Fair Work Ombudsman v Corporation Sun Pty Ltd
[2020] FCCA 2849
•21 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v CORPORATION SUN PTY LTD & ANOR | [2020] FCCA 2849 |
| Catchwords: INDUSTRIAL LAW – Penalty hearing – non-compliance with compliance notice – factors for consideration – cooperation shown following commencement of litigation – penalty in mid-high range imposed. |
| Legislation: Crimes Act 1914 (Cth), s.4AA Fair Work Act 2009 (Cth), ss.3, 45, 539, 545, 546, 550, 570, 712, 716 |
| Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113 Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357 Trade Practices Commission v CSR Ltd [1990] FCA 521 |
| Applicant: | Fair Work Ombudsman |
| First Respondent: | Corporation Sun Pty Ltd Acn 105 207 172 |
| Second Respondent: | Michael Le |
| File Number: | PEG 292 of 2019 |
| Judgment of: | Judge Kendall |
| Hearing date: | 16 October 2020 |
| Date of Last Submission: | 16 October 2020 |
| Delivered at: | Perth |
| Delivered on: | 21 October 2020 |
REPRESENTATION
| Counsel for the Applicant: | Ms C Hartigan |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Counsel for the Respondents: | Mr V Lo |
| Solicitors for the Respondents: | VL Legal |
DECLARATIONS
The first respondent contravened s.716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice issued
22 May 2018 (the “Compliance Notice”).
The second respondent was involved, within the meaning of s.550(2) of the Fair Work Act 2009 (Cth), in the contravention by the first respondent of s.716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.
ORDERS
The first respondent pay $11,000 to the Consolidated Revenue Fund of the Commonwealth of Australia, pursuant to s.545(1) of the Fair Work Act 2009 (Cth) by 7 April 2021.
The first respondent pay interest on the amount ordered to be paid in Order 1 above to the Consolidated Revenue Fund of the Commonwealth of Australia, pursuant to s.547(2) of the Fair Work Act 2009 (Cth) by 7 April 2021.
The applicant distribute the amount ordered to be paid in Orders 1 and 2 above to the Employees, on a proportional basis in accordance with the total amounts set out below:
Employee Amount of underpayment Bin-Yin Chen $3,133.87 Chin Hsiang CHEN $1,094.18 Jou-Yu CHIANG $2,724.35 Chen-En HSU $1,974.23 Ching Ju HSU $730.71 Hsioa-Ting HSUEH $3,433.97 Shih-Yun LIN $2,590.88 Hui Hsin PENG $1,084.73 Yu Hsuan PENG $728.65 Hui-Min YEH $2,325.74 Tsai Hua YU $290.55
By 21 April 2021, the first respondent pay a pecuniary penalty fixed in the sum of $18,900 to the Commonwealth pursuant to s.546(1) of the Fair Work Act 2009 (Cth) for the contravention by the first respondent as set out in Declaration (1) above.
By 21 April 2021, the second respondent pay a pecuniary penalty fixed in the amount of $3,780 to the Commonwealth pursuant to s.546(1) of the Fair Work Act 2009 (Cth) for his involvement (within the meaning of s.550 of the Fair Work Act 2009 (Cth)) in the contravention by the first respondent as set out in Declaration (2) above.
In the event that the first respondent does not comply with Orders 1 and 2 above, by reason of its liquidation or any other reason, the second respondent is to pay the pecuniary penalty ordered in Order 5 above to the applicant within a further 14 days of the first respondent’s default of Orders 1 and 2. The applicant will then pay the pecuniary penalty to the Employees on a proportional basis in accordance with the amounts set out in Order 3 above.
The applicant have liberty to apply.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT Perth |
PEG 292 of 2019
| Fair Work Ombudsman |
Applicant
And
| Corporation Sun Pty Ltd Acn 105 207 172 |
First Respondent
| Michael Le |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 30 July 2019, the applicant, the Fair Work Ombudsman, filed an application in this Court alleging that the first respondent, Corporation Sun Pty Ltd ACN 105 207 172, had contravened s.716(5) of the Fair Work Act 2009 (Cth) (the “Act”) as it had failed to comply with a Compliance Notice. The applicant alleged that the second respondent, Mr Michael Le, was involved in this contravention pursuant to s.550 of the Act.
On 20 December 2019, the parties filed a Statement of Agreed Facts. The Statement of Agreed Facts is provided at Annexure A to these reasons for judgment. It is unnecessary for the Court to summarise the relevant background here. Rather, Annexure A should be read with this judgment as it details the background to this matter.
These reasons for judgment address what penalty should be imposed as a result of the admissions made by the respondents in the Statement of Agreed Facts. Those admissions are as follows:
32. Corporation Sun admits that at all relevant times Corporation Sun was:
(a) bound by the FW Act in respect of the employment of the Employees; and
(b) an employer in the horticulture industry, and the Award covered and applied to Corporation Sun and the Employees during their Employment Periods.
33. Corporation Sun admits that it did not have a reasonable excuse for failing to comply with the Compliance Notice.
34. Corporation Sun admits that it contravened subsection 716(5) of the FW Act by failing to comply with the Compliance Notice.
35. Mr Le admits that:
(a) within the meaning of subsection 550(2) of the FW Act, he was, by way of his acts or omissions, directly or indirectly knowingly concerned in, or party to, Corporation Sun’s contravention of subsection 716(5) of the FW Act by failing to comply with the Compliance Notice; and
(b) he is therefore to be treated under subsection 550(1) of the FW Act, as having himself contravened subsection 716(5) of the FW Act.
On the basis of the admitted contraventions, the Court made orders by consent programming the matter for a hearing on penalty. On 11 March 2020 the respondents’ lawyers withdrew from the proceedings. By consent orders made on 2 April 2020, the second respondent was given leave to act on behalf of the first respondent.
The penalty hearing was initially listed on 6 August 2020. Shortly prior to the hearing, the respondents obtained new legal representation. By consent, the matter was adjourned to 16 October 2020. The respondents were given additional time to file and serve any written materials and the applicant was given an opportunity to respond.
Despite having new legal representation and despite being given an opportunity to file further materials, the respondents provided nothing further to the Court. This is unfortunate.
The written materials before the Court (as relevant to the penalty hearing) thus include:
a)the application and statement of claim filed on 31 July 2019;
b)the Statement of Agreed Facts filed on 20 December 2019;
c)an affidavit of Jacqualine McArthur affirmed 23 January 2020;
d)an affidavit of the second respondent affirmed 25 May 2020; and
e)an outline of submissions filed by the applicant on 19 June 2020.
At the hearing of this matter, the applicant was represented by Ms Hartigan. The respondents were represented by Mr Lo, who provided brief oral submissions to the Court.
Principles
The Court’s power to impose pecuniary penalties for breaches of civil remedy provisions is found in s.546 of the Act. There is no dispute that s.716 of the Act is a civil remedy provision.
The purpose of imposing a penalty for a contravention of the Act is protective in nature: Trade Practices Commission v CSR Ltd [1990] FCA 521. It is not so much that the imposition of a penalty is intended to provide a retributive or rehabilitative function. Rather, it serves to educate against and deter conduct that breaches the Act: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113 (“ABCC”).
Parliament has, by ss.539(2) and 546(2) of the Act, determined the “maximum” price of deterrence for contraventions of the Act. However, the “maximum penalty” should be reserved for the most serious cases. Further, the Court should use the maximum penalty as a “yardstick” to determine the appropriate penalty in this case: Mornington Inn v Jordan [2008] FCAFC 70 at [41]-[46] (“Mornington Inn”).
Reading ss.539(2) and 546(2) together, the maximum penalty units which can be imposed upon the first respondent is 150. The maximum penalty units which can be imposed upon the second respondent is 30.
The Compliance Notice needed to be complied with by 19 June 2018. At that time, s.4AA of the Crimes Act 1914 (Cth) provided that a penalty unit was $210. Hence, the maximum penalty which can be imposed:
a)on the first respondent, is $31,500; and
b)on the second respondent, is $6,300.
As noted, the maximum penalty should be reserved for the most serious cases. To assist the Court in determining whether the facts of this case are “serious” or whether it is appropriate to reduce the penalty, the Court may have regard to a variety of factors and circumstances. While there are no fixed factors, the following list of factors is accepted as relevant to the Court’s task in proceedings of this sort:
a)the nature and extent of the conduct which led to the breaches;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss sustained as a result of those breaches;
d)whether the breaches were distinct or arose out of one course of conduct;
e)the size of the business and the enterprise involved;
f)whether or not the breaches were deliberate;
g)whether the party committing the breach had exhibited contrition, taken corrective action and cooperated with enforcement authorities;
h)the need to ensure compliance with minimum standards by provision of effective means of investigation; and
i)the need for specific and general deterrence.
(Kelly v Fitzpatrick [2007] FCA 1080 (“Kelly”))
The Court must approach its task objectively. That task is inherently specific to the factual circumstances of each particular matter. As such, not all of the factors outlined above are relevant to the Court’s consideration. The Court will consider the factors described above, determine if they are relevant and, if they are, assess what weight should be given to them. The Court will then consider if there are any other relevant matters arising from the material which may warrant consideration. The Court will then determine what penalty should be imposed and “take one final look” at that penalty to determine whether, in totality, it is an appropriate response to the contravention in this case.
The Court notes at the outset that in the materials before it is information concerning criminal charges relevant to the second respondent. The Court draws no adverse inference from these criminal charges. The charges are irrelevant to the Court’s determination as to the appropriate penalty for the contraventions in this matter.
Consideration
In this matter, the following factors are relevant to determining the appropriate penalty and will be considered in turn:
a)the nature, circumstances and extent of the contravention and the loss/consequences that arose from it;
b)the size of the first respondent’s business (including financial circumstances) and the circumstances in which the relevant conduct took place as that conduct relates to the second respondent (including his personal situation);
c)the degree of contrition shown, corrective action taken and cooperation demonstrated;
d)the need to ensure compliance with minimum standards; and
e)the need for specific and general deterrence.
The nature, circumstances and extent of the contravention and the loss/consequences that arose from it
In this matter, the contravention relates to a failure to comply with compliance notices issued under s.716.
The Explanatory Memorandum to the Fair Work Bill 2008 (Cth) (at [2673]) captures the underlying purpose of compliance notices. It provides:
Clause 716 sets out a mechanism for an inspector to issue a compliance notice. This provides inspectors with another option to deal with non-compliance instead of pursuing court proceedings.
As demonstrated by s.716(4A) and (4B), the statute is designed to address alleged contraventions in a way that avoids litigation. The nature of the contravention here undermines the core objective of the Act – which is to ensure flexibility and to provide effective (and efficient) compliance mechanisms: the Act, s.3.
In this matter (in relation to the circumstances which gave rise to the Compliance Notice), the first respondent underpaid eleven employees (who were in Australia on working holiday visas) the wages they were entitled to under the Horticulture Award 2010. The underpayments occurred between February 2017 and October 2017 and ranged from approximately $300 to $3,500.
What is in issue is the failure to comply with the Compliance Notice. The extent of the underpayments is of little relevance.
The circumstances surrounding the failure to comply with the notice are, however, of concern to the Court. This requires an analysis of any steps that were taken prior to the Compliance Notice being issued to place the respondents on notice that there was a potential issue and an assessment of what occurred when the Compliance Notice was issued.
Relevantly, the respondents were, during the relevant period, represented by their former solicitors. Here:
a)from 30 October 2017, the respondents were aware that an investigation was in progress in relation to alleged underpayments. The respondents were informally requested to produce documents. They did not do so;
b)on 28 November 2017, a Notice to Produce Documents and Records was issued to the first respondent pursuant to s.712. The documents needed to be provided by 15 December 2017. A request for an extension was made, but denied. The documents and records requested were eventually provided on 15 February 2018 (approximately two months after they should have been provided);
c)a further request for documents pursuant to s.712 was issued for additional documents (specifically, annual leave records). The first respondent failed to comply with that request;
d)on 16 April 2018, the respondents’ then solicitors were advised that a compliance notice would be issued detailing the accrued annual leave and annual leave loading underpayments;
e)
on 22 May 2018, the Compliance Notice was served. The first respondent was required to remedy underpayments by
19 June 2018;
f)in response to requests from the respondents’ solicitors’, various documents related to the investigation were provided to the respondents;
g)on 21 June 2018, the respondents were advised that there was no evidence that the first respondent had complied with the Compliance Notice. The respondents’ solicitor responded with requests for further documents. Further documents were provided on 18 July 2018;
h)no action was taken by the respondents. On 20 December 2018, the applicant advised the respondents that they had until 4 January 2019 to comply with the Compliance Notice and that, if they did not do so, litigation might be commenced;
i)on 3 July 2019, the applicant advised that litigation would be commenced in this Court and invited the respondents to co-operate by entering into an agreed statement of facts; and
j)on 30 July 2019, the action was commenced in this Court. Shortly prior to the first court date, the parties provided consent orders which noted that the parties intended to file a statement of agreed facts, that the respondent consented to the relief sought and that the Court was only required to determine penalty.
It is clear from the above that the respondents’ approach to this matter has been unsatisfactory and was entirely avoidable.
The respondents were on notice from 30 October 2017 of the potential contravention. They had almost 18 months prior to the applicant commencing litigation to remedy or action the Compliance Notice. Instead, the respondents protracted the entire process.
At the hearing, it was explained that the second respondent was the subject of criminal proceedings throughout the relevant period.
The Court does not accept that the fact that other proceedings were on foot constitutes a reasonable excuse for failing to comply with the notice.
While the Court accepts that the respondents may have been inhibited from accessing documents until February 2018 (in part because of the criminal proceedings), this was still over 12 months prior to litigation being commenced in this Court and 3 months prior to the compliance notice being issued.
Once the Compliance Notice was issued, the respondents made further requests for documents which the applicant made available (even though the applicant was not obliged to do so).
The respondents then effectively “sat on their hands”. The applicant waited a further six months and then, again, contacted the respondents and gave them yet another opportunity to comply with the notice or offer an excuse for not complying. There was, again, no response from the respondents. This “silence” continued until this action was commenced on 30 July 2019. Only then did the respondents finally accept responsibility.
The respondents’ cavalier approach towards the Compliance Notice reflects an unacceptable disregard for its statutory obligations. The respondents were given ample opportunity to comply with the Compliance Notice. Their conduct frustrated the purpose of the legislative and procedural process.
In light of the above, the Court concludes that “the nature, extent and circumstances surrounding the contravention” warrant a penalty in the high-range.
In terms of “the nature and extent of the loss”, the applicant has advanced arguments concerning the quantum of loss experienced by the employees of the first respondent and, in particular, the vulnerability of those employees. Again, these submissions are more directed to the subject matter of the Compliance Notice – not the failure to comply with the notice itself.
The Court accepts that the loss suffered by the employees was a corollary of the failure to comply with the Compliance Notice. Hence, some weight in favour of the applicant’s argument is appropriate. Otherwise, the failure to comply with the Compliance Notice has caused public resources to be expended on proceedings that could have, and should have, been avoided.
On the basis of the above, the nature and extent of the loss warrants a penalty in the low to mid-range.
The size of the first respondent’s business and the circumstances relevant to the second respondent
The size of a business and its financial circumstances or the personal circumstances of any individual do not excuse a business or individual from their statutory obligations: Kelly at [30]. It may nevertheless provide grounds for mitigation. However, any mitigation must be assessed so as to ensure that the penalty is meaningful and deters similar conduct.
In Jordan v Mornington Inn Pty Ltd [2007] FCA 1384 at [99] it was stated:
As to the respondent’s own financial position, however, in considering the size of a penalty, capacity to pay is of less relevance than the objective of general deterrence: Leahy (No 2) at [9]. In any event, to the extent that financial hardship might mitigate what would otherwise be an appropriate penalty, such an argument would need to be based on evidence. Apart from the income figures mentioned above, which were advanced from the Bar table, no such evidence was forthcoming.
In this matter, the second respondent’s affidavit provided some information about the first respondent’s size and financial position and the second respondent generally.
That evidence can be summarised as follows:
a)the legal proceedings in the District Court caused the second respondent and “the companies” financial and mental hardship which, in the end, caused the second respondent to “lose everything”;
b)the COVID-19 pandemic has caused a major drop in the first respondent’s business turnover. Between the period of February to April 2020, the first respondent has recorded a loss of approximately $35,000;
c)the second respondent’s pay slips record that his annual salary is approximately $18,200 and that he is receiving JobKeeper payments;
d)the first respondent is having wages subsidised by the JobKeeper program;
e)the second respondent is currently paying off another penalty (totalling $48,838) received for an unrelated matter at $350 per week. His declaration made in support of a payment plan for that offence indicates that his family’s weekly expenditure exceeds its income. He holds only $350 in savings and has no assets. He estimates his liabilities to amount to over $1.5 million; and
f)a storm occurred in the area of the farm site which resulted in 60 per cent of the farm’s plantation being “wiped out”.
At the hearing, references were made to the COVID-19 pandemic and its impact on the respondents.
The applicant’s evidence indicates that the first respondent is still an active company and that the second respondent has title over a number of properties (subject to a mortgage or caveat in some circumstances).
The Court is sympathetic to the difficulties faced by any business trying to operate in the midst of a global health crisis. Twelve months ago the current situation would have been unimaginable and the future remains uncertain. The first respondent is but one of many businesses to have suffered financial hardship as a result of the COVID-19 pandemic. The first respondent’s primary crop also suffered damage in a storm.
However, having assessed all of the evidence before the Court, the Court does not place significant weight on these matters insofar as they are advanced to mitigate any penalty owed.
The affidavit detailed above provides only a brief snapshot (three months) of the first respondent’s financial circumstances. It does not indicate the year-to-date profit and loss. Further, it is not certified or verified by a professional. There is nothing to suggest an incapacity to pay a fine. Nor does it suggest that the first respondent will cease trading. Rather, the second respondent’s affidavit says that the business is “struggling to stay afloat until further notice on restriction easements”. This suggests that the first respondent will “stay afloat” and, following the easing of any COVID-19 restrictions, will operate again.
As for the second respondent’s financial circumstances, the Court has some difficulty accepting that the declaration provided in relation to a payment plan for another matter accurately reflects the second respondent’s financial circumstances (noting discrepancies with the assets and liabilities). On the evidence, the Court is not satisfied that the second respondent is incapable of paying a penalty.
In addition to the second respondent’s financial circumstances, some of the evidence before the Court also pertains to his personal circumstances. This evidence can be summarised as follows:
a)the second respondent suffered immense mental hardship during the legal proceedings in the District Court. A psychological report dated 18 May 2018 indicated that the second respondent was suffering severe psychological distress including Acute Stress Disorder, clinical depression and anxiety and early stages of post-traumatic stress disorder;
b)the second respondent was involved in a head on collision with another car in July 2018 which has restricted some of his work duties; and
c)the second respondent’s daughter suffers from a disability and requires additional assistance.
The Court accepts the second respondent’s evidence that his personal circumstances have been difficult.
However, the evidence does not demonstrate that the second respondent’s mental health was the reason for the contravention or contributed to the contravention (i.e., that it contributed to the non-compliance with the Compliance Notice).
It is notable that the second respondent was represented by solicitors during the entire period that there was a failure to comply with the Compliance Notice. The reasons advanced by the solicitors in the initial stages of the investigation, and when issued with the Compliance Notice, did not indicate that the second respondent’s mental health prevented him from producing documents or providing a response. Rather, it was explained that criminal proceedings were the reason for the delay in responding to the Compliance Notice and that the legal representatives did not have enough information to do what was required of them.
On the basis of the evidence before the Court, the second respondent’s mental health played no part in the contravention.
The second respondent’s affidavit indicates that, following his car crash in July 2018, he took no time off work and continued to manage his market garden. Hence, it cannot be said that the accident prevented compliance with the notice. The second respondent immediately returned to work following the accident. It is assumed that, as part of his role in managing the market garden, he would have been aware of the Compliance Notice and was in a position to address it.
Finally, while the Court sympathises with the second respondent’s difficult family situation, there is no evidence that this contributed to, or was a reason for, the respondents’ non-compliance with the Compliance Notice.
On the basis of the above, the Court does not accept that the second respondent’s personal circumstances warrant a reduction in penalty.
The degree of contrition shown, corrective action taken and cooperation demonstrated
In terms of contrition, there has been none shown by the second respondent himself or on behalf of the first respondent. The second respondent’s affidavit is silent in relation to regret or contrition. Instead, the affidavit filed by the second respondent simply explains his personal circumstances and the first respondent’s circumstances. There is no responsibility taken. It appears from the second respondent’s affidavit that he was “too busy”, or not particularly concerned with addressing the Compliance Notice. In fact, he makes no reference to the compliance notice at any stage, nor to any underpayments.
Shortly prior to the hearing of this matter, the applicant advised the Court that, sometime after 19 June 2020, the first respondent had paid $9,111.86 of the $20,111.86 the first respondent had underpaid the employees. The first respondent still owes $11,000. This payment is not significant in the Court’s view. This part payment was made over two years after it was required by the Compliance Notice. It was made nearly one year after these proceedings were initiated and at least six months after the respondents had agreed to the underpayments. The lack of urgency demonstrates a lack of contrition.
It is apparent from what the Court has discussed above (at [24]) that there has been a general lack of cooperation from the respondents since the investigation into their business practices was commenced. Nonetheless, the respondents have cooperated to some extent with the relevant court practices by filing the Statement of Agreed Facts.
A preparedness to cooperate in order to facilitate the course of justice can warrant a discount in penalty: Mornington Inn. However, as the applicant notes, there is a caveat in this regard as described in Mornington Inn at [76] as follows:
As Branson J has pointed out (see Alfred v Walter Construction Group Limited [2005] FCA 497) the rationale for providing a discount for an early plea of guilty in a criminal case does not apply neatly to a case, such as the present, where a civil penalty is sought and the case proceeds on pleadings. Nevertheless, in our view, it should be accepted, for the same reasons as given in Cameron, that a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.
Here, there has been no acceptance of wrongdoing or a credible expression of regret. In the circumstances, the Statement of Agreed Facts does little to mitigate the damage done.
On balance, the lack of contrition, the absence of corrective action and the limited cooperation shown warrant a penalty in the mid-high range.
The need to ensure compliance with minimum standards
Section 716 of the Act provides as follows:
(1) This section applies if an inspector reasonably believes that a person has contravened one or more of the following:
(a) a provision of the National Employment Standards;
(b) a term of a modern award;
…
Giving a notice
(2) The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a) take specified action to remedy the direct effects of the contravention referred to in subsection (1);
(b) produce reasonable evidence of the person’s compliance with the notice.
…
Relationship with civil remedy provisions
(4A)An inspector must not apply for an order under Division 2 of Part 4-1 in relation to a contravention of a civil remedy provision by a person if:
(a) the inspector has given the person a notice in relation to the contravention; and
(b) either of the following subparagraphs applies:
(i) the notice has not been withdrawn, and the person has complied with the notice;
(ii) the person has made an application under section 717 in relation to the notice that has not been completely dealt with.
Note:A person other than an inspector who is otherwise entitled to apply for an order in relation to the contravention may do so.
(4B)A person who complies with a notice in relation to a contravention of a civil remedy provision is not taken:
(a)to have admitted to contravening the provision; or
(b)to have been found to have contravened the provision.
Person must not fail to comply with notice
(5) A person must not fail to comply with a notice given under this section.
Note:This subsection is a civil remedy provision (see Part 4-1).
(6) Subsection (5) does not apply if the person has a reasonable excuse.
For convenience, the Court again refers to the purpose of s.716 of the Act as set out in the Fair Work Bill 2008 (Cth) Explanatory Memorandum (at [2673]):
Clause 716 sets out a mechanism for an inspector to issue a compliance notice. This provides inspectors with another option to deal with non-compliance instead of pursuing court proceedings.
Here, the failure to comply with the compliance notice undermines the entire purpose of the statutory provision. The purpose of a compliance notice is to avoid litigation. Further, the above provision also provides an employer or person issued with a Compliance Notice other avenues through which to challenge a Compliance Notice or provide a reasonable reason as to why it/they cannot comply with the notice.
Here, the respondents forewent both of these options. That decision has resulted in litigation. Their conduct has undermined the core objective and purpose of the statutory provision – which, by all intents, is designed to assist those who are issued with a Compliance Notice.
On the basis of the above, the Court considers a penalty in the mid-range to be appropriate.
The need for specific and general deterrence
In Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46, the High Court stated that the purpose of civil penalties is not to penalise, but to promote the public interest in compliance with statutory obligations and to deter repetition of a contravention (by both the contravener and the public at large).
Further, it was explained in ABCC at [98] that, in relation to general deterrence:
... it is important to send a message that contraventions of the sort under consideration are serious and not acceptable: Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406 at 418 [32].
A contravention of s.716 undermines the fundamental purpose of the statute (to avoid litigation and encourage efficiency in the resolution of any identified shortcomings by employers). It also inhibits Fair Work Inspectors and the applicant from carrying out their roles to enforce the legislation.
Were a lower penalty to be imposed, it would, in the Court’s view, undermine the role of the regulator and the purpose of the relevant statutory provision. It could have the effect of encouraging non-compliance as a way to evade payment or encourage evasive action until a Court order requires compliance.
A penalty in the mid-high range will achieve the required level of general deterrence.
In relation to specific deterrence, in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357 at [37] it was explained that:
… specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur …
Here, the first respondent continues to operate and employ people. The second respondent also appears to be responsible for the management of the first respondent. The Court notes that there is no evidence before it of any previous contraventions of the Act or similar conduct of this sort. As a first time offender, this does not suggest that the need for specific deterrence is pressing.
However, no apology has been forthcoming, there has only recently been corrective action (being the payment of part of the amounts that are owed to employees) and there is no evidence of what the respondents have done, or what processes they will now undertake, to ensure that the same contravention does not happen again.
On the basis of the above, a penalty in the mid-range is warranted in order to ensure specific deterrence.
Assessment of Penalty and Totality
The applicant submits that a penalty in the mid-high range is appropriate. The applicant suggests a penalty between:
a)$17,010 to $19,845 in respect of the first respondent; and
b)$3,402 to $3,969 in respect of the second respondent.
Accordingly, on the applicant’s submission a penalty should be imposed in the range of 54 per cent and 63 per cent of the maximum.
Unfortunately, the respondents’ submissions in relation to penalty were not entirely clear. The respondents appear to suggest that the relevant penalty range should be:
a)$5,000-$8,000 for the first respondent; and
b)$500-$800 for the second respondent.
Accordingly, on the respondents’ oral submissions, a penalty between 15 per cent and 25 per cent should be imposed on the first respondent and a penalty between 8 per cent and 13 per cent should be imposed on the second respondent.
Unfortunately, no submissions were advanced by the respondents that explained how that penalty range was arrived at. Rather, it was submitted that any requirement to pay a penalty should be “suspended”. It was not, however, entirely clear why or for how long. The respondents seemed to suggest that if the respondents did not breach s.716 of the Act “for six months” then the entire penalty should be “waived in its entirety” (arguably, on the basis of good behaviour). The respondents also stressed that this was a “first offence” and that the COVID-19 pandemic constitutes a “special consideration”.
These arguments will be addressed below.
The second respondent, while not the Director of the first respondent, was the Chief Executive Officer of the first respondent. In circumstances where the second respondent has admitted being involved in the contravention and admitted that that he was responsible for the overall operation, management and control of the first respondent (and noting that there are no mitigating factors specific to the second respondent), the Court is satisfied that the penalty percentage imposed on him should be at the same level as any penalty imposed on the first respondent.
A penalty in the mid-high range is appropriate. The respondents’ submissions in relation to penalty underestimate the seriousness of what occurred and cannot be justified on the evidence before the Court.
Having assessed the evidence detailed above, the Court considers a penalty imposed at 60 per cent of the maximum to be appropriate.
This will amount to:
a)$18,900 for the first respondent, and
b)$3,780 for the second respondent.
The final task for the Court is to examine “one final time” whether the penalty arrived at “appears to be wrong” and ensure that it is “not oppressive”: Mornington Inn.
While the Court has noted above that the specific circumstances have caused hardship, the Court is nevertheless satisfied that the penalties imposed are proportionate to the contravention and the manner in which the contravention occurred.
A discretion to “suspend” the penalty?
At the hearing, it was submitted, that while the respondents accepted that a penalty will be imposed, the Court should exercise its discretion to “suspend the sentence”. In effect, what the respondents want is an order that, if the respondents do not “repeat” the contravention for six months after this judgment is delivered then the penalty be “waived”.
The Court accepts that imposing a penalty is discretionary.
The respondents did not refer to any authority that suggests that the Court has the power to “suspend” (and then permanently waive) a penalty imposed if an individual demonstrates “good behaviour”.
In Director of the Fair Work Building Industry Inspectorate v Ellen (The Longford Gas Plant Case) [2016] FCA 1395, Justice Tracey referred to a number of cases where the Court ordered that penalties imposed be suspended for a period of time. His Honour stated:
57. The Court’s discretion to suspend a pecuniary penalty, imposed under the Act, is not to be constrained by prescriptive principles. Nonetheless, some general observations may be made. Any penalty imposed must be meaningful and operate as a deterrent both to the contravenor and any others who might, in future, be tempted to engage in similar conduct. The penalty must also reflect the need to maintain public confidence in the operation of the enterprise agreements which regulate the employment of large numbers of Australian workers: cf Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 580. A meaningful penalty will be one that falls within a permissible range, having regard to all of the circumstances of a particular case. Any suspension of whole or part of the penalty will necessarily reduce the amount immediately payable. If the penalty imposed is in the low end of the range then a suspension may take the penalty payable outside the range. Conversely, if the penalty imposed is at the high end of the range there may be greater scope for suspension with the reduced figure remaining within the permissible parameters.
58. The penalty must be meaningful, not only for the purpose of specific deterrence, but also taking into account the important need for general deterrence. If the suspension is conditional on the contravenor’s good conduct during a particular period it may be justified on the basis that it will operate as an incentive to the contravenor to be of good behaviour during that period. In this regard it is notable that the main reason why McKerracher J was prepared wholly to suspend the pecuniary penalties which he had imposed in Calabro (No 7) was that the contravenors were also restrained, by injunction, from any repetition of the contravening conduct for a period of seven years. If, during that period, any further contraventions occurred a contravenor would be liable to pay the suspended penalty and be subject to prosecution for contempt of Court. General deterrence, on the other hand, requires that the amount imposed must be sufficiently high as to serve to dissuade others from acting in a similar way. This object will not be achieved if the amount payable, following suspension, is very low.
59. Other considerations which may, in a given case, have a bearing on the question of whether or not to suspend (wholly or in part) a monetary penalty include the seriousness of the offending conduct, the contravenor’s prior conduct and the prospect of any future contravention coming to the attention of the applicant in a particular proceeding. This latter consideration may weigh more heavily in industries, such as the construction industry, in which workers regularly move between employers and projects and may assume greater relevance where the project on which the misconduct occurred has been completed by the time the Court comes to consider appropriate penalties and whether or not to suspend them.
The respondents here highlight the economic impact of COVID-19 and the fact that the respondents are “first time offenders”.
These issues, while relevant, can be assessed when determining the amount of any penalty and when that penalty should be paid. The Court has done so.
These issues do, however, have to be assessed within the context of the other core issues before the Court. The lack of contrition shown by the respondents in this proceeding and the serious and ongoing nature of the non-compliance until very recently are such that any “permanent” suspension risks sending a clear, and unacceptable, message that contraventions of this sort are not serious. They are.
The Court notes that these are difficult times. Accordingly, the Court is of the view that, rather than allowing a one month period within which to pay the penalties, the Court will allow the respondents until
21 April 2021 (a period of six months) to pay, in full, the penalty sums.
Other Orders and Declarations Sought
The applicant seeks a declaration that the respondents have contravened s.716 of the Act (the second respondent by virtue of s.550 of the Act). The respondents have admitted to doing so and have not otherwise indicated why they believe the declarations should not be made. Accordingly, declarations will be made.
In addition to any penalty amount, the applicant also seeks an order requiring that the first respondent pay the balance of the sum owing, with interest, to the Consolidated Revenue Fund within 28 days. This sum (currently $11,000) will then be distributed to the eleven employees who were underpaid in the course of their employment with the first respondent.
Section 545(1) of the Act allows the Court to make any order it considers appropriate if it is satisfied that a person has contravened a civil remedy provision. Here, the underpayments constitute a contravention of s.45 of the Act. The Court is satisfied that the respondents have contravened this provision by failing to pay their employees owed entitlements under the Horticulture Award 2010.
Accordingly, orders relating to the payment and the distribution of the outstanding sum owed to the employees will be made. However, the Court will allow the first respondent until 7 April 2021, to pay the remaining $11,000 plus interest. It is noted that the respondents indicated that the first respondent intended to pay this amount in any event within the next four months.
The applicant also seeks an order that, in the event that the first respondent fails to comply with the orders requiring payment of the remaining $11,000 plus interest, the second respondent will be required to pay the applicant the pecuniary penalty awarded against him (being $3,780) within a further 14 days and that amount will be proportionally distributed to the employees. The Court has no particular issue with an order of this type and notes that it is intended to ensure that the first respondent’s employees are compensated to some extent.
Conclusion
The substantive issue before the Court relates to the quantum of any penalty imposed on the respondents.
The Court has concluded that the penalties imposed will amount to:
a)$18,900 for the first respondent; and
b)$3,780 for the second respondent.
The Court will grant the respondents until 21 April 2021 to make full payment of these amounts.
The Court has also made orders that require the respondents to remedy the underpayments which were the subject of the compliance notice by 7 April 2021, and a number of ancillary orders regarding the dispersal of those funds.
The applicant has not sought any costs and (noting s.570) the Court is not inclined to make any such order in the circumstances of this case.
I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for judgment of Judge Kendall
Associate:
Date: 21 October 2020
Annexure A
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