Fair Work Ombudsman v Double Hao International Pty Ltd
[2024] FedCFamC2G 343
•19 April 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Double Hao International Pty Ltd [2024] FedCFamC2G 343
File number: SYG 2072 of 2021 Judgment of: JUDGE FORBES Date of judgment: 19 April 2024 Catchwords: FAIR WORK – non-compliance with compliance notice – application for penalties and other relief – application for declaration that second respondent was involved in the contravention - consideration of factors relevant to assessment of penalty – whether employer acted deliberately or lacked good faith – realistic assessment of impact of penalty - consideration of accessorial liability - application for an order that respondent pay compensation to employee equal to alleged underpayment – consideration of factors relevant to exercise of discretion – penalty ordered – compensation order refused on discretionary grounds Legislation: Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) s 545, 546, 550, 716, 717
Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth) sch 2, pt 11, item 142
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 4.04, 9.04, 13.03, 13.05
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
Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
Dafallah v Fair Work Commission [2014] FCA 328
Fair Work Ombudsman v Avant-Garde Logistics Solutions Pty Ltd [2022] FedCFamC2G 879
Fair Work Ombudsman v Carers Portland Inc [2023] FedCFamC2G 620
Fair Work Ombudsman v Chia Tung Development Corp Ltd & Anor [2016] FCCA 2777
Fair Work Ombudsman v Cobra Security Services Pty Ltd [2024] FedCFamC2G 336
Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor [2019] FCCA 1148
Fair Work Ombudsman v Pacific Security Services Pty Ltd [2021] FedCFamC2G 111
Fair Work Ombudsman v Powell [2022] FedCFamC2G 831
Fair Work Ombudsman v Soma Kitchen & Anor (No.2) [2020] FCCA 2583
Kelly v Fitzpatrick [2007] FCA 1080
Trade Practices Commission v CSR Ltd [1991] ATPR 41-076
Division: Division 2 General Federal Law Number of paragraphs: 136 Date of last submission: 16 September 2023 Date of hearing: 25 August 2023 Place: Melbourne Solicitor for the Applicant: Fair Work Ombudsman Respondents: Mr Liu in person ORDERS
SYG 2072 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: DOUBLE HAO INTERNATIONAL PTY LTD
First Respondent
RONG LIU
Second Respondent
ORDER MADE BY:
JUDGE FORBES
DATE OF ORDER:
19 APRIL 2024
THE COURT DECLARES THAT:
1.The Second Respondent was involved, within the meaning of section 550(2) of the Fair Work Act 2009 (Cth) (FW Act) in the contravention by the First Respondent of section 716(5) of the FW Act declared in order 2 of the 7 February 2023 orders.
THE COURT ORDERS THAT:
2.Pursuant to section 546(1) of the FW Act the First Respondent pay a pecuniary penalty of $9,990 for its contravention of section 716(5) of the FW Act.
3.Pursuant to section 546(3)(a) of the FW Act, the pecuniary penalty ordered in order 2 be paid by the First Respondent to the Consolidated Revenue Fund of the Commonwealth within 28 days.
4.The matter be listed for a further directions hearing on 8 May 2024 at 9.30am.
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 FORBES
INTRODUCTION
Pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (the FW Act) the Fair Work Ombudsman (the Ombudsman) seeks the imposition of a pecuniary penalty against the first respondent, Double Hao International Pty Ltd (ACN 623 230 160) (Double Hao or the Company), for its declared contravention of section 716(5) of the FW Act.
The Ombudsman also seeks a declaration that the second respondent, Mr Rong Liu, was relevantly involved in Double Hao’s contravention of s 716(5) within the meaning of section 550(1) of the FW Act.
On 7 February 2023, default judgment was entered for the Ombudsman against Double Hao pursuant to rule 13.05(2)(c) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (the Rules). On that occasion the Court made a declaration that the first respondent had contravened section 716(5) of the FW Act by failing to comply with a compliance notice issued to the Company on 11 August 2021 (the Compliance Notice). The Court also ordered Double Hao to take steps to comply with the Compliance Notice, including by calculating and paying any outstanding entitlements owed to a former employee.
On 25 August 2023, I heard the Ombudsman’s application for pecuniary penalties in respect of Double Hao’s contravention and submissions as to the accessorial liability of Mr Liu. During the course of the hearing a number of important issues were ventilated in respect of which the Ombudsman sought leave to file further written submission. On 15 September 2023, the Ombudsman filed further written submissions addressing those issues.
I have considered the written and oral submissions of the parties. I have decided that the first respondent, Double Hao, should be ordered to pay a penalty of $9,990.00 for its contravention of section 716(5). I also declare that the second respondent Mr Liu was involved in Double Hao’s contravention within the meaning of section 550 of the FW Act.
I have decided, in the exercise of my discretion, not to make an order pursuant to section 545(1) of the FW Act requiring Double Hao to pay specified compensation to its former employee, Ms Madeleine Mitchell.
These reasons explain why I have made these orders.
BACKGROUND
At all relevant times, Double Hao was the operator of a retail business under the name “The Springs Milkbar”, a convenience and takeaway food store which sold newspapers, cigarettes, small goods and some take away food[1]. Double Hao has a registered office in Highton, Victoria[2]. Mr Liu was a director and the secretary of Double Hao[3].
[1] Affidavit of Toby Chapman affirmed on 13 June 2023 at [15] (T Chapman Affidavit)
[2] T Chapman Affidavit at [22]
[3] T Chapman Affidavit at [22]
Between 20 March 2018 and 12 November 2020, Double Hao employed Ms Madeleine Mitchell as a general shop assistant. Ms Mitchell had worked in the business for some years when it was operated by a previous owner.
In or around 5 November 2020, the Ombudsman received a request for assistance from Ms Mitchell in respect claimed underpayments[4]. The Ombudsman subsequently commenced an investigation into Double Hao’s compliance with Commonwealth workplace laws and the various instruments.
[4] T Chapman Affidavit at [7]
On 26 November 2020, Fair Work Inspector (FWI) Rachel Abela spoke to Ms Mitchell’s husband, who indicated that Ms Mitchell had been underpaid an amount estimated at around $4,000[5]. The Ombudsman’s inspectors also obtained other evidence from Ms Mitchell and the respondents.
[5] T Chapman Affidavit at [10]
As a result of his investigations, FWI Mark Chapman (FWI M Chapman) formed a reasonable belief pursuant to s 716(1) of the FW Act that:
(1)employees of the first respondent were entitled to be paid wages and work to conditions stipulated in the General Retail Industry Award 2010 (2010 Award) and subsequently the General Retail Industry Award 2020 (2020 Award);
(2)Ms Mitchell was classified as a Retail Employee Level 1 under the 2010 Award and the 2020 Award. She was entitled to be paid a base hourly rate of $23.50 per hour;
(3)Ms Mitchell had been employed by Double Hao as a casual employee;
(4)Double Hao had contravened clause 13.2 of the 2010 Award and 11.3 of the 2020 Award by failing to pay the applicable minimum level 1 rate for an adult employee plus a casual loading of 25%[6].
[6] T Chapman Affidavit at [23]
On 2 March 2021, FWI M Chapman gave Double Hao a Compliance Notice (First Compliance Notice).
Throughout March 2021, Mr Liu communicated with FWI Chapman via email and phone calls, discussing the contents of this notice. For example, on 21 March 2021 Mr Liu sent an email to the inspector which attached a document “wage_issue.docx”[7] which presumably expressed concerns about the First Compliance Notice or the basis on which it had been issued. Also, on 6 April 2021, Mr Liu sent the Ombudsman an email of calculations of Ms Mitchell’s entitlements, ultimately claiming that Ms Mitchell owed the first respondent $7,652[8].
[7] T Chapman affidavit at [17] and Annexure TC-11 which was not produced to the Court
[8] T Chapman Affidavit at [20]
On around 9 August 2021, the Ombudsman identified that the First Compliance Notice had been served on an incorrect address[9].The Ombudsman withdrew the First Compliance Notice.
[9] T Chapman Affidavit at [21]
On 11 August 2021, FWI M Chapman issued Double Hao with the Compliance Notice which is the subject of these proceedings. The Compliance Notice was issued on the strength of FWI Chapman’s reasonable belief that during the period between 20 March 2018 and 12 November 2020 Double Hao had contravened relevant clauses of the 2010 Award and 2020 Award by failing to pay casual minimum wages and casual loading to Ms Mitchell in respect of her ordinary hours of work[10].
[10] T Chapman Affidavit at [23(b)(iii) and (c)]
The Compliance Notice was sent to the respondents via express post and by email[11]. The Compliance Notice required Double Hao to take the following actions by 27 August 2021:
(1)identify the number of hours worked by Ms Mitchell during the contravention period;
(2)identify the amount Double Hao paid to Ms Mitchell during the contravention period;
(3)calculate the amount Double Hao should have paid to Ms Mitchell during the contravention period;
(4)make full payment to Ms Mitchell of the difference between the amount paid in the amount that should have been paid to her;
(5)calculate and pay any additional superannuation contributions to Ms Mitchell; and
(6)provide reasonable evidence to the Ombudsman of compliance with the Compliance Notice by 1 September 2021.
[11] T Chapman Affidavit at [27]
On 18 August 2021, after emailing the Compliance Notice to Mr Liu again, FWI M Chapman spoke to Mr Liu on the phone, who confirmed he had received the Compliance Notice[12].
[12] T Chapman Affidavit at [27]
On 7 September 2021, the Ombudsman sent a letter to Double Hao’s registered office regarding the Company’s failure to comply with the Compliance Notice.
The respondents did not comply with the Compliance Notice by requisite date which caused the Ombudsman to commence these proceedings.
Litigation background
The Ombudsman initiated these proceeding on 9 November 2021. For reasons which are not immediately apparent, the Ombudsman commenced the proceedings in the Sydney registry of the Court.
On 2 December 2021, her Honour Judge Given made orders that the matter be transferred to the Melbourne registry.
The matter first came before me on 6 July 2022. Ms Ding appeared on behalf of the Ombudsman and Mr Liu appeared on behalf of the Company and himself. Mr Liu was assisted by a Mandarin interpreter. Noting that Mr Liu appeared to have a poor command of English, a limited capacity to fully comprehend the nature of the proceedings and being concerned that his rights might differ from those of the first respondent, I was not prepared to grant him leave to represent the first respondent. Accordingly, as required by rule 9.04 of the Rules, the first respondent was directed to file and serve a notice of address for service by a legal practitioner by no later than 5 August 2022. I noted that the Ombudsman would inform the respondents as to how they might access legal assistance in relation to this proceeding (July Orders).
On 1 September 2022, I ordered that the parties to attend a mediation conducted by a registrar of the Court.
Evidently, the matter did not settle at mediation, and the parties returned for further directions on 27 October 2022. On that occasion, I made orders in similar terms to the July Orders, requiring the first respondent to file a notice of address for service by a legal practitioner and noting that, if the first respondent failed to do so, the Ombudsman may serve an application seeking default judgment (October Orders).
On 24 January 2023, the Ombudsman filed an application for default judgment by reason of the first respondents’ failure to comply with the October Orders.
On 7 February 2023, the Default Application came before me. Mr Fiorenza appeared on behalf of the Ombudsman and Mr Liu represented the respondents. After hearing submissions from the parties, I ordered that default judgment be entered for the Ombudsman pursuant to rule 13.05(2)(c) of the Rules by reason of Double Hao’s failure to:
(1)file and serve a notice of address for service as required by the October Orders;
(2)file and serve a defence in accordance with rule 4.04(3) of the Rules; and
(3)defend the proceeding with due diligence in accordance with rule 13.04(2)(b)(vii) of the Rules.
I made declarations that Double Hao had contravened section 716(5) of the FW Act by failing to comply with the Compliance Notice. I further ordered the first respondent to take steps to comply with the Compliance Notice, including by calculating and paying the outstanding amounts stipulated within the Compliance Notice.
The proceedings were otherwise adjourned to 6 July 2023 for a further hearing of the Ombudsman’s claim for the imposition of a penalty in respect of the first respondent’s declared contraventions and its claims that Mr Liu be held liable as an accessory of this declared contravention. The hearing date was subsequently amended to 18 August 2023.
On 1 March 2023, Mr Liu filed a defence, responding to the Ombudsman’s statement of claim. In that defence Mr Liu made substantial admissions, including that he was involved in Double Hao’s contravention of section 716(5) within the meaning of section 550(2)[13]. The one substantive denial related to the inspector’s reasonable belief that Ms Mitchell had been employed as a casual employee. Mr Liu pleaded that she had been employed on a part-time basis[14].
[13] Defence at [3] & [14]-[16]
[14] Defence at [6a]
On 6 April 2023, Ms Mitchell sent the Ombudsman copies of pay slips she received between 2018 and 2019. Based on these pay slips, FWI Toby Chapman performed calculations. In an affidavit filed in these proceedings FWI T Chapman asserts that in order to rectify the effects of Double Hao’s contravention, it should pay the employee $3,593.10 in outstanding wages and $377.28 in superannuation, plus interest[15].
[15] T Chapman Affidavit at [31]
By consent orders made on 31 May 2023, Double Hao was directed to file and serve an outline of submission relating to penalties by 29 June 2023. Subject to any claim for privilege against exposure to penalties, the second respondent was required to file and serve any evidence in relation to his alleged accessorial liability (May Orders).
On 1 June 2023, the Ombudsman filed its outline of written submissions on both liability and penalty.
On 14 August 2023, Mr Liu informed my chambers that due “some private reasons”, he was required to stay in Geelong and was unable to attend Court in person on 18 August 2023. He requested that the hearing be conducted via web conference. While the Ombudsman did not oppose Mr Liu’s request for an adjournment, it expressed a preference for the hearing to be conducted in person. Taking into account the interests of both parties, I decided that the matter should proceed with all parties present in Court, for the following reasons:
(1)there are limited resources available within the Court for the matter to proceed in a hybrid fashion;
(2)the requirement for a Mandarin interpreter injected additional complexity and it would be more efficient for the interpreter and Mr Liu to be present in the one place;
(3)it is likely that documents would have to be shown to Mr Liu; and
(4)the matter will proceed more efficiently in person.
The matter was adjourned for a period of one week to enable the Mr Liu sufficient time to attend Court in person.
On 25 August 2023, I heard Ombudsman’s application for penalties against the first respondent and the second respondent’s accessorial liability.
Orders sought by the Ombudsman
At the hearing on 25 August 2023 the Ombudsman sought the following declarations and orders[16]:
[16] Ombudsman's Outline of Submissions, Annexure A
(1)a declaration that the Second Respondent was involved, within the meaning of section 550(2) of the FW Act, in the contravention by the First Respondent of section 716(5) of the FW Act declared in order 2 of the Default Judgement.
(2)Orders that:
(a)pursuant to section 545(1) of the FW Act, the First Respondent pay to Ms Mitchell compensation for loss suffered by Ms Mitchell as a result of the First Respondent’s contravention of section 716(5) of the FW Act by:
(i)paying $3,593.10 to Ms Mitchell in wages within 28 days of this order;
(ii)paying interest to Ms Mitchell on the amount referred to in paragraph 2(a)(i), within 28 days of this order, pursuant to section 547(2) of the FW Act; and
(iii)paying $377.28 in superannuation to Ms Mitchell’s nominated superannuation fund;
(b)pursuant to section 546(1) of the FW Act, the First Respondent pay a pecuniary penalty between $19,980 - $23,310 to the Commonwealth for the contravention declared in order 2 of the Default Judgement;
(c)the proceedings be adjourned for a further hearing in the applicant’s claim for penalties against the Second Respondent for the declared contravention; and
(d)such other for further orders as Court considers appropriate.
Submissions
Mr Fiorenze, a solicitor, appeared on behalf of the Ombudsman at the hearing. The Ombudsman relied upon a comprehensive written outline of submissions which was further developed orally by Mr Fiorenze.
In support of its application for relief against the respondents, the Ombudsman relied on the following:
(1)the Statement of Claim filed by the Ombudsman on 9 November 2021;
(2)the defence filed on 1 March 2023 by the second respondent;
(3)unsworn affidavit of Fair Work Inspector (FWI) Toby Chapman dated 1 June 2023;
(4)affidavit of solicitor Zoe Clippingdale affirmed on 31 May 2023; and
(5)further affidavit of FWI Toby Chapman dated 13 June 2023
Mr Liu appeared in person on behalf of the respondents. Mr Liu exhibited a rudimentary command of English and was assisted at the hearing by a Mandarin interpreter. Given that liability had already been determined against Double Hao and Mr Liu had filed a defence admitting to his involvement, I allowed him to represent both respondents. Mr Liu did not file any written submissions in support of his defence, instead relying on his oral submissions made at the hearing.
Mr Liu argued, among other things, that the first respondent should not be subjected to pecuniary penalties or other orders because the Compliance Notice had been issued on the inspector’s mistaken belief that Double Hao’s former employee, Ms Mitchell, had been employed on a casual basis. Mr Liu submitted that Ms Mitchell had in fact been engaged as a part-time employee and that she had been properly remunerated as such.
Mr Liu submitted that Ms Mitchell had a permanent part time arrangement and that she worked the same regular hours for two days per week. He said that he took her on from the previous owner of the business and continued to pay her as a part-time employee. Mr Liu said that Ms Mitchell had taken him to the Fair Work Commission, which she would have had no right to do if she was a casual employee. He said that Ms Mitchell had made an application for long service leave which she could not do as a casual. Mr Liu also submitted that during the Covid-19 lockdown the government gave Ms Mitchell money because she was a part-time employee. None of these legal or factual contentions were supported by documentary evidence.
Mr Liu said that he had asked the inspector questions after he received the Compliance Notice. He said he had endeavoured to explain the situation to the Ombudsman including by providing calculations about the amount the employee had been paid. He submitted that he had tried to explain to the inspector that Ms Mitchell was a part-timer, but did not get an answer to the questions he raised. He submitted that in all the circumstances he was confused by what the inspector was doing, he had tried to do what he believed was the right thing and that the Court should not impose any penalty.
In his oral submission Mr Liu also lamented the fact that he operated a small business - “just a milk bar” - and that he experienced great difficulty in defending the proceedings because of his inability to afford legal representation. He submitted that he did not earn enough money to get a lawyer.
The submissions made by Mr Liu and various questions from the Court prompted considerable dialogue between the Court and the Ombudsman’s representative about the appropriateness of the form of orders sought by the Ombudsman. At the conclusion of the hearing, I invited the Ombudsman to file and serve further brief written submissions on the following matters, which I considered could be relevant to the question of penalty:
(1)whether, having regard to the evidence filed in this case, any calculations made by the respondents regarding the hours worked by or payments made to the former employee can be regarded by the Court as compliance or part compliance with the Compliance Notice;
(2)further to (1) above, in determining the appropriate penalty to be imposed on the first respondent, to what extent, if at all, the Court should take into account any calculations performed by the respondents and/or any communications between the respondents and the Ombudsman regarding the status of Ms Mitchell’s employment;
(3)the evidence which informed the inspector’s formation of a reasonable belief that Ms Mitchell performed work as a casual employee and not a part time employee of the first respondent; and
(4)the factual and legal basis which supports an order requiring the first respondent to pay Ms Mitchell $3,593.10 (plus interest), having regard to the observations by his Honour Judge Blake in Fair Work Ombudsman v Carers Portland Inc [2023] FedCFamC2G 620 (Carers Portland) at [41] to [57].
I also invited the respondents to file and serve any submission in response.
On 15 September 2023, the Ombudsman filed its Further Written Submissions addressing the matters above. I have considered those further submissions and will refer to them as necessary in the course of these reasons. The respondents did not file anything in response to the Ombudsman’s further submission.
ACCESSORIAL LIABILITY OF THE SECOND RESPONDENT
The Ombudsman seeks a declaration that Mr Liu was involved in the first respondent’s contravention of s 716(5), such that he will be taken to have contravened the provision[17].
[17] Fair Work Act 2009 (Cth) (FW Act) s 550(1)
The Ombudsman’s Written Submissions conveniently and correctly addressed the issue of accessorial liability as follows (omitting footnotes):
Applicable law
14. Section550 of the FW Act provides that:
(1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) hasaided, abetted, counselled or procured the contravention; or
(b) hasinduced the contravention by threats, promises or otherwise; or
(c) hasbeen in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) hasconspired with others to effect the contravention.
15.A person who is involved in a contravention of a civil remedy provision (such as section 716(5) of the FW Act) is taken to have contravened that provision.
16.An individual will be involved in a primary contravention of section 716(5) in circumstances where they knew the compliance notice was issued, were aware of its contents, made the decision not to take any action in respect of the compliance notice and knew that the corporate respondent did not comply with the compliance notice.
17.Relevant to this proceeding, a person will be “involved in a contravention of a civil remedy provision” where they have “aided, abetted, counselled or procured the contravention”, or where they have “been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention".
18. In order to aid, abet, counsel or procure the relevant contravention, the person must intentionally participate in the contravention with the requisite intention. In order to have the requisite intention, the person must have knowledge of “the essential matters” which go to make up the events, whether or not the person knows that those matters amount to a contravention. That is to say, it is not necessary that the accessory should appreciate that the conduct in question is unlawful.
19.Actual, rather than imputed, knowledge is required. Actual knowledge may be inferred from “a combination of suspicious circumstances and a failure to make an inquiry”.
20.The notion of being “knowingly concerned” in a contravention has a different emphasis from that of aiding, abetting, counselling or procuring a contravention. To be knowingly concerned in a contravention, the person must have engaged in conduct which “implicates or involves him or her” in the contravention so that there be a “practical connection between” the person and the contravention.
21.In terms of the knowledge elements in respect of a contravention of section 716(5) of the FW Act, in Fair Work Ombudsman v NoBrace Centre Pty Ltd & Anor [2019] FCCA 1148, Blake J said as follows ([73]-[76]):
“…the Second Respondent was an intentional participant in the contravention of the First Respondent. He had knowledge of the essential matters which make up the events leading to the contravention. There was a practical connection between his actions and the contravention. He knew the Compliance Notice was issued. He knew it had to be complied with. As the sole director and the person with management control of the First Respondent, he elected that the First Respondent not comply with the Compliance Notice. The evidence shows that he was knowingly concerned in the contravention.”
22.In the context of a contravention of section 716(5) of the FW Act, it will be sufficient to establish that an accessory (relevantly, Mr Liu as the directing mind and will of Double Hao) received the Compliance Notice, was aware of its contents, knew that it had to be complied with by simple reason of reading the content of the notice, and did not comply with it.
The Ombudsman submits that an individual will be involved in a primary contravention of s 716(5) in circumstances where they knew the compliance notice was issued, were aware of its contents and knew that the corporate respondent did not comply with the compliance notice[18].
[18] Fair Work Ombudsman v Chia Tung Development Corp Ltd & Anor [2016] FCCA 2777 at [34]-[35]; see also Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor [2019] FCCA 1148 at [66]-[73] (Nobrace)
The Ombudsman submits the Mr Liu was at all material times aware of the Compliance Notice and of the requirements therein. As outlined in the background, on 18 August 2021, Mr Liu confirmed with the Ombudsman that he had received a copy of the Compliance Notice via email. The Ombudsman submits that the Compliance Notice clearly stipulated that a failure to comply constituted a contravention of s 716(5) of the FW Act, which may attract the imposition of civil penalties.
The Ombudsman contends that the Court can be satisfied that Mr Liu was the person with the requisite authority and responsibility to ensure that Double Hao complied with the Compliance Notice. The Ombudsman submits that at all relevant times, Mr Liu was:
(1)a director and secretary of Double Hao;
(2)responsible for the overall operation, management and control of Double Hao;
(3)responsible for ensuring Double Hao complies with its legal operations under the FW Act;
(4)a person whose conduct engaged in on behalf of Double Hao and within the scope of his actual or apparent authority is taken to be that of Double Hao under section 739(1) of the FW Act;
(5)the sole point of contact between the Ombudsman and Double Hao in respect of the investigation and the Compliance Notice.
The Ombudsman submits that in relation to Mr Liu’s accessorial liability, Mr Liu:
(1)was responsible for ensuring that Double Hao complied with the Compliance Notice, as he was a director and secretary of the Company;
(2)from on or around 18 August 2021 (within the period of compliance) had knowledge of the Compliance Notice issued to Double Hao;
(3)he has actual knowledge that Double Hao failed to comply with the Compliance Notice;
(4)was an intentional participant in Double Hao’s failure to comply with the Compliance Notice;
If there were any doubt about the Ombudsman’s evidence, the Ombudsman relies on the admissions made by Mr Liu in his defence filed in March 2023. In that defence, Mr Liu admitted:
(1)that he had actual knowledge of the Compliance Notice;
(2)had knowledge that the Company failed to comply with the Compliance Notice;
(3)was an intentional participant in Double Hao’s failure to comply with the Compliance Notice;
(4)being involved in the Company’s contravention of s 716(5) within the meaning of s 550(2); and
(5)pursuant to s 550(1) is taken to have himself contravened section 716(5) of the FW Act.
Default judgement has been entered against the first respondent Double Hao. No application has been made for that judgment to be set aside, notwithstanding Mr Liu’s informal challenge to the Compliance Notice. Double Hao must be taken to have admitted the Ombudsman’s claim against it. Mr Liu, by his defence, has admitted his involvement.
In light of Mr Liu’s admissions, I consider it appropriate to formally find and declare that he was relevantly involved in the first respondent’s contravention of s 716(5). Even absent his admissions, the evidence comfortably satisfies me that the necessary elements for a finding of accessorial liability are made out.
I note the Ombudsman’s initiating application seeks the imposition of pecuniary penalties against Mr Liu in respect of his involvement. I will list this matter for a further directions hearing to deal with that issue.
PENALTY AGAINST DOUBLE HAO
The Ombudsman seeks the imposition of penalties against the first respondent pursuant to the declared contravention of subsection 716(5) of the FW Act.
Under subsection 546(1) of the FW Act, the Court is granted power to order that a person pay a pecuniary penalty where it is satisfied that the person has contravened a civil remedy provision. Pursuant to the table in subsection 539(2) of the FW Act, s 716(5) is a civil remedy provision.
At the time this proceeding was initiated, a contravention of subsection 716(5) attracted a maximum penalty of 30 penalty units for an individual contravenor[19]. The value of a penalty unit was $222[20]. The maximum penalty for an individual must not exceed $6,600.00. The penalty amount for a corporate respondent must not be more than five times the maximum penalty amount for an individual. Accordingly, the maximum penalty amount a Court may order against a body corporate respondent in contravention s 716(5) is $33,300.00 or 150 penalty units.
[19] Pursuant to Item 142 of the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth), Item 33, Column 4 of the table in section 539(2) of the FW Act has been amended from “30 penalty units” to “60 penalty units”. This amendment commenced on 27 February 2024.
[20] Crimes Act 1914 (Cth) s 4AA
In written submissions, the Ombudsman seeks that a penalty be imposed on Double Hao in the range of 60% to 70% of the maximum penalty amount, which in dollar figures equates to a penalty between $19,980.00 and $23,310.00.
Applicable legal principles
The approach of the Court in determining penalties is well settled. In assessing an appropriate penalty the Court has a broad discretion.
The primary, if not sole, purpose of the civil remedy regime prescribed in the FW Act is the promotion of the public interest in compliance with provisions of the FW Act by way of deterrence of further contravention[21].
[21] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [15]-[16] (Pattinson)
This purpose was recently reinforced by the High Court of Australia in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 (Pattinson). Reaching for that purpose involves putting a price on a contravention which is fairly and reasonably appropriate.
The Court's task requires an objective assessment of the gravity and seriousness of the offending, having regard to all relevant facts and circumstances. The considerations deemed relevant to this task are well known and frequently cited[22]. They include:
[22] Trade Practices Commission v CSR Ltd [1991] ATPR 41-076; see also Pattinson at [18]; Kelly v Fitzpatrick [2007] FCA 1080 at [14]
·The nature and extent of the conduct which led to the breach;
·The circumstances in which the conduct took place;
·The nature and extent of any loss or damage sustained as a result of the breach;
·Whether there has been similar previous conduct by the respondent;
·Whether the breach was properly distinct or arose out of one course of conduct;
·The size of the business enterprise involved;
·Whether or not the breach was deliberate;
·The involvement of senior management in the breach;
·Whether the party committing the breach has shown contrition;
·Whether the party committing the breach has taken corrective action;
·Whether the party committing the breach has cooperated with enforcement authorities;
·the need to ensure compliance with minimum standard by provision of an effective means for investigation and enforcement of employee entitlements; and
·The need for specific and general deterrence.
While this extensive list is well-settled and often cited, it is not to be interpreted by the Court as a “rigid catalogue of matters for attention”. In Pattinson, the High Court reiterated that this list of possible relevant considerations ought not to be treated as a checklist. The Court may take into consideration matters relevant to both the character of the contravening conduct and of the contravenor. Each case is fact dependent and some considerations will be more relevant or carry greater weight in some cases than in others. The Court's task is and remains the determination of what penalty is most appropriate given all of the relevant circumstances of the case.
CONSIDERATION
Deterrence
Deterrence, both general and specific, is the primary objective of civil penalties[23]. A penalty must have a necessary “sting” or “burden” which aims to “achieve the specific and general deterrent effects that are the raison d’etre of its imposition”[24].
[23] Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [55] (French CJ, Kiefel, Bell, Nettle and Gordon JJ); Pattinson at [15]
[24] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3 at [116] (Gageler J); Fair Work Ombudsman v Powell [2022] FedCFamC2G 831 at [57] (Judge Forbes) (Powell)
A civil penalty must reflect deterrence, not punishment, retribution or rehabilitation. An appropriate penalty should be proportionate in the sense that it recognises the objective seriousness of the contravention, it should deliver a sufficient sting so as not to be regarded as an acceptable cost of doing business and it should strike “a reasonable balance between oppressive severity and the need for deterrence in a particular case”[25].
[25] Pattinson at [41]
General
The Ombudsman advanced the following written submissions on general deterrence (footnotes excluded):
47.General deterrence must serve a purpose such that the penalty is not seen by others as just “the cost of doing business”. In order to be useful as a general deterrent, a penalty should reflect the will of Parliament for standards laid down in the Act to be observed.
48.The ability for a FWI to issue a compliance notice is to provide a mechanism for the efficient and cost-effective rectification of identified contraventions of the FW Act, including underpayments, as an alternative to commencing litigation – the consequences of non-compliance with the notice should be viewed as seriously as if the direct path to prosecution for the underlying contraventions had occurred.
49.The efficacy of statutory notices such as compliance notices will be undermined if recipients perceive that a failure to comply carries no meaningful consequences. In imposing a meaningful penalty, the Court will deter other persons from failing to comply with compliance notices.
50.On this basis, the FWO submits that there is a need to send a message to employers generally that a failure to comply with a compliance notice should not and will not be tolerated by the FWO, the community and the Courts.
51.The penalties to be imposed in this matter should be sufficiently high to impress upon other employers the importance of complying with the legal obligations owed to their employees.
I accept the submission of the Ombudsman that the penalty for non-compliance with a compliance notice should set at a sufficiently high level to deter other like-minded persons from engaging in the same or similar contravening conduct. The penalty should impress on other employers the significance of statutory obligations owed to employees. The penalty should also demonstrate to employers at large that non-compliance with a Compliance Notice is seen as unacceptable by the Ombudsman, the Courts and the community.
Specific
The Ombudsman submits that there is a particular need to deter Double Hao from engaging in the same contravening conduct in the future, for the following reasons:
(1)Double Hao appears to be still operating its business and engaging employees;
(2)Double Hao has demonstrated a disregard for the Court by failing to comply with the Court orders resulting in the default judgment;
(3)Mr Liu remains the director of Double Hao and no evidence has been provided to demonstrate any change which would avoid a similar transgression;
(4)by failing to comply with the Compliance Notice, Double Hao has demonstrated a disregard for its obligations under the FW Act and as an employer under Commonwealth workplace laws; and
(5)the absence of any rectification of the effects of the non-compliance with the Compliance Notice and any real evidence of contrition or remorse on the part of Double Hao.
In oral submissions, the Ombudsman reiterated that Mr Liu had not filed any submission or evidence on behalf of the Company to demonstrate that rectification had taken place or even been attempted. The Ombudsman said that there had been a complete absence of any contrition or remorse by the Company[26], which exacerbated the need for specific deterrence.
[26] Transcript of Penalty Hearing page 12
The main thrust of the Ombudsman’s submission is that the Company’s lack of compliance or rectification is indicative of its apathetic approach to the statutory compliance notice scheme and Commonwealth workplace laws. For that reason, it posits that a penalty should be meaningful so that the Company is discouraged from breaching fair work instruments in future.
Nature, circumstances and deliberateness of conduct
The Ombudsman submits that the Double Hao’s failure to comply with the Notice is serious and demonstrated a deliberate disregard for its obligations under the FW Act and for the Ombudsman’s authority.
The Ombudsman submits that by failing to comply with the Notice, Double Hao left it with no other option but to expend public funds on instituting these proceedings. The Ombudsman submits that the Company did not provide a reasonable excuse for its non-compliance or provide the regulator with evidence of rectification by the due date stipulated in the Notice.
The Ombudsman further submitted that the Company did not meaningfully engage with the Ombudsman after it failed to comply with the Notice. At the hearing, I asked the Ombudsman whether I should take into account the two sets of calculations performed by Mr Liu as a mitigating factor when assessing penalty. In supplementary submissions, the Ombudsman contended that these calculations should not be regarded as an attempt to partially comply with the Notice.
Ultimately, the Ombudsman maintains that Double Hao’s failure to comply with the Compliance Notice was deliberate.
The first respondent’s failure to comply with the Notice has been established by the entry of default judgement and the declaration by the Court regarding Double Hao’s contravention of s 716(5). By reason of that judgment, which has not been set aside, Double Hao is taken to have admitted that it failed to take the specified action set out in the Compliance Notice.
However, I do not accept that the first respondent demonstrated a blatant disregard of its obligations under the FW Act or that it was indifferent to the compliance notice. This is not a case where the employer completely ignored the notice or displayed contempt for the statutory compliance regime.
The evidence reveals that some steps were taken by Mr Liu in response to the issuing of compliance notices, albeit not the steps required by the notices.
A strong theme of Mr Liu’s oral submission was his confusion as to why the inspector would issue a compliance notice which asserted that Double Hao had contravened casual employment provisions of the Award and why the notice required the company to perform wage calculations on the basis that Ms Mitchell had been employed as a casual employee. It seems from the very outset of the investigation that Mr Liu genuinely believed that Ms Mitchell had been employed on a part-time basis, just as she had for years under the former owner of the milk bar business. There was palpable frustration from Mr Liu that he had tried to persuade the inspector to accept this view. He said he had asked the Ombudsman for assistance to understand the basis for the compliance notice and said he asked a number of questions of the inspector, but these went unanswered.
The evidence in the court book reveals that there were indeed many exchanges between Mr Liu and the Ombudsman and that the status of Ms Mitchell’s employment was a constant sore.
Whilst it is acknowledged that Double Hao did not make an application to the Court pursuant to s 717 for a review of the notice and did not formally proffer a reasonable excuse for non-compliance, it would be incorrect to say that Mr Liu and Double Hao sat idle and did nothing at all about the compliance notices.
The first of the compliance notices was issued on 2 March 2021. The covering email from the Inspector, which attached the notice, expressly invited Mr Liu to contact the inspector by phone or email “to discuss this matter or clarify any of the issues raised in the Compliance Notice”.
It appears that Mr Liu did that very thing. On 21 March 2021, a Sunday night at 10.08pm, Mr Liu sent an email to FWI M Chapman which attached a document “wage_issue.docx”, the contents of which are summarised at [17] of the unsworn affidavit of Mr T Chapman upon which the Ombudsman relies. It is evident even from that summary that Mr Liu was looking to the inspector for an explanation and/or assistance as to why Ms Mitchell was regarded as a casual and not a part-timer and why the inspector considered that Ms Mitchell was covered by the Award. From the affidavit summary, it would appear that the document “wage_issue.docx” also contained information from Mr Liu about the hours Ms Mitchell had worked and what she had been paid. This correspondence from Mr Liu to the inspector was but one of many phone and email exchanges regarding contested issues about the compliance notices.
I pause at this juncture to note that while the document “wage_issue.docx” was referred to and summarised at [17] and purportedly annexed as Annexure TC-11 to the unsworn affidavit of FWI T Chapman, the document was not produced in the court book. I directed the Ombudsman to produce a copy of the correspondence, on the basis that it appeared contextually relevant to the issues of deliberateness and cooperation – particularly in circumstances where the Ombudsman had made the serious allegation that Mr Liu had not acted in good faith. I was told by the Ombudsman’s representative that enquiries would be made about the document, yet there does not appear to have been any response to my direction.
There is also evidence before the Court that Mr Liu provided at least two sets of calculations in response to the Ombudsman’s compliance notices.
First, on 6 April 2021, in response to the First (but subsequently withdrawn) Compliance Notice, Mr Liu provided calculations to the Ombudsman. Those calculations stated that Ms Mitchell owed Double Hao $7,652.00 in respect of purported overpaid wages, a Fair Work Commission settlement, accountant fees paid by Double Hao in relation to Ms Mitchell receiving job keeper payments and other matters.
The Ombudsman submits that these calculations cannot be regarded as compliance, part compliance or even attempted compliance with any of the steps of the compliance notice. The Ombudsman submits these calculations were not completed in good faith or by reference to the steps required by the notice itself. The Ombudsman also criticises Double Hao’s calculations as not being referrable to any award, minimum entitlements or law.
Mr Liu then provided a second set of calculations to the Ombudsman on 5 March 2023, approximately 18 months after the period for compliance under the Compliance Notice had elapsed and after these proceedings had commenced. Again, the Ombudsman submits that these calculations did not engage with the steps required to be taken under the Compliance Notice and that they should be given no weight as the respondents have not made any payments, despite the calculations identifying outstanding underpayments.
The Ombudsman criticises the second set of calculations as being based on a misclassification of Ms Mitchell as a part-time employee and because they incorrectly deducted an amount paid to Ms Mitchell in a Fair Work Commission settlement. The Ombudsman says that there was no proper legal or factual basis for the calculations.
In its supplementary written submissions the Ombudsman contends that any attempts made by Double Hao to perform calculations were not made in good faith and should not be considered to constitute partial or full compliance with the Compliance Notice.
The Ombudsman contends that the statutory enforcement regime afforded Double Hao and Mr Liu just two options when the Compliance Notice was issued – that they either strictly comply with its requirements or formally challenge the notice pursuant to section 717[27]. The Ombudsman submits that the respondents elected to do neither. Further, in oral and written submissions[28], the Ombudsman contends that where a notice is contested but not by using the requisite statutory review mechanism, the informal challenge constitutes a deliberate non-compliance.
[27] Fair Work Ombudsman v Pacific Security Services Pty Ltd [2021] FedCFamC2G 111 at [55]
[28] Supplementary submission at [15]
The Court has declared that the first respondent did not comply with its obligations under the Compliance Notice. However, for the purposes of determining penalty, I do not accept the Ombudsman’s submission that the respondents acted in blatant disregard of the Notice, that they acted in bad faith or that they made no genuine attempt to calculate the payments owed to Ms Mitchell.
It seems to me from an overall assessment of the evidence, including the communications between Mr Liu and the Ombudsman, that there was a genuine misunderstanding and confusion on Mr Liu’s part as to the basis on which the inspector had formed his reasonable belief regarding Ms Mitchell’s award coverage, employment status and alleged underpayments. I accept that Mr Liu’s calculations did not properly engage with the requirements of the Compliance Notice and that his response took the form of advocacy for what he believed was the proper legal and factual position. However, the Ombudsman’s assertions of deliberate disregard and lack of good faith are overreach and do not fairly characterise the respondents’ conduct.
It is all very well to submit that the respondents failed to make a formal application to have the notice reviewed and set aside pursuant to s 717. But where, as here, an employer is expressly invited to raise concerns or seek clarification about an issued compliance notice, and does that very thing, it would not be unreasonable to expect those concerns to be addressed or clarified through informal communication at the first instance. It would not be unreasonable to await further clarification before seeking a formal review under s 717.
Where an allegation of bad faith (or lack of good faith) is directed at a party it is incumbent on the party making the allegation to ensure that the full facts and circumstances are laid out. It is disappointing and unhelpful that a contextually relevant document [TC-11], which potentially corroborates the respondents’ submission that they sought assistance or clarification from the Ombudsman about the compliance notice, was not made available to the court.
In my view, the penalty in this case should recognise that the first respondent at least sought to engage with the Ombudsman, albeit not in the manner prescribed by the Notice. In assessing the deliberateness of the first respondent’s conduct I also take into account my impression that Mr Liu’s limited English skills and comprehension may have impacted the manner in which he responded to the Notice.
Nature and extent of loss
The Ombudsman submits that Double Hao has failed to comply with its legislative obligations by denying Ms Mitchell her minimum wage entitlements. The regulator submits that Ms Mitchell “has not received the amount owing to her”[29] despite the Compliance Notice being issued over two years ago in August 2021. The Ombudsman submit that Double Hao was given ample time to participate in the FWI’s investigation and rectify the underpayments stipulated within the Notice.
[29] Ombudsman’s submissions at [58]
The Ombudsman contends that Double Hao has failed to pay Ms Mitchell $3,593.10 in wages and approximately $377.28 in superannuation, plus interest. These amounts were calculated by FWI T Chapman in or around April 2023 after the inspector received copies of payslips from Ms Mitchell[30]. It is this asserted loss which the Ombudsman says should be taken into account as a factor relevant to the quantum of penalty.
[30] T Chapman Affidavit at [29]-[31]
The Ombudsman also contends, and I accept, that the first respondent’s failure to comply with the Compliance Notice has caused a broader public loss. The Ombudsman and the Court have spent time and public funds dealing with enforcement, liability and civil remedy proceedings which would not have otherwise been required. As the Court explained in Fair Work Ombudsman v Soma Kitchen & Anor (No.2)[31]:
“[39][…] the purpose of s 716 is to provide an alternative to litigation. That is, it is designed to prevent litigation. Litigation is timely and expensive. It is also not controversial that Court resources are limited and this Court actively promotes alternative resolution methods in order to reduce unnecessary expenditure. Here, that purpose has been systematically undermined.”
[31] [2020] FCCA 2583 at [39]
The compliance notice regime provides a mechanism which affords employers an opportunity to respond to and rectify alleged contraventions of the FW Act and industrial instruments on a no-admissions basis and with immunity from further enforcement action. A failure to comply with a compliance notice defeats the public benefit of the compliance regime, including the avoidance of litigation involving the regulator. The wasted time and public resources used to enforce compliance with the Notice is deserving of a penalty.
In considering the weight to be given to the alleged underpayments caution must be exercised. The Ombudsman submits that Ms Mitchell is ‘owed’ nearly $4,000 however the calculation of that amount is premised on the assumed legal and factual correctness of the inspector’s reasonable belief. It is an amount which the Ombudsman confidently asserts the employer would have arrived at had it taken the steps required by the Compliance Notice.
The amount of alleged underpayments about which the FWI has formed a reasonable view is a matter which can be taken into account generally in considering the gravity of the employer’s conduct. It is open to the Court, based on the FWI’s reasonable belief and any other relevant evidence (such as its own calculations), to infer that an employee has probably suffered some loss by reason of the employer’s alleged contravention of its statutory obligations under the FW Act, award or enterprise agreement. Even if those losses are not proven and not precisely quantified, the Court may be persuaded that the employer’s conduct, viewed as a whole, puts the compliance notice contravention into a context which is deserving of a particular penalty.
In the circumstances of this case, I am prepared to infer that Ms Mitchell has suffered some loss of wages by reason of Double Hao’s conduct. However, I am not satisfied that there is sufficient evidence before the Court to establish the correctness of the Ombudsman’s calculations.
Size of business
The Ombudsman submits that there has been no evidence provided regarding the size of the Double Hao business, including any profit and loss statements from the past two years. The Ombudsman’s submissions echo the well-established principle that the size and financial circumstances do not exculpate an employer’s contravention of fair work instruments[32]. As Justice Tracey said in Kelly v Fitzpatrick [2007] FCA 1080 at [28]:
“[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”
[32] Powell at [83]; Fair Work Ombudsman v Avant-Garde Logistics Solutions Pty Ltd [2022] FedCFamC2G 879 at [50] (Judge Symons).
In his oral submissions, Mr Liu repeatedly drew the Court’s attention to the fact that Double Hao is a small business, a milk bar, implying that concessions should be made based on the basis that it operates a small ‘corner store” business.
While the Ombudsman submits that there is no evidence before the Court regarding size of that business, it would have been disingenuous for the Ombudsman not to concede that the respondents do in fact operate a very small business. It was self-evident to the Court, when directions hearings were conducted by Microsoft Teams, that Mr Liu was participating from the sandwich counter of his shop and that his ability to participate in proceedings was compromised by his responsibility for business operations and lack of funds for legal representation.
Of course, none of these factors relieve the respondents from their obligation to meet minimum employment standards or exculpate Double Hao from its contravention of s 716(5). But in determining the quantum of an appropriate penalty, the Court should make a realistic assessment of the likely impact of the penalty, notwithstanding the absence of financial information or other evidence regarding the business. In this case, even in the absence of that forensic evidence, the Court can readily infer that the penalties sought by the Ombudsman could have a crushing effect.
Corrective action and cooperation
In their written outline of submission, the Ombudsman contended that Double Hao had not taken any sufficient corrective action and that despite orders of the Court in February 2023 to comply with the Compliance Notice, there is no evidence of any payments having been made to Ms Mitchell.
As I mentioned earlier, Mr Liu provided the Ombudsman with a set of calculations on 6 April 2021 and a second set of calculations on 5 March 2023, after default judgment had been entered. At the hearing Mr Liu sought to rely on the second calculations to establish that there had been some cooperation from the respondents.
I asked the Ombudsman whether the Court should take into account any of the calculations performed by the second respondent as evidence of cooperation with the regulator or attempted compliance with the Notice, and whether this should be treated as a mitigating factor.
At the hearing, and in its supplementary written submissions, the Ombudsman submitted that by virtue of the default judgment entered on 7 February 2023 it was not open to the Court to make a finding that the Company partially complied with the Compliance Notice by making calculations. The Ombudsman contended that:
(1)the calculations were not conducted within the relevant period of compliance;
(2)the first set of calculations related to a previous withdrawn compliance notice and are thus irrelevant;
(3)the second set of calculations were sent to the Ombudsman 18 months after the period of compliance under the Notice ceased;
(4)the second set of calculations were based on a misclassification of Ms Mitchell as a part-time employee and contained other errors; and
(5)Mr Liu has failed to make any payments despite his own calculations identifying outstanding underpayments.
Furthermore, the Ombudsman submits that these calculations were not completed in good faith, as they were not done with reference to the Award or within parameters of award coverage and employee status set by the inspector’s reasonable belief. The Ombudsman submits that there was no genuine attempt to calculate the underpayments. The Ombudsman stated that the Court ought to only afford minimal weight with regard to the second set of calculations, due to their lack of any factual or legal integrity.
While I am not prepared to find that the first respondent cooperated with the regulator such as to warrant a discount, I do not accept the Ombudsman’s submission that Double Hao acted in bad faith or the implication that its conduct aggravated the seriousness of its contravention.
From the outset, the respondents, perhaps unwisely, have not let go of their genuinely held belief that Ms Mitchell was engaged and properly paid as a part-time employee. As I mentioned earlier, calculations undertaken by the respondents, whilst not complying with the steps required in the Compliance Notice, should be seen as advocacy on their part in an attempt to persuade the regulator to its point of view. Indeed, in the course of his oral submissions, Mr Liu said that he had tried to “negotiate” with the Ombudsman to convince it that Ms Mitchell was a part-time employee.
The respondents’ unshaken belief about the status of Ms Mitchell’s employment and her entitlements may (or may not) be misplaced. That is not a finding I am required to make. If Double Hao had wanted to contest the validity of the Compliance Notice or the factual or legal basis of the inspector’s reasonable belief, it probably should have sought a review of the notice pursuant to s 717 rather than informally arguing the toss with the regulator. But it cannot be inferred from the fact that the respondent chose the latter course that it was not acting in good faith.
I accept the Ombudsman’s submission that Double Hao has not expressed any contrition or remorse in respect of its failure to comply with the Compliance Notice. I accept that no discount on penalty for corrective action or cooperation should be applied.
Compliance with minimum standards
The Ombudsman submits that compliance with the minimum standard of fair work instruments is vital to ensuring that employers comply with the safety net of modern awards and ensures that employees are remunerated for work they perform. The Ombudsman submits that 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[33].
[33] NoBrace at [40]
I accept that the failure to comply with a statutory notice issued by the regulator should be regarded as serious. A penalty should be set at an appropriate amount so as not to undermine the compliance notice scheme as an effective alternative to costly and wasteful litigation.
Conclusion on penalty
The Ombudsman submits that the imposition of a penalty in the range of 60% to 70% of the maximum is appropriate. That equates to $19,980-$23,310. The Ombudsman submits that a penalty in that range strikes a reasonable balance between deterrence and oppressive severity, in circumstances where there is no evidence to suggest that the penalty would be other crushing or oppressive.
The Ombudsman has not put forward any evidence to suggest that Double Hao has any history of prior offending. I infer that this is its first contravention of the FW Act and that in assessing specific deterrence it should be treated accordingly.
In my view, based on the factors discussed above, the penalty sought by the Ombudsman is disproportionate to the true gravity of the contravention. The contravention is serious but that does not mean, in the particular circumstances of this case, that it warrants a penalty in the upper-middle or high range.
I am satisfied that a penalty of 30% of the maximum will in this case achieve the purpose of general and specific deterrence. I have no doubt that for the first respondent a penalty of that size will be impactful and have a meaningful consequence.
ORDER FOR COMPENSATION
In addition to the penalty, which is an order made pursuant to section 546 of the FW Act, the Ombudsman also seeks an order, pursuant to section 545(1), that Double Hao pay compensation to Ms Mitchell for the loss allegedly suffered by her as a result of the respondent’s contravention of s 716(5). Although the Compliance Notice itself did not prescribe a requirement to pay a fixed sum, the Ombudsman contends, based on calculations undertaken in June 2023, that Ms Mitchell is owed $3,593.10 in outstanding wages and $377.28 in superannuation. The Ombudsman submits that it is appropriate for those amounts to be regarded as a loss which is consequential to the first respondent’s failure to comply with the Compliance Notice.
During the hearing, I invited the Ombudsman to file a supplementary submission to address the then recent case of Fair Work Ombudsman v Portland Inc [2023] FedCFamC2G 620. In that case, his Honour Judge Blake refused to exercise his discretion to make an order for compensation pursuant to s 545(1) because, inter alia:
(1)there was no causal nexus between non-compliance with the compliance notice and the ‘loss’ suffered by the employee; and
(2)the legislature would not have intended for a compensatory order to be made under section 545 on the strength of an inspector’s “reasonable belief” where a more exacting and higher standard of proof would have to be met to establish that loss by judicial determination.
In Carers Portland, his Honour Judge Blake discussed the evidentiary deficiencies with the compliance notice regime in s 716, specifically finding that an inspector’s “reasonable belief” under section 716 does not require proof of the underlying contraventions of fair work instrument.
By its supplementary submission filed on 15 September 2023, the Ombudsman submitted that the decision in Carers Portland was wrong and should not be followed. At [16] to [36] of those submissions the Ombudsman advanced the following reasons why Carers Portland was wrongly decided and why the Court, in this case, should exercise its discretion to make an order for compensation:
(1)the Court has a broad discretion under s 545 to make any order it considers appropriate if it is satisfied that a person has contravened a civil remedy provision, including s 716(5);
(2)in determining whether to exercise its direction, the Court should have regard to what would have occurred had the contravention of s 716(5) not taken place;
(3)the loss suffered by Ms Mitchell should be regarded as causally related to the contravention because, if Double Hao had taken the steps required by the Compliance Notice, it would have undertaken calculations, revealed an underpayment and then would have been required to rectify the unpaid wages and superannuation;
(4)the Court can be satisfied that the calculations undertaken by FWI T Chapman properly revealed the underpayment which the employer would have established had it complied with the Compliance Notice;
(5)an order for the payment of compensation pursuant to s 545 is consistent with the purpose of the statutory compliance scheme in s 716 which is directed at taking “specified action to remedy the direct effects of the contravention”;
(6)contrary to the finding at [56] of Carers Portland, an award of compensation for contravention of s 716(5) does not undermine the integrity of the FW Act. The Court’s broad power under s 545 to make preventative, remedial or compensatory orders[34] is not constrained. The section allows remedies to be crafted to meet the circumstances of any given contravention[35];
(7)the fact that a compliance notice is issued on the basis of an inspector’s reasonable belief does not constrain a Court from ordering compensation;
(8)the fact that there is an alternative enforcement mechanism available to the Ombudsman and its inspectors should not preclude the exercise of the Court’s discretion.
[34] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3 at [110]
[35] Dafallah v Fair Work Commission [2014] FCA 328 at [148]
It is unnecessary for me to fully articulate each of the Ombudsman’s submissions in this case as many of the same issues have been subsequently agitated and explored in more recent judgements of the Court, including in Fair Work Ombudsman v Cobra Security Services Pty Ltd [2024] FedCFamC2G 336 (Cobra Security).
In Cobra Security, the Court was asked to make a similar compensatory order in a case involving a contravention of section 716(5). For the reasons set out at paragraph [82] and following in that judgement, I decided that it was inappropriate for the Court to exercise its discretion to make such an order. I concluded, as did Judge Blake in Carers Portland, that the legislature could not have intended for a compensatory order to be made pursuant to section 545 on the strength of an inspector’s “reasonable belief” where a more exacting and higher standard of proof would have to be met to establish the underlying contravention by judicial determination. I also concluded that if there were any unpaid wages, that was a loss occasioned by the substantive contravention of the FW Act, an award or enterprise agreement – it was not a consequence of the employer’s failure to comply with a compliance notice.
The views and reasoning I expressed in Cobra Security lead me to refuse the Ombudsman’s application for compensation in this case. There is nothing about the circumstances of this case which would cause me to exercise my discretion differently.
My decision not to make the compensation order does not in any way prejudice the Ombudsman, Ms Mitchell or a registered employee organisation on her behalf from commencing proceedings in relation to alleged contraventions of the FW Act or any applicable award.
DISPOSITION
For the reasons set out above I will order that the first respondent pay a pecuniary penalty in sum of $9,990, being 30% of the maximum penalty for a corporate contravenor. That penalty should be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days.
For the reasons set out in Cobra Security at paragraph [80] and following, I am not inclined to make an order requiring Double Hao to pay compensation to its former employee, Ms Mitchell.
I will declare that the second respondent was involved in the first respondent’s contravention of section 716(5) within the meaning of s 550 and that he will be taken to have contravened the FW Act.
This matter will be listed for a further directions hearing on a date to be fixed for the making of procedural orders regarding the Ombudsman’s application for the imposition of penalties upon the Second Respondent.
I certify that the preceding one hundred and thirty-six (136) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Forbes. Associate:
Dated: 19 April 2024
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