Fair Work Ombudsman v C & H Entertainment Pty Ltd
[2021] FCCA 1216
•4 June 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Fair Work Ombudsman v C & H Entertainment Pty Ltd [2021] FCCA 1216
File number(s): MLG 4215 of 2019 Judgment of: JUDGE BURCHARDT Date of judgment: 4 June 2021 Catchwords: INDUSTRIAL LAW – application for imposition of civil penalties – whether first respondent failed to comply with compliance notice – notice submitted by respondents to be invalid but court not accepting this submission – first respondent clearly not complying with compliance notice – second respondent submitting reasonable excuse for non-compliance but court not accepting this submission – first respondent clearly in breach of record-keeping requirements – second respondent involved with all contraventions and third respondent involved with record keeping contraventions. Legislation: Fair Work Regulations 2009 (Cth) reg 3.33, 3.46(1)
Fair Work Act2009 (Cth) ss 535, 536, 550, 712, 716, 717)
Cases cited: CFMEU v Clarke [2007] FCAFC 87
Ezy Accounting 123 Pty Ltd v Fair Work Ombudsman (2018) 360 ALR 261
Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 136
Fair Work Ombudsman v Joys Child Care Ltd & Anor [2019] FCCA 3356
Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 1833
Fair Work Ombudsman v South Gin Pty Ltd (No.2) [2016] FCA 832
Yorke v Lucas [1984] 158 CLR 661
Number of paragraphs: 39 Date of hearing: 17 May 2021 Place: Dandenong
Counsel for the Applicant: Ms Preston Solicitor for the Applicant: Fair Work Ombudsman Counsel for the First Respondent: No Appearance
Counsel for the Second Respondent: Mr McKenney Solicitor for the Second Respondent: Wisewould Mahony Lawyers Counsel for the Third Respondent: Self-Represented ORDERS
MLG 4215 of 2019 BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: C & H ENTERTAINMENT PTY LTD (ACN 610 733 376)
First Respondent
DON HARIS KUMARAGE
Second Respondent
CHANNA DISSANAYAKE
Third Respondent
ORDER MADE BY:
JUDGE BURCHARDT
DATE OF ORDER:
4 JUNE 2021
THE COURT ORDERS THAT:
1.The Applicant file and serve any affidavit evidence and submissions on the question of penalty by 18 June 2021.
2.The Second and Third Respondents file and serve any affidavit evidence and submissions on the question of penalty by 16 July 2021.
3.The matter be listed for a hearing on penalty on a date to be fixed not before 18 August 2021 at 9:00 am.
4.The parties have liberty to apply.
REASONS FOR JUDGMENT
JUDGE BURCHARDT
INTRODUCTORY
In this matter the applicant, Fair Work Ombudsman, seeks declarations that the first respondent contravened:
(a)section 716(5) of the Fair Work Act2009 (Cth) (“Act”) by failing to comply with a compliance notice;
(b)section 535(1) of the Act by failing to make and keep employee records prescribed by regulation 3.33(3) of the Fair Work Regulations;
(c)section 536(1) of the Act by failing to give payslips within one working day of payment; and
(d)section 536(2) of the Act by giving a payslip without the information prescribed by regulation 3.46(1) of the regulations.
The applicant also seeks declarations that the second respondent was involved within the meaning of section 550 of the Act in each of the contraventions just described and that the third respondent was involved in the breaches of the records contraventions.
The respondents have largely sought to rely upon the penalty privilege that is available to them, and this is a position accepted, in that regard, by the applicant (although the respondents have filed defences which did not actually plead the penalty privilege). The second respondent additionally says that if there is a failure to comply with the compliance notice that both the first and second respondents had a reasonable excuse.
The first respondent has been placed in liquidation and no remedy is sought against it, although obviously the question as to whether the first respondent failed to comply with statutory obligations is of critical significance to the accessorial liability claims made against the second and third respondents.
For the reasons that follow, I think that the applicant has made good its case that the first respondent failed to comply with the compliance notice and failed to comply with the relevant provisions in relation to keeping and provision of employee records. I further find that the failure to comply with the notice was not one for which there was a reasonable excuse. I further find that the second and third respondents were both involved in the contraventions as alleged.
FORMAL MATTERS
I do not understand there to be any dispute as to the authority of Ana-Liza McDonald being properly appointed as a Fair Work inspector, or that there is any challenge to her authority to have done the various things to which she has deposed in her affidavits, which are before the Court. In any event, Ms McDonald has deposed as to these matters and she was not required for cross-examination.
THE COMPLIANCE NOTICE ISSUE
Section 716 of the Act relevantly provides:
(1) This section applies if an inspector reasonably believes that a person has contravened one or more of the following:
(a) a provision of the National Employment Standards;
(b) a term of a modern award;
(c) a term of an enterprise agreement;
(d) a term of a workplace determination;
(e) a term of a national minimum wage order;
(f) a term of an equal remuneration order.
Giving a notice
716(2) The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a) take specified action to remedy the direct effects of the contravention referred to in subsection (1);
(b) produce reasonable evidence of the person's compliance with the notice.
716(3) The notice must also:
(a) set out the name of the person to whom the notice is given; and
(b) set out the name of the inspector who gave the notice; and
(c) set out brief details of the contravention; and
(d) explain that a failure to comply with the notice may contravene a civil remedy provision; and
(e) explain that the person may apply to the Federal Court, the Federal Circuit Court or an eligible State or Territory Court for a review of the notice on either or both of the following grounds:
(i) the person has not committed a contravention set out in the notice;
(ii) the notice does not comply with subsection (2) of this subsection; and
(f) set out any other matters prescribed by the regulations.
716(5) A person must not fail to comply with a notice given under this section.
Note: This subsection is a civil remedy provision (see Part 4-1).
716(6) Subsection (5) does not apply if the person has a reasonable excuse.
The matters going to prove the circumstances which led up to and included the preparation of the compliance notice are dealt with in an affidavit of Ana-Liza McDonald affirmed at Brisbane on 18 August 2020. Ms McDonald deposed that in about on or around 20 June 2019 the applicant commenced an investigation into the respondents after receiving a request from a Ms Lowri Jenkins, a former employer of the first respondent. The steps undertaken included reviewing documents provided by Ms Jenkins between 15 July 2019 and 9 August 2019 which included photographs of timesheets, Ms Jenkins’ record of her own hours of work, various emails and text messages passing between Ms Jenkins and the second and third respondents, and other related matters (see paragraph 6 of the affidavit). The affidavit also records an interview with Ms Jenkins on 6 and 7 August 2019 and Ms Jenkins gave details of her duties and the fact that she was a casual employee who did not have set hours, however, worked only if she wished to and was not paid annual leave or sick leave.
Ms McDonald deposed that on around 5 August 2019 she signed a notice to produce records (“NTP”) or documents pursuant to section 712 of the Act addressed to the proper officer of the first respondent. This was not complied with and on 20 August 2019 Ms McDonald sent an email to the second and third respondents attaching a letter regarding failure to comply with the NTP. This elicited a response on 29 August 2019 from the second respondent, to which the third respondent was copied, stating they were having issues with their landlord and were attending a VCAT hearing the next day. The email also attached a number of Ms Jenkins’ timesheets and a notice of re-entry. Ms McDonald made a further request for information on 2 September 2019 to the second and third respondents to which a reply was received from the second respondent requesting that Ms McDonald advise him of the total amount of the claims, and asserting they were happy to pay any outstanding amount. Ms McDonald deposed that no such moneys were ever paid. On 4 September 2019 another employee of the office of the applicant received 11 undated rosters from one Harry Kulbir Singh on behalf of the first respondent, and on 6 September 2019 Ms McDonald received an email from the second respondent attaching four payslips for Ms Jenkins covering the period 13 February 2019 to 12 March 2019 and 10 April 2019 to 7 May 2019. On 10 September 2019 Ms McDonald received an email from the second respondent stating that he thought the payslips were what Ms Jenkins received.
Ms McDonald goes on to depose that by 9 September 2019 she had reached a number of conclusions, including that the first respondent employed Ms Jenkins as a casual between 24 January 2019 and 30 April 2019. She also concluded that the Hospitality Industry (General) Award 2010 applied to the first respondent in respect of Ms Jenkins’ employment and that she was appropriately classified as a food and beverage attendant, grade 2. Ms McDonald deposed to having formed the belief that the first respondent had contravened a number of clauses of the Hospitality Award (see paragraph 7(d) of the affidavit). Ms McDonald goes on to depose that on 11 September 2019 she and fellow officer May had a telephone conversation with the second and third respondents in which Ms McDonald explained that she would be issuing a compliance notice under section 712 of the Act requiring the first respondent to calculate the amounts owing to Ms Jenkins and rectify any other payments. She also told the second and third respondents she would be issuing three infringement notices to the first respondent for failing to make and keep employee records, failing to issue payslips within one business day of making the payments, and for giving a payslip without the prescribed information required by the Act. She also arranged for the second respondent to attend the FWO offices in Melbourne to receive the compliance notice. On the same day, 11 September 2019, Ms McDonald sent an email to the second respondent attaching the infringement notices and later that day received an email from him expressing his regret over the situation and requesting that she provide advice as to how the first respondent could mediate the situation and reconsider the amounts of the infringement notices. Ms McDonald replied on the same day to the second respondent and third respondent (who had been copied to the prior email from the second respondent), confirming the investigation was complete and referring Mr Kumarage to information regarding how to apply for the infringement notices to be withdrawn or request an extension of time to pay the notices.
On or around 16 September 2019 Ms McDonald prepared a compliance notice for the first respondent and caused it to be served personally on the second respondent at the Fair Work office in Melbourne. The receipt of service is annexed as part of “ALM-16” and there is no question that it was indeed received.
The affidavit goes on to detail a number of exchanges between Ms McDonald and the second respondent as to whether the first respondent was going to comply with the compliance notice, including assertions by the second respondent that the first respondent could not afford to pay the amounts due. Ms McDonald goes on to say, as is not I believe controversial, that the first respondent did not at any point comply with the compliance notice, nor had the first respondent applied to any relevant court for a review of the compliance notice pursuant to section 717 of the Act.
In the face of the material in Ms McDonalds’ affidavit I am comfortably persuaded that by the time the compliance notice was sent the inspector reasonably believed that the first respondent had, indeed, contravened the relevant provisions of the Hospitality Award described in paragraph 7(d) of Ms McDonald’s affidavit.
The next question is whether the notice itself was valid. The second respondent has submitted that it is not. The compliance notice is annexure “ALM-16” to Ms McDonald’s first affidavit and is at court book 218 and following. The terms of the challenge mounted by the first and second respondents is at paragraph 13 of their response where it is suggested that a compliance notice “failed to sufficiently identify and particularise the allegations of non-compliance and, in these circumstances, the notice was invalid.” The notice clearly sets out the name of the person to whom it is addressed (section 716(3)(a)). It sets out the name of the inspector who gave the notice (section 716(3)(b)). It sets out brief details of the contravention inasmuch as the alleged contraventions of the Hospitality Award are set out (section 716(3)(c)). It explains that a failure to comply with the notice may contravene a civil remedy provision (section 716(3)(d)). It explains that the respondent might apply to any relevant court for a review of the notice (section 716(3)(e)). There is no assertion made that it otherwise failed to comply with any relevant regulations (section 716(3)(f).
Although no point has been taken about it, the notice also clearly complied with section 716(2).
In these circumstances, and noting that the allegation that the notice was deficient was scarcely pressed, if at all, in oral submissions, it is plain that the notice complied with section 716.
Accordingly, this brings into focus the matter pressed more significantly by the respondent that it had a reasonable excuse for non-compliance within the meaning of section 716(6). It was submitted by counsel that there must be intentional participation and that actual knowledge was required. The period of employment was short. Both the second and third respondents had engaged with the Fair Work Ombudsman and the first respondent had been placed into liquidation. It was submitted that the financial position of the first respondent meant that the second respondent’s position was reasonable. Compliance was not possible because of the company’s financial position. The respondent had offered a payment plan and counsel referred to Fair Work Ombudsman v Joys Child Care Ltd & Anor [2019] FCCA 3356 at [11] where Judge Altobelli set out matters from the judgment of Justice White in Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 136 (“Devine Marine”) at [154]-[155] in this regard. While it might be thought somewhat circular, the authority stands for the proposition that a reasonable excuse is one that would be regarded as reasonable by a reasonable person in the relevant circumstances. Nonetheless, I note that at [12] Judge Altobelli quoted Justice White in Devine Marine at [165]:
[165] The expense and inconvenience (and perhaps oppression) in complying, will not usually provide a “reasonable excuse” for non-compliance with the notice. It is to be expected that compliance will usually occasion a respondent some inconvenience and expense but, unless the circumstances are out of the ordinary this is to be taken to be a necessary incidence of compliance, and will not relieve the respondent from complying with the notice.
Counsel pointed to the fact that the first respondent had been placed into liquidation. The respondents had pointed to issues with their landlord in a VCAT hearing (see “CB-158”) and had sought properly to engage with the Fair Work Ombudsman (see “CB-216” and “CB-232” in which the second respondents had sought extensions of time to finalise the outstanding amounts).
Counsel drew the court’s attention to the fact that the applicant had not been satisfied, on 3 October 2019, with the respondent’s financial information. It was submitted that the financial position of the first respondent meant that the second respondent’s position was reasonable. There could not be compliance with the compliance notice because of the financial position of the company, and the respondents had proposed a payment plan. In submissions in reply counsel for the applicant pointed to the profit and loss statement at “CB-247”, noting that there was, in fact, a profit and that liquidation did not occur until 10 June 2020. It was submitted that the reason for non-compliance was a choice on the part of the respondents. The underpayments were only part of the matters addressed by the compliance notice. The other part was the calculation of the amount to pay. The Fair Work Ombudsman had sought a schedule (see “CB-242”) and this had never occurred. Counsel pointed to the email from Ms McDonald to the second respondent, copied to the third respondent, dated 14 October 2019 (“CB-287”) in which all relevant information had been requested by 15 October 2019, such never having been provided. Counsel for the applicant referred to the judgment of Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833 at [133] where Flick J said:
Financial difficulty, it has been long recognised, is not a justification for an employer to fail to comply with its statutory reward obligations; Fair Work Ombudsman v South Gin Pty Ltd (No.2) [2016] FCA 832 at [50] per White J.
In the end, like a number of matters in this somewhat convoluted proceeding, the end result can be stated relatively shortly. There is no doubt that the first respondent failed to comply with the compliance notice. The financial circumstances of the first respondent do not provide a reasonable excuse. The materials before the Court suggest that at the relevant time in late 2019 the first respondent was, at the very least, continuing to trade. Furthermore, the rectification of pay was by no means the only matter the compliance notice addressed, and I accept the applicant’s submission that the first respondent’s failure in this regard is not touched on by the reasonable excuse defence in any event.
While a lack of financial resources may well have operated on the capacity of the respondent to comply with the compliance notice by actually paying and rectifying the matters complained of, there is no meaningful evidence before the Court to suggest that the respondent lacked the capacity to calculate the amounts that ought to be paid. The applicant requested a schedule of the workings for Ms Jenkins (CB-242) and there is no evidence that this could not have been complied with. The remarks of Justice White, extrapolated above, are directly applicable. The respondents did not have a reasonable excuse for non-compliance.
DID THE FIRST RESPONDENT MAKE AND KEEP EMPLOYMENT RECORDS AS REQUIRED
As the applicant’s written submissions point out, the first respondent was required to produce documents in relation to Ms Jenkins’ employment pursuant to the NTP issued on 5 August 2019 and no documents were provided. The first respondent through the second respondent Mr Singh then provided documents, specifically some rosters, some timesheets and some payslips which are annexures “ALM-7” to “ALM-11” in Ms McDonald’s first affidavit. As the written submissions correctly point out, no documents were provided which related to or recorded the payment of any loadings or penalties rates. It is not denied that as a casual employee Ms Jenkins should have attracted a loading of 25% and various other penalty rates.
Once again, the applicant’s written submissions correctly point out that no records were made or kept to the loadings or penalty rates that Ms Jenkins was entitled to be paid as can be inferred from the non-production of any such records pursuant to the NTP, and the production of documents showing the first respondent paid Ms Jenkins a flat rate of $21 gross. As the applicants written submissions again correctly point out it is readily apparent the first respondent contravened regulation 3.33 of the Fair Work Regulations 2009 (Cth) and thereby section 535 of the Act.
Section 536 of the Act requires an employer to give an employee a payslip within one working day of paying the employee for the performance of work. As the written submissions of the applicant again correctly and succinctly point out, despite paying Ms Jenkins on eight occasions for work performed in her employment, she was only given one payslip which was sent on 3 March 2019 and related to a payment received on or around 18 February 2019. It is clear therefore that the first respondent contravened section 536(1) of the Act.
The one payslip the first respondent did provide likewise did not comply with the Act. It did not specify the name of the employer, the date on which the payslip relates was made and the Australian Business Number of the employer. This was information required by regulation 3.46(1) of the Act. Accordingly, since none of the required information was contained, the first respondent contravened section 536(2)(b) of the Act.
IS THE SECOND RESPONDENT LIABLE FOR THE CONTRAVENTION OF THE FIRST RESPONDENT IN RESPECT OF THE COMPLIANCE NOTICE
A person is involved in a contravention of a civil penalty provision pursuant to section 550(2) 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 in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention.
Only subparagraphs (a) and (c) are pressed in this instance.
In order to aid, abet, counsel or procure the contravention the person must intentionally participate in the contravention with the requisite intention, as the applicant’s written submissions point out (see Yorke v Lucas [1984] 158 CLR 661 at [667]). In order to have the requisite intention the person must have knowledge of the essential matters which go to make up the events, whether or not the person knows that those matters amount to a contravention. It is not necessary that the accessory should appreciate that the conduct in question is unlawful. Actual knowledge is, however, required, but that may be inferred from a combination of suspicious circumstances and a failure to make an inquiry (Ezy Accounting 123 Pty Ltd v Fair Work Ombudsman (2018) 360 ALR 261 at [12]. The question of being knowingly involved is somewhat different. In that case the person must have engaged in some act or conduct which implicates or involves him or her in the contravention so that there is a practical connection between the person and the contravention (CFMEU v Clarke [2007] FCAFC 87 at [26]). The phrase “involved in” requires conduct which implicates a person such that they become involved in or associated with it. A person cannot be involved in conduct for the purposes of section 550 merely by reason of the knowledge of the conduct being pursued (Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 1833 at [116]).
With those matters in mind I will turn to the failure to comply with the compliance notice.
The following relevant matters are not in dispute. The second respondent is, and was at all material times:
(e)a natural person capable of being sued;
(f)one of two directors of the first respondent’s;
(g)the controlling mind of the first respondent.
He was also the person with whom Inspector McDonald and other officers of the applicant’s office corresponded in relation to the Fair Work Ombudsman investigation and compliance notice. Where the second respondent took issue was in relation to whether or not the evidence rose high enough to support the assertion that the second respondent was responsible for the management of the first respondent, including setting rates of pay, paying the employee and giving payslips, and creating or causing the creation of, and keeping or causing to be kept, records of hours worked and amounts paid to the employee.
It is not entirely clear to me whether issue is taken with the assertion that the second respondent was responsible for ensuring that the first respondent complied with its legal obligations under the Act.
Given that the second respondent was, at all material times, a director with a 50 per cent shareholding in the first respondent, and given that the evidence shows that the other 50 per cent shareholder is overseas and played no material part in the running of the first respondent’s business, in my view the position is clear. Plainly the second respondent was the person, as the on-the-spot director, to whom the obligations to comply with the requirements under the Act devolved. No other explanation makes any sense. The extracts of texts send by Mr Dissanayake, the third respondent, to Ms Jenkins at “CB-101” and “CB-104” comfortably satisfy me that Mr Dissanayake was apparently administering the pay of Ms Jenkins but was doing so by clear reference to the authority of the second respondent. He was also responsible for all dealings with the Fair Work Ombudsman (see “CB-152” to “CB-153”). He had knowledge of the compliance notice as he accepted service on behalf of the first respondent and was reminded of the timeframe for compliance by phone message the week prior to the deadline.
In these circumstances, I have no doubt that the second respondent was involved with the failure of the first respondent to comply with the compliance notice within the meaning of section 550(1)(c) of the Act.
WAS THE SECOND RESPONDENT INVOLVED IN THE FAILURE TO MAKE AND KEEP EMPLOYMENT RECORDS AS REQUIRED
I have already dealt with the liability of the first respondent. The question now is the second respondent’s liability. I accept that the second respondent had ultimate control and authority over the affairs of the first respondent. I accept that he organised the running of the business, as is shown by his correspondence with the Fair Work Ombudsman if nothing else. However, it would appear to be uncontroversial that he left the onsite operations, including hiring, to managers (“CB-307”). He was, however, onsite from time to time (see “CB-307”) and was aware of Ms Jenkins’ employment.
The second and third respondents (and I shall return to the latter) knew by at least December 2017 of their obligations in respect of record keeping and payslip requirements, and that the Hospitality Award contained penalty rates, including for work at nights and on public holidays, through previous involvement with the Fair Work Ombudsman in respect of other employees. I accept the submission of the applicant (written submissions, paragraph 57) that Ms Jenkins was paid a flat rate of pay including for work on weekends, public holidays and nights, however, Ms Jenkins had informed both respondents that what her base hourly rate of pay should be and that the second respondent told her in reply that “the business could not pay her that sort of wage but that they would come to an agreement on something”. I have no difficulty in inferring that the second respondent knew that loadings and penalty rates under the award were neither applied nor considered relevant and that he was therefore involved with, within the meaning of section 550, in the first respondent’s record keeping contraventions.
WAS THE SECOND RESPONDENT INVOLVED IN THE CONTRAVENTIONS REGARDING THE FAILURE TO PROVIDE PAYSLIPS
Once again, this matter can be dealt with shortly. It is apparent that the second respondent was aware of the sort of payslips that were provided to Ms Jenkins and that these were not in the required legislative form. I also accept that Ms Jenkins told the second respondent that she was not being provided with payslips on 10 April 2019 (“CB-74”). This necessarily means that the second respondent was, indeed, involved with the payslip contraventions within the meaning of section 550 of the Act.
WAS THE THIRD RESPONDENT LIABLE AS AN ACCESSORY FOR THE RECORD KEEPING CONTRAVENTIONS
The third respondent was, on any view of the matter, involved in the day to day management of the first respondent. He is a brother of the second director, who lives in America, and in respect of whom he has a power of attorney (see “CB-200” to “CB-205”). He was generally responsible for administering pay and associated records (“CB-308”) and he knew that the payments to Ms Jenkins were a flat rate of $21 per hour (see third respondent’s defence, paragraph 9). He actually worked with Ms Jenkins, at least on occasions. He was well aware of what her hours were. In these circumstances he was plainly involved in both the failure to keep records and the failure to provide payslips. The third respondent’s oral submissions asserted that he had no responsibility for keeping records at all and that it was his job to get money and transfer to the accounts on the instructions he received. He was just dealing with a bank account and had in fact made some payments himself because the bar could not pay her. Ms Jenkins had approached him but he never took responsibilities. In essence, he put, it was not his job to say how much they get paid. He said that he had also lost money as well as the directors. In short, it was his position that none of this was his responsibility. For the reasons expressed, I do not accept those submissions.
CONCLUSIONS
I have determined that the first respondent failed to comply with the compliance notice and failed to keep records as required by the regulations, and failed to provide payslips as required. I have found that the second respondent was involved in all of those contraventions and that the third respondent was involved in the pay records and payslips contraventions. The matter will need to be relisted for further hearing as to the imposition of penalty.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Burchardt. Associate:
Dated: 4 June 2021
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