Fair Work Ombudsman v Goldfinger Facility Management Pty Ltd & Anor
[2016] FCCA 356
•23 February 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v GOLDFINGER FACILITY MANAGEMENT PTY LTD & ANOR | [2016] FCCA 356 |
| Catchwords: PRACTICE AND PROCEDURE – Application for substituted service –difficulty in serving second respondent – test for substituted service. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.19(j) and (k), 58(3), 82(3) |
| Cotis v Macpherson [2007] FMCA 2060; (2007) 169 IR 30; (2007) 5 ABC(NS) 405 Fair Work Ombudsman v ACN 052 182 180 Pty Ltd [2013] FCCA 688 Fair Work Ombudsman v ACN 146 435 118 Pty Ltd & Anor (No. 2) [2013] FCCA 1270 Fair Work Ombudsman v Anahata Naturals Pty Ltd & Anor [2014] FCCA 2954 Fair Work Ombudsman v Finetune Holdings Pty Ltd & Anor (No. 3) [2012] FMCA 883 Fair Work Ombudsman v Garfield Berry Farm Pty Ltd [2011] FMCA 885; (2011) 9 ABC(NS) 593 Fair Work Ombudsman v Jay Group Services Pty Ltd & Ors [2014] FCCA 2869 Fair Work Ombudsman v Jooine (Investment)Pty Ltd & Anor [2013] FCCA 2144 Fair Work Ombudsman v Kentwood Industries Pty Ltd (No. 2)[2010] FCA 1156; (2010) 201 IR 234 Fair Work Ombudsman v Terrence Cyril Thomas (trading as Over The Top Happy Cleaning Services Pty Ltd ) [2013] FCCA 536 Hanssen Pty Ltd v Jones [2009] FCA 192; (2009) 179 IR 57 Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 Low v Maye [2015] FCCA 3485 Ponzio v B & P Caelli Constructions Pty Ltd[2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444 Societe des Produits Nestle SA & Anor v James William Christian & Anor [2014] FCCA 367 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | GOLDFINGER FACILITY MANAGEMENT PTY LTD |
| Second Respondent: | BLAGOJCE DJONESKI |
| File Number: | PEG 414 of 2014 |
| Judgment of: | Judge Antoni Lucev |
| Hearing dates: | 8 and 13 May and 10 July 2015 |
| Date of Last Submission: | 10 July 2015 |
| Delivered at: | Perth |
| Delivered on: | 23 February 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr R Hooker |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| For the First Respondent: | No appearance |
| For the Second Respondent: | No appearance |
ORDERS
Pursuant to rule 6.14 of the Federal Circuit Court Rules 2001 (“FCC Rules”), service by hand on the Second Respondent of the Application and Statement of Claim dated and filed 17 December 2014 (collectively, the Documents) in these proceedings be dispensed with, and that in lieu thereof the Documents be served on the Second Respondent by emailing the Documents to the following email address:
Pursuant to Rule 6.14 of the FCC Rules, that until further order, or until a Notice of Address for Service is filed by the Second Respondent, service by hand on the Second Respondent of all Documents in these proceedings be dispensed with, and that in lieu thereof all documents be served in the manner outlined in Order (1).
The Second Respondent file and serve a Notice of Address for Service on or before 7 days after the Applicant emails the Documents to the Second Respondent pursuant to Order (1).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 414 of 2014
| FAIR WORK OMBUDSMAN |
Applicant
And
| GOLDFINGER FACILITY MANAGEMENT PTY LTD |
First Respondent
| BLAGOJCE DJONESKI |
Second Respondent
REASONS FOR JUDGMENT
Introduction – Application
By application filed on 18 December 2014 (“the Application”), the applicant, the Fair Work Ombudsman (“FWO”) pleads that the first and second respondents, respectively, a company, Goldfinger Facility Management Pty Ltd (“Goldfinger”) and its sole director, secretary and shareholder, Mr Blagojce Djoneski (“Mr Djoneski”), operated a commercial cleaning business and:
a)failed to pay certain cleaning employees in accordance with the Cleaning Services Award 2010 (“Award”). The alleged contraventions relate to failure to pay wages, overtime and casual loading; and
b)in relation to two management employees there was underpayment of minimum wages, failure to pay wages in full, underpayment of annual leave on termination of employment, underpayment of public holiday pay and failure to provide payslips.
In respect of both the cleaning and management employees, relief, including declarations, orders for payment, and for the payment of pecuniary penalties are sought by the FWO.
Application in a Case for orders for substituted service
By an Application in a Case made on 7 April 2015 (“the Substituted Service Application in a Case”) the FWO seeks orders for personal service to be dispensed with and for substituted service as follows:
1. Pursuant to rule 6.14 of the Federal Circuit Court Rules 2001 (FCC Rules), service by hand on the Second Respondent of the Application and Statement of Claim dated and filed 17 December 2014 (collectively, the Documents) in these proceedings be dispensed with, and that in lieu thereof the Document be served on the Respondent by:
(a) Emailing the Documents to the email addresses of:
i. [email protected], and
ii. [email protected] and
iii. [email protected]; and
(b) publication of a notice of these proceedings in the form of Annexure A to this application once in 'The West Australian' newspaper published in the State of Western Australia and once in 'The Australian' newspaper within 14 days of these orders.
2. Pursuant to Rule 6.14 of the FCC Rules, that until further order, or until a Notice of Address for Service is filed by the Second Respondent, service by hand on the Second Respondent of all documents in these proceedings be dispensed with, and that in lieu thereof all documents be served in the manner outlined in Order 1 (a) and (b).
3. The Second Respondent file and serve a Notice of Address for Service on or before 7 days after the publication of a notice as referred to in 1 (b).
It is unnecessary to set out the terms of Annexure A.
History of the proceedings
Subsequent to the Application being filed on 18 December 2014, the matter was listed for a first directions hearing on 5 February 2015 where neither Goldfinger nor Mr Djoneski appeared. Orders were made adjourning the matter to a further directions hearing.
The further directions hearing took place on 7 April 2015 where again neither respondent appeared, and orders were made adjourning the matter to a second further directions hearing.
The second further directions hearing took place on 9 April 2015 where again neither Goldfinger nor Mr Djoneski appeared. The Court made the following orders:
1. The applicant’s application in a case be listed for hearing at 9.30am on 8 May 2015, with leave to the applicant to appear by telephone.
2. A copy of the application in a case and supporting affidavits be served by email to the email addresses of:
ii. [email protected]; and
iii. [email protected],
by 16 April 2015, and the applicant file and serve an affidavit of service by 23 April 2015.
3. Costs of today be reserved.
At the hearing of the Substituted Service Application in a Case on 8 May 2015 neither Goldfinger nor Mr Djoneski appeared. That hearing was adjourned to a third further directions hearing.
The third further directions hearing took place on 13 May 2015 and again neither Goldfinger nor Mr Djoneski appeared. The Court made the following orders:
1. The applicant’s application in a case be adjourned to 10.15am on 10 July 2015.
2. The applicant file submissions and any affidavit evidence in relation to:
(a) the second respondent’s status as an undischarged bankrupt;
(b) the applicant’s interest in continuing these proceedings;
(c) the public interest in continuing these proceedings; and
(d) the obligations of the applicant as a model litigant as they relate to these proceedings;
one week prior to the hearing.
3. Costs, if any, of today be reserved.
At the adjourned hearing of the Substituted Service Application in a Case on 10 July 2015 neither Goldfinger nor Mr Djoneski appeared.
Requirements for substituted service
Rule 6.14 of the Federal Circuit Court Rules 2001 (Cth) (“FCC Rules”) provides follows:
6.14 Substituted service
(1) If, for any reason, it is impracticable to serve a document in a way required under this Part, the Court may make an order dispensing with service or substituting another way of serving the document.
(2) The Court may specify the steps to be taken for bringing the document to the attention of the person to be served.
(3) The Court may specify that the document is to be taken to have been served on the happening of a specified event or at the end of a specified time.
Rule 6.15 of the FCC Rules sets out a non-exhaustive list of matters that the Court may have regard to in ordering substituted service, as follows:
6.15Matters to be taken into account
When making an order for dispensing with service or for substituted service, the Court may have regard to:
(a) whether reasonable steps have been taken to attempt to serve the document; and
(aa) whether it is likely that the steps that have been taken have brought the existence and nature of the document to the attention of the person to be served; and
(b) whether the person to be served could become aware of the existence and nature of the document by means of advertising or another means of communication that is reasonably available; and
(c) the likely cost to the party serving the document, the means of that party and the nature of the proceedings; and
(d) any other relevant matter.
In Societe des Produits Nestle SA & Anor v James William Christian & Anor [2014] FCCA 367 at [3] to [10] per Judge Manousaridis (“Nestle SA”) this Court reviewed the cases concerning dispensing with service and substituted service for the purposes of applying r.6.14 of the FCC Rules, and then went on to set out the matters about which the Court had to be satisfied before making an order for substituted service, as follows:
11. To satisfy the Court, therefore, that it is impracticable to serve by hand a document on a person that the rules require be served by hand, it is necessary for the party seeking to so persuade the Court to adduce evidence that tends to establish the following:
a) a diligent attempt has been made to discover the place or places at which the person may be served by hand the document, but that attempt has not produced reliable information about the place or places at which the person may be handed the document; or
b) if there is reliable information about the place or places at which the person may be handed the document, diligent attempts have been made to meet that person at that place or places with a view to handing that person the document, but those attempts have proved fruitless.
12. The second matter of which, in my opinion, the Court must be satisfied before it may make an order under r.6.14 of the FC Rules dispensing service is that the document “has been brought to the attention of the person to be served”. In the context of rules for substituted service which have used the same expression, it has been held that this requires the Court to be satisfied that the proposed method of substituted service (or the method of service actually undertaken) is reasonably likely to bring the proceedings to the notice of the person being served: Syndicate Mortgage Solutions Pty Ltd v Khaled El-Sayed [2009] NSWSC 207 per Brereton J.
Nestle SA at [11]-[12] per Judge Manousaridis.
Affidavits in support of Substituted Service Application in a Case
In support of the Substituted Service Application in a Case the following affidavits were relied upon:
a)the affidavit of John Lawrence Henke (“Mr Henke”) sworn on 23 January 2015 (“Mr Henke’s Affidavit”);
b)the affidavit of Toni Ann Dwyer Goldston (“Ms Goldston”) sworn on 2 April 2015 (“Ms Goldston’s First Affidavit”);
c)the affidavit of Luke Russell Thomas (“Mr Thomas”) affirmed on 7 April 2015 (“Mr Thomas’ First Affidavit”);
d)Ms Goldston’s affidavit of service sworn 23 April 2015 (“Ms Goldston’s Second Affidavit”);
e)Ms Goldston’s affidavit sworn 3 July 2015 (“Ms Goldston’s Third Affidavit”);
f)Mr Thomas’ affidavit affirmed 3 July 2015 (“Mr Thomas’ Second Affidavit”) and
g)Mr Thomas’ affidavit affirmed 9 July 2015 (“Mr Thomas’ Third Affidavit”).
Ms Goldston’s First Affidavit
Ms Goldson’s First Affidavit deposes that she is a senior employer with the FWO with the conduct of this matter.
In relation to service on Goldfinger Facility Management Ms Goldston says that:
a)on 12 January 2015, after these proceedings were initiated, she caused a letter containing the Application and Statement of Claim to be sent by registered post to the proper officer of Goldfinger Facility Management to the address listed as Goldfinger Facility Management’s registered office on an annexed company search;
b)the letter to Goldfinger Facility Management was returned unopened;
c)on 3 February 2015 Ms Goldston phoned the office listed as the registered office of Goldfinger Facility Management and was told that Goldfinger Facility Management was no longer a client, and that that office had had no contact with Goldfinger Facility Management since assisting Mr Djoneski to establish Goldfinger Facility Management;
d)attempts have been made by a firm of process servers to serve Mr Djoneski by hand at the address listed in the company search, but the process servers have advised Ms Goldston that they were unable to effect service;
e)on 23 and 27 January 2015, Ms Megan Carter, a senior lawyer employed by the FWO, sent emails to Mr Djoneski at email addresses obtained by the FWO during the course of the investigations to which the proceedings relate, namely:
ii)[email protected]; and
iii)[email protected],
(“the Email Addresses”) but no response was received from Mr Djoneski;
f)on 27 January 2015 the FWO commissioned a firm of investigators to conduct a location search of Mr Djoneski in order to try and locate him, but that search was unsuccessful;
g)the location search showed that Mr Djoneski was bankrupt by reason of a sequestration order made against him on 23 July 2014, and that he remained an undischarged bankrupt;
h)the FWO wrote to the Official Trustee in Bankruptcy (“Official Trustee”) requesting assistance to locate Mr Djoneski on 23 February 2015, but the official trustee’s response of 4 March 2015 (“Official Trustee’s March 2015 Letter”) advised that:
i)Mr Djoneski has not yet lodged his statement of affairs with the official trustee;
ii)the official trustee has exhausted all avenues to notify the bankrupt regarding his bankruptcy including email, registered post and telephone;
iii)contact details provided by the petitioning creditor in the bankruptcy for Mr Djoneski were not correct; and
iv)the official trustee would not be able to provide any contact details that would assist the FWO to locate Mr Djoneski;
i)a movement search conducted by the Border Operations Centre of the Department of Immigration and Border Protection (“Department of Immigration”) at the instance of the FWO resulted in advice to the FWO on 1 April 2015 from the Department of Immigration that Mr Djoneski had not exited Australia within the period 19 June 2014 to 25 March 2015;
j)there was some evidence that Mr Djoneski had used a virtual office at 50 St Georges Terrace, Perth, but the proprietors of the virtual office had stopped doing business with Mr Djoneski because he owed them money; and
k)on 2 April 2015 Ms Goldston obtain a mobile telephone number for Mr Djoneski from a source who wishes to remain anonymous, and the phone went through to a message bank identifying it as the phone of Bill Djoneski, and Ms Goldston left a message that she was ringing to advise that the FWO had commenced proceedings against him in relation to Goldfinger Facility Management’s alleged contraventions of workplace laws, and requesting that he contact her urgently on a telephone number which she provided so that she could provide him with a copy of the Application and Statement of Claim in the proceedings.
The Court notes that the Official Trustee’s March 2015 Letter indicates that:
a)Mr Djoneski resigned from the position of sole director of the company on the date of bankruptcy;
b)ASIC disqualified Mr Djoneski from managing companies for three years from 19 May 2010 due to his involvement as a director of four failed companies all involving cleaning businesses under different names;
c)because a cleaning business would not have any substantial assets, other than vacuum cleaners, office furniture and equipment, the Official Trustee did not consider it to be commercial to attempt to realise Goldfinger Facility Management’s assets or equity, the existence and whereabouts of which were unknown: Bankruptcy Act, s.19(j) and (k);
d)the Official Trustee has finalised its investigation in relation to Goldfinger Facility Management, and does not intend to appoint any director to Goldfinger Facility Management because it is uncommercial to do so, but indicated to the FWO that it could seek an order from a Court to appoint a liquidator for the company; and
e)the Official Trustee’s investigations could not identify any realisable assets in the bankrupt estate of Mr Djoneski and as a result it is unlikely that a dividend will be paid from Mr Djoneski’s bankrupt estate.
In the Official Trustee’s March 2015 Letter the Official Trustee also said as follows:
It is the view of the Official Trustee that joining the proceedings as a party would be of no benefit to the estate. As a result, the Official Trustee will not join the proceedings as a party.
The bankrupt estate currently has no funds. Therefore, please ensure that no Cost Order is sought against the Official Trustee in this matter.
Furthermore, please note the provisions of Section 58(3) of the Act:
s. 58(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
However, it should also be noted that [a] Civil Penalty may not be provable in bankruptcy under s.82(3) of the Act and therefore a leave of the Court may not be required for the proceedings to commence:
s. 82(3) Penalties or fines imposed by a court in respect of an offence against a law, whether a law of the Commonwealth or not, are not provable, in bankruptcy.
Ms Goldston’s Second Affidavit
Ms Goldston’s Second Affidavit attests to service being effected in accordance with the Court’s orders of 9 April 2015.
Ms Goldston’s Third Affidavit
Ms Goldston’s Third Affidavit attests that:
a)on 1 June 2015, the FWO commissioned Advance National Services to conduct a second location search on Mr Djoneski in order to try and locate him;
b)on 12 June 2015, the FWO received notification that the second location search had not located Mr Djoneski. A copy of that location search report was annexed to Ms Goldston’s Third Affidavit.
Mr Henke’s Affidavit
Mr Henke is a process server acting on behalf of AAC Process Servers & Investigations. Mr Henke’s Affidavit says that upon instructions from the FWO he sought to effect service of the Application and Statement of Claim, plus a letter from the FWO, upon Mr Djoneski at the Terrace Road address given in the company search for Goldfinger Facility Management. Mr Henke attended at the Terrace Road address on three consecutive days, 16, 17 and 18 January 2015, and twice on 17 January 2015. Mr Henke’s Affidavit further says that:
a)on 16 January 2015 he was unable to gain any response via the intercom at the secure residential complex for the unit number for Mr Djoneski;
b)on the morning of 17 January 2015 he was again unable to gain any response via the intercom system;
c)in the evening of 17 January 2015 he spoke to a male person via the intercom for the unit with Mr Djoneski’s address who advised him that he did not know anyone by that name and stated that Mr Henke had the wrong address; and
d)on 20 January 2015 Mr Henke rang a mobile number which had been provided to him, but was advised that it had been disconnected.
Mr Thomas’ First Affidavit
In Mr Thomas’ First Affidavit he says he is a Fair Work Inspector under the Fair Work Act 2009 (Cth) employed by the FWO’s Adelaide office, and further says that:
a)he had the conduct of the investigation into the alleged contraventions of the FW Act by Goldfinger Facility Management and the involvement in those alleged contraventions by Mr Djoneski;
b)deposes to various attempts to locate Mr Djoneski, including:
i)attending at The Melbourne Hotel in Perth where the employees the subject of alleged contraventions worked for Goldfinger Facility Management, and being told that The Melbourne Hotel had terminated their contract with Goldfinger Facility Management;
ii)discussions with the landlord of serviced offices in St Georges Terrace, Perth which had been leased by Goldfinger Facility Management, but which lease had been terminated for non-payment of rent;
iii)an internet search which identified an entity called Goldfinger International Consultants Corporation which had a street address in St Georges Terrace, Perth (as well as a mailing address at another St Georges Terrace, Perth address) and a subsequent attendance at the street address, where he was informed that a person called “Bill” had had a virtual office previously but had his contract terminated due to non-payment;
iv)attendance at the street address for the St Georges Terrace mailing address, at which he was informed that those premises were a virtual mailbox;
v)a telephone attendance upon a person who had a serviced office at 44 St Georges Terrace and who indicated that Mr Djoneski was a client but that she had not recently spoken to Mr Djoneski, and who provided to Mr Thomas a mobile telephone contact number for Mr Djoneski;
vi)an attendance at an address in Terrace Road, East Perth listed as the residential address for Mr Djoneski on the company search, where the building manager informed him that Mr Djoneski was evicted from the premises in 2014;
vii)documents from sources including employees the subject of the alleged contraventions and the serviced office providers indicating that they had corresponded with Mr Djoneski on emails addresses including [email protected] and [email protected];
viii)his having sent a number of emails to Mr Djoneski at [email protected], [email protected] and [email protected] to which no response has been received;
ix)attempts to contact Mr Djoneski on four different telephone numbers (one mobile and three landlines), three of which were disconnected and the fourth belonging to a person who worked for a major construction company;
x)electoral roll searches in the names of Blagojce Djoneski; Blagojce Doneski; Bill Djoneski; and Bill Doneski, which were unsuccessful in obtaining an address for Mr Djoneski; and
xi)a location report (often referred to as a skip trace report) provided to the FWO by a process serving firm which revealed the St Georges Terrace premise address as already visited, and the name of a further cleaning services company the premises for which were not attended as the company had been de-registered.
Mr Thomas’ Second Affidavit
Mr Thomas’ Second Affidavit relevantly attested that on 12 May 2015 Mr Thomas caused a search to be conducted by the Border Operations Centre of the Department of Immigration to determine whether Mr Djoneski had departed Australia after 25 March 2013. On 27 May 2015 the Department of Immigration advised the FWO that there were no movement records for the requested timeline.
Mr Thomas’ Third Affidavit
Mr Thomas’ Third Affidavit relevantly attested that:
a)on 26 May 2015, he had a conversation with Mr Glenn VanderPutt (“Mr VanderPutt”) a Director of Wild Energy Pty Ltd (“Wild Energy”), which owns and operates the Email Addresses. Mr VanderPutt told him that the Email Addresses would expire on 27 May 2015 and said words to the effect that Wild Energy would no longer do business with Mr Djoneski;
b)he discussed with Mr VanderPutt whether an extension of the expiry dates for the Email Addresses could be obtained so as to allow for the service of court documents, and Mr VanderPutt said words to the effect that an extension could be obtained if the FWO was willing to pay for that extension;
c)on 27 May 2015, Ms Goldston instructed Mr VanderPuttt to extend the expiry dates for the Email Addresses;
d)on 17 June 2015, he sent a test email to [email protected]. On 20 June 2015 he received a message informing him that the delivery of the message had failed;
e)on 22 June 2015, he informed Mr VanderPutt by email of the delivery failure message for the email sent to [email protected]. Mr VanderPutt stated that he had sent a test email and it went through without any problems; and
f)on 3 July 2015, he sent a further test email to the Email Addresses, and received a message informing him that the delivery of the message sent to [email protected] had failed.
Consideration
Issues
Before dealing with the question of whether the Substituted Service Application in a Case ought to be granted, the Court deals with two other issues, namely:
a)whether Mr Djoneski’s status as an undischarged bankrupt is a bar to the imposition of civil penalties under the FW Act; and
b)whether the public interest would be served by continuance of the proceedings.
In terms of the Substituted Service Application in a Case the issues which arise for determination are:
a)whether diligent efforts have been able to locate Mr Djoneski which have been unsuccessful; and
b)whether the proposed method of substituted service is likely to bring the proceedings to the notice of Mr Djoneski.
Mr Djoneski’s status as an undischarged bankrupt
Mr Djoneski was declared bankrupt on 23 July 2014.
Section 58(3) of the Bankruptcy Act provides:
Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a) To enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b) Except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
Section 82(3) of the Bankruptcy Act provides as follows:
(3) Penalties or fines imposed by a court in respect of an offence against a law, whether a law of the Commonwealth or not, are not provable in bankruptcy.
The FWO seeks the imposition of civil penalties in relation to Mr Djoneski, but does not seek any orders for rectification by Mr Djoneski of any amounts found by the Court to have been underpaid by Goldfinger.
Cotis v Macpherson [2007] FMCA 2060; (2007) 169 IR 30; (2007) 5 ABC(NS) 405 (“Cotis”) was a case in relation to the imposition of penalties under the Workplace Relations Act 1996 (Cth) (“WR Act”) in circumstances where the person against whom the penalties were to be imposed was bankrupt. The question arose as to whether a penalty under s.719 of the WR Act (the predecessor of the s.546 of the FW Act) was a penalty imposed by a court in respect of an offence against Commonwealth law and hence not a provable debt, and whether the person seeking the imposition of penalties, who was a Workplace Inspector under the s.167 of the WR Act, was a creditor of the bankrupt.
In Cotis at [7] per Driver FM the Federal Magistrates Court agreed with submissions made by the applicant Workplace Inspector, Mr Cotis, to the following effect:
Section 58(3): applicable principles
The applicant is not a creditor enlivening s.58(3) of the Bankruptcy Act
Upon the declaration of bankruptcy all property of the bankrupt vests in the Official Trustee (s.58(1)). Therefore, a “creditor” may not commence any legal proceedings if the proceedings are in respect of a “provable debt” (s.58(3)).The applicant, in applying for the relief set out in the Application, is not a “creditor” for the purpose of s.58(3) of the Bankruptcy Act but rather is a person to whom standing has been given pursuant to the Workplace Relations Act to commence proceedings against the respondent (the term “creditor” is not relevantly defined in s.1 of the Bankruptcy Act).
Accordingly, s.58(3) of the Bankruptcy Act is not enlivened and leave need not be sought by the applicant prior to commencing these proceedings and the respondent cannot apply to have the proceedings stayed pursuant to s.60(1)(b)(i) of the Bankruptcy Act (see further below).Even if the applicant were a creditor for the purpose of s.58(3) of the Bankruptcy Act, the relief sought does not engage the Bankruptcy Act
If the applicant were a creditor for the purpose of s.58(3) of the Bankruptcy Act, neither the declarations nor the penalty sought are “provable debts” for the purpose of the Bankruptcy Act and thus s.58(3) has no application.In order to determine if leave is required under s.58(3) it is necessary to consider whether the relevant proceedings are as specified in that provision “in respect of a provable debt”.
The words “in respect of” are widely construed, particularly in light of the policy underlying that provision and the Bankruptcy Act generally of ensuring a fair distribution of the bankrupt’s assets among creditors, so that no one creditor receives undue advantage (see Re Sharp; Ex parte Tietyens Investments Pty Ltd (in liq) [1998] FCA 1367 at 7 and Green v Schneller (2001) 189 FLR 82 at 85-87).The nexus required between the proceeding and the provable debt may be both direct and indirect (Melnik v Melnik [2005] FCAFC 160 at [45]- [48]).
It is therefore necessary to examine whether or not the civil penalty and declarations sought in the application give rise to “a provable debt”. If they do not then s.58(3) does not apply.
The term “provable debt” is broadly defined in s.82(1) of the Bankruptcy Act and would appear to apply to the recovery of, for example, payments sought from the respondent to satisfy any outstanding employee entitlements (Storey v Lane [1981] HCA 47; (1981) 147 CLR 549). As defined the term would clearly not apply to declaratory relief.However, in relation to the penalty sought to be imposed on the respondent, the penalty is not a provable debt (Mathers v Commonwealth [2004] FCA 217; (2004) 134 FCR 135 at [13]- [14] and [22]-[29] and Australian Winch & Haulage Co Pty Ltd v State Debt Recovery Office [2005] NSWSC 423; (2005) 189 FLR 315 at [10]) and is therefore not subject to the prohibition in s.58(3) against the commencement of legal proceedings.
For the reasons given above, insofar as relief sought is concerned, the Court does not, because it is not a provable debt, have any jurisdiction to stay or otherwise determine incompetent the proceedings commenced by the applicant against the respondent.
In Cotis is was further said at [8]-[10] per Driver FM as follows:
8. In addition to those submissions I note that the learned authors in McDonald, Henry and Meek, Australian Bankruptcy Law and Practice, at page 1-4085, paragraph 82.3.05, state:
Section 82(3) [of the Bankruptcy Act] makes it clear that all penalties or fines imposed by courts are not provable debts. In addition, statutory fines initially imposed by bodies that are not courts (eg parking fines imposed by, and ultimately payable to, a local council or other authority, pursuant to the “PERIN” procedure in Sch 7 to the Magistrates Court Act 1989 (Vic) have been held to be “fines imposed by a Court” under s 82(3) where the orders for their collection and enforcement are made by a court, and orders for payment of the fines are deemed by legislation to be orders of a court.
9. The learned authors refer to State of Victoria v Mansfield [2003] FCAFC 154; (2003) 130 FCR 376; 199 ALR 395. The learned authors go on to state that:
The “offence against a law” for which the penalty or fine was imposed need not be criminal in nature, and a pecuniary penalty imposed under s 76 of the Trade Practices Act 1974 breaches of Pt IV of that Act (which due to s 78 are not criminal) would not be a provable debt due to the operation of s 82(3): Mathers v Commonwealth [2004] FCA 217; (2004) 134 FCR 135.
10. I find, on the basis of the submissions and the authorities referred to that, for the purposes of s.82(3) of the Bankruptcy Act, the penalties sought by the applicant in this proceeding are penalties for fines imposed by a court in respect of an offence against a law of the Commonwealth and hence are not provable in bankruptcy. It follows that s.58(3) of the Bankruptcy Act provides no bar to the present proceeding. It also follows that any penalties imposed by the Court would remain payable after the discharge of Mr Macpherson from bankruptcy, and that bankruptcy provides no release in respect of them.
In Cotis, the Federal Magistrates Court further observed that neither personal nor corporate insolvency was a refuge from the sanction of a civil penalty under s.719 of the WR Act: Cotis at [12] per Driver FM.
Following Cotis, the Federal Magistrates Court in Fair Work Ombudsman v Finetune Holdings Pty Ltd & Anor (No. 3) [2012] FMCA 883 at [48] per Lucev FM observed that:
Bankruptcy is no bar to the imposition of civil penalties against an individual.
In Fair Work Ombudsman v Garfield Berry Farm Pty Ltd [2011] FMCA 885; (2011) 9 ABC(NS) 593 at [13]-[14] per Riley FM the Federal Magistrates Court observed as follows:
13. What is sought ultimately in this case is a penalty or fine in respect of an offence against a law of the Commonwealth. There is authority that penalties imposed under the Fair Work Act 2009 are not debts provable in the bankruptcy. They are authorities of this court, namely, Curtis v MacPherson [sic] [2007] FMCA 2060; (2007) 169 IR 30 at paragraphs 6 to 10, and Fair Work Ombudsman v Bundy Market Meats Pty Ltd (2009) 190 IR 180; [2009] FMCA 994 at 2. This court, of course, should follow decisions of other Federal Magistrates for reasons of judicial comity, unless it is thought that those decisions are clearly wrong. I am not of the view that they are clearly wrong. On the contrary, it seems to me that they are correct.
There is also a decision of the Federal Court, Mathers v Commonwealth of Australia (2004) 134 FCR 135; [2004] FCA 217, where Heerey J considered the meaning of the word “offence” in s.82(3) of the Bankruptcy Act 1966. His Honour noted that a criminal offence is one type of offence, and “offence”, in fact, means any contravention of a law. It seems to me that on the authority of Mathers, it is clear that the penalties that would be imposed under the Fair Work Act 2009 and Workplace Relations Act 1996 (repealed) in this case would be penalties in respect of an offence against a law. Consequently, they would not be debts provable in the bankruptcy, and there is nothing to prohibit the court proceeding with the application in this case.
In Fair Work Ombudsman v ACN 052 182 180 Pty Ltd [2013] FCCA 688 at [24] per Judge F Turner it was said that:
The Court notes that penalties are not characterised as provable debts, and hence survive bankruptcy. This was acknowledged by the Court in Cotis …
The authorities make it clear, and the Court therefore finds, that s.58(3) of the Bankruptcy Act is inapplicable to these proceedings because:
a)the FWO is not a creditor for the purposes of the Bankruptcy Act; and
b)section 82(3) of the Bankruptcy Act provides that penalties or fines imposed by a Court in respect of an offence against a law, whether a law of the Commonwealth or not, are not provable in bankruptcy.
The FWO’s interest and the related public interest in continuing the proceedings
FWO functions and the public interest
The functions of the FWO are enacted in s.682 of the FW Act and include:
a)“to commence proceedings in a court, … to enforce this Act, fair work instruments and safety net contractual entitlements”: s.682(d) of the FW Act; and
b)“to represent employees who are, or might become, a party to proceedings in a court, … under this Act, or a fair work instrument, if the FWO considers that representing the employees will promote compliance with this Act or the fair work instrument”: s.682(f) of the FW Act.
The allegations in issue in these proceedings are contraventions of the FW Act, alleged to have occurred to the significant detriment of employees who have not been paid at all, or significantly underpaid in relation to one employee.
In initiating proceedings of this nature, or of an analogous kind, the objective of a public regulator is different to that of a party to a commercial proceeding, and is part of a compliance system aimed at bringing about compliance with Commonwealth workplace laws.
Loss to the Employees
The alleged contraventions are serious. They represent an alleged failure to afford six employees important minimum entitlements as provided for in the Award and the FW Act. Five of the employees, it is alleged, were not paid at all. The amounts alleged to be owed to each of the employees is significant given their short periods of employment:
a)Mr Ferriday worked for Goldfinger for 28 days and was underpaid $3,351.91 representing 100% of his entitlement;
b)Ms Lee worked for Goldfinger for 17 days and was underpaid $1,557.08 representing 100% of her entitlement;
c)Ms Kim worked for Goldfinger for 14 days and was underpaid $1,263.35 representing 100% of her entitlement;
d)Ms E Kim worked for Goldfinger for 21 days and was underpaid $3,187.33 representing 100% of her entitlement;
e)Mr Khaja worked for Goldfinger for 54 days and was underpaid $4,211.54 representing 72.5% of his entitlement; and
f)Mr Quaraishi worked for Goldfinger for 127 days and was underpaid $13,055.89 representing 100% of his entitlement.
The employees have been without their alleged wage entitlement for a lengthy period of time. During that time, Goldfinger may have had the benefit of the alleged underpayments or non-payments. Further, the employees are not entitled to access the Fair Entitlements Guarantee scheme as they do not meet the requirements of s.10(1) of the Fair Entitlements Guarantee Act 2012 (Cth) (“FEG Act”). They do not meet the requirements of the FEG Act as:
a)the end of their employment was not due to the insolvency of Goldfinger;
b)their employment did not conclude less than six months before the appointment of an insolvency practitioner for Goldfinger;
c)the end of their employment did not occur after the appointment of an insolvency practitioner for Goldfinger; and
d)five of the employees are not Australian citizens or permanent residents of Australia.
Given the practical difficulties the employees would likely face in maintaining any relevant form of enforcement proceedings on their own behalf, the Court accepts that these proceedings represent the only realistic option that enables the employees to access a meaningful remedy.
Means of relief
In the event that Goldfinger becomes insolvent and is thus incapable of rectifying any underpayments which are established, the FWO may seek orders under s.546(3) of the FW Act that any pecuniary penalties imposed by the Court against either Goldfinger or Mr Djoneski are paid to the employees, to the extent that the underpayments are not, or are unlikely to be, rectified by Goldfinger.
In Fair Work Ombudsman v Anahata Naturals Pty Ltd & Anor [2014] FCCA 2954, the FWO successfully obtained a penalty against Anahata Naturals Pty Ltd in circumstances with similarities to this matter. The FWO obtained:
a)default judgment against the company in circumstances where the Official Trustee declined to appoint a director to the company;
b)orders imposing penalties against the company and a bankrupt director; and
c)orders that the company rectify the outstanding wages, however if the company did not so rectify, that the bankrupt director pay penalty amounts to the relevant employee to the amount of the underpayment.
Ultimately, in the event that all or some of the alleged contraventions are substantiated, even if penalties are not ordered, or ordered but not paid, declaratory relief is sought by the FWO. Declarations have genuine utility as they clearly identify the contravening conduct and mark the Court’s disapproval of that conduct. In Fair Work Ombudsman v Kentwood Industries Pty Ltd (No. 2)[2010] FCA 1156; (2010) 201 IR 234 at [210] per McKerracher J the Federal Court observed that:
There may be a public interest in the granting of declaratory relief in regulatory proceedings to record the contraventions’ seriousness and to explain the basis for the imposition of pecuniary penalties and other relief. A declaration in this case may indicate the importance of compliance with statutory standards, particularly in the employment of low paid and/or vulnerable employees.
Specific deterrence
Mr Djoneski, on the evidence before the Court, has an extensive history vis-a-vis the FWO and its predecessors in which entities operated by him have been the subject of complaints to the FWO by its employees: Mr Thomas’ Second Affidavit at [7]-[13]. That history involves a particular lack of co-operation resulting in the frustration of at least 10 of the FWO’s investigations, in addition to the six investigations that are the subject of these proceedings: Mr Thomas’ Second Affidavit at [8(a) and (d),] [9(b)], [10(a), (b), (e), (f) and (g)] and [12(a) and (b)]. The evidence also reflects that Mr Djoneski also has a history of operating businesses that fail, and then subsequently setting up new businesses: Mr Thomas’ Second Affidavit at [7]. If the alleged contraventions are proven, subject to any evidence led, or anything which might be said in mitigation by Goldfinger or Mr Djoneski (should they appear), the need for specific deterrence may be significant, and be a means of holding Goldfinger and Mr Djoneski (as the sole director, secretary and shareholder of Goldfinger) to account for any contraventions proven, and provide a means for the Court to express its view of any proven conduct by Goldfinger or Mr Djoneski.
General deterrence
The role of general deterrence in determining penalty is illustrated by the Federal Court in Ponzio v B & P Caelli Constructions Pty Ltd[2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444 at [93] per Lander J:
In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217.
It is arguable that there is a high need for general deterrence in the cleaning industry as:
a)there is a high volume of complaints to the FWO concerning the cleaning industry: Mr Thomas’ Second Affidavit at [15];
b)high volumes of contraventions of workplace laws are being identified by the FWO concerning the cleaning industry: Mr Thomas’ Second Affidavit at [15]-[16]; and
c)the cleaning industry is providing job opportunities for a large number of employees who may be vulnerable to exploitation: Mr Thomas’ Second Affidavit at [16], and in this case four of the employees were in the arguably vulnerable position of being non-citizens of Australia with permission to reside in the country under the terms of their applicable working visas: Fair Work Ombudsman v Jooine (Investment)Pty Ltd & Anor [2013] FCCA 2144 at [92]-[93] per Judge Lloyd-Jones (“Jooine”).
The need for deterrence, both specific and general, in the cleaning industry is well recognised by the Court: see, for example, Fair Work Ombudsman v Jay Group Services Pty Ltd & Ors [2014] FCCA 2869 at [68] per Judge Lloyd-Jones; Jooine at [98]-[103] per Judge Lloyd-Jones; Fair Work Ombudsman v ACN 146 435 118 Pty Ltd & Anor (No. 2) [2013] FCCA 1270 at [87]-[92] per Judge Lucev; Fair Work Ombudsman v Terrence Cyril Thomas (trading as Over The Top Happy Cleaning Services Pty Ltd) [2013] FCCA 536 at [46]-[48] per Judge Riley.
The Court accepts that by seeking declarations and the imposition of penalties in the event that certain conduct is proven, the FWO seeks to make employers, and the community generally, aware that employers must provide employees with the correct entitlements and provide each employee with a payslip, and that if they do not penalties may result. There is therefore a general deterrence purpose in continuing these proceedings.
Obligations of the FWO as a model litigant
The Commonwealth’s obligations, and those of its agencies, to act as a model litigant are set out in Appendix B of the Legal Services Directions 2005 (“Legal Services Directions”), sourced in the Judiciary Act 1903 (Cth). Clause 2(e) of the Legal Services Directions requires litigation costs to be kept to a minimum. The Legal Services Directions must, however, be considered in the statutory context of the FWO’s decision to bring and maintain these proceedings, and its application seeking to continue these proceedings, under the FW Act is consistent with the objectives of the FWO as a regulator as set out in the FW Act.
Conclusion – public interest and continuance of proceedings
The Court accepts that there is a public interest in bringing and continuing these proceedings because:
a)nothing arising from or associated with Mr Djoneski’s financial circumstances precludes the Court from proceeding to exercise its jurisdiction, or in turn the FWO from continuing to maintain its pursuit of the Application compatibly with its statutory role and functions;
b)should the allegations, or some of them, be established, the Court can mark its disapproval of the contraventions, an outcome which, among other possible consequences, will serve as a warning to other employers against engaging in similar conduct: Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 at [28] per Tracey J (“Kelly”).
c)of the significance of the quantum of the alleged loss to the employees, these proceedings representing the only realistic option for the employees to obtain a meaningful remedy for the losses alleged to have been caused to them;
d)in continuing the proceedings against both Goldfinger and Mr Djoneski the prospects of appropriate relief whether by way of penalty or declaration are maximised;
e)making declarations will:
i)record the serious nature of the contraventions; and
ii)help to educate employers about their obligation to ensure that employees are paid the correct wage entitlements, and warn them of the consequences of failing to meet those obligations;
f)the allegations, if sustained, giving rise to a genuine purpose of specific deterrence, given that the evidence discloses Mr Djoneski’s significant history of being the subject of related complaints to the FWO and its predecessors (some of which have been substantiated) and of frustrating the investigations of the FWO: Mr Thomas’ Second Affidavit at [7]-[13]; and
g)the further genuine purpose of general deterrence given that:
i)as they were visa holders at the time of the contraventions five of the employees may be vulnerable to exploitation, four of the employees being on working holidays and another being subject to a Temporary Business Entry Visa (Class UC): Jooine at [92]-[93] per Judge Lloyd-Jones (but as to the exploitation of vulnerable employees on working visas, and the need for proof of the exploitation: see Hanssen Pty Ltd v Jones [2009] FCA 192; (2009) 179 IR 57 at [59]-[62] per Siopis J (“Hanssen”));
ii)the cleaning industry is an industry with high volumes of complaints to the FWO and high levels of contraventions; and
iii)it is important for the FWO as a regulator to ensure that, where employers engage in behaviour to evade the FWO, such behaviour will not result in, or risk, the regulator adopting an approach to its statutory role and functions which is other than diligent and rigorous.
The Court accepts that in all the circumstances of this matter as articulated above, the continuance of these proceedings against Goldfinger and Mr Djoneski is in the public interest.
Attempts to locate and serve Mr Djoneski
The following steps have been taken by the FWO to personally serve or to locate Mr Djoneski:
a)on 16 and 17 January 2015, Mr Henke, a process server engaged by Advanced National Services at the direction of the FWO, attempted to personally serve the Documents on Mr Djoneski at the address listed for Mr Djoneski with ASIC;
b)on 23 and 27 January 2015, attempts were made to provide the Documents to Mr Djoneski via email at the Email Addresses obtained by the FWO during the investigation to which this matter relates;
c)engaging Advanced National Services on two occasions to conduct a comprehensive location search;
d)corresponding with the Official Trustee and being advised that the Official Trustee was not able to locate Mr Djoneski;
e)obtaining two searches from the Department of Immigration to determine whether Mr Djoneski is in fact residing in Australia, and being advised that Mr Djoneski had not recently departed Australia;
f)conducting an electoral roll search and being unable to obtain an address for Mr Djoneski;
g)leaving a message on a mobile phone number which had a recorded voice mail message in the name of “Bill Doneski”; and
h)sending an email annexing the Documents to Mr Djoneski at the Email Addresses.
The Court is satisfied that the FWO has not personally served Mr Djoneski with the Application and Statement of Claim as required by r.6.06 of the FCC Rules as, despite numerous attempts to locate Mr Djoneski, the FWO has been unable to do so.
The Court finds that the FWO, despite considerable and diligent efforts to do so, has not been able to locate Mr Djoneski.
Whether proposed method of substituted service likely to bring proceedings to notice of Mr Djoneski
Essentially, the proposed means of substituted service are:
a)by means of emailing the relevant documents to the Email Addresses; and
b)publication of a notice in a particular form in ‘The West Australian’ and ‘The Australian’ newspapers.
The evidence discloses that employees and the serviced office providers have communicated with Mr Djoneski on the [email protected] and [email protected] email addresses. There is no evidence that any person has corresponded successfully with Mr Djoneski, or anyone else, at the [email protected] email address. There is evidence that Mr Thomas sent a test email to [email protected] which failed, but subsequently he was advised that a test email sent to that email address had gone through without any problems. Subsequently, Mr Thomas sent a test email to the Email Addresses and received a message informing him that delivery of the message sent to [email protected] had failed. There is no evidence of successful transmission of an email to this email address subsequently, and the Court is therefore not satisfied that an email to this address would be brought to Mr Djoneski’s attention. Therefore, as at 3 July 2015, the email addresses [email protected] and [email protected] were email addresses to which the Court is satisfied that emails can successfully be sent. In the absence, however, of any evidence that the [email protected] email address has recently been successfully used for any form of email communication with Mr Djoneski, the Court is not satisfied that if an email were sent to that email address it would be likely to come to Mr Djoneski’s attention. The same evidentiary difficulty does not arise with respect to the email address [email protected], and given the evidence that there has been email communication between Mr Djoneski and some of the employees and service providers to Goldfinger using this email address, the Court is satisfied that an email to this address, attaching the relevant documents, would be brought to Mr Djoneski’s attention.
As to the proposed method of substituted service by advertising in ‘The West Australian’ and ‘The Australian’ newspapers there is no evidence that this will be be an efficacious means of bringing the proceedings to Mr Djoneski’s attention. There is no evidence that Mr Djoneski receives or reads these newspapers or that there is someone who is likely to bring a notice in these newspaper to his attention. Further, as this Court recently observed in Low v Maye [2015] FCCA 3485 at [11] per Judge Lucev:
11. The Court raised with Counsel for the applicant trustee the possibility of publishing advertisements in newspapers published nationally and throughout the State of Western Australia for the purposes of endeavouring to bring the existence of the documents to the attention of the respondent bankrupt. The applicant trustee, through Counsel, indicated a preparedness to publish such advertisements. The Court has, however, since considered the efficacy of such advertisements. The Court adds that the likely cost of such an advertisement, particularly one of sufficient prominence to possibly bring it to the attention of the respondent bankrupt, either directly or indirectly, would be such as to outweigh its likely efficacy. There is no evidence to suggest that such advertisements would be seen by the respondent bankrupt, or, necessarily, brought to his attention. Given the notoriously diminished circulation of print media in recent times the Court is not satisfied that for this reason, and the other reasons set out immediately above, that the respondent bankrupt could become aware of the existence and nature of the documents sought to be served by means of such advertising: Federal Circuit Court Rules 2001 (Cth), r.6.15(b). The Court will therefore not impose an additional requirement to publish an advertisement in any print media by way of a form of substituted service.
Similar considerations apply in these proceedings, and the Court therefore does not consider that substituted service by way of a newspaper advertisement in this case would be likely to bring to Mr Djoneski’s attention these proceedings and the relevant documents therein.
Conclusions and orders
The Court has concluded that:
a)Mr Djoneski’s status as an undischarged bankrupt is no bar to the continuation of these proceedings;
b)it is in the public interest that the proceedings against Mr Djoneski continue;
c)the FWO has made considerable and diligent efforts to locate Mr Djoneski but has been unable to do so; and
d)the Court is satisfied that the proposed method of substituted service by email to the email address [email protected] is reasonably likely to bring the proceedings to the notice of Mr Djoneski.
In the above circumstances, the Court will order that:
a)there be an order that personal service on Mr Djoneski be dispensed with, and that there be service on him of the Application and Statement of Claim by email at the [email protected] email address;
b)that until further order, or the filing of a Notice of Address for Service by Mr Djoneski, service of all documents on him be by the means of email at the [email protected] email address; and
c)that Mr Djoneski file and serve a Notice of Address for Service on or before 7 days after the FWO emails the Application and Statement of Claim to him at the [email protected] email address.
The Court will hear the parties as to costs.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Associate:
Date: 23 February 2016
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