Fair Work Ombudsman v C & G Smith Enterprises Pty Ltd

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FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Fair Work Ombudsman v C & G Smith Enterprises Pty Ltd [2022] FedCFamC2G 579

File number(s): MLG 2189 of 2021
Judgment of: JUDGE FORBES
Date of judgment: 22 July 2022
Catchwords: INDUSTRIAL LAW – Fair Work – contravention of compliance notice – failure to remedy underpayments to former employee – employer acknowledged indebtedness – no engagement with regulator or Court proceedings – default judgment – serious contravention – penalties ordered
Legislation:

Crimes Act 1914 (Cth) s 4AA

Fair Work Act 2009 (Cth) s 33, 539, 546, 716, 717
Cases cited:

Agreed Penalties Case (2015) 258 CLR 482

Australian Building and Construction Commissioner v Pattinson [2022] HCA 13

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640

Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8

Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) FCR 560

Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46

Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128

Fair Work Ombudsman v Extrados Solutions Pty Ltd [2014] FCCA 815

Fair Work Ombudsman v Kleen Group Ltd Anor [2016] FCCA 278

Fair Work Ombudsman v Matcraft Pty Ltd & Ors [2021] FCCA 272
Fair Work Ombudsman v New Shanghai North t/a New Shanghai Charlestown [2017] FCA 1301

Fair Work Ombudsman v New Shanghai North t/a New Shanghai Charlestown (2017) 275 IR 148

Fair Work Ombudsman v Trucking Services Pty Ltd [2021] FCCA 760

Fair Work Ombudsman v Viper Industries Pty & Anor [2015] FCCA 492

Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354

Kelly v Fitzpatrick [2007] FCA 1080

Singtel Optus Pty Ltd v Australian Competition and Consumer Commission[2012] FCAFC 20

Singtel Optus Pty Ltd v Australian Competition and Consumer Commission(2012) 287 ALR 249 at 265

Trade Practices Commission v CSR Ltd[1990] FCA 521

Trade Practices Commission v CSR Ltd (1991) ATPR 41-076

Division: Division 2 General Federal Law
Number of paragraphs: 96
Date of last submissions: 26 April 2022
Date of hearing: 27 May 2022
Solicitor for the First Applicant: Ms Anna Boden
Solicitor for the Respondent: No appearance

ORDERS

MLG 2189 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

FAIR WORK OMBUDSMAN

Applicant
AND:

C & G SMITH ENTERPRISES PTY LTD

Respondent

ORDER MADE BY:

JUDGE FORBES

DATE OF ORDER:

22 July 2022

THE COURT ORDERS THAT:

1.Pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (“the FW Act”), the Respondent pay a pecuniary penalty of $22,200 for the contravention of section 716(5) of the FW Act the subject of the declaration made by this Court on 22 December 2021, within 28 days of the date of this order.

2.Pursuant to section 546(3)(a) of the FW Act, any pecuniary penalties ordered to be paid by the Respondent be paid into the Consolidated Revenue Fund of the Commonwealth within 28 days.

3.The Applicant has liberty to apply on…

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Details
Case
[2022] FedCFamC2G 579
Decision Date

CaseChat Overview and Summary

The Fair Work Ombudsman filed an application against C & G Smith Enterprises Pty Ltd (the respondent) in relation to contraventions of the Fair Work Act 2009 (Cth). The respondent, which traded as Rapid Tune Keysborough, is an automotive service centre located in Keysborough, Victoria. The company employed Mr Sun Been Kim, who was covered by the Vehicle Manufacturing, Repair, Services and Retail Award 2020 and was underpaid wages, annual leave, leave loading, and superannuation contributions. Despite acknowledging liability in a Terms of Agreement, the respondent failed to remedy the underpayments, leading to proceedings by the Fair Work Ombudsman.

The court considered whether the contravention was serious and deserving of a substantial penalty. The court also considered the respondent's limited resources and lack of prior contraventions, but found that these factors did not excuse the non-compliance. The court emphasised the importance of compliance with the Fair Work Act to protect employees and uphold the integrity of the compliance scheme.

The court found the contravention to be serious and deserving of a substantial penalty. The penalty serves the dual objectives of general and specific deterrence, ensuring that the penalty is not regarded by the contravener merely as a “cost of doing business”. The court found the contravention to be objectively serious and deserving of a substantial penalty which serves the dual objectives of general and specific deterrence. The court took into account the respondent's limited resources and lack of prior contraventions, but found that these factors did not excuse the non-compliance. The conduct of the respondent corrodes the compliance scheme under the FW Act and impedes the Ombudsman in discharging its statutory function.

The court ordered that the respondent pay a pecuniary penalty of $16,335 to the Fair Work Ombudsman. The court also made orders for the respondent to take appropriate steps to adhere with the Compliance Notice and for the applicant to ensure that a copy of the orders were served on the respondent.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

I heard this application on 27 May 2022. There was no appearance for the respondent. In support of its application for imposition of penalties, the Ombudsman relied on a number of affidavits and a written outline of submissions[1], which it developed orally at the hearing. I have read and considered those documents in reaching my decision.[1] Applicant’s Submissions on Penalty page 3 [4] BACKGROUND The background to the respondent’s alleged contravention is summarised below. This summary has been derived from the statement of claim and affidavits filed by the Ombudsman in these proceedings. The documents on which the Ombudsman relies have been served on the respondent and the evidence has not been challenged. The respondent company traded as Rapid Tune Keysborough, an automotive service centre located in Keysborough, Victoria. Mr Corey Smith has been the sole director and secretary of the company from its registration in May 2019. Employees of the respondent were entitled to be paid wages and work to conditions stipulated in the Vehicle Manufacturing, Repair, Services and Retail Award 2020 (“the Award”). The Award provided, amongst other things, the minimum weekly and hourly wage rates for employees covered by the Award[2].[2] Vehicle Manufacturing, Repair, Services and Retail Award 2020 cl 16.2 Between the period of 1 October 2019 and 30 October 2020, the respondent employed Mr Sun Been (‘Andy’) Kim to work as a motor mechanic. Mr Kim was covered by the Award and was classified as a Vehicle RS&R industry employee – tradesperson or equivalent Level 1 in Wage Group R6. Under the Award he was entitled to a minimum wage of $862.50 per week or $44,850 per year. On 30 November 2020, Mr Kim’s employment ceased. Following the termination of his employment, Mr Kim sought payment of outstanding amounts he believed were owed to him by the respondent. These amounts comprised underpaid wages, annual leave and leave loading entitlements and unpaid superannuation contributions. On 4 December 2020, Mr Kim and Mr Smith (the director of the respondent) entered into a Terms of Agreement deed (“the Terms of Agreement”). By the Terms of Agreement, the respondent agreed to pay Mr Kim his outstanding final payment of $8,167.70 on or before 31 January 2021. Of this total amount, $5,745.88 was the net amount owed, which included annual leave pay, leave loading and backpay entitlements, and $2,421.82 was the amount owed in superannuation contributions[3]. This amount excluded the PAYG withholding of $3,016.00[4].[3] Cox affidavit affirmed 26 April 2022 page 13; Annexure CC-2 (“Cox affidavit”) [4] Cox affidavit page 13; Annexure CC-2 Mr Kim and Mr Smith both signed the Terms of Agreement. The Terms of Agreement stipulated that if the respondent failed to pay Mr Kim the total amount of $8,167.70 by 31 January 2021, Mr Kim reserved the right to commence Court action to recover the amount[5].[5] Cox affidavit page 13; Annexure CC-2 I note at this juncture that the Ombudsman contends that by signing the Terms of Agreement, Mr Smith acknowledged on behalf of the respondent that Mr Kim had not been properly paid, that entitlements were owed to him and that payment would be made to him on or before 31 January 2021. The Ombudsman contends that the Terms of Agreement led Mr Kim to believe that the respondent acknowledged its liability and caused him to refrain from pressing his claims for at least 2 months, including over the Christmas period.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

It is well-established that the lack of financial resources should not justify the imposition of a lesser penalty, as an employer should not be absolved of its obligation under fair work instruments based on the size of its business[57]. [57] Fair Work Ombudsman v Extrados Solutions Pty Ltd [2014] FCCA 815 at [10] CONCLUSION Compliance with minimum standards is an important feature of the FW Act. Employees should enjoy an effective safety net of entitlements under the NES and relevant industrial instruments. The enforcement and penalty regime in the legislation reflects parliament’s intent that employers should comply with their minimum obligations. These matters inform the judicial task of determining the appropriateness of penalties for contraventions of civil remedy provisions. The imposition of a pecuniary penalty for a contravention of the FW Act should be fixed with the view to ensuring that the penalty is not regarded by the contravener merely as a “cost of doing business”[58]. [58] Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [66]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission[2012] FCAFC 20; (2012) 287 ALR 249 at 265 [62]–[63] In this matter, I consider the contravention to be objectively serious and deserving of a substantial penalty which serves the dual objectives of general and specific deterrence. I have taken into account that the respondent is a small business. I infer that it has limited resources and, while registered, is no longer trading. I accept that is has no previous history of contraventions. Nonetheless, I find that those matters do not excuse the respondent’s non-compliance and its head-in-the-sand response to the compliance notice and these proceedings. The conduct of the respondent corrodes the compliance scheme under the FW Act and impedes the Ombudsman in discharging its statutory function. The conduct deprives deserving employees of their rightful entitlements. It results in costly and unnecessary proceedings in this Court involving public funds and judicial resources. It should not be seen as an acceptable course for others to follow. In Fair Work Ombudsman v Trucking Services Pty Ltd [2021] FCCA 760 at [21] Judge Jarrett (as His Honour then was) recently observed: “The failure to comply with a notice properly issued by the applicant is serious. As other judges of this Court have observed, the efficacy of statutory notices such as compliance notices will be hindered or made redundant if recipients perceive that a failure to comply carries no meaningful consequences. Given the importance of a Fair Work Inspector’s power to issue compliance notices, and that compliance with such notices avoids the need for litigation or the imposition of any penalties,penalties for non-compliance should be set at a level which demonstrates there are serious consequences for failing to comply with a compliance notice. In doing so, the Court will deter other parties from failing to comply with compliance notices.”

Ratio Decidendi

Legal Principle Established

The respondent did not file and serve a Notice of Address for service or any response or defence. Default Judgment and Declaration On 24 November 2021, the applicant filed an Application in a Proceeding seeking default judgment against the respondent pursuant to rule 13.05(2)(c) of the Rules. Judgment was sought against the respondent by reason of its failure to comply with orders made by the Court on 20 October 2021 and its failure to defend the proceedings with due diligence. The application was supported by an affidavit of Ms Boden which deposed to the service of previous Court orders, including to a new registered office of the respondent. At a Directions Hearing on 1 December 2021, there was again no appearance for or on behalf of the respondent. I adjourned the Ombudsman’s application for hearing to 22 December 2021. I also ordered the Ombudsman to serve a copy of my orders upon the respondent at its last known address – a step I had taken in relation to previous orders for the purpose of giving the respondent every possible opportunity to engage in the proceedings. At the hearing of the Ombudsman’s application for default judgment on 22 December 2021, Mr Minucci of counsel appeared on behalf of the Ombudsman. There was again no appearance for the respondent. Being satisfied as to service and for reasons given ex tempore that day I granted the Ombudsman the relief sought in the application for default judgment. On that day, I declared that[19]: “Upon the admissions which the Respondent is taken to have made by reason of its default, the Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with a compliance notice given to the Respondent on 7 April 2021 (Notice)”[19] Orders Judge Forbes made on 22 December 2021 order 2 Additionally, I made orders requiring the respondent to take appropriate steps to adhere with the Compliance Notice and for the applicant to ensure that a copy of my orders were served on the respondent. Following the default judgment, an agent of the Ombudsman sent a copy of these Default Orders by registered post to the respondent’s office[20]. Australia Post confirmed that the envelope was marked as delivered on 30 December 2021[21]. On 23 December 2021, the Default Orders were also emailed to the Mr Smith’s two known email addresses[22]. [20] Anna Louise Boden affidavit affirmed 22 April 2022 page 2 [8] [21] Anna Louise Boden affidavit affirmed 22 April 2022 page 2 [10][22] Anna Louise Boden affidavit affirmed 22 April 2022 page 2 [9] In my orders made on 22 December 2021 I included a notation drawing the respondent’s attention to the Court’s power under rule 17.05 to vary or set aside a judgment or order after it has been entered in circumstances where the judgment or order has been made in the absence of that party. Notwithstanding, the respondent has not made any application for the default judgment or any of my orders to be set aside. PENALTY PROCEEDING The Ombudsman now seeks the imposition of pecuniary penalties[23] against the respondent for the declared contravention of sub-section 716(5) of the FW Act. [23] Fair Work Act 2009 (Cth) s 546(2)(b)