resolution of the question whether Ezy is accessorially liable for its involvement in certain of those admitted contraventions.
On 29 July 2016 the Court made orders for the filing of material and a hearing on that issue on 16 February 2017.
FWO’s allegations
The FWO’s case against Ezy set out in its amended statement of claim filed by consent on 14 February 2017 was Ezy:
7. .. was at all relevant times:
(a) a corporation incorporated under the Corporations Act 2001 (Cth);
(b) capable of being sued in its corporate name;
(c) the provider of payroll services to the First Respondent;
and was at all relevant times:
(d) aware of the duties performed by the Employees Ares for the First Respondent;
(e) aware that the Employees were Ares was paid the flat rates specified in paragraph 19(b) below for all hours worked during the period from 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014;
(f) aware of the hours worked by Ares during the period from 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014, including:
i. the particular days that Ares worked during this period, which included a Saturday, Sunday and a public holiday (being 26 December 2014);
ii. that Ares worked between the hours of 9:00 pm to midnight;
iii. the start and finish times for each day Ares worked during this period; and
iv. the total number of hours worked by Ares during this period;
(g) aware that Ares was paid a flat rate of $16.50 for all hours worked for the First Respondent between 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014;
(h) aware that on 12 occasions during the period between 15 September 2014 to 5 October 2014 and 15 December 2014 to 31
December 2014, Ares worked at least 5 hours and did not receive a meal break;
(i) aware that Ares was not paid any additional amount with respect to any of the applicable penalty rates, loadings or allowances during the period between 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014;
(j) aware that industrial award minimum wage entitlements applied to employees of the First Respondent employed at the Business; and
(k) aware that the Fast Food Industry Award 2010 applied to the First Respondent's employment of its employees.
The FWO alleged Ezy had actual knowledge of the factual matrix of the admitted contraventions by the first respondent, was an intentional participant in those and either/or aided, abetted or by its acts or omissions directly or indirectly was knowingly concerned in or a party to those contraventions. Accordingly the FWO alleged Ezy pursuant to s.550 of the FW Act was involved in, and therefore should be treated as having itself also contravened those provisions.
Specifically, the FWO alleges that Ezy was involved in the following contraventions of the FW Act by the first respondent in relation to the Employee between 15 September 2014 and 5 October 2014 and again between 15 December 2014 and 31 December 2014:
Contravention
Section
Details of contravention
1
s.45
failure to pay the minimum hourly rate of pay- clauses 13.2 and 17 of the Award
3
s.45
failure to pay the evening loading -subclause 25.A.1 of the Award
4
s.45
failure to pay the Saturday loading -subclause 25.5(b) of the Award
5
s.45
failure to pay the Sunday loading -subclause 25.5(c)(i) of the Award
6
s.45
failure to pay the public holiday penalty rate - clause 30.3 of the Award
7
s.45
failure to provide rest breaks and meal breaks- clause 27.1 of the Award
8
s.45
failure to pay the special clothing allowance-subclause 19.2(b)(i) of the Award.
Ezy’s response
Ezy denied liability, and in its defence filed 24 March 2016 denied it provided payroll services to the first respondent. It was Ezy’s position it provided “book keeping services” which “included the processing of the [f]irst respondent’s payroll”. In relation to this Ezy’s defence provided the following particulars:
“For each pay period, the First Respondent provided the Third Respondent with payroll instructions contained in an excel spreadsheet which identified the name of each employee, the number of hours worked by each employee and the total amount of pay to be paid to each employee for the relevant pay period.
The Third Respondent inputted the payroll information into its MYOB accounting software in order to confirm the amount of pay to be paid to each employee and to produce payroll records for the First Respondent.
The Third Respondent’s MYOB contained the hourly rates for each employee. These hourly rates were inputted into MYOB by the Third Respondent in accordance with the instructions provided by the First Respondent with respect to the hourly rate for each employee.”
In its defence Ezy denied it was aware of the duties or the total number of hours the Employee (Mr Zheng) performed for the first respondent. In relation to this Ezy’s defence provided the following particulars:
“The Third Respondent, in processing the First Respondent’s payroll, did not have knowledge of such information because in processing the payroll, it only confirmed whether the amounts to be paid to employees of the First Respondent were correct for the relevant pay period by inputting the number of hours worked for the relevant pay period into MYOB. MYOB would then calculate the correct pay in accordance with the employees’ hourly rate recorded in MYOB.”
Ezy maintained it was not aware the Employee did not take any meal breaks and was not paid any additional amount with respect to any of the applicable penalty rates, loading or allowances. Ezy also rejected the allegation it was aware the Award applied to the first respondent’s employment of the Employee, otherwise denied liability and sought, in so far as it was concerned, the application be dismissed.
Accessorial liability
Section 45 of the FW Act provides that a “person must not contravene a term of a modern award”. The consequences of a person’s contravening a modern award, and hence s.45, are provided for in Part 4-1 of the FW Act. Relevant to the case before the Court is s.546(1) of the FW Act which provides that this Court (among others) may “on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision”. “Civil remedy provision” is defined in s.539(1) to mean the provisions referred to in column 1 of an item in the table in s.539(2) of the FW Act. Section 45 of the FW Act is included as an item in that table and, therefore, is a “civil remedy provision”.
It is not only the person who has contravened a civil remedy provision who may be liable to an order for the payment of a pecuniary penalty s.550 of the FW Act provides that:
“Involvement in contravention treated in same way as actual contravention
(1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.”
In relation to Ezy s.550 of the FW Act provides that a person who is involved in a contravention of the civil remedy provision is treated as having contravened that provision. If such involvement is found, the Court may award a penalty in respect of Ezy.
The relevant principles associated with determining liability under s.550 of the FW Act were conveniently summarised by White J in Fair Work Ombudsman v South Jin Proprietary Limited [2015] FCA 1456 at [227]-[235] as follows:
“227 In order to be knowingly concerned in, or party to, a contravention, a person must have engaged in some conduct which “implicates or involves” him or her in the contravention, so that there is a “practical connection” between the person and the contravention: Qantas Airways Ltd v Transports Workers’ Union of Australia[2011] FCA 470; (2011) 280 ALR 503 at [324][325]. See also Construction, Forestry, Mining and Energy Union v Clarke[2007] FCAFC 87; (2007) 164 IR 299 at [26]. In Trade Practice Commission v Australian Meat Holdings Pty Ltd[1988] FCA 244; (1988) 83 ALR 299, Wilcox J at 357 quoted with approval the following passage from the judgment of the Full Court of the Supreme Court of Western Australia in Ashbury v Reid(1961) WAR 49:
“The question which a Court should ask itself in determining whether an act or omission on the part of an individual comes within the terms of section 54 is whether on the facts it can reasonably be said that the act or omission shown to have been done or neglected to be done by the defendant does in truth implicate or involve him in the offence, whether it does show a practical connection between him and the offence.”
The statement in Ashbury v Reid was also approved in R v Nifadopoulos(1988) 36 A Crim R 137 at 140 with the Court (Kirby ACJ, Maxwell and Carruthers JJ agreeing) saying that “a person cannot become criminally involved in an act made unlawful by mere knowledge or inaction on his part – some act or conduct on his part is necessary”.
228. In Yorke v Lucas(1983) 49 ALR 672 at 681, the Full Court of this Court approved the following statement of Pennycuick VC in Re Maidstone Buildings Provisions Ltd[1971] 1 WLR 1085 at 10923:
“[T]he expression “party to” must on its natural meaning indicate no more than “participates in” or “concurs in”. And that, it seems to me, involves some positive steps of some nature.”
See also Sent v Jet Corporation of Australia[1984] FCA 178; (1984) 2 FCR 201 at 2089.
229. In order for a person to have been knowingly concerned in a statutory contravention, that person must have been an intentional participant, with knowledge of the essential elements constituting the contravention: Yorke v Lucas[1985] HCA 65; (1985) 158 CLR 661 at 670. However, it is not necessary that a person with knowledge of the essential elements making up the contravention also know that those elements do amount to a contravention: Yorke v Lucas at 667; Rural Press Ltd v Australian Competition and Consumer Commission[2003] HCA 75; (2003) 216 CLR 53 at [48]. An accessory does not have to appreciate that the conduct involved is unlawful: Australian Competition and Consumer Commissioner v Giraffe World Australia Pty Ltd (No 2)[1999] FCA 1161; (1999) 95 FCR 302 at [186].
230. Actual knowledge of the essential elements constituting the contravention is required. Imputed or constructive knowledge is insufficient: Young Investments Group Pty Ltd v Mann[2012] FCAFC 107 at [11]; [2012] FCAFC 107; (2012) 293 ALR 537 at 541.
231. Proof that a person had actual knowledge of each of the essential elements making up a contravention may be derived from direct evidence but more commonly will be a matter of inference from all the circumstances found to be proved. In some cases, actual knowledge can be inferred from the combination of a respondent’s knowledge of suspicious circumstances and the decision by the respondent not to make enquiries to remove those suspicions. Nevertheless it is actual knowledge which is required. In this respect, Wilson, Deane and Dawson JJ in Giorgianni v The Queen[1985] HCA 29; (1985) 156 CLR 473 at 505 said:
“[A]lthough it may be a proper inference from the fact that a person has deliberately abstained from making an inquiry about some matter that he knew of it and, perhaps, that he refrained from inquiry so that he could deny knowledge, it is nevertheless actual knowledge which must be proved and not knowledge which is imputed or presumed.”
And later (at 5078):
“The fact of exposure to the obvious may warrant the inference of knowledge. The shutting of one’s eyes to the obvious is not, however, an alternative to the actual knowledge which is required as the basis of intent to aid, abet, counsel or procure.”
232. The conclusion that a person has actual knowledge of the elements of a contravention by reason of that person’s knowledge of suspicious circumstances coupled with a deliberate failure to make enquiries which may have confirmed those suspicions requires consideration of the person’s knowledge of the matters giving rise to the suspicion, the circumstances in which the person did not make the obvious enquiry and the person’s reasons, to the extent that they are known, for not having made the enquiry. It is not every deliberate failure to make enquiry which will support the inference of actual knowledge. In several cases, including Official Trustee in Bankruptcy v Mitchell[1992] FCA 521, (1992) 38 FCR 364 at 371 and Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd[1994] FCA 1222, (1994) 123 ALR 681 at 6934, this Court has referred with approval to a passage from the advice of Lord Sumner in Zamora (No 2) [1921] 1 AC 891 at 8123 in which his Lordship noted two senses in which a person may be said not to know something because they do not wish to know it:
“A thing may be troublesome to learn, and knowledge of it, when acquired, may be uninteresting or distasteful. To refuse to know any more about the subject or anything at all is then a wilful but a real ignorance. On the other hand, a person is said not to know because he does not want to know, where the substance of a thing is borne in upon his mind with a conviction the full details or precise proofs may be dangerous, because they may embarrass his denials or compromise his protests. In such a case he flatters himself that whereas ignorance is safe, ‘tiz folly to be wise, but there he is wrong, for he has been put upon notice and his further ignorance, even though actual and complete, is a mere affectation and disguise.”
233. In the former circumstance described by Lord Sumner, the person will not have actual knowledge of the matter. In the latter circumstance, the person does have that knowledge but deliberately refrains from asking questions or seeking further information in order to maintain a state of apparent ignorance. That is not a circumstance of constructive or imputed knowledge, but of actual knowledge reduced to minimum by the person’s wilful conduct: Richardson & Wrench at 694 (Burchett J).
234. The requisite actual knowledge must be present at the time of the contravention. A later acquisition of knowledge of the essential matters is not sufficient.
235. A company may be knowingly concerned in a statutory contravention. The knowledge of an officer of a corporation is imputed to the corporation: s 826 of the WR Act and s 793 of the FW Act.”
In an earlier decision in Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365, White J had considered and reviewed the relevant principles for the purpose of accessorial liability and the approach bearing upon the requisite intention and knowledge for a finding of accessorial liability[1] along with the decisions in Potter v Fair Work Ombudsman [2014] FCA 187 and Fair Work Ombudsman v Al Hilfi [2012] FCA 1166 before determining liability of the alleged accessories in the case then before him, finding one was[2] and the other wasn’t[3] involved in the contraventions.
[1] See paragraphs [176] to [188].
[2] See paragraph [196] – [197].
[3] See paragraph [204] – [205].
Those decisions were referred to in Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 (along with the decision in Fair Work Ombudsman v South Jin Proprietary Limited [2015] FCA 1456 ) and at [1018] Katzmann J said:
“Where a contravention concerns the breach of an award, in Potter v Fair Work Ombudsman [2014] FCA 187 at [81] Cowdroy J held that it was necessary that an alleged accessory have actual knowledge of the existence of the relevant award and of its application to the employees in question. In Fair Work Ombudsman v Al Hilfi [2012] FCA 1166 at [44] Besanko J considered that there was a good deal of force in the argument put against the Ombudsman that it was necessary that it be established that the alleged accessory had actual knowledge, amongst other things, that the applicable award applied to the particular employees, that the work of each of the employees gave rise to the specific entitlements, and that they were not paid those entitlements. In the absence of full argument, White J followed Potter and Al Hilfi in Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [188], although he did not consider that it was necessary that the accessory knew the name of the award (see [191]).”
However in Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034, Katzmann J took the following view:[4]
“The Ombudsman submits that the test set by Potter is too high. I am inclined to agree. Where the contravention is a failure to pay award rates, an accessory must know what rates are being paid but need not know that the rates which were paid were below the rates prescribed by the applicable award. As White J acknowledged in South Jin at [229], “[a]n accessory does not have to appreciate that the conduct involved is unlawful.””
[4] Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 at [1019]. Katzmann J did not, however, have to decide which view was correct because, as her Honour noted at [1020] that it did not matter because the relevant respondents in that case knew of the relevant awards.
Importantly also in that case Katzmann J for the reasons that her Honour gave indicated that it was not necessary to show that the shareholder (one of the alleged accessories) was aware of the details of each particular contravention if he was aware of a system that tended to produce or lead to contraventions. [5]
[5] See para [957] and following
The authorities establish that, in order for a person to have accessorial liability, he or she must be a knowing participant or, in other words:
a)have knowledge of the essential facts constituting the contravention;
b)must be knowingly concerned in the contravention;
c)must be an intentional participant in the contravention based on actual not constructive knowledge of the essential facts constituting the contravention – although constructive knowledge may be sufficient under s.550(2)(c) of the FW Act in cases of wilful blindness; and
d)need not know that the matters in question constituted a contravention.
Overview of position on accessorial liability
FWO’s position
Counsel for the FWO relied on written submissions filed prior to the hearing and told the Court that Ezy’s own evidence demonstrated they knew the Award applied to the first respondent’s employees. Counsel for the FWO submitted Ezy sought to posit “artificial” distinctions between the essential facts of the relevant contraventions and what it said it did not know. In any event it was submitted the evidence would make out that Mr Lau (the director of Ezy) should be held to have been wilfully blind and there was a “strong practical connection” in the sense referred to in the authorities between Ezy and the relevant contraventions.
Counsel for the FWO submitted the evidence of Ezy’s witnesses was “an artificial attempt” to “compartmentalise” knowledge and, given the provisions of s.793 of the FW Act, it was possible to aggregate knowledge. Failing this, Counsel for the FWO submitted that the Court should, given the evidence of Ezy’s director, find he was wilfully blind and as a result Ezy was accessorially liable.
Ezy’s position
Ezy set out its position in submissions filed on 13 January 2017:
“4. Ezy denies liability. Ezy was not Mr Zheng’s employer. Ezy owed no primary legal responsibility to Mr Zheng to ensure he received his minimum entitlements. Ezy was a service provider performing payroll data entry work: Ezy’s data entry work for the First Respondent was lawful and proper. Section 550 requires actual knowledge and intentional participation in a contravention. Ezy says that it did not have knowledge of the essential elements of the contraventions and was not an intentional participant in them. In circumstances in which the FWO has proceeded against a body corporate (Ezy) an issue is the attribution of the state of mind of individuals to the body corporate. In this case, Ms Sharon He (“Ms He”), a bookkeeper, who performed the data entry work, did not know of the Award or its terms. Ms He did not have the necessary actual knowledge of the essential elements of the contravention. Mr Eric Lau (“Mr Lau”), Ezy’s director, who had some knowledge of the Award by reason of an earlier audit of Blue Impression’s sister restaurant, Hanaichi Doncaster, was not involved in any way as to any transaction involving Mr Zheng.”
In opening Counsel for Ezy relied on the submissions filed on behalf of his client. Counsel for Ezy stressed that it was his client’s case it did not have the knowledge of the essential elements of the contraventions in relation to the Employee and was not an intentional participant in them. On that basis and for the reasons elaborated on in those submissions Ezy denied liability.
Liability hearing
FWO’s evidence
At the hearing on 16 February 2017, Counsel for the FWO told the Court his client relied on:
(a)the application filed on 9 December 2015;
(b)the amended statement of claim filed on 14 February 2017;
(c)the statement of agreed facts with the first respondent on 29 April 2016;
(d)the statement of agreed facts with the second respondent on 23 June 2016;
(e)affidavit of Katherine Goonan filed on 9 September 2016;
(f)affidavit of Katherine Goonan, filed on 11 November 2016;
(g)submissions filed 25 November 2016; and
(h)submissions in rely filed 3 February 2017.
Ezy’s evidence
At the hearing on 16 February 2017, Counsel for Ezy told the Court his client relied on:
(a)the affidavit of Mr Eric Lau filed on 17 October 2016;
(b)the affidavit of Ms Lina Hii filed on 17 October 2016;
(c)the affidavit of Ms Sharon He filed on 17 October 2016; and
(d)submissions filed 13 January 2017.
Evidence
Inspector Goonan
The FWO relied on the evidence of Inspector Goonan, who gave evidence and was cross-examined. Inspector Goonan adopted her affidavits filed 9 September 2016 and 11 November 2016 as true and correct.[6] In her earlier affidavit she deposed:
[6] See exhibits A1 and A2
“…
11. In the period 2012 to 2015, the FWO conducted the National Hospitality Industry Campaign (Campaign). Wave 3 of the Campaign targeted the take away food industry.
12. In 2014, as part of Wave 3 of the Campaign the FWO conducted an audit of ‘Hanaichi Fine Food’, including ‘Hanaichi QV’, a Japanese fast food restaurant operated by the First Respondent (FWO Audit). A true copy of an ASIC extract for ‘Hanaichi QV’ and Blue Impression Pty Ltd is provided at Tab [1].
13. On 17 February 2014, FWI Maria Marcello (FWI Marcello) visited ‘Blue Impression Pty Ltd, shop 6, Food Court, Doncaster Westfield’. A true copy of FWI Marcello’s site visit report is provided at Tab [2].
14. On 3 March 2014, Mr Eric Lau, a director of the Third Respondent, emailed FWI Chris Wisdom. A true copy of Mr Lau’s email and attachments is provided at Tab [3]. A true copy of an ASIC extract for the Third Respondent is provided at Tab [4].
15. On 24 April 2014, the FWO sent to Mr Lau correspondence which outlined the findings of the FWO Audit which advised that the Fast Food Industry Award 2010 (Fast Food Award) applied to the employment of employees of ‘Hanaichi Fine Food’ (Audit Findings Letter). A true copy of the Audit Findings Letter is provided at Tab [5].
16. Between 28 April 2014 to 13 June 2014, Mr Lau corresponded with the FWO about an extension of time in relation to the Audit Findings Letter. A true copy of the email train is provided at Tab [6].
17. On 18 June 2014 and 3 July 2014, Ms Caroline Pellow from Employsure Pty Ltd (Employsure) emailed the FWO in relation to the FWO Audit in response to the Audit Findings Letter. A true copy of these emails is provided at Tab [7].
18. On 8 July 2014, the FWO responded to the email from Employsure referred to in paragraph 0 above. A true copy of this email is provided at Tab [8].
19. On 10 July 2014, Ms Pellow emailed a number of documents to the FWO, including a ‘Record of Payments Made to Employees’ document signed by the First Respondent’s director, pay slips and bank transfer receipts. A true copy of this email and its attachments is provided at Tab [9].
20. On 15 July 2014, the FWO sent to Mr Lau correspondence titled ‘National Hospitality Campaign – Wave 3 Completion of Audit’. A true copy of this correspondence is provided at Tab [10].
…
43. On 9 December 2015, the Applicant commenced proceedings against the First Respondent alleging that it underpaid Mr Zheng and Ms Hsieh (the Employees) a total of $9,549.47 and that it had contravened several provisions of the FW Act.
44. The Applicant also commenced proceedings against the Third Respondent alleging that it was at all relevant times:
(a) aware of the duties performed by the Employees for the First Respondent;
(b) aware that the Employees were paid the following flat rates for all hours worked:
i. Mr Zheng was paid $16.50 per hour from 15 September 2014 to 11 January 2015 and $17.00 per hour from 12 January 2015 to 13 March 2015; and
ii. Ms Hsieh was paid $16.50 per hour;
(c) aware of the hours worked by Mr Zheng during the period from 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014, including:
i. the particular days that he worked during this period, which included a Saturday, Sunday and a public holiday (being 26 December 2014);
ii. that he worked between the hours of 9:00 pm to midnight;
iii. the start and finish times for each day he worked during this period; and
iv. the total number of hours he worked during this period;
(d) aware that Mr Zheng was paid a flat rate of $16.50 for all hours worked for the First Respondent between 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014;
(e) aware that Mr Zheng did not take any meal breaks during the period between 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014;
(f) aware that Mr Zheng was not paid any additional amount with respect to any of the applicable penalty rates, loadings or allowances during the period between 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014;
(g) aware that industrial award minimum wage entitlements applied to employees of the First Respondent employed at Hanaichi QV; and
(h) aware that the Fast Food Award applied to the First Respondent’s employment of its employees.
45. In order to determine Mr Zheng’s underpayment for the period between 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014, I relied on the following documents which were provided by the First Respondent on 23 April 2015 in response to the NTP referred to in paragraph 23 above:
(a) Rosters;
(b) A spreadsheet created by the First Respondent detailing the actual start and finish times of Mr Zheng based on clock card records;
(c) Payslips for Mr Zheng.
These documents are provided at Tab [11].
46. In order to establish whether Mr Zheng took meal breaks, I relied on the spreadsheet referred to in paragraph 0 above as well as an email from Employsure dated 11 May 2015 in which it is confirmed that if a break is not recorded in the records, then a break was not taken. A true copy of the email from Employsure dated 11 May 2015 is provided at Tab [12].”
In cross-examination, Inspector Goonan said she was not involved in the first audit of the first respondent in 2014. Inspector Goonan’s evidence was given in a straightforward and candid fashion and I was given no reason to question her evidence which I accept.
Respondent’s Evidence
At this stage, it’s timely to say something about the evidence of Ezy’s witnesses generally. Mr Lau (Ezy’s director), his wife Ms Hii and Ms He (who worked at Ezy) all gave evidence. Regrettably, and for reasons that will become clear presently, having heard all of the evidence (and even allowing for the ordeal of giving evidence in Court) Ezy’s witnesses did not impress as candid or forthcoming such that their evidence could be accepted without question.
Mr Eric Lau
Mr Lau gave evidence and was cross examined. In his affidavit filed 17 October 2016 he deposed:
“1. I am a Director of Ezy Accounting 123 Pty Ltd (ACN 105 317 691) (“Ezy”), the Third Respondent in this proceeding. I am authorised to make this affidavit on behalf of Ezy. I do so from my own knowledge save where otherwise stated.
…
7. Ezy denies the claim. I have never met or spoken with Mr Zheng. I had no part in employing him to work at Hanaichi QV. I never saw him work. I had no part in setting the terms and conditions of his employment at Hanaichi QV. I did not set his rate of pay or the hours he worked. I did not set the roster. I did not know what work he performed at Hanaichi QV until allegations were made against Ezy. To the best of my knowledge, no-one working at Ezy ever met Mr Zheng, had any part in setting the terms and conditions of his employment or knew what work he performed for Hanaichi QV. I personally did not know Mr Zheng’s rate of pay. Ms Sharon He (“Ms He”), a bookkeeper who Ezy engaged did the data entry work in the 2 relevant periods. She did not tell me Mr Zheng’s rate of pay.
8 . Ezy was a service provider to Blue Impression. Ezy’s role as a service provider was limited to certain bookkeeping work: data entry work and the uploading of MYOB files to Blue Impression’s bank. Ezy uploaded data sent to it by Blue Impression. Ezy had no authority to make any adjustment to the data (relevantly the pay rates) Blue Impression provided. I have tried to provide additional details as to Ezy’s services to Blue Impression below.
…
10. At the time of the issues with Mr Zheng, I had never read the Award. Ezy does not employ any person whose work is covered by the Award. I knew from the Audit at Hanaichi Doncaster that the Award provided for minimum rates. I also knew that a higher rate was payable for Saturday and Sunday work. I did not know what the minimum rates were in 2014 and 2015.
11. I did not know that the Award required the payment of:
(a) an evening loading;
(b) a special clothing allowance; or
(c) public holiday rates.
These issues had not been part of the Audit.
…
13. I am a Chartered Accountant and Migration Consultant.
14. I did my tertiary study at Monash University and at the University of New South Wales. I hold a commerce degree from Monash University which I attained in 1996. I completed a Masters of Taxation at the University of New South Wales in 2002. I also became a chartered accountant in 2001.
15. Ezy, as a company, was registered on 30 June 2003. I am the only director and shareholder of Ezy.
16. I have operated Ezy, my own accounting firm, since 2003. Ezy’s business is a tax and accounting business. Ezy has a number of corporate and individual clients. Most of the work I personally perform in the business is taxation work for the larger corporate and individual clients of the firm. Blue Impression is a corporate client of Ezy. I know Mr Charles Pai (“Mr Pai”) to be a director of Blue Impression.
…
E. Ms Lina Hii
18. In addition, my wife, Ms Lina Hii (“Lina”), is a certified practising accountant. Lina works in the business when she can. Lina did not provide the services to Blue Impression in the period 15 September 2014 to 5 October 2014 or 15 December 2014 to 31 December 2014.
F. Ms Sharon He
19. The name of Ms He appears in the documents attached to Ms Goonan’s affidavit relevant to the allegations against Ezy (Attachment 26, page 390). Ms He is a bookkeeper.
20 Ezy paid Ms He on an hourly basis. Ms He did the data entry work for Blue Impression in the pay periods which are the subject of the claims against Ezy (15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014). Ms He is no longer a contractor for Ezy.
21 I never spoke to Ms He about the Audit early in 2014. As it happened, she was ill at the time. I did not talk to Ms He about minimum rates under the Award or about the award at all. Although the work Ms He performed was valued by the client and earned fees for Ezy, it was mechanical data entry work.
…
23. Ezy is a service provider for Blue Impression. Apart from the services Ezy provides I, and Ezy, are not involved in the running or operation of the Hanaichi QV business. Ezy has no involvement in hiring of employees. Ezy has no involvement in setting pay rates or conditions for employees. Ezy had no advisory role as to minimum obligations under any award. I do not have any legal or human resources or industrial relations expertise, which would equip me to advise Blue Impression as to its obligations under any award or under the Fair Work Act 2009. I have never advised Blue Impression as to its obligations. I was not asked to provide this advice. In particular, I deny any suggestion that may be made that I have advised or encouraged Blue Impression not to meet its obligations under any award or under the Fair Work Act 2009 to Mr Zheng.
24. The terms and conditions of employment was a matter between Blue Impression and its employees. I did not make inquiries as to whether those minimum conditions were or were not being met. I believed that was outside the scope of the work Ezy was retained to do. Because I did not know what work Mr Zheng was doing, I did not know if the Award covered Mr Zheng. I did not know that Blue Impression was not meeting minimum Award conditions for Mr Zheng.
25. In 2014 and 2015, Ezy did tax and accounting work for Blue Impression. Ezy also provided some bookkeeping services to Blue Impression for Hanaichi QV. I have set out the scope of the bookkeeping services for Hanaichi QV in more detail below.
H. The audit of Hanaichi Doncaster (“Audit”)
26. In early 2014, the FWO had conducted an audit of a business of Blue Impression: namely, Hanaichi Doncaster (“Audit”): that is, the Audit occurred approximately one year before the allegations about Mr Zheng. In her affidavit, at [12], Ms Goonan says that the Audit included “Hanaichi QV”. Insofar as I was involved, the Audit was only for Hanaichi Doncaster.
…
28. Ms Alice Wong (“Ms Wong”) worked with Blue Impression or a related company as a manager. Ms Wong knew that I was an accountant and did tax work for Blue Impression. Ms Wong came to me for some help in relation to employee information at Hanaichi Doncaster.
29 At some point in this process, I learned that the FWO was conducting the Audit. Mr Pai asked me to be the contact point for the Audit. It was on this basis that I was listed as the contact person on the “Entity Information Form”: Attachment 4, page 8-10.
30. As the contact person, I received a letter dated 24 April 2014 that the FWO had found that: “Hanaichi Fine Food has contravened certain sections of the Fair Work Act 2009”: Attachment 6, pages 42–45 (“Contravention Letter”). I provided the Contravention Letter to Blue Impression. As a result of the fact that the FWO had found that Blue Impression had breached its legal obligations to employees, Blue Impression engaged “Employsure”, employment law experts, for professional advice as to proper wage rates and payroll matters. Ezy did not engage Employsure. As I have said, I had no professional expertise as to these issues, was not in a position to provide advice to Blue Impression as to its obligations and was not asked for advice. In fact, I did not provide advice.
31. After I received the Contravention Letter dated 24 April 2014, I had a conversation with Mr Pai. I told Mr Pai that he must follow up and act according to the letter.
32. In due course, as part of the Audit, Employsure provided information to me as to the rates that employees at Hanaichi Doncaster should have been paid under the Award. As a data entry exercise, and because preparing spreadsheets is part of what I do, I entered the rates into a spreadsheet to enable underpaid amounts that needed to be paid to be calculated. Employsure provided the rates to be entered to me. The actual rates in the spreadsheet were not important to me. My role was limited to the data entry function of entering the rates into a spreadsheet and setting up the formula so the amount of any underpayment could be calculated. Attached and shown to me and marked “EL-1” is a copy of a spreadsheet I prepared and provided to Ms Caroline Pellow at Employsure under cover of an email dated 19 June 2014 (12:47 pm) which calculated underpayments due to employees.
33. Having prepared this spreadsheet and provided it to Ms Pellow at Employsure, I was not involved in communications with the FWO as to whether the amounts set out in the spreadsheet did, or did not, rectify underpayments owed to employees at Hanaichi Doncaster to the satisfaction of the FWO.
34. In due course, on 15 July 2014, as the contact point on the Audit, I received the letter titled “Completion of Audit”: Attachment 11, pages 70-71. I also provided this letter to Blue Impression.
35. In about May 2015, when issues now the subject of this proceeding became the subject of investigation, Ms Goonan asked a series of questions and Ezy located (and provided to the FWO via our lawyers) two emails dated 2 September 2014 and 3 September 2014. The email dated 2 September 2014 (9:53 am) was an email from Employsure to Lina in which Ezy was provided with minimum rates under the Award. Lina forwarded this email to Ms Alice Wong on 3 September 2014 (9:22 am). Lina wrote, among other matters: “Hopefully, this gives you a better guidelines on the minimum wage casual staff.” I did not receive this email or see it. The 2 emails are part of Attachment 26 to Ms Goonan’s affidavit (pages 408-409). …”
As indicated earlier Mr Lau was not an impressive witness. A clear indication of the unsatisfactory nature of Mr Lau’s evidence was the following exchange:
“Q.Do you agree with me that its inevitable because of the way your systems work, that if its not altered, that there are going to be further underpayments made to the employees in question?
A. That’s correct, yes.
Q.You knew at the time that that would occur there would be further underpayments?
A. No.
…
QOK so its important, in the context of a high turnover of staff, to ensure that, when a new person begins, they are paid the correct award rate at the time?
A. That is not a decision I have made.
…
Q. …And yet you didn’t alter the MYOB database for new employees or for existing employees; you didn’t alter their flat rates?
A. No, I didn’t.
Q. And you did that knowing that they would – it was inevitable they would be underpaid if you didn’t?
A. I have no authority to alter anything”[7]
[7] Transcript 16 February 2017 page 23, line 25 to page 24, line 39.
Mr Lau’s (and Ezy’s) answer to the allegations that they were involved in the first respondent’s contraventions appears to be best summarised in the following extraordinary answer (for the owner of any business, especially one run by someone who has tertiary qualifications and extensive business interests):
“…we don’t question the pay rate ... we don’t raise questions. We just process what we are given.”[8]
[8] See transcript 16 February 2017 page 35 lines 39 to 44.
Having observed Mr Lau in the witness box and listening to his evidence, including comparing it to the documents put to him in evidence, I am satisfied he was engaged in a transparent (and unsuccessful) attempt to understate the nature of the relationship between himself (as director of Ezy or otherwise) with the first respondent.
I am satisfied he (unsuccessfully) sought to reconstruct his view and understanding of the nature and level of his involvement in that relationship, and that affects the quality of his evidence generally and leads to the conclusion that, sadly, I find his evidence unreliable.
The following exchange in cross-examination best illustrates the blasé, (and what I find was deliberately obtuse) nature of Mr Lau’s evidence:
“Mr Tracey:So take those 12 employees who were underpaid, as found by the audit. They were going to continue to be underpaid, were they not, if MYOB flat rates were not updated for each of them?
Mr Lau:If they are still employed, yes.
Mr Tracey:And the same applies to any other employees on the flat rates, because, as you knew, those flat rates were below the award?
Mr Lau:If the employee is still employed, yes.
…
Mr Tracey:Okay. So it’s important, in the context of a high turnover of staff, to ensure that, when a new person begins, they are paid the correct award rate at the time?
Mr Lau:That is not a decision I have made.
Mr Tracey: I’m not asking you that. I’m asking you whether that’s important?
Mr Lau: It is important, yes.
Mr Tracey: Yes. And yet you didn’t alter the MYOB database for new employees or existing employees; you didn’t alter their flat rates?
Mr Lau: No, I didn’t.
Mr Tracey: And you did that knowing that they would – it was inevitable they would be underpaid if you didn’t?
Mr Lau: I have no authority to alter anything.
…
Mr Tracey: You were prepared for Mr Pye, your client, to go on underpaying his staff?
Mr Lau: I’m prepared to enter the data as per instruction given.
Mr Tracey: That’s not an answer to my question, Mr Lau. You were prepared to go on with a situation, to allow it to continue, whereby your MYOB system had the incorrect rates, and that would inevitably lead to underpayments of wages?
Mr Lau: I don’t do data entry, so I don’t know what’s the deal.
…
Mr Tracey: Is your evidence that you have just given to this effect: that it was Mr Pye’s concern what he paid and whether he underpaid people. That was not a matter you were going to even worry about; you just wouldn’t trouble yourself with it?
Mr Lau: That’s right. That’s not my engagement.
…
Mr Tracey: What had the audit found, Mr Lau?
Mr Lau: The audit found there’s underpayments.”
Mr Lau effectively asked the Court to accept he wasn’t cognisant of matters which would have been matters he either had in the past assisted the first respondent with, or acted on its behalf to resolve (including with the FWO in relation to the previous audit), or would have been to someone in his position (and with his qualifications) self -evident or prompted him to make inquiries. I reject that as a transparent attempt to limit his (and that of Ezy) responsibility for what Ezy was actually involved in.
Having heard all of the evidence I was left with the clear impression that Mr Lau knew the first respondent had been underpaying its employees in 2014 and was still underpaying its employees at the relevant time for the purposes of these proceedings and sought in his evidence to indicate that this was not so.
In my view his evidence left open the clear option that Mr Lau knew, as a matter of inference, that the first respondent was underpaying its employees (and not meeting the requirements of the Award), including in relation to the Employee, at the relevant times and wished to avoid having objective evidence that that was so, in order that he might avoid culpability.
Ms Hii
I have already referred to the unsatisfactory nature of Mr Lau’s evidence. In relation to Ms Hii, as Mr Lau’s wife, her evidence left the clear impression she tailored her evidence to suit what she understood would be Ezy’s interests. Like her husband Ms Hii sought to minimise her own involvement and knowledge of matters critical to the issue of accessorial liability.
Ms Hii’s adopted her affidavit sworn on 17 October 2016 where she deposed:
“…
5. I am a certified practising accountant. I attained my degree from Monash University in 1997.
6. I am also married to Mr Eric Lau (“Eric”).
7. I work in Ezy’s business. I work 5 days a week in Ezy’s business from approximately 9:30am until 3.00 pm.
…
10. I know that there are minimum rates for employees in Australia. I know those rates are set out in awards. I did not know the amount of the minimum rate under the Award in September or December 2014. I do not have any expertise in awards. I did not advise Blue Impression as to what rates it had to pay to comply with its obligations under the Award.
11. I did not know that any relevant award imposed legal obligations on Blue Impression to:
(a) pay an evening loading;
(b) pay a Saturday loading;
(c) pay a Sunday loading;
(d) pay a public holiday loading;
(e) pay a special clothing allowance; and/or
(f) provide meal or rest breaks to employees.
12. I have now read the information set out the attachment to my email to Ms Wong dated 3 September 2010: Attachment 26, pages 410-417. These legal obligations are set out in that attachment. As I said above, however, I did not read this information at the time. I acted only as a messenger passing on the information from the Employsure to Blue Impression.
E. The allegations as to Mr Zheng
13. I knew that Ezy provided some bookkeeping services to Blue Impression in September and December 2014. Ms Sharon He (“Ms He”), a bookkeeper, did that work for Ezy. Ms He was an experienced bookkeeper. She did not discuss the details of her weekly work with me unless there was a particular problem as to excel formulas or reconciliations.
14. I have never met Mr Zheng. I do not know him. I did not know his name until the allegations arose in this proceeding. I had no part in engaging Mr Zheng to work for Blue Impression. I did not set his terms and conditions of employment at Blue Impression. I did not discuss those rates with any person. I did not know what work he did for Blue Impression. I did not know his hours of work. I did not know if he worked Saturdays, Sundays and/or public holidays. I did not know if he was provided with meal or rest breaks. I did not know if he was provided with a clothing allowance.
15. Ms He would have needed to know his rate of pay to do the bookkeeping work she did. Ms He did not tell me the rates. I did not expect her to tell me the rates. There was no reason for her to do so.
16. From 15 September 2014 to 5 October 2014 and from 15 December 2014 to 31 December 2014, I had no personal involvement in data entry work for Blue Impression. Ms He did this work. I never spoke to Ms He about awards.”
Sadly, like all of the evidence given on behalf of Ezy, Ms Hii’s evidence in cross examination was such that it left open the clear inference it was in aid of an obvious (and unsuccessful) attempt to shift responsibility for the operation of the Ezy payroll system, and the wage (under) payments it produced to someone else.
Ms He
Ezy also relied on the evidence of Ms He who worked as a book keeper. In her affidavit filed on 17 October 2016 Ms He deposed:
“…
4. I hold an Advanced Diploma in Financial Services which I finished at Swinburne University of Technology in 2010.
…
6 I am a bookkeeper. Apart from an absence because of my illness in the period April to August 2014, I performed bookkeeping work on a contract basis for Ezy between August 2011 and July 2016.Ezy paid me an hourly rate of $25.00 per hour for my work. In 2015, my hourly rate was increased to $30.00.
7. In my work I came to know both Mr Eric Lau (“Mr Lau”) and Ms Lina Hii (“Ms Hii”). Mr Lau was the owner of Ezy’s business. Ms Hii also worked as an accountant in the business and was married to Mr Lau.
…
10. I know that in Australia there are minimum rates of pay for employees. It is my understanding that those minimum rates are set out in awards. I have no knowledge of awards beyond that basic understanding. I did not know which award applied to employees of Blue Impression at Hanaichi QV. I did not know the name of any award which applied. I did not know the amount of any minimum rate set out in any relevant award.
11. As at September 2014 and December 2014 (the relevant dates for this proceeding), I did not know that any relevant award required:
(a) the payment of an evening loading;
(b) the payment of Saturday loading;
(c) the payment of Sunday loading;
(d) the payment of public holiday loading;
(e) the payment of special clothing allowance; and/or
(f) the provision of meal or rest breaks to employees.
E. Bookkeeping work I did at Ezy
12. At Ezy, I did the data entry work for Blue Impression in the pay periods which are the subject of the claims against Ezy as to Mr Zheng (15 September 2014 - 5 October 2014 and 15 December 2014 - 31 December 2014).
…
19. I only discussed issues with Mr Lau or Ms Hii if I had problems from the accounting side, such as how to make adjustments at end of financial year, what is the basic rule of depreciation for some particular assets and so on. To the best of my memory, I did not discuss my data entry work for Mr Zheng with either Mr Lau or Ms Hii for the periods 15 September 2014 to 5 October 2014 and 15 December 2014 to 31 December 2014. I did not tell Mr Lau or Ms Hii Mr Zheng’s pay rate. I did not show them the emails I had received or the attached spreadsheets in September or December 2014. I can think of no reason that I would have discussed Mr Zheng’s pay rate or the spreadsheets with Mr Lau or Ms Hii at that time.
20. It was my job to do the data entry work. Most of the employees were paid the same rates. I did not know if the rates complied with the award. I did not think twice about it. It never crossed my mind. Only now, looking back, I believe it was not my business to know whether or not the rates complied with any award. That was a matter for the employer. I did not think about this issue one way or another at the time. It was not my job. I did not have knowledge of minimum rates or awards to tell people (Blue Impression) what they had to pay their employees. My role was just to do the bookkeeping (data entry) work and to create the files to enable the processing of payments on the basis of the data I was provided.
No discussions with Mr Lau of Ms Hii
21. I did not discuss awards with Mr Lau or Ms Hii. Mr Lau never told me that I should assist Blue Impression to underpay Mr Zheng. Ms Hii never told me that I should assist Blue Impression to underpay Mr Zheng. The issue of awards or minimum rates simply never came up as part of the bookkeeping work I was doing or my discussions with Mr Lau or Ms Hii.”
Ms He’s evidence also left a lot to be desired. In cross-examination, she was so guarded, and her answers at times so unresponsive, that (putting to one side the palpable impression she gave of wanting to do nothing to offend Mr Lau) it leads to the conclusion that I have real reservations about the credibility of her evidence.
Sadly, like each of the other witnesses for Ezy, Ms He’s evidence was so unresponsive and at times self-serving that I am satisfied it amounted to a retrospective rationalisation of her (their) conduct deliberately designed to minimise their liability.
The evidence in chief filed on behalf of Ezy by Mr Lau, Ms Hii and Ms He was remarkable for the precision with which details of what were said to be matters not known to those witnesses were not known, where they claimed not to have been known because of a lack of awareness of awards, or the more specific requirements of the FW Act or the Award in question. This apparent inherent contradiction was never properly explained.
Overall the evidence of the witnesses for Ezy left the clear impression of designed or calculated ignorance as to those matters. However, this ignorance was never adequately explained given the frequency with which on the evidence (certainly Mr Lau and Ms Hii) dealt with Employsure for the first respondent and the advice and information about those matters they received as a result.
Submissions
Both parties filed submissions prior to the trial on which they relied, which were supplemented by submissions from Counsel at the close of the evidence.
FWO’s submissions
Counsel for the FWO submitted that Ezy should, on the evidence before the Court, be held liable as an accessory because of the operation of s.550(2)(a) and/or (c) of the FW Act. Counsel for the FWO submitted the evidence demonstrated that Ezy had aided, abetted, counselled or procured the relevant contraventions and/or had been, by act or omission, directly or indirectly knowingly concerned in or a party to the contraventions.
Counsel for the FWO submitted the evidence demonstrated that Ezy intentionally participated in the underpayment contraventions by performing the payroll processing for the first respondent where both Mr Lau and Ms Hii knew the Award applied, and the first respondent was only paying a flat hourly rate.
Counsel for the FWO submitted the evidence demonstrated the principal cause of Ezy’s involvement in the contraventions by the first respondent was the failure by Ezy to update its MYOB software. Counsel for the FWO submitted it was clear from the evidence of both Mr Lau and Ms Hii that where the first respondent had outsourced its payroll to Ezy, all of the payment processing, the use of the MYOB software by Ezy to calculate the wage payments, and the payment of wages to the banks of the Employee concerned was done by Ezy. Accordingly, it was submitted, this evidence was sufficient to satisfy the Court that Ezy was an intentional participant in the underpayment contraventions.
Counsel for the FWO also submitted that, for the purposes of s.550(2)(c) of the FW Act, the evidence was Ezy, through Mr Lau, knew the results of the audit of the first respondent; knew the Award which applied to employees of the first respondent and that it had been paying flat rates of pay, all of which were under what was then the relevant minimum rate. It was submitted the evidence that the payroll system that Ezy was responsible for inevitably lead to underpayments, demonstrated the underpayment contraventions affecting the Employee were caused by the omission/s of Ezy.
Counsel for the FWO submitted the evidence of Ezy’s witnesses was unfortunately a transparent and unsuccessful attempt to minimise their knowledge and limit their involvement in the contraventions by the first respondent. In the circumstances, Counsel for the FWO submitted there was every reason to conclude, on the evidence, Mr Lau as director of Ezy was wilfully blind, and there was clear evidence of a deliberate failure to ask questions and make inquiries as to the obligations of the first respondent.
In the circumstances such a finding was clearly open where Ezy, through Mr Lau, knew of the 2014 audit findings, the flat rates of pay being paid, that the Award applied and that Mr Lau had access to all of the first respondent’s payroll data on Ezy’s computer and MYOB software, and yet refrained from making the most basic checks. It was submitted the conduct of Mr Lau and, through him, Ezy clearly fell into the category of wilful blindness.
Counsel for the FWO, by reference to the authorities referred to in his client’s written submissions, contended that the evidence clearly made out suspicious circumstances and the requisite wilful failure on the part of Mr Lau by Ezy to make the necessary inquiries.
Counsel for the FWO submitted in the circumstances of this case, on the evidence, all the Court was being asked to do was an “orthodox” application of s.550 of the FW Act and the fact that Ezy was an accounting firm providing payroll services to the first respondent, should not stand in the way of a finding of accessorial liability where the evidence demonstrated ample grounds to do so.
Insofar as Ezy sought to limit its exposure to liability by relying on the limits to aggregation of knowledge in cases such as Commonwealth Bank of Australia v Kojic [2016] FCAFC 186, that authority in this case it was submitted could and should be distinguished. It was submitted this was the case as, unlike the case in Commonwealth Bank of Australia v Kojic (supra), what is at issue here is knowledge of essential facts, intentional acts and omissions rather than fraud, dishonesty or failure to act in good faith or, given the provisions of s.793 of the FW Act, the state of mind of Mr Lau, (the wilfully blind state of mind of Mr Lau) should be held to be the controlling mind of Ezy.
Counsel for the FWO, relying on the decision of Fair Work Ombudsman v Grouped Property Services (supra), rejected the respondent’s contention that as, Mr Lau claimed, he didn’t know Mr Zheng worked for the first respondent, Ezy couldn’t be liable as an accessory for the first respondent’s contraventions.
In this case, in reliance on that authority, Counsel for the FWO submitted where the evidence was Mr Lau was aware of the system of non-compliance, operated the payroll software that led to it, admitted not updating pay rates, notwithstanding his knowledge of the 2014 audits, that Mr Lau, and Ezy through him, was aware of the system that led to Mr Zheng being underpaid.
Ezy’s submissions
In closing submissions, Counsel for Ezy acknowledged Mr Lau’s evidence was “all over the place”, that “perhaps” he “shut his eyes” and that the best case the FWO had was of wilful blindness.
However, Counsel for Ezy reiterated that the case his client was required to meet was as set out in the amended statement of claim. Counsel for Ezy sought to place a different emphasis on the decision in Fair Work Ombudsman v Group Property Services (supra) to that taken by Counsel for the FWO.
Counsel for Ezy submitted that Mr Lau had no knowledge of Mr Zheng’s personal pay rate, what he was doing, or anything of that detail. It was submitted that Mr Lau did not have the requisite actual knowledge necessary for the Court to make a finding of accessorial liability against Ezy. Counsel for Ezy submitted, as I understood it, that it was not possible to make a finding of accessorial liability even on the basis that it was found that Mr Lau was wilfully blind unless Mr Lau knew who Mr Zheng was and that he was working for the first respondent.
The basis upon which this submission (which I reject) by Counsel for Ezy proceeded was that, if Mr Lau’s evidence was accepted, he didn’t talk to Ms He about what was in the payroll for the first respondent. Counsel for Ezy submitted “you would not expect Ms He” to advise Mr Lau that Mr Zheng had worked for the first respondent during the relevant period and it was inherently improbable that they would do so.
Counsel for Ezy summarised what was said to be the evidence of what Mr Lau knew as at 15 September 2014. It was said Mr Lau knew there had been systematic problems with the first respondent underpaying employees, he knew the minimum rate in the relevant award, and because of the control of the payroll system of Ezy, knew that there was no change and there was a risk of underpayment.
Be that as it may, it was submitted Mr Lau did not know about Mr Zheng or his pay rate and, until it could be proven he did, he could not be found to have had the requisite actual knowledge. When pressed on how, in the face of the uncontroverted fact that Ezy through its payroll system arranged for Mr Zheng to be (under)paid and produced payslips for him during the relevant periods, that submission could be maintained Counsel for Ezy said that we live in a world of legal fictions.
Counsel for Ezy, by reference to Commonwealth Bank of Australia v Kojic (supra) and s.793 of the FW Act, submitted that the Court could either attribute the knowledge of Ms He to Ezy or that of Mr Lau, but the Court could not aggregate all of that knowledge.
In relation to wilful blindness, Counsel for Ezy submitted that that didn’t extend to the circumstances in which liability may be imposed. Counsel for Ezy acknowledged the “strongest case” of the FWO was in relation to the first alleged contravention. In relation to the other contraventions, Counsel for Ezy pointed to the evidence of Inspector Goonan that Mr Lau said he didn’t know the applicable award provided for evening rates, public holiday rates, or meal breaks. Counsel for Ezy contended that, unless the evidence established that Mr Lau knew the Award provided for those and that Mr Zheng worked for the first respondent, there could be no finding of liability. Whilst acknowledging that the evidence was Mr Lau knew the Award provided for penalty rates for Saturdays and Sundays, it was submitted Mr Lau had to know Mr Zheng worked those, otherwise there would be no finding of liability, and this applied also in relation to the allegation concerning uniform allowance.
FWO’s reply submissions
In reply, Counsel for the FWO submitted that Mr Lau did not need to have specific knowledge of Mr Zheng for Mr Lau to have knowledge of the essential facts constituting the contraventions. Counsel for the FWO, on the basis of the authority in FWO v Group Property Services (supra), submitted it was enough for Mr Lau to know of the systematic problems and of the wrong rates in the MYOB software, thereby leading to underpayments and other contraventions of the Award.
Counsel for the FWO noted that the evidence was always at Mr Lau’s fingertips, and he was always able to determine who, what, when, and whether Mr Zheng worked, the evidence was Mr Lau did nothing to find out who was being paid what under the payroll system Ezy controlled.
Counsel for the FWO submitted that the evidence was Mr Lau deliberately abstained from making inquiries, (his own evidence was he did not ask questions about wage rates) and it was submitted given his knowledge from the audit findings, he knew that inevitably there would be underpayments.
Counsel for the FWO submitted there was clear evidence of knowledge in this case on the part of Mr Lau and Ezy where there was “red flag after red flag” such as to enable a finding of wilful blindness.
Counsel for the FWO submitted the evidence was Mr Lau had deliberately failed to make inquiries, where he was on notice of all of those red flags, and that the first respondent was paying fixed flat rates which were less than and in contravention of the Award.
Consideration
It is important to recall that Ezy has admitted:
“(a) It provided bookkeeping services to the First Respondent which included the processing of the First Respondent’s payroll.
(b)For each pay period, the First Respondent provided the Third Respondent with payroll instructions contained in an excel spreadsheet which identified the name of each employee, the number of hours worked by each employee and the total amount to be paid to each employee for the relevant pay period.
(c)The Third Respondent inputted the payroll information into MYOB accounting software in order to confirm the amount of pay to be paid to each employee and to produce payroll records for the First Respondent.
(d)The Third Respondent’s MYOB contained the hourly rates for each employee. These hourly rates were inputted into MYOB by the Third Respondent in accordance with instructions provided by the First Respondent with respect to the hourly rate for each employee.”[9]
[9] See defence – para 3
In relation to each of the contraventions of the first respondent, Counsel for Ezy acknowledged that the FWO’s strongest case was as to the involvement by his client in the contraventions relating to minimum rates because of the level of knowledge by Ezy made out on the evidence.
Whilst accepting that the Court should find Inspector Goonan was a witness of truth, Counsel for Ezy submitted the evidence was insufficient to make out his client’s involvement in the contraventions. The recurring theme to these submissions was the contention that the evidence did not demonstrate any of Ezy’s witnesses knew the Employee affected (Mr Zheng) was commencing work for and/or subsequently was working for the first respondent. Accordingly, the submission went, Ezy did not have the actual knowledge of the essential facts going to the contraventions it was alleged to have been involved in, in this case (ie, that the Employee worked for the first respondent during the relevant period that the contraventions referred to earlier had occurred).
I have already referred to the submissions made by Ezy in relation to aggregation. In Commonwealth Bank of Australia v Kojic (supra) the Full Court upheld an appeal on the basis of, inter alia, an incorrect application of the authority in Krakowski v Eurolynx Properties Limited [1995] HCA 68; 183 CLR 563. In doing so Edelman J referred to decisions where there had been a “consistent interpretation” of Krakowski v Eurolynx Properties Limited (supra).
One such decision cited by His Honour was Macquarie Bank Ltd v Sixty-Fourth Throne[1998] 3 VR 133 where the Victorian Court of Appeal noted that Eurolynx (supra) authorised a consideration of the knowledge and circumstances of all relevant persons including what may properly be inferred in order to ascertain the mind of the corporation.
In Director of the Fair Work Building Industry Inspectorate v Robinson [2016] FCA 525 Charlesworth J said of s.793 of the FW Act that:
“48. Section 793 does not, of itself, fix upon a body corporate liability for contraventions found to have been committed by its officers, employees or agents. Rather, it attributes to the body corporate the conduct and state of mind of its officers, employees and agents in prescribed circumstances. The question of whether the body corporate has contravened the FW Act (and, if so, on how many occasions) must be answered by assessing the facts, namely the conduct and state of mind attributed to the body corporate, against the elements of the contravention said to have been committed by it.
49. Two further things should be said about s.793 of the FW Act. The first is that s.793 does not exhaustively prescribe the legal means by which the state of mind held by, or the conduct engaged in by, a body corporate may be ascertained. Its purpose is to provide for an expanded range of persons whose conduct and state of mind might be ascribed to a body corporate than that which exists at common law…”[10] (emphasis added)
[10] These were obiter comments by Her Honour and that case concerned the provisions of, inter alia, s.557 of the FW Act.
Recently in Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2017] FCAFC 50 the Full Court when considering the meaning of “knowing involvement” within the meaning of s.550 of the FW Act said the following (in the context of an appeal from a decision at first instance that had struck out an amended statement of claim) whilst not referring to Commonwealth Bank v Kojic (supra) said:
“A mental state such as knowledge can only be attributed to a corporation by attributing it to one or more of the corporation’s officers or employees: Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582-583. For the purposes of the FWA, s.793(2) provides that if it is necessary to establish the state of mind of a body corporate, it is enough to show that the relevant conduct was engaged in by a person specified in s.793(1) and that person had the required state of mind. The persons specified in s 793(1) are an officer, employee or agent (an “official”) engaged in conduct on behalf of the body corporate within the scope of his or her actual or apparent authority; and any person acting at the direction or with the consent or agreement of an official if the direction, consent or agreement is within the scope of the official’s actual or apparent authority.”
Section 793 of the FW Act, in substance, statutorily attributes to the corporation the conduct of the individuals referred to in the section (see Hanley v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2000] FCA 118; (2000) 100 FCR 530 at [58]; Australian Workers’ Union v Leighton Contractors Pty Limited [2013] FCAFC 4 at [86]; Australian Nursing and Midwifery Federation v Kaizen Hospitals (Essendon) Pty Ltd [2015] FCAFC 23 at [121]). Section 793 is of broad application (see Katzmann J in Australian Workers Union v Leighton Contractors Pty Ltd (supra) at [87]). Given the above, s.793 provides that the relevant conduct of Mr Lau is taken, for the purposes of the FW Act to have been engaged in also by the body corporate (in this case Ezy).
In relation to the first part of Ezy’s submission referred to above, I reject the submission on the basis of the evidence before the Court. In relation to the second part of that submission, for reasons to which I will return, I am satisfied that I should apply the approach in Fair Work Ombudsman v Group Property Services (supra). In other words, I’m satisfied that I should find that Ezy knew Mr Zheng worked for the first respondent.
As in Fair Work Ombudsman v South Jin Pty Ltd [2015 ] FCA 1456 the FWO’s claim in this case against Ezy did not ultimately stand or fall on alleged knowledge by Ezy of the amounts paid. Instead the FWO’s claim was that Ezy must have known that the first respondent was underpaying its employees (and in this case Mr Zheng) because Ezy knew the rates in its payroll system were not sufficient to allow the first respondent to comply with the obligations imposed on it by the Award. On the evidence before the Court and for the reasons set out below, I am satisfied this knowledge was clearly fixed in the mind of Mr Lau as a result of the 2014 audit.
I accept the thrust of the submissions made on behalf of the FWO that Mr Lau was in total control of Ezy. Mr Lau accepted he directed and instructed Ms He.[11] The view I have taken on the basis of all of the evidence is that Ms He (with no disrespect meant to her) was a mere functionary in Ezy’s office, and Mr Lau’s wife certainly did not call the shots. This was done by Mr Lau who, notwithstanding his wholly unbelievable efforts to minimise his knowledge of what was done for and by Ezy was, I am satisfied, the operative mind of Ezy.
[11] See transcript 16 February, page 37, lines 44 to 45.
Mr Lau agreed in cross-examination that he had received the letter from the FWO in 2014. It was that letter which identified in detail provisions that the Award provided for ordinary hours, hours on Saturdays and Sundays, along with allowances including for uniform.[12]
[12] See transcript page 7, line 33 to page 8, line 43.
Mr Lau agreed he knew, as a result of the audit, how to check the correct Award rates and that it was inevitable because of the way Ezy’s MYOB system worked, if the rates weren’t altered, there would be underpayments and that Ezy did not alter those flat rates.[13]
[13] See transcript 16 February, pages 22 to 24.
Mr Lau acknowledged in cross-examination that Ezy produced (as part of its payroll services to the first respondent) pay advices and that the Employee’s (Mr Zheng) details were on Ezy’s database, that Ezy produced payroll advices for the Employee that record his hours and what he was paid for both of the relevant periods, and these were things that Ezy was responsible for calculating.[14]
[14] See transcript 16 February, page 28, line 29 to page 29, line 12.
It has been the FWO’s case that Ezy was aware:
a)of the duties performed by the Employee;
b)aware he was paid a flat rate for all hours worked;
c)aware of the hours worked by the Employee during the period 15 September to 5 October 2014 and 15 December to 31 December 2014;
d)aware the Employee was not paid any additional amounts in respect of applicable penalty rates, loadings, or allowances; and
e)aware that the Award applied to the Employee’s employment with the first respondent.
In April 2014 Mr Lau, when he was acting on behalf of the first respondent in relation to the 2014 audit, received correspondence from the FWO which detailed contraventions of the Award.[15]
[15] See Annexure to First Goonan Affidavit at 42-45.
The findings set out in that correspondence detailed contraventions following an assessment of time and wage entitlements, penalty rates, overtime, record keeping and payslip requirements for employees of the first respondent.[16]
[16] Ibid.
Both Mr Lau and Ms Hii got advice from an organisation that described itself as a “leading expert in the field of workplace relations” (Employsure) on, inter alia, the first respondent’s obligations under the FW Act and the Award.
The company of which Mr Lau was a director, Ezy, produced payroll advices for the Employee throughout the relevant periods.[17] Mr Lau was aware of the Award and that it contained clauses dealing with, inter alia, uniform and, Saturday and Sunday rates.[18]
[17] See Annexure to First Goonan Affidavit at 550.
[18] See Annexure to First Goonan Affidavit at 403-404.
Ezy admitted its MYOB system contained hourly rates of pay for the Employee and the system Ezy operated and had responsibility for (try as they might to deny it) produced payroll records and pay slips for the Employee.[19]
[19] See Defence paragraph 3.
On that basis it is risible to suggest that even the most basic query would not have revealed to Ezy that the Employee was not receiving: the relevant minimum hourly rate in accordance with clauses 13.2 and 17 of the Award; evening loading in accordance with clause 25.5(a)(i) of the Award; Saturday loading in accordance with clause 25.5(b) of the Award; Sunday loading in accordance with clause 25.5(c)(ii) of the Award; public holiday penalty rates in accordance with clause 30.3 of the Award; rest and meal breaks in accordance with clause 27.1 of the Award (but only in relation to the period 15 December to 31 December 2014); and clothing allowance in accordance with clause 19.2(b)(i) of the Award.[20]
[20] See Annexure B of the Fair Work Ombudsman’s submissions filed on 25 November 2016.
The first respondent’s pay rate sheets were sent to Ezy. Given what I am satisfied was Mr Lau’s control over Ezy’s operations (i.e. that at all times it was acting under and at his sole direction), it is reasonable to infer (and I do so infer) that those matters in paragraph [91] would have come to his attention had he not shut his mind. Mr Lau knew, as a result of the 2014 audit, of the concerns about the first respondent’s compliance with its obligations under the Award and that the flat rate payments he was aware were being paid did not comply with the Award. Contrary to the impression sought to be cast over the operation of Ezy’s services to the first respondent in submissions[21], I am satisfied that Mr Lau was the directing mind and will of Ezy and was, if he had not shut his eyes, aware of the matters in paragraph [91].
[21] See for example paragraph 4 of submissions filed 13 January 2017.
In relation to the issue of whether Mr Lau (and through him Ezy) was wilfully blind in Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342 His Honour White J of the Federal Court considered the issue of accessorial liability for contraventions of the Corporations Act 2001 (Cth). At paragraph [397] to [411] of that decision His Honour addressed the general principles as to involvement as an accessory including in relation to wilful blindness.[22] The parties’ submissions filed prior to trial addressed the issue of wilful blindness in the context of accessorial liability in this case.[23]
[22] See also Fair Work Ombudsman v Liquid Fuel Pty Ltd [2015] FCCA 2694 at [26]-[38], [80]-[81].
[23] See applicant submissions filed 25 November 2016 at paragraphs 92 to 110, respondent’s submissions filed 13 January 2017 at paragraphs 64 to 71; and applicant’s submissions in reply.
In relation to Mr Lau’s knowledge in submissions filed prior to trial, Ezy contended:
“By the Audit, Mr Lau had learned a “distasteful” fact: his client underpaid some of its employees. Mr Lau took the attitude that he did not wish to know any more about it: Award obligations were outside his professional expertise and outside the scope of work he had been retained to do. He was not the employer. He met his professional obligations by passing on Award updates received via Employsure to his client. It is a real burden which the law imposes on employers to ensure that employees are paid their minimum obligations. It is not a burden, however imposed on service providers. There is no duty under section 550 (or otherwise) on a service provider to take reasonable steps (or any steps) to ensure that an entity to which it provides services complies with the law. When Blue Impression employed Mr Zheng it was not Mr Lau’s responsibility to find out the applicable rates. As the employment continued, it was not his responsibility to monitor whether the hours or days worked gave rise to penalty entitlements. It was not his obligation to see that a clothing allowance was paid or meal breaks provided. It is submitted that it is unsurprising that a service provider would not interrogate these details of a client’s business.”
Ezy contended:
“103 Nonetheless, to establish Ezy’s accessorial liability (by attribution to it of Mr Lau’s state of mind), Mr Lau needed to have specific knowledge as to Mr Zheng. His evidence will be to the effect that he had nothing to do with Mr Zheng. He did not know Mr Zheng had been employed or what he was being paid. Knowledge cannot be imputed to him. This is not a case in which he actually knew what Mr Zheng was being paid and passively acquiesced. It is unsurprising that given Ezy was performing limited data entry work that Mr Lau would not have actual knowledge of the employment and conditions of his client’s individual employee, Mr Zheng. Accordingly, with reference to Mr Zheng, and the approach of White J in Devine Marine, Mr Lau did not know:
(a) Mr Zheng performed work for Blue Impression;
(b) he did so as an employee; and/or
(c) Mr Zheng’s pay rate.
104 There is insufficient evidence to conclude that Mr Lau (and by attribution Ezy) intentionally participated in Mr Zheng’s underpayment. Only if it conducted the forensic analysis that the circumstances of this litigation has caused to be undertaken, Ezy had at its disposal the means to work out that Mr Zheng was being underpaid. No person at Ezy undertook that forensic exercise. It did not make those inquiries because it perceived it as outside the scope of its professional retainer to make those inquiries. Not making inquiries does not equate to Ezy’s knowing connivance in Mr Zheng’s underpayment.”
However, contrary to those claims by Ezy in submissions, I am satisfied the evidence demonstrates Ezy (through Mr Lau) deliberately shut its eyes to what was going on in a manner that amounted to connivance in the contraventions by the first respondent.
Mr Lau, in his capacity as director of Ezy, exercised overriding control over Ezy’s activities, including in its dealings with the first respondent. Mr Lau has admitted he knew of the applicable award (the Award) and that it provided minimum rates. As a result of what I’m satisfied was his wilful blindness Ezy should be found to be aware of the essential matters which go to make up the contraventions admitted by the first respondent. Given Mr Lau’s involvement with and on behalf of the first respondent arising from the audit and the level of control he exercised over Ezy and those who performed work for it, I find it inherently improbable he did not see all the documentation that was relevant to the 2014 audit or the necessary increases to rates of pay that were required to comply with the applicable award (the Award) or the material from the first respondent Ezy received to provide payroll services during the relevant period/s.
As the FWO said in written submissions (and I am satisfied the evidence bore this out):
“Mr Lau’s conduct was that of a man who, in spite of being put on notice of the first respondent’s underpayments of its employees, and, who, as part of his key role in determining the first respondent’s obligations to its employees (including when he was liaising with Employsure) sought to remain ignorant and deliberate refrain from asking questions or seeking further information.”[24]
[24] See Fair Work Ombudsman’s submissions in reply, 3 February 2017 at paragraph 9.
Despite the risible denials made by Mr Lau (and by Ezy’s other witnesses on his behalf) in evidence before the Court I reject the submission that there was not sufficient evidence to establish accessorial liability against Ezy.
At this stage it suffices to adopt, from the submissions filed on behalf of the FWO, the following which I am satisfied accurately summarises the evidence before the Court:
“102. Mr Lau is the sole director, secretary and shareholder of the Third Respondent and the evidence indicates that he is the ‘controlling mind’ of the Third Respondent’s business. Mr Lau was personally made aware of a number of factors which very clearly indicated that the First Respondent was not paying the correct rate.
103 Mr Lau deposes to the following:
(a) The terms and conditions of employment were a matter between the First Respondent and its employees. He did not make inquiries as to whether those minimum conditions were or were not being met. He believed that was outside the work the Third Respondent was retained to do.[25]
[25] Lau Affidavit at par 24.
(b) After he received the Contravention Letter dated 24 April 2014, he had a conversation with Mr Pai. He told Mr Pai that he must follow up and act according to the letter.[26]
[26] Lau Affidavit at par 31.
(c) As part of the audit, Employsure provided information to him as to the rates that employees at Hanaichi Doncaster should have been paid under the Modern Award. As a data entry exercise, and because preparing spreadsheets is part of what he did, he entered the rates into a spreadsheet to enable the underpaid amounts that needed to be paid to be calculated. Employsure provided the rates to be entered to him. The actual rates in the spreadsheet were not important to him. His role was limited to the data entry function of entering rates into a spreadsheet and setting up a formula so the amount of any underpayment could be calculated.[27]
[27] Lau Affidavit at par 32.
(d) He repeats that the First Respondent’s arrangements for the payment of wages to its employees were outside the scope of the data entry work and the Third Respondent’s expertise. He did not see it as part of his professional obligations, having regard to the limited scope of work which the Third Respondent had been retained to do, to know whether the First Respondent was paying Ares minimum entitlements under the Modern Award. The Third Respondent’s role was restricted to a data processing role to enable certain employees to be paid in accordance with the information the Third Respondent was provided with.[28]
[28] Lau Affidavit at par 55.
104. The following matters are all matters which very clearly put Mr Lau on notice that the amounts paid by the First Respondent, and processed by the Third Respondent, were not correct:
(a) On 19 June 2014, Mr Lau emailed Employsure and attached a document titled “Doncaster Employees – Fair Work Audit’.[29] This attachment sets out the ‘MYOB RATE’ paid to 17 employees. This rate is either $16.50 or $17.00 per hour. The attachment also separately sets out the ‘Fair Work Rate’ and includes the Modern Award rates for weekday hours, Saturday hours and Sunday hours. The fact that the Mr Lau prepared this document is particularly telling. The attachment clearly demonstrates that the MYOB rate is lower than the award rates and calculates the total difference between what the employees were actually paid, and what they were entitled to be paid.
[29] First Goonan Affidavit, Exhibit KG-1: at Tab 33 on pages 805-807.
(b) On 10 July 2014, Mr Lau emailed Employsure and attached a document which set out the ‘Award rates’ and the ‘Actual rate’.[30] The ‘Actual rate’ listed was either $16.50 or $17.00 per hour.
(c) On 21 July 2014, in response to a query from Eric regarding a complaint made by a former employee, Se Byung Youn (Mr Youn), Employsure emailed Mr Lau and stated “Further, is the company still paying Youn $16.50? Unless Youn is a junior employee this would present an underpayment risk as this is below the minimum wage.”[31]
(d) On 13 August 2014, Ms Hii sent an email to Employsure and attached several pay slips relating to an employee by the name of Mr Youn.[32] The pay slips evidence that this employee was paid $16.50 per hour.
(e) On 3 September 2014, Mr Pai emailed Employsure (and copied in Mr Lau) about a letter received from Mr Youn.[33] The letter is attached to the email and provides underpayment calculations prepared by Mr Youn based on casual rates. Mr Youn’s letter alleges that he was paid between $12 to $16.50 per hour.
(f) On 4 September 2014, Mr Pai emailed Employsure (and copied in Mr Lau) about a letter received from Mr Youn.[34] The letter is attached to the email and provides further calculations prepared by Mr Youn based on part time rates.
105. Mr Lau repeatedly asserts that he did not view that it was the Third Respondent’s role to know whether the correct rates were being paid by the First Respondent. However, the facts clearly indicate that he did know that the rates were incorrect. As part of the FWO Audit he was clearly put on notice that the rates were incorrect. Although he frames his involvement as mere ‘data entry’, the fact remains that in calculating the underpayment amounts, he was aware that the rates that were being paid were incorrect.
106. Mr Lau’s admissions that he ‘did not make inquiries as to whether minimum conditions were or were not being met’, and that he ‘did not turn his mind to whether the rates were compliant with the award’’[35] stand significantly against him in the face of the very clear indications that the rate being paid by the First Respondent was not correct. The Applicant submits that the evidence demonstrates that Mr Lau deliberately ‘shut his eyes’ to matters which were self-evident or matters which would have prompted him to make inquiries. By his own evidence, Mr Lau states he refrained from making inquiries as he did not believe it was within the scope of the work the Third Respondent was retained to do.
107. Furthermore, Mr Lau deposes that he spoke to the First Respondent’s director, Mr Pai, after receiving the Audit Findings Letter and told him to ‘follow up and act according to the letter’. However, it is important to note that the Third Respondent processed payroll in accordance with the rates entered into its MYOB system. It was the Third Respondent which had control over the MYOB system. Mr Lau himself did not ‘follow up’ and check that the Third Respondent had updated the pay rates, notwithstanding that it was he himself or his staff who had control over MYOB. Mr Lau omitted to take action to prevent the contraventions from occurring.[36]
108. Mr Lau is a Certified Practising Accountant with a Masters in Taxation and appears to be an experienced businessperson. He is also the director of multiple corporate entities, some of which operate several businesses…”
[30] First Goonan Affidavit, Exhibit KG-1: at Tab 33 on pages 1199-1201.
[31] First Goonan Affidavit, Exhibit KG-1: at Tab 33 on page 827.
[32] First Goonan Affidavit, Exhibit KG-1: at Tab 33 on pages 835-849.
[33] First Goonan Affidavit, Exhibit KG-1: at Tab 33 on pages 881-885.
[34] First Goonan Affidavit, Exhibit KG-1: at Tab 33 on pages 886-889.
[35] Lau Affidavit at par 44.
[36] Under the FW Act, conduct includes an “omission” (s 12) and, under s 550(2)(c), a person may be knowingly concerned in or party to a contravention by act or “omission”. The relevant connection can be established where the alleged accessories were knowingly concerned in an omission by failing to prevent the contraventions from taking place: Fair Work Ombudsman v Al Hifi (No 2) [2013] FCA 16 at [9], [18] -[19].
I accept the submissions on part of the FWO that Mr Lau (and as a result Ezy) was wilfully blind. In this case I am satisfied it is possible to infer actual knowledge on the part of Mr Lau from a combination of suspicious circumstances and a failure to make inquiries. I reject Ezy’s and Mr Lau’s evidence (and his assertions about what he did not know) and am satisfied in light of all of the evidence that he and Ezy was engaged in a contrivance, a deliberate shutting of the eyes or calculated ignorance.
I accept the FWO’s submissions that Ezy (and Mr Lau) had at their fingertips all the necessary information that confirmed the failure to meet the Award obligations by the first respondent and nonetheless persisted with the maintenance of its (payroll) system with the inevitable result that the Award breaches occurred.[37]
[37] See paragraph 13 of the Fair Work Ombudsman’s submissions in reply filed 3 February 2017.
It follows that Ezy was involved in the first respondent’s contraventions as alleged by the FWO save in relation to the contravention concerning the meal breaks for the first period between 15 September and 5 October 2014.
Conclusion
Accordingly, for the reasons set out above, I am satisfied that the FWO has established that there should be declarations that Ezy was accessorially liable for the contraventions set out at the beginning of these reasons.
I certify that the preceding one hundred and ten (110) paragraphs are a true copy of the reasons for judgment of Judge O'Sullivan
Date: 28 April 2017
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