Fair Work Ombudsman v E-Agri Management and Technical Services Pty Ltd
[2023] FedCFamC2G 1029
•14 November 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
Fair Work Ombudsman v E-Agri Management and Technical Services Pty Ltd [2023] FedCFamC2G 1029
File number: MLG 3290 of 2021 Judgment of: JUDGE BLAKE Date of judgment: 14 November 2023 Catchwords: INDUSTRIAL LAW – Failure to comply with a Compliance Notice – Second Respondent admits breach – agreed penalty range – pecuniary penalty imposed within agreed range. Legislation: Fair Work Act 2009 (Cth) ss 546(1), 550, 550(2), 716, 716(5), 717. Cases cited: Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Kelly v Fitzpatrick [2007] FCA 1080
Professional Employees Award 2020
Professional Employees Award 2010
Division: Division 2 General Federal Law Number of paragraphs: 38 Date of hearing: 5 October 2023 Place: Melbourne Counsel for the Applicant: Ms Dowsett Solicitor for the Applicant: McInnes Wilson Lawyers Advocate for the Respondents: In Person Solicitor for the Respondents: None ORDERS
MLG 3290 of 2021 BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND:2 E-AGRI MANAGEMENT AND TECHNICAL SERVICES PTY LTD
First Respondent
NIGEL BLAIR
Second Respondent
ORDER MADE BY:
JUDGE BLAKE
DATE OF ORDER:
14 NOVEMBER 2023
THE COURT ORDERS THAT:
1.Pursuant to section 546(1) of the Fair Work Act 2009 (Cth), the Second Respondent pay a pecuniary penalty to the Commonwealth in the total sum of $3,600 for the Contravention set out in paragraph 1 of the Orders of Judge Blake dated 21 April 2023, within 28 days of the date of these Orders.
2.The parties have liberty to apply on 7 days notice.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review 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 BLAKE:
This is an application by the Fair Work Ombudsman (‘Applicant’) for the imposition of a pecuniary penalty against the Second Respondent for failing to comply with a Compliance Notice issued to the First Respondent under section 716 of the Fair Work Act 2009 (Cth) (‘Act’).
BACKGROUND
On 17 December 2021, the Applicant commenced proceedings in this Court against both Respondents for failing to comply (or being involved in the failure to comply) with a Compliance Notice pursuant to section 716(5) of the Act.
During the course of the proceedings, the First Respondent was placed into liquidation. The proceedings were continued by the Applicant against the Second Respondent.
On 12 April 2023, the Applicant and the Second Respondent filed with the Court, a Statement of Agreed Facts (‘Agreed Facts’). In that document, among other things, the Second Respondent admitted that he was involved in the First Respondent’s failure to comply with the Compliance Notice as contemplated by section 550 of the Act. The Agreed Facts are attached as Annexure A to these reasons.
On 21 April 2023, the Court declared that the Second Respondent was involved (within the meaning of section 550(2) of the Act) in the First Respondent’s failure to comply with the Compliance Notice. The Court made orders setting the matter down for a hearing on penalty.
The hearing on penalty subsequently proceeded before me. The Applicant was represented by Ms Dowsett of Counsel. It relied on two affidavits of Inspector Natalie Roberts (‘Inspector Roberts’), an affidavit of James Christensen, and its written outline of submissions and submissions in reply. It also filed a Court Book and a list of authorities. The Second Respondent represented himself and relied on an affidavit filed by him on 31 July 2023, as well as various matters that were effectively annexed to the Agreed Facts document, but were not in fact agreed to by the Applicant. Neither party sought to cross-examine witnesses, and the matter proceeded on submissions.
The position put in the Applicant’s outline of submissions, and not challenged by the Second Respondent, is that the parties agree that the Court should impose a penalty on the Second Respondent in the range of $3,000-$4,000.
In written submissions, the Applicant sought an order that, in the first instance, any pecuniary penalty be paid to the affected employee. At the hearing, the Applicant did not press this submission.
RELEVANT PRINCIPLES
It is open to parties to propose penalties to be imposed by the Court and to make submissions in respect of the appropriate penalty range: Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [46]-[64]. While it is open to the parties to embark upon this course, the Court must nevertheless satisfy itself that the penalty is appropriate. The Court ought not depart from the proposal of the parties, merely because it might have been disposed to some other figure.
In Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450, the High Court stated at [9] that ‘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’. The High Court also stated at [42] that penalties ‘are not retributive, but rather are protective of the public interest in that they aim to secure compliance by deterring repeat contraventions’.
In Kelly v Fitzpatrick [2007] FCA 1080 at [14], the Federal Court set out a list of non-exhaustive factors relevant to the imposition of penalties under the Act.
I intend to approach this matter consistently with the authorities referred to above.
ASSESSMENT
The maximum penalty the Court is able to impose on the Second Respondent for a single contravention of section 716(5) of the Act is $6,600.
Deterrence
Specific deterrence is directed at the party who has contravened the provision. It is concerned with ensuring a contravening party is not prepared to engage in the contravening conduct in the future. General deterrence is concerned with ensuring, among other things, that the penalty is likely to act as a deterrent in preventing similar contraventions by like-minded persons.
There is a need for specific deterrence in this case. The Second Respondent did not comply with the Compliance Notice. The notice remains not complied with. There is evidence before me that the Second Respondent is a director of other companies. He is therefore apparently involved in conducting business operations, and it is reasonable to infer that he either will, or may be, responsible for the engagement of employees in the future.
As to general deterrence, the Compliance Notice framework provides a mechanism for efficient and cost-effective identification and rectification of potential breaches of the Act. It provides an alternative to litigation, by enabling the Applicant to issue a Compliance Notice if it has a reasonable belief that relevant laws are being contravened, and for a recipient of the notice to consider it, and then decide whether to comply with it or challenge it. The effect of this framework will be hindered if recipients perceive that there is no meaningful consequence for a failure to comply with a Compliance Notice. Given these matters, there is a need for general deterrence in this case. The level of penalty needs to be set at a level necessary to take both specific and general deterrence into account.
Nature, circumstances and deliberateness of contravening conduct
Gabor Dobradi (‘Mr Dobradi’) was employed by the First Respondent. He made a request for assistance to the Applicant. He alleged he had not been paid his minimum wages by the First Respondent. The Applicant investigated the matter. Inspector Roberts formed a reasonable belief that Mr Dobradi had not been paid minimum wages under the Professional Employees Award 2020, (formerly the Professional Employees Award 2010). She subsequently issued the Compliance Notice to the First Respondent.
The evidence discloses that various attempts were made by the Applicant to secure compliance with the Compliance Notice. Those efforts did not secure compliance by the Respondents. It is clear from the various attempts made by the Applicant (including those set out in detail at paragraph [20] of Inspector Roberts’ first affidavit), that the Respondents knew of the Compliance Notice.
The Second Respondent’s evidence and submission is that following the provision of documents by him on 5 July 2021, he thought the matter was being considered by the Applicant. In this respect, he points to an email from the Applicant on 6 July 2021 which states ‘Thanks Nigel, I’ll pass this information on to our legal team for consideration’. He says he was therefore surprised when months later, the Applicant commenced proceedings for his failure to comply with the Compliance Notice.
The email of 6 July 2021 needs to be considered against the following. First, Inspector Roberts sent an email to the Respondents on 23 June 2021, in which she asks the Respondents to provide details regarding the company’s financial situation, noting ‘anything you provide will be of benefit to you when the matter goes before the court’. This indicates the Applicant was intending to commence proceedings. Second, the Second Respondent did not take any step to comply with the Compliance Notice even after the proceedings were commenced.
The Second Respondent also says that he was hampered from dealing with the Compliance Notice because of the impact of Covid-19 and the associated lockdowns that occurred in 2020 and 2021. He says, among other things, that the business lost its funding, was in a parlous state, was unable to meet its debts, and needed to be shut down. He says he attempted to keep Mr Dobradi engaged and to do the best by him, and that the approach taken by the Applicant deters employers from supporting employees in difficult times. He also says that he disagreed with the amount the Applicant claimed was outstanding to Mr Dobradi, and he communicated that clearly to the Applicant.
I accept that the First Respondent lost its funding because of the Covid-19 pandemic and the associated lockdowns. I also accept that circumstances would have been difficult for the Second Respondent at the time the Compliance Notice was issued, given the impact of Covid-19 on the First Respondent. I accept, having regard to the tax return information annexed to his affidavit, that the Second Respondent earned only a very modest income in the financial years ending in 2020 and 2021. All of these matters go some way to explaining the Second Respondent’s failure to comply with the Compliance Notice, and I take them into account. While I take them into account, I do not accept that they prevented the Second Respondent from either taking any of the steps as set out in the Compliance Notice, or, if he felt it was necessary, taking steps to review the Compliance Notice under section 717 of the Act. The Second Respondent must bear some responsibility for his failure to take either of those steps which were available to him, and which he can be taken to have been on notice of.
Corrective action, contrition and co-operation
The First Respondent never apologised, or took steps to comply with the Compliance Notice. The Second Respondent has never apologised for being involved in the failure to comply with the Compliance Notice.
It is acknowledged that given the state of the First Respondent, it can no longer comply with the Compliance Notice, whatever the Second Respondent may think. It is also the case, however, that the Respondents had a period of approximately two years from the time the Compliance Notice was issued, until the time the First Respondent was placed into liquidation, to comply with the Compliance Notice.
There is no evidence before the Court of anything the Second Respondent has done at a personal level to ensure that either he, or any business he manages or is involved with, will comply with Compliance Notices in the future.
As I noted, this matter proceeded on the basis of the Agreed Facts. That ultimately meant that the matter could proceed to hearing on penalty, without the need for a hearing on liability. That has saved the Applicant and the Court time and resources, and I give weight to it. Balanced against that, however, is the following:
(a)Entry into the Agreed Facts did not occur promptly. The proceedings had been on foot for 16 months before it occurred; and
(b)It had been anticipated early in the proceedings by the parties that the matter would proceed to penalty on the basis of the parties reaching agreement as to key facts. The Respondents ultimately chose not to proceed down that path, before changing their minds again, and then entering into the Agreed Facts. That sequence of events led to the matter being delayed and costs being incurred, including court costs and litigation costs by the Applicant.
Ultimately, the lack of contrition and lack of corrective action point toward a penalty at the higher end of the range. Some weight needs to be given to the Second Respondent’s entry into the Agreed Facts, however, not as much weight should be placed on this, given the circumstances to which I have referred.
Nature and Extent of Loss
In written submissions, the Applicant submitted that the loss flowing from the failure to comply with the Compliance Notice included Mr Dobradi being denied his wages. By the time the matter came on for hearing, however, the Applicant did not press this submission. The Applicant adduced evidence that Mr Dobradi had been paid an amount of around $44,192.31 through the Fair Entitlements Guarantee Scheme. The Applicant was unable to say, however, whether that amount incorporated an amount for unpaid wages that was the subject of the Compliance Notice.
The Applicant’s decision not to press the submission above was appropriate. That Mr Dobradi may be entitled to wages under the relevant award is not a matter that was proved in this case.
Notwithstanding the above, the following losses arise in this matter. First, there has been a cost to the Applicant and to the Court, arising from the institution and prosecution of these proceedings. That would not have occurred had the Respondents complied with the Compliance Notice, or sought to review the Compliance Notice under section 717 of the Act. Second, failure to comply with a Compliance Notice occasions a public loss. The utility of the Compliance Notice framework is undermined when employers fail to comply with Compliance Notices. I take these matters into account.
Financial circumstances of the Second Respondent
There is no dispute that the First Respondent is in liquidation. There is no dispute that it was unable to continue in business because funding was withdrawn at the onset of the Covid-19 pandemic. The Second Respondent annexed to his affidavit, tax return information from the financial years 2020 and 2021. Those documents show that in the year ending 30 June 2020, the Second Respondent’s taxable income was $27,899. The documents also show that in the year ending 30 June 2021, the Second Respondent’s taxable income was $23,106.
While I accept that the Second Respondent earned only a modest income for the financial years 2020 and 2021, that information does not materially advance matters. There is no evidence before me as to the present financial position of the Second Respondent. There is no evidence before me as to his current income, or any assets held in his name. I am therefore not able to make any assessment as to whether any pecuniary penalty may be oppressive, or whether the level of penalty to be imposed on an individual needs to be tempered by reference to personal considerations.
Compliance with minimum standards
I accept, and take into account, the fact that failure to comply with a Compliance Notice undermines the enforcement framework designed to protect, among other things, safety net entitlements of employees.
Previous prior conduct
The Second Respondent says that he has been involved with businesses for 23 years, and in that time, has never disregarded the office of the Applicant and the obligations (which I take to mean workplace obligations) imposed on him. The Applicant did not suggest otherwise. I am satisfied that the Second Respondent has not engaged in previous similar conduct.
PENALTY
Determining a penalty is a matter of ‘instinctive synthesis’. When all of the matters above are weighed, I am satisfied that it is appropriate to make an order for a penalty in the range identified by the parties.
The question then becomes what the penalty should be. In this matter, the factors pointing toward a penalty at the higher end of the range identified by the parties include the nature and deliberateness of the contravening conduct, general and specific deterrence, the lack of contrition, the somewhat inconsistent nature of the cooperation given in the proceedings, the failure to take corrective action, and the nature and extent of the loss. The factors that point toward a lesser penalty include, to a limited extent, the modest income earned by the Second Respondent in the years during which the contravention occurred, the co-operation which was ultimately given to the Applicant during the proceedings to avoid a hearing on liability, the circumstances surrounding the contravening conduct (those circumstances being Covid-19 and the Second Respondent’s attempts to continue to retain Mr Dobradi throughout that period), and the fact that this is the first offence for the Second Respondent. When these factors are weighed, I am of the view that the penalty should be in the amount of $3,600.
I have considered the application of the totality principle and do not intend to apply it in this case. This is a single contravention, and a single penalty. There is no evidence to support any view that the imposition of such a penalty is oppressive.
The Applicant sought orders that the penalty be paid to the Commonwealth within 28 days of the date of this order. I agree it is appropriate to make such an order.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Blake. Associate:
Dated: 14 November 2023
ANNEXURE A
Statement of Agreed Facts filed 12 April 2023
This Statement of Agreed Facts is made by the Applicant and the Second Respondent in these proceedings for the purposes of section 191 of the Evidence Act 1995 (Cth).
A. APPLICATION
1. On 17 December 2021, the Applicant filed an Application and Statement of Claim in this Court against E-Agri Management and Technical Services Pty Ltd (First Respondent) and Mr Nigel Blair (Second Respondent) alleging a contravention of section 716(5) of the Fair Work Act 2009 (Cth) (FW Act) for a failure to comply with a compliance notice issued on 26 March 2021 pursuant to section 716(2) of the FW Act.
B.THE AGREED FACTS
The Parties
The Applicant
2.The Applicant, the Fair Work Ombudsman, is and was at all relevant times:
(a)a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to section 687(1) of the Fair Work Act 2009 (Cth) (FW Act);
(b)a Fair Work Inspector (FWI) pursuant to section 701 of the FW Act; and
(c)a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions pursuant to section 539(2) of the FW Act.
3.FWI Natalie Roberts (FWI Roberts) is and was at all relevant times a FWI appointed by the Applicant under section 700 of the FW Act.
The First Respondent
4.The First Respondent, E-Agri Management and Technical Services Pty Ltd (ACN 625 845 276) was at all relevant times:
(a)a company incorporated under the Corporations Act 2001 (Cth) (Corporations Act) and registered since 30 April 2018;
(b)a "constitutional corporation" within the meaning of section 12 of the FW Act;
(c)a "national system employer" within the meaning of section 14 of the FW Act; and
(d)a "person" within the meaning of section 716 of the FW Act.
5.On 17 March 2023, a notice of resolution was filed with the Australian Securities and Investments Commission on behalf of the First Respondent, stating that the company be wound up voluntarily by way of creditor's voluntary winding up under section 491 (1) of the Corporations Act and that a liquidator had been appointed.
6.At all relevant times, the First Respondent had its registered office address located at Unit 1, 21 Wellington Street, St Kilda in the State of Victoria (Registered Office Address).
7.At all relevant times, the First Respondent's Principal Place of Business was located in Hawthorn, Victoria (Principal Place of Business).
The Second Respondent
8.The Second Respondent, Mr Nigel Blair, is and was at all relevant times:
(a) a natural person capable of being sued;
(b) the sole director of the First Respondent since 14 March 2019;
(c) a person responsible for the operation, management, and control of the First Respondent; and
(d) a person responsible for ensuring the First Respondent complied with its legal obligations under the FW Act.
9.Prior to 14 March 2019, Mr Patrick Duffy was a co-director of the First Respondent (alongside the Second Respondent), holding that position from 30 April 2018 until 14 March 2019.
Investigation
10.On 22 October 2020, the Applicant received a request for assistance from a then current employee of the First Respondent, Mr Gabor Dobradi (Employee), alleging a failure by the First Respondent to pay his minimum wages.
11.Following the request for assistance made by the Employee, in or around 22 October 2020, the Applicant commenced an investigation into the First Respondent's compliance with Commonwealth workplace laws (Investigation).
12.Based on the information and evidence obtained in the course of the Investigation, on or around 26 March 2021, FWI Roberts formed a reasonable belief within the meaning of section 716(1) of the FW Act that, at all relevant times:
(a)the First Respondent employed the Employee on a full-time basis from 7 May 2018;
(b)by reason of the matters admitted to in paragraphs 4(c), 4(d) and 12(a), the Professional Services Employees Award 2010 renamed the Professional Services Employees Award 2020 (together, the Award), a modern award under the FW Act, covered and applied to the First Respondent in respect of the employment of the Employee;
(c)the Employee was engaged by the First Respondent in the role of an Engineering Manager and performed duties consistent with the classification of a "Level 4 -Professional" employee under Schedule A of the Award; and
(d)the First Respondent failed to pay the Employee any of his minimum wage entitlements (Full-time Minimum Wage Entitlement) for his ordinary hours of work performed during the period between 1 July 2020 to 21 December 2020 (Contravention Period).
13.By reason of the matters referred to in paragraph 12 above, FWI Roberts formed a reasonable belief for the purposes of section 716(1)(b) of the FW Act, that by failing to pay the Full-time Minimum Wage Entitlement, the First Respondent contravened the minimum wage clause of the Award in respect of the Employee's employment during the Contravention Period (Contravention).
The Compliance Notice
14.On 26 March 2021, FWI Roberts gave a compliance notice to the First Respondent in respect of the Contravention (Compliance Notice), pursuant to section 716(2) of the FW Act by sending it by pre-paid post to the Registered Office Address of the First Respondent.
15.On 30 March 2021, FWI Roberts also emailed a copy of the Compliance Notice to the email addresses '[email protected]' and '[email protected]', being the email addresses of the Second Respondent. The Second Respondent received the email addressed to [email protected]., but not to [email protected].
16.Pursuant to section 716(2) of the FW Act, the Compliance Notice required the First Respondent to:
(a)take the following action (Specified Action) by 16 April 2021 to remedy the direct effects of the Contravention:
(i)identify the number of hours the Employee worked during the Contravention Period in respect of which the Full-time Minimum Wage Entitlement was required to be paid by the Award;
(ii)identify the amount the First Respondent paid to the Employee during the Contravention Period in respect of the Full-time Minimum Wage Entitlement;
(iii)calculate the amount the First Respondent should have paid to the Employee during the Contravention Period in respect of the Full-time Minimum Wage Entitlement
(iv)make a payment to the Employee of the difference between the amount referred to in 16(a)(ii) and the amount referred to in 16(a)(iii);
(v)make a record of the information and amounts referred to in paragraphs 16(a)(i), 16(ii) and 16(a)(iii) and the amount of the payment referred to in paragraph 16(a)(iv) (Underpayment Rectification Information); and
(vi)calculate and pay the additional superannuation required by clause 17 of the Award in respect of the amount required to be paid to the Employee in respect of those amounts required to be paid as a result of the steps undertaken at paragraphs 16(a)(i) to 16(a)(iv); and
(b)prepare a schedule that sets out the Underpayment Rectification Information and the additional superannuation contributions calculated and paid to the applicable superannuation fund as a result of paragraph 16(a)(vi) above; and
(c)produce reasonable evidence to the Applicant of the First Respondent's compliance with the Compliance Notice by 23 April 2021 , by producing a copy of the schedule referred to in paragraph 16(b) and proof that full payment has been made to the Employee and the applicable superannuation fund as a result of paragraphs 16(a)(iv) and 16(a)(vi) above.
17.The Compliance Notice met the requirements of section 716(3) of the FW Act.
Failure to comply with the Compliance Notice
18.The First Respondent failed to:
(a)take the Specified Action by 16 April 2021, or at all;
(b)prepare a schedule that sets out the Underpayment Rectification Information and the additional superannuation contributions calculated and paid to the applicable superannuation fund; and
(c)produce any reasonable evidence to the Applicant of compliance with the Compliance Notice by 23 April 2021, or at all.
19.By reason of the matters admitted in paragraph 18 above, the First Respondent failed to comply with the Compliance Notice issued on 26 March 2021. The Second Respondent admits that the First Respondent did not have a reasonable excuse for failing to comply with the Compliance Notice.
Accessorial liability of the Second Respondent
20.At all relevant times, the Second Respondent was responsible for ensuring that the First Respondent complied with the Compliance Notice.
21.By reason of the matters admitted in paragraphs 8, 14, 15, 18 and 19 above, the Second Respondent:
(a)had knowledge that the Compliance Notice was given to the First Respondent;
(b)had knowledge that the First Respondent failed to comply with the Compliance Notice; and
(c)was knowingly concerned for the purposes of section 550(2) of the FW Act in the First Respondent's failure to comply with the Compliance Notice.
22.By reason of the matters admitted in paragraph 21 above, the Second Respondent was involved, within the meaning of section 550(2) of the FW Act, in the First Respondent's failure to comply with the Compliance Notice as outlined in paragraph 19 above, and pursuant to section 550(1) of the FW Act, contravened section 716(5) of the FW Act; and
Relief Sought
23.By consent, the Applicant and Second Respondent agree to seek:
(a)a declaration that the Second Respondent was involved in, within the meaning of section 550(2) of the FW Act, the First Respondent's failure to comply with the Compliance Notice and contravened section 716(5) of the FW Act.
(b)orders that pursuant to section 546(1) of the FW Act, the Second Respondent pay a pecuniary penalty to the Commonwealth for the Contravention declared at (a) above, within 28 days of those orders being made;
(c)orders pursuant to section 546(3)(c) of the FW Act, that the Applicant is to remit the pecuniary penalty referred to at (b) above, to the Employee. In the event the Applicant is unable, within 120 days and after making reasonable attempts to locate the Employee, to remit the pecuniary penalty to the Employee, the Applicant is to remit the pecuniary penalty to the Commonwealth Consolidated Revenue Fund;
(d)the Second Respondent and Applicant have liberty to apply on the giving of three (3) days' notice, each to the other; and
(e)the matter otherwise be finalised with no orders as to costs.
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