Fair Work Ombudsman v Chatime Australia Pty Ltd - [2022] FedCFamC2G 934

Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934

File number(s): SYG 3321 of 2019

Judgment of: JUDGE MANOUSARIDIS

Date of judgment: 11 November 2022

Catchwords: INDUSTRIAL LAW – application for remedies in relation to first respondent’s contraventions of award – employer largely admits it failed to make payments as required under relevant award – whether the employer’s managing director was a person involved in the employer’s contraventions of a number of provisions of the award – findings reasonably open to be made which, if made, would support the conclusion that the managing director was involved in a number of contraventions of the award – proceeding to the extent it relates to claims made against managing director set down for directions to give managing director an opportunity to elect to go into evidence.

Legislation:
Competition and Consumer Act 2010 (Cth)

Fair Work Act 2009 (Cth) ss 44, 45, 90(1), 90(2), 116, 345, 550

Trade Practices Act 1974 (Cth) s 75B

Workplace Relations Act 1996 (Cth) s 728

Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 17.05

Federal Circuit Court Rules 2001 (Cth) r 15.29A

Fast Food Industry Award 2010 cls 3.1, 4, 11, 12.1, 12.2, 12.5, 12.7, 13.1, 13.2, 13.4, 16, 17, 18, 25.5(a)(i), 25.5(a)(ii), 25.5(b), 25.5(c), 25.6, 26, 28.3, 30.3

Cases cited:
Australian Building and Construction Commissioner v Parker [2017] FCA 564

Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63; 98 ER 969

Director of the Fair Work Building Industry Inspectorate v Bavco Pty Ltd & Ors(No.2) [2014] FCCA 2712

Dowling v Kirk & 16 Ors [2007] FMCA 2106

EZY Accounting 123 Pty Ltd v Fair WorkOmbudsman [2018] FCAFC 134

Fair Work Ombudsman v Al Hilfi [2012] FCA 1166

Fair Work Ombudsman v Chatime Australia Pty Ltd [2021] FCCA 1766

Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365

Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557

Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034

Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833

Giorgianni v R (1985) 156 CLR 473

Hui v Champion [2019] FCA 1111

Johnson v Youden [1950] 1 KB 544

Potter v Fair Work Ombudsman [2014] FCA 187

Richardson and Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd [1994] FCA 1222

Yorke v Lucas (1985) 158 CLR 661

Division: Fair Work

Number of paragraphs: 113

Date of last submission/s: 23 September 2022

Date of hearing: 20, 21, and 22 July and 20 September 2021

Place: Sydney

Counsel for the Applicant: Mr J Darams and Mr M Harker, by video

Solicitor for the Applicant: Office of the Fair Work Ombudsman

Counsel for the Respondents: Mr D Mahendra, by video

Solicitor for the Respondents: Piper Alderman Lawyers
ORDERS

SYG 3321 of 2019

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:
FAIR WORK OMBUDSMAN

Applicant

AND:
CHATIME AUSTRALIA PTY LTD (ACN 136 677 453)

First Respondent

CHEN ZHAO

Second Respondent

order made by:

JUDGE MANOUSARIDIS

DATE OF ORDER:

11 November 2022

THE COURT ORDERS THAT:
1.The proceeding is listed for a directions hearing at 9:30 am on 2 December 2022.

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
introduction

The applicant (FWO) claims that from 8 August 2016 to 25 December 2016 (relevant period) the first respondent (Chatime) failed to pay to 152 of its employees (Employees) amounts it was obliged to pay under the Fast Food Industry Award 2010 (Award), and Chatime also failed to pay the Employees the amounts it was required to pay under s 90 of the Fair Work Act 2009 (Cth) (FW Act); and, for these reasons, Chatime contravened s 45 and s 44 of the FW Act. The FWO also claims that Chatime’s managing director, the second respondent, Mr Zhao, was a “person involved”, within the meaning of s 550(2) of the FW Act, in most of Chatime’s contraventions of s 45 of the FW Act and, for that reason, is to be taken to have contravened s 45 of the FW Act.
The respondents admit Chatime engaged in conduct that contravened s 44 and s 45 of the FW Act, substantially as the FWO alleges in the statement of claim. The respondents, however, dispute three aspects of the allegations the FWO makes in the statement of claim: first, whether 11 of the 12 Employees whom the FWO alleges were casual employees were employed as casual employees; second, whether, as the FWO contends, certain Employees ought to be classified under the Award as Level 3 employees rather than as Level 2 or Level 1 employees, as the respondents contend; and third, whether Employees whom the respondents admit were not paid for a minimum engagement of three hours had in fact been rostered for a minimum period that was less than three hours, as the FWO alleges.
Mr Zhao, on the other hand, denies he is a “person involved in” Chatime’s contraventions of s 45 of the FW Act. Mr Zhao submits that the FWO’s case in relation to his involvement in Chatime’s contravention, as pleaded in the statement of claim, can only be made out if the Court accepts the evidence of Mr Chen, Chatime’s former chief financial officer; but, Mr Chen’s evidence is entirely lacking in credit and, for that reason, the FWO cannot succeed on its claims against Mr Zhao.
In these reasons for judgment I determine the three controversies I identify above; I identify Chatime’s contraventions of s 44 and s 45 of the FW Act; and I consider whether Mr Zhao was involved in Chatime’s contraventions of s 45 of the FW Act. Before I undertake these tasks, it will be necessary to address what occurred at the hearing on 22 July 2021, and the orders I made at that time. I will then set out the relevant terms of the Award, and the number and classifications of the Employees during the relevant period. I will then set out in narrative form, the evidence and my findings that are particularly relevant to the FWO’s claims that Mr Zhao is a person who was involved in Chatime’s contraventions.
orders made at hearing on 21 july 2021
At the hearing the FWO read an affidavit made by Mr Chen, who, as I have already noted, was Chatime’s former chief financial officer, counsel for the respondents cross-examined Mr Chen over the first two days of the hearing. On the morning of the third day of the hearing, before counsel for the respondents had completed his cross-examination, Mr Chen forwarded to the Court a medical certificate containing an opinion that Mr Chen was not fit to continue to give evidence. I heard submissions about, among other things, whether I should strike out the evidence Mr Chen had given, including the evidence contained in his affidavit. I delivered reasons for judgment on the basis of which I made the following orders:[1]
1.Pursuant to r 15.29A of the Federal Circuit Court Rules 2001 (Cth), but subject to order 2, the applicant may continue to use the affidavit made by Lawrence Budiman Chen on 12 April 2021.
2.If, in the course of preparing his reasons for judgment, Judge Manousaridis forms the view that there is a prospect that if the second respondent does not read his affidavit made on 2 June 2021 and make himself available for cross‑examination Judge Manousaridis may accept any part of Mr Chen’s affidavit that is adverse to the first or second respondents, the proceeding will be listed for directions for the purpose of setting the matter down for the continuation of the cross‑examination of Mr Chen and, if the second respondent so elects, for the second respondent reading his affidavit and making himself available for cross‑examination.
[1] Fair Work Ombudsman v Chatime Australia Pty Ltd [2021] FCCA 1766
These orders do not, and were not intended, to relieve me from considering and determining whether I should accept Mr Chen’s evidence, to the extent it is relevant to whether Mr Zhao is a person who was involved in Chatime’s contraventions of s 45 of the FW Act. The orders prevent me from proceeding to determine whether I should accept Mr Chen’s evidence, to the extent it is so relevant, without first giving Mr Zhao the opportunity to consider whether his counsel should continue with Mr Chen’s cross-examination, and whether Mr Zhao should give evidence and be exposed to cross-examination; and the orders will so prevent me only if, in the course of considering Mr Chen’s evidence, I form the view that his evidence, to the extent it may be relevant to establishing Mr Zhao was involved in Chatime’s contraventions, is reasonably capable of being accepted. If, on the other hand, I form the view that Mr Chen’s evidence ought not to be accepted, I am at liberty to find that I do not accept his evidence.
My task, therefore, when assessing Mr Chen’s evidence, is to determine whether his evidence is credible and, if credible, whether, if accepted, the FWO will be able to prove that Mr Zhao is a person who was involved in Chatime’s contraventions of s 45 of the FW Act. If I determine Mr Chen’s evidence is not credible, his evidence will not be available to prove that Mr Zhao is a person who was involved in Chatime’s contraventions of s 45 of the FW Act.
the award
Clause 4.1 of the Award provided that the Award covered employers throughout Australia in the fast food industry and their employees in the classifications listed in cl 17. The expression “fast food industries” is defined in cl 3.1 as follows:
fast food industry means the industry of taking orders for and/or preparation and/or sale and/or delivery of:
•meals, snacks and/or beverages, which are sold to the public primarily to be consumed away from the point of sale;
•take away foods and beverages packaged, sold or served in such a manner as to allow their being taken from the point of sale to be consumed elsewhere should the customer so decide; and/or
•food and/or beverages in food courts and/or in shopping centres and/or in retail complexes, excluding coffee shops, cafes, bars and restaurants providing primarily a sit down service inside the catering establishment
Clause 16.1 of the Award provided that all employees covered by the Award must be classified according to the structure set out in Schedule B. That schedule classified employees into the following three levels:
B.1 Fast Food Employee Level 1
B.1.1 An employee engaged in the preparation, the receipt of orders, cooking, sale, serving or delivery of meals, snacks and/or beverages which are sold to the public primarily to take away or in food courts in shopping centres.
B.1.2 A Fast Food Employee Level 1 will undertake duties as directed within the limits of their competence, skills and training including incidental cleaning and cleaning of toilets.
B.2 Fast Food Employee Level 2
An employee who has the major responsibility on a day to day basis for supervising Fast Food employees Level 1 and/or training new employees or an employee required to exercise trade skills.
B.3 Fast Food Employee Level 3
An employee appointed by the employer to be in charge of a shop, food outlet, or delivery outlet.
The Award also differentiated between full-time, part-time, and casual employees. A full-time employee is an employee who is engaged to work an average of 38 hours a week;[2] a part-time employee is an employee who works less than 38 hours a week and has reasonable predictable hours of work;[3] and a casual employee is “an employee who is engaged as such”.[4] An employer is required to roster a part-time employee for a minimum of three consecutive hours;[5] and the minimum daily engagement of a casual employee was three hours.[6]
[2] Award, cl 11
[3] Award, cl 12.1
[4] Award, cl 13.1
[5] Award, cl 12.5
[6] Award, cl 13.4
Clause 17 of the Award provided for the minimum weekly wages for Level 1, Level 2, and Level 3 employees. The weekly wage for a Level 3 employee differed according to whether the employee was in charge of two or more persons. Clause 18 provided for the minimum weekly wages for persons under 21 years of age, and these rates were expressed as a percentage of the minimum weekly wages provided for by cl 17. A part-time employee was to be paid for ordinary hours worked at the rate of 1/38th of the weekly rate for the class of work performed;[7] and a casual employee was to be paid both the ordinary hourly rate paid to a full-time employee and an additional loading of 25% of the ordinary hourly rate for a full-time employee.[8]
[7] Award, cl 12.7
[8] Award, cl 13.2
The Award also required an employer to:
(a)pay to full-time and part-time employees a 25% loading for all hours worked on a Saturday (Saturday Loading);[9]
(b)pay to full-time and part-time employees a 50% loading for all hours worked on a Sunday (Sunday Loading);[10]
(c)pay to casual employees a 75% loading, inclusive of the casual loading, for all hours worked on a Sunday (Sunday Casual Loading);[11]
(d)pay to full-time and part-time employees 250% of the ordinary hourly rate, and pay to casual employees 275% of the ordinary hourly rate for hours worked on public holidays (Public Holiday penalty rate);[12]
(e)pay to full-time and part-time employees a 10% loading for ordinary hours worked between 9:00 am and midnight Monday to Friday, which for casual employees applied in addition to the 25% casual loading (9:00 pm Midnight Loading);[13]
(f)pay to full-time and part-time employees a 15% loading for ordinary hours worked between midnight and 6:00 am Monday to Friday (Post Midnight Loading);[14]
(g)pay full-time and part-time employees overtime rates (Overtime Rates) for hours worked in excess of 38 hours per week or an average of 38 hours per week averaged over a four week period, or 11 hours on any one day;[15] and
(h)pay to full-time and part-time employees annual leave loading.[16]
[9] Award, cl 25.5(b)
[10] Award, cl 25.5(c)(i)
[11] Award, cl 25.5(c)(ii)
[12] Award cl 30.3 (as admitted on the pleadings: Statement of Claim [45]; Defence [45])
[13] Award cl 25.5(a)(i) (as admitted on the pleadings: Statement of Claim [48]; Defence [48])
[14] Award, cl 25.5(a)(ii)
[15] Award, cl 26 (as admitted on the pleadings: Statement of Claim [56]; Defence [56])
[16] Award, cl 28.3
Clause 12.2 of the Award is also relevant:
At the time of first being employed, the employer and the part-time employee will agree, in writing, on a regular pattern of work, specifying at least:
(a) the number of hours worked each day;
(b) which days of the week the employee will work;
(c) the actual starting and finishing times of each day;
(d) that any variation will be in writing;
(e) that the minimum daily engagement is 3 hours; and
(f) the times of taking and the duration of meal breaks.
chatime’s employees during relevant period
From at least around 2013 up to 25 December 2016, Chatime conducted the business of making and selling to customers a beverage known as “bubble tea” for immediate consumption. Chatime conducted the business through a number of stores. Chatime operated in New South Wales and in Victoria; and it also conducted the business of a franchisor of the name “Chatime” and the business practices it uses in its own business.
At various times from 8 August 2016 to 25 December 2016 (being the “relevant period” I identify above), Chatime employed 152 employees (these being the “Employees” I defined at the beginning of these reasons) to work at one or more of its stores.[17] 43 of the Employees (Junior Employees) were 20 years old or younger;[18] and the remaining Employees were older than 20 years of age (Adult Employees).[19] Further, around 95 of the Employees were foreign nationals resident in Australia on visas.[20]
[17] Statement of claim, [4], [6]; Defence, [4], [6]
[18] Statement of claim, [8]; Defence, [8]
[19] Statement of claim, [9]; Defence, [9]
[20] Statement of claim, [10]; Defence, [10]
At various times during the relevant period:
(a)eight of the Employees (Full-Time Employees) were engaged to work at least 38 hours per week, and they had reasonably predictable hours of work;[21]
(b)132 of the Employees (Part-Time Employees) worked less than 38 hours per week, and had reasonably predictable hours of work;[22] and
(c)one of the Employees, Mr S, was a Full-Time Employee from 8 October 2016 to 30 October 2016, and a Part-Time Employee from 31 October 2016 to 25 December 2016.[23]
[21] Statement of claim, [11]; Defence, [11]
[22] Statement of claim, [12]; Defence, [12]
[23] Statement of claim, [14]; Defence, [14]
The FWO alleges that twelve of the Employees who did not work an average of 38 hours per week did not work reasonably predictable hours of work and, for that reason, were casual employees for the purposes of the Award (Asserted Casual Employees).[24] The respondents accept that one of the Asserted Casual Employees was a casual employee, but the remaining 11 employees were not.[25] Chatime alleges that these 11 Employees worked predictable hours. I will refer to the competing submissions and evidence later in these reasons.
[24] Statement of claim, [13]
[25] Defence, [13]
Chatime classified the Employees into a number of descriptions. The descriptions were “Trainee”, “Staff- T-Rista”, “Team Leader”, “Store Supervisor T-Master”, and “Store Manager T-Legend”.[26] Those of the Employees who were classified as “trainee” and “staff” (Level 1 Employees) performed some or all of the duties of taking orders, operating a cash register, making drinks, and cleaning; and it is common ground that these employees are “Level 1 Employees” for the purposes of the Award.[27] The FWO alleges that Employees who were classified as “Team Leader”, “Store Supervisor T-Master”, and “Store Manager T-Legend” were in charge of an outlet, and performed the duties of counting stock, supervising the training of Level 1 Employees, rostering and managing staff and, for that reason, are “Level 3 Employees” for the purposes of the Award.[28] The respondents admit that Employees who were classified as “Store Manager T-Legend” were always in charge of an outlet, and performed the duties of counting stock, supervising the training of Level 1 Employees and, for that reason, are “Level 3 Employees”. The respondents deny that Employees who were classified as “Team Leader” and “Store Supervisor T-Master” were always in charge of an outlet and, therefore, were Level 3 Employees.[29] The respondents submit “Team Leader” and “Store Supervisor T-Master” were Level 2 Employees.
evidence and some findings
[26] Statement of claim, [15]; Defence, [15]
[27] Statement of claim, [16]; Defence, [16]
[28] Statement of claim, [17]
[29] Defence, [17]
May 2013 – Mr Chen’s evidence of conversations with Mr Zhao and Ms Qian in May 2013
According to Mr Chen, Mr Zhao and the other director of Chatime, Ms Qian, set the pay rates for Chatime’s employees. Mr Chen further says that:
(d)In May 2013 Mr Chen spoke to Mr Zhao and Ms Qian about the pay rates, and Mr Chen remembers “Mr Zhao and Ms Qian telling” Mr Chen that “the rates were Chinatown market rates”.[30]
(e)Mr Chen had a further conversation in May 2013 with Mr Zhao and Ms Qian. Mr Chen told them that he had noticed the balance sheet of the company “was off by two million dollars for items that did not exist”, and that Chatime “was underpaying its staff”; “we are . . . breaking the law”; and “if you want to have long term success in this country and the franchise, this matter needs to be fixed”.[31]
(f)Mr Chen “suspected that Chatime was underpaying its employees because the average rate paid by Chatime employees in 2013 was substantially below what [Mr Chen] received as a fast food employee in 1998”. Mr Chen was processing payroll, and, in his view, the rates of pay seemed too low.[32]
(g)Mr Chen suggested that Mr Zhao give Mr Chen a chance “to look at possibilities or ways to fix that”, in response to which Mr Zhao said “Yes, do whatever you wish”.[33]
[30] Affidavit of L B Chen, [6]
[31] Affidavit of L B Chen, [8], [9]
[32] Affidavit of L B Chen, [10]
[33] Affidavit of L B Chen, [11]

There are a number of observations that may be made about this part of Mr Chen’s evidence:
(a)Mr Chen does not identify the context in which the first of the two conversations occurred.
(b)Mr Chen suspected Chatime was underpaying its employees because the average rate Chatime was paying its employees was substantially below what Mr Chen says he received as a fast food worker 15 years ago in 1998; yet Mr Chen does not identify the average rate he says Chatime was paying its employees, or the amounts Mr Chen was paid in 1998. Further, it is implausible that the fact or matter that led Mr Chen to suspect Chatime was underpaying its employees was Mr Chen’s recollection of what he was being paid as a fast food employee 15 years ago.
(c)Mr Chen does not identify the law or laws he believed that Chatime was breaking, or in what way he believed Chatime was breaching any law.
(d)Mr Chen’s evidence that he believed that Chatime was breaking the law, at least to the extent the relevant law was an award, is inconsistent with his evidence (which I set out in the next section of these reasons) about his meeting with Mr Gillan, a lawyer, on 26 July 2013. Mr Chen says he met with Mr Gillan to ask for advice about whether any award applied to Chatime’s employees. That suggests that as at 26 July 2013 Mr Chen did not know whether any award may have applied to Chatime’s employees; and, for that reason, Mr Chen would not have had any positive belief that Chatime was breaking any award.
(e)If, as Mr Chen deposes, he believed or suspected Chatime was breaking any law, it is reasonable to expect that Mr Chen would have communicated that suspicion or belief to Mr Gillan, and sought advice about whether Chatime was breaking the law, and about what Chatime should do to ensure it no longer broke the law. There is no evidence Mr Chen communicated any such belief, or sought or received any advice about whether Chatime was breaking the law.
I therefore do not accept this part of Mr Chen’s evidence. There is in evidence, however, a chain of emails between Mr Chen and Mr Gillan sent from 26 to 30 July 2013 to which I refer in the next section of these reasons. The email chain is a basis for inferring, and I find, that by 26 July 2013 Mr Chen believed or suspected that an award or awards may have applied to Chatime’s employees. I also find that Chatime was not purporting to pay its employees amounts by reference to any award, and that Mr Chen had decided to obtain legal advice about what award or awards applied, so that he could determine what amounts Chatime should be paying its employees under the relevant award or awards.
July 2013 – Mr Chen receives advice on award coverage
Shortly before 26 July 2013, Mr Chen met with Mr Gillan to seek advice about whether any award applied to Chatime’s employees.[34] In an email Mr Gillan sent to Mr Chen on 26 July 2013, Mr Gillan said that his preliminary view was that the “National Fast Food Award 2010” covers Chatime, and he was making inquiries about the wage rates. Mr Gillan further said that unless he can source these rates from a colleague, he suspected that “some additional work will be required to set up a wage rate table”.[35] After Mr Chen sent an email to Mr Gillan on 30 July 2013, Mr Gillan sent the following email:[36]
[34] Affidavit of L B Chen, [12]; exhibit “FWO-1”
[35] Affidavit of L B Chen, [12]; exhibit “FWO-1”
[36] Affidavit of L B Chen, [12]; exhibit “FWO-1”
I apologise for the delay; however, I was off work yesterday due to illness.
After reviewing the industrial award coverage issue, it would seem to be the case that ‘Boost Juice’ businesses are relying on the National Fast Food Award 2010 (instead of the Retail Industry General Award 2010) to underpin their enterprise bargaining agreements registered with the Fair Work Commission. Attached to this email is a copy of an enterprise agreement made by Commissioner McKenna of the Fair Work Commission.
In terms of wage rate information, my preliminary view is that the National Fast Food Award 2010 applies to Chatime. The wage rates for full-time, part-time and casual are attached to this email in the Pay and conditions guide. See page 5 for casual rates for adult- Level 1 (see ‘post March 2006 employer in far right column).
To obtain the Monday to Friday (late night), Saturday, Sunday and Public Holiday rates under the National Fast Food Award 2010 will be more difficult. I will have to export them from the Fair Work Ombudsman calculator: see I expect there is about 8-10 hours of work for my offices to set up an Excel Spreadsheet showing fulltime/part & casual rates (for adults and juniors) across Mon-Fri, Saturday, Sunday and Public holidays. Under the National Fast Food Award 2010, three (3) grades apply:
Retail 1: shop assistant
Retail 2: shop assistant with supervisory duties
Retail 3: shop assistant in charge
I suspect the vast majority of Chatime employees would be Retail 1: shop assistant.
In light of the time involved to do the work (extract rates from Fairwork Ombudsman Calculator and set up Excel Spreadsheet), I propose a rate of $2,500 (+gst). This will include membership for the fifteen corporate stores for 1 year. Please note my membership fee for restaurants is only $750 (+gst) as I have the wage rates in excel format. I was hopeful of sourcing the rates from elsewhere but I had no such luck.
I look forward to hearing from you. Should you have any queries please contact me directly on . . . .
Mr Chen responded with an email sent on 31 July 2013 thanking Mr Gillan for the information, and noting that Mr Chen would peruse the information “after our month end process”. Mr Chen requested that Mr Gillan “withhold setting up spread sheet and stick to $750 multi-site fee”.[37]
[37] Affidavit of L B Chen, [12]; exhibit “FWO-1”
In his affidavit Mr Chen says that, based on Mr Gillan’s advice, Mr Chen realised that Chatime “was underpaying its staff by not complying with the” Award, and “so” he “asked to meet the directors to discuss this”.[38] Mr Chen does not, however, identify how, on the basis of Mr Gillan’s advice, he formed the belief that Chatime was not complying with the Award. In his email of 30 July 2013 Mr Gillan advised Mr Chen that further work was required to discover “Monday to Friday (late night), Saturday, Sunday and Public Holiday rates under the National Fast Food Award 2010”; but Mr Chen, in his email of 31 July 2013, instructed Mr Gillan not to undertake work to identify those rates.[39] I have already found, however, that by the time he sought Mr Gillan’s advice on 26 July 2013 Mr Chen believed or suspected that an award or awards applied to Chatime’s employees, that Chatime was not purporting to pay its employees amounts by reference to any award, and that he had decided to obtain legal advice about what award or awards applied so that Mr Chen could determine what amounts Chatime should be paying to its employees under the award or awards that applied to them. It is therefore likely, and I find, that Mr Gillan’s email of 30 July 2013 confirmed Mr Chen’s suspicion or belief that an award applied to Chatime’s employees, and that Mr Gillan advised Mr Chen that the Award applied. In light of the information Mr Chen gave during a presentation on 12 September 2013 (to which I refer below), which included information of rates payable under an award, it is open to find, and I find, that after Mr Chen received Mr Gillan’s advice, Mr Chen calculated the rates on an hourly basis he considered were payable under the Award to Chatime’s employees.
[38] Affidavit of L B Chen, [13]
[39] Affidavit of L B Chen, [12]; exhibit “FWO-1”
I do not accept Mr Chen’s evidence that he asked to meet Chatime’s directors for the purpose of discussing his belief that Chatime was not complying with the Award. As will appear later at the presentation Mr Chen gave on 12 September 2013, Mr Chen presented his calculations of the amounts he believed Chatime was required to pay its employees under the Award. Mr Chen presented two costing models, one that was predicated on Chatime fully complying with the Award, and one that was predicated on Chatime not complying with the Award. If, as Mr Chen deposes, he asked to meet Chatime’s directors to discuss his belief that Chatime was not complying with the Award, Mr Chen would have restricted his presentation to a scenario that involved Chatime fully complying with the Award.
12 September 2013 - presentation
On 12 September 2013 Mr Chen gave a presentation to Mr Zhao, Ms Qian, and two Chatime employees, Ms Ferrao and Mr Wang.[40] Mr Chen’s presentation was accompanied by Microsoft PowerPoint slides titled “Store Staff Pay Restructure Discussion”.[41] The PowerPoint slides are as follows:
[40] Statement of Claim, [76]; Defence, [76]
[41] Statement of Claim, [76]; Defence, [77]; affidavit of L B Chen, [15], exhibit “FWO-1”, tab 2
(a)A slide headed “Factsheet: current”. This identified the number of employees; the annual store gross wages; the percentage of sales accounted for by those wages; the annual paid hours; the average gross hourly rate; and the annual cost of trainees.
(b)A slide headed “Factsheet: issues”. It referred to “staff retention”, “ability to attract quality staff”, “costs of trainee”, “compliance”, and “administration”.
(c)A slide headed “Factsheet: award rate”. It recorded the job classifications of “manager”, “senior manager”, “senior staff”, “staff”, “trainee I”, and “trainee II”, and the rates attached to these positions. Different rates were assigned to each position, and the rates differed between corresponding positions according to whether the position was in Sydney or in Melbourne, and whether the amount was paid through a bank or in cash. The respondents admit that this part of the slide displayed the hourly rates Chatime was paying to its employees at the time, both by bank transfer and in cash.[42]
[42] Statement of Claim, [78(a)]; Defence, [78(a)]
(d)The slide headed “Factsheet: award rate” also recorded rates, but these rates were assigned to the job classifications of “manager”, “supervisor”, and other classifications identified by age ranging from 21 years to under 16 years of age. The rates as between each classification differed according to whether the position was full-time or part-time, on the one hand, and casual, on the other; and whether the work was performed after 9 pm and after 12 midnight on Mondays to Fridays, or on Saturdays or Sundays or on “PH” (that is, public holidays).
(e)A slide headed “costing model” (Costing Model A) which contained the following amounts and descriptions:

Amount Particulars

$1,700,000 BASE: Current store staff annual gross pay

$318,203 + minimum award rate of $17.98

$23,010 + uniform allowance ($1.25 per shift)

$328,260 + casual rate 23%

$218,217 + weekend penalty (Saturday & Sunday)

($36,445) − scrap bonus

($55,125) − 15 mins unpaid break

($20,102) − pay all trainees in cash

$78,844 + payroll on costs

$854,862 Total Net costs

$2,554,862 NEW BASE

The respondents admit that this slide explained that paying minimum award rates, a uniform allowance, casual loading, and weekend penalties (while removing a bonus and a 15 minute unpaid break, and paying trainees in cash) would add $854,862 to Chatime’s store staff annual net pay.[43]
[43] Statement of Claim, [79]; Defence, [79]
(f)A slide headed “Funding model”, which recorded the following details:

Amount Particulars

$854,862 Total Net costs

$641,000 + 10% retail price

$282,000 + 10% wholesale price

$72,000 + royalty & marketing increase

$995,000 total increase

$140,000 funding surplus

(g)A slide headed “Costing model B” (Costing Model B), which was as follows:

Amount Particulars

$1,700,000 BASE: Current store staff annual gross pay

$318,203 + minimum award rate of $17.98

$23,010 + uniform allowance ($1.25 per shift)

($36,445) − scrap bonus

($55,125) − 15 mins unpaid break

($20,102) − pay all trainees in cash

$24,717 + payroll on-costs

$254,258 Total Net costs

$1,954,258 NEW BASE

The respondents admit that this slide explained that paying only minimum award rates and a uniform allowance (while removing a bonus and a 15 minute unpaid break, and paying trainees in cash) would add $254,258 to the Chatime’s store staff annual net pay.[44]
[44] Statement of Claim, [81]; Defence, [81]
(h)A slide headed “Funding model B”, which is as follows:

Amount Particulars

$254,258 Total Net costs

$320,500 + 5% retail price

$141,000 + 5% wholesale price

$36,000 + royalty & marketing increase

$497,500 total increase

$243,242 funding surplus

(i)A slide headed “Implementation plan”, which is as follows:
·Early November briefing
·1 January 2014 commencement
·Update staff rate & sell price
·Trainee paid all in cash
·Award rate limited to ‘bank’ hours
·Existing cash rate applies to ‘cash’ hours

On or around 12 September 2013 Mr Chen gave a presentation to Mr Zhao, Ms Qian, her husband, Mr Wang (general manager of the warehouse), and Ms Ferrao (Chatime’s Head of Operations) “about the requirements of the Award and what was required for compliance” [45] Mr Chen deposes:[46]
I cannot now recall the exact words or the effect of the words I spoke. However [I] told them that I had received advice from a lawyer, and we are bound to follow it. I told them that what we were paying the staff was not only low, but also unlawful and we needed to fix it. I told them that it was lower than the minimum wage rate under the Award. At this meeting I let everyone know that I had received external legal advice regarding the Award.
[45] Affidavit of L B Chen, [14]
[46] Affidavit of L B Chen, [14]
Mr Chen further deposes as follows:
(a)When he displayed the slide headed “Costing model” (being Costing Model A I defined above), Mr Chen said that “this is what the Fast Food Award will require us to pay, this is the right way”; Chatime needed to stop paying trainees in cash; that what Chatime was doing “was unlawful and if we are going to continue to grow we will have to do the right thing”; and that “Costing model A would cost Chatime around $855,000 per year if Chatime complied with the Award”.[47]
(b)Mr Chen said that “if we are not to adopt Costing Model A, Costing Model B would be the second-best option for the company”, after which Mr Chen says he presented the slide headed “Costing model B” which “detailed only paying minimum Award rates and uniform allowance but not pay casual loading or weekend penalty rates, and removing bonuses and 15 minutes unpaid breaks”.[48]
(c)Mr Chen presented Costing Model B because he “did not believe that they [the board] would have accepted Costing Model A”.[49]
(d)When he presented the slide headed “Costing model B” Mr Chen said it was “a partial compromise”; it was only a “partial compliance with the Award”; that “if we are not to adopt Costing Model A, Costing Model B would be the best option for the company”; Costing Model B was not full compliance with the Award; and that Chatime would continue to employ casuals and engage people to work on weekends, but they would not be paid casual loading or weekend penalty rates.[50]
(e)Mr Zhao gave no feedback about Costing Model A but, after Mr Chen finished presenting Costing Model B, Mr Zhao asked Mr Chen how quickly Mr Chen would be able to implement “the offsetting initiative”. Mr Chen says he does not remember how he responded to this question, but he says that he remembers that “the original plan was to implement Costing Model B from 1 January 2014”.[51] At the end of the presentation Mr Zhao and Ms Qian said they were happy to sign off to implement Costing Model B.[52]
[47] Affidavit of L B Chen, [18]
[48] Affidavit of L B Chen, [19]
[49] Affidavit of L B Chen, [19]
[50] Affidavit of L B Chen, [20]
[51] Affidavit of L B Chen, [23]
[52] Affidavit of L B Chen, [24]
In evidence given under cross-examination Mr Chen accepted that the presentation of 12 September 2013 was the first occasion, after he received Mr Gillan’s advice, on which he raised the issue of wage rates;[53] and Mr Chen also accepted that he did not know whether Chatime’s directors would agree with his suggestion that Chatime should be paying the amounts he calculated it ought to pay under the Award.[54] Mr Chen also gave the following evidence:[55]
If you didn’t know that – if you didn’t know whether they would agree with you or not, there was no reason for you to present a model that did not comply with the award; correct?‑‑‑Can you rephrase that question again.
If you did not know whether the directors would agree with you, there was no reason to present a model that did not comply with the award; correct?‑‑‑Sorry, I – I will ask you to repeat that question again. I don’t .....
Mr Chen, are you having difficulty hearing me?‑‑‑No. I don’t have difficulty hearing you. I just find the questions ‑ ‑ ‑
Can I ask you to answer the question, please?‑‑‑Yes. I’m trying to understand the question, Mr Mahendra.
Well, I’ve asked it twice now, Mr Chen. I think you can answer it. Please answer the question?‑‑‑I don’t understand the question. I can’t answer a question that I don’t understand.
Mr Chen, you’re being evasive, aren’t you?‑‑‑No, absolutely not.
. . . .
Mr Chen, if your starting point is you did not know whether the directors would agree to comply with the award or not, you agree, don’t you, that there was no reason to present a model that did not comply with the award; correct?‑‑‑Incorrect.
[53] T34.25
[54] T34.30
[55] T34.30-T35.25
I do not accept Mr Chen’s evidence that he prepared and presented Costing Model B because he “did not believe that they [the board] would have accepted Costing Model A”.[56] Nor do I accept that Mr Chen had prepared two costing models for the purpose of providing the directors of Chatime with two options, one of which was predicated on Chatime making all the payments it was obliged to make under the Award, and the other predicated on Chatime making only some of the payments it was obliged to make under the Award.
(a)Mr Chen accepted in cross-examination that he did not know whether Chatime’s directors would agree to Chatime paying its employees the amounts it was required to pay under the Award. Thus, it is difficult to understand why Mr Chen would provide a costing model that was predicated on Chatime not complying with the Award.
(b)If Mr Chen believed that Chatime’s directors would not agree to Chatime paying its employees the amounts required under the Award, it is difficult to understand why Mr Chen also prepared a costing model that reflected the amounts he had calculated Chatime would be required to pay under the Award.
(c)The slide headed “Implementation plan” assumes that Costing Model B, not Costing Model A, would be implemented; and that is because the “Implementation plan” stated that the “Award rate” would be “limited to ‘bank’ hours”, and the “Existing cash rate” would apply to “‘cash’ hours”. If, as Mr Chen deposes, he had prepared Costing Model A and Costing Model B to provide the directors of Chatime with a choice between complying with all provisions of the Award (Costing Model A) and complying only with some of those provisions (Costing Model B), Mr Chen would not have presented an implementation plan for only one of the costing models, being Costing Model B.
[56] Affidavit of L B Chen, [19]
The evidence does not permit me to make any finding about why Mr Chen prepared two costing models, and it is not necessary that I make any such finding.
In cross-examination Mr Chen was taken to a transcript of answers he had given in an examination conducted by a Deputy Fair Work Ombudsman (DFWO) on 20 June 2018.[57] Mr Chen accepted that in the examination:
[57] The transcript of the interview was not tendered in evidence, but I have marked it “MFI1” in chambers
(a)Mr Chen said that during the presentation of 12 September 2013 he said that “this is what the fast food award will require us to pay”, and that “this is the right way”.[58]
[58] T36.15
(b)Mr Chen told the DFWO that:[59]
[59] T36.40
What I was more interested about is to get buy-in, because when I presented that, I don’t know the confidence level whether I would get the directors to agree or not. Either, “Yes, I love your idea, Lawrence,” or, “We don’t – we don’t want to hear about that.” So my main focus was to get the buy-in to say, “We want to do something about this.”
(c)The DFWO asked Mr Chen whether at the 12 September 2013 presentation he referred to the advice he received from Mr Gillan, and Mr Chen had answered “honestly, I don’t recall”.[60]
(d)The DFWO told Mr Chen that he had stated that he had gained the impression that “Iris [Qian] and Charlie [Zhao]” were open to adopting Costing Model B;[61] and, in response to the DFWO’s question about what gave Mr Chen that impression, Mr Chen said:[62]
Because there was simply no feedback or eye contact on costing model A. And the second thing I could see was the amount and the magnitude I was telling them earlier. This would be almost a million dollars cost to cover model A, and the fact that the company was only doing a $50,000 profit a month in a good month, this means, in a best year, you would be making $600,000 profit, so this would make them fall off the chair. Why my CFO or head of finance would want me to do something that put me from a profitable company to a loss. So I was – I was have a muted receptions on costing model B.
(e)Mr Chen told the DFWO that the facial expression of the directors when he presented Costing Model B indicated they started to pay attention to it, and “there were discussions that flowed soon after . . . costing model B. A lot . . . more evident than anything [Mr Chen] said in the initial model”;[63] and Mr Chen also recalled describing to the DFWO the gist of the discussions as follows:[64]
For instance, they would look at a slide, they would look at this be implemented and when and how quickly can you implement the offsetting initiative? What is the price increase for retail and the price increase for wholesale?
[60] T37.20
[61] T38.30
[62] T38.45
[63] T39.15
[64] T39.30

Also in evidence given under cross-examination Mr Chen said his motive in giving the presentation was to “instil changes”;[65] and that the directors did not give any negative feedback about Costing Model A.[66]
[65] T37.1
[66] T39.5
In his affidavit Mr Chen said he “prepared the PowerPoint slides by looking up the Award rates and [Mr Chen] prepared the calculations based on the Award and the advice [Mr Chen] received from Mr Gillan”.[67] In evidence given under cross-examination, however, Mr Chen said he did not calculate the rates.[68] When asked who calculated the rates Mr Chen said he did not recall,[69] but then said he obtained them either from Mr Gillan or from the FWO.[70] Later Mr Chen said that the $17.98 rate was contained in the “Fast Food Award table”, but after it was put to Mr Chen that the Award provided weekly rates of pay, Mr Chen said Mr Gillan provided the $17.98 rate to Mr Chen;[71] and Mr Chen also accepted that he went to the FWO website to work out how much it would costs to include all the rates provided for by the Award.[72] When Mr Chen was asked whether he obtained any opinion as to which parts of the Award applied to Chatime, Mr Chen said he “really struggle[d] to answer [the cross-examiner’s] questions, because the only one aim [Mr Chen] was seeking . . . from Mr Gillan is which award . . . applies to Chatime”.[73] After Mr Chen accepted that the only advice he received from Mr Gillan was what award applied,[74] Mr Chen did not accept it was up to him to work out which parts of the Award were relevant to Chatime; Mr Chen said it was “up to the directors to work out”;[75] yet Mr Chen also accepted that when preparing the presentation he was trying to work out what part of the Award applied to Chatime.[76] Mr Chen also accepted that he did not know what parts of the Award applied to Chatime, but he was doing his best to work out what applied, and what did not apply.[77]
[67] Affidavit of L B Chen, [15]
[68] T40.20; T41.15
[69] T41.15
[70] T41.15
[71] T41.40
[72] T42.1
[73] T42
[74] T42.20
[75] T42.25
[76] T42.35
[77] T44.5
I do not accept the account Mr Chen gives in his affidavit of what occurred during his presentation of 12 September 2013.
(a)Mr Chen’s evidence is inconsistent with what he told the DFWO occurred at the presentation. Mr Chen told the DFWO that what he was “more interested about” was to get “buy-in” because he said he did not know whether he would “get the directors to agree or not”; while the impression Mr Chen gives in his affidavit is that he told the directors that Chatime was not complying with the Award, and that it was required to comply with the Award. Mr Chen also told the DFWO that he could not remember whether he informed the directors that he had obtained legal advice, but in his affidavit Mr Chen says he did tell the directors he had obtained legal advice and, moreover, that Chatime was bound to follow it.
(b)Mr Chen’s evidence is inconsistent with the slides he presented at the meeting. If, in truth, Mr Chen’s purpose in requesting and making the presentation were to advise the directors that Chatime must comply with the Award, there would have been no reason for Mr Chen to prepare and present Costing Model B.
(c)Mr Chen’s evidence is inconsistent with the slide titled “Implementation plan”. As I have already noted, the plan contemplated that Chatime would implement a plan where it would pay wages at the “award” rate, but the award rate would be limited to “bank” hours, namely, to partial compliance with the Award. In other words, the “Implementation plan” contemplated the implementation of Costing Model B. If, in truth, Mr Chen informed the directors Chatime was required to pay its employees at the Award rates, he would not have presented to the directors an implementation plan that was predicated on Chatime not making all of the payments that Mr Chen had calculated Chatime was required to make under the Award.
(d)Quite apart from these matters, the evidence Mr Chen gave in cross-examination lead me to find that he is not a witness on whom I could safely rely. In the course of Mr Chen’s cross-examination in relating to wage rates that I have set out in paragraph 34, for example, Mr Chen accepted but then denied or did not recall he calculated rates payable under the Award; and he agreed but then rejected that it was his role to determine which parts of the Award applied to Chatime’s business.
Even though I do not accept Mr Chen’s evidence, it is the case that the respondents admit that on 12 September 2013 Mr Chen gave a presentation to Mr Zhao, Ms Qian, Mr Wang, and Ms Ferrao by reference to the PowerPoint slides. Given these admissions, and the contents of the PowerPoint slides, it is reasonably open to find as follows:[78]
[78] I explain in paragraph 112 of these reasons why I have not made findings of fact in relation to the FWO’s case against Mr Zhou, but limit myself in these reasons for judgment to determining whether it is reasonably open to make findings that are relevant to the FWO’s case against Mr Zhou.
(a)As of 12 September 2013 Chatime was not paying its employees amounts calculated by reference to any award. The basis on which such inference is reasonably available to be made is the slide titled “Factsheet: award rate”. That document records what the respondents admit are the rates Chatime paid its employees; but the document also purports to record amounts payable under an award, including rates for working after 9 pm and 12 am, and rates for working on Saturdays, Sundays, and public holidays; and these are different from the rates the “Factsheet: award rate” shows Chatime was then paying its employees. These matters reflect the allegations made in paragraph 78 of the statement of claim.
(b)On 12 September 2013 Mr Chen presented to Mr Zhao, Ms Qian, Mr Wang, and Ms Ferrao two costing models – Costing Model A and Costing Model B - that referred to “award” rates Chatime may pay. Costing Model A assumed Chatime would pay a “minimum award rate of $17.98”, which would require Chatime to pay an extra $318,203 in wages; a “uniform allowance” of $1.25 per shift, which would require Chatime to pay an extra $23,010 in wages; a “casual rate” of 23%, which would require Chatime to pay an extra $328,260; and a “weekend penalty (Saturday & Sunday)”, which would require Chatime to pay an extra $218,217 in wages. Costing Model B, on the other hand, assumed Chatime would pay the “minimum award rate of $17.98”, which would require Chatime to pay an extra $318,203 in wages; and a “uniform allowance” of $1.25 per shift, which would have required Chatime to pay an extra $23,010 in wages; but Costing Model B did not include a “casual rate” of 23%, which would require Chatime to pay an extra $328,260; and a “weekend penalty (Saturday & Sunday)”, which would have required Chatime to pay an extra $218,217 in wages. These matters substantially reflect the allegations made in paragraph 78 and 79 of the statement of claim.
(c)During the presentation Mr Chen identified the Award by name. The basis on which such finding would reasonably be open to be made is, first, Mr Chen prepared the slides and gave the presentation; and, second, before he gave the presentation, Mr Gillan had advised Mr Chen that the Award applied to Chatime’s employees.
(d)Given that Mr Zhao attended the presentation, Mr Zhao became aware of, and believed the matters referred to in (b) and (c). On the basis of that awareness, Mr Zhao also became aware of and believed in the truth of representations to the following effect:
(i)the Award applied to Chatime’s employees;
(ii)Chatime has employees that work part-time, full-time, and as casuals;
(iii)Chatime’s employees work, or may work, at times that included before and after 9 pm on Mondays to Fridays, after 12 pm on Mondays to Friday, and on Saturdays, Sundays, and public holidays;
(iv)the Award provided for the payment of different rates of pay depending on whether Chatime’s employees worked full-time and part-time, on the one hand, or casual, on the other; or on whether they worked before or after 9 pm on Mondays to Fridays, or after 12 pm on Mondays to Fridays, or on Saturdays, Sundays, and public holidays;
(v)Costing Model B contemplated that Chatime’s employees would be engaged at what was represented to be the minimum hourly rate payable under the Award, together with what was purported to be a uniform allowance per shift; and that Chatime’s employees would be so engaged at that rate whether they worked before or after 9 pm on Mondays to Fridays, or after 12 pm on Mondays to Fridays, or on Saturdays, Sundays, and public holidays.
(e)Mr Chen presented the costing scenarios for the purpose of recommending to and seeking the approval of Mr Zhao, Ms Qian, Mr Wang, and Ms Ferrao that Chatime implement Costing Model B. The bases on which this inference is available to be drawn is the “Implementation plan”, and in particular its reference to the “award rate” being “limited to ‘bank’ hours”; the respondents’ allegation that Mr Chen was the architect of the “Factsheet: award rate” and Costing Model;[79] and the respondents’ allegation that Chatime relied on Mr Chen’s advice and recommendations in implementing a non-compliant approach to paying staff.[80]
(f)On 12 September 2013, during or after Mr Chen completed his presentation, Mr Zhao, Ms Qian, Mr Wang, and Ms Ferrao accepted Mr Chen’s recommendation that he implement the plan that Mr Chen outlined in the “Implementation plan”, being Costing Model B; and Mr Zhao and Ms Qian, or in the alterative Mr Zhao, Ms Qian, Mr Wang, and Ms Ferrao, authorised Mr Chen to implement the “Implementation plan”. The bases on which such inference may reasonably be drawn are the matters identified in (e); and the email Mr Chen sent to Mr Zhao, Ms Qian, Mr Wang, and Ms Ferrao on 12 September 2013.
[79] Defence, [80]
[80] Defence, [80]
12 September 2013 – Mr Chen sends email identifying key dates and milestones
At 6.42 pm on 12 September 2013 Mr Chen sent the following email to Ms Zhao, Ms Qian, Mr Wang, and Ms Ferrao:[81]
[81] Affidavit of L B Chen, [23]; Affidavit of L B Chen exhibit “FWO-1”, tab 3
As discussed this afternoon, I outline below key dates & milestones which are dependencies for the pay restructure implementation:
·By 26 September - Retail menu consolidation completed with Purchasing Dept notified (Alison & Karen)
·By 4 October - Purchasing Dept completed forward planning (Clark)
·By 11 October - Retail price increase determined at product level with Purchasing & Finance Dept notified (Alison)
·By 18 October - Wholesale price increase determined at product level with Finance Dept notified (Clark)
·By 25 October - Menu panel change costing estimate completed (Alison & Karen)
·By 25 October - Retail & wholesale price increase incorporated into Budget CY14 (Lawrence)
·By 31 October-Shift8 [sic] notified about retail price change effective 1 January 2014 (Clark)
·By 30 November - Store staff briefed regarding pay changes (Lawrence & Alison)
·By 30 November - Franchisees briefed about both retail & wholesale price rise (Iris/ Alison/Clark/whoever willing to put their hand up)
·By 30 November - Shift8 completed & tested retail price change to be effective from 1 January (Clark)
·By 31 December - Staff pay rate updated in ADP (Lawrence & Aileen)
·By 31 December - Wholesale sell price updated in MYOB (Lawrence & Bonnie)
·By 31 December - Wholesale order form updated & sent to all franchisees & warehouse (Lawrence & Bonnie)
Please let me know if I might have missed any items. I suggest we discuss this topic in our weekly Monday morning meeting.
Also enclosed is the slide I presented this afternoon for your record. As this is a sensitive matter, please do not cascade/share any further.
February 2014 - Implementation of proposal and Mr Chen’s resignation
According to Mr Chen by February 2014 Chatime implemented the proposal to which Chatime’s directors agreed on 12 September 2013.[82] Mr Chen further says that in the middle of February 2014 Mr Chen spoke to Mr Zhao and to Ms Qian, telling them that he had finished the project as instructed, but he did not the like the outcome because “we are basically half-pregnant”. Mr Chen told Mr Zhao and Ms Qian that “you are either pregnant or not pregnant and we are half-pregnant because we are not complying with the Award”. Mr Chen further says that he told Mr Zhao and Ms Qian the he could not see how he could continue to work in the company, and he “then tendered” his resignation a week after that discussion.[83]
[82] Affidavit of L B Chen, [28]
[83] Affidavit of L B Chen, [32]
I do not accept this part of Mr Chen’s evidence. First, it is implausible. Mr Chen, over two months, implements a plan he considered did not comply with the Award; and yet, immediately after he implements the plan, Mr Chen says he resigned because the plan, which he implemented did not comply with the Award. Second, I have already found that it was Mr Chen who had proposed that Chatime implement Costing Model B. It is implausible that Mr Chen would resign because he had implemented a plan he himself had recommended Chatime adopt. Third, in evidence given under cross-examination, Mr Chen did not accept that he resigned from Chatime because he was concerned that Chatime was not complying with the Award.[84] That is inconsistent with the evidence Mr Chen gave in his affidavit to the extent Mr Chen intended to convey that he decided to resign from Chatime because Chatime was not complying with the Award.
[84] T92.30
In any event, the respondents admit that from 12 September 2013 to in or about February 2014 Mr Chen took steps to implement “Costing Model B” and announce it to Chatime’s employees at the New South Wales and Victoria stores.[85] Further, the respondents admit that from in or around late February 2014 until 25 December 2016 (being the end of the “relevant period” I identify at the beginning of these reasons), Mr Zhao did not authorise or direct any change to the way Chatime paid its employees.[86]
[85] Defence, [83(c)]
[86] Defence,[86]
January 2016 – Mr Chen re-employed by Chatime
Between about April 2014 and August 2014 Mr Chen worked for his former employee, Harris Farm Market; and between about September 2014 and April 2016 Mr Chen was employed by Goodman Fielder as a commercial manager.[87]
[87] Affidavit of L B Chen, [33]
According to Mr Chen in January 2016 he had dinner with Mr Zhao and Mr Antonius. Mr Zhao and Mr Antonius asked Mr Chen to join Chatime once again. Mr Zhao told Mr Chen that “[w]e are now paying people correctly”. Mr Chen understood this to mean that “Chatime was now fully compliant to [sic] the Award and no longer using Costing Model B”.[88] Mr Zhao told Mr Chen that Mr Antonius would be the general manager, and “Cheryl” (being Ms Cheryl Shen), who had implemented a new system for payroll, would be head of human resources.[89] Mr Chen deposes that, “[a]fter hearing that Chatime was now compliant with the Award, [he] recommenced working for Chatime on 18 April 2016” as the Chief Financial Officer.[90]
[88] Affidavit of L B Chen, [34]
[89] Affidavit of L B Chen, [35]
[90] Affidavit of L B Chen, [36]
In evidence given under cross-examination Mr Chen accepted that the effect of what he had deposed in his affidavit was that one of the reasons he recommenced his employment with Chatime was that Chatime was complying with the Award; but Mr Chen did not accept that was because compliance with the Award was of a concern to Mr Chen.[91] Mr Chen also accepted that, when Chatime initially employed him, he managed the functions of payroll, payments analysis, and financial reporting; and he was responsible for human resources;[92] but in his newly commenced role of chief financial officer he was not required to look after human resources.[93]
[91] T93.5
[92] T94.10
[93] T95.5
I do not accept Mr Chen’s evidence that during his dinner with Mr Zhao and Mr Antonius, in January 2016, Mr Zhao told Mr Chen that “[w]e are now paying people correctly”. First, Mr Chen does not give evidence of how the question of Chatime’s payment of its employees became the topic of conversation. Second, and more significantly, contemporaneous evidence to which I will refer below shows that by 24 February 2017 Mr Chen was made aware that Chatime had a serious non-compliance issue in relation to the payment of wages to its employees, and that Mr Chen was actively involved in remedying that issue; yet Mr Chen gives no evidence that he told anyone that Mr Zhao and Mr Antonius had previously told him that Chatime was paying it people “correctly”; nor does he give evidence that he told anyone that he had believed that Chatime was paying its people “correctly” and, for that reason, had been led to believe that Chatime was paying its people “correctly”.
March 2016 – Mr Chen claims he was told EBA fully compliant
According to Mr Chen in March 2016, before he recommenced his employment with Chatime, Mr Chen attended Chatime’s annual conference. Mr Chen recalls Mr Zhao, Ms Qian, Mr Wang, and Ms Shen told him that Chatime had an Enterprise Bargaining Agreement (EBA), and that it was “fully compliant with the Award”.[94] I do not accept this evidence. There is no evidence Chatime was a party to any EBA and, for that reason, it is unlikely that Mr Zhao, Ms Qian, Mr Wang, and Ms Shen would have informed Mr Chen that Chatime was a party to an EBA. Further, as I set out later in these reasons, Mr Chen says that on 24 February 2017 he became aware that Chatime was not a party to any EBA.[95] There is no evidence, however, that Mr Chen had told anyone that Mr Zhao had told him in March 2016 that Chatime was a party to an EBA that was “fully compliant with the Award”.
[94] Affidavit of L B Chen, [46]
[95] Affidavit of L B Chen, [52[
Mid-June 2016 – Mr Chen asks for EBA
In paragraph 48 of his affidavit, being a paragraph of Mr Chen’s affidavit counsel for the FWO did not read, Mr Chen deposed that from mid-June 2016 he “frequently asked Ms Shen and Mr Antonius for a copy of the EBA”, but they did not provide him with the EBA. I mention this part of his affidavit because Mr Chen was cross-examined on the assumption that he had given such evidence:[96]
When you started in the role . . . as the chief financial officer? - In 2016.
Yes?‑‑‑So can you repeat that question again, sorry, I just can’t remember ‑ ‑ ‑
In 2016 in respect of your role as CFO, you say, you would no longer have to look after HR, correct?‑‑‑Correct.
So you wouldn’t have been concerned about award compliance if it wasn’t your responsibility, correct?‑‑‑Correct, yes, correct, yes.
And it wasn’t a concern to you in 2016, was it?‑‑‑Correct.
. . . . If award compliance was of no concern to you in 2016, why did you ask for a copy of the EBA several times?‑‑‑Yep. Two reasons. My staff look after payroll. And I often get asked by my staff to ensure that all the payments is, would be done correctly. So that is one reason. Two, we often have issue with complaints from [staff] and operations, other departments that finance, have processing incorrectly. So the aim from that question is to ensure that we would pre-empt unnecessary complaints from the other departments that we have done things improperly, incorrectly, and to ensure that we will withstand the performance expectation within the company. In other words, prevention.
So insofar as your role was concerned, is your evidence that you were asking for the EBA because you wanted to ensure other people were complying with their obligations?‑‑‑No. No
You simply wanted to know that they, what wage rates were being paid. Is that right?‑‑‑The matter of fact that, in 2016, the company culture is rather, was rather toxic. It was a lot of blaming, and my staff has been working under endless pressure to ensure that they don’t get sacked or they got marked down as non-performer. So the culture itself is the driver behind the fear that we do not want to make a mistake and therefore having a repercussion of being fired down the track.
[96] T95.20-T96.5

This part of Mr Chen’s evidence is inconsistent. On the one hand Mr Chen says that he wanted to have the EBA for a number of reasons, one of which was to ensure his staff made correct payments. On the other hand, when Mr Chen was questioned if he requested a copy of the EBA to ensure other people were complying with their obligations, Mr Chen answered “no”.
24 February 2017 – Ms Chen’s conversation with Ms Wojciechowski
According to Mr Chen on 24 February 2017 he received a telephone call from Ms Wojciechowski who conducted a business under the name of “Employment Innovations”. Ms Wojciechowski asked Mr Chen whether he was aware that Chatime “has been underpaying its employees”. Mr Chen says he responded by saying that he had “been suspecting it for many months”, that he had been told Chatime had an EBA, and that he had asked to see it but he had not seen it. Ms Wojciechowski told Mr Chen there was no EBA.[97] After that discussion, Mr Chen says he spoke to Ms Shen who told him she thought “EBA meant employment agreement”.[98]
[97] Affidavit of L B Chen, [52]
[98] Affidavit of L B Chen, [53]
I do not accept this evidence.
(a)I have not accepted Mr Chen’s evidence that he had been told that Chatime was a party to an EBA. It is therefore unlikely Mr Chen would have had a discussion with Ms Wojciechowski about any EBA.
(b)It is implausible that an employee in the position of Mr Chen would have asked for an EBA, but not be provided with it. For that reason, it is unlikely Mr Chen would have told Ms Wojciechowski that he had asked to see the EBA, but he had not seen it.
(c)Mr Chen does not say what Ms Wojciechowski said about the nature and extent of the underpayments; and Mr Chen does not give evidence that he made any enquiries of Ms Wojciechowski about the nature and extent of the underpayments. If Ms Wojciechowski had indeed asked Mr Chen whether he was aware Chatime was underpaying its employees, it is reasonable to expect that Mr Chen would have asked Ms Wojciechowski what underpayments she was referring if only to determine whether they reflected the underpayments Mr Chen says he had been suspecting “for many months”.
(d)Mr Chen does not refer to attending the meeting to which Ms Wojciechowski referred in an email she sent on 24 February 2017 to Mr Zhao, Mr Antonius, Ms Shen, and Mr Chen.[99] That email (which I reproduce below) suggests, and I find, that on 24 February 2017 Mr Zhao, Mr Antonius, Ms Shen, and Mr Chen met with Ms Wojciechowski who informed those present that she had identified a “serious non-compliance issue” with Chatime’s corporate stores, and suggested a number of potential solutions. That email suggests that Ms Wojciechowski first informed Mr Chen of compliance issues at the meeting of 24 February 2017, not in a telephone conversation, as Mr Chen in his evidence implies.
[99] Affidavit of M Chapman, exhibit MC-1, page 196
24 February 2017 –Ms Wojciechowski sends email
On 24 February 2017 Ms Wojciechowski sent an email Mr Zhao, Mr Antonius, Ms Shen, and Mr Chen in which she stated (emphasis in original):[100]
[100] Affidavit of M Chapman, exhibit MC-1, page 196
Hi All,
Good to meet today.
Whilst we have identified a serious non−compliance issue with your corporate stores, the good news is it can be resolved, where there is willingness to do so.
As I mentioned, there are a number of options available to you to make it right − but we need to review the data to determine the best course of action. What is a given though, is that remedying the problem is going to incur an increase in wage costs to Chatime, irrespective of the solution deployed. However, this size of this cost will vary depending on the solution you pursue.
[To] recap, the solutions we discussed today are:
A. Pay against the award rate using the award interpretation functionality in your payroll system, or;
B. Transfer non-compliant employees to Employment Innovations, under the terms of our own Enterprise Agreement already in place, or;
C. Put in place a new Enterprise Agreement for Chatime.
Each of these solutions have their own advantages and disadvantages, and as I mentioned today, the direction you choose to take from these options then locks you into committing to that solution for the long−term: i.e. it becomes extremely difficult to switch between these options once started from an IR/legal standpoint.
[The] next steps are to send me roster data of three sample corporate stores and I'll run this our financial models to see how the numbers land and [to] facilitate clearer decision making.
In terms of your franchise stores, the solutions I'll be presenting to the network on Tuesday are primarily:
1. HR & payroll system (automatically using the Fast Food modern award) + access to the EI HR advice line: $250 + GST per month ongoing (additional implementation fees apply).
2. Put in place an Enterprise Agreement for an individual franchisee: $3,950 + GST
. . . .
March 2017 – calculation of amounts to render Chatime compliant
Sometime before 7 March 2017 Mr Chen sent data to Ms Wojciechowski that enabled Ms Wojciechowski to establish “the costs of operating compliantly under the Fast Food Modern Award vs operating under the terms of the Outsourced model with its underpinning Enterprise Agreement”.[101] In an email sent to Mr Chen and Ms Shen on 7 March 2017, Ms Wojciechowski referred to the data Mr Chen had provided, and, on the basis of that data, determined the total number of hours and the percentage of those hours that should be treated as overtime for part-time staff where they are deemed to have 10 ordinary hours per week. Ms Wojciechowski compared this with the “Enterprise Agreement in place under the Outsourced Employment model”. Ms Wojciechowski concluded that Chatime would be required, under the Award, to pay an additional $462,225 per year as opposed to under the “Outsourced Employment model”.[102]
[101] Affidavit of M Chapman, exhibit MC-1, page 323
[102] Affidavit of M Chapman, exhibit MC-1, page 323
On 9 March 2017 Mr Chen sent an email to Ms Wojciechowski in which he referred to a “good discussion yesterday”, noting that “we shall continue our discussion internally based on numbers I have crunched”.[103] Mr Chen asked three questions “in relation to outsourced employment”, but then noted that, “[a]s it stands, outsourced employment is only slightly cheaper than award model”; and that was because Mr Chen “crossed out the $462,225 savings claim” which had “2 fundamental calculation errors”.[104] Mr Chen informed Ms Wojciechowski, by email on 13 March 2017, that Chatime’s “senior management team including executive directors” had met on that day to “discuss the whole matter”.[105]
[103] Affidavit of M Chapman, exhibit MC-1, page 322
[104] Affidavit of M Chapman, exhibit MC-1, pages 322-323
[105] Affidavit of M Chapman, exhibit MC-1, page 321
On 14 March 2017 Mr Chen gave a presentation to Chatime.[106] Section 6 of the presentation was titled “New payroll process”.[107] The slide stated that “[a]s of 20 March 2017, all brewery staff paid under Fast Food Award”; “[a]nnualised cost before tax $500k~ plus one-off leave accrual adjustment $14k~”; and sets out a summary of “process change”.
[106] Affidavit of M Chapman, exhibit MC-1, page 232,
[107] Affidavit of M Chapman, exhibit MC-1, page 245
On 20 March 2017 Mr Chen sent an email to a number of people, including Ms Zhao, Ms Qian, Mr Antonius, and Ms Shen, to which he attaches “labour cost increase analysis based on week 10 actual on sample of 6 breweries”.[108] Mr Chen said that the “process itself has been very time consuming & complex hence it is 100% certain we will need a payroll software to interpret & calculate the Fast Food Award”. After setting out a table containing labour costs, Mr Chen stated:[109]
[108] Affidavit of M Chapman, exhibit MC-1, page 275
[109] Affidavit of M Chapman, exhibit MC-1, page 276
Over the course of this & next week, Ops, HR & Finance will be working closely to implement the following:
1.Turn on Fast Food Award in the system for fortnightly commencing 20 March 2017
2.Set up retail staff correctly in EI system with HR issuing amended employment agreement for every retail staff
3.Turn on time attendance function in every corporate brewery POS
4.Train T-legends & T-masters in Sydney & Melbourne on the new rostering, timesheet & payroll process
5.Uniformed communication to all retail staff regarding the change
If you have any questions, feel free to discuss.
In his affidavit Mr Chen says that in March 2017 he met with Mr Zhao, Mr Antonius, Ms Qian, Ms Shen, and Mr Nouri, Chatime’s Head of operations. Mr Chen deposes that he told the meeting that Chatime had been underpaying staff wages at a corporate level, and that Chatime needed “to implement this award as soon as possible” and that this would “have a financial impact on the Company”. Mr Chen said he “gave them an estimate of between $300,000 and $500,000 a year on a corporate store level”.[110] Mr Chen further deposes that at the meeting Mr Zhao directed Mr Chen to “implement this as soon as possible”, and that Mr Zhao said that he was “not happy about this information and that it will make Chatime’s financial results worse off”.[111]
[110] Affidavit of L B Chen, [54]
[111] Affidavit of L B Chen, [55]
It is apparent from the emails, to which I have referred above, that in March 2017 Mr Chen did meet with Chatime’s directors and executive staff; and he did so to deal with the “non-compliance” issue Ms Wojciechowski identified in her email of 24 February 2017. I do not accept, however, that in any such meeting Mr Chen said words to the effect he deposes he said, because they are not consistent with emails sent in March 2017. The emails make it clear that it was Ms Wojciechowski who communicated to Mr Chen, Mr Zhao, Ms Shen, and Mr Antonius the non-compliance issue, and she did so by no later than 24 February 2017 when she met with Mr Chen, Mr Zhao, Ms Shen, and Mr Antonius. The emails also make it clear that Mr Chen took the lead in obtaining data and undertaking calculations to determine which of the options that Ms Wojciechowski identified in her email of 24 February 2017 that Chatime should adopt. One of the options identified was to implement the Award. Mr Chen’s analyses resulted in an estimate of additional costs expressed in precise figures; the emails do not suggest any estimate in the range of between $300,000 and $500,000.
20 March 2017 – Chatime “switches” to Award
According to the minutes of the meeting of Chatime’s board of directors on 8 May 2017, the following was noted as an agenda item:[112]
Recent switch to Fast Food Award as of 20 March 2017 does not exempt the Board &the Company from underpayment liability of past wages paid. It is estimated liability of $4m-$6m will arise should this matter materialise which eclipses company total net equity.
[112] Affidavit of M Chapman, exhibit MC-1, page 450
On the basis of this evidence, I find that on or about 20 March 2017 Chatime decided to implement procedures that were intended to ensure that Chatime paid its employees that were covered by the Award according to the terms of the Award.
In a PowerPoint presentation Mr Chen made to Chatime on 11 April 2021, Mr Chen confirmed that “[s]tage 1 – identify shortfall (now complete)”.[113]
[113] Affidavit of M Chapman, exhibit MC-1, page 266
FWO’s investigations
On 20 July 2017 a number of Fair Work Inspectors (FWIs) made unannounced visits to a number of Chatime stores. Commencing on 20 August 2017, FWIs issued a number of notices to produce to Chatime, and Chatime produced documents in response to those notices. On 3 August 2018 Mr Zhao was interviewed by two FWI.
On 8 October 2018, a FWI issued to Chatime a notice under reg 5.05 of the Fair Work Regulations 2009 (Cth) in which the FWI recorded his findings that, from 1 August 2016 to 31 December 2016 (being the “relevant period” I identify at the beginning of these reasons), Chatime failed to make payments it was required to make under the Award in amounts totalling $176,469.45.[114] On 24 and 30 October 2018, and on 22 February 2019, Chatime provided to an FWI evidence of rectification of the underpayments.[115]
[114] Affidavit of M Chapman, [33]
[115] Affidavit of M Chapman, [34], [35]
disputes in relation to underpayments
As I noted earlier in these reasons, Chatime disputes three aspects of the FWO’s statement of claim.
Asserted Casual Employees
The first issue relates to the Employees who are identified next to numbers 141-145 and 147-152 in Part 3 of Schedule 1 to the statement of claim (being the “Asserted Casual Employees” I identify earlier in these reasons). The question is whether the Asserted Casual Employees worked reasonably predictable hours.
The FWO submits the Asserted Casual Employees did not work reasonably predictable hours. The FWO relies on evidence identified in annexure “A” to the FWO’s outline of closing submissions. The annexure identifies the hours, and the days on which, each of the Asserted Casual Employees worked. The FWO also relies on Chatime not producing any evidence of Chatime’s agreement under cl 12.2 of the Award with any of the Asserted Casual Employees specifying the matters stated in cl 12.2 of the Award.
I am satisfied on the basis of the evidence on which the FWO relies that each of the Asserted Casual Employees was not a Full-Time Employee, and did not work reasonably predictable hours and, for that reason, was a casual employee.
Classification of “Team Leader” and “Store Supervisor T Master”
The FWO alleges that the Employees Chatime classified as “Team Leader” and “Store Supervisor T Master” are properly classified under the Award as Level 3 employees. Chatime, however, denies this on the ground that these classes of employees were not in charge of any outlet.
The FWO relies on a document Chatime produced that describes the position of “Store Supervisor T Master”.[116] One of the listed responsibilities of a “Store Supervisor T Master” is standing “in as a store in charge in the absence of a store manager T-Legend”. The FWO submits this document manifests an intention that a “Store Supervisor T Master” has a responsibility to be in charge of the shop, at least where the “store manager T-Legend” was not available.
[116] Affidavit of M Chapman, exhibit MC-2, page 1491
I do not accept the FWO’s submission. Item B.3 of schedule B to the Award identifies a Fast Food Employee Level 3 as an “employee appointed by the employer to be in charge of a shop, food outlet, or delivery outlet”. Schedule B does not include a person who has not been appointed but who may, however, be in charge of a shop when the person who has been appointed to be in charge of a store – the “store manager T-Legend” – is not available. I therefore accept the respondents’ submission that “Team Leader” and “Store Supervisor T Master” are properly classified as Fast Food Employees Level 2.
Alleged rostering contravention
This issue relates to ten Part-Time Employees. The FWO has identified evidence that shows that each of these Employees were occasionally rostered for less than the minimum three hours.[117] I am satisfied on the basis of this evidence that the ten Part-Time Employees had each been rostered to work for less than three hours.
[117] Applicant’s Outline of Closing Submissions, annexure “B”
chatime’s contraventions
The respondents admit that, during the relevant period, Chatime paid each Employees a flat hourly rate for all hours worked during that period, the flat rates being those identified in a table that is schedule 1 to the statement of claim in the column headed “Pay rate”. [118] This does not reflect the structure of the payments the Award required Chatime to make to its employees, and by itself suggests Chatime contravened various provisions of the Award. More particularly, and given my conclusions in the previous section of these reasons, Chatime failed to comply with the Award as follows.
[118] Statement of claim, [18]; Defence, [18]
(a)Chatime failed to pay to the Adult Employees identified in Schedule 2 to the statement of claim the amounts it was required to pay under cl 17 of the Award.[119] Given I have concluded that “Team Leader” and “Store Supervisor T Master” are not Level 3 employees, the rates by reference to which the FWO has calculated the underpayments to those classes of employees will need to be amended to reflect the rates payable in relation to Level 2 employees. By failing to make the payments to the Adult Employees as it was required to make under cl 17 of the Award, Chatime contravened cl 17 of the Award and, therefore, s 45 of the FW Act.
[119] Statement of claim, [26]-[29]; Defence, [26]-[29]
(b)Chatime failed to pay to the Junior Employees identified in Schedule 3 to the statement of claim the rates it was required to pay under cl 18 of the Award.[120] Given I have concluded that “Team Leader” and “Store Supervisor T Master” are not Level 3 employees, the rates by reference to which the FWO has calculated the underpayments to those classes of Employees will need to be amended to reflect the rates payable in relation to Level 2 employees. By failing to make the payments to the Junior Employees as it was required to make under cl 18 of the Award, Chatime contravened cl 18 of the Award and, therefore, s 45 of the FW Act.
(c)I have found that Chatime engaged the Asserted Casual Employees as casual employees. It follows, therefore, that Chatime failed to pay the Casual Employees (being the Employees identified in schedule 4 to the statement of claim) the casual loading it was required to pay under cl 13.2 of the Award; and that the sum of the underpayments is $2,338.94. By failing to make the casual loading payments to the Casual Employees it was required to make under cl 13.2 of the Award, Chatime contravened cl 13.2 of the Award and, therefore, s 45 of the FW Act.[121]
(d)Chatime failed to pay to the Full-Time Employees and Part-Time Employees, and Casual Employees identified in schedule 5 to the statement of claim the Saturday Loading it was required to pay under cl 25.5(b) of the Award.[122] Given I have concluded that “Team Leader” and “Store Supervisor T Master” are not Level 3 employees, the rates by reference to which the FWO has calculated the underpayments for these classes of Employees will need to be amended to reflect the rates payable in relation to Level 2 employees. By failing to make the payments to the Employees identified in schedule 5 to the statement of claim, as it was required under cl 25.5(b) of the Award, Chatime contravened cl 25.5(b) of the Award and, therefore, s 45 of the FW Act.
(e)Chatime failed to pay to the Full-Time Employees, Part-Time Employees, and Casual Employees identified in schedule 6 to the statement of claim the Sunday Loading it was required to pay under cl 25.5(c) of the Award.[123] Given I have concluded that “Team Leader” and “Store Supervisor T Master” are not Level 3 employees, the rates by reference to which the FWO has calculated the underpayments for these classes of Employees will need to be amended to reflect the rates payable in relation to Level 2 employees. By failing to make the payments to the Employees identified in schedule 6 to the statement of claim, as it was required to make under r cl 25.5(c) of the Award, Chatime contravened cl 25.5(c) of the Award and, therefore, s 45 of the FW Act.
(f)Chatime failed to pay to the Full-Time Employees, Part-Time Employees, and Casual Employees identified in schedule 7 to the statement of claim the Public Holiday Penalty it was required to pay under cl 30.3 of the Award.[124] Given I have concluded that “Team Leader” and “Store Supervisor T Master” are not Level 3 employees, the rates by reference to which the FWO has calculated the underpayments for these classes of Employees will need to be amended to reflect the rates payable in relation to Level 2 employees. By failing to make the payments to the Employees identified in schedule 7 to the statement of claim, as it was required to make under cl 30.3 of the Award, Chatime contravened cl 30.3 of the Award and, therefore, s 45 of the FW Act.
(g)Chatime failed to pay to the Full-Time Employees, Part-Time Employees, and Casual Employees identified in schedule 8 to the statement of claim the 9:00 pm Midnight Loading it was required to pay under cl 25.5(a)(i) of the Award.[125] Given that I have concluded “Team Leader” and “Store Supervisor T Master” are not Level 3 employees, the rates by reference to which the FWO has calculated the underpayments for these classes of Employees will need to be amended to reflect the rates payable in relation to Level 2 employees. By failing to make the payments to the Employees identified in schedule 8 to the statement of claim, as it was required to make under cl 25.5(a)(i) of the Award, Chatime contravened cl 25.5(a)(i) of the Award and, therefore, s 45 of the FW Act.
(h)Chatime failed to pay to each of the five (Level 3) Employees identified in paragraph 51 of the statement of claim the Post-Midnight Loading it was required to pay under cl 25.5(a)(ii) of the Award.[126] By failing to make the payments to the Employees identified in schedule 8 to the statement of claim, as it was required to make under cl 25.5(a)(ii) of the Award, Chatime contravened cl 25.5(a)(ii) of the Award and, therefore, s 45 of the FW Act.
(i)Chatime failed to pay to the Full-Time Employees and Part-Time Employees identified in schedule 9 to the statement of claim the Overtime Rates it was required to pay under cl 26 of the Award.[127] Because I have concluded that “Team Leader” and “Store Supervisor T Master” are not Level 3 employees, the rates by reference to which the FWO has calculated the underpayments for these classes of Employees will need to be amended to reflect the rates payable in relation to Level 2 employees. By failing to make the payments to the Employees identified in schedule 9 to the statement of claim, as it was required to make under cl 25.6 of the Award, Chatime contravened cl 25.6 of the Award and, therefore, s 45 of the FW Act.
(j)Chatime failed to pay to the Full-Time Employees and Part-Time Employees identified in schedule 10 to the statement of claim the 17.5% annual leave loading it was required to pay under cl 28.3 of the Award.[128] Given I have concluded that “Team Leader” and “Store Supervisor T Master” are not Level 3 employees, the rates by reference to which the FWO has calculated the underpayments for these classes of Employees will need to be amended to reflect the rates payable in relation to Level 2 employees. By failing to make the payments to the Employees identified in schedule 10 to the statement of claim, as it was required to make under cl 28.3 of the Award, Chatime contravened cl 25.6 of the Award and, therefore, s 45 of the FW Act.
(k)Chatime, contrary to cl 12.5 of the Award, rostered the Part Time Employees, identified in schedule 11 to the statement of claim, to work less than three hours and were not paid for the minimum engagement of three hours. Chatime, therefore, contravened cl 12.5 of the Award and, for that reason, contravened s 345 of the FW Act.[129]
[120] Statement of claim, [30]-[33]; Defence, [30]-[33]
[121] Statement of claim, [34]-[36]; Defence, [34]-[36]
[122] Statement of claim, [37]-[40]; Defence, [37]-[40]
[123] Statement of claim, [41]-[44]; Defence, [41]-[44]
[124] Statement of claim, [45]-[47]; Defence, [45]-[47]
[125] Statement of claim, [48]-[50]; Defence, [48]-[50]
[126] Statement of claim, [51]-[55]; Defence, [51]-[55]
[127] Statement of claim, [56]-[58]; Defence, [56]-[58]
[128] Statement of claim, [59]-[61]; Defence, [59]-[61]
[129] Statement of claim, [62]-[64]; Defence, [62]-[64]

In the light of the Full Federal Court’s setting out of this passage, with apparent approval, it appears that the prevailing view among the justices of the Federal Court is the view Katzmann J expressed in Grouped Property Services that “[w]here 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”.
Mr Zhao submits that the view expressed by Katzmann J in Grouped Property Services is obiter, whereas in Potter, Cowdroy J relied on the view that it was necessary to prove knowledge of an award before a person could be held to be involved in a contravention of the award; and, for that reason, this Court is bound to follow Potter.[151] On a strict application of the principles of precedent, Mr Zhao is correct.
[151] Outline of Closing Submissions for the Respondents, [33]
System of non-compliance
There is another question that it would be appropriate to consider at this point; and that is the notion of a “system producing certain outcomes that constitute contraventions of the FW Act” (system of non-compliance) which Katzmann J considered in Grouped Property Services. In that case the FWO submitted that where a court finds a “system of non-compliance” with provisions of the FW Act, a person will be held to be involved in the contravening outcomes, resulting from the operation of such system, if the person has knowledge of the system without proof that the person knew the details of each particular outcome.[152] In a passage on which Mr Zhao particularly relies, Katzmann J deals with this submission as follows (Mr Zhao’s emphasis):
I accept the Ombudsman’s contention, as far as it goes. Mobilegate shows that, where an alleged accessory is aware of a system producing certain outcomes, and those outcomes constitute contraventions of the Act, it is unnecessary to show that the alleged accessory knew the details of each particular instance of those outcomes in order to show the requisite knowledge. As I will explain, reasoning of that kind allows me to conclude that certain arrangements put in place by Rosario, such as the sham contracting arrangements, were knowing and intentional means of avoiding paying certain entitlements, such as penalty rates and leave loadings. Provided he knew, for example, that an employee covered by the sham contracting arrangements worked on weekends, Rosario could be knowingly concerned in GPS’s failure to pay penalty rates notwithstanding that he may never have known on which weekends and for how many hours the employee worked.
But much of the Ombudsman’s submissions in this respect rose no higher than evidence that Rosario was told that GPS had failed to pay certain entitlements to certain employees on certain occasions, and thereafter failed to ensure that GPS paid the same entitlements to different employees on different occasions. Evidence of this nature is inadequate: the mere fact that Rosario was put on notice that a particular kind of contravention had occurred did not make him strictly liable for all similar contraventions occurring in the future. Nor does it give rise to an inference that he had actual knowledge of those later contraventions or of a “system of non-compliance”. Although, as I will explain, Rosario had ultimate control over the operations of the company, the evidence suggests that many aspects of the day-to-day running of it were handled by others such as Alfredo, Enrico, Ms Voytenko, Mr Modi and Mr Kanbar. Other aspects were delegated to the area managers and supervisors such as Mr Arguello, Ms Satchell and Ms Robinson. It is quite likely that many of the details of the operation, particularly relating to the rostering of staff, were left to these people and were unknown to Rosario.
. . . .
The result of the foregoing is that the Ombudsman’s case in relation to a “system of noncompliance” only got her so far. For many of the contraventions, it was also necessary to show that Rosario knew something of the circumstances of the employees in question: for example, that the employees had actually worked shifts that entitled them to the allowances that GPS had failed to pay. In some instances the Ombudsman identified evidence of this nature, relating to the cases of one or more employees. Where she did, I have referred to these submissions and generally limited my consideration to the cases on which the Ombudsman relied. In relation to other contraventions, the Ombudsman did not point to such evidence at all. In those instances I have confined my consideration of the evidence to the cases of one or a handful of employees. If the Ombudsman wishes to press her case against Rosario in relation to other employees then I will consider whether to grant her leave to do so in the next stage of this proceeding.
[152] Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034, at [957], [958], [968]
I do not read this passage to mean that a person must have knowledge of each contravention before the person can be held to be involved in contraventions that arise from the implementation of a system of non-compliance. It is apparent from the first paragraph of this passage that Katzmann J was of the view that a person would be involved if he or she puts in place a scheme which, if implemented, would involve a contravention of the FW Act. Her Honour in fact made a finding to that effect (emphasis in original):[153]
In the Liability Judgment I found, at [963], that:
Whether or not Rosario was the architect of the scheme to move employees from employment contracts to contracts for service, he certainly directed the process. He told Mr Arguello that “everyone” had to be on an ABN “so that they become subcontractors, like it or not”. Lorne Jones, who was responsible for hiring new cleaners, was told by Rosario that “they must have an ABN”, because “all the cleaners are subcontractors, even the people in head office are subcontractors”. Ms Satchell gave evidence to similar effect. To Mr Arguello, Rosario explained the purpose of the “ABN” scheme: to avoid “any problem with Fair Work Australia” and enable the company to pay them “whenever and whatever they want because they are subcontracted and there is not a specific law about subcontractors”. Mr Arguello said that Rosario told him to “terminate” anyone who didn’t want to “go on an ABN” (I take it that this was a reference to the “termination” of their employment only).
Rosario’s conduct in this regard is shameful. I impose a penalty of $8,000.
[153] Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557, at [601], [602]
Katzmann J held Mr Rosario had been involved in the employer’s scheme to move employees from employment contracts to contracts for service, even though he did not directly induce employees to move from employment contracts to contracts for service. It was sufficient that Mr Rosario directed others to implement the scheme. That is consistent with a person’s being involved because he or she has counselled or procured conduct knowing that the conduct, if engaged in, would consist of facts that would constitute a contravention of the FW Act.
In my opinion, the question whether a person has been involved in contraventions of the FW Act, which results from the operation of a system of non-compliance, is best resolved by the notions of counselling or procuring. A person will be a “person . . , involved” in such contraventions if the person had in mind, or had knowledge of, a system of non-compliance, and induced another person to give effect to such system.
FWO’s pleaded case and Mr Zhao’s response
The FWO’s pleaded case, and Mr Zhao’s response, are as follows:
(a)At all material times:
(i)Mr Zhao was a director of Chatime (Mr Zhao admits this);[154]
[154] Statement of Claim, [5(c)]; Defence, [5(c)]
(ii)Mr Zhao was the managing director of Chatime (Mr Zhao admits this);[155]
[155] Statement of Claim, [5(d)]; Defence, [5(d)]
(iii)Mr Zhao was a shareholder of Chatime along with Ms Qian and three companies (Mr Zhao admits this);[156]
[156] Statement of Claim, [5(e)]; Defence, [5(e)]
(iv)in 2016 Mr Zhao attended and participated in management meetings of Chatime, at which matters, including finance, operations, and human resources, were discussed (Mr Zhao admits this);[157]
[157] Statement of Claim, [5(f)]; Defence, [5(f)]
(v)because of (i) to (iv), Mr Zhao knew that Chatime employed persons to work in its business on a full-time, part-time, and casual basis, and operated its business from stores on each of the days of the week, including Saturdays and Sundays (Mr Zhao admits he knew Chatime employed persons to work in its business on a full-time basis, and that it operated its business from stores on each of the days of the week, including Saturdays and Sundays, but otherwise denies he knew Chatime employed persons to work on a part-time and casual basis);[158] and
[158] Statement of Claim, [5(g)]; Defence, [5(g)]
(vi)because he was a director and managing director Mr Zhao had ultimate authority to implement on behalf of Chatime, or to approve financial changes or decisions that affected what wages were paid to Chatime’s employees, and had ultimate authority on behalf of Chatime to ensure Chatime complied with its obligations under the FW Act (Mr Zhao denies this).[159]
[159] Statement of claim, [5(h)(i)]; Defence, [5(h)(i)]
(b)On 12 September 2013 Mr Zhao attended a meeting with Ms Qian, Mr Chen, and Ms Ferrao and Mr Wang. Mr Zhao admits this.[160]
[160] Statement of claim, [76]; Defence, [76]
(c)At the meeting Mr Chen gave a presentation to Mr Zhao and the other attendees entitled “Store Staff Pay Restructure Discussion”, which was accompanied by Microsoft PowerPoint slides. Mr Zhao admits this.[161]
[161] Statement of claim, [77]; Defence, [77]
(d)The PowerPoint slides included a slide entitled “Factsheet: award rate” (Award Slide) which:
(i)displayed the range of hourly rates paid by Chatime to its employees, for those who were paid cash in hand (from $9.42 to $16.00), as well as for those who were paid by electronic bank transfer (from $9.46 to $17.07) (Mr Zhao admits this);[162] and
[162] Statement of claim, [78(a)]; Defence, [78(a)]
(ii)displayed a range of rates payable at that time under the Award, including:
(A)hourly rates of $17.9842 for adult full-time or part-time employees;
(B)a range of hourly rates of $7.1937 and $16.1858 for junior employees aged from under 16 to 20 (for full-time or part-time employees);
(C)higher hourly rates of $18.8780 for supervisors and $19.3681 for managers (for full-time or part-time employees);
(D)higher hourly rates than the full-time and part-time rates (for adult & junior employees, supervisors and managers) of between $8.8482 and $23.8228, for employees who were casual; and
(E)higher hourly rates (for adult employees, supervisors and managers), of between $23.5593 and $47.0645, for work performed after 9.00 pm on Mondays to Fridays, after 12 midnight on Mondays to Fridays, and on Saturdays, Sundays and public holidays.[163]
[163] Statement of claim, [78(b)]
(Mr Zhao denies these allegations, but only to the extent it is alleged that the rates stated were the correct rates payable under the Award.[164])
[164] Defence, [78(b)]
(e)The PowerPoint included a second slide entitled “Costing model”, which explained that paying minimum award rates, uniform allowances, casual loading and weekend penalties (while removing a bonus and a 15 minute unpaid break, and paying trainees in cash) would add $854,862 to Chatime’s store staff annual net pay. Mr Zhao admits this.[165]
[165] Statement of claim, [79]; Defence, [79]
(f)At the time he displayed the Award Slide and “Costing model”, Mr Chen said words to the effect of: “this is what the Fast Food Award will require us to pay, this is the right way”; Chatime’s current system of paying employees was unlawful; and if Chatime was to grow they would have to do the right thing. Mr Zhao denies this, but alleges that Mr Chen was the architect of the slides and costing models; and Mr Zhao says he relied on Mr Chen’s “advice and recommendations in implementing a non-compliant approach to the payment of staff”.[166]
[166] Statement of claim, [80]; Defence, [80]
(g)The PowerPoint also included a third slide entitled “Costing model B”, which explained that paying only minimum award rates and uniform allowance (while removing a bonus and a 15 minute unpaid break, and paying trainees in cash) would add $254,258 to Chatime’s store staff net pay. Mr Zhao admits this.[167]
[167] Statement of claim, [81]; Defence, [81]
(h)At the time Mr Chen displayed “Costing model B” slide, Mr Chen said that it was “partial compliance”. Mr Zhao denies this.[168]
[168] Statement of claim, [82]; Defence, [82]
(i)In response to Mr Chen's presentation:
(i)Mr Zhao instructed Mr Chen to implement “Costing model B” as the method for paying Chatime’s employees (Mr Zhao denies this);[169]
[169] Statement of claim, [83(a)]; Defence, [83(a)]
(ii)Mr Chen emailed the PowerPoint to Mr Zhao and the other attendees on the evening of 12 September 2013, explaining “key dates & milestones” that were required for “Costing Model B” to be implemented (Mr Zhao admits this);[170] and
[170] Statement of claim, [83(b)]; Defence, [83(b)]
(iii)from 12 September 2013 to about February 2014 Mr Chen took steps to implement “Costing model B” and announce it to Chatime’s employees in the NSW Stores and Victorian Stores (Mr Zhao admits this).[171]
[171] Statement of claim, [83(c)]; Defence, [83(c)]
(j)In or around late February 2014 Mr Chen spoke to Mr Zhao and explained he was not happy that Chatime was “only partially complying” with the Award as a result of its implementation of “Costing Model B”. Mr Zhao denies this.[172]
[172] Statement of claim, [84]; Defence, [84]
(k)Because of the matters in (b) to (j), Mr Zhao knew or was aware, by no later than late February 2014 that Chatime:
(i)had adopted a practice of only paying its employees engaged to work in its business an hourly rate of pay and a uniform allowance, but no other entitlements which may be payable to them under the Award in respect of their employment in Chatime’s business; and
(ii)was “thereby contravening” the Award by failing to pay loadings, penalty rates and overtime rates to its employees as and when they became entitled to them under the Award (“together, (a) and (b) constituting the adoption of a System of Non-Compliance”).
Mr Zhao denies these allegations.[173]
[173] Statement of claim, [85]; Defence, [85]
(l)From around late February 2014 to 25 December 2016 (being the end of the relevant period), Chatime did not authorise or direct any change to the way in which it paid its employees in its business, and therefore change or remove the System of Non-Compliance or otherwise take steps to ensure that Chatime was compliant with all of its obligations under the Award as employer. Mr Zhao admits this.[174]
[174] Statement of claim, [86]; Defence, [86]
(m)Because of the matters in (b)-(l) in the period from about 12 September 2013 to 25 December 2016, Mr Zhao knew that:
(i)the Award applied to Chatime’s employment of its employees;
(ii)minimum wage entitlements under the Award applied to Chatime’s employees which differed according to age (for junior employees) and job classification;
(iii)the Award provided for a minimum rate of pay;
(iv)the Award provided for a casual loading;
(v)the Award provided for a uniform allowance; and
(vi)the Award contained provisions for the payment of penalty rates and loadings.
(Mr Zhao denies these allegations.[175])
[175] Statement of claim, [87]; Defence, [87]
(n)Because of the matters in (b)-(l), at all material times, Mr Zhao knew that:
(i)Chatime employed employees in the Business on a casual basis;
(ii)Chatime:
(A)operated its business at hours which included weekdays from 9 pm to midnight, weekdays after midnight, on Saturdays, on Sundays and on public holidays; and
(B)required its employees to work at those times.
Mr Zhao admits these allegations.[176]
[176] Statement of claim, [88]; Defence, [88]
(o)Because of the matters in (l) and (n), from about late February 2014 to 25 December 2016, Mr Zhao knew, or in the alternative was wilfully blind to the fact, that Chatime:
(i)paid employees it employed a minimum rate of pay for all hours worked and a uniform allowance; and
(ii)did not pay its employees any additional amount with respect to casual loading, work performed on weekdays from 9pm to midnight, weekdays after midnight, Saturdays, Sundays and public holidays and overtime.
Mr Zhao denies this.[177]
(p)Because of the matters in (a) and (k)-(o)
(i)from in or about late February 2014 to 25 December 2016 Mr Zhao was aware, by reason of the adoption of the System of Non-Compliance, that Chatime’s employees did not receive a casual loading, Saturday loading, Sunday loading, public holiday penalty rate, 9.00 pm Midnight Loading, the Post Midnight Loading and any payment for working overtime as they were entitled to receive under the Award; and
(ii)through his acts or omissions, Mr Zhao was an intentional participant in the factual matters that comprise Chatime contraventions of the Award.
Mr Zhao denies this.[178]
(q)Because of the matter in (n)-(p), Mr Zhao aided and abetted, counselled or procured, or was directly or indirectly knowingly concerned in or party to, Chatime’s contraventions of the Award and, therefore, contraventions of s 45 of the FW Act. Mr Zhao denies this.[179]
[177] Statement of Claim, [89]; Defence, [89]
[178] Statement of Claim, [90]; Defence, [90]
[179] Statement of Claim, [91]; Defence, [91]
Parties’ submissions
The FWO submits as follows:
(a)As a matter of law the FWO is not required to prove that Mr Zhao was aware that Chatime’s contraventions were a breach of the law; or that Mr Zhao knew of the Award and its application. All the FWO needs to prove is that Mr Zhao had knowledge of the essential elements of Chatime’s contraventions.[180]
(b)The FWO’s case is based on Mr Zhao having knowledge of a “system of non-compliance”; and in such cases the FWO need only prove that the person sought to be made liable as a person involved in the contravention had knowledge of the system that has been adopted.[181] It is irrelevant that the FWO may have pleaded a greater degree of knowledge by Mr Zhao; and that is because it is immaterial that a party pleads more than it needs to establish its case.[182] Moreover, a pleading cannot supplant the law by requiring a party to meet a higher test.[183]
(c)Mr Zhao engaged in conduct that implicated or involved him in Chatime’s contraventions, this conduct being his participation in the decision to adopt Costing Model B. The FWO relies on the evidence of Mr Chen, and the following admissions:[184]
(i)Mr Zhao was Chatime’s managing director at all material times;
(ii)on 12 September 2013 Mr Zhao attended a meeting with another director, Ms Qian, and two employees;
(iii)at the meeting Mr Chen gave a PowerPoint presentation which set out two alternative costing models, the first of which set out the additional cost of paying the “minimum award rate”, plus “uniform allowance”, “casual rate”, and “weekend penalty rate”; and the second of which (Costing Model B) set out the additional cost of paying the “minimum award rate”, plus “uniform allowance”; and
(iv)after that meeting, Chatime implemented Costing Model B.
[180] Applicant’s Outline of Closing Submissions, [7]-[10]
[181] Applicant’s Outline of Closing Submissions, [11], relying on EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134, at [34], and Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034, at [995]-[997] and [1019]
[182] Applicant’s Outline of Closing Submissions, [12], relying on Hui v Champion [2019] FCA 1111, at [53]
[183] Applicant’s Outline of Closing Submissions, [12], relying on Fair Work Ombudsman v Priority Matters Pty Ltd & Anor [2019] FCCA 56, at [50]
[184] Applicant’s Outline of Closing Submissions, [18]

Mr Zhao, on the other hand, submits as follows:
(a)The FWO’s pleaded case against Mr Zhao is predicated on the allegation that Mr Zhao was aware of the “system of non-compliance”, being a system the FWO alleges in paragraph 85 of the statement of claim; and that Mr Zhao instructed Mr Chen to implement “Costing model B” as the method for paying the Employees. That means it is necessary for the FWO to prove the pleaded facts on the basis of which the FWO alleges Mr Zhao was aware of the system of non-compliance.[185] Those pleaded facts include the allegation that Mr Zhao was aware of the existence or application of the Award to the Employees.[186]
(b)The decision in Potter is binding because Cowdroy J decided that the person who was sought to be made liable was a person involved in another person’s contravention of an award, and must have knowledge of the award and its application; whereas Katzmann J’s observations on this question are obiter dicta.[187] For these reasons the FWO must prove that Mr Zhao was aware of the Award before he can be held to be liable as a person involved in Chatime’s contraventions of the Award.
(c)Even if the FWO were permitted to advance a case outside the scope of the statement of claim, and, for that reason, the FWO would not be required to prove Mr Zhao knew of the Award, or of its application to the Employees, the FWO’s case is based on the allegation that Mr Zhao knew of Chatime’s “system of non-compliance”. That is “somewhat misplaced”, and based on an incorrect interpretation of what Katzmann J said in Grouped Property Service. Mr Zhao interprets the FWO’s case to be based on no more than the contention that Mr Zhao knew of Costing Model B. Mr Zhao submits there is no persuasive evidence that he knew anything about any specific employee and the shifts that they worked; or that any employee complained to Mr Zhao about being underpaid, and he did nothing about it; or that Mr Zhao avoided rectifying underpayments; or that Mr Zhao hired and fired staff; or that Mr Zhao was concerned with the terms and conditions of employment of Chatime’s employees; or that Mr Zhao was the architect of the system of non-compliance; or that Mr Zhao exercised any control over the payment of wages; or that Mr Zhao had ultimate control over Chatime’s finances and the remuneration of its employees.[188]
[185] Outline of Closing Submissions for the Respondents, [13]
[186] Outline of Closing Submissions for the Respondents, [17]
[187] Outline of Closing Submissions for the Respondents, [33]
[188] Outline of Closing Submissions for the Respondents, [31]
Determination
The determination of the issues arising on the parties’ competing submissions turns on whether:
(a)the statement of claim pleads sufficient facts (material facts) which, if proved, would establish that Mr Zhao was implicated in one or more of Chatime’s contraventions of s 45 of the FW Act, that he had the requisite knowledge of the facts that constituted the contraventions; and,
(b)given Mr Zhao’s admissions, and the findings I have already made, the material facts have been established.
Material facts
It would be useful to group the material facts into three classes: those that constitute Chatime’s contraventions in which the FWO alleges Mr Zhao was involved; those that constitute Mr Zhao’s participation or implication in Chatime’s contraventions, and those that allege Mr Zhao’s knowledge of the facts and legal character of Chatime’s contraventions.
Relevant contraventions
The contraventions of Chatime in which the FWO alleges Mr Zhao was involved[189] are those alleged in paragraphs 34-36 of the statement of claim (failure to pay casual loading in contravention of cl 13.2 of the Award), paragraphs 37-40 of the statement of claim (failure to pay Saturday loading in contravention of cl 25.5(b) of the Award), paragraphs 41-44 of the statement of claim (failure to pay Sunday Loading in contravention of cl 25.5(c) of the Award, paragraphs 45-47 of the statement of claim (failure to pay public holiday penalty rates in contravention of cl 30.3 of the Award), paragraphs 48-50 of the statement of claim (failure to pay 9:00 pm Midnight Loading in contravention of cl 25.5(a)(i) of the Award), paragraphs 51-55 of the statement of claim (failure to pay Post Midnight Loading in contravention of cl 25.5(a)(ii) of the Award), and paragraphs 56-58 of the statement of claim (failure to pay Overtime Rates in contravention of cl 26 of the Award). Each of these contraventions (Relevant Contraventions) is alleged to have consisted in Chatime paying the Employees concerned a flat rate of pay which was less than the rates payable to the Employees for the work they had performed at the times they performed the work.
[189] Statement of claim, [90]-[92]
Mr Zhao’s participation in the Relevant Contraventions
The conduct that is alleged to constitute Mr Zhao’s participation or implication in the Relevant Contraventions are the matters alleged in paragraphs 76-83 and 86 of the statement of claim. In those paragraphs the FWO alleges Mr Chen presented Costing Model A and Costing Model B; Mr Chen made statements to the effect that Costing Model A reflected the amounts Chatime was required to pay under the Award, and Costing Model B reflected payment of only some of the amounts Chatime was required to pay under the Award; Mr Zhao instructed Mr Chen to implement Costing Model B; from 12 September 2013 to around February 2014 Mr Chen took steps to implement Costing Model B; and from around February 2014 to 25 December 2016 Mr Zhao had taken no step to change or remove Chatime’s method for paying its employees that was provided for by Costing Model B.
These allegations, if established, would support a finding that Mr Chen participated or was implicated in the Relevant Contraventions. That would be so because the Relevant Contraventions consisted of Chatime paying the flat rates; Costing Model B provided for Chatime paying its employees a flat rate, contrary to the requirements of the Award which provided for the payment of different rates having regard to the level of employee who performed work, and the times at which the employees were engaged to work; Mr Zhao instructed Mr Chen to implement the method of payment provided for Costing Model B; by February 2014 Mr Chen had implemented Costing Model B; and from February 2014 to 25 December 2016 Chatime paid its employees according to the method provided for by Costing Model B. In short, these matters would support the finding that Mr Zhao had counselled and procured Mr Chen to implement procedures within Chatime where Chatime would pay its employees amounts that were less than the amounts Chatime was required to pay under the Award; and therefore Mr Zhao can be said to have participated and been implicated, not only in Chatime’s implementing the non-complying method for paying as, but also in Chatime maintaining that method of payment up to 25 December 2016, being the last day of the relevant period.
Mr Zhao’s knowledge
In paragraph 85 of the statement of claim the FWO alleges that Mr Zhao was aware (alleged knowledge) that by no later than 14 February 2014 that Chatime had adopted a practice of paying its employees at a flat hourly rate and a uniform allowance, but no other entitlements; and, for that reason, was contravening the Award. Further, in paragraph 87 of the statement of claim, the FWO alleges Mr Zhao was aware the Award applied to Chatime’s employees, and that the Award provide for the payment of a minimum rates, a uniform rates, loadings, and penalty rates. The statement of claim relies on paragraphs 76-83 and 86 to support the alleged knowledge. If proved or otherwise admitted, paragraphs 76-83 and 86 are capable of supporting a finding that Mr Zhao had the alleged knowledge.
Conclusion.
I am satisfied that, if established or otherwise admitted, the allegations of fact on which the FWO relies in the statement of claim are capable of establishing that Mr Zhao was involved in the Relevant Contraventions.
Evidence and admissions
The allegations on which the FWO relies includes allegations that rely on the evidence of Mr Chen. I have not accepted Mr Chen’s evidence; but in paragraph 36 of these reasons I have set out findings I have concluded are reasonably open to be made (Available Findings).
Mr Zhao’s participation in Relevant Contraventions
On the basis of the Available Findings, if made, and the admissions Mr Zhao makes in his defence, it is reasonably open to find that Mr Zhao participated or was implicated in the Relevant Contraventions. The acts that would constitute Mr Zhao’s participation or implication in the Relevant Contraventions would be as follows:
(a)Mr Zhao having heard the presentation Mr Chen gave at the meeting of 12 September 2013, and his having seen the PowerPoint presentations, and in particular the “Factsheet: award rate” slide, and Costing Model A and Costing Model B.
(b)Mr Zhao, together with Ms Qian, Mr Wang, and Ms Ferrao, accepting Mr Chen’s recommendation that Chatime implement the “Implementation plan”, that is, Costing Model B, and instructing or authorising Mr Chen to implement Costing Model B.
(c)Mr Chen having completed the implementation of Costing Model B by February 2014.
(d)Mr Zhao taking no action to alter the method for paying Chatime’s employees that was set up on Mr Chen’s implementing Costing Model B for the period that extended at least up to 25 December 2016.
Mr Zhao’s participation in the Relevant Contraventions are open to be characterised in two ways. One way is that Mr Zhao was one of a number of persons who induced or authorised Mr Chen to implement a method which, when implemented, resulted in Chatime making payments to its members that did not comply with provisions of the Award. It would be open to characterise this as Mr Zhao counselling or procuring Chatime to implement a method for paying wages that involved Chatime not paying the Award rates to the Employees. A second characterisation is that Mr Zhao, as the managing director of Chatime, was in a position to alter the Costing Model B method for paying wages that had been implemented by February 2014, but he did not do so. On this characterisation, Mr Zhao’s participation would constitute his aiding and abetting the Relevant Contraventions.
Mr Zhao’s knowledge
Given the Available Findings, and in particular the Available Findings in paragraph 36(d) of these reasons for judgment, it would be reasonably open to find that, at the time Mr Zhao, Ms Qian, Mr Wang, and Ms Ferrao accepted Mr Chen’s recommendation that Chatime authorised or instructed Mr Zhao to implement it, Mr Zhao was aware of the following:
(a)the Award applied to Chatime;
(b)Chatime employed full time, part-time, and casual employees;
(c)the Award required the payment of a minimum rate, and additional rates for casual and other loadings and penalty rates;
(d)Costing Model B provided for a method of payment that did not allow for the payment of amounts above the minimum rate provided for by the Award, and in particular amounts for casual loadings, and penalty rates;
(e)on Mr Chen’s implementing Costing Model B, Chatime would be paying its employees according to the method provided for by Costing Model B which would involve Chatime not paying to its employee amounts for the casual and other loading rates or penalty rates the Award would require Chatime to pay; and
(f)for the period that extended at least up to 25 December 2016 Chatime paid its employees according to the method provided for by Costing Model B.
Mr Zhao’s knowledge could be characterised in two ways. First, Ms Zhao knew that, by accepting Mr Chen’s recommendation that Chatime implement Costing Model B; and by Mr Zhao, together with Ms Qian, Mr Wang, and Ms Ferrao, authorising or instructing Mr Chen to implement Costing Model B; Mr Zhao counselled and procured Mr Chen and, therefore, Chatime, to implement a method for paying Chatime’s employees which Mr Zhao knew would involve Chatime not paying casual and other loadings, or penalty rates. The second way Mr Zhao’s knowledge could be characterised is that, throughout the period that extended until 25 December 2016, Mr Chen knew that Chatime was paying its employees according to the method provided for by Costing Model B which he knew involved Chatime not paying amounts the Award required it to pay, these being casual and other loadings, and penalty rates.
Conclusion.
I am satisfied that, given the Available Findings, and the admissions the respondents make in their defence, it would be open to find that Mr Chen was a person involved in the Relevant Contraventions within the meaning of s 550(2) of the FW Act.
Should final findings be made?
It will have been apparent that I have gone no further than identifying what findings I consider are reasonably open to make. I have done this because there is a potential deficiency in the orders I made at the hearing on 21 July 2021. Those orders implicitly assume that Mr Zhao would not elect to go into evidence if I were not to accept Mr Chen’s evidence. That, however, may not be a correct assumption, and to proceed on that basis may work injustice on Mr Zhao. If I were to proceed on the assumption that Mr Zhao does not wish to go into evidence that might be a circumstance that could lead me to draw available inferences with greater confidence.[190]
[190] On the basis of the principle stated by Lord Mansfield in Blatch v Archer ([1774] EngR 2; (1774) 1 Cowp 63, at 65; 98 ER 969, at 970) that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted”.
I therefore do not propose to make any final findings in relation to whether Mr Zhao is a person who was involved in the Relevant Contraventions. Instead, I propose to publish these reasons for judgment, and list the proceeding for directions some three weeks after the day I publish them to give Mr Zhao an opportunity to consider whether he wishes to elect to go into evidence. On Mr Zhao informing the Court whether he so elects, and after hearing from the parties, I will make further directions, either to give Mr Zhao the opportunity to go into evidence and be cross-examined, or for me to reserve judgment on whether I should make any of the findings I have concluded in these reasons are reasonably open to be made.
disposition
The only order I propose to make is to set the matter down for a directions hearing at 9.30 am on 2 December 2022. At the directions hearing the parties should have available the form of orders each party contends I should make to give effect to that part of my reasons for judgment that deals the FWO’s claims against Chatime. Also at the directions hearing, Mr Zhao should be in a position to inform the FWO and the Court whether he wishes to elect to go into evidence and, whether or not he so elects, what further directions I should make in relation to the FWO’s claims against Mr Zhao.

I certify that the preceding one hundred and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis.
Associate:
Dated: 11 November 2022

File number(s):	SYG 3321 of 2019
Judgment of:	JUDGE MANOUSARIDIS
Date of judgment:	11 November 2022
Catchwords:	INDUSTRIAL LAW – application for remedies in relation to first respondent’s contraventions of award – employer largely admits it failed to make payments as required under relevant award – whether the employer’s managing director was a person involved in the employer’s contraventions of a number of provisions of the award – findings reasonably open to be made which, if made, would support the conclusion that the managing director was involved in a number of contraventions of the award – proceeding to the extent it relates to claims made against managing director set down for directions to give managing director an opportunity to elect to go into evidence.
Legislation:	Competition and Consumer Act 2010 (Cth) Fair Work Act 2009 (Cth) ss 44, 45, 90(1), 90(2), 116, 345, 550 Trade Practices Act 1974 (Cth) s 75B Workplace Relations Act 1996 (Cth) s 728 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 17.05 Federal Circuit Court Rules 2001 (Cth) r 15.29A Fast Food Industry Award 2010 cls 3.1, 4, 11, 12.1, 12.2, 12.5, 12.7, 13.1, 13.2, 13.4, 16, 17, 18, 25.5(a)(i), 25.5(a)(ii), 25.5(b), 25.5(c), 25.6, 26, 28.3, 30.3
Cases cited:	Australian Building and Construction Commissioner v Parker [2017] FCA 564 Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63; 98 ER 969 Director of the Fair Work Building Industry Inspectorate v Bavco Pty Ltd & Ors(No.2) [2014] FCCA 2712 Dowling v Kirk & 16 Ors [2007] FMCA 2106 EZY Accounting 123 Pty Ltd v Fair WorkOmbudsman [2018] FCAFC 134 Fair Work Ombudsman v Al Hilfi [2012] FCA 1166 Fair Work Ombudsman v Chatime Australia Pty Ltd [2021] FCCA 1766 Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833 Giorgianni v R (1985) 156 CLR 473 Hui v Champion [2019] FCA 1111 Johnson v Youden [1950] 1 KB 544 Potter v Fair Work Ombudsman [2014] FCA 187 Richardson and Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd [1994] FCA 1222 Yorke v Lucas (1985) 158 CLR 661
Division:	Fair Work
Number of paragraphs:	113
Date of last submission/s:	23 September 2022
Date of hearing:	20, 21, and 22 July and 20 September 2021
Place:	Sydney
Counsel for the Applicant:	Mr J Darams and Mr M Harker, by video
Solicitor for the Applicant:	Office of the Fair Work Ombudsman
Counsel for the Respondents:	Mr D Mahendra, by video
Solicitor for the Respondents:	Piper Alderman Lawyers

SYG 3321 of 2019
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:	FAIR WORK OMBUDSMAN Applicant
AND:	CHATIME AUSTRALIA PTY LTD (ACN 136 677 453) First Respondent CHEN ZHAO Second Respondent

order made by:	JUDGE MANOUSARIDIS
DATE OF ORDER:	11 November 2022

Amount	Particulars
$1,700,000	BASE: Current store staff annual gross pay
$318,203	+ minimum award rate of $17.98
$23,010	+ uniform allowance ($1.25 per shift)
$328,260	+ casual rate 23%
$218,217	+ weekend penalty (Saturday & Sunday)
($36,445)	− scrap bonus
($55,125)	− 15 mins unpaid break
($20,102)	− pay all trainees in cash
$78,844	+ payroll on costs
$854,862	Total Net costs
$2,554,862	NEW BASE

Amount	Particulars
$254,258	Total Net costs
$320,500	+ 5% retail price
$141,000	+ 5% wholesale price
$36,000	+ royalty & marketing increase
$497,500	total increase
$243,242	funding surplus