Fair Work Ombudsman v Chatime Australia Pty Ltd (No 2)
[2023] FedCFamC2G 712
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Chatime Australia Pty Ltd (No 2) [2023] FedCFamC2G 712
File number(s): SYG 3321 of 2019 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 11 August 2023 Catchwords: INDUSTRIAL LAW – whether second applicant is a person involved in the first respondent’s contraventions of s 45 of the Fair Work Act 2009 (Cth) – whether necessary to show that the second respondent had knowledge of the award or of the terms of award the first respondent contravened – knowledge of terms of award contravened necessary – whether the second respondent had such knowledge – the second respondent had such knowledge – proceeding listed for directions hearing to make directions in relation to the formulation of orders and penalties. Legislation: Fair Work Act 2009 (Cth) s 45
Fast Food Industry Award 2010 cls 13, 17, 19, 25
Cases cited: Construction, Forestry, Mining and Energy Union v Clarke [2007] FCAFC 87
Fair Work Ombudsman v A to Z Catering Solution Pty Limited & Anor (No.2) [2018] FCCA 2299
Fair Work Ombudsman v Al Hilfi [2012] FCA 1166
Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934
Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365
Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034
Fitness Australia Ltd v Copyright Tribunal [2010] FCAFC 148
Giorgianni v R (1985) 158 CLR 661
Jones v Dunkel (1959) 101 CLR 298
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11
Potter v Fair Work Ombudsman [2014] FCA 187
Seltsam Pty Ltd v McNeill [2006] NSWCA 158
Yorke v Lucas (1985) 158 CLR 661
Division: Fair Work Number of paragraphs: 50 Date of hearing: 24 July 2023 Place: Sydney Counsel for the Applicant: Mr J Darams and Mr M Harker Solicitor for the Applicant: Office of the Fair Work Ombudsman Counsel for the Respondents: Mr D Mahendra 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 AUGUST 2023
THE COURT ORDERS THAT:
1.The proceeding be listed for a directions at 9:30 am on 31 August 2023 to make orders to give effect to reasons for judgment and to make directions in relation to penalties.
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
On 11 November 2022 I published reasons for judgment (earlier reasons) in which I made a number of findings in relation to the claims for relief the applicant (FWO) made under the Fair Work Act 2009 (Cth) (FW Act) against the first respondent (Chatime), and qualified findings in relation to the claims for relief the FWO made under the FW Act against the second respondent, Mr Zhao.[1] I also set the matter down for directions 9:30 am on 2 December 2022.
[1] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934
I set the matter down for directions for two purposes. The first was to provide the parties the opportunity to formulate the form of orders I should make to give effect to that part of the earlier reasons that concerned the FWO’s claims against Chatime. The second purpose was to provide Mr Zhao the opportunity to decide whether to elect to go into evidence and, if so, what further directions I should make in relation to the FWO’s claims against Mr Zhao.
The parties agreed about the declarations I should make to give effect to the findings I made in relation to the FWO’s claims against Chatime. On the basis of that agreement, on 17 March 2023 I made the following declarations and notation:
THE COURT DECLARES THAT:
1. The First Respondent contravened the following civil remedy provisions:
a) section 45 of the FW Act by failing to pay the 104 adult employees listed in Schedule 1 of the Annexure to these Orders (Annexure) minimum hourly rates pursuant to clause 17 of the Fast Food Industry Award 2010 (Fast Food Award);
b) section 45 of the FW Act by failing to pay the 41 junior employees listed in Schedule 2 of the Annexure junior minimum hourly rates pursuant to clause 18 of the Fast Food Award;
c) section 45 of the FW Act by failing to pay casual loadings to the 12 casual employees listed in Schedule 3 of the Annexure pursuant to clause 13.2 of the Fast Food Award;
d) section 45 of the FW Act by failing to pay the Saturday loading to the 130 Employees listed in Schedule 4 pursuant to clause 25.5(b) of the Fast Food Award;
e) section 45 of the FW Act by failing to pay the Sunday loading to the 122 Employees listed in Schedule 5 pursuant to clause 25.5(c) of the Fast Food Award;
f) section 45 of the FW Act by failing to pay the public holiday penalty rates to the 51 Employees listed in Schedule 6 pursuant to clause 30.3 of the Fast Food Award;
g) section 45 of the FW Act by failing to pay the 9.00pm – Midnight Loading to the 118 Employees listed in Schedule 7 pursuant to clause 25.5(a)(i) of the Fast Food Award;
h) section 45 of the FW Act by failing to pay the After Midnight Loading to Heting Yang (Irelia), PoChuan Lu (Luke), Xin Shi (Aiko), Shang Shan Wu and Winne Chen, listed in Schedule 8 pursuant to clause 25.5(a)(ii) of the Fast Food Award;
i) section 45 of the FW Act by failing to pay overtime rates to the 35 Employees listed in Schedule 9, pursuant to clause 26 of the Fast Food Award;
j) section 45 of the FW Act by failing to pay annual leave loading to the 47 Employees listed in Schedule 10 pursuant to clause 28.3 of the Fast Food Award;
k) section 45 of the FW Act by failing to roster the 10 Employees listed in Schedule 11 for the Minimum Engagement Hours pursuant to clause 13.4 of the Fast Food Award;
l) section 44(1) of the FW Act by failing to pay annual leave entitlements to the 27 Employees listed in Schedule 12 pursuant to section 90(1) of the FW Act;
m) section 44(1) of the FW Act by failing to pay annual leave on termination to the 19 Employees listed in Schedule 13 pursuant to section 90(2) of the FW Act;
n) section 44(1) of the FW Act by failing to pay public holiday entitlements to the 4 Employees listed in Schedule 14 pursuant to section 116 of the FW Act.
THE COURT NOTES THAT:
2. By reason of the declared contraventions in Order 1, the First Respondent underpaid the Employees listed in Schedule 15 a total of $162,533.13 gross.
In the meantime, by 1 December 2022 Mr Zhao communicated to the FWO and to the Court that he had elected to go into evidence; and on that day I made directions requiring Mr Zhao to file and serve any further affidavits on which he intends to rely on all issues other than penalty.[2] After I granted him further time to file his affidavits, Mr Zhao did so on 10 March 2023; and, eventually, the matter was set down for further hearing on 24 July 2023 to permit Mr Zhao to give evidence, and for the parties to make submissions in relation to the FWO’s claims against Mr Zhao.
[2] Mr Zhao had earlier filed an affidavit which he made on 3 June 2021
In these reasons for judgment I consider the FWO’s claims against Mr Zhao, in light of the findings, both unqualified and qualified, I made in the earlier reasons; the evidence Mr Zhao gave at the hearing on 24 July 2023; and the parties’ submissions.
These reasons for judgment assume familiarity with the earlier reasons. It would add to the clarity of these reasons for judgment, however, if I begin by repeating some of the findings I made in the earlier reasons. I will then set out the evidence Mr Zhao gives in his affidavits, and which he gave under cross-examination at the hearing on 24 July 2023.
SOME FINDINGS MADE IN EARLIER REASONS:
In the earlier reasons I made findings that include the following:
(a)As at 26 July 2013 Chatime was not purporting to pay its employees amounts by reference to any award. By that time, however, Mr Chen, Chatime’s former chief financial officer, believed or suspected that an award or awards may have applied to Chatime’s employees; and he 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.[3]
(b)By email sent to Mr Chen on 30 July 2013, Mr Gillan advised that the Fast Food Industry Award 2010 (Award) applied to Chatime’s employees; and this confirmed Mr Chen’s suspicion or belief that an award applied to Chatime’s employees. Before 12 September 2013, Mr Chen calculated the rates on an hourly basis he considered were payable under the Award to Chatime’s employees. [4]
(c)On 12 September 2013 Mr Chen gave a presentation to Mr Zhao, Ms Qian, and two Chatime employees, Ms Ferrao and Mr Wang.[5] Mr Chen’s presentation was accompanied by Microsoft PowerPoint slides titled “Store Staff Pay Restructure Discussion”.[6] The slides included a sheet headed “factsheet: current” which set out, among other things, the annual store gross wages; a factsheet headed “Factsheet: award rate”; a slide headed “costing model” (Costing Model A); a slide headed “Costing model B” (Costing Model B); and a slide headed “implementation plan”.
(d)Costing Model A 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;[7] and Costing Model B 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.[8]
(e)At 6:42 pm on 12 September 2013 Mr Chen sent an email to Mr Zhao, Ms Qian, Mr Wang, and Ms Ferrao setting out the “key dates & milestones which are dependencies for the pay restructure implementation”.[9]
[3] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, [21]
[4] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, [24]
[5] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, [26]
[6] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, at [26]
[7] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, at [26(e)]
[8] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, at [26(g)]
[9] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, at [37]
In paragraph 36 of the earlier reasons, I concluded it was reasonably open to make the following findings (Available Findings):
(a)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.
(b)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.
(c)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 Fridays, 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.
(d)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;[10] and the respondents’ allegation that Chatime relied on Mr Chen’s advice and recommendations in implementing a non-compliant approach to paying staff.[11]
(e)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 he outlined in the “Implementation plan”, being Costing Model B; and Mr Zhao and Ms Qian, or in the alternative 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.
MR ZHAO’S EVIDENCE
[10] Defence, [80]
[11] Defence, [80]
3 June 2021 affidavit
Mr Zhao has made two affidavits, one on 3 June 2021, and the other on 10 March 2023. In his first affidavit Mr Zhao deposed as follows:
(a)Chatime was started in 2009 when he and Ms Qian decided it would be a good idea to start up a bubble tea business.[12]
[12] C Zhao affidavit 03.06.2021, [4]
(b)Mr Zhao attended a meeting on “13 [sic] September 2013” to which Mr Chen refers in his affidavit of 14 September 2021, and with the persons Mr Chen identifies in his affidavit.[13] Ms Zhao says that he did not “recall the exact conversation or discussion during the meeting”; but Mr Zhao said:[14]
[13] C Zhao affidavit 03.06.2021, [42]
[14] C Zhao affidavit 03.06.2021, [43]
a. Mr Chen did not say anything about the Chatime paying its employees unlawfully or less than any lawful requirements;
b. Mr Chen did not say anything about ‘the right way’ to pay employees;
c. Mr Chen did not say anything about Costing Model B only being in ‘partial compliance’ with an ‘Award’ or the law.
(c)Had Mr Zhao known that Costing Model B did not comply with the Award, he would not have supported it.[15]
(d)A decision was made to proceed with Costing Model B. That decision was made by all those present at the meeting. Mr Zhao said words to the effect of: “Well I think Costing Model B”, in response to which the other persons in the meeting said “yes, agreed”.
(e)Until 2015 Mr Zhao and Ms Qian “were very much ‘hands on’” in the conduct of the business, “from orders, administration and accounts to physically unloading shipping containers full of boxes of pearls for the bubble tea mix”.[16]
(f)By 2015 Mr Zhao and Ms Qian realised they were “understrength in terms of compliance in all areas”; and they decided to hire a general manager who had experience working in the franchise model, and would professionalise the business. That resulted in Chatime engaging Mr Antonius.[17]
(g)In the middle of December 2013 an issue arose about the pay rate for staff working on Boxing Day, and New Year’s Day. That was the subject of an exchange of emails. At that time Mr Zhao understood that Chatime had “a practice of paying staff at a rate of 1.5 x the employees rate”, which Mr Zhao understood was lawful.[18]
[15] C Zhao affidavit 03.06.2021, [44]
[16] C Zhao affidavit 03.06.2021, [5]
[17] C Zhao affidavit 03.06.2021, [6]
[18] C Zhao affidavit 03.06.2021, [48]
It is apparent from this evidence that, at the time he made his affidavit on 3 June 2021, Mr Zhao had some recollection of the meeting of 12 September 2013. That follows from Mr Zhao’s positively affirming that Mr Chen did not state certain words; and also from Mr Zhao deposing that he recalled he favoured Costing Model B, and all other persons present at the meeting agreeing with Mr Zhao. Mr Zhao, however, did not depose to whether he had any other recollection of what occurred at, or what was said in, the meeting. Mr Zhao says nothing about whether he has any recollection of having observed the slides Mr Chen presented; whether he had acquired any understanding of what the slides conveyed, and if so what understanding, if any, he recalls he had on his observing the slides. More particularly, Mr Zhao says nothing about whether he recalls observing any of the following words and, if so, what he recalls he understood those words conveyed:
(a)the words “award rates” that appear in the two fact sheets each titled “Factsheet award rate”;
(b)the words “minimum award rate of $17.98” and “uniform allowance” that appear in each of Costing Model A and Costing Model B;
(c)the words “casual rate 23%” and “weekend penalty (Saturday & Sunday)” that appear in Costing Model A, but do not appear in Coasting Model B; and
(d)the words “Award rate limited to ‘bank’ hours” that appear in the slide headed “Implementation plan”.
Notwithstanding these matters, Mr Zhao does say he recalls favouring Costing Model B over Costing Model A. That implies that Mr Zhao acquired sufficient knowledge of the contents each of Costing Model A and Costing Model B to enable him to understand the differences between the costing models, assess their relative merits, and ultimately decide, or join in the decision, that Chatime proceed with Costing Model B.
It is convenient that I note at this point that, at the hearing, counsel for the FWO objected to my admitting into evidence paragraph 44 of Mr Zhao’s affidavit made on 3 June 2021 where he deposed that, if he had known that Costing Model B did not comply with the award he would not have supported it.[19] The ground of objection was relevance, opinion, submission, and conclusion. I admitted the evidence, subject to relevance, noting that I would address the admissibility of the evidence in my reasons for judgment, to the extent I find it is relevant.
[19] C Zhao affidavit 03.06.2021, [44]
The paragraph to which counsel for the FWO objected is evidence of what Mr Zhao would have done in a hypothetical state of affairs, namely, knowing that implementing Costing Model B would not comply with the Award. It has been held that evidence of this nature is not evidence of an opinion, but evidence of a state of mind, and is admissible to prove the state of mind. The question of the admissibility of such evidence was considered by Bryson JA in Seltsam Pty Ltd v McNeill, where, after reviewing a number of authorities, his Honour said:[20]
I do not find it possible to see evidence given by a person about his state of mind, in an actual or hypothetical situation, as an opinion. The state of a person’s mind is a fact and remains a fact whether what is under the discussion is an actual state of mind, or the state in which a person’s mind would be in some contingency which has not happened. The strongest theme of dissatisfaction with such evidence is its lack of reliability because of its self-serving nature, given as the evidence is when it is known with hindsight that the subject is of importance to the party who gives the evidence. This source of dissatisfaction is not in my opinion a reason in principle for rejecting the evidence; if it is relevant it is admissible, and this source of dissatisfaction is to be met by taking appropriate care in deciding whether the evidence is to be believed, which remains a decision of fact.
[20] Seltsam Pty Ltd v McNeill [2006] NSWCA 158, at [123] (Tobias JA agreeing, at [8]). See also Fitness Australia Ltd v Copyright Tribunal [2010] FCAFC 148, at [65]
10 March 2023 affidavit
In his affidavit made on 10 March 2023 Mr Zhao deposed as follows:
4.As at 12 September 2013, I did not understand or fully appreciate exactly what an award was or the ramifications for non-compliance with an award.
5.During the 12 September 2013 meeting:
a. Mr Chen did not specify any name in reference to the ‘award’ referred to in the slides;
b. Mr Chen did not spend a lot of time on the slides he presented;
c. I do not recall anybody in the room asking any questions;
d. Frankly, I did not spend much time considering the content of the slides but rather had proceeded on the basis that it was all correct, as I trusted Mr Chen, at the time;
e. I did not [believe?], at any stage during, or in the days and weeks that followed, that 12 September 2013 meeting, that the approach taken would expose Chatime (and me) to penalties for a non-compliant approach to pay and remuneration'
6. I was not the author of the Chen PowerPoint presentation nor did I see the PowerPoint at any stage before the meeting. I am not aware of any other person being involved in the Chen PowerPoint other than Mr Chen himself. I deny being “involved in” the creation of the Chen PowerPoint or the presentation at the September 2013 meeting (apart from being in attendance at that meeting).
7. I did not instructed [sic] Mr Chen to prepare the presentation. I did not see the presentation until the September 2013 Meeting at which time Mr Chen briefly explained in a high level way the ‘options’ for payment of wages for the company.
8. During the September 2013 Meeting, I do recall Mr Chen saying words to the following effect:
Mr Chen said: “You have two options. Costing Model A or B. Obviously one is cheaper than the other.
9. When considering both ‘costing models’ I did not consider that the items listed under the ‘minimum award rate’ in each of those ‘costing models’ to be mandated by law. At the time, there were a range of considerations, including those listed on the third slide in relation to ‘Staff retention’, ‘Ability to attract quality staff and ‘Compliance’.
10. At the time we approved of the costing model, I had no idea that the model presented was noncompliant with the legal requirements of the Fair Work Act 2009.
A number of observations may be made about this evidence:
(a)First, as with his affidavit of 3 June 2021, Mr Zhao’s second affidavit suggests he has some recollection of the meeting of 12 September 2013.
(b)Second, Mr Zhao’s saying that he did not understand or “fully” appreciate “exactly” what an award was, or what would be the ramifications for non-compliance with an award, implies Mr Zhao had some understanding of what an award is, and he had a notion that non-compliance with an award may have some ramifications. Mr Zhao, however, does not set out what his understanding of these matters was.
(c)Third, Mr Zhao’s saying that that he did not understand or fully appreciate exactly what an award was, or what would be the ramifications for non-compliance with an award; and Mr Zhao’s evidence that Mr Chen did not specify any name in reference to the “award” referred to in the slides, further implies that Mr Zhao recalls either observing or hearing references to “an award”. Mr Zhao, however, does not say what he recalled he observed, or what he recalled was said about any award.
(d)Fourth, Mr Zhao deposes that he did not believe that in the days and weeks after 12 September 2013 that the adoption of Costing Model B would expose Chatime and Mr Zhao to penalties for a non-compliant approach to pay and remuneration; and that, at the time Costing Model B was approved, it was “noncompliant with the legal requirements of the” FW Act. Counsel for the FWO objected to the admissibility of this evidence on the grounds of relevance, opinion, form, submissions, and conclusion. I admitted the evidence, subject to relevance. The evidence goes to the state of mind of Mr Zhao and is relevant or potentially relevant, assuming (as in the earlier reasons I found[21]) I am bound by the judgment of Cowdroy J in Potter v Fair Work Ombudsman.[22]
[21] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, at [90]
[22] Potter v Fair Work Ombudsman [2014] FCA 187
Evidence given on 24 July 2023
Counsel for the FWO commenced his cross-examination of Mr Zhao by asking him whether he remembers the discussion that took place on 12 September 2013. Mr Zhao said “some of them”,[23] and continued as follows:[24]
What do you remember of the conversation – sorry – the discussion that took place on 12 September 2013?‑‑‑I think a group of people in the meeting room was talk about the salary for the business.
Is that all you remember?‑‑‑I think Mr Chen provided a couple options about that – wages.
Is that all you remember?‑‑‑I think so.
Do you remember what you said to Mr Chen in the meeting?‑‑‑I don’t recall.
Okay. Do you remember what Mr Chen said to you in the meeting?‑‑‑No. Couldn’t recall.
When you say you couldn’t recall, you can’t recall now, can you?‑‑‑Yes. I can’t recall now.
It’s almost 10 years after that meeting; correct?‑‑‑Yes.
[23] T5.20
[24] T5.25-T5.45
Counsel then directed Mr Zhao to portions of the transcript (FWII transcript) of an interview (FWI interview) with a Fair Work Inspector (FWI) in which Mr Zhao had participated. First, counsel took Mr Zhao to the answers he gave to questions beginning with question 525 in the FWII transcript.[25] These questions relate to the email Mr Chen sent to Mr Zhao and others at 6:42 pm on 12 September 2013 setting out the “key dates & milestones which are dependencies for the pay restructure implementation”.[26] The FWII transcript records Mr Zhao stating that he assumed he received the email; “it was five years ago”; and, in response to a question about what Mr Zhao could say about the email, Mr Zhao said he thought “there was a discussion about the retail price increase”. In evidence given under cross-examination, Mr Zhao said “I think so” to counsel’s question that by stating in the FWI interview “it was five years ago” Mr Zhao was “intending to say, ‘The email is from five years ago. I don’t really remember receiving it’”.[27]
[25] Court Book, page 1583
[26] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, at [37]
[27] T7.35
Second, Mr Zhao was asked about his answer to question 536 of the FWII transcript, where Mr Zhao said he “can recall based on reading and seeing”, and that he “can’t really remember exactly because five years ago”.[28] That answer was given to the question the FWI asked about the subject of the email Mr Chen sent to Mr Zhao at 4:42 pm on 12 September 2013, namely, “Store Staff Pay Restructure LC120990133.pptx”. In evidence given under cross-examination Mr Zhao said it was “just purely a memory thing. I don’t think I can remember exactly, because it’s five years already”.[29]
[28] CB1585
[29] T8.20
Third, Mr Zhao was asked about the answers he gave to questions beginning with question 587 in the FWII transcript. It would be convenient to reproduce the FWII transcript to which Mr Zhao was taken, and to interpose evidence Mr Zhao gave in cross-examination in relation to the emphasised portions of the reproduced transcript:
Q587. KS So what did you understand when you were delivered that from Lawrence. What did you understand all of that to mean, the award rates and penalties and allowances.
A CZ I understand based on – based on just looking at that but that was the figures that we - - -
Q588. KS Did you – so again I'm - - -
A CZ Yeah.
Q589. KS - - - just coming back to, you said in 2016 that was the first time that you had been made aware of rates of pay or award entitlements or potential underpayment issues. But this was in 2013 and there’s some very clear reference to rates of pay and entitlements and allowances and penalty rates.
A CZ Yeah I just couldn't recall um, it was – it was a very brief, honestly there was a very brief discussion at that time about this stuff.
Q590. KS What was the discussion?
A CZ Oh it's more about – I think it's mainly from – from Lawrence just try to make the pay – I think try to increase the pay and also try to increase the retail and wholesale price to make sure from the costing oil and the (indistinct) oils was correct.
Q591. KS So to clarify. Your understanding is Lawrence came to you to increase the wage rates to employees and to do that you had to increase the - - -
A CZ I think he just – I think I recall, he probably discussed it with all of us, with not only me but with all of us I think at that time.
Q592. KS Who else was there?
A CZ I think was everyone on the – on that email. It was – it was - - -
Q593. KS So Alison Ferrao, Clark Wang - - -
A CZ Yeah.
Q594. KS - - - yourself and Iris.
A CZ Yeah because we are the I think at that time the two directors is me and Iris and Clark is her husband, so (indistinct) - - -
Q595. KS Okay. And so you'll see here there appears to be two options in this funding model and in this implementation plan. There’s a costing model and then there’s a costing model B. Do you agree with that?
A CZ I can’t recall now, I can’t remember but yeah obviously from the (indistinct) it is.
Q596. KS Do you recall what was discussed or decided about that proposal or those two options?
A CZ I don’t think we – I think we – we went through it in that probably in the meeting before as you mentioned the email that’s - that I assume we had a meeting before that. But - - -
Q597. KS Do you recall which option you went with?
A CZ No idea, it was too long. I don’t know, I don’t recall which – which - - -
Mr Zhao was asked whether by the emphasised portion of this last answer Mr Zhao was referring to the fact that the decision about which option to adopt was five years before the FWI interview. After a number of questions, Mr Zhao said that at the time of the FWI interview he could not remember which option he had taken;[30] and he confirmed that his statement “it was too long” was to be understood “as a reference to the fact that whatever decision was made was made five years before” the FWI interview.[31]
[30] T11.30
[31] T11.35
The FWII transcript continues as follows:
Q598. KS Do either of those options look familiar as to what structure the business took from 2013? What rates you paid staff or what the amounts were, the base amounts?
A CZ I don’t even know what rate we paid at the end because it doesn’t say – it doesn’t say anything. I thought we pay – I thought we pay award rate. But I know yeah, there’s a cash payment on a trainee, that one I know, but I don’t know. Because as I said I was – to me I was more care about at the end of day if – if there’s increase, but I thought there would be increase to the award rate then whether we – the company get -get a big penalty in terms of the final P&L. I think that’s why for me as MD I'm more care about if we increase the retail price for certain percentage on - and the wholesale price, what – what the different options we have, I think there was a 5 per cent, I can see from here a 10 per cent and 5 per cent but I can’t recall which option we actually took.
Q599 KSM’hmm.
A CZ Yep, it was way too long.
Q600. KS So do you recall – do you recall Lawrence taking you through these two options though? Do you recall the meeting. Do you recall seeing this - - -
A CZ I can’t – that’s why I can’t recall the meeting, but I assume if – if there’s implementation that it should – we should be – we should run through that. But I just can’t recall when was that meeting or is that on a monthly, weekly or sorry, on a weekly Monday morning meeting or it's on the meeting before that. That one I can’t - - -
Mr Zhao was asked whether by the emphasised portion of the FWII transcript he is to be understood as stating he was not sure whether the discussion on 12 September 2013 was at a weekly meeting or at a separate meeting. Mr Zhao said he could not recall whether “it was . . . a part of the monthly meeting or just a separate meeting”.[32]
[32] T12.25
The FWII transcript continues as follows:
Q603. KS Okay. Some of the issues that he's raised here, so in the fact sheet he talks about compliance as an issue.
A SZ Which fact sheet?
Q604. KS So - - -
A CZ Oh here.
Q605. KS Yep. Do you recall discussing that with him or him discussing issues around compliance and the company being compliant in 2013?
A CZ I can’t remember but – I can’t remember which particular part would be discussed but that obviously if that’s put in there, there must be some discussion but I can’t recall, it’s too long.
Q606. KS Do you recall if you had any concerns about the company potentially not being compliant in 2013 as the managing director.
A CZ I think I do.
Q607. KS And what do you recall about that?
A CZ I can’t exactly remember what I – but of course I am concerned with non-compliance but I didn’t pay, honest I probably didn't pay too much attention of the detail of rates. But I know there’s a – there’s a cash composite for the training costs.
Mr Zhao said the highlighted portion of this part of the FWII transcript is to be understood as him having stated that “Look, you’re asking me these questions five years after the discussions in 2013, and because of that period of time, I just can’t remember these things”.[33]
[33] T13.15
At the conclusion of this part of his cross-examination, Mr Zhao gave the following evidence:
Can I put this proposition to you. Is it fair to assume, though, that your recollection of the discussion on 13 [sic] September 2013 isn’t better today; your memory of that isn’t better today than it was when you were interviewed by the ombudsman in 2018?‑‑‑I think after the interview, we – we start to – because when we started going through those emails – because when she asked me in the interview, I didn’t really recall much, but afterwards I start to pulling out email and I start to review that; so I start to bring a little bit more memory.
Sure?‑‑‑Yes.
To the extent that your memory has changed from what you were – had on the day of the interview in 2018, then what you’ve been able to tell this court about your memory is what you explained in the beginning of your evidence today; is that right?‑‑‑Yes.
Counsel for the FWO then cross-examined Mr Zhao about the evidence he gave in his affidavit of 10 March 2023. Mr Zhao confirmed that the reference in paragraph 5(a) of his affidavit to Mr Chen not having specified “any name in reference to the award referred to in the slides” was a reference to what was contained in the slides Mr Chen presented; and he accepted that it is possible that Mr Chen could have referred to the name of an award, but Mr Zhao “can’t remember now”.[34] Mr Zhao also said that he did not ask anyone about whether the information contained in Mr Chen’s slides was accurate.[35]
[34] T14.30
[35] T14.45
PARTIES’ SUBMISSIONS
In her counsel’s written submissions, the FWO submitted as follows:
(a)To be liable as a person involved in the contraventions identified in the declarations made on 10 March 2023 (Contraventions), the FWO need only establish that:
(i)Mr Zhao engaged in conduct that “implicated or involved him” in the Contraventions so that there is a practical connection between Mr Zhao and the Contraventions;[36] and
(ii)Mr Zhao had knowledge of the non-compliant system the Chatime adopted.[37]
(b)The “matters referred to by the Court at [36]” of the earlier reasons (being the “Available Findings” I identify above) are sufficient, and go beyond what is necessary to satisfy each of these elements. Those matters are further supported by the admissions Mr Zhao made that he was the managing director of Chatime at all relevant times; Mr Zhao attended the meeting of 12 September 2013 in which Mr Chen presented the PowerPoint presentation titled “Store Staff Pay restructure Discussion”; after that meeting Chatime implemented Costing Model B; and Mr Zhao, in his affidavit of 10 March 2023, deposes that he was one of a group of persons who approved Costing Model B, thus indicating that Mr Zhao not only participated in, but he made the decision that Chatime implement Costing Model B.[38]
(c)The evidence does not raise any contrary inference that Mr Zhao was not aware of the system Chatime implemented by his own decision; and that is because Mr Zhao himself says he considered each costing model Mr Chen presented. Mr Zhao therefore knew that Chatime could pay the “minimum award rate”, plus “uniform allowance”, “casual rate”, and “weekend penalty rate” referred to in Costing Model A, but Mr Zhao (potentially with others) instead decided Chatime would only pay the “minimum award rate”, plus the “uniform allowance”, as provided for by Costing Model B.
[36] Applicant’s Supplementary Outline of Submissions, [4(a)], relying on Construction, Forestry, Mining and Energy Union v Clarke [2007] FCAFC 87, at [26]
[37] Applicant’s Supplementary Outline of Submissions, [4(b)], relying on Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034, at [955]-[957] and [1019].
[38] Applicant’s Supplementary Outline of Submissions, [6], [7]
In his counsel’s written submissions, Mr Zhao submits as follows:
(a)The matters noted in paragraph 36 of the earlier reasons do not reflect the FWO’s pleaded case.[39]
(b)The “key inferences the Court seeks to draw” are “clearly rebutted”. In particular, Mr Zhao’s evidence rebuts inferences that Mr Chen identified the Award by name, or that Mr Zhao believed the Award applied to Chatime’s employees, or that Mr Zhao believed the Award provided for different rates depending on whether Chatime’s employees worked full-time or part-time or casual, or whether they worked on Saturday, Sundays, or on public holidays, or that Mr Zhao believed Chatime employees would be engaged at what was represented to be the minimum hourly rate payable under the Award, or that Mr Zhao authorised Mr Chen to implement the “Implementation plan”.[40]
(c)This Court is bound by the judgment of Cowdroy J in Potter.[41]
[39] Outline of Submissions of the Respondents, [3]
[40] Outline of Submissions of the Respondents, [5]
[41] Potter v Fair Work Ombudsman [2014] FCA 187
In oral address counsel for the FWO made the following submissions:
(a)Mr Zhao, in his affidavit of 10 March 2023, does not contradict, or is otherwise give evidence, that would result in my not making the Available Findings.[42] The Available Findings should be made even though I had not accepted Mr Chen’s evidence.[43] The best evidence Mr Zhao has given is that he does not remember.
(b)Even if I am not prepared to find that Mr Chen referred to the Award by name, it is sufficient to find Mr Zhao had knowledge of the Award even if Mr Chen simply referred to an award without specifically identifying the Award by name.[44]
[42] T17.20
[43] T17.40
[44] T22.30-T22.40
In his oral address, counsel for Mr Zhao repeated the effect of his written submissions; and it will not be necessary to set these out. It is appropriate, however, that I note that counsel for Mr Zhao submitted that an award, for the purposes of s 45, is a fact.[45]
[45] T27.25-T27.40
DETERMINATION
In the earlier reasons I concluded that the statement of claim pleads facts which, if proved, would establish that Mr Zhao was a person involved in Chatime’s contraventions alleged in the statement of claim.[46] I also concluded that it is open to find that Mr Zhao participated and was implicated in the relevant contraventions.[47] It is clear from Mr Zhao’s evidence that he was present at the meeting on 12 September 2013, and he at the very least joined with others in approving the implementation of the Costing Model B which, when implemented, led to Chatime not paying employees amounts it ought to have paid them under the Award. I am therefore satisfied, on the basis of these matters, and the matters I identify in paragraph 106 of the earlier reasons, that Mr Zhao participated or was implicated in the Contraventions; and that his participation or implication may be characterised in one or both of the following ways:
(a)Mr Zhao was one of a number of persons who induced or authorised Mr Chen to implement a method that, when implemented, resulted in Chatime making payments to its employees that did not comply with provisions of the Award. This constitutes Mr Zhao counselling or procuring Chatime to implement a method for paying wages that involved Chatime not paying the Award rates to the relevant employees.
(b)Mr Zhao, as the managing director of Chatime, was in a position to alter 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 constituted his aiding and abetting the Relevant Contraventions.
[46] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, at [95], [99]-[104]
[47] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, at [106], [107]
The determinative questions, then, are these: What knowledge must the FWO prove Mr Zhao had in relation to the Contraventions? Has the FWO proved Mr Zhao had such knowledge?
Knowledge of what?
In the earlier reasons I accepted Mr Zhao’s submission that this Court is bound to follow Cowdroy J’s judgment Potter.[48] It would be convenient if I set out again the relevant passage from his Honour’s judgment:[49]
Knowledge that the Clerical NAPSA applied to the Employees is not identical to knowledge that a failure to pay the Employees in accordance with the Clerical NAPSA constitutes a breach of a civil remedy provision, although it is undeniable that the difference is a small one. The Court finds that, to be an accessory to the underpayment contraventions, Mrs Potter must have known the Clerical NAPSA applied to the Employees. It is not difficult to imagine a situation in which directors of a company honestly but mistakenly arrange for the company’s employees to be paid under an incorrect award. There would be no doubt that the company had underpaid its employees, and by virtue of that fact, contravened the FW Act. If the position were as the FWO submits however, the directors would be liable as accessories to those contraventions simply because they knew how much the employees were being paid and because they had knowledge of the existence of the applicable award, even though they honestly believed that such award did not apply.
[48] Fair Work Ombudsman v Chatime Australia Pty Ltd [2022] FedCFamC2G 934, at [90]
[49] Potter v Fair Work Ombudsman [2014] FCA 187, at [81]
According to this passage, a person must be shown to have knowledge that an award applied to an employee before the person can be found to be liable as a person involved in another person’s contravention of s 45 of the FW Act in relation to that employee. Further, such person must have knowledge of the term of the award that has not been complied with. That is what Besanko J held in Fair Work Ombudsman vAl Hilfi,[50] and White J held in Fair Work Ombudsman v Devine Marine Group Pty Ltd,[51] as summarised by Katzmann J in Fair Work Ombudsman v Grouped Property Services Pty Ltd (emphasis added):[52]
Where a contravention concerns the breach of an award, in Potterv Fair Work Ombudsman [2014] FCA 187 at [81] Cowdroy J held that it was necessary that an alleged accessory have actual knowledge of the existence of the relevant award and of its application to the employees in question. In Fair Work Ombudsman vAl Hilfi [2012] FCA 1166 at [44] Besanko J considered that there was a good deal of force in the argument put against the Ombudsman that it was necessary that it be established that the alleged accessory had actual knowledge, amongst other things, that the applicable award applied to the particular employees, that the work of each of the employees gave rise to the specific entitlements, and that they were not paid those entitlements. In the absence of full argument, White J followed Potter and Al Hilfi in Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [188], although he did not consider that it was necessary that the accessory knew the name of the award (see [191]).
[50] Fair Work Ombudsman vAl Hilfi [2012] FCA 1166, at [44]
[51] Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365, at [188]
[52] Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034, at [1018]-[1020]
In Fair Work Ombudsman v A to Z Catering Solution Pty Limited & Anor (No.2), I incorrectly considered it was open to me to follow the Katzmann J’s approach in Grouped Property Services, and I followed her Honour’s approach. I did so for the following reasons:[53]
I return, then, to what the authorities say about of what a person must have knowledge before he or she can be held to be involved in another person’s contravention of the FW Act, and consider how that applies to contraventions of the FW Act based on contraventions of a term of a modern award, contrary to s.45 of the FW Act. A person must have “knowledge of the essential elements of the contravention”;[54] but this does not “require knowledge of the law and it is necessary to distinguish between knowledge of or belief in the existence of facts which constitute” the contravention “and knowledge or belief that those facts are” a contravention “under the law”.[55] In the case of a contravention of a term of a modern award that is constituted by an employer not paying or not paying in full the amount which the term of the modern award requires the employer to pay, the essential elements of the contravention of which the person must have knowledge before that person can be held to be involved in such contravention are: (a) the facts that gave rise to the obligation to pay the amount under the term of the modern award; and (b) the employer’s not paying, or the employer’s having paid an amount to the employee. The contravention is complete when the employer does not, at the time required by the term of the modern award, pay, or pay in full, the amount the modern award requires the employer to pay. That the term of the modern award in question required the employer to pay to the employee a particular amount is a requirement imposed by law. That means it is unnecessary that in addition to having knowledge of the essential elements that I have identified that the person also know that the law requires the employer to make a payment or a payment of a particular amount or amounts. In other words, it is not necessary that the person also know that there exists a modern award or a term of a modern award that requires the employer to pay the employee an amount prescribed by the term of the modern award.
[53] Fair Work Ombudsman v A to Z Catering Solution Pty Limited & Anor (No.2) [2018] FCCA 2299, at [281]
[54] Yorke v Lucas (1985) 158 CLR 661, at page 670
[55] Giorgianni v R (1985) 158 CLR 661, at page 506
Apart from incorrectly proceeding on the basis that it was open to me to follow the approach of Katzmann J in Grouped Property Services, what I said in the above passage ignores the text of s 45 of the FW Act. That section, which provides that a “person must not contravene a term of a modern award”, contains two essential elements: the existence of a term of a modern award; and conduct (by commission or omission or both) that is contrary to the term of the modern award. Knowledge of the essential elements of a contravention of s 45 of the FW Act, therefore, requires knowledge of the conduct that constitutes the contravention of the term of a modern award; and knowledge of the term of the modern award such conduct contravened. This analysis reflects the views Besanko J expressed in Al Hilfi. Knowledge of the two elements of a contravention of an award, however, does not require knowledge or a belief that the conduct contravened s 45, or that such conduct was otherwise unlawful.
On this analysis, therefore, for Mr Zhao to be liable as a person involved in the Contraventions, it is necessary to show, first, that he knew of the conduct that constituted the Contraventions (namely, Chatime implementing Cost Model B); and, second, he knew of the existence of each term of the Award that Chatime’s conduct contravened. It is, however, unnecessary to prove that Mr Zhao believed or knew that the conduct that constituted the Contraventions contravened s 45 of the FW Act, or that he knew or believed that such conduct was unlawful.
What did Mr Zhao know?
This question is to be answered by reference to three sets of factors. The first set is that Mr Zhao filed two affidavits, he made himself available to be cross-examined, and he was cross-examined. These matters by themselves eliminate the availability of reasoning that is associated with the “rule” in Jones v Dunkel.[56] Second, the FWO does not submit Mr Zhao is not a credible witness. Rather, the FWO submits Mr Zhao has little memory of what was said at the meeting of 12 September 2013. Third, I have not accepted the evidence of Mr Chen, which was to the effect that Mr Chen made it known to Mr Zhao that Costing Model B, if implemented, would be contrary to the Award.
[56] Jones v Dunkel (1959) 101 CLR 298. “The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party’s case. . . . The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn.” (Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11, at [63] (Heydon, Crennan, and Bell JJ))
It is the case that Mr Zhao remembers little about the meeting of 12 September 2013. In both of his affidavits, however, Mr Zhao deposes to having some recollection of the meeting; and, as I have already noted, Mr Zhao’s having positively deposed to certain things not having been said implies he had some actual recollection of the meeting, at least at the time he made his affidavits. Mr Zhao also manifested some recollection of the meeting of 12 September 2013 during his interview by the FWI. In response to questions about documents showing very clear references to rates of pay, entitlements, allowances, and penalty rates, Mr Zhao said “it was very brief, honestly there was a very brief discussion at that time about this stuff”; and that the discussions related to “increase the pay and also try to increase the retail and costing price”; and “he probably discussed it with all of us”.
I therefore accept that the matters to which Mr Zhao deposes about what occurred and said, and what was not said at the meeting, reflect his actual recollection; and I am also satisfied that his recollection accurately reflects that which Mr Zhao says he recalls. In particular, on the basis of his evidence, I am satisfied that at the meeting of 12 September 2013:
(a)Mr Zhao read the slides and, therefore, was aware of the use of “award” where that appeared in the slides; and he was also aware of other words which appear to relate to an award;
(b)Mr Chen did not refer to the Award by name;
(c)Mr Zhao did not understand or fully appreciate exactly what an award is, or the ramifications for non-compliance with an award; but this does not mean he had no understanding of what an award is, or that he had no understanding or the ramification for non-compliance with an award;
(d)Mr Zhao did not spend a lot of time on the slides he presented; and
(e)Mr Zhao believed that what Mr Chen had presented was correct; and Mr Zhao did not believe that one of the alternatives Mr Chen presented, namely, Costing Model B, was non-compliant with legal requirements.
My satisfaction of these matters is reinforced by the evidence Mr Zhao gives in paragraph 44 of his affidavit made on 3 June 2021 that, if he had known that Costing Model B did not comply with the Award, he would not have supported it.[57] That evidence is admittedly self-serving; but, in the circumstances of this case, it is plausible and, in any event, it has not been challenged in cross-examination. On the basis of that evidence, I find that at the time he approved or joined in the approval of Costing Model B, Mr Zhao did not believe he was committing Chatime to implement a scheme to pay employees that was unlawful. That, however, does not necessarily mean Mr Zhao did not have knowledge of the essential elements of a contravention of s 45 of the FW Act – Chatime’s conduct that constituted the Contraventions (Contravening Conduct), and the terms of the Award the conduct contravened.
[57] C Zhao affidavit 03.06.2021, at [44]
As I noted earlier in these reasons, Mr Zhao recalls having favoured Costing Model B over Costing Model A; and this implies Mr Zhao acquired knowledge of the contents of each of Costing Model A and Costing Model B as was necessary to enable him to understand the differences between the two costing models, assess their relative merits, and decide, or join in the decision, that Chatime implement with Costing Model B. The question, then, is whether, when taken with the decision Mr Zhao made, or joined in making, that Chatime implement Costing Model B, Mr Zhao’s knowledge of the contents of Costing Model A and Costing Model B constituted knowledge of the terms of the Award and of the Contravening Conduct.
I first turn to the contents of Costing Model A. That document assumed that, as at 12 September 2013, Chatime did not pay but, if Costing Model A were implemented, Chatime would pay:
(a)a “minimum award rate of $17.98”, which would require Chatime to pay an extra $318,203 in wages;
(b)a “uniform allowance” of $1.25 per shift, which would require Chatime to pay an extra $23,010 in wages;
(c)a “casual rate” of 23%, which would require Chatime to pay an extra $328,260; and
(d)a “weekend penalty (Saturday & Sunday)”, which would require Chatime to pay an extra $218,217 in wages.
Each of the expressions “minimum award rate”, “uniform allowance”, “casual rate” and “weekend penalty” unmistakably refers to a particular term or set of terms of the Award. Thus, the expression “minimum award rates” refers to the minimum wage rates payable under cl 17 of the Award; the expression “uniform allowance” of $1.25 refers to the amounts payable under cl 19.2(b)(ii) of the Award; the expression “casual rate” of 23% is intended to refer to the rates payable to casual employees stated in cl 13 of the Award;[58] and the expression “weekend penalty” refers to the payment of loadings for Saturday work and Sunday work, as provided for by cl 25(b) and cl 25(c) of the Award respectively.
[58] Although the 23% stated in the Costing Model is incorrect; cl 13.2 of the Award provides for the payment of a 25% casual loading.
I find that by having knowledge of the matters I identify in paragraph 43 of these reasons, Mr Zhao had knowledge of the terms of the Award I identify in paragraph 44. It does not matter that Mr Zhao did not know the Award by its name; and it does not matter that Mr Zhao did not read the Award itself, or that he did not know the clauses of the Award I identify in paragraph 44. That is so because the matters of which Mr Zhao did have knowledge necessarily implied knowledge of the “award” to which Costing Model A unmistakably referred, namely, the Award; and that the expressions “minimum award rate”, “uniform allowance”, “casual rate” and “weekend penalty”, necessarily implied knowledge of the terms of the Award to which these expressions unmistakably referred, and which gave rise to Chatime’s obligations to pay the additional amounts Costing Model A identified.
I then turn to Costing Model B. Like Costing Model A, Costing Model B assumed that, as at 12 September 2013, Chatime did not pay but, if Costing Model B were implemented, Chatime would pay:
(a)a “minimum award rate of $17.98”, which would require Chatime to pay an extra $318,203 in wages; and
(b)a “uniform allowance” of $1.25 per shift, which would require Chatime to pay an extra $23,010 in wages.
Unlike Costing Model A, however, Costing Model B made no reference to:
(a)a “casual rate” of 23%, which would require Chatime to pay an extra $328,260; or
(b)“weekend penalty (Saturday & Sunday)”, which would require Chatime to pay an extra $218,217 in wages.
By deciding, or joining in the decision, that Chatime implement Costing Model B, rather than Costing Model A, Mr Zhao knew that he had decided, or that he had joined in the decision, to commit Chatime to pay to employees the minimum award rates and a uniform allowance, amounts Chatime had not previously paid; but he also decided, or joined in the decision, not to commit Chatime to pay employees the “casual rate”, or the “weekend penalty (Saturday & Sunday)” rates Costing Model A identifies as being payable under the award. That necessarily constitutes knowledge on the part of Mr Zhao that Chatime had committed it would not comply with those provisions of the Award that obliged Chatime to pay its employees casual rates and weekend penalty rates.
Was Mr Zhao’s knowledge sufficient to render him a person involved?
On the findings I have made I am satisfied that Mr Zhao had knowledge of the essential elements of the Contraventions, to the extent those contraventions consisted in Chatime not complying with those terms of the Award that Costing Model A identified were payable under the Award but which were omitted from Costing Model B. Those terms related to casual rates, and the payment of “weekend penalty (Saturday & Sunday)” rates. I so find, even though I have found that Mr Zhao believed he did not commit Chatime to engage in any unlawful activity, and even though he believed that it was appropriate that Chatime implement Costing Model B.
DISPOSITION
I will order that the proceeding be listed for directions at 9:30 am on 31 August 2023 for directions in relation to the orders I should make to give effect to these reasons, and in relation to penalties.
I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 11 August 2023
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