Fair Work Ombudsman v Donence
[2023] FedCFamC2G 32
Federal Circuit AND FAMILY Court of Australia (DIVISION 2)
Fair Work Ombudsman v Donence [2023] FedCFamC2G 32
File number: MLG 3336 of 2021 Judgment of: JUDGE RILEY Date of judgment: 25 January 2023 Catchwords: INDUSTRIAL LAW – failure to comply with a compliance notice – penalty – specific and general deterrence being the purpose of civil penalties. Legislation: Fair Work Act 2009 ss. 539(2), 545(1), 546 and 716. Cases cited: Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8
Fair Work Ombudsman v Bedington [2012] FMCA 1133
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412.
Division: Division 2 General Federal Law Number of paragraphs: 57 Date of hearing: 21 December 2022 Place: Melbourne Solicitor for the Applicant: Office of the Fair Work Ombudsman Solicitor for the Respondent: None ORDERS
MLG 3336 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: OSCAR DONENCE
Respondent
order made by:
JUDGE RILEY
DATE OF ORDER:
25 January 2023
THE COURT ORDERS THAT:
1.Within 28 days, pursuant to s.546 of the Fair Work Act 2009, the respondent pay pecuniary penalties, fixed in the sum of $4,100, to the Commonwealth for the respondent’s contravention set out in declaration 4 made on 6 July 2022.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE RILEY:
Introduction
This matter concerns the penalty, if any, to be imposed for the respondent’s contravention of the Fair Work Act 2009 (“the Act”). The contravention consisted of the respondent failing to comply with a compliance notice issued by the applicant under s.716(5) of the Act.
The applicant is the Fair Work Ombudsman. The respondent, Mr Donence, is a sole trader who operates a business of installing commercial kitchens.
Mr Donence employed Richard Thamm on a casual basis. Mr Thamm sought the assistance of the Ombudsman. The Ombudsman formed the view that Mr Donence had not paid Mr Thamm anything for his work during the period 13 February 2021 to 22 March 2021.
On 14 July 2021, the Ombudsman sent a compliance notice to Mr Donence under s.716(2) of the Act. The compliance notice required Mr Donence to:
(a)calculate and pay the outstanding amounts, including superannuation, to or on behalf of Mr Thamm by 13 August 2021; and
(b)provide evidence to the Ombudsman by 20 August 2021 that he had done so.
Mr Donence failed to comply with either limb of the compliance notice by the specified dates.
The Ombudsman commenced these proceedings on 21 December 2021. The matter was listed for first return on 31 January 2022 before Judge Davis. On that date, there was no appearance by or on behalf of Mr Donence. The matter was subsequently adjourned to 4 March 2022 for directions.
On 4 March 2022, Mr Donence appeared in person at the directions hearing. The orders made by Judge Davis on that day noted that:
(a)Mr Donence acknowledged having received the application and statement of claim in this proceeding by email on 22 December 2021 and by express post; and
(b)Mr Donence confirmed that he was content to be served by email at his current email address, being [email protected].
On 29 March 2022, the matter was listed for directions before Judge Blake. Mr Donence appeared in person on that date. Judge Blake made orders adjourning the matter to 23 May 2022 for further directions before Judge Davis.
Following Judge Davis’ resignation from the court, the matter was re-docketed to me and the directions hearing listed on 23 May 2022 was re-listed to 30 May 2022.
The directions hearing on 30 May 2022 proceeded by Microsoft Teams. Mr Donence was dialled in to the hearing by telephone. The matter was adjourned to 6 July 2022 at 10am for final hearing on the question of liability, or if Mr Donence was in default, for determination of the application for default judgment.
On 5 July 2022, Mr Donence was notified by email to [email protected] that the hearing on 6 July 2022 would proceed via Microsoft Teams. Mr Donence replied to the email attaching a medical certificate that outlined his inability to attend court from 5 July 2022 to 12 July 2022 inclusive.
On 6 July 2022, Mr Donence failed to appear at the final hearing. To the extent that Mr Donence may have been understood to have applied for an adjournment, the court refused it for reasons orally given at the time. The court gave default judgment for the Ombudsman. The court declared that the respondent had contravened s.716(5) of the Act by failing to comply with a compliance notice. The orders and declaration made on 6 July 2022 were as follows:
THE COURT ORDERS THAT:
1. The application for an adjournment, if any, is refused.
2. The matter be adjourned to 26 October 2022 at 10am for penalty hearing.
3. Judgment be entered for the applicant against the respondent pursuant to r.13.05(2)(c) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (“the Rules”) by reason of the respondent’s default pursuant to r. 13.04(2)(b)(ii),(iii),(iv) and (vii) of the Rules.
THE COURT DECLARES THAT:
4. The respondent contravened s.716(5) of the Fair Work Act 2009 (“the Act”) by failing to comply with the compliance notice issued on 14 July 2021 (“the compliance notice”).
THE COURT FURTHER ORDERS THAT:
5. Pursuant to s.545(1) of the Act, the respondent take the outstanding steps that were required by the compliance notice within 28 days of this order, by:
a. calculating and paying to Richard Thamm’s nominated superannuation fund any required superannuation contributions payable in respect of the underpayments to be paid to Richard Thamm under the compliance notice; and
b. producing to the applicant evidence that the outstanding superannuation entitlement was paid as required by order 5.a.
6. The applicant have liberty to apply on seven days’ notice in the event that any of the above orders are not complied with.
7. By 4pm on 12 August 2022, the applicant file and serve any affidavit evidence and submissions in respect of penalty.
8. By 4pm on 26 August 2022, the respondent file and serve any affidavit evidence and submissions in respect of penalty.
9. By 4pm on 9 September 2022, the applicant file and serve any reply submissions and evidence in respect of penalty.
10. Should the respondent not file any materials pursuant to order 8, the hearing listed pursuant to order 2 be vacated and the matter be determined on the papers.
11. The applicant serve a copy of this order on the respondent within seven days.
AND THE COURT NOTES THAT:
A.Pursuant to r.16.05(2)(a) of the Federal Circuit Court Rules 2001, the court may vary or set aside a judgment or order made in the absence of a party.
Reasons for those orders and the declaration were given orally at the time.
The respondent did not comply with order 8 made on 6 July 2022. Nor did the Ombudsman comply with order 11 made on 6 July 2022. The Ombudsman did not serve the orders made on 6 July 2022 until 29 July 2022. In these circumstances, I did not consider it appropriate for the issue of penalty to be determined on the papers in accordance with order 10 of the orders made on 6 July 2022. Instead, I listed the matter for directions on 11 November 2022.
On that occasion, Mr Donence did not appear. The matter was listed for penalty hearing on 21 December 2022. The Ombudsman was required to serve Mr Donence within seven days with a copy of the order. The Ombudsman did that.
On 21 December 2022, Mr Donence did not appear. The court attempted to telephone him, but he did not answer the call. The penalty hearing proceeded in his absence.
The Ombudsman seeks a penalty in the range of $3,796.20 to $4,428.90.
documents relied upon
The Ombudsman relied on the following documents:
(a)the initiating application filed on 21 December 2021;
(b)the statement of claim filed on 21 December 2022;
(c)the affidavit of Philip James Christidis affirmed on 25 February 2022;
(d)the affidavit of Philip James Christidis affirmed on 11 May 2022;
(e)the affidavit of Clint Adam Rollins affirmed on 11 August 2022;
(f)the affidavit of Kate Elizabeth Ruhl affirmed on 31 October 2022;
(g)the affidavit of Kate Elizabeth Ruhl affirmed on 13 December 2022;
(h)the affidavit of Kate Elizabeth Ruhl affirmed on 21 December 2022; and
(i)the Ombudsman’s submissions on penalty filed on 13 August 2022.
compliance notices
Section 716 of the Act provides that:
716 Compliance notices
Application of this section
(1)This section applies if an inspector reasonably believes that a person has contravened one or more of the following:
…
(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.
…
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.
action for contravention of civil remedy provision
In respect of contraventions of civil remedy provisions, such as a failure to comply with a compliance notice, s.539(2) of the Act provides that a fair work inspector may apply to this court in relation to the contravention.
Section 546(1) of the Act provides that this court may order a person to pay a pecuniary penalty for a breach of a civil remedy provision, such as a failure to comply with a compliance notice.
maximum penalty
Subsection 546(2) of the Act provides that the penalty cannot be more than the amount calculated in accordance with s.539(2) of the Act.
Subsection 539(2) of the Act contains a table which provides that the maximum penalty for a breach of s.716(5) of the Act is 30 penalty units. A penalty unit at the time of the breach was worth $222. That means that the maximum penalty for the breach in this case was $6,660.
the purpose of civil penalties
In Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13, all the members of the High Court, except Edelman J, said that:
[9]… Under the civil penalty regime provided by the Act, the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act. In that context, the penalties fixed by the primary judge were appropriate because they were no more than might be considered to be reasonably necessary to deter further contraventions of a like kind by Mr Pattinson, the CFMMEU or others. They represented a reasonable assessment of what was necessary to make the continuation of the CFMMEU’s non-compliance with the law, amply demonstrated by the history of its contraventions, too expensive to maintain.
[10]The Full Court’s critical error was that it was distracted by a concern, drawn from the criminal law, that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a “notion of proportionality”, in the sense in which the Full Court used that term, in a civil penalty regime. Further, and relatedly, their Honours were misled by the view that the Act required that the maximum penalty be reserved for only the most serious examples of the offending comprehended by s 349(1), and that this principle could prevent the court from imposing the maximum penalty even though a penalty in that amount might reasonably be considered to be necessary to deter future contraventions of a like kind. Nothing in the text, context or purpose of s 546 requires that the maximum penalty be reserved for the most serious examples of misconduct within s 349(1). What is required is that there be “some reasonable relationship between the theoretical maximum and the final penalty imposed”9 . That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others10 .
…
[15]Most importantly, it has long been recognised that, unlike criminal sentences, civil penalties are imposed primarily, if not solely, for the purpose of deterrence. The plurality in the Agreed Penalties Case said18 :
[W]hereas criminal penalties import notions of retribution19 and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd , is primarily if not wholly protective in promoting the public interest in compliance20 :
“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”
FN 9:Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25 at 63 [156].
FN 10:NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 293.
FN 18:(2015) 258 CLR 482 at 506 [55].
FN 19:Gapes v Commercial Bank of Australia Ltd (1979) 27 ALR 87 at 90 ; cf Australian Securities and Investments Commission v Ingleby (2013) 39 VR 554 at 565 [44].
FN 20:[1991] ATPR 41-076 at 52 ,152; cf Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (2015) 229 FCR 331 at 357 –358 [65]–[67].
proportionality
In Pattinson, the High Court addressed the question of proportionality as follows:
[40]Nothing in the text, context or purpose of s 546 of the Act suggests that the Full Court’s “notion of proportionality” inheres in the court’s task, pursuant to s 546, to fix a penalty which it considers to be an “appropriate” penalty. The discretion conferred by s 546 is, like any discretionary power conferred by statute on a court, to be exercised judicially, that is, fairly and reasonably67 having regard to the subject matter, scope and purpose of the legislation68 . In a civil penalty context, Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission69 said:
“[I]nsistence upon the deterrent quality of a penalty should be balanced by insistence that it ‘not be so high as to be oppressive’. Plainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression.”
[41]It may therefore be accepted that s 546 requires the court to ensure that the penalty it imposes is “proportionate”, where that term is understood to refer to a penalty that strikes a reasonable balance between deterrence and oppressive severity. It is in this sense that the Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd70 used the term “proportionality”, when their Honours said:
“If it costs more to obey the law than to breach it, a failure to sanction contraventions adequately de facto punishes all who do the right thing. It is therefore important that those who do comply see that those who do not are dealt with appropriately. This is, in a sense, the other side of deterrence, being a dimension of the general deterrence equation. This is not to give licence to impose a disproportionate or oppressive penalty, which cannot be done, but rather to recognise that proportionality of penalty is measured in the wider context of the demands of effective deterrence and encouraging the corresponding virtue of voluntary compliance.” (emphasis added)
[42]However, the Full Court’s “notion of proportionality” derived from Veen (No 2) is something quite different. That notion cannot be reconciled with the decisive statements in the Agreed Penalties Case that civil penalties are not retributive, but rather are protective of the public interest in that they aim to secure compliance by deterring repeat contraventions71. To introduce considerations drawn from theories of retributive justice into the application of s 546 of the Act undermines the primary significance of deterrence.
…
[46]It does not follow, as the Full Court suggested76 and as the CFMMEU argued in this Court, from the rejection of the Full Court’s “notion of proportionality” that s 546 must be taken to require the imposition of a penalty approaching the maximum in relation to any and every contravention by a recidivist offender. 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. A contravention may be a “one-off” result of inadvertence by the contravenor rather than the latest instance of the contravenor’s pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law on the part of a union official, or where the official responsible for a deliberate breach has been disciplined by the union. In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
[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 of the kind adverted to by French J in CSR. For example, 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.
…
[50]This Court’s reasoning in the Agreed Penalties Case is distinctly inconsistent with the notion that the maximum penalty may only be imposed in respect of contravening conduct of the most serious kind. Considerations of deterrence, and the protection of the public interest, justify the imposition of the maximum penalty where it is apparent that no lesser penalty will be an effective deterrent against further contraventions of a like kind. Where a contravention is an example of adherence to a strategy of choosing to pay a penalty in preference to obeying the law, the court may reasonably fix a penalty at the maximum set by statute with a view to making continued adherence to that strategy in the ongoing conduct of the contravenor’s affairs as unattractive as it is open to the court reasonably to do.
FN 25:[1991] ATPR 41–076 at 52 ,152-52,153.
FN 26:See also Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 at 114 –116 [126]; Kelly v Fitzpatrick (2007) 166 IR 14 at 18 –19 [14].
FN 27:Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 580 [91].
FN 67:Comcare v Banerji (2019) 267 CLR 373 at 403 [40].
FN 68:Oshlack v Richmond River Council (1998) 193 CLR 72 at 81 [22], 96 [65], 120-121 [134]; Northern Territory v Sangare (2019) 265 CLR 164 at 172 –173 [24].
FN 69:(1996) 71 FCR 285 at 293.
FN 70:(2016) 340 ALR 25 at 62 [152].
FN 71: (2015) 258 CLR 482 at 495 [24], 506 [55], 507–508 [59], 523-524 [110].
FN 76:Pattinson v ABCC (2020) 282 FCR 580 at 647 –648 [195].
Approach to determining penalty
Bromwich J summarised the proper approach to determining penalty in cases such as this in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 at [36] as follows:
(1)Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2)Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3)Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4)Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5)Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
A convenient checklist of the factors that the court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is as follows, (with paragraph letters inserted):
(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 or damage sustained as a result of the breaches.
(d)Whether there had been similar previous conduct by the respondent.
(e)Whether the breaches were properly distinct or arose out of the one course of conduct.
(f)The size of the business enterprise involved.
(g)Whether or not the breaches were deliberate.
(h)Whether senior management was involved in the breaches.
(i)Whether the party committing the breach had exhibited contrition.
(j)Whether the party committing the breach had taken corrective action.
(k)Whether the party committing the breach had cooperated with the enforcement authorities.
(l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
(m)The need for specific and general deterrence.
The court must, of course, be mindful of the caution expressed by Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [91] as follows:
Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. There is no suggestion in the present case that the learned magistrate made any relevant error in her identification of the matters which she should consider in fixing penalties.
The court will consider the circumstances of the case under the various headings suggested in Mason, and then consider whether any other matters are relevant.
Step 1: identifying the breach
As stated above, Mr Donence contravened s.716(5) of the Act by failing to comply with a compliance notice issued on 14 July 2021.
Step 2: single course of conduct
The breach in the present case was a single breach, so the grouping provisions do not apply.
Step 3: grouped breaches
This step does not apply in the present case as there was only one breach.
Step 4: the appropriate penalty for the breach
a. the nature and extent of the conduct which led to the breach
There was one breach, being the failure to comply with a compliance notice.
In her outline of submissions on penalty filed on 15 August 2022, the Ombudsman said without challenge and I accept that:
11.The power of a FWI to issue a compliance notice was introduced into the FW Act to provide a mechanism for dealing with non-compliance with minimum entitlements in the FW Act, as an alternative to commencing litigation for each underlying contravention of an obligation.9 If a person complies with a compliance notice, no civil remedy proceedings can be brought against the person for an underlying contravention.10
12. Compliance notices thereby provide a mechanism for the efficient and cost-effective rectification of identified contraventions of the FW Act, including underpayments to employees. Compliance notices have been recognised by the Court as “an important part of the armoury of Fair Work Inspectors in fulfilling their functions”.11
13. The Compliance Notice issued by FWI Rollins on 14 July 2021 gave the Respondent the opportunity to rectify the underpayments to Mr Thamm, and therefore be protected from civil remedy proceedings in respect of the contraventions set out in the Compliance Notice. The Respondent elected not to take this opportunity.
14. After the Compliance Notice was served on the Respondent, Fair Work Officer Meg Dalkin (Ms Dalkin), an employee of the Applicant, took steps to ensure the Respondent knew of the Compliance Notice and his obligation to comply with it, and provided him with additional information to help him comply. Ms Dalkin contacted the Respondent prior to the due date to remind him of his obligation to comply and he confirmed that he knew the Compliance Notice was due.12 The Respondent told Ms Dalkin he might need to pay the amounts owing “in parts” but made no payment by the due date and did not respond to Ms Dalkin’s invitation to provide evidence of his financial position or a proposed schedule of payments. 13 In these circumstances, it is submitted that the Respondent’s failure to comply with the Compliance Notice was deliberate and represents a disregard for the enforcement powers of the Applicant and its functions as a regulator, and for the compliance regime in the FW Act.
FN 9:Fair Work Bill 2008, Explanatory Memorandum at [2673].
FN 10:Section 716(4A) of the FW Act. See also, section 716(4B) of the FW Act which provides that, in complying the person is not taken to have admitted or been found to have contravened the civil remedy provision of an underlying contravention.
FN 11:Fair Work Ombudsman v Blue Hornsby Pty Ltd & Anor [2016] FCCA 1150, [29].
FN 12:Affidavit of Clint Adam Rollins, affirmed 11 August 2022 (Rollins Affidavit), [7]-12] and annexures CR-3 to CR-8.
FN 13:Rollins Affidavit, [9]-[11] and annexures CR-5 to CR-7.
b. the circumstances in which that conduct took place
The circumstances of the breach were largely as discussed under the previous heading. The underlying allegations were that Mr Donence had failed to pay minimum wages, casual loading and industry allowances to Mr Thamm in breach of the applicable awards for a period of about one month. The underlying alleged defaults represented an underpayment of about $5,000.
c. the nature and extent of any loss or damage sustained
Mr Donence’s failure to comply with the compliance notice meant that Mr Thamm did not receive his approximately $5,000 outstanding entitlements in the time frame specified by the compliance notice. In her outline of submissions on penalty filed on 15 August 2022, the Ombudsman said without challenge and I accept that:
24.Mr Thamm has been directly impacted by the Respondent’s failure to comply with the Compliance Notice, because he was denied his wages and superannuation contributions.
25. While the Court’s focus appropriately should be directed to the non-compliance with the Compliance Notice, rather than the contraventions underlying the Compliance Notice,25 the delay in Mr Thamm receiving his wages for seven months after the Compliance Notice fell due (and 12 months after his employment ended) and the ongoing failure to pay his superannuation, is a relevant loss flowing from the failure to comply with the Compliance Notice.26
26. The Applicant submits that the legislature has set penalties for non-compliance with a compliance notice because a failure to comply will cause the Applicant (and the Court) to spend time and public funds dealing with civil remedy proceedings which would otherwise not have been required had compliance occurred.27 Despite the Applicant’s efforts to secure compliance with the Compliance Notice, and the Respondent being clearly informed of the consequences of failing to comply,28 the Applicant was required to commence these proceedings to ensure Mr Thamm recovered his outstanding wages. Even the commencement of proceedings and orders of this Court have not yet secured payment of the required superannuation.
FN 25:Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor(No 2) [2020] FCCA 2583 [38].
FN 26:Fair Work Ombudsman v Corporation Sun Pty Ltd & Anor [2020] FCCA 2849, [22].
FN 27:Fair Work Ombudsman v Jaycee Trading Pty Ltd & Anor (No.2) [2013] FCCA 2128, [9].
FN 28:First Christidis Affidavit, annexure PC-4; Rollins Affidavit, [7]-[12] and annexures CR-3 to CR-8.
d. whether there had been similar previous conduct
The Ombudsman did not suggest that Mr Donence had engaged in any similar conduct previously.
e. whether the breaches arose out of the one course of conduct
There was a single breach, which the Ombudsman accepts was a single course of conduct.
f. the size of the business enterprise involved
Mr Donence did not provide any evidence to the court about the size of his business, or about anything else. It may be accepted, however, that Mr Donence’s business is fairly small.
Having said that, however, Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [28]:
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level”.
(footnote omitted)
Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at [27]:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.
g. whether or not the breach was deliberate
The breach was deliberate. As discussed above, Mr Donence was well aware of the compliance notice. An officer of the Ombudsman spoke to Mr Donence in an effort to assist him to comply with the requirements of the notice. However, he failed to do so.
h. whether senior management was involved in the breach
Mr Donence was, to all intents and purposes, the senior management of his business. He was involved in the breach.
i. contrition, corrective action and co-operation with the authorities
Mr Donence has taken some corrective action. On 3 March 2022, he paid $5,009.17 to Mr Thamm. That sum represented Mr Thamm’s outstanding wages, but not his outstanding superannuation, which amounted to $455.38. The $5,009.17 was paid about two months after these proceedings were commenced, about seven months after the compliance notice required that sum to be paid, and about 11 months after the wages were due to have been paid under the relevant award and the Act. The superannuation has still not been paid, according to the affidavit affirmed by Ms Ruhl on the day of the penalty hearing, notwithstanding these proceedings being on foot, and Mr Donence being at imminent risk of being penalised for his non-compliance.
Mr Donence has not co-operated with the authorities. He did not make admissions, but left the Ombudsman to seek default judgment. Mr Donence has rarely deigned to appear in court. Notwithstanding the compliance notice and court orders, Mr Donence has not paid on behalf of Mr Thamm his outstanding superannuation.
There is nothing to suggest that Mr Donence is contrite.
In addition, in her outline of submissions on penalty filed on 15 August 2022, the Ombudsman said that:
20.The Applicant submits that the Respondent has failed to meaningfully engage in the proceedings. The Respondent has failed to defend the proceedings, albeit making representations on multiple occasions of his intention to do so to the Court, resulting in multiple delays to proceedings and in the Applicant being put to the time and costs of making an application for default judgment in order for the matter to progress.
21.The Respondent has not expressed any contrition and has alternatively made excuses for his failure to comply with the Compliance Notice, including alleging that Mr Thamm was not a good worker and as such was overpaid,22 and that Mr Thamm was aware that the Respondent would not pay him until the kitchen was completed and he received payment from his customer.23Those purported excuses demonstrate a fundamental failure by the Respondent to recognise and accept the safety net of minimum entitlements that the FW Act provides for the protection of employees.
22.While rectification can be seen as a manifestation of contrition, in this case when followed by the failure to meaningfully engage in the proceedings and to complete the required rectification, the back payment does demonstrate the acceptance of wrongdoing and the facilitation of the administration of justice that would warrant a significant discount on penalty.24
FN 22:Second Christidis Affidavit, annexure PC-9.
FN 23:Respondent Response, dated 28 April 2022.
FN 24: Mornington Inn Pty Ltd v Jordan [2008] FCAFC, [78].
j. the need to ensure compliance with minimum standards
In her outline of submissions on penalty filed on 15 August 2022, the Ombudsman said and I accept that:
28.One of the principal purposes of the FW Act is to provide a guaranteed safety net of fair, relevant, and enforceable minimum terms and conditions for all employees.29 To be able to enforce these terms, FWIs must be able to exercise their compliance powers effectively. The purpose of the powers conferred on FWIs is to provide the FWO with an effective means of investigating and enforcing compliance with minimum standards and industrial instruments.
29. The Respondent’s failure to comply with the Compliance Notices undermines the FW Act’s enforcement framework and the safety net of entitlements it is designed to protect.30
30. The failure to comply with a statutory notice properly issued by the FWO is serious.31 The efficacy of statutory notices such as compliance notices will be hindered or made redundant if recipients perceive that a failure to comply carries no meaningful consequences.32
FN 29:Section 3(b), FW Act.
FN 30:Fair Work Ombudsman v Trek North Tours (No 2) [2015] FCCA 1801, [21]–[22].
FN 31:Fair Work Ombudsman v VS Investment Group Pty Ltd [2013] FCCA 208, [51].
FN 32:Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No 2) [2019] FCCA 2144, [40].
k. the need for specific and general deterrence
As discussed above, the High Court made it clear in Pattinson that deterrence, both specific and general, is the primary objective of penalties in matters such as the present.
In her outline of submissions on penalty filed on 15 August 2022, the Ombudsman said and I accept that:
General deterrence
15.General deterrence must serve a purpose such that the penalty is not seen by others as just ‘the cost of doing business’.14 In order to be useful as a general deterrent, a penalty ‘should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by likeminded persons or organisations’.15
16.The efficacy of statutory notices such as compliance notices will be hindered if recipients perceive that a failure to comply carries no meaningful consequences. Given the importance of the power to issue a compliance notice as a tool of FWIs, and that compliance with such notices avoids the need for litigation or the imposition of any penalties,16 penalties for noncompliance should be set at a level which demonstrates that there are serious consequences for failing to comply with a compliance notice. In doing so, the Court will deter other parties from failing to comply with compliance notices.
Specific deterrence
17.Specific deterrence is directed at ensuring that a contravenor is not prepared to embark upon the risk of engaging in the same contravening conduct in the future.17
18. The Applicant submits that given the continued operation of the business18 and the fact that the Compliance Notice has still not been complied with in full …, that it is necessary that any penalty imposed on the Respondent contains sufficient ‘sting or burden’ that the Respondent will ‘seek to avoid the risk of subjection to future penalties’ and therefore be ‘deterred from future contraventions’.19
FN 14:Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290, [27].
FN 15:Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65, [93] (Lander J).
FN 16:Fair Work Ombudsman v Syndicate Group Pty Ltd [2015] FCCA 2847, [27]; cited in Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150, [29].
FN 17:Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128, [50].
FN 18:Rollins Affidavit, [17] and Annexure CR-10.
FN 19:Australian Building and Construction Commissioner v J Hutchinson Pty Ltd T/A Hutchinson Builders [2019] FCA 667 at [15] (unreported, 7 May 2019, Logan J), quoting Keane, Nettle and Gordon JJ of the High Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157,[116].
Other issues
In Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70, Stone and Buchanan JJ held at [75]:
A conventional consideration in assessing a discount in a criminal case for a plea of guilty is the stage in the proceedings at which the plea is entered. Normally, the maximum discount for this factor, sometimes thought to be 25%, is reserved for a plea made at the first reasonable opportunity …
In Fair Work Ombudsman v Bedington [2012] FMCA 1133 Jarrett FM held at [87]:
The cases indicate that a discount on the penalty to be imposed is appropriate where there has been co-operation and admissions early in the course of an investigation or soon after the commencement of proceedings. Such discounts range as high as 30% in some cases. …
The Ombudsman submitted that it would not be appropriate to apply a discount of more than 5% for the respondent’s partial rectification. I accept that submission.
Step 4: the appropriate penalty
The Ombudsman submitted that the appropriate penalty range for Mr Donence was as follows:
Maximum penalty
Penalty with 5% discount
Recommended penalty range
Penalty amount
$6,660.00
$6,327.00
60-70%
$3,796.20 to $4,428.90
In my view, the appropriate penalty for Mr Donence for his single contravention is $4,100, which is about 65% of the discounted maximum penalty. It seems to me that this amount will be a clear signal to Mr Donence and others in his position that not fully complying with compliance notices in a timely manner is a costly mistake.
Step 5: the totality principle
There is no need to undertake the check that is required by the totality principle, as there was only a single contravention.
conclusion
There will be orders accordingly. In addition, I will reiterate the order that Mr Donence pay on Mr Thamm’s behalf the superannuation he is owed. The penalty can be paid to Mr Thamm, the Commonwealth or another entity. No submissions were made about this. However, following the usual course where proceedings are brought by the Ombudsman, there will be an order that the penalty be paid to the Commonwealth.
I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 25 January 2023
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