Fair Work Ombudsman v Express Cars Direct Australia Wide Pty Ltd (No 2)
[2024] FedCFamC2G 1179
•11 November 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Express Cars Direct Australia Wide Pty Ltd (No 2) [2024] FedCFamC2G 1179
File number: MLG 1274 of 2023 Judgment of: JUDGE SYMONS Date of judgment: 11 November 2024 Catchwords: INDUSTRIAL LAW – Fair Work – failure to comply with compliance notice – application for penalty orders and relief directed at performance of steps required under the compliance notice – where respondents did not file affidavit or submissions and engaged haphazardly in the proceeding – where first respondent continues to trade and remains registered – where steps required under compliance notice still unperformed at time of penalty hearing – whether payment of a fixed amount identified as underpayment is a step required under the compliance notice – whether contingent underpayment is a relevant loss for the assessment of penalty or the making of compensatory orders under s 545(1) of the Fair Work Act 2009 (Cth) – penalty orders made Legislation: Fair Work Act 2009 (Cth), ss 44, 45, 545, 546, 716 Cases cited: Australian Building and Construction Commission v Pattinson (2022) 274 CLR 450; [2022] HCA 13
Fair Work Ombudsman v Benny842 Pty Ltd [2022] FedCFamC2G 1009
Fair Work Ombudsman v Carers Portland Inc [2023] FedCFamC2G 620
Fair Work Ombudsman v Carers Portland Inc (No 2) [2024] FedCFamC2G 72
Fair Work Ombudsman v Cobra Security Services Pty Ltd [2024] FedCFamC2G 336
Fair Work Ombudsman v DB Richardson Trading Pty Ltd [2023] FedCFamC2G 203
Fair Work Ombudsman v Express Cars Direct Australia Wide Pty Ltd [2024] FedCFamC2G 775
Fair Work Ombudsman v Pure Telecom Pty Ltd [2024] FedCFamC2G 664
Fair Work Ombudsman v Tester [2021] FCCA 771
Fair Work Ombudsman v Tolu Investors Pty Ltd [2023] FedCFamC2G 773
Fair Work Ombudsman v Wells [2019] FCCA 3488
Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290
The Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; [2015] HCA 46
Trade Practices Commission v CSR Ltd [1990] FCA 521
Division: Division 2 General Federal Law Number of paragraphs: 53 Date of last submissions: 31 October 2024 Date of hearing: 31 October 2024 Place: Melbourne Solicitor advocate for the Applicant: Mr S Witton, Australian Government Solicitor Solicitor advocate for the Respondents: Mr I Hone ORDERS
MLG 1274 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: EXPRESS CARS DIRECT AUSTRALIA WIDE PTY LTD
First Respondent
BILLY PETREVSKI
Second Respondent
ORDER MADE BY:
JUDGE SYMONS
DATE OF ORDER:
11 NOVEMBER 2024
THE COURT ORDERS THAT:
1.Pursuant to s 546(1) of the Fair Work Act 2009 (Cth) (FW Act), the first respondent pay a pecuniary penalty of $21,450 to the Commonwealth in respect of one contravention of s 716(5) of the FW Act.
2.Pursuant to s 546(1) of the FW Act, the second respondent pay a pecuniary penalty of $4,290 to the Commonwealth in respect of his involvement, within the meaning of s 550(2) of the FW Act, in the contravention of s 716(5) of the FW Act by the first respondent.
3.The applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE SYMONS:
INTRODUCTION
On 23 August 2024, I found that the first respondent (Express Cars) had contravened s 716(5) of the Fair Work Act 2009 (Cth) (Act) by failing to comply with a Compliance Notice given to it by Fair Work Inspector (FWI) Villaneuva on 26 August 2022. I also found that the second respondent (Mr Petrevski) was involved within the meaning of s 550(2) of the Act in the contravention by Express Cars of s 716(5) of the Act. I made declarations that reflected these matters and otherwise reserved the question of penalty and other relief sought by the applicant (Ombudsman) to a hearing on 31 October 2024: see Fair Work Ombudsman v Express Cars Direct Australia Wide Pty Ltd [2024] FedCFamC2G 775 (Liability Decision).
As foreshadowed, these reasons concern two matters. First, whether a pecuniary penalty should be imposed on each of the respondents for their respective contraventions of the Act. Second, whether orders should be made requiring Express Cars to take steps ostensibly “required by the Compliance Notice” including payment of a fixed amount described as an “underpayment”.
The background to this matter, as well as various factual findings, are set out in the Liability Decision.
THE MATERIAL BEFORE THE COURT
The Ombudsman relied on the application and statement of claim filed on 17 July 2023, an affidavit of FWI Higgs affirmed and filed on 24 November 2023, a further affidavit of FWI Higgs affirmed and filed on 9 September 2024, the Liability Decision and a written outline of submissions filed on 10 October 2024.
Despite making orders on 23 August 2024 that the respondents by 26 September 2024 and 24 October 2024 file affidavits directed at the issue of penalty and written submissions, respectively, the respondents did not file any material. Mr Hone who appeared for the respondents at the hearing on penalty accepted that the ability of the respondents to participate in the hearing would necessarily be limited. I did however permit Mr Hone to make responsive submissions after hearing from the Ombudsman’s lawyer, Mr Witton.
PRINCIPLES RELATING TO PENALTY
The primary purpose of deterrence was re-emphasised by the High Court in Australian Building and Construction Commission v Pattinson(2022) 274 CLR 450. In that decision, the majority upheld the Commissioner’s appeal and confirmed that the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with provisions of the Act by those responsible and by (like) others. The High Court rejected the approach implicit in the decision of the Full Court (the subject of the appeal) that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The majority held instead that “[t]he power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a ‘notion of proportionality’ in a civil penalty regime”.[1] However, the High Court did accept that s 546 requires the Court to ensure that any penalty “strikes a reasonable balance between deterrence and oppressive severity”.[2] It was only in this more qualified sense that the concept of “proportionality” had any role to play.
[1] Pattinson at [10].
[2] Ibid at [41].
The High Court in Pattinson also referred to the several factors identified by French J in Trade Practices Commission v CSR Ltd [1990] FCA 521 which informed the assessment of a penalty of an appropriate deterrent value. The list revealed that both the circumstances of the contravener and the circumstances of the contravention may be relevant to the assessment of whether the maximum level of deterrence is called for.[3] However, the High Court repeated the caution that the list of possible relevant considerations should not be approached as a “rigid catalogue of matters for attention” and instead the task of the court remains to determine what is an “appropriate” penalty in the circumstances of the particular case.[4]
[3] Ibid at [57].
[4] Ibid at [18] and [19].
The Ombudsman invited the Court – through its written outline and oral submissions – to adopt an approach which reflected the foregoing principles.
ASSESSMENT
Maximum penalty
The maximum penalty the Court is able to impose on Express Cars for a single contravention of s 716(5) of the Act at the time of the contravention is $33,000. The maximum penalty the Court is able to impose on Mr Petrevski for a single contravention of s 716(5) of the Act at the relevant time 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 and operates on matters particular to the person or organisation concerned. General deterrence is concerned with ensuring, among other things, that the penalty is likely to act as a deterrence in preventing similar contraventions by like-minded persons or organisations. It has often been said that general deterrence must serve the intended purpose such that a penalty is not seen by others as just “the cost of doing business”[5] or an “acceptable cost of doing business”.[6]
[5] Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 at [27].
[6] Pattinson at [43] citing The Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [110].
There is a need for specific deterrence in this case. Express Cars did not and has not complied with the Compliance Notice. Furthermore, the evidence before the Court appearing in the second affidavit of FWI Higgs, which was not controverted by Mr Hone, is that Express Cars continues to trade and remains a registered company. Mr Petrevski remains the sole director and shareholder of Express Cars. There is a real prospect that the respondents are currently responsible for the engagement of employees and have obligations under the Act and/or will assume that responsibility in the future.
Mr Hone submitted that there was a limited need for deterrence in this case because the respondents had at all times maintained a genuine belief that there was no money owing to Mr Lucente, the former employee of Express Cars identified in the Compliance Notice.
However, this submission fails to engage with the nature of the compliance notice regime which requires an employer, even one who maintains a genuine belief that no money is owing, to either take the steps required by the notice and to calculate the amount (if any) of the outstanding entitlement, or to challenge the compliance notice under s 717(1)(a) of the Act on the basis that the person has not committed a contravention set out in the notice. Express Cars took neither step.
It does not seem to me appropriate that an employer who essentially thumbs their nose at a compliance notice without taking any affirmative action, should be afforded more leniency, both in terms of their own need for deterrence and the optics this would convey to the putative like-minded employer.
As to general deterrence, I accept the submission of the Ombudsman that it is necessary and appropriate for the Court to impose a penalty that signals to employers in the transport industry that non-compliance with statutory notices will not be tolerated. In doing so I adopt the well-rehearsed sentiments that the failure to comply with a compliance notice properly issued is a serious matter and that “the efficacy of such notices will be eroded or negated if recipients perceive that a failure to comply carries no meaningful consequences”.[7]
[7] Fair Work Ombudsman v Tester [2021] FCCA 771 at [28].
Nature, extent and circumstances of the contraventions
The Ombudsman submits it to be significant that in the Liability Decision I recorded a finding that the decision taken by the respondents not to take any action in response to the Compliance Notice was an exercise of will rather than a decision based on incapacity or inability and that Express Cars had not demonstrated a reasonable excuse for failing to comply with the Compliance Notice.
The Ombudsman submits that the respondents’ ongoing non-compliance with the Compliance Notice, in circumstances where there is no reasonable excuse, increases the objective seriousness of the contravention (referring to Fair Work Ombudsman v Wells [2019] FCCA 3488 at [29]).
Nature and extent of loss
I accept the submission of the Ombudsman that the failure by the respondents to comply with the Compliance Notice has caused it to expend public funds in commencing and pursuing these proceedings against the respondents, which would not have been required had there been compliance with the Compliance Notice. This is a public loss that I take into account in fixing penalties which has been exacerbated by the haphazard approach taken by the respondents to this proceeding which necessarily protracted its course taken through the Court.
The Ombudsman invites the Court to also take account of a different loss which is described as the loss flowing to Mr Lucente from the failure of Express Cars to comply with the Compliance Notice but more particularly involves the denial to Mr Lucente of his proper entitlements for his employment with Express Cars. The Ombudsman submits that if Express Cars had complied with the Compliance Notice, that would have resulted in it undertaking calculations which would have led to it paying an amount which it ought to have paid to Mr Lucente. The Ombudsman fixes this amount at $4,380.62.
The Ombudsman submits that on previous occasions this Court has accepted this submission and cites as examples, Fair Work Ombudsman v Tolu Investors Pty Ltd [2023] FedCFamC2G 773 at [65]-[66]; Fair Work Ombudsman v DB Richardson Trading Pty Ltd [2023] FedCFamC2G 203 at [36]-[37]; and Fair Work Ombudsman v Benny842 Pty Ltd [2022] FedCFamC2G 1009 at [33]-[35].
The Ombudsman acknowledges that the Court took a different approach in Fair Work Ombudsman v Carers Portland Inc (No 2) [2024] FedCFamC2G 72 (Carers Portland 2) where at [33] Judge Blake stated that he could not be satisfied that there was loss or damage that flowed to the employee from underpayments. The Ombudsman submits that the approach adopted by his Honour was plainly wrong because in considering whether the applicant had proven the employee affected was underpaid in accordance with the Act, Judge Blake considered the wrong question. The question should instead have been whether or not the employee suffered loss or damage due to the respondent’s failure to comply with a compliance notice.
I have considered each of the decisions referred to by the Ombudsman as endorsing the approach now urged on me.
In Tolu Investors, the Court identified the loss flowing to the employee as a delay in understanding the entitlements to which he was owed and took account of the delayed receipt of the amount ultimately paid to the employee by the respondent employer who had performed its own calculations to identify this amount.
In DB Richardson, the Court took account, as a relevant loss, that outstanding entitlements had, by reason of a default judgment, been taken to be admitted and had remained unrectified for a significant period.
In Benny842, the Court took account of a loss in the form of outstanding entitlements in an unquantified amount. It did so “[h]aving regard to the FWO’s investigation and in the absence of any defence to the allegations underlying the compliance notice” (at [35]).
The first observation I make is that none of these decisions are on all fours with this case. In Tolu Investors, the employer had performed its own calculations to determine the amount outstanding to the affected employee while in DB Richardson neither respondent participated in the proceeding and in Benny842, the self-represented second respondent provided no material in opposition to submissions made by the Ombudsman. As a result, in each of the cases relied on by the Ombudsman there was no active contradictor to the approach urged on the Court by the Ombudsman and in any case and with respect, no detailed consideration of whether it was appropriate to take loss referable to an alleged or deemed underpayment into account.
By way of contrast, the view expressed by Judge Blake in Carers Portland 2 represented the continuation of observations made by his Honour in Fair Work Ombudsman v Carers Portland Inc [2023] FedCFamC2G 620 (Carers Portland 1) in the context of responding to a submission from the Ombudsman that the Court should make orders under s 545(2)(b) of the Act “awarding compensation for loss that a person has suffered because of ‘the contravention”. The Ombudsman sought an order for the payment of a specified amount referable to unpaid entitlements.
While Judge Blake did not finally determine the matter, his Honour identified what I respectfully consider to be a set of cogent reasons as to why such orders would not be appropriate. Central to his Honour’s reasoning was the rejection of the proposition that an unproved outstanding entitlement could constitute compensable loss in a compliance notice proceeding.
Judge Blake was especially concerned with the following matters:
First, although the Ombudsman sought an order for compensation equivalent to the failure of the employer to comply with a modern award and the National Employment Standards (NES), the proceeding in fact commenced by the Ombudsman was of a different character; it concerned a contravention of s 716(5) of the Act rather than ss 44 or 45 (contravention of NES and modern award, respectively).[8]
[8] Carers Portland 1 at [43].
Second and reflecting the different character of the proceeding, the Ombudsman had not proved that the modern award or the NES had been contravened.[9]
[9] Carers Portland1 at [44].
Third, because there was no finding before the Court that the employer had breached a modern award or the NES, there was no causal connection between the contravention of the civil penalty provision and the compensation claimed.[10]
[10] Carers Portland 1 at [45].
Fourth, there was a disconnect between the orders sought by the Ombudsman in purported discharge of the obligations required by the compliance notice and the steps in fact required by the compliance notice. The compliance notice did not require any specific amount to be paid to the employee. It was possible that a person responding to the compliance notice might, after performing calculations, determine that no amount, or a different amount, was in fact payable to the employee.[11]
[11] Carers Portland 1 at [46]-[49].
Fifth, it would undermine the integrity of the provisions directed at contraventions of an award, enterprise agreement or the NES if compensation could effectively be obtained for contraventions of awards, enterprise agreements or the NES in a proceeding commenced under s 716(5) of the Act, without having to prove the contravention.[12]
[12] Carers Portland 1 at [56].
Similar concerns were identified by Judge Forbes in Fair Work Ombudsman v Cobra Security Services Pty Ltd [2024] FedCFamC2G 336 who addressed the issue of loss both as it related to penalty (s 546 of the Act) and compensation under s 545 of the Act; both were concerned principally with the question of causation. His Honour found that the unpaid wages and entitlements asserted by the Ombudsman were not loss and damage which the Court was required to take into account in determining penalty for the employer’s breach of s 716(5).[13] Judge Forbes also determined that it was not appropriate for the Court to exercise its discretion to make a compensatory order under s 545 of the Act. The reasoning as it concerned both provisions reflected the following considerations which were identified at [192]:
(1)the compliance notice regime is intended to be an alternative administrative pathway of enforcement, separate and distinct from conventional judicial prosecution for breaches of civil remedy provisions;
(2)it is an inherent feature of the compliance notice scheme that it does not require proof of substantive underlying contraventions;
(3)the substantive contraventions and particularisation of losses have not been pleaded and did not properly form part of the case before the Court. There is no evidence before the Court which would allow a finding of substantive contravention to the requisite Briginshaw standard of proof;
(4)the employee losses asserted by the Ombudsman assume a substantive contravention by the employer of relevant industrial instruments;
(5)the asserted employee losses are not a direct or natural consequence of the employer’s failure to comply with the Compliance Notice; and
(6)the Ombudsman and the employees are not prevented from pursuing penalties and other relief, including compensation.
[13] Cobra Security at [177].
The same set of considerations apply in this case and perhaps operate with greater force given that no calculations have been produced by the Ombudsman to attempt a quantification of the alleged underpayment and where the respondents have actively and persistently challenged the notion that they owe any amount of money to Mr Lucente by way of outstanding entitlements. This is not the forum to test the validity of this challenge but that is precisely the point. I am not persuaded that it is appropriate to take account of a contingent loss, either for the purpose of assessing penalty, or for the purpose of making an order under s 545(1) of the Act. I do not consider the reasoning set out in Carers Portland 1, Carers Portland 2 or Cobra Security to be plainly wrong in principle. Instead, I respectfully agree with the reasoning and propose to follow it.
If there was authority to the opposite effect of a higher court, then I would of course be bound to apply that instead. On this point, I inquired of the Ombudsman at hearing as to whether the Ombudsman had sought to appeal any of the decisions that adopted the position on loss set out in Carers Portland. Following the hearing, the Ombudsman sent a note to chambers (copied to the respondents’ lawyer) to the effect that the matters of Carers Portland[14] and Gami Chicken[15] were before the Federal Court and listed for hearing in May 2025. However, the Ombudsman did not invite me to reserve my decision pending the determination of either of these appeals and I don’t propose to do so.
[14] VID152/2024 Thi Hai Duong Luong v Fair Work Ombudsman.
[15] VID319/2024 Fair Work Ombudsman v Vanna Taking.
Size of the first respondent and financial circumstances
The respondents have not produced any evidence as to the size of Express Cars or its financial circumstances. Although Mr Hone submitted that any penalty to be applied to either respondent should be at the modest end of the spectrum, this submission was not made on the basis of an asserted inability to absorb a penalty but rather, as noted earlier, indicative of an attitude that a need for deterrence was not a feature of this case.
I am therefore unable to take the size and financial circumstances of the respondents into account in determining the level of any penalty.
Corrective action, cooperation and contrition
The Ombudsman submits that no discount is available to the respondents in respect of corrective action, cooperation or contrition. I accept this submission.
Although the defence filed by the respondents contained an admission that Express Cars had received the Compliance Notice and failed to take the steps that it identified, in their submissions filed three months out of time and without leave, the respondents submitted that they should not be found liable for the contraventions alleged by the Ombudsman because there was no substantive failure on their part to pay entitlements owing to Mr Lucente. The maintenance of this submission meant that the Court was required to determine the question of liability, which resulted in the Liability Decision.
The history of the proceeding recorded at [11] to [19] of the Liability Decision paints a picture of indifference on the part of the respondents. The respondents did not appear at the first directions hearing and failed to comply with procedural orders for the filing of material that had been made with the consent of the parties. The Ombudsman made an application for default judgment that was ultimately abandoned because the respondents very belatedly chose to re-engage although even then, in a manner that demonstrated a lack of respect for the Court.
There has been nothing redeeming in the conduct or attitude of the respondents that would justify a discount on penalty.
Similar previous conduct
There is no evidence before me that the respondents have engaged in similar previous conduct. I therefore infer that it is a first offence for the respondents and will take that consideration into account.
THE PECUNIARY PENALTIES TO BE IMPOSED
The Ombudsman seeks that the Court impose penalties in the range of 60-70% of the maximum penalty available on each respondent. This translates to a penalty in the range of $19,980 to $23,310 for Express Cars and $3,996 to $4,662 for Mr Petrevski. The respondents instead submit that any penalty should not exceed 30% of the maximum applicable. As noted earlier, this largely reflects the submission that there is a limited need for deterrence in this case and the contention (which I have earlier rejected) that the respondents made an early concession of liability.
Having regard to the various characteristics of this case it seems to me that a penalty in the higher end of the scale is warranted. I am not persuaded that the primary objective of deterrence is insignificant in this case. To the contrary, the attitude demonstrated by the respondents in this proceeding gives me little confidence that lessons have been learned or that they would be discouraged from engaging in future contraventions of the Act simply as a result of being named as respondents to this proceeding. Little is known about the respondents given their failure to file material on penalty but the one message that resonates loud and clear is that they continue to maintain that they have done nothing wrong. The only matter that operates in the respondents’ favour is that this is apparently their first offence.
I will impose a penalty of 65% of the maximum penalty on each of Express Cars and Mr Petrevski. There is no evidence before the Court that would allow me to make a finding that any penalty would be crushing or oppressive. I will not discount the penalty.
Accordingly, I will order that Express Cars pay a penalty of $21,450 and Mr Petrevski pay a penalty of $4,290.
OTHER ORDERS
As noted earlier, the Ombudsman seeks orders pursuant to s 545(1) of the Act that Express Cars take the steps required by the Compliance Notice to pay the amount of $4,380.62 to Mr Lucente and to pay interest on this amount which it refers to as “the Underpayment Amount”.
For reasons that I have explained at [21] to [36] above, I am not satisfied that it is appropriate to make these orders.
For completeness, I note that in support of its application for compensatory orders the Ombudsman made the submission that whereas in Carers Portland 2 Judge Blake had found there was no utility in making orders that required the respondent to take the steps required by the compliance notice because the respondents were unlikely to comply, in this case there was utility in requiring Express Cars to make a payment of the underpayment amount because no other action to date has “secured compliance”. While there may be utility in the making of such an order as it would provide an economic benefit to Mr Lucente, the submission does not overcome the fundamental difficulties that I have earlier identified, by reference to the decisions of Carers Portland 1, Carers Portland 2 and Cobra Security.
The Ombudsman would be achieving an outcome not available to it, even if there had been compliance with the Compliance Notice. In that eventuality, Express Cars would have been required only to perform calculations and to make payment of any underpayment identified through that exercise.
The Ombudsman referred me to the decision of Judge Cameron in Fair Work Ombudsman v Pure Telecom Pty Ltd [2024] FedCFamC2G 664 as an example of this Court making compensatory or remedial orders of the kind sought in this proceeding. I have considered this decision but prefer the view expressed in Cobra Security that the obligation on the part of the employee to pay sums to the employee is created not by the compliance notice but by the anterior failure, at the point at which the obligation arises under statute or industrial instrument.[16]
[16] Cobra Security at [182].
I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons. Associate:
Dated: 11 November 2024
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