Fair Work Ombudsman v Centennial Wealth Pty Ltd (No2)
[2023] FedCFamC2G 647
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Centennial Wealth Pty Ltd (No2) [2023] FedCFamC2G 647
File number(s): SYG 259 of 2022 Judgment of: JUDGE D HUMPHREYS Date of judgment: 25 July 2023 Catchwords: INDUSTRIAL LAW – Fair Work – Contravention of 716 of the Act – Determination of pecuniary penalties – orders mande Legislation: Fair Work Act 2009 (Cth) s 550, 716(5) Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary‑Smith (2008) 165 FCR 560
Canturi v Sita Coaches Pty Ltd (2002) 116 FCR 276
Fair Work Ombudsman v Nobrace Centre Pty Ltd (in Liquidation) [2019] FCCA 2979
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301
Jordan v Mornington Inn Pty Ltd [2007] FCA 1284
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383
Seven Network (Operations) Pty Ltd v Communications, Electrical, Electronic, Energy Information, Postal Plumbing and Allied Services Union of Australia (CEPU) (2001) 110 IR 372
Division: Division 2 General Federal Law Number of paragraphs: 31 Date of last submission/s: 17 July 2023 Date of hearing: In Chambers Place: Parramatta Solicitor for the Applicant: Ms Quigley. Solicitor for the Respondents: No appearance. ORDERS
SYG 259 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: CENTENNIAL WEALTH PTY LTD (ACN 606 400 873)
First Respondent
MS NEVENKA LOVRIC
Second Respondent
order made by:
JUDGE D HUMPHREYS
DATE OF ORDER:
25 July 2023
THE COURT ORDERS THAT:
1.Pursuant to section 546(1) of the FW Act, the Second Respondent pay a pecuniary penalty of $4000.00 for her involvement in the contravention of section 716(5) by the First Respondent.
2.Pursuant to section 546(3) of the FW Act, that:
a.the pecuniary penalty imposed on the Second Respondent be paid into the Consolidated Revenue Fund of the Commonwealth of Australia within 28 days of the Court’s orders; and
b.within 28 days of receipt of the pecuniary penalty referred to in 2(a) above, the Applicant is to pay this amount to Ms Alla Krjatian.
3.The Applicant has liberty to apply on seven days’ notice in the event that any of the proceeding orders are not complied with.
4.Pursuant to rule 17.05(2)(g) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)) the Court vary the typographical errors made in the Judgment of 15 May 2023 in relation to:
a.The name of the Second Respondent be corrected from ‘Navenka Lovrich’ to ‘Nevenka Lovric’;
b.Order 3 - A declaration that the Second Respondent was involved, within the meaning of section 550 of the FW Act, in the contravention by the First Respondent of section 716(5) of the FW Act referred to at paragraph 2 above;
c.Paragraph [5] - Fair Work Department’s be amended to Fair Work Ombudsman’s;
d.Paragraph [34] - A declaration that the Second Respondent was involved, within the meaning of section 550 of the FW Act, in the contravention by the First Respondent of section 716(5) of the FW Act referred to at paragraph 2 above;
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE D HUMPHREYS
INTRODUCTION
On 15 May 2023, the Court made declarations that the First Respondent, Centennial Wealth Pty Ltd (“Centennial”) contravened s 716(5) if the Fair Work Act 2009 (“the Act”) by failing to comply with a compliance notice issued on 26 August 2021.
Centennial was placed under external administration on 9 September 2022 and a Court order was made on 12 September 2022 that the company be wound up. As a result, no further action can be taken against Centennial.
The Court made a further declaration that the second respondent. Ms Nevenka Lovric, who was the sole director of the first respondent at the time the Compliance Notice was issued, was involved within the meaning of s 550 of the Act in the contravention of Centennial.
On that day, the Court made further orders for the filing and service of any evidence in relation to the appropriate penalty to be imposed upon Ms Lovric. Evidence and submissions have been filed on behalf of the Fair Work Ombudsman (“FWO”). No material has been received on behalf of Ms Lovric.
Given the absence of any material filed by Ms Lovric, and as noted and foreshadowed in the orders of 15 May 2023, the Court has dealt with the matter on the basis of the material before it, without an oral hearing on penalty.
For the reasons set out below, the Court is of the view that the appropriate pecuniary penalty to impose on Ms Lovric is $4,000.00. This amount is to be paid to the FWO within 28 days of the date of this order.
THE FACTUAL BACKGROUND
Centennial Wealth was a company that was run by Ms Lovric’s husband. On 6 June 2020, Ms Lovric’s husband passed away. Ms Lovric took over as the Sole Director of Centennial.
Following a complaint lodged by a former employee, Ms Alla Krjation to the FWO, a reasonable belief was formed that Centennial had breached various provisions of the Act and failed to pay Ms Krajatian various entitlements, including pay for the period of 7- 30 March 2020, some 3 weeks, along with a failure to pay a notice period on dismissal and a failure to pay accrued but untaken leave.
On 26 August 2021, the FWO issued a third Compliance Notice on Centennial, noting that two previous Notices had been withdrawn. That third Notice set out the details of the alleged breaches of the Act and required rectification by 23 September 2021, with evidence of rectification to be provided to the FWO by 30 September 2021.
Centennial failed to comply with the Notice by the due date. Over a period of some months, up until 29 December 2021, Ms Krajatian was partially paid her entitlements by five instalments of $400.00 amounts or $2000.00 in total. An amount of $5,254.33 remains outstanding. On 22 February 2022, the FWO commenced proceedings in this Court.
Ms Lovric has failed to effectively engage with the Court in a meaningful manner in relation to the finalisation of these proceedings with the result that default judgement was made, in favour of the FWO.
EVIDENCE BEFORE THE COURT
The FWO relies upon its Amended Statement of claim filed on 29 April 2022, along with 4 affidavits of Ms Shana Quigley affirmed 14 June 2023, 10 May 2023, 17 June 2022 and 28 April 2022. The FWO also relies upon an Affidavit of Diana Barker affirmed 10 May 2023.
Ms Lovric has filed three Affidavits dated 10 June 2022, 15 August 2022 and 28 August 2022. The Court has considered all this material in arriving at the appropriate penalty to be imposed.
THE LAW IN RELATION TO PENALTY’S IN FAIR WORK MATTERS.
The Court has a broad discretion as to penalty. In Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [71], that the Court should fix a penalty ‘it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions of the Act’. Further, at [10] and [12], the High Court stated that the penalty must not exceed what is ‘reasonably necessary to achieve the purpose of section 546: the deterrence of future contraventions of a like kind by the contravener and others’.
In Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301 Bromwich J summarised how the discretion is to be approached at [36], as follows:
1) Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
2) Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
3) Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
4) Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
5) Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
The purpose of a civil penalty is primarily, if not wholly, promoting the public interest in compliance with the laws that have been contravened, and it does not engage principles of retribution or rehabilitation: (Fair Work Ombudsman v Nobrace Centre Pty Ltd (in Liquidation) [2019] FCCA 2979 (“Nobrace”) per Kelly J at [65]). As these principles of retribution or rehabilitation are not involved in the determination of a civil penalty, this intensifies the focus of a civil penalty determination on issues of specific and general deterrence: (Nobrace at [66]).
The Act does not set out any mandatory criteria, inclusive or exclusive, that the Court must consider when determining whether to impose a penalty or the amount of any penalty:
(Canturi v Sita Coaches Pty Ltd (2002) 116 FCR 276; at [88]). The choice of penalty must be guided by the “individual circumstances of a case, not by a line-by-line comparison with another case”: (Australian Ophthalmic Supplies Pty Ltd v McAlary‑Smith (2008) 165 FCR 560 at [12]). The process is an intuitive one by the Court and not an application of a scientific process: (Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [60]‑[63]).
In Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 (“Mason v Harrington”), Mobray FCM set out what is a now well accepted set of factors relevant in assessing a pecuniary penalty. They are as follows:
a) the nature and extent of the conduct which led to the breaches;
b) the circumstances in which the conduct took place;
c) the nature and extent of any loss sustained as a result of the breaches;
d) whether there has been similar previous conduct by the Respondents;
e) whether the breaches were properly distinct or arose out of one course of conduct;
f) the size of the business enterprise involved;
g) whether or not the breaches were deliberate;
h) whether senior management was involved in the breaches;
i) whether the party committing the breach had exhibited contrition;
j) whether the party committing the breach had taken corrective action;
k) whether the party committing the breach had cooperated with enforcement authorities;
l) the need to ensure compliance with minimum standards by provision of an effective means for the investigation and enforcement of employee entitlements; and
m) the need for specific and general deterrence.
Merkel J in Seven Network (Operations) Pty Ltd v Communications, Electrical, Electronic, Energy Information, Postal Plumbing and Allied Services Union of Australia (CEPU) (2001) 110 IR 372 set out some guiding considerations for the Court at [374]:
[374] matters to be taken into account in determining the appropriate penalty include the cost of the contravention, deterrence, the flagrancy and deliberateness of the breach, the offender’s past record of behaviour and any contrition displayed by the offender.
WHAT PENALTY SHOULD BE IMPOSED?
The following matters are relevant using Mason v Harrington as a guide. The maximum penalty pursuant to s 539(2) and s 546(2)(a) of the Act that the Court may impose, is $6,600.00 in relation to an individual for a breach of s 716(5) of the Act.
The nature of the contravention is a failure to comply with a Compliance Notice. Had the Notice been complied with Court action would not have been necessary. The Court is satisfied that Ms Lovric was provided with multiple opportunities to address the matters the subject of the Compliance Notice at a time when she was the Sole Director of Centennial. The Court is satisfied that the non-compliance was deliberate.
The Court notes that the nature and extent of the loss was an amount of $7,254.33 gross, which has been partly rectified by an amount of $2000.00, leaving some $5,254.33 outstanding. This represents a real and significant loss to Ms Krjatian.
Ms Lovric has claimed that Centennial was unable to pay the full amount owing due to the death of her husband. While taking this into account, a capacity to pay does not exculpate contraventions of workplace laws and a capacity to pay and is of less relevance than the objective of deterrence: (Jordan v Mornington Inn Pty Ltd [2007] FCA 1284 at [99]).
On behalf of the FWO it was submitted that the precise nature of Ms Lovric’s finances is not in evidence, rather, she simply asserts that she does not have any funds to make a future payment or any penalty. The Court notes that no evidence has been provided by Ms Lovric and her precise financial circumstances are simply are not known.
In terms of corrective action, contrition and cooperation, the FWO concedes that Ms Lovric did not completely ignore the Compliance Notice, rather, she failed to meaningfully engage or take sufficient steps to enable Centennial to comply by the dates required in the Compliance Notice.
After making some payments, Ms Lovric has failed to meaningfully engage with the Court and it was submitted, with this conduct, taken as a whole, demonstrates a lack of genuine contrition, a lack of insight into the seriousness of the non-compliance and a failure to acknowledge the responsibility of her conduct. The Court accepts this submission.
The Court accepts that a discount of 5% for the partial payments made to date is appropriate in the circumstances.
In relation to general deterrence, the Court accepts that general deterrence must serve a purpose that the penalty is not seen by others is just a cost of doing business. Further, given the importance of Compliance Notices as an enforcement tool, non-compliance is a serious matter and the Court is required to set a penalty that will demonstrate there are serious consequences for failing to comply with a Compliance Notice.
In relation to specific deterrence, any penalty needs to be set at a level that is directed at ensuring that the contravener will not embark upon such conduct in the future. Whilst no action can be taken against Centennial, it is important that any penalty set, will be a deterrence to Ms Lovric. The FWO noted that Ms Lovric remains either a Director or Secretary of a number of other registered companies.
It was submitted on behalf of the FWO that a penalty in the range of $3796.20 to $4428.90, being 60 to 70% of the maximum penalty (with a 5% discount for partial payments made), is in the appropriate range. The Court agrees with this submission. Such a penalty would not be crushing or oppressive, but will be sufficient to signal both to Ms Lovric and the community that there are significant consequences in failing to comply with Compliance Notices.
Taking all relevant factors into account, the Court is of the view that a penalty of $4,000.00 is appropriate. The penalty is to be paid into the Consolidated Revenue Fund of the Commonwealth within 28 days.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of Judge D Humphreys. Associate:
Dated: 25 July 2023
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