Fair Work Ombudsman v Gothic Downs Pty Ltd (No 2)
[2023] FedCFamC2G 359
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
Fair Work Ombudsman v Gothic Downs Pty Ltd (No 2) [2023] FedCFamC2G 359
File number: MLG 2176 of 2020 Judgment of: JUDGE RILEY Date of judgment: 10 May 2023 Catchwords: INDUSTRIAL LAW – penalties for failure to comply with compliance notices. Legislation: Fair Work Act 2009 ss. 539(2), 546, 550, 557(1), 716(5) Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3
Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; [2015] HCA 46
Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364
Fair Work Ombudsman v Gothic Downs Pty Ltd [2022] FedCFam2G 21
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Division: Division 2 General Federal Law Number of paragraphs: 63 Date of hearing: 17 February 2023 Place: Melbourne Counsel for the Applicant: Jack Tracey Solicitor for the Applicant: Office of the Fair Work Ombudsman Advocate for the Respondents: Azwar Koya Solicitor for the Respondents: Koya & Co ORDERS
MLG 2176 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: GOTHIC DOWNS PTY LTD
(ACN 006 552 058)
First RespondentGIUSEPPE CONFORTO
Second Respondent
order made by:
JUDGe riley
DATE OF ORDER:
10 may 2023
THE COURT ORDERS THAT:
1.Within 28 days, pursuant to s.546 of the Fair Work Act 2009 (“the Act”), the first respondent pay pecuniary penalties fixed in the sum of $50,400 to the Commonwealth, for the first respondent’s contraventions set out in declaration 1 made on 24 January 2022.
2.Within 28 days, pursuant to s.546 of the Act, the second respondent pay pecuniary penalties fixed in the sum of $10,080 to the Commonwealth for the second respondent’s involvement, within the meaning of s.550 of the Act, in the first respondent’s contraventions as set out in declaration 2 made on 24 January 2022.
3.The applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE RILEY:
INTRODUCTION
This matter concerns the penalties to be imposed for the first and second respondents’ contraventions of the Fair Work Act 2009 (“the Act”). The applicant is the Fair Work Ombudsman (“the Ombudsman”). The first respondent (“Gothic”) is a company which previously ran six but now runs two retail bakeries in suburban Melbourne. The second respondent (“Mr Conforto”) was at all material times the sole director of Gothic.
Following a contested hearing, the liability of Gothic and Mr Conforto was established in Fair Work Ombudsman v Gothic Downs Pty Ltd [2022] FedCFam2G 21. In that case, the court declared that:
1. The first respondent contravened:
a.s.716(5) of the Fair Work Act 2009 (“the Act”) by failing to comply with a compliance notice given to it on 13 December 2019 in respect of Dawinder Kaur; and
b.s.716(5) of the Act by failing to comply with a compliance notice given to it on 13 December 2019 in respect of Sahar Abdulkarim.
2.The second respondent was involved, within the meaning of s.550 of the Act, in the first respondent’s contraventions of s.716(5) of the Act by failing to comply with each of the compliance notices.
Pursuant to s.539(2) and s.546(2) of the Act, the maximum penalty that the court may impose for a contravention of s.716(5) of the Act is 30 penalty units for an individual and 150 penalty units for a company. At the time of the contraventions, on 31 January 2020, the value of a penalty unit was $210. Consequently, the maximum penalties are $31,500 for Gothic and $6,300 for Mr Conforto for each contravention.
The Ombudsman proposed total penalties as follows:
Contraventions Gothic Downs Mr Conforto Maximum Proposed penalty Maximum Proposed penalty Section 716(5): Failure to comply with the Kaur Compliance Notice $31,500 $22,050 (70%) $6,300 $4,410 (70%) Section 716(5): Failure to comply with the Abdulkarim Compliance Notice $31,500 $22,050 (70%) $6,300 $4,410 (70%) Total $63,000 $44,100 $12,600 $8,820 Total less 10% discount for totality $39,690 $7,938
The respondents proposed total penalties for both of them of “$20,000 odd”, which I take to mean in the range of $20,000 to $23,000.
MATERIAL RELIED UPON
At the hearing before this court, the Ombudsman relied upon:
(a)the initiating application filed on 24 June 2020;
(b)the statement of claim filed on 24 June 2020;
(c)the affidavit sworn by James William Roberts on 14 April 2021;
(d)her written submissions on liability filed on 30 June 2021;
(e)her further written submissions on liability filed on 6 December 2021;
(f)the liability judgment, Fair Work Ombudsman v Gothic Downs Pty Ltd [2022] FedCFam2G 21;
(g)her written submissions on penalty filed on 21 February 2022, except for paragraph 15; and
(h)the affidavit sworn by James William Roberts on 21 February 2022.
At the hearing before this court, the respondents relied upon a bundle of documents they sent to my chambers on the morning of the hearing. The Ombudsman did not challenge the admissibility of those documents and they became exhibit 2. They were:
(a)certificates of appreciation from three schools;
(b)a certificate of appreciation from a food bank; and
(c)a letter from Gothic’s accountant regarding its financial position.
The respondents did not file written submissions or any affidavit evidence on penalty.
THE PURPOSE OF CIVIL PENALTIES
In Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13, all the members of the High Court, except Edelman J, said that:
[9]… Under the civil penalty regime provided by the Act, the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act. In that context, the penalties fixed by the primary judge were appropriate because they were no more than might be considered to be reasonably necessary to deter further contraventions of a like kind by Mr Pattinson, the CFMMEU or others. They represented a reasonable assessment of what was necessary to make the continuation of the CFMMEU’s non-compliance with the law, amply demonstrated by the history of its contraventions, too expensive to maintain.
[10]The Full Court’s critical error was that it was distracted by a concern, drawn from the criminal law, that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a “notion of proportionality”, in the sense in which the Full Court used that term, in a civil penalty regime. Further, and relatedly, their Honours were misled by the view that the Act required that the maximum penalty be reserved for only the most serious examples of the offending comprehended by s 349(1), and that this principle could prevent the court from imposing the maximum penalty even though a penalty in that amount might reasonably be considered to be necessary to deter future contraventions of a like kind. Nothing in the text, context or purpose of s 546 requires that the maximum penalty be reserved for the most serious examples of misconduct within s 349(1). What is required is that there be “some reasonable relationship between the theoretical maximum and the final penalty imposed”. That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others.
…
[15]Most importantly, it has long been recognised that, unlike criminal sentences, civil penalties are imposed primarily, if not solely, for the purpose of deterrence. The plurality in the Agreed Penalties Case said:
[W]hereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd , is primarily if not wholly protective in promoting the public interest in compliance:
“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”
(citations omitted)
PROPORTIONALITY
In Pattinson, the High Court addressed the question of proportionality as follows:
[40]Nothing in the text, context or purpose of s 546 of the Act suggests that the Full Court’s “notion of proportionality” inheres in the court’s task, pursuant to s 546, to fix a penalty which it considers to be an “appropriate” penalty. The discretion conferred by s 546 is, like any discretionary power conferred by statute on a court, to be exercised judicially, that is, fairly and reasonably having regard to the subject matter, scope and purpose of the legislation. In a civil penalty context, Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission said:
“[I]nsistence upon the deterrent quality of a penalty should be balanced by insistence that it ‘not be so high as to be oppressive’. Plainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression.”
[41]It may therefore be accepted that s 546 requires the court to ensure that the penalty it imposes is “proportionate”, where that term is understood to refer to a penalty that strikes a reasonable balance between deterrence and oppressive severity. It is in this sense that the Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd used the term “proportionality”, when their Honours said:
“If it costs more to obey the law than to breach it, a failure to sanction contraventions adequately de facto punishes all who do the right thing. It is therefore important that those who do comply see that those who do not are dealt with appropriately. This is, in a sense, the other side of deterrence, being a dimension of the general deterrence equation. This is not to give licence to impose a disproportionate or oppressive penalty, which cannot be done, but rather to recognise that proportionality of penalty is measured in the wider context of the demands of effective deterrence and encouraging the corresponding virtue of voluntary compliance.” (emphasis added)
[42]However, the Full Court’s “notion of proportionality” derived from Veen (No 2) is something quite different. That notion cannot be reconciled with the decisive statements in the Agreed Penalties Case that civil penalties are not retributive, but rather are protective of the public interest in that they aim to secure compliance by deterring repeat contraventions. To introduce considerations drawn from theories of retributive justice into the application of s 546 of the Act undermines the primary significance of deterrence.
…
[46]It does not follow, as the Full Court suggested and as the CFMMEU argued in this Court, from the rejection of the Full Court’s “notion of proportionality” that s 546 must be taken to require the imposition of a penalty approaching the maximum in relation to any and every contravention by a recidivist offender. It is important to recall that an “appropriate” penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a “one-off” result of inadvertence by the contravenor rather than the latest instance of the contravenor’s pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law on the part of a union official, or where the official responsible for a deliberate breach has been disciplined by the union. In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
[47]The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors of the kind adverted to by French J in CSR. For example, where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
…
[50]This Court’s reasoning in the Agreed Penalties Case is distinctly inconsistent with the notion that the maximum penalty may only be imposed in respect of contravening conduct of the most serious kind. Considerations of deterrence, and the protection of the public interest, justify the imposition of the maximum penalty where it is apparent that no lesser penalty will be an effective deterrent against further contraventions of a like kind. Where a contravention is an example of adherence to a strategy of choosing to pay a penalty in preference to obeying the law, the court may reasonably fix a penalty at the maximum set by statute with a view to making continued adherence to that strategy in the ongoing conduct of the contravenor’s affairs as unattractive as it is open to the court reasonably to do.
(citations omitted)
APPROACH TO DETERMINING PENALTY
Bromwich J summarised the proper approach to determining penalty in cases such as this in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 at [36] as follows:
(1)Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2)Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3)Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4)Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5)Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
A convenient checklist of the factors that the court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is as follows, (with paragraph letters inserted):
(a)The nature and extent of the conduct which led to the breaches.
(b)The circumstances in which that conduct took place.
(c)The nature and extent of any loss or damage sustained as a result of the breaches.
(d)Whether there had been similar previous conduct by the respondent.
(e)Whether the breaches were properly distinct or arose out of the one course of conduct.
(f)The size of the business enterprise involved.
(g)Whether or not the breaches were deliberate.
(h)Whether senior management was involved in the breaches.
(i)Whether the party committing the breach had exhibited contrition.
(j)Whether the party committing the breach had taken corrective action.
(k)Whether the party committing the breach had cooperated with the enforcement authorities.
(l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
(m)The need for specific and general deterrence.
The court must, of course, be mindful of the caution expressed by the High Court at [19] of Pattinson as follows:
It may readily be seen that this list of factors includes matters pertaining both to the character of the contravening conduct (such as factors 1 to 3) and to the character of the contravenor (such as factors 4, 5, 8 and 9). It is important, however, not to regard the list of possible relevant considerations26 as a "rigid catalogue of matters for attention"27 as if it were a legal checklist. The court's task remains to determine what is an "appropriate" penalty in the circumstances of the particular case.
(citations omitted).
The court will consider the circumstances of the case under the various headings suggested by Mowbray FM, and then consider whether any other matters are relevant.
Step 1: identifying the breaches
As stated above, Gothic breached s.716(5) of the Act by:
(a)failing to comply with a compliance notice given to it on 13 December 2019 in respect of Davinder Kaur; and
(b)failing to comply with a compliance notice given to it on 13 December 2019 in respect of Sahar Abdulkarim.
Mr Conforto was involved in each of Gothic’s breaches.
Step 2: single course of conduct
Section 557(1) of the Act, which provides for certain contraventions of specified civil remedy provisions to be treated as a single contravention if they arose out of a single course of conduct, does not apply to contraventions of s.716(5). In the present case, the respondents each committed two separate breaches of the Act.
Step 3: grouped breaches
The Ombudsman submitted, and the respondents did not dispute, that it would not be appropriate to group the breaches as they were separate and distinct, concerned different employees and were not part of a single course of conduct. In the absence of any dispute about that characterisation, I accept the Ombudsman’s submission on this point.
Step 4: the appropriate penalty for the breaches
a. the nature and extent of the conduct which led to the breach
The nature and extent of the conduct which led to the contraventions is that an officer of the Ombudsman formed the reasonable belief that Gothic had underpaid two employees. Gothic eventually accepted that in a two year period, it:
(a)had underpaid Ms Kaur over $20,000 in wages and had failed to pay over $10,000 to her superannuation fund; and
(b)had underpaid Ms Abdulkarim over $6,000 in wages and had failed to pay about $4,000 to her superannuation fund.
The Ombudsman then served two compliance notices on the respondents. Gothic and Mr Conforto were aware of the compliance notices and were aware of what they required. Gothic and Mr Conforto sought to debate with the Ombudsman exactly how much was owed to Ms Kaur and Ms Abdulkarim. However, Gothic did not pay even the amounts that it conceded were owing until long after the time for compliance with the compliance notices had passed.
b. the circumstances in which that conduct took place
At the hearing, the respondents emphasised that Gothic is a family owned, suburban bakery business that has been operating for 20 years, and that its sole director works in the business as a baker. The respondents argued they did not remain idle when Gothic received the compliance notices from the Ombudsman. They said that they engaged an accountant to calculate the underpayments. However, as mentioned above, they did not make any payment to or on behalf of the employees until long after the time for rectification under the compliance notices had passed.
Indeed, Gothic did not pay the amount owing to Ms Kaur until 30 November 2021, which was about 22 months after compliance with the compliance notices was required and about three years after Ms Kaur ceased employment with Gothic. Obviously, the amounts outstanding for wages should have been paid fortnightly during the two years that Ms Kaur worked for Gothic. Gothic did not pay Ms Abdulkarim the amount owing to her until 4 September 2020, about eight months after compliance with the compliance notices was required and about 21 months after the amounts were payable to her.
While working for Gothic, Ms Kaur was on a Temporary Work (Skilled) (subclass 457) visa that was sponsored by Gothic. I infer that Ms Kaur was not very familiar with Australian employment laws. As such, Ms Kaur was a vulnerable employee. I infer that the respondents took advantage of her vulnerability.
c. the nature and extent of any loss or damage sustained
The loss or damage is not the underpayments as such, but the failure to comply with the compliance notices. A failure to comply with compliance notices defeats the public benefit of the compliance notice system, including the avoidance of litigation involving a regulator.
Having said that, compliance with the compliance notices required rectification of the underpayments. As noted, Gothic did not pay the amounts owed to Ms Kaur and Ms Abdulkarim for a very considerable time after those amounts ought to have been paid.
d. whether there had been similar previous conduct
The Ombudsman did not suggest Gothic had engaged in any similar conduct previously.
e. whether the breaches arose out of the one course of conduct
This point has been addressed at step 2 above.
f. the size of the business enterprise involved
The accountant’s letter explained that Gothic employed about six to eight family members and about five to eight non-family members.
In any event, Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [28]:
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level”
(footnote omitted)
Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at [27]:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.
g. whether or not the breaches were deliberate
The Ombudsman submitted that the breaches were deliberate. The respondents argued that they were genuinely confused about how much was owing.
To my mind, the respondents’ protestations ring hollow, in circumstances where they did not pay even the minimum amounts that they conceded were owing until long after the compliance notices required rectification.
The Ombudsman submitted that:
Gothic Downs’ conduct in failing to comply with the Compliance Notices demonstrates a deliberate disregard for its obligations under the FW Act and the authority of the FWO as a regulator of Commonwealth workplace laws.
I accept that submission.
h. whether senior management was involved in the breach
The respondents did not suggest that senior management was not involved in the breaches. They did not suggest, for example, that there was a computer glitch or an incompetent bookkeeper. Mr Conforto was the sole director of Gothic at all material times. I am satisfied that he was completely in control of the calculation of payments to employees and their superannuation funds. I am satisfied that he was heavily involved in the breaches.
i. contrition, corrective action and co-operation with the authorities
In her written submissions on penalty filed on 21 February 2022, the Ombudsman said:
38.Where a corporate respondent is involved, an expression of contrition is most clearly seen by the way that the corporation takes steps to correct its wrongdoing and change its behaviour.
39.The Respondents made certain qualified admissions during the course of these proceedings.
40.The Respondents, however, failed to file any affidavit evidence and then filed submissions with respect to liability for the first time on 29 November 2021 (the morning of the liability hearing). These actions of the Respondents, which did not comply with the Court’s orders and directions, have frustrated the efficient progress of this matter.
41.The Respondents’ qualified admissions and rectification of non-compliance with the Compliance Notices by way of payments to Ms Kaur and Ms Abdulkarim after proceedings were commenced should therefore be given reduced weight, especially when consideration is also given to the fact that the matter proceeded to a defended hearing in respect of liability and the Respondents sought to raise for the first time at that hearing a defence which was not pleaded in their defence.
42.There is no evidence before the Court that Mr Conforto has expressed any contrition in respect of the failure to comply with the Compliance Notices nor evidence that Gothic Downs and Mr Conforto have amended their work practices to ensure that the contraventions are not committed in respect of future employees.
43.In all these circumstances, there is no warrant for the Court to apply a discount on penalty for co-operation, of the kind that is sometimes applied where full admissions are made by a respondent (which plainly did not occur in this proceeding where liability was contested).
(citations omitted)
I accept the Ombudsman’s submissions on this factor.
At the penalty hearing, the respondents submitted that Gothic had rectified the underpayments by making the required payments to Ms Kaur and Ms Abdulkarim. However, they admitted that those payments were made “very late”. The rectification in fact occurred about one week before the liability hearing.
The respondents, through their solicitor, told the court that they regretted making the payments late. That regret falls a long way short of actually being sorry for the harm the respondents caused Ms Kaur, Ms Abdulkarim and the Ombudsman. The rectification payments cannot be seen as a demonstration of contrition. Rather, they can best be seen as an attempt to minimise the consequences for the respondents.
The respondents contested liability and contested penalty. They made a few admissions, but nothing that could properly be characterised as co-operating with the authorities.
There does not seem to me to be any proper basis for allowing any discount in this matter for co-operation, corrective action or contrition.
j. the need to ensure compliance with minimum standards
In her written submissions on penalty filed on 21 February 2022, the Ombudsman said:
44.Gothic Downs’ failure to comply with the Compliance Notices, and Mr Conforto’s involvement in that failure, undermines the FW Act’s enforcement framework and the safety net of entitlements it is designed to protect and reflects a prioritisation of the Respondents’ own interests at the expense of Ms Kaur and Ms Abdulkarim’s minimum entitlements.
45.The failure to comply with a statutory notice properly issued by the FWO is serious. The efficacy of statutory notices such as compliance notices will be reduced or even rendered nugatory if recipients perceive that a failure to comply carries no meaningful consequences.
46.Given the importance of an FWI’s power to issue compliance notices, and that compliance with such notices avoids the need for litigation or the imposition of any penalties, penalties for non-compliance should be set at a level which demonstrates there are serious consequences for failing to comply with a compliance notice.
(citations omitted)
I accept those submissions.
k. the need for specific and general deterrence
In relation to deterrence, I note the passages from Pattinson cited above. In addition, in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 326 ALR 476; (2015) 90 ALJR 113; (2015) 255 IR 87; [2015] HCA 46, French CJ, Kiefel, Bell, Nettle and Gordon JJ said at [55]:
No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. ... The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”
(footnotes omitted)
Similarly, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3, Keane, Nettle and Gordon JJ said at [116]:
As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty’s general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition.
(footnotes omitted)
Specific deterrence
In relation to specific deterrence, Gray J observed in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170 at [37] that:
… Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur. …
In her written submissions on penalty filed on 21 February 2022, the Ombudsman said:
56.There is a particular need specifically to deter the Respondents from engaging in the same contravening conduct in the future, given that:
(a)Gothic Downs remains registered;
(b)Mr Conforto remains the sole director and secretary of Gothic Downs and is a director of two further companies;
(c)the Respondents have demonstrated a disregard for Gothic Downs’ obligations under the FW Act and as an employer under Commonwealth workplace laws by failing to comply with the Compliance Notices; and
(d)the absence, to date (noting the advanced stage of this proceeding) of any real contrition, remorse or co-operation on the part of the Respondents, save for the much belated payments to the Employees – which, the Court should infer, were only made because the Applicant had commenced this proceeding.
57.A penalty should accordingly be fixed at a level which specifically deters the Respondents from engaging in further contravening conduct.
(citations omitted)
I accept the Ombudsman’s submissions in this regard. It is particularly significant that the respondents are still in business and that Mr Conforto is the director of two other companies.
General deterrence
In relation to general deterrence, Lander J noted in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 at [93]:
… 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. 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…
(footnotes omitted)
Similarly, in Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at 230-231; [2001] FCA 1364, Finkelstein J said at [9]:
… even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law’s disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ….
In her written submissions on penalty filed on 21 February 2022, the Ombudsman said:
51.General deterrence must serve a purpose such that the penalty is not seen by others as just ‘the cost of doing business’. In order to be useful as a general deterrent, a penalty ‘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’.
52.In imposing a meaningful penalty, the Court will deter other persons from failing to comply with compliance notices.
53.General deterrence is also of particular importance in this matter due to the level of noncompliance in the retail industry, particularly with respect to visa holders.
54.On this basis, the FWO submits that there is a need to send a message to employers generally and to the retail industry in particular, that a failure to comply with a compliance notice will not be tolerated by the FWO, the community and the Courts.
55.The penalties to be imposed in this matter should be sufficiently high to impress upon other employers, in particular, the importance of complying with the legal obligations owed to their employees. As Marshall J observed in Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2):
“It is important to ensure that the protections provided by the [FW] Act to Employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected.”
(citations omitted)
I accept the Ombudsman’s submissions on general deterrence.
Other issues
I do not consider that there are any other relevant issues in this case.
Step 4: the appropriate penalty
The respondents orally submitted at the penalty hearing that, although Gothic has the financial capacity to pay a fine, a large penalty in the sum sought by the Ombudsman would have a significant impact on the viability of Gothic. The respondents submitted that a fine of $20,000 to $23,000 would be sustainable for Gothic.
The accountant’s letter was not in the form of a sworn or affirmed affidavit and was not supported by any accounting records. For these reasons, it can only be given limited weight.
In any event, the accountant’s letter says that Gothic had a profit of about $88,000 in the 2021 year, but only because the family had reduced their wages by $100,000. It said Gothic would probably have the same profit in the 2022 year, but that the family would have to increase their wages to service $500,000 of loans that they had to take out against their properties because of a business downturn due COVID-19. The letter said that the stress on the business might “force the owners to sell properties or close the business”.
The respondents did not place any evidence before the court about how many properties they own or what the equity in those properties is. They did not place any evidence before the court that specifies the wages paid to Mr Conforto or his family members. They did not place any evidence before the court that purports to be a complete statement of their assets and liabilities, and their incomes and outgoings. All that the accountant provided was some vague and unsubstantiated assertions.
I am left in a position where I am unable to assess for myself whether the respondents have the capacity to pay a penalty of any particular amount. In the absence of appropriate evidence, I proceed on the basis that the maximum permissible penalty in this case would not be unduly oppressive.
I note the certificates of appreciation and give them some weight. Contributions to the community of the sort the certificates represent are commendable, but are also to some extent a form of advertising, rather than entirely selfless and substantial gifts.
In all the circumstances of this case, I consider that total penalties of 80% of the maximum for each contravention for each respondent is warranted. That works out to be $50,400 for Gothic and $10,080 for Mr Conforto. It seems to me that penalties at that level would provide an adequate deterrent for the respondents and others who may be tempted to behave as they have.
Step 5: the totality principle
In her written submissions on penalty filed on 21 February 2022, the Ombudsman submitted that a 10% reduction should be allowed for the totality principle. However, I cannot see any proper basis for a discount for totality. I consider that the aggregate penalties indicated above are appropriate for the whole of the contravening conduct engaged in by the respondents.
It was not suggested that the penalties should be paid to anyone other than the Commonwealth, so that will be the requirement.
There will be orders accordingly.
I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 10 May 2023
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