Fair Work Ombudsman v First Step Finance Pty Ltd (No 2)
[2024] FedCFamC2G 860
•13 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v First Step Finance Pty Ltd (No 2) [2024] FedCFamC2G 860
File number(s): SYG 1916 of 2023 Judgment of: JUDGE CAMERON Date of judgment: 13 August 2024 Catchwords: INDUSTRIAL LAW - declarations of contravention of civil remedy provisions of the Fair Work Act 2009 (Cth) made previously – penalty for contravention – relevant considerations. Legislation: Fair Work Act 2009 (Cth) ss 536, 539, 546, 716
Crimes Act 1914 (Cth) s 4AA
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
Dafallah v Fair Work Commission (2014) 225 FCR 559
Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (2018) 264 FCR 155
Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216
Kelly v Fitzpatrick (2007) 166 IR 14
McIver v Healey [2008] FCA 425
Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153
Fair Work Ombudsman v Lohr (2018) 158 ALD 457
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560
Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450
Division: Fair Work Number of paragraphs: 26 Date of hearing: 13 August 2024 Place: Sydney Solicitor for the Applicant: Ms R. Miguntenna (Office of the Fair Work Ombudsman) Counsel for the Respondents: No appearance by or on behalf of the respondents ORDERS
SYG 1916 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: FIRST STEP FINANCE PTY LTD ACN 615 460 332
First Respondent
DAVID BRIAN WARD
Second Respondent
ORDER MADE BY:
JUDGE CAMERON
DATE OF ORDER:
13 AUGUST 2024
THE COURT ORDERS THAT:
1.Within 28 days the first respondent pay a pecuniary penalty to the Commonwealth for its contraventions of ss 536(3) and 716(5) of the Fair Work Act 2009 (Cth) (FW Act) in the total amount of $97,710.
2.Within 28 days the second respondent pay a pecuniary penalty to the Commonwealth for his contraventions of ss 536(3) and 716(5) of the FW Act in the total amount of $19,480.
THE COURT NOTES THAT:
1. These Orders have been amended pursuant to Rule 17.05(2)(g) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
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 Cameron
INTRODUCTION
In this matter, on 11 June 2024 default judgment in the form of compensation and interest orders were entered for the applicant, the Fair Work Ombudsman (Ombudsman). Also made were declarations to the effect that the first respondent, First Step Finance Pty Ltd (FSF), and the second respondent, David Ward, who was at all relevant times FSF’s sole director and secretary, had contravened s.716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with the requirements of compliance notices dated 17 August 2021, 8 September 2022 and 21 August 2023 (Compliance Notices). Declarations were also made that the respondents had contravened s.536(3) of the FW Act because FSF had issued pay slips to Mr Tuhati and Mr Bomoushakian which FSF knew to be false or misleading (First Judgment).
The matter was set down for further hearing on the question of penalty and these reasons concern that issue.
SERVICE
The Ombudsman filed an affidavit of Fair Work Inspector (FWI) Julia Astorga affirmed on 16 July 2024 deposing to service on the respondents in accordance with the substituted service orders made on 2 February 2024 of the declarations and orders made on 11 June 2024. FWI Astorga also deposed in that affidavit to other steps taken to bring the listing to the respondents’ attention.
In all the circumstances, I am satisfied that the respondents have been served and otherwise made aware of today’s hearing and the fact they have not appeared, whether electronically or when called outside the Court, should not prevent the matter from proceeding.
BACKGROUND FACTS
The facts that were relevantly admitted by the respondents in this matter by reason of their failure to oppose or even participate in the earlier part of this proceeding, were summarised by the Ombudsman in her written submissions as follows:
Hawthorne Compliance Notice
7. In or around July 2021, Fair Work Inspector Julia Astorga (FWI Astorga) commenced an investigation in response to a request for assistance from Mr Hawthorne.
8. On 17 August 2021, FWI Astorga gave the Hawthorne Compliance Notice to the First Respondent after forming a reasonable belief that the First Respondent had contravened s 90(2) of the FW Act in respect of Mr Hawthorne.
9.The Hawthorne Compliance Notice required the First Respondent to calculate and rectify the underpayment to Mr Hawthorne by 14 September 2021, and produce reasonable evidence of its compliance to the Applicant by 21 September 2021.
10.The First Respondent did not take the action specified in the Hawthorne Compliance Notice by 21 September, or at all.
11.Had the First Respondent complied with the Hawthorne Compliance Notice, it would have paid at least $3,556.81 to Mr Hawthorne.
Tutahi Compliance Notice
12. In or around July 2021, FWI Astorga commenced an investigation in response to a request for assistance from Mr Tutahi.
13. On 8 September 2022, FWI Astorga gave the Tutahi Compliance Notice to the First Respondent after forming a reasonable belief that the First Respondent had contravened clauses 15.1 and 20.1 of the Banking, Finance and Insurance Award 2020 and s 90(2) of the FW Act in respect of Mr Tutahi.
14.The Tutahi Compliance Notice required the First Respondent to calculate and rectify the underpayment to Mr Tutahi by 29 September 2022, and produce reasonable evidence of its compliance to the Applicant by 7 October 2022.
15.The First Respondent did not take the action specified in the Tutahi Compliance Notice by 7 October 2022, or at all.
16.Had the First Respondent complied with the Tutahi Compliance Notice, it would have paid at least $8,704.04 to Mr Tutahi.
Bomoushakian Compliance Notice
17.In or around March 2023, FWI Astorga commenced an investigation in response to a request for assistance from Mr Bomoushakian.
18.On 21 August 2023, FWI Astorga gave the Bomoushakian Compliance Notice to the First Respondent after forming a reasonable belief that the First Respondent had contravened clauses 4.1 and 4.3 of the National Minimum Wage Order 2022 and s 90(2) of the FW Act in respect of Mr Bomoushakian.
19.The Bomoushakian Compliance Notice required the First Respondent to calculate and rectify the underpayment by 20 September 2023, and produce reasonable evidence of its compliance to the Applicant by 27 September 2023.
20. While payments were made to Mr Bomoushakian by or on behalf of the First Respondent, such payments do not amount to compliance with the Bomoushakian Compliance Notice because, as outlined in paragraphs 38 to 41 of the Applicant’s submissions on default filed on 4 June 2024 (Default Submissions):
(a) they were not made prior to the due date of 20 September 2023;
(b) no evidence of compliance was provided to the Applicant;
…
Pay slips
21. The First Respondent gave:
(a) two pay slips to Mr Tutahi in March and April 2021 recording amounts that were never paid; and
(b) two pay slips to Mr Bomoushakian in July and December 2022 recording amounts that were not paid on the payment dates stipulated in the pay slips, but 10 to 14 months later.
I adopt that summary.
FIRST JUDGMENT
The declarations and orders made by the Court on 11 June 2024 were:
1. Upon admissions taken to have been made by reason of the first respondent’s default, the first respondent contravened:
(a) section 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with a compliance notice given to the first respondent on 17 August 2021 in respect of Mr Clinton Wayne Hawthorne (Hawthorne Compliance Notice);
(b) section 716(5) of the FW Act by failing to comply with a compliance notice given to the first respondent on 8 September 2022 in respect of Mr Jackson Tutahi (Tutahi Compliance Notice);
(c) section 716(5) of the FW Act by failing to comply with a compliance notice given to the first respondent on 21 August 2023 in respect of Mr Ellie Varant Bomoushakian (Bomoushakian Compliance Notice); and
(d) section 536(3) of the FW Act by giving two pay slips to each of Ms Tutahi and Mr Bomoushakian which it knew to be false or misleading.
2. Upon admissions taken to have been made by reason of the second respondent’s default, the second respondent was involved, within the meaning of section 550(2)(c) of the FW Act, in the first respondent’s contraventions referred to in declarations 1(a), (b), (c) and (d) above and, by reason of section 550(1) of the FW Act, is taken to have contravened:
(a) section 716(5) of the FW Act, as referred to in declarations 1(a), (b) and (c) above; and
(b) section 563(3) of the FW Act, as referred to in declaration 1(d) above.
LEGISLATION
Sections 536(3) and 716(5) are civil remedy provisions: s.539 of the FW Act, items 29 and 33. In combination, ss.539(2) and 546(2) of the FW Act provide that the maximum pecuniary penalty for contravention of s.716(5) is 30 penalty units for an individual and 150 penalty units for a body corporate. The maximum pecuniary penalties for contravention of s.536(3) are, respectively, 60 penalty units for an individual and 300 penalty units for a body corporate unless a serious contravention is alleged, which it is not in this case.
At the time of the 2021 and 2022 contraventions (that is, in respect of the Hawthorne and Tuhati Notices) and the payslip contraventions, a penalty unit was worth $222: s.4AA Crimes Act 1914 (Cth).
At the time of the 2023 contravention (that is, in respect of the Bomoushakain Notice), a penalty unit was worth $313: s.4AA Crimes Act 1914 (Cth).
EVIDENCE
The Ombudsman read:
(a)the affidavit of Joseph Khoury, filed 1 February 2024;
(b)the affidavit of Ruby Miguntenna, filed 1 February 2024;
(c)the second affidavit of Ms Miguntenna, filed 11 April 2024;
(d)the affidavit of Kathleen Grace Davies, filed 10 May 2024;
(e)the second affidavit of Ms Davies, filed on 4 June 2024; and
(f)the affidavit of FWI Astorga, filed on 16 July 2024.
CONSIDERATION
Generally
The purpose of civil penalties of the sort available under the FW Act is deterrence, not compensation: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at 195 [116]; Dafallah v Fair Work Commission (2014) 225 FCR 559 at 593 [140]. In Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (2018) 264 FCR 155 at 167 [19], the Full Court of the Federal Court said:
It is unnecessary to engage in any extended discussion of principle. Of particular significance is the recognition that deterrence (general and specific) is the principal and indeed only object of the imposition of a penalty — to put a price on contravention that is sufficiently high to deter repetition by the contravener and others who might be tempted to contravene the Act: French J in Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076 at 52,152, cited by the plurality in Commonwealth v Director of the Fair Work Building Industry Inspectorate (Civil Penalties Case) [2015] HCA 46; (2015) 258 CLR 482 at [55]. ...
In this case, the question of penalty is to be determined as follows:
(a)the Court is to identify the separate contraventions involved. Each contravention of a separate obligation in the Award and the FW Act is a separate contravention: Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223; Kelly v Fitzpatrick (2007) 166 IR 14 at 17 [11]; McIver v Healey [2008] FCA 425 at [16]; Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153 at 159 [13]; Fair Work Ombudsman v Lohr (2018) 158 ALD 467 at 469 [29];
(b)the Court should consider whether contraventions resulting from any particular course of conduct ought to be treated as a single contravention under s.557(1) of the FW Act; (course of conduct);
(c)the Court should determine an appropriate penalty to impose in respect of each contravention that is to be penalised (whether a single contravention or a course of conduct) having regard to all of the circumstances of the case; and
(d)having fixed an appropriate penalty for each contravention the Court should consider the aggregate penalty to determine whether it is an appropriate response to the contravening conduct; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (the totality principle).
When determining the appropriate penalty to impose, regard should be had to all of the circumstances of the case, guided by the various discretionary considerations discussed in authorities such as Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 at 460-461 [18]-[19], in order to arrive at a single result that is an instinctive synthesis of those various factors.
Course of conduct
The contraventions committed by the respondents have been identified. The Ombudsman has submitted that the contraventions of s.536(3) of the FW Act in providing false or misleading payslips on four occasions ought to be taken to constitute a single contravention and I accept that submission. I also accept her submission that the contraventions of s.716(5) are sufficiently distinct, amongst other things, occurring about a year apart over a three year period, and that treating them as part of a single course of conduct would be inappropriate.
Particular considerations
The nature and extent of the conduct which led to the breaches
Relevant background facts have already been summarised. To that summary it may usefully be added that once the compliance notices were served, various attempts were made by the Ombudsman to communicate with the second respondent, all to no avail. Further, the evidence is that there had not been compliance with the Court’s orders, at least as at 15 July 2024, and Ms Miguntenna has advised the Court today that they had still had not been satisfied.
The losses suffered by the employees in question were:
(a)Mr Hawthorne: $3,556.81;
(b)Mr Tutahi: $8,704.04 plus superannuation; and
(c)Mr Bomoushakian: $4,259.61 less any PAYG tax paid, plus superannuation.
Those figures are deemed to have been admitted and so, I infer, were the calculations on which they were based, which are to be found in annexure A to the amended statement of claim. However, the figure for Mr Hawthorne was corrected in Ms Kelly’s affidavit of 10 May 2024 and I shall have regard to that figure instead of the one in the amended statement of claim.
Based on a 38 hour week, I have calculated Mr Bomoushakian’s salary as $190,000 p.a.,
Mr Hawthorne’s at $133,800 and Mr Tutahi’s at $66,500. The sums owed to Mr Hawthorne and Mr Bomoushakian were not great as a percentage of their total salaries but the same cannot be said in relation to Mr Tutahi. The relevant underpayment represented roughly 13% of his annual pay.
Corrective action, contrition and co-operation
Some corrective action was taken in respect of Mr Bomoushakian’s underpayments and so some credit should be given for that, but even now he has not been paid in full. No corrective action has been taken in relation to Mr Hawthorne and Mr Tutahi and the respondents have not participated in this proceeding in the slightest way. It appears that the respondents have chosen to disregard their obligations in respect of the employees.
Minimum standards
The system of compliance notices is an economical and efficient way of bringing contraventions to the attention of employers and to induce compliance with no other consequences for the employer, such as liability to suffer civil penalty. All that is required is that the stated contravention be remedied in accordance with the notice. The failure of the respondents to comply with the notices served in this case undermines the effectiveness of that system.
The purpose of the requirement that employees be given a written record of the pay they receive is obvious enough when it comes to situations like the present, where pay has not been paid as it should have been and was not paid when it was said to have been. Such a failure tends to undermine the basic entitlement to be paid for work performed, in that the failure can conceal a failure to satisfy that entitlement. The gravity of a failure to provide such records is manifested in the 600 penalty unit maximum penalty for a serious contravention.
Size of business and senior management
No evidence has been advanced to suggest that any consideration should be given to the respondents because of the size of the business, the availability of appropriate advice or any other matter peculiar to the business in question.
Deterrence
Given the respondents’ failure to comply with the Compliance Notices over the course of a number of years, what penalty might be appropriate to achieve deterrence, both special and general, is a matter of central importance. Although the first respondent is in the process of being struck off, it is still registered and may not ultimately be struck off. As for the second respondent, the evidence indicates that he is a director of four companies other than the first respondent. Given the respondents’ lack of compliance over a long time I consider a significant component for special deterrence should be included in the penalties for contravention of s.716(5) of the FW Act. Given that the respondents’ failures in that regard are considerable and persistent, it is important that a message be sent to others that such conduct will not go unaddressed by the Court and that the penalties to be imposed for contravention of s.716(5) include a significant element for general deterrence.
CONCLUSION
I find that the appropriate penalties in this case are:
First respondent
(a)Hawthorne compliance notice:, $19,800
(b)Tutahi compliance notice: $23,100
(c)Bomoushakian compliance notice: $28,170
(d)Payslips: $26,640
Total: $97,710
Second respondent
(a)Hawthorne compliance notice: $3,960
(b)Tutahi compliance notice: $4,620
(c)Bomoushakian compliance notice: $5,600
(d)Payslips: $5,300
Total $19,480
I believe those penalties to be just and appropriate.
I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 9 September 2024
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