Fair Work Ombudsman v Darna Pty Ltd

[2014] FCCA 2222

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v DARNA PTY LTD & ANOR [2014] FCCA 2222

Catchwords:
INDUSTRIAL LAW – Second Respondent director’s liability in respect of First Respondent company’s contravention of s.716(5) of the Fair Work Act 2009 (Cth) – proceedings adjourned for determination of penalty in respect of each of the First Respondent and Second Respondents.

Legislation:

Corporations Act 2001 (Cth)

Fair Work Act 2009 (Cth), ss.539(2), 550, 550(1), 550(2), 716(5)
Federal Circuit Court Rules 2001 (Cth), r.15.06
Workplace Relations Act 1996 (Cth), s.728(2)
Trade Practices Act 1974 (Cth), s.75B

Dowling v Kirk [2007] FMCA 2106

Yorke v Lucas (1985) 158 CLR 661

Applicant: FAIR WORK OMBUDSMAN

First Respondent:

DARNA PTY LTD

(ACN 135 545 069)

Second Respondent: YOAV OREN

File Number: MLG 932 of 2013

Judgment of: Judge Hartnett

Hearing date: 25 September 2014

Delivered at: Melbourne

Delivered on: 24 October 2014

REPRESENTATION

Counsel for the Applicant: Mr Tracey

Solicitors for the Applicant: Office of the Fair Work Ombudsman

The First Respondent: No Appearance

The Second Respondent: In Person

DECLARATION

The Court declares that the Second Respondent contravened s.716(5) of the Fair Work Act 2009 (Cth).

ORDERS

1. The proceedings are adjourned to 18 December 2014 at 10am for penalty hearing in respect of each of the First and Second Respondents. 

2. The Applicant’s rights in respect of any application for costs pursuant to s.570 of the Fair Work Act 2009 (Cth) are reserved.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 932 of 2013

FAIR WORK OMBUDSMAN

Applicant

And

DARNA PTY LTD
(ACN 135 545 069)

First Respondent

YOAV OREN

Second Respondent

REASONS FOR JUDGMENT

1. On 27 June 2013, the Applicant filed an Application and Statement of Claim commencing these proceedings. On 7 January 2014, the Second Respondent filed a Response and Defence on behalf of the Respondents. On 27 May 2014, default judgment was obtained against the First Respondent. The Court declared that the First Respondent contravened s.716(5) of the Fair Work Act 2009 (Cth) (‘the FW Act’) by failing to comply with a Compliance Notice issued to the First Respondent on 28 May 2013.

2. Before the Court in these proceedings was the question of the Second Respondent’s liability in relation to the contravention by the First Respondent of s.716(5) of the FW Act in the First Respondent’s failure to comply with a Compliance Notice dated 28 May 2013 requiring it to pay Mr Moshe Ittah the amount of $4,222.05 (gross) by 11 June 2013. Indeed this amount still remains owing.

3. In respect of this matter going to the Second Respondent’s accessorial liability, the Applicant relied upon the Statement of Claim, an Affidavit affirmed by Ms Brodie Janelle Smith on 28 August 2014, a further Affidavit by Ms Michelle Elise Carey affirmed on 29 August 2014 and the Applicant’s Submissions on Liability of the Second Respondent filed 28 August 2014. The Applicant also relied upon the transcript of this Court’s proceedings of 13 March 2014 on the hearing of the Second Respondent’s Application in a Case pursuant to r.15.06 of the Federal Circuit Court Rules 2001 (Cth) (‘the Rules’). Such transcript has been received in evidence as a true record of those proceedings.

4. The Second Respondent relied upon an Affidavit sworn by him on 11 September 2014 (in relation to which paragraph 7 and parts of paragraph 8, as indicated on the Affidavit on the court file and in the court room upon argument are struck out) and the Second Respondent’s Submissions on his Liability filed 16 September 2014.

5. The issue for determination by the Court is whether the Second Respondent was involved in the First Respondent’s contravention within the meaning of s.550 of the FW Act and is therefore taken to have himself contravened s.716(5) of the FW Act. On the basis of the evidence before the Court and for the reasons which follow, the Court determines that the Second Respondent was involved in the First Respondent’s contravention of the FW Act in that he had actual knowledge of the essential facts comprising the contravention and was an intentional participant and/or knowingly concerned in the contravention.

The law

1. The Applicant is the Fair Work Ombudsman and a Fair Work Inspector. The Applicant has standing to bring these proceedings in accordance with s.539(2) of the FW Act.

2. The First Respondent is a company duly registered in accordance with the Corporations Act 2001 (Cth). The Second Respondent was, at all relevant times, a director, secretary and shareholder of the First Respondent, although the Court notes the Second Respondent ceased to be a director and secretary of the First Respondent effective from 7 July 2014.

3. Section 550(1) of the FW Act provides as follows:-

   “(1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.”

4. Section 550(2) of the FW Act defines when a person is involved in a contravention. It provides as follows:-

   “(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:

   (a) has aided, abetted, counselled or procured the contravention; or

   (b) has induced the contravention, whether by threats or promises or otherwise; or

   (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

   (d) has conspired with others to effect the contravention.”

5. As submitted by Counsel for the Applicant, s.550(2) of the FW Act is an accessorial liability provision in identical terms to s.728(2) of the Workplace Relations Act 1996 (Cth) and in substantially the same terms as s.75B of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth). The principles that apply to these accessorial liability provisions are set out in Yorke v Lucas (1985) 158 CLR 661 at 667 to 670 and in Dowling v Kirk [2007] FMCA 2106 at [23] to [33].

6. In Dowling v Kirk,[1] Cameron FM (as His Honour then was) said as follows:-

   [1] [2007] FMCA 2106 at [23] to [33].

   “[23] Section 728 of the [Workplace Relations] Act [1996] provides:

   (1) A person who is involved in a contravention of a civil remedy provision is treated as having contravened that provision.

   (2) For this purpose, a person is involved in a contravention of a civil remedy provision if, and only if, the person:

   (a) has aided, abetted, counselled or procured the contravention; or

   (b) has induced the contravention, whether by threats or promises or otherwise; or

   (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

   (d) has conspired with others to effect the contravention.

   [24] Section 728 is drawn in terms very similar to those of s 75B of the Trade Practices Act 1974. The latter section has been considered in a number of decisions which provide guidance as to the meaning of the same terms where they are found in s 728(2). Those Trade Practices Act authorities show that in order that a person may be “involved in” contravention of a civil remedy provision it is necessary to demonstrate that the person in question was a knowing participant in the contravention: Yorke v Lucas  (1985) 158 CLR 661 at 668-670.

   [25] In Yorke v Lucas, speaking of s 75B(1)(a), the High Court observed at 667 that that paragraph uses criminal law terms, namely the words “aided, abetted, counselled or procured” which, in that branch of the law, are used to designate participation in a crime either as a principal in the second degree or as an accessory before the fact. Such conduct requires intent in order that the offence can be proved. The High Court noted that a person will be guilty of the offences of aiding and abetting or counselling and procuring the commission of an offence only if the person intentionally participates in it, in the sense that he or she has knowledge of the essential matters going to make up the offence, whether or not he or she knows they amount to a crime.

   [26] As to the proper construction of s 75B(1)(a), the High Court said:

   Notwithstanding that s 75B operates as an adjunct to the imposition of civil liability, its derivation is to be found in the criminal law and there is nothing to support the view that the concepts which it introduces should be given a new or special meaning. (at 669)

   [27] The High Court described persons falling within the reach of s 75B(1)(a) of the Trade Practices Act -- s 728(2)(a) in the Workplace Relations Act -- as "accessories", with the consequent requirement implied by that term of knowing participation in a contravention.

   [28] As to the Trade Practices Act equivalent of s 728(2)(c), the High Court said:

   In our view, the proper construction of par (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention. (at 670)

   [29] Lindgren J summarised the relevant passage in Yorke v Lucas in Australian Competition & Consumer Commission v Giraffe World Australia Pty Ltd (1999) 95 FCR 302 at 346 [184] in the following terms:

   In Yorke v Lucas (1985) 158 CLR 661, in which the managing director of a vendor's corporate agent was held not liable by reason of s 75B(1) for the vendor's misrepresentation, Mason ACJ, Wilson Deane and Dawson JJ held in a joint judgment (at 670) that:

   ofor a person to be “knowingly concerned in” a contravention, he or she must have “knowledge of the essential facts constituting the contravention”;

   oThe word “knowingly” in para (c) qualifies the expression “concerned in” and not “a party to”; and

   o“the proper construction of par (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.

   In the same case, Brennan J said that under s 75B, civil liability is imposed only on “those who engage in the conduct prescribed in s 75B with the state of mind ... call[ed] mens rea” (at 673).

   [30] Although Lindgren J said at [186] that it was not necessary that the accessory should have appreciated that the conduct was unlawful, his Honour stressed at [187] that the state of mind of a supposed accessory in relation to a particular pleaded contravention was a critical issue. His Honour said that simple reference to evidence of the positions and conduct of the respective alleged accessories, without attempting to show that the evidence established intention and knowledge as well as “involvement”, would be to fail to address that critical issue.

   [31] His Honour’s reasoning was approved by the Full Court of the Federal Court in Rural Press Ltd v Australian Competition & Consumer Commission  (2002) 118 FCR 236 at 283 [160]. Their Honours also approved the following comments of Malcolm AJA in Heydon v NRMA Ltd (2000) 51 NSWLR 1 at 109 in relation to a party being knowingly concerned in, or party to, a contravention:

   In Yorke v Lucas, it was held that for liability to be attracted the person concerned must be an intentional participant and possessed of knowledge of the matters or things constituting the contravention, even if he did not know that they did constitute a contravention. It is enough to know the essential facts.

   [32] In Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17, the Full Court of the Federal Court said:

   For a person to be involved in a contravention within the meaning of s 75B(1)(c) of the Act, a person must be an intentional participant in the contravention, the necessary intent being based upon knowledge of the essential elements of the contravention: see Yorke v Lucas (1985) 158 CLR 661 at 670. Thus, while it is not necessary to establish that the individual Respondents had knowledge that there was a contravention of a provision of Pt V of the Act, it is necessary to demonstrate that each individual Respondent had knowledge of each of the essential elements of the contravention.

   In order to establish whether any of the individual Respondents was involved in a contravention, it is necessary to examine the state of mind of each of them separately in relation to each alleged contravention. Here the Commission's pleading did not permit of such a course. It did not ever identify the contravention that the particular Respondent was said to be involved in. We do not understand any of the Respondents to have addressed any case specific to them. Rather, his Honour appears to have assumed that merely being a director of IMB and being involved in promoting its activities was sufficient to attract the operation of s 75B(1)(c) in relation to any contravention on the part of IMB that occurred during the time that the individual was involved in promoting IMB's activities. However, his Honour made no finding concerning the state of mind of any of the individual Respondents. Further, the Full Court was not invited by the Commission to make findings in that regard. Rather, the Commission sought to support the conclusions reached by the primary judge.

   It is not necessary to establish any subjective element in relation to a contravention of Pt V of the Act. A contravention may be committed unintentionally. That is to say, a person may contravene a provision of Pt V even though that person does not have knowledge of all of the essential elements that constitute the contravention. However, before any accessorial liability will arise, it is necessary to establish the subjective element of knowledge of each of the essential elements of the contravention. That knowledge may be constructive in the sense that it may be possible to show wilful blindness in relation to the elements of a contravention. However, absent a finding of wilful blindness, it is necessary to establish actual knowledge on the part of a person to whom it is sought to sheet home accessorial liability in respect of a contravention of Pt V. (at [133]-[135])

   [33] What these authorities show is that in order for a person to have accessorial liability under s 728(2) of the Act he or she

   omust have knowledge of the essential facts constituting the contravention;

   omust be knowingly concerned in the contravention;

   omust be an intentional participant in the contravention based on actual not constructive knowledge of the essential facts constituting the contravention -- although constructive knowledge may be sufficient under paragraph (c) in cases of wilful blindness; and

   oneed not know that the matters in question constituted a contravention.”

Consideration

1. The Applicant submits the Second Respondent was involved in the First Respondent’s contravention in that he:-

   a)aided, abetted, counselled or procured the contravention; or

   b)was knowingly concerned in or party to the contravention.

2. The essential facts constituting the contravention of s.716(5) of the FW Act by the First Respondent as submitted by Counsel for the Applicant are:-

   a)a Compliance Notice was given to the First Respondent in accordance with the FW Act;

   b)the Compliance Notice required the First Respondent to take certain action within a specific time; and

   c)the First Respondent did not take that required action.  This has been found by the Court to be so.

3. The Applicant submits that the Second Respondent had actual knowledge of each of the essential facts constituting the First Respondent’s contravention and was an intentional participant in the First Respondent’s failure to comply with the compliance notice, in particular the Second Respondent was:-

   a)aware of the Compliance Notice;

   b)knew that the Compliance Notice required the First Respondent to pay Mr Ittah the amount of $4,222.05 within a specific time;

   c)knew that the First Respondent did not make any payment to Mr Ittah; and

   d)was the person responsible for the First Respondent’s failure to make any payment to Ittah.

4. The Second Respondent takes no issue with the fact that he had actual knowledge of the Compliance Notice and the requirements to pay Mr Ittah, and the Court notes that the Compliance Notice was sent by registered post to the address listed with the Australian Securities and Investments Commission as the registered office of the First Respondent, which is also an address the Second Respondent uses in his personal capacity.  Further, the Second Respondent in correspondence with the Applicant demonstrated knowledge of the contents of the Compliance Notice.

5. The Second Respondent does not dispute that Mr Ittah has not been paid the sum required to be paid to him as set out in the Compliance Notice.  The Second Respondent, the Court finds, did have actual knowledge of the First Respondent’s failure to make any payment to Mr Ittah in accordance with the Compliance Notice on the basis that:-

   a)Fair Work Inspector Pronk sent a notice to the First Respondent, addressed to and received by the Second Respondent, stating that the First Respondent had failed to comply with the Compliance Notice; and

   b)the Second Respondent confirmed in writing to Fair Work Inspector Pronk on 17 June 2013 that the First Respondent and/or the Second Respondent had not complied with the Compliance Notice.

6. The Second Respondent does not admit that he was an intentional participant in the First Respondent’s failure to comply with the Compliance Notice.

7. The Court finds, as submitted by Counsel for the Applicant, that the Second Respondent was the person responsible for the First Respondent’s failure to comply with the Compliance Notice, and was therefore an intentional participant in the contravention. He was the person who acted on behalf of the First Respondent in all its dealings with the office of the Applicant. Fair Work Inspector Ms Brodie Smith had supervision of the investigation conducted by Fair Work Inspector Pronk into the complaint of Mr Ittah.  In her Affidavit affirmed 28 August 2014, Fair Work Inspector Smith deposed in paragraph 6 therein that at all times the Second Respondent was the person that Fair Work Inspector Pronk dealt with on behalf of the First Respondent.  Further, the Second Respondent was at the time the Compliance Notice was issued:-

   a)one of two directors of the First Respondent;

   b)the secretary of the First Respondent; and

   c)the holder of 25 of the 100 shares issued for the First Respondent.

   The Second Respondent’s correspondence to the Applicant refers to the Second Respondent’s beliefs as the basis for the First Respondent’s non-compliance with the Compliance Notice.  In paragraph 13 of her Affidavit, Fair Work Inspector Smith deposed as follows:-

   “On 17 June 2013, FWI Pronk received an email from the Second Respondent, with the subject ‘Your notice 12 June 13’. The email

   (a) stated “I have a very good reason why I haven’t complied with your notice.  I believe your decision is wrong and has no legal stand”; and

   (b) included an email signature, listing the Second Respondent’s address as “2/147 Balaclava Rd, Caulfield North, VIC 3161.”[2]

   The notice to which the Second Respondent referred of 12 June 2013, was a letter sent to the First Respondent by registered post from Fair Work Inspector Pronk, addressed to the Second Respondent and titled “Failure to Comply with Compliance Notice”. 

   Further, the Second Respondent has, in correspondence to the Applicant, made statements to the effect he was responsible for the First Respondent’s actions, including “… I am not going to run away denying my involvement or responsibility for the chain of events of (sic) behalf of the company”[3], this being part of an email sent by the Second Respondent on 29 July 2014 to Ms Baillie, the lawyer employed by the Applicant who has had the primary carriage of this matter (‘Ms Baillie’). 

   [2] Affidavit of Brodie Janelle Smith affirmed 28 August 2014 at [13].

   [3] Affidavit of Ms Michelle Elise Carey affirmed 29 August 2014 at [11].

1. It was submitted by Counsel for the Applicant and the Court accepts, that the facts of this case are such that there is a very strong case of accessorial liability as against the Second Respondent. In the hearing on 13 March 2014, the Second Respondent made the following representations to the Court:-

   “I fully admit in front of the Court I and Darna are one. Darna is my company.  I'm the one who’s making the calls, I’m the one who’s making the shots.  I was the guy in charge of payroll.  I was the guy that’s paying Mr Ittah’s super and weekly payments.  I am the guy that provided them with every time sheet, every pay slip, every pay advice.”[4]

   [4] Transcript of hearing on 13 March 2014, page 27 at [3] to [9].

2. The Second Respondent clearly at all times acted on behalf of the First Respondent. He determined for the First Respondent not to comply with the Compliance Notice because he personally disagreed, and still does, with the determinations included in it. From 6 July to 11 July 2013, Ms Baillie received three emails from the Second Respondent in relation to the proceedings. Those emails set out, amongst other things, the Second Respondent’s views on the determinations included in the Compliance Notice. Nevertheless, the Second Respondent did not apply for review of that Compliance Notice during the period for compliance or following formal notice from the Applicant that the First Respondent had failed to comply with the Compliance Notice. The Respondents applied to this Court for a review of the Compliance Notice on 8 January 2014. That application was subsequently dismissed by the Court on the basis that the First Respondent was in default as defined by the Rules, and the Second Respondent had no reasonable prospect of success in the application for review.

3. The declaration sought shall be made. The Applicant puts the Respondents on notice as to a costs application that might be made. The proceedings will be adjourned for a hearing as to penalty.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Associate: 

Date: 24 October 2014