Fair Work Ombudsman v Design Wolf Solutions Pty Ltd
[2023] FedCFamC2G 589
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Design Wolf Solutions Pty Ltd [2023] FedCFamC2G 589
File number(s): BRG 459 of 2022 Judgment of: JUDGE VASTA Date of judgment: 6 July 2023 Catchwords: INDUSTRIAL LAW – Contraventions of Fair Work Act 2009 (Cth) – pecuniary penalty – deterrence Legislation: Fair Work Act 2009 (Cth): ss 90(2), 546, 550(2), 716(5) Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Mason v Harrington Corporation Proprietary Limited t/as Pangaea Restaurant & Bar [2007] FMCA 7
Division: Division 2 General Federal Law Number of paragraphs: 40 Date of last submission/s: 29 May 2023 Date of hearing: In Chambers on the papers Place: Brisbane Solicitor for the Applicant: HWL Ebsworth Lawyers Counsel for the Respondents: The Respondents did not provide submissions ORDERS
BRG 459 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: DESIGN WOLF SOLUTIONS PTY LTD
First Respondent
BRENTON JOHN BOUND
Second Respondent
order made by:
JUDGE VASTA
DATE OF ORDER:
6 JULY 2023
THE COURT ORDERS THAT:
1.Pursuant to s. 546(1) of the Fair Work Act 2009 (Cth) (“FW Act”), the First Respondent pay a pecuniary penalty to the Commonwealth for the declared contraventions set out in Court order dated 17 April 2023 in the sum of $25,000, within 28 days of this order.
2.Pursuant to s. 546(1) of the FW Act, the Second Respondent pay a pecuniary penalty for his involvement within the meaning of s. 550(2) of the FW Act in the declared contraventions by Design Wolf Solutions Pty Ltd as set out in Court order dated 17 April 2023 in the sum of $5,000, within 28 days of this order.
3.The Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE VASTA
Introduction
On 17 April 2023, the Court made a declaration that the first respondent, Design Wolf Solutions Pty Ltd, had contravened s. 716(5) of the Fair Work Act 2009 (Cth) (“FW Act”) by failing to comply with a compliance notice dated 14 September 2021. The Court also declared that the second respondent, Brenton John Bound, was involved in the contravention of the first respondent within the meaning of s. 550(2) of the FW Act.
The Court adjourned the matter to give the applicant, who is the Fair Work Ombudsman (“FWO”), and the respondents an opportunity to make submissions as to the imposition of pecuniary penalties.
I ordered that, if the respondents did not file their submissions by 26 June 2023, the matter would be determined on the papers and the hearing date vacated.
The respondents did not file their material and so I have determined the matter on the papers.
Background
The first respondent is a company that operates a construction and home maintenance business. The second respondent is a director of the first respondent and was responsible for the overall operation, management and control of the first respondent.
A person by the name of Billy Hill (“the employee”) worked for the first respondent from 10 August 2020 until 14 May 2021. He was employed under the Building and Construction General On-site Award on a full-time basis.
When the employee was terminated, he had an entitlement to, and a balance of, 71 hours and 34 minutes of accrued annual leave. Upon termination, the employee was entitled to be paid out that accrued annual leave and annual leave loading. He claimed that he was not paid his entitlements.
The employee asked the applicant for assistance. The applicant began an investigation.
That investigation found that the employee had not been paid in accordance with s. 90(2) of the FW Act, in that he had not been paid his accrued annual leave.
Compliance notice
Whilst it was in the purview of the applicant to begin litigation against the first respondent for that failure to pay the proper entitlements to the employee, the applicant instead took advantage of the compliance notice provisions of the FW Act. This is a proper alternative to litigation.
By issuing a compliance notice, the applicant informs an employer that there is a reasonable belief that the employer has breached their duty to properly pay their employee/s. The notice gives the employer the opportunity to rectify that breach and, if the employer does so, there are no lasting consequences.
This means that there are no declarations made by Court and it also means that there can be no action taken against the employer for the contravention of the National Employment Standards. It also means that the employee is properly remunerated.
If an employer wishes to dispute the substance of the compliance notice, there are remedies available to that employer.
Chronology
The applicant gave the first respondent (through the second respondent) a compliance notice on 14 September 2021. The notice requested the first respondent to remedy the effects of the contravention in respect of the employee by identifying the amount of untaken leave hours due to the employee at the time of termination of his employment.
The notice also asked the employer to identify the actual amount that the employer had paid to the employee on the termination of his employment.
The notice requested the employer to calculate and rectify the outstanding amount owed to the employee and to make a record of the information and amounts.
These tasks had to be completed by the employer by 14 January 2022. The notice also required the employer to produce reasonable evidence to the applicant of its compliance with the notice by 21 January 2022.
The applicant did not hear from the first respondent, or the second respondent, despite the issuing of the compliance notice. On 12 January 2022, the compliance officer of the applicant contacted the second respondent. The second respondent advised that he was no longer an authorised representative of the first respondent. The officer then called the second respondent on his mobile number and left a voicemail message noting the due date for compliance with the compliance notice and offering assistance with understanding its requirements.
That same day, 12 January 2022, the officer also sent an email to the second respondent referring to the voicemail message and noting the compliance notice.
Later that day, the second respondent sent a reply email advising that the first respondent had “pretty much folded” and was no longer operating and could not make the payment referenced in the email.
On 13 January 2022, the officer sent a reply email to the second respondent advising that the trading status of the first respondent was not a reasonable excuse for failing to comply with the compliance notice and that the applicant would seek to enforce the compliance notice irrespective of whether the first respondent was trading. The second respondent replied asking for an extension of six weeks to make the payment.
On 25 January 2022, the officer sent an email to the second respondent advising that the request for additional time had been referred for consideration but had been declined.
On 4 February 2022, the officer sent a text message to the second respondent advising that legal action may be commenced against the first respondent for failing to comply with the compliance notice.
On 7 February 2022, the officer received a call from the second respondent. The second respondent said that the business was now closed and he no longer had access to the email address to which the applicant had been sending correspondence. The second respondent asserted that he had emailed the officer using another email address.
The officer informed the second respondent that they had received no email correspondence from the second respondent through any email address. The second respondent then shouted expletives at the officer before the officer ended the call.
On 18 February 2022, the officer sent the second respondent a formal notification that the first respondent had failed to comply with the compliance notice and that the second respondent was required to advise whether the first respondent had a reasonable excuse for not complying with the compliance notice.
The second respondent did not reply to any email.
On 24 October 2022, the applicant launched the present proceedings. The first respondent and second respondent have not appeared in relation to this matter at any stage. I have been satisfied that both respondents have been properly served and know about these proceedings; they simply have chosen not to attend.
Pecuniary penalties
The law in relation to assessment of pecuniary penalties has really been laid down quite comprehensively. The High Court, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3, said, at paragraph 116 of that judgment:
As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty's general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition.
The High Court reaffirmed that principle very recently in the matter of Australian Building and Construction Commissioner v Pattinson [2022] HCA 13. The High Court said, at paragraph 46:
[46] It is important to recall that an “appropriate” penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. …
[47] The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors … where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
[48] It is not necessary to multiply examples further. It is sufficient to say that a court empowered by section 546 to impose an “appropriate” penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.
In Mason v Harrington Corporation Proprietary Limited t/as Pangaea Restaurant & Bar [2007] FMCA 7, which is known as the Pangaea case, the Court went through, in effect, a number of factors the Court should be mindful of when imposing pecuniary penalties. One must be careful, though, in looking at the Pangaea case (Supra), that one does not simply look at those matters as some form of checklist to see whether or not the facts of the case with the particular factors either aggravate or mitigate the penalty. As such, the list compiled in Pangaea (Supra) is extremely useful, but it should not be a formula used by the Court to slavishly come up with some sort of almost mathematical guide for the imposition of penalties.
Notwithstanding what has been said in Pattinson, the principles in Pangea are still apposite when looking at the circumstances of the contravention as well as the circumstances of the contavenor.
Relevant circumstances
In this matter, the amount owed to the employee by the first respondent has been calculated as being $1,918.95. The Court is not imposing a pecuniary penalty because the first respondent and second respondent failed to pay the employee that sum of money, but rather because the first respondent and second respondent failed to comply with the compliance notice.
As earlier mentioned, the compliance notice regime is an excellent alternative to litigation and allows the wheels of industry to keep turning whilst important matters are worked out by employers. For this reason, the Court views non-compliance with a compliance notice as a very serious contravention of the FW act.
In this case there has been a complete failure by the respondents to engage with the applicant to resolve this matter. The behaviour of both respondents has been to treat the compliance notice with utter contempt.
Because of the lack of engagement in the court process by either of the respondents, I have very little information about either of the respondents. I do not know whether the first respondent is still trading or not and I have no information as to what the personal or financial circumstances of the second respondent truly are.
The maximum penalty for the contravention by the first respondent is $33,300 and the maximum penalty for the contravention by the second respondent is $6660.
As has been said by the High Court, the purpose of the imposition of pecuniary penalties is to deter. Deterrence will only be met if there are meaningful consequences for the behaviour exhibited by the respondents.
I have taken into account all of the relevant matters. Considering the dearth of information that is before the Court, because of the path that the respondents have chosen, I have imposed a penalty that is appropriate upon all the material before the Court.
In all the circumstances, I impose a pecuniary penalty of $25,000 upon the first respondent and a pecuniary penalty of $5000 upon the second respondent.
I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Vasta. Associate:
Dated: 6 July 2023
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