Fair Work Ombudsman v Finetune Holdings Pty Ltd and Anor (No.3)
[2012] FMCA 883
•2 October 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v FINETUNE HOLDINGS PTY LTD & ANOR (NO.3) | [2012] FMCA 883 |
| INDUSTRIAL LAW – Failure to produce employment records – penalty. |
| Bankruptcy Act 1966 (Cth), ss.82(3), 189(1) Corporations Act 2001 (Cth), s.471B Fair Work Act 2009 (Cth), ss.539, 546(1) and (3)(a), 550, 687, 701, 712 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) Technical Services - Architects Award 2000 Workplace Relations Act 1996 (Cth), Division 2, Part 2-9 |
| Alcantara & Anor v Buildpower Pty Ltd (2010) 199 IR 73; [2010] FMCA 626 Ponzio v B & P Caelli Constructions Pty Ltd and Ors (2007) 158 FCR 543; [2007] FCAFC 65 Workplace Ombudsman v Golden Maple Pty Ltd (2009) 186 IR 211; [2009] FMCA 664 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | FINETUNE HOLDINGS PTY LTD |
| Second Respondent: | ANTONINO RECHICHI |
| File Number: | PEG 142 of 2010 |
| Judgment of: | Lucev FM |
| Hearing date: | On the papers |
| Date of Last Submission: | 22 August 2012 |
| Delivered at: | Perth |
| Delivered on: | 2 October 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr G Spain |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| For the First Respondent: | No appearance |
| For the Second Respondent: | Mr Antonino Rechichi in person |
ORDERS
In relation to the declaration of contravention on 11 May 2012, the second respondent pay a penalty of $1,650, to be paid to the Commonwealth Consolidated Revenue Fund by 2 April 2013.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 142 of 2010
| FAIR WORK OMBUDSMAN |
Applicant
And
| FINETUNE HOLDINGS PTY LTD |
First Respondent
| ANTONINO RECHICHI |
Second Respondent
REASONS FOR JUDGMENT
Application and background
By a Statement of Claim filed on 19 August 2010, the applicant, the Fair Work Ombudsman,[1] alleged that the first respondent, Finetune Holdings Pty Ltd[2] contravened s.712(3) of the Fair Work Act 2009 (Cth)[3], by failing to comply with a notice to produce records or documents.[4]
[1] “FW Ombudsman”.
[2] “Finetune Holdings”.
[3] “FW Act”.
[4] “NTP”.
In the Statement of Claim, the applicant also alleged that the second respondent, Antonino Rechichi[5] was involved in the contravention, by reason of s.550 of the FW Act.
[5] “Mr Rechichi”.
On 11 May 2012, the Court handed down a judgment in favour of the FW Ombudsman,[6] and made the following declaration:
[6] Fair Work Ombudsman v Finetune Holdings Pty Ltd (No. 2) [2012] FMCA 349 (“Finetune Holdings (No. 2)”).
(1) The Court declares that:
(a) the first respondent, by failing to comply with a Notice to Produce Records or Documents dated 23 November 2009 issued pursuant to s.712 of the Fair Work Act 2009 (Cth) to make available the following records or documents by 5.00pm on 8 December 2009:
(i) pay advice in the form of pay slips for Mr King Cheong from 1 September 2008 to 31 August 2009;
(ii) time records in the form of rosters for Mr King Cheong from 1 September 2008 to 31 August 2009;
(iii) tax file number declaration for Mr King Cheong;
(iv) job description detailing the duties for Mr King Cheong;
(v) records indicating termination date (example: resignation letter or letter of termination),
contravened s.712(3) of the Fair Work Act 2009 (Cth).
(b) The second respondent has, in respect of the contravention of the Fair Work Act 2009 (Cth) referred to in sub-paragraph (a) above:
(i) Aided and abetted the first respondent to engage in the contravention; and
(ii) was directly or indirectly, knowingly concerned in, or party to the contravention,
for the purposes of s.550 of the Fair Work Act 2009 (Cth), and has therefore contravened s.712(3) of the Fair Work Act 2009 (Cth).
On or about 31 December 2010, Mr Rechichi was declared bankrupt by a Registrar of this Court. Mr Rechichi did not disclose that fact to the Court as presently constituted until he filed his submissions on penalty on 2 August 2012.[7]
[7] Affidavit of Abby Jayne Becroft, sworn 7 June 2012 at para.3 (“Becroft June 2012 Affidavit”).
On or about 19 April 2011, an order had been made by the Federal Court of Australia in Perth to wind up Finetune Holdings, and appoint a liquidator.[8] As a consequence of that order, the proceedings insofar as they relate to Finetune Holdings, are stayed.[9] Again, this Court was unaware of that order, and the order was not disclosed to this Court until Mr Rechichi filed his submissions on penalty on 2 August 2012.
[8] Becroft June 2012 Affidavit at paras.4-5.
[9] Corporations Act 2001 (Cth), s.471B.
The FW Ombudsman now seeks orders pursuant to:
a)s.546(1) of the FW Act that Mr Rechichi pay a pecuniary penalty in the mid range of the maximum available penalty for his contravention; and
b)s.546(3)(a) of the FW Act that any penalties imposed on Mr Rechichi be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days of any order made.
Mr Rechichi says that any penalty to be imposed ought to be about twenty per cent of the maximum available penalty for the contravention, and that in his financial circumstances he ought to be given up to 12 months to pay any penalty imposed.
Penalty – general principles and considerations
General principles concerning penalty
The federal courts have regard to general principles which have been developed in relation to the imposition of penalties in workplace relations matters, including the following:
a)fundamentally, the penalty must be proportionate to the gravity of the contravening conduct;[10]
[10] Attorney-General v Tichy (1982) 30 SASR 84 at 92 per Wells J; Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2011] FCA 810 at para.25 per Gilmour J (“ABCC”).
b)penalties are imposed for the following purposes:
i)punishment, proportionate to the offence and according to prevailing standards;
ii)personal or specific deterrence, assessing the risk of reoffending, and general deterrence, as a deterrent to others who might be likely to offend; and
iii)rehabilitation;[11]
c)the sentencing task is one of instinctive synthesis in which the court takes account of all relevant factors and arrives at a single result taking due account of all of those relevant factors;[12]
d)proportionality and consistency are a final check on the penalty assessed;[13]
e)courts may identify a range of factors appropriate to the assessment of penalty, but ought to be wary of the use of check lists which “give rise to the risk of transforming the process of instinctive synthesis into the application of a rigid catalogue of matters for attention”;[14] and
f)courts ought also be wary of comparing penalties from other cases when assessing the amount of penalty to be fixed.[15]
[11] Ponzio v B & P Caelli Constructions Pty Ltd and Ors (2007) 158 FCR 543 at 559-560 per Lander J; [2007] FCAFC 65 at para.93 per Lander J (“Caelli Constructions”); ABCC at para.26 per Gilmour J.
[12] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 567-568 per Gray J and 572 per Graham J; [2008] FCAFC 8 at para.27 per Gray J and para.55 per Graham J (“Australian Ophthalmic Supplies”); ABCC at para.27 per Gilmour J.
[13] Australian Ophthalmic Supplies FCR at 572 per Graham J; FCAFC at para.54 per Graham J; ABCC at para.28 per Gilmour J.
[14] Australian Ophthalmic Supplies FCR at 579-580 per Buchanan J; FCAFC at paras.89-91 per Buchanan J; ABCC at para.30 per Gilmour J.
[15] NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295 per Burchett and Kiefel JJ; ABCC at para.31 per Gilmour J.
General considerations relevant to assessment of penalty
Considerations which may be taken into account in assessment of penalty are well established and have been consistently applied by this
Court,[16] but are not fixed or immutable.[17] Broadly, the relevant factors can be listed as follows:
[16] Examples include: Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 (“Mason”); Olsen v Sterling Crown Pty Ltd (2008) 177 IR 337; [2008] FMCA 1392 (“Sterling Crown”); Construction, Forestry, Mining and Energy Unionv Austral Bricks (Qld) Pty Ltd (2009) 178 IR 470; [2009] FMCA 143; Workplace Ombudsman vGolden Maple Pty Ltd (2009) 186 IR 211; [2009] FMCA 664 (“Golden Maple”); Fair Work Ombudsman v Industrial Roadpavers (WA) Pty Ltd (2010) 194 IR 436; [2010] FMCA 204 (“Industrial Roadpavers”).
[17] Australian Ophthalmic Supplies FCR at 580 per Buchanan J; FCAFC at para.91 per Buchanan J; Golden Maple IR at 224 per Lucev FM; FMCA at para.11 per Lucev FM.
a)the nature and extent of the conduct which led to the contraventions;
b)the circumstances of the conduct (including deliberate defiance or disregard of Commonwealth workplace relations legislation);
c)the consequences of the contravening conduct;
d)the objects of Commonwealth workplace relations legislation;
e)whether the contraventions are distinct or arise from a single course of conduct;
f)deterrence, both general and specific;
g)relevant record of civil penalty contraventions;
h)the size and financial resources of the contravener;
i)co-operation with regulatory authorities;
j)the contravener’s contrition;
k)the size of the prescribed penalty, and any recent increases to that prescription; and
l)the totality principle.
A number of the factors are relevant to the present matters and are therefore considered below.
Nature and extent of the conduct
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)on 23 November 2009 Fair Work Inspector David Warner,[18] personally served the NTP on Mr Rechichi at Mr Rechichi’s principal place of business; [19]
[18] “Inspector Warner”.
[19] Inspector Warner’s Affidavit, sworn 16 February 2011 at para.5 and Annexure DW1 (“Warner Affidavit”).
b)on 9 December 2009, Fair Work Inspector Michael Truong,[20] wrote to Mr Rechichi, in Mr Rechichi’s capacity as Director of Finetune Holdings, noting the failure to comply and sought a reasonable excuse by 17 December 2009;[21]
[20] “Inspector Truong”.
[21] Inspector Truong’s Affidavit, sworn 16 February 2011 at para.17 and Annexure MT6 (“First Letter”) (“Truong Affidavit”).
c)no response was ever received from Mr Rechichi to the First Letter;[22]
d)on 30 June 2010, Inspector Truong wrote to Mr Rechichi, in his capacity as Director of Finetune Holdings, again noting the failure to comply and again seeking a reasonable excuse by 7 July 2010;[23]
e)no response was ever received from Mr Rechichi to the Second Letter;[24]
f)these proceedings were commenced on 19 August 2010;
g)Mr Rechichi produced the records requested under the NTP at 8.34pm on 12 September 2010.[25] This was:
i)in excess of nine months after the NTP was served;
ii)almost one month after the proceedings were commenced by the FW Ombudsman;
iii)four days after a letter was sent by the FW Ombudsman to the lawyers originally acting on behalf of Finetune Holdings and Mr Rechichi, inviting their clients to reassess their position;[26] and
iv)the night before the first directions hearing.[27]
[22] Truong Affidavit at para.18.
[23] Truong Affidavit at para.22 and Annexure MT8 (“Second Letter”).
[24] Truong Affidavit at para.23.
[25] Affidavit of Abby Jayne Becroft, sworn 10 February 2011 at paras.6-11 (“Becroft February 2011 Affidavit”).
[26] Becroft February 2011 Affidavit at para.5.
[27] Becroft February 2011 Affidavit at paras.6-7.
Mr Rechichi’s submissions
Mr Rechichi agrees with the submissions made in sub-paragraphs (a) (b) (d) and (f) of the FW Ombudsman’s submissions in the previous paragraph.
In relation to the allegation that Mr Rechichi did not respond to the First Letter or the Second Letter, Mr Rechichi points to the circumstances at the time, which he says were as follows:
a)the production of the NTP was said to be for the purposes which are set out at paragraph 15 below;
b)the nature of the contravention itself is not significant in scope;
c)Mr Rechichi’s conduct prior to the issue of the NTP indicated Mr Rechichi’s willingness to engage with the FW Ombudsman in an attempt to resolve the matters;
d)Mr Rechichi provided the requested records to the FW Ombudsman, albeit late;
e)upon a thorough examination of the requested records the FW Ombudsman subsequently determined that no further action was to be taken against Mr Rechichi;
f)prior to the issuance of the NTP Mr Rechichi:
i)entered into a voluntary assisted resolution, which he mistakenly thought had been a complete resolution of all actions or investigations which the FW Ombudsman might take or pursue against him (or Finetune Holdings), thereby negating the need for compliance with the NTP; and
ii)mistakenly believed he had entered into a Compliancy Agreement (in amended form)[28] with the FW Ombudsman, which he mistakenly believed would have precluded the FW Ombudsman from issuing the NTP, and thus negated the need for him to comply with the NTP; and
g)following the issue of the NTP, Mr Cheong took a separate and independent action against Finetune Holdings in the Magistrates Court of Western Australia,[29] which was settled by orders of the State Magistrates Court prior to the commencement of these proceedings, leading Mr Rechichi to mistakenly conclude or believe that, coupled with the Amended Compliance Agreement, there was no further requirement to comply with the NTP.
[28] “Amended Compliance Agreement”.
[29] “State Magistrates Court”.
Mr Rechichi says that when the proceedings were commenced, legal advice was taken which resulted in an understanding of the obligations under the NTP. Subsequently, the required documents were produced as outlined in sub-paragraph (g) of the FW Ombudsman’s submissions in paragraph 11 above.
Consideration
The NTP required production of the records or documents set out in the declaration at paragraph 3 above. Production was required by 5:00pm on 8 December 2009, and was said to be for the purposes of:
· determining whether Part 2-9, Division 2 the Workplace Relations Act 1996 (the Australian Fair Pay and Conditions Standard) (as continued in operation by the Fair Work (Transitional Provisions and Consequential Amendments Act) 2009) is being or has been complied with;
· determining whether an award based transitional instrument, namely the Technical Services – Architects Award 2000, is being or has been complied with;
· determining whether the FW Act is being or has been complied with, specifically:
· Section 535 (compliance with employer obligations in relation to employee records)
· Section 536 (compliance with employer obligations in relation to pay slips)
The NTP warned that:
Failure to comply with this Notice, without reasonable excuse, is a contravention of subsection 712(3) of the Act and may attract a maximum penalty of $33,000 in respect of a body corporate or $6,600 in respect of an individual.[30]
[30] Inspector Warner’s Affidavit, Annexure DW1.
The nature and extent of the conduct was a single failure to comply with an NTP requiring production of records or documents in relation to a single employee. The records were required for the purposes of determining whether or not obligations to pay entitlements and to maintain records had been complied with. An appropriate warning was conveyed on the face of the NTP that failure was a contravention of s.712(3) of the FW Act which may attract a maximum penalty, in Mr Rechichi’s case, of $6,600.
The nature of the conduct in this case involved a deliberate refusal by Finetune Holdings and Mr Rechichi to comply with the NTP until after proceedings had been commenced and legal advice received. The nature of the conduct was deliberate, and involved a lengthy period of refusal of about nine and a half months, in the face of ongoing requests for compliance or the provision of a reasonable excuse.
It must be acknowledged that there was, eventually, compliance, and that there were steps taken by Finetune Holdings and Mr Rechichi to resolve the underlying dispute involving the employee, Mr King Cheong. An attempt, however, to resolve a dispute about a matter with an employee, does not absolve an employer from a requirement to comply with an NTP.[31] The voluntary assisted resolution and Amended Compliance Agreement do not assist Mr Rechichi much in relation to the nature and extent of his conduct as the warnings in the First Letter and Second Letter were clear: comply by producing the documents, or risk an action in relation to contravention, and a possible fine.
[31] Alcantara & Anor v Buildpower Pty Ltd (2010) 199 IR 73 at 88 per Lucev FM; [2010] FMCA 626 at paras.67-69 per Lucev FM (“Alcantara”).
Whilst a failure to comply with an NTP is of itself serious, the contravention in this case, of a single NTP with respect to a single employee in relation to compliance with employee entitlements and obligations to keep employee records and pay slips, is, of itself, not conduct which is likely to attract a penalty at the high end, or even the middle to high end, of the penalty spectrum.
The circumstances in which the conduct took place
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)the contravening conduct was a failure to produce records requested by the FW Ombudsman by way of an NTP, issued in relation to an employee of Finetune Holdings, Mr King Cheong.[32] While the nature of the contravention itself is not significant in scope, the circumstances must be seen in the context of their interaction with the FW Ombudsman following the issue of the NTP;
b)Mr Rechichi, on behalf of Finetune Holdings, demonstrated a consistent unwillingness to co-operate with the FW Ombudsman. There were several times during the investigation when Finetune Holdings and Mr Rechichi had the opportunity to provide the FW Ombudsman with the records requested in the NTP;[33]
c)Mr Rechichi, who was the sole director and secretary of Finetune Holdings at the relevant time, was in charge of the day to day operations of Finetune Holdings’ business, had access to the documents requested, and was personally served with the NTP. The FW Ombudsman submits that these facts, coupled with Mr Rechichi’s late compliance with the NTP and the asserted reasonable excuses,[34] allows an inference to be drawn that Mr Rechichi made the deliberate decision not to provide records until after the commencement of these proceedings, and is responsible for the failure to provide the records as required by the FW Act; and
d)the FW Ombudsman submits that the prolonged failure to produce the records requested under the NTP should be considered as serious.[35] It involved a deliberate course of conduct and displayed disregard for the FW Act and the role of the FW Ombudsman as regulator.
[32] “Mr Cheong”.
[33] Finetune Holdings (No. 2) at paras.9-10 per Lucev FM.
[34] Finetune Holdings (No. 2) at para.43 per Lucev FM.
[35] Sterling Crown IR at 347 per Lucev FM; FMCA at para.35 per Lucev FM.
Mr Rechichi’s submission
Mr Rechichi agrees with sub-paragraph (a) of the preceding paragraph, and repeats the submissions at paragraphs 13-14 above.
Mr Rechichi does not agree with the FW Ombudsman’s submission that he was unwilling to co-operate. He says that at all times he demonstrated a willingness to co-operate with the investigation conducted by the FW Ombudsman, as evidenced by his willingness to enter into a voluntary assisted resolution with the FW Ombudsman, and to mistakenly believe the Amended Compliance Agreement negated obligations under the NTP. Mr Rechichi says this is evidenced in Finetune Holdings (No. 2) where this Court said:
Mr Rechichi did not believe he had to produce them earlier (a belief which was erroneous if it was based on the 6 October 2009 Letter and the Amended Compliance Undertaking, for reasons outlined above).[36]
[36] Finetune Holdings(No. 2) at para.66(a) per Lucev FM.
Mr Rechichi does not agree with the inference that the FW Ombudsman says should be drawn as to the deliberateness of Mr Rechichi’s conduct, and:
a)repeats the submissions at paragraphs 13-14 above; and
b)says that the asserted reasonable excuses proffered by him were, in retrospect, mistaken or false beliefs of correctness formulated by him during the course of the FW Ombudsman’s investigation, that lead him to mistakenly believe that a resolution had been achieved, and that compliance with the NTP was no longer required, rather than the making of a deliberate decision to not comply in the absence of any false beliefs.
Although Mr Rechichi does not agree with the FW Ombudsman’s submissions as to the deliberateness of his conduct, he acknowledges and concedes that the failure to comply with the NTP was a serious contravention.
FW Ombudsman’s submissions in reply
The FW Ombudsman submitted in reply as follows:
a)Mr Rechichi’s submissions that:
i)on production of the documents requested under the NTP, it was determined by the FW Ombudsman that “no further action was necessary to be taken against the respondent” in respect of the additional contraventions identified by Inspector Truong; and
ii)“any further action possibly being contemplated against the respondent [by the FW Ombudsman] was either unwarranted or unlikely to succeed”,
is disputed by the FW Ombudsman, as there is no evidence before the Court from which these conclusions can be drawn. The FW Ombudsman relies on the evidence of Inspector Truong,[37] which is that despite additional contraventions being identified at the time of production of the documents requested under the NTP, a decision was made that the FW Ombudsman would not pursue any of the additional contraventions;
b)Mr Rechichi makes reference to various events during the FW Ombudsman’s investigation which, in his submission, led to a mistaken belief that these negated the need for Finetune Holdings and Mr Rechichi to comply with the NTP. Mr Rechichi is simply traversing matters already judicially determined in these proceedings;[38]
c)evidence filed by the FW Ombudsman demonstrates that Mr Rechichi was, at the very least, on notice of the requirement to comply with the NTP, and that a failure to so comply would constitute a contravention of Commonwealth workplace relations laws;[39]
d)Finetune Holdings and Mr Rechichi failed to comply with the NTP and ignored the communications made by Inspector Truong on behalf of the FW Ombudsman; and
e)Mr Rechichi’s awareness of his obligations must have increased over time, and as such it cannot be accepted that the conduct was not deliberate in nature. The FW Ombudsman maintains its position that Mr Rechichi’s contravention of s.712(3) of the FW Act was deliberate.
[37] Truong Affidavit at para.30.
[38] Finetune Holdings (No.2) at paras.43-62 per Lucev FM.
[39] Truong Affidavit at paras.11-12, 18 and 23 and annexure MT-5; Finetune Holdings(No. 2) at paras.9-10 and 43-62 per Lucev FM.
Mr Rechichi’s submissions in reply
Mr Rechichi submitted in reply that:
a)there is a lack of evidence before the Court to enable it to draw the conclusion that “any further action possibly being contemplated against the respondent was either unwarranted or unlikely to succeed”. In the absence of evidence as to why the FW Ombudsman decided not to pursue Mr Rechichi for any alleged further contraventions found as a result of its investigations, no conclusion as to the actual existence of any such further contraventions can be relied upon, and Inspector Truong’s evidence of such contraventions should be dismissed, as it skews the facts unfairly;
b)he does not agree that Finetune Holdings and Mr Rechichi were at least on notice of the requirement to comply with the NTP;
c)at all times he demonstrated willingness to co-operate with the FW Ombudsman;
d)he does not accept that his awareness increased over time, but that it changed upon review and receipt of legal advice once the FW Ombudsman had commenced legal proceedings. If the FW Ombudsman’s submission that the actions of Finetune Holdings and Mr Rechichi were at all times deliberate in nature are to be believed, it follows that Mr Rechichi would have set out with the intention to contravene the workplace relations legislation, and there is no evidence that proves that this was the case. Indeed, the fact that records were ultimately produced indicates that Finetune Holdings and Mr Rechichi did not ever set out to intentionally contravene the FW Act; and
e)in Cotis v Macpherson, which the FW Ombudsman relies upon in support of its submissions for penalty:
i)the respondent did not ever produce any documents;
ii)there were 13 serious contraventions that had impacted upon persons and property, and which ran over a period of years; and
iii)there was no evidence of any attempt by the respondent to assist a liquidator, who had been appointed, to produce the documents;[40]
f)the matters in Macpherson differ vastly to those in this matter; and
g)any reliance upon Macpherson to substantiate penalty ought to be dismissed as irrelevant, and demonstrates that the FW Ombudsman is seeking a penalty that is not appropriate in the circumstances.
[40] (2007) 169 IR 30; [2007] FMCA 2060 (“Macpherson”).
Consideration
Essentially similar matters were relied upon by Mr Rechichi in the liability hearing as reasonable excuses for non-compliance with the NTP.[41] In that regard:
[41] Section 712(4) of the FW Act provides a person with a defence of “reasonable excuse” not to produce documents the subject of an NTP issued under s.712(3) of the FW Act.
a)in relation to the 6 October 2009 Letter, the Court concluded that:
49. The Court observes that the 6 October 2009 Letter simply did not relate to the same matter as is the subject of the NTP, and hence these proceedings. The 6 October 2009 Letter related to the underpayment of Mr Cheong’s wages, whilst the NTP related to the production of documents and records for the purposes of a broader investigation as to whether:
a) the Australian Fair Pay and Conditions Standard;
b) the Technical Services – Architects Award 2000; and
c) employer obligations under the FW Act in relation to employee records and pay slips,
had been complied with by Finetune Holdings.
50. The Court also observes that the fact that it was Inspector Truong who made contact with Mr Cheong to determine whether or not payment had been made in accordance with Mr Rechichi’s agreement to make payment by the later date of 6 November 2009 does not preclude Inspector Truong from acting as he did. The Court accepts that, in the circumstances, it was necessary for Inspector Truong “to assess whether the agreements made … have been actioned” and that if they had not been actioned “then at that point in time is when the Fair Work Ombudsman decides whether or not to action into that full investigation”. Inspector Truong would, in the Court’s view, have failed to properly exercise his duties and responsibilities as an FW Inspector if he had failed to pursue this matter solely on the basis that he had not been contacted by Mr Cheong, but rather that the contact with Mr Cheong had been made by Inspector Truong.
51. In the circumstances, Mr Rechichi cannot rely upon the 6 October 2009 Letter as providing any reasonable excuse for his failure to comply with the NTP, which at the dates of Mr Rechichi’s failure to comply with the terms of the assisted voluntary resolution processes set out in the 6 October 2009 Letter, was still more than six weeks away from being issued, and more than eight weeks away from the requested documents and records being required to be produced.[42]
[42] Finetune Holdings(No. 2) at paras.49-51 (footnote omitted).
b)in relation to the Amended Compliance Agreement, the Court concluded that:
55. A number of matters emerge from the evidence with respect to the Amended Compliance Undertaking. They are as follows:
a) the Amended Compliance Undertaking was the undertaking that Mr Rechichi was prepared to enter into, on behalf of Finetune Holdings;
b) there was no agreement as to the terms of the Amended Compliance Undertaking:
i) as there was “no signed compliance undertaking”, and therefore “no agreement in place because it wasn’t signed” as asserted by Inspector Truong; and
ii) because Inspector Truong “made it clear to me [Mr Rechichi] that he … was not prepared to change [the substantive terms of the Proposed Compliance Undertaking]”; and
c) the Amended Compliance Undertaking was not faxed to Inspector Truong as initially asserted by Mr Rechichi, consistent with the evidence given by Inspector Truong under cross-examination, and it was not received by Inspector Truong (or the Office of the FW Ombudsman) because, as was ultimately effectively conceded by Mr Rechichi under cross-examination, he did not fax the Amended Compliance Undertaking to Inspector Truong:
“ [Counsel] And you didn’t fax to him the version of the compliance undertaking with your handwritten changes on it, did you? --- [Mr Rechichi] I probably didn’t, no.”
56. As at 19 November 2009, or shortly thereafter, Finetune Holdings had:
a) reneged on the assisted voluntary resolution set out in the 6 October 2009 Letter, and
b) not entered into a compliance undertaking, and nor had the FW Ombudsman accepted such an undertaking from Mr Rechichi.
Consequently, the argument that the NTP was not complied with because there was an agreement, in the form of the Amended Compliance Undertaking must fail, especially in circumstances where Mr Rechichi concedes that the basis for such an agreement, the Amended Compliance Undertaking, was never sent back to Inspector Truong or the FW Ombudsman.
57. There was therefore no impediment to the issuance of the NTP on 23 November 2009 on the basis of any compliance undertaking having been entered into by Finetune Holdings, because it had not done so.[43]
[43] Finetune Holdings(No. 2) at paras.55-57 per Lucev FM (footnotes omitted).
c)in relation to the State Magistrates Court proceedings, the Court concluded that:
60. The State Magistrates Court Proceedings could never have provided Finetune Holdings a reasonable excuse not to comply with the NTP because:
a) Mr Cheong’s claim in respect of those proceedings was issued almost three months after the time for compliance with the NTP had passed; and
b) the general order requiring Finetune Holdings to pay Mr Cheong $5,500 did not issue until almost six months after the time for compliance with the NTP had passed.
Furthermore, the State Magistrates Court Proceedings were limited to the alleged underpayment of Mr Cheong, and not the broader set of issues in relation to which the NTP had been issued. In any event, the FW Ombudsman exercises the powers under s.712 independent of the actions of the persons the subject of the records or documents sought to be produced.
61. Therefore, the State Magistrates Court Proceedings did not, and could not have, provided a reasonable excuse for Finetune Holdings’ failure to comply with the NTP.
62. In any event, it is not apparent as to how the FW Ombudsman would, in the exercise of its statutory functions, ever have been bound by the settlement of private proceedings between Mr Cheong and Finetune Holdings in relation to the underpayment, when what the NTP sought was the production of records and documents relating to a broader set of issues. Even if the Amended Compliance Undertaking had been complied with, it was limited to its terms, and its terms did not preclude the FW Ombudsman from investigating other matters related to Mr Cheong’s employment with Finetune Holdings. In any event, the FW Ombudsman could not be estopped from pursuing any matters, or any additional matters, as:
a) estoppel does not run against the exercise of a discretion reposed in the executive and regulated by statute; and
b) especially where statutory rights are created, as here, for the benefit of the public or a section of the public, they should not be estopped.[44]
[44] Finetune Holdings(No. 2) at paras.60-62 per Lucev FM (footnotes omitted).
It is evident, in particular from the terms of the First Letter and Second Letter, that Mr Rechichi ought to have been aware that there was a requirement to comply with the NTP.
In the Court’s view Mr Rechichi’s acts were deliberate, in that he made a conscious decision initially not to comply with the NTP, and then a further conscious decision to comply with the NTP once proceedings had been instituted, and he had received legal advice. The deliberate decision not to comply initially, and for some considerable time thereafter, was no less deliberate by reason of what Mr Rechichi asserts with respect to voluntary assisted resolution, the Amended Compliance Agreement, and his erroneous beliefs about compliance with the NTP. As the Court found in Finetune Holdings(No. 2) the voluntary assisted resolution was reneged upon by Mr Rechichi, and the Amended Compliance Agreement was not entered into, and they could not, and did not, therefore form a basis for compliance with the NTP. Furthermore, it was unnecessary for Mr Rechichi to have set out with the intent of not complying with the NTP for his actions to be deliberate. The result, however, of his deliberate decision was that the FW Act was not complied with.
Mr Rechichi’s awareness that he had contravened s.712(3) of the FW Act must have increased over time, otherwise, he would not have sought legal advice nor complied with the NTP once the proceedings were commenced. Even then, having complied with the NTP by producing the documents (and in effect making an admission that it was necessary to produce them), Mr Rechichi acted inconsistently by then asserting that he had a reasonable excuse for earlier non-production of the documents when he did not, in fact, have that reasonable excuse.[45]
[45] Finetune Holdings(No. 2) at paras.43-62 per Lucev FM.
The reference by the FW Ombudsman to additional “contraventions” identified by Inspector Truong is not helpful. The Court must determine penalty for contraventions found, not contraventions which might have been found if an application had been made by the FW Ombudsman. It is unhelpful because if the application had been made the contravention or contraventions might not have been found, and that makes manifest the unfairness to Mr Rechichi in setting penalty by reference to alleged “contraventions” identified by the FW Ombudsman but in respect of which no application has been made, and, therefore, no finding is able to be made by this Court.
The contravention here occurred in circumstances where Mr Rechichi’s conduct:
a)was deliberate;
b)was delayed with respect to compliance, in circumstances where there was no reasonable excuse for non-compliance; and
c)by his reneging on the voluntary assisted resolution and not entering into the Amended Compliance Agreement, it meant that there was no reasonable excuse as Mr Rechichi asserted, or indeed any real excuse, at all, for not complying with the NTP.
Nature and extent of loss or damage
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)while the consequences of the contravention do not immediately impact upon any person in terms of loss or damage, the loss or damage should be considered in the context of the relevant statutory objective. That is, regard should be had to “conduct ... [which] undermines the utility and effectiveness of a fundamental object”,[46] of the FW Act;
b)one of the principal objects of the FW Act is to ensure a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions for all employees;[47]
c)in order to enforce minimum terms and conditions, Fair Work Inspectors must be able to exercise their compliance powers effectively. The purpose of the powers conferred on Fair Work Inspectors (such as the power to issue an NTP under s.712 of the FW Act) is to provide the FW Ombudsman with effective means for investigating and enforcing compliance with both minimum standards and industrial instruments;
d)Mr Rechichi’s conduct assisted the stifling of the FW Ombudsman’s ability to conduct a proper investigation of a complaint made by Mr Cheong against Finetune Holdings, and was conduct undermining the relevant statutory objectives of the FW Act; and
e)the FW Ombudsman submits that in this context, the effect of the contravention should be considered by the Court as being of similar importance as would be the case if loss or damage were suffered.[48]
[46] Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at para.56 per Flick J; Sterling Crown IR at 351 per Lucev FM; FMCA at para.52 per Lucev FM.
[47] FW Act, s.3(b).
[48] Sterling Crown IR at 351 per Lucev FM; FMCA at para.52 per Lucev FM; Industrial Roadpavers IR at 446 per Lucev FM; FMCA at para.28 per Lucev FM.
Mr Rechichi’s submissions
Mr Rechichi:
a)submits that the consequences of the contravention have no immediate impact upon any person in terms of loss or damage, and this should be more heavily weighed when assessing penalty. The FW Ombudsman’s submission for penalty to be applied as if loss or damage had been incurred represents an unfair or inequitable weighting; and
b)acknowledges the importance of the underlying principal objectives of the FW Act (being to ensure a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions for all employees). In this particular matter, however, when the FW Ombudsman was provided with the requested records, albeit late, it determined that no further action was warranted to be taken by the FW Ombudsman, and it can be inferred that any further action was either unwarranted or unlikely to succeed.
Consideration
The extent of the loss and damage might be said to be limited to the failure to produce the relevant documents. In the Court’s view, it goes further than that, however, because what is involved was not merely a failure to comply with the NTP, but also has the following consequences:
a)the powers conferred on Fair Work Inspectors, which are designed to provide the FW Ombudsman with the means to investigate and enforce compliance with minimum legislated standards and industrial instruments, are impaired by a failure to comply with an NTP; and
b)employees may be denied their lawful entitlements, or part thereof, because the failure to comply with the NTP means that documents essential to a determination of which entitlements have been complied with are not produced, and entitlements, or partly met entitlements, might not be able to be calculated, properly or at all.
The investigative, compliance and enforcement powers of the FW Ombudsman, and the payment to employees of entitlements, are therefore adversely affected by a failure to comply with an NTP. Thus there is loss and damage in the sense of a failure to comply with a statutory objective,[49] and “this effect must be considered as being of similar importance as would be the case if loss and damage were suffered.”[50] By failing to provide the records as requested, Finetune Holdings and Mr Rechichi engaged in conduct undermining the utility and effectiveness of the relevant legislative provisions.[51]
[49] Pagasa at para.56 per Flick J; Sterling Crown IR at 350-351 per Lucev FM; FMCA at para.51 per Lucev FM.
[50] Industrial Roadpavers IR at 446 per Lucev FM; FMCA at para.28 per Lucev FM.
[51] Industrial Roadpavers IR at 447 per Lucev FM; FMCA at para.33 per Lucev FM.
Mr Rechichi’s submission that it can be inferred from the fact that no further action was taken by the FW Ombudsman once the NTP had been complied with is unhelpful. The NTP ought to have been complied with, irrespective of whether it resulted in the production of records which did or did not disclose further contraventions. In the same way that the alleged contraventions in respect of which the FW Ombudsman made no further application ought not be had regard to with respect to penalty, so the fact that the documents produced did not disclose any further contraventions also ought to be disregarded in mitigation of any penalty applicable to Mr Rechichi.
Similar previous conduct
The Court accepts that Mr Rechichi is a first time contravener of Commonwealth workplace relations legislation, and is, therefore, entitled to some discount on penalty.
Size of the business and capacity to pay
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)the size and financial circumstances of Finetune Holdings are not relevant in this case as Finetune Holdings is in liquidation;
b)any sanction is to be imposed at a meaningful level;[52]
[52] Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited [2001] FCA 383 at para.13 per Finkelstein J (in the context of deterrence), cited in Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J.
c)bankruptcy is no refuge from the imposition of civil penalties;[53]
[53] Macpherson IR 35-39 per Driver FM; FMCA at paras.6-10 per Driver FM.
d)Mr Rechichi was the controlling mind of Finetune Holdings and the decision maker in relation to the contravention;
e)in determining what monetary penalty to impose on an offender, it is usual for a court to take into account the offender’s capacity to pay. However, difficulty in paying penalties should not prevent the Court from imposing penalties which are otherwise appropriate. As the Federal Court has previously noted:
In this connection it is important that the respondent – and other employers bound by the award or by other awards under the Act – understand the importance of complying with an award and it follows that any decision taken by them which is regarded as affecting their obligations to comply with particular provisions of an award or the award generally should only be taken after careful consideration. They must not be left under the impression that in times of financial difficulty they can breach an award made under the Act either with impunity or in the belief that no substantial penalty will be imposed in respect of a breach found by a court to have been committed.[54]
and
While this evidence suggests that both Vista and Mr McNamee may have difficulty in paying penalties, I do not think I should allow it to deflect me from imposing whatever penalties are otherwise appropriate.[55]
f)there needs to be cogent evidence about actual financial circumstances for the Court to consider capacity to pay in mitigation of a penalty.[56]
[54] Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503 at 508 per Keely J.
[55] Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd & Anor (1994) 127 ALR 673 at 688 per Wilcox J. These principles have subsequently been applied in prosecutions under workplace legislation, for example, Cotis v Pow Juice Pty Ltd [2007] FMCA 140 at para.68 per Lloyd-Jones FM; Fair Work Ombudsman v Security Protection Services Pty Ltd & Ors (2010) 194 IR 96 at 112 per F Turner FM; [2010] FMCA 252 at para.74 per F Turner FM; Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at paras.27-29 per Driver FM (“Rajagopalan”).
[56] McIlwain v Ramsey Food Packaging Pty Ltd (No.4) (2006) 158 IR 181 at 217 per Greenwood J; [2006] FCA 1302 at para.98 per Greenwood J. In Rajagopalan at para.29 per Driver FM the need was recognised to adduce proper evidence of incapacity to pay for it to be a relevant consideration. See, in the different context of OHS sentences in NSW, McColl v John Watson Building Services Pty Ltd (2004) 137 IR 310; [2004] NSWIRComm 353.
In response to a letter from the FW Ombudsman,[57] Mr Rechichi provided the following financial records[58] to the FW Ombudsman to assist the Court in determining penalty:
i)tax returns for the financial years ending 30 June 2009; 30 June 2010 and 30 June 2011;
ii)financial statements for the year ended 30 June 2011 for Antonio Rechichi trading as Anthony Rechichi Architect (unsigned and undated);
iii)notification of registration of Australian Business Number, 26 027 037 379, dated 20 January 2011;
iv)Australian Business Register registering Anthony Rechichi Architect as a sole trader (page 1 only provided);
v)a copy of a sequestration order dated 28 March 2011; and
vi)covering letter dated 15 June 2012 which stated that Mr Rechichi rents both office and residential premises and has a liability with the Australian Taxation Office;[59]
[57] Affidavit of Gregory Carl Spain, sworn 25 June 2012 (“Spain Affidavit”) at annexure GCS-1.
[58] Together “Mr Rechichi’s Financial Information”.
[59] See Spain Affidavit at annexure GCS-2.
Mr Rechichi’s Financial Information shows that:
a)the taxable income of Mr Rechichi was:
i)$537 for the financial year ending 30 June 2009;
ii)$79,080 for the financial year ending 30 June 2010; and
iii)$5,257 for the financial year ending 30 June 2011;[60]
b)in the financial year ending 30 June 2011 Mr Rechichi operated a business, as a sole trader, known as Anthony Rechichi Architect, which generated a total income of $40,635. The declared net income for the business was $6,870.[61]
[60] See Individual Tax Returns for year ended 30 June 2009, 30 June 2010 and 30 June 2011: Spain Affidavit at annexure GCS-2.
[61] See Individual Tax Return for year ended 30 June 2011 and Financial Statements for year ended 30 June 2011: Spain Affidavit at annexure GCS-2.
The FW Ombudsman submits that Mr Rechichi’s Financial Information shows that Mr Rechichi is operating a business which is generating a low level of profit and that to the extent to which Mr Rechichi may seek to rely on his capacity to pay penalties, this factor ought to have little, if any, effect in mitigation.
Mr Rechichi’s submissions
Mr Rechichi:
a)submits that Finetune Holdings’ size is not relevant as it is in liquidation;
b)submits that he is currently conducting a small business as a sole trader;
c)submits that he is a bankrupt, and was made bankrupt by sequestration order of the Court. The Bankruptcy Act does not preclude a bankrupt from paying court imposed penalties, and so any notion of refuge, or the seeking of refuge, as suggested in the FW Ombudsman’s submission, should be dismissed as irrelevant in the consideration on penalty;
d)submits that the FW Ombudsman’s submission concedes that Mr Rechichi is “operating a business which is generating a low level of profit”;
e)relies heavily upon his incapacity to pay a penalty, and submits that any penalty must be such as to not become oppressive or crushing in light of his fragile financial position;
f)also relies upon his diminished capacity to earn an income as a bankrupt, as the Bankruptcy Act 1966 (Cth)[62] contains earning thresholds that limit Mr Rechichi to earning an income of a maximum of $47,693.10 per annum before an income contribution to the trustee estate is made. In that regard any additional earnings Mr Rechichi may seek to earn over and above the maximum income stated, in an effort to pay for the penalty imposed are subject to a mandatory contribution to the trustee as a matter of priority; and
g)is a registered architect and earns a living as a sole trader operating his practice known as Anthony Rechichi – Architect. He operates out of rented premises that can at best be described as of mediocre standard. He is a divorced single man with no dependants, and is living in rented premises at 12E Waterloo Street, Joondanna, which are shared with his elderly and pensioned parents, in order to help save on living costs, and is attempting to rebuild from his bankruptcy.
[62] “Bankruptcy Act”.
FW Ombudsman’s further submissions
The FW Ombudsman further submits that:
a)the maximum earning threshold applicable to Mr Rechichi’s bankruptcy should bear little weight on the penalty imposed, as the penalty imposed on Mr Rechichi will survive the period of his bankruptcy;[63]
b)there is currently no sworn evidence from Mr Rechichi before the Court in relation to his own personal finances, such information as has been provided is limited, and there is no indication of Mr Rechichi’s personal expenses, which would allow the Court to fully assess the nature and extent of the alleged inability to pay a penalty;
c)the evidence provided in support of Mr Rechichi’s submission that his immediate financial position is “fragile” is lacking in detail, and unsubstantiated by independent documentation. The Court should, therefore, give limited weight to Mr Rechichi’s submissions in relation to the effect of his financial position; and
d)in light of Mr Rechichi’s submissions, and Mr Rechichi’s Financial Information, the FW Ombudsman acknowledges it would be appropriate for the Court to make an order providing Mr Rechichi with an extended period to pay any penalty imposed.
[63] MacPherson IR 35-39 per Driver FM; FMCA at paras.6-10 per Driver FM; Bankruptcy Act, s.82(3) specifically provides that penalties imposed by Court in respect of an offence against a law are not provable in bankruptcy, hence s.189(1) of the Bankruptcy Act is not enlivened.
Mr Rechichi’s submissions in reply
Mr Rechichi submitted in reply that:
a)at the time of the contravention Finetune Holdings was a small enterprise which had been in existence since March 2005, and had operated as a small architectural services company, and small property development company. It had only ever employed one employee, Mr Cheong, and had operated from small rented premises in Northbridge; and
b)he is currently conducting a small business as an architect trading as a sole trader, and does not have any employees. Any assistance that he may require from time to time is by way of contractors. The financial statements tendered illustrate that after deducting his expenses there were earnings of $6,870.00 pre tax to June 2011, indicating a surplus of $572 per month for basic living expenses. This is substantially lower than the $47,693.10 threshold set by the Bankruptcy Act which is designed to be low enough to not be impacted upon by the effects of bankruptcy.
Consideration
Properly evidenced, and for proper reasons, incapacity to pay may afford some relief by way of mitigation of penalty.[64]
[64] Workplace Ombudsman v KSN Engineering Pty Ltd (2009) 185 IR 316 at 322-323 per Lucev FM; [2009] FMCA 538 at paras.10 and 13 per Lucev FM. See also the extensive treatment of the issue in Sterling Crown IR at 352-356 per Lucev FM; FMCA at paras.58-76 per Lucev FM, and the various authorities referred to therein, including Federal Court authorities on penalties in trade practices and workplace relations cases, and largely repeated in Fair Work Ombudsman v MMP Management Services Pty Ltd & Anor [2012] FMCA 207 at paras.39 and 41-49 per Lucev FM.
In Sterling Crown, this Court having reviewed Federal Court authorities with respect to the payment of penalties in trade practices and workplace relations cases, some of which have been cited above, as well as the judgments of this Court concerning the size of the employer and capacity to pay a penalty, concluded that:
“It therefore appears that the size and financial resources of a contravener are factors to be considered, and the impact of those factors upon the setting of penalty is in each case a matter for consideration of the particular circumstances of the size and financial resources of the contravener, plus the other factors which are relevant.”[65]
[65] Sterling Crown IR at 356 per Lucev FM; FMCA at para.76 per Lucev FM.
Bankruptcy is no bar to the imposition of civil penalties against an individual.[66]
[66] Macpherson IR at 35-39 per Driver FM; FMCA at paras.6-10 per Driver FM (“Macpherson”); Fair Work Ombudsman v Garfield Berry Farm Pty Ltd (2011) 9 ABC(NS) 593 at 596 per Riley FM; [2011] FMCA 885 at paras.13-14 per Riley FM.
The evidence in this case establishes that:
a)Mr Rechichi is bankrupt;
b)for two of the last three years Mr Rechichi’s income has been minimal;
c)it is difficult to ascertain Mr Rechichi’s precise financial position as Mr Rechichi’s Financial Information, and other materials tendered, do not establish his exact financial position with any precision; and
d)the FW Ombudsman acknowledges by its indication that it is appropriate for Mr Rechichi to have an extended period in which to pay any penalty imposed that Mr Rechichi’s financial position is not a strong one.
In imposing a penalty in a case as this where the maximum penalty is $6,600, and the Court is faced with a contravener who is a first time contravener of Commonwealth workplace relations legislation, and has committed a single contravention, it must be borne in mind that any penalty is not likely to exceed the mid range penalty sought by the FW Ombudsman, and may indeed be less than that, if other factors such as contrition and co-operation with enforcement authorities are taken into account. It must also be borne in mind that Mr Rechichi suggested a penalty of 20 per cent of the maximum, or $1,320, in any event, payable over 12 months. That indicates some capacity to pay if a penalty is imposed.
The most that can be safely concluded on the evidence is that Mr Rechichi can pay a fine at the lower end of the penalty range, but will require time to pay, as his present financial position is not a strong one.
The Court observes that it has had no regard to the position of Finetune Holdings, for as was initially submitted by the FW Ombudsman and Mr Rechichi, its position is irrelevant in view of its liquidation.
Deliberateness of the contravention
FW Ombudsman’s submissions
The FW Ombudsman essentially repeated submissions set out above[67] that the failure by Finetune Holdings to produce to the FW Ombudsman the documents or records requested in the NTP until 12 September 2010, was a deliberate contravention.
[67] See para.20 above.
Mr Rechichi’s submissions
Mr Rechichi submitted that the contravention was not deliberate and repeated the submissions made above.[68]
[68] See para.23 above.
Consideration
For reasons set out above,[69] the Court is of the view that the contravention was deliberate.
Involvement of senior management
[69] See para.29 above.
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)Mr Rechichi was the sole director and company secretary of Finetune Holdings;
b)during the relevant period, Mr Rechichi was the person with responsibility for the day to day activities of Finetune Holdings, and accordingly, the contravention is directly attributable to the actions or omissions of Mr Rechichi in his capacity as sole director and secretary of Finetune Holdings;[70]
c)there is no evidence that the contravention was attributable to any person other than Mr Rechichi; and
d)this high level of involvement by senior management is a factor which aggravates the seriousness of the contravention.
[70] Finetune Holdings (No.2) at paras.18-19 per Lucev FM.
Mr Rechichi’s submissions
Mr Rechichi does not dispute the FW Ombudsman’s submissions, but repeats the submissions made above with respect to the circumstances in which the conduct took place.[71]
[71] See paras.13-14 above.
Consideration
The fact that the conduct in question is that by the sole director, and the company secretary, is an aggravating factor as to the seriousness of the contravention by Mr Rechichi. Effectively, Mr Rechichi controlled Finetune Holdings. It is not disputed that he alone was responsible for dealing with workplace relations and employee issues. Whatever was done by Finetune Holdings was done by Mr Rechichi, or done at his behest. Senior management of Finetune Holdings was therefore inextricably intertwined with the acts and omissions of Finetune Holdings, and had direct knowledge of, and was involved in, the contravention. The nature of Mr Rechichi’s involvement in the contravention makes it more serious, particularly in circumstances where there has been, for reasons set out above,[72] a deliberate course of conduct, and for reasons set out below,[73] a lack of contrition and corrective action, and virtually no co-operation with the FW Ombudsman.
Contrition, corrective action, co-operation with enforcement authorities
[72] See para.29 above.
[73] See para.64 below.
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)this factor involves three related, yet separate elements, each of which has resonance in this case; and
b)Mr Rechichi has not accepted responsibility for his conduct nor has he expressed any contrition in respect of the contravention.
Finetune Holdings and Mr Rechichi were virtually non co-operative in respect of their obligations to comply with the NTP, as demonstrated by:
a)Mr Rechichi failing to respond to the First and Second Letters;[74]
b)the failure to provide any records pertaining to Mr Cheong’s employment until after the commencement of these proceedings;[75]
c)the reasonable excuses proffered by Mr Rechichi, particularly the excuse that other business activities required urgent attention,[76] from which it may be inferred that Mr Rechichi did not regard his obligation to provide records seriously; and
d)the significant time and expense to which the FW Ombudsman has been put in pursuing the matter and have failed to facilitate the course of justice. It is particularly telling that the records were ultimately produced only after these proceedings were commenced, once Finetune Holdings and Mr Rechichi had realised the inevitable.[77]
[74] Finetune Holdings (No.2) at paras.9-10 per Lucev FM.
[75] Finetune Holdings (No.2) at paras.11-12 per Lucev FM.
[76] Finetune Holdings (No.2) at para.43 per Lucev FM.
[77] Dennington v Prescott [2008] FMCA 1105 at para.34 per O’Sullivan FM; Sterling Crown IR at 356-357 per Lucev FM; [2008] FMCA 1392 at para.77 per Lucev FM; Industrial Roadpavers IR at 449 per Lucev FM; FMCA at para.48 per Lucev FM.
Mr Rechichi’s submissions
Mr Rechichi:
a)does not agree with the FW Ombudsman’s submissions, and repeats submissions made above concerning the circumstances in which the conduct took place, and the loss and damage caused by the contravention, which Mr Rechichi says provide the context within which his actions were undertaken with regard to the NTP;
b)says that this matter was commenced as a result of a complaint for unpaid entitlements made by a complainant. The FW Ombudsman’s role is to assist in resolving such complaints (although it is not limited to that role) and in that regard the FW Ombudsman has been empowered to act upon such a complaint in accordance with the FW Act. The reference to the significant time and expense the FW Ombudsman was put to in pursuing the matter must be viewed in context of the role the FW Ombudsman plays as the “housekeeper” or “guardian” of the FW Act; and
c)with the benefit of hindsight and of the matters raised in the hearing says:
i)his conduct should not have followed the path that it did, particularly the mistaken beliefs he adopted during the course of the investigation which lead to the non-compliance with the NTP;
ii)he understands the importance of the requirement of the FW Ombudsman’s right to investigate all affairs that uphold the objects of the FW Act; and
iii)he is truly regretful and remorseful about and of the actions that he took and the manner in which they occurred.
FW Ombudsman’s further submissions
The FW Ombudsman further submitted that:
a)Mr Rechichi failed to comply with Commonwealth workplace laws over a lengthy period of time. He has not shown outward indications of remorse until the submissions in respect of penalty were made; and
b)the contrition shown at this stage may be viewed as Mr Rechichi’s regret that he is now before the Court on this matter facing penalties. This is not genuine contrition in the FW Ombudsman’s submission, such as to warrant a significantly discounted penalty.
Mr Rechichi’s submissions in reply
Mr Rechichi submitted in reply that:
a)he cannot agree with the FW Ombudsman’s submission on contrition, and further states that genuine contrition takes place after the realisation that one’s actions and behaviour were wrong, which has now been demonstrated; and
b)he repeats submissions made above with respect to the circumstances in which the conduct took place, and the loss and damage caused.[78]
[78] See paras.13, 22-24 and 26 above.
Consideration
Contrition came late to Mr Rechichi in these proceedings. Mr Rechichi seeks to justify that by saying that one cannot be contrite until one realises that one’s actions and behaviour are wrong. Contrition may have manifested itself in this case after the NTP was complied with by Mr Rechichi. That, however, was not the case: rather, Mr Rechichi continued to assert, wrongly, that he had a reasonable excuse for not complying with the NTP. Mr Rechichi’s contrition appears somewhat imperfect: made of necessity and in the face of a fear of an impending penalty, or at least a bowing to the inevitable, rather than being truly contrite. The lack of true contrition is manifested in the penalty submissions which continually seek to justify the course of action taken by Mr Rechichi by reference to the circumstances of the matter, and in particular, by a re-assertion of reasonable excuse, in circumstances where reasonable excuse was not able to be established by Mr Rechichi.[79] Like contrition, co-operation with the FW Ombudsman was late in coming. There was some co-operation by reason of compliance with the NTP, but only after legal advice had been taken following the commencement of the proceedings. Notwithstanding the “admission” made by compliance with the NTP after the commencement of these proceedings, the proceedings were then fought with full vigour (and continue to be fought with some vigour even at this penalty stage) by reference to a defence of reasonable excuse which was neither justified nor established by Mr Rechichi.
[79] See paras.27 and 32(b) and (c) above, and Finetune Holdings(No. 2) at paras.43-62 per Lucev FM.
The lack of contrition and co-operation with the FW Ombudsman is an aggravating factor in relation to the assessment of penalty, and a factor warranting no reduction in penalty in the circumstances, save perhaps for some small acknowledgement of the compliance with the NTP after these proceedings had commenced.
Ensuring compliance with minimum standards
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)this is an important consideration in the present case. One of the principal objects of the FW Act has been the maintenance of an effective safety net of employer obligations, and effective enforcement mechanisms; and
b)the substantial penalties set by the legislature in relation to contraventions of provisions such as s.712(3) of the FW Act reinforce the importance placed on compliance with minimum standards.
Mr Rechichi’s submissions
Mr Rechichi does not dispute the FW Ombudsman’s submissions set out above, but further repeats the submissions made above with respect to loss and damage.[80]
[80] See para.34 above.
Consideration
In assessing the seriousness of the conduct by Mr Rechichi, and what the level of penalty might be, the Court must have regard to the statutory purposes of the FW Act.[81] Relevantly, the objects in s.3 of the FW Act include:
[81] Golden Maple IR at 235 per Lucev FM; FMCA at para.63 per Lucev FM.
(b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and
…
(e) … providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms … .
In the context of the objects and purposes of the FW Act requiring compliance with minimum standards and facilitating enforcement of the FW Act deliberate contravention as to production of records, extending over a period of time, involves an undermining of the statutory objects and purposes of the FW Act, because ensuring compliance with minimum standards may not be able to be enforced if relevant documents are not produced. As such it is serious conduct warranting a meaningful penalty.
Specific and general deterrence
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)the Courts have recognised that general deterrence is an important and relevant consideration in assessing penalty for contraventions of Commonwealth workplace relations legislation, in order to mark disapproval of the conduct in question.[82] The penalty should be of a kind that would have the effect of deterring similar conduct by like-minded persons or organisations.[83] This consideration is equally important to small businesses as to large employers;[84]
b)the contravention in this case concerns the powers of the FW Ombudsman and its ability to ensure effective compliance with minimum entitlements. The FW Ombudsman submits that the penalty in this case should be imposed at a meaningful level to so as to deter others from committing similar contraventions and to emphasise the importance of assisting and cooperating with the FW Ombudsman’s Fair Work Inspectors in their investigations;
c)as for specific deterrence, Mr Rechichi should be left in no doubt that failing to comply with minimum obligations will not be tolerated. The FW Ombudsman concedes that the records sought in the NTP have now been produced. Specific deterrence is, however, a relevant consideration in relation to whether Mr Rechichi operates a business in the future that requires employment of individuals; and
d)specific deterrence is particularly relevant in this case given:
i)that Mr Rechichi did not co-operate with the FW Ombudsman in its investigation and the attempts to ensure compliance with workplace laws;
ii)the deliberateness of the contravention;
iii)the duration of the delay in failing to produce the records requested under the NTP, being a period of over nine months; and
iv)the lack of contrition.
[82] Klousia v TKM Investments Pty Ltd & Anor [2009] FMCA 208 at para.55 per O’Sullivan FM; Alcantara & Anor v Buildpower Pty Ltd (No.2) [2010] FMCA 763 at para.32 per Lucev FM.
[83] Caelli Constructions FCR at 559-560 per Lander J; FCAFC at para.93 per Lander J.
[84] Kelly v Fitzpatrick (2007) 166 IR 14 at 21 per Tracey J; [2007] FCA 1080 at para.28 per Tracey J.
Mr Rechichi’s submissions
Mr Rechichi agrees with the submissions made by the FW Ombudsman, save for the FW Ombudsman’s submission that specific deterrence is particularly relevant in this case, and the reasons given by the FW Ombudsman for that. Mr Rechichi does not accept this and repeats submissions made above concerning the circumstances in which the conduct occurred, and the loss and damage as a consequence of that conduct.[85]
[85] See para.34 above.
Consideration
A primary objective of penalties is deterrence.[86] In imposing civil penalties, deterrence is therefore a significant consideration.[87] It is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend.[88] The penalty must be of a kind that demonstrates an appropriate assessment of the seriousness of the offending conduct.[89] In circumstances where there has been no, or at best only a little, relevant measure of contrition or co-operation, the Court is satisfied that this is still an appropriate case for specific deterrence in relation to the conduct of Mr Rechichi, because it is his conduct that caused Finetune Holdings to act in the way that it did, and which is therefore responsible for the lack of contrition and co-operation, and which should not be repeated.
[86] Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J; Sterling Crown IR at 351 per Lucev FM; FMCA at para.53 per Lucev FM.
[87] Caelli Constructions FCR at 577 per Jessup J; FCAFC at para.164 per Jessup J.
[88] Caelli Constructions FCR at 559 per Lander J; FCAFC at para.93 per Lander J; Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J.
[89] Caelli Constructions FCR at 559 per Lander J; FCAFC at para.93 per Lander J.
General deterrence is an important and relevant consideration in assessing penalty, in order to mark disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct.[90]
[90] Klousia at para.55 per O’Sullivan FM; Industrial Roadpavers IR at 447 per Lucev FM; FMCA at para.37 per Lucev FM.
This is an appropriate case for a meaningful measure of general deterrence insofar as employers ought not to be impressed with the idea that they can:
a)avoid the requirement to produce documents upon request by the FW Ombudsman; or
b)fail to co-operate with FW Inspectors lawfully exercising powers under the FW Act.
Conclusions as to penalty
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)Mr Rechichi’s conduct has shown a distinct disregard for the objects of the FW Act, a matter compounded by the consistent lack of co-operation with the FW Ombudsman; and
b)the penalty imposed against Mr Rechichi should be in the mid range.
Mr Rechichi’s submissions
Mr Rechichi submits that the imposition of a penalty that is being recommended by the FW Ombudsman, when taking into account Mr Rechichi’s diminished capacity to earn and the fragile state of his financial and personal affairs, imposes an undue and unjust impost on his living conditions, that is oppressive and crushing. Further, and with regard to the actual loss and damage sustained as a result of the contravention, it is excessive. The FW Ombudsman’s recommendation for the penalty to be imposed should not be accepted. In the alternative, Mr Rechichi suggests that the penalty ought to be in the lower range of around 20 per cent. This is punishment apropos to Mr Rechichi’s personal situation and the seriousness of the contravention made. In addition, Mr Rechichi requests that he be granted a significant amount of time to make payment, in the order of 6 to 12 months.
FW Ombudsman’s further submissions
The FW Ombudsman further submits that issues surrounding capacity to pay raised by Mr Rechichi are not fully supported by evidence, and in any event, this must be balanced with other matters, in particular the deliberateness of the breach, involvement of senior management, lack of co-operation and the objective of general deterrence.
Mr Rechichi’s further submissions
Mr Rechichi repeated the submissions previously made.
Consideration
This is a single contravention of a provision with respect to the production of documents to the FW Ombudsman under the FW Act. It is not a matter which falls in the most serious category of such contraventions, and in terms of range of penalty would not justify a penalty in excess of anything above the mid point of the penalty range, which provides for a maximum penalty of $6,600. In assessing penalty, however, the Court takes account, in particular, of the fact that:
a)this is a serious, deliberate contravention;
b)there is only a single contravention, but a contravention which extended over more than nine months, with compliance with the NTP occurring after the proceedings commenced and on the eve of the first directions hearing;
c)Mr Rechichi was a senior manager (indeed the only senior manager) responsible for the conduct of these matters within Finetune Holdings, and that it was at his behest that the conduct occurred;
d)the conduct, in the totality of the circumstances, included conduct for which Mr Rechichi was responsible such as reneging on a voluntary assisted resolution and failing to enter into the Amended Compliance Agreement;
e)there was loss and damage in the context of the statutory objectives of the FW Act, which may impact upon the maintenance of minimum standards and entitlements;
f)there was no similar previous conduct in relation to breaches of Commonwealth workplace relations legislation;
g)Mr Rechichi is most likely in a difficult financial position, and probably has a diminished capacity to pay any fine imposed, at least immediately;
h)contrition and co-operation by Mr Rechichi were limited; and
i)having regard to the circumstances in which the contravention occurred, and the limited contrition and co-operation, there is a need for limited specific deterrence, and for more general deterrence.
Weighing all of the above factors the Court has determined that an appropriate penalty for this contravention is 25 per cent of the maximum penalty, that is, $1,650. Given Mr Rechichi’s somewhat difficult financial circumstances the Court will order that there be six months to pay, that is by 2 April 2013. The penalty is to be paid to the Commonwealth Consolidated Revenue Fund.
Totality principle
The Court is not required to consider the application of the totality principle in this case as it concerns a single contravention by Mr Rechichi.[91]
[91] Alcantara IR at 84-85 per Lucev FM; FMCA at para.51 per Lucev FM; Workplace Ombudsman v Securit-e Holdings Pty Ltd (2009) 187 IR 330 at 337 per Raphael FM; [2009] FMCA 700 at para.24 per Raphael FM.
Order
For the reasons set out above the Court will make an order that a penalty of $1,650 be paid by the second respondent to the Commonwealth Consolidated Revenue Fund by 2 April 2013.
I certify that the preceding eighty-two (82) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 2 October 2012
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