Fair Work Ombudsman v House of Hoi an Pty Ltd
[2022] FedCFamC2G 133
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
Fair Work Ombudsman v House of Hoi An Pty Ltd [2022] FedCFamC2G 133
File number(s): MLG 3876 of 2020 Judgment of: JUDGE RILEY Date of judgment: 3 March 2022 Catchwords: INDUSTRIAL LAW – non-compliance with compliance notice – failure to keep records – failure to provide pay slips – penalties. Legislation: Fair Work Act 2009 ss. 535(1), 536(1), 545(1), 546, 547(2) , 550(2), 557(1), 716(5) and 717
Fair Work Regulations 2009 reg.3.36
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 Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8
Cousins v Merringtons (No 2) [2008] VSC 340
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
Eva v Southern Motors Box Hill Pty Ltd (1977) 15 ALR 428; (1977) 30 FLR 213; (1977) 2 TPC 64; (1977) ATPR 40-026
Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128
Fair Work Ombudsman v Bedington [2012] FMCA 1133
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301
Fair Work Ombudsman v Priority Matters Pty Ltd (No 5) [2020] FCCA 901
Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012] FMCA 258
Fair Work Ombudsman v Touchpoint Media Pty Ltd & Anor [2018] FCCA 2615
Fair Work Ombudsman v Zillion Zenith International Pty Ltd & Anor [2014] FCCA 433
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70
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 65Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Number of paragraphs: 98 Date of hearing: 14 February 2022 Place: Melbourne Counsel for the applicant: Jack Tracey Solicitor for the applicant: Office of the Fair Work Ombudsman Counsel for the respondents: Michael Thomas Solicitor for the respondents: Aitken Partners ORDERS
MLG 3876 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: HOUSE OF HOI AN PTY LTD
(ACN 606 791 057)
First RespondentKEERTHI HAPUGASDENIYA
Second Respondent
ORDER MADE BY:
JUDGE RILEY
DATE OF ORDER:
3 MARCH 2022
THE COURT ORDERS THAT:
1.Within 28 days, pursuant to s.545(1) of the Fair Work Act 2009 (“the Act”), the first respondent calculate and pay any outstanding superannuation contributions into the nominated superannuation funds of the following employees:
(a)Hong Nam Nguyen;
(b)Chi Phan Uyen Ngyuen; and
(c)Hewa Battage Sanjaya Kasun Premachandra.
2.Within 28 days, pursuant to s.545(1) and s.547(2) of the Act, the first respondent pay interest on the outstanding superannuation contributions into the employees’ nominated superannuation funds.
3.Within 35 days, the first respondent provide evidence to the applicant that the outstanding superannuation contributions and interest were paid into the nominated superannuation funds.
4.Within 28 days, pursuant to s.546 of the Act, the first respondent pay pecuniary penalties, fixed in the sum of $58,684.50, to the Commonwealth for its contraventions set out in declaration 1 made on 14 February 2022.
5.Within 28 days, pursuant to s.550(2) of the Act, the second respondent pay pecuniary penalties, fixed in the sum of $7,654.50, to the Commonwealth for his involvement in the contraventions set out in declarations 1(a) and 1(c) made on 14 February 2022.
Note:The form of the order is subject to the entry in the court’s records.
Note:This copy of the court’s reasons for judgment may be subject to review 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 certain contraventions of the Fair Work Act 2009 (“the Act”).
The applicant is the Fair Work Ombudsman. The first respondent is a company which operated a Vietnamese restaurant. The second respondent was a director and the secretary of the first respondent from 30 June 2015, and the sole director and secretary of the first respondent from 30 June 2018.
The Ombudsman gave a compliance notice to the first respondent on 23 October 2019. It alleged that the first respondent had underpaid wages and superannuation for the period of 12 April 2016 to 23 September 2019 for three employees. The alleged underpayments were of nine different types, being penalty rate, annual leave and minimum wage defaults. The compliance notice required the first respondent to calculate and rectify the underpayments of wages and superannuation by 20 November 2019. The first respondent did not do so.
In addition, the Ombudsman alleged that the first respondent contravened certain record keeping and pay slip requirements, and alleged that the second respondent was involved in the first respondent’s contraventions of the compliance notice and pay slip requirements.
The parties agreed to the court making declarations as follows:
1. The first respondent contravened:
a.s.716(5) of the Fair Work Act 2009 (“the Act”) by failing to comply with the compliance notice given to it on 23 October 2019 (“the compliance notice”);
b.s.535(1) of the Act by failing to make and keep employee records prescribed by reg.3.36 of the Fair Work Regulations 2009 (“the Regulations”); and
c.s.536(1) of the Act by failing to give pay slips to Hong Nam Nguyen, Hewa Battage Sanjaya Kasun Premachandra and Chi Phan Uyen Nguyen (“the employees”) within one working day of making payment to them for the performance of work; and
2.The second respondent was involved, within the meaning of s.550(2) of the Act, in each of the first respondent’s contraventions of ss.716(5) and 536(1) of the Act, referred to in declarations 1(a) and (c).
The parties also agreed to the court making orders as follows:
3.Pursuant to s.545(1) of the Act, the first respondent take the steps required by the compliance notice within 28 days of these orders by:
a.calculating and paying to the applicant, on behalf of the employees, the outstanding entitlements that it was required to pay the employees;
b.preparing and producing to the applicant a schedule outlining its calculation of the outstanding entitlements that it was required to pay to the employees; and
c.providing evidence that the outstanding entitlements referred to in order 3(a) have been rectified.
4.Pursuant to s.547(2) or s.545(1) of the Act, within 28 days of these orders, the first respondent pay interest to the applicant on the outstanding entitlements owed to the employees pursuant to order 3(a).
5.The applicant distribute to the employees the amounts paid pursuant to orders 3(a) and 4 within 60 days of the payment being made.
6.Pursuant to s.546 of the Act, the first respondent pay pecuniary penalties, in a sum to be determined, to the Commonwealth for the contraventions by the first respondent set out in order 1.
7.The second respondent pay pecuniary penalties, in a sum to be determined, to the Commonwealth for his involvement, within the meaning of s.550(2) of the Act, in the contraventions set out in order 2.
8.The applicant have liberty to apply on seven days’ notice in the event that any of the above orders are not complied with.
Those orders and declarations were made on 14 February 2022.
THE QUESTIONS FOR THE COURT
The main question remaining for the court was the amount of the penalties to be imposed on each respondent for their contraventions.
In addition, there was a dispute between the parties as to superannuation. The Ombudsman proposed an order that the first respondent take an additional step required by the compliance notice. The Ombudsman’s proposed order was substantially that:
Within 28 days, pursuant to s.545(1) of the Fair Work Act 2009, the first respondent calculate and pay superannuation contributions into the employees’ nominated superannuation funds for any additional superannuation contributions.
The Ombudsman also sought orders:
(a)pursuant to s.545(1) and s.547(2) of the Act, that the first respondent pay interest to the employees’ nominated superannuation funds for the additional superannuation contributions required to be paid; and
(b)requiring the first respondent to provide evidence to the Ombudsman that the additional superannuation contributions were paid.
The respondents argued that no such orders should be made, because they were in dispute with the Australian Taxation Office (“ATO”) about the amount of superannuation required to be paid. They submitted that no order about superannuation should be made until that dispute was resolved, or that any orders only take effect after the dispute was resolved.
The Ombudsman argued that it was the employer’s responsibility to accurately calculate and pay superannuation contributions on behalf of employees, and the court should make orders requiring compliance with the compliance notice. The compliance notice specifically required the first respondent, by 20 November 2019, to have calculated and paid additional amounts for superannuation contributions. The respondents’ counsel was unable to explain why the dispute with the ATO had not been resolved at some point between 20 November 2019 and 14 February 2022, being the day of the hearing in this court.
Obviously, calculating the amount of superannuation payable is straightforward, once the correct wages are calculated. However, the difficulty in the present case was that the correct amount of underpayments, if any, has not been agreed between the parties. The respondents said that the first respondent had actually overpaid the employees, and the Ombudsman said that the first respondent still owed the employees additional wages.
This goes to the question of penalty, because, if the compliance notice has been complied with, albeit late, it shows that the respondents have taken corrective action. That is a mitigating factor in relation to penalty.
The respondents did not bring a proceeding under s.717 of the Act, which would have allowed them to seek a review of the compliance notice. However, they say they had no reason to do that, because the compliance notice did not specify any particular amount of underpayment.
The Ombudsman did not wish to cross-examine in the present proceeding about the amount of the underpayments or at all. The Ombudsman submitted that there was evidence before the court on which the court could be satisfied that the underpayments were “substantial”. The figures proposed by the Ombudsman added up to about $70,000. The evidence the Ombudsman relied on consisted of admissions in the form of an email from the respondents’ accountant.
The respondents said that they now sought to resile from those admissions. In the second respondent’s affidavit affirmed on 25 January 2022, he said that:
(a)Mr Premachandra would often arrive late and leave early, so did not work the required hours;
(b)Mr Nguyen sent an email to the second respondent saying that he did not seek any further payment; the email was exhibited to the second respondent’s affidavit;
(c)Ms Nguyen sent an email to the second respondent saying that she had received sufficient payment; the email was exhibited to the second respondent’s affidavit;
(d)Mr Premachandra was overpaid;
(e)Mr Nguyen was overpaid;
(f)Ms Nguyen was underpaid, but did not require any further payment; and
(g)superannuation was not paid, but would be paid once the correct figures were worked out.
In these circumstances, there is a dispute as to the amount of underpayments, if any. In the absence of cross-examination at the final hearing on 14 February 2022, the court is not in a position to prefer the Ombudsman’s evidence over the respondents’ evidence or vice versa. Consequently, I will consider the question of penalty without forming any view as to the amount of the underpayments, if any.
Regarding superannuation, the compliance notice required the first respondent to calculate and pay superannuation contributions by 20 November 2019, and provide evidence of compliance to the Ombudsman by 27 November 2019. The first respondent did not do that, and nor did it make an application under s.717 of the Act, before 20 November 2019 or at all. In the circumstances, I consider that it is appropriate to make the orders that the Ombudsman sought. It was up to the first respondent to correctly calculate the wages and superannuation over two years ago. For the respondents to now engage in a dispute with the ATO, and seek more time to meet their fundamental responsibilities, is not acceptable. If the respondents do not get the figures right at this point, and make the appropriate payments, they will be in breach of court orders.
THE PARTIES’ PROPOSALS REGARDING PENALTY
The Ombudsman proposed penalties as follows:
First Respondent
Contravention of the FW Act Maximum penalty Maximum less 10% discount Proposed penalty percentage Proposed penalty amount Section 716(5) – compliance notice $31,500 $28,350 80% $22,680 Section 536(1) – pay slips $63,000 $56,700 50% $28,350 Section 535(1) – employee records $63,000 $56,700 40% $22,680 Total: $73,710 Less 10% for totality: $66,339.00 Second Respondent
Contravention of the FW Act Maximum penalty Maximum less 10% discount Proposed penalty percentage Proposed penalty amount Section 716(5) – compliance notice $6,300 $5,670 80% $4,536 Section 536(1) – pay slips $12,600 $11,340 50% $5,670 Total: $10,206.00 Less 10% for totality: $9,185.40
The respondents proposed penalties as follows:
First Respondent
Contravention of the FW Act Maximum penalty Maximum less 10% discount Proposed penalty percentage Proposed penalty amount Section 716(5) – compliance notice $31,500 $28,350 50% $14,175 Section 536(1) – pay slips $63,000 $56,700 30% $17,010 Section 535(1) – employee records $63,000 $56,700 40% $22,680 Total: $53,865 Less 10% for totality: $48,478.50 Second Respondent
Contravention of the FW Act Maximum penalty Maximum less 10% discount Proposed penalty percentage Proposed penalty amount Section 716(5) – compliance notice $6,300 $5,670 50% $2,835 Section 536(1) – pay slips $12,600 $11,340 30% $3,402 Total: $6,237 Less 10% for totality: $5,613.30
In summary, for the first respondent, the Ombudsman proposed total penalties of $66,339.00 and the respondents proposed total penalties of $48,478.50. For the second respondent, the Ombudsman proposed total penalties of $9,185.40 and the respondents proposed total penalties of $5,613.30.
MATERIAL RELIED UPON
At the hearing on 14 February 2022, the Ombudsman relied upon:
(a)her application filed on 2 November 2020;
(b)the statement of claim filed on 2 November 2020;
(c)the statement of agreed facts filed on 23 August 2021;
(d)the affidavit affirmed by Laura Cook on 16 April 2021
(e)the affidavit affirmed by Laura Cook on 7 October 2021; and
(f)the Ombudsman’s written submissions filed on 11 October 2021.
The respondents relied upon:
(a)the statement of agreed facts filed on 23 August 2021;
(b)the affidavit affirmed by Keerthi Hapugasdeniya on 25 January 2022; and
(c)the respondents’ written submissions filed on 14 February 2022.
Neither of the deponents was cross examined.
AGREED FACTS
The parties filed a statement of agreed facts on 23 August 2021 which is as follows:
A. PARTIES
1. The Applicant is and was at all relevant times:
(a)a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to section 687(1) of the Fair Work Act 2009 (Cth) (FW Act);
(b)a Fair Work Inspector (FWI) pursuant to section 701 of the FW Act; and
(c)a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions pursuant to section 539(2) of the FW Act.
2. The First Respondent is and was at all relevant times:
(a) a company incorporated under the Corporations Act 2001 (Cth);
(b)a “constitutional corporation” within the meaning of section 12 of the FW Act;
(c)a “national system employer” within the meaning of section 14 of the FW Act;
(d)the operator of a dine-in restaurant located at Unit 1, 40 Green Street, Prahran in Victoria (Business); and (e) by reason of the matters pleaded at paragraphs 2(b) and 2(c), covered by the FW Act in respect of its employees.
3. The Second Respondent is and was at all relevant times:
(a) a natural person capable of being sued;
(b)a director and secretary of the First Respondent from 30 June 2015, and the sole director and secretary of the First Respondent from 30 June 2018;
(c)responsible for the overall operation, management and control of the First Respondent;
(d)responsible for ensuring that the First Respondent complied with its legal obligations under the FW Act; and
(e)a person whose conduct is taken to be that of the First Respondent’s under section 793(1) of the FW Act, to the extent that the conduct was engaged in on behalf of the First Respondent and was within the scope of his actual or apparent authority.
B. EMPLOYEES
4.In the period from 12 April 2016 to 23 September 2019 (Employment Period), the First Respondent employed:
(a)Hong Nam Nguyen (Mr Nguyen) to work on a full-time basis between 5 December 2017 and 13 July 2019;
(b)Hewa Battage Sanjaya Kasun Premachandra (Mr Premachandra) to work on a full-time basis between 12 April 2016 and 23 September 2019; and
(c)Chi Phan Uyen Nguyen (Ms Nguyen) to work on a casual basis between 2 January 2018 and 22 July 2019 (collectively, Employees).
C. COMPLIANCE NOTICE
5.FWI James Roberts (FWI Roberts) and FWI Laura Cook (FWI Cook) are and were at all relevant times FWIs who were appointed by the Applicant under section 700 of the FW Act.
6.In or around August 2019, FWI Roberts commenced an investigation into the First Respondent (Investigation).
7.Based on the information obtained in the course of the Investigation, being the matters set out in the affidavit of FWI Cook affirmed 16 April 2021, FWI Cook formed a reasonable belief within the meaning of section 716(1) of the FW Act that at all relevant times during the Employment Period:
(a)the First Respondent employed the Employees on the basis set out in paragraph 4 above;
(b)Mr Nguyen performed duties within the classification of a ‘Cook Grade 4’ set out in clause B.3.7 of Schedule B to the Restaurant Industry Award 2010 (Restaurant Award);
(c)Mr Premachandra performed duties within the classification of a ‘Cook Grade 5’ set out in clause B.3.8 of Schedule B to the Restaurant Award;
(d)Ms Nguyen performed duties within the classification of a ‘Food and Beverage Attendant Grade 2’ set out in clause B.2.2 of Schedule B to the Restaurant Award; and
(e)by reason of the matters pleaded in paragraphs 2(d) and 7(a)-(d) above, the Restaurant Award covered and applied to the First Respondent in respect to the employment of the Employees; and (f) the First Respondent made partial payments to Mr Nguyen, Mr Premachanrda and Ms Nguyen in relation to the performance of work but failed to pay all amounts owed to them under the Restaurant Award and National Employment Standards (NES).
8.By reason of the matters pleaded in paragraph 7 above, FWI Cook formed a reasonable belief pursuant to sections 716(1)(a) and (b) of the FW Act that the First Respondent contravened:
(a)clause 20.1 of the Restaurant Award by failing to pay the minimum hourly wage in respect of the ordinary hours worked by the Employees;
(b)clause 13.1 of the Restaurant Award by failing to pay a casual loading in respect of the ordinary hours worked by Ms Nguyen;
(c)clause 34.1 of the Restaurant Award by failing to pay a loading in respect of work performed on Saturdays and public holidays by the Employees;
(d)clause 34.2 of the Restaurant Award by failing to pay a loading for ordinary hours worked by the Employees between 10pm and midnight Monday to Friday;
(e)clause 35.2 of the Restaurant Award by failing to pay annual leave loading; and
(f)section 90(2) of the FW Act (a provision of the NES) by failing to pay Mr Premachandra and Mr Nguyen untaken annual leave on termination of employment (Contraventions).
9.On 23 October 2019, FWI Cook gave a compliance notice to the First Respondent pursuant to section 716(2) of the FW Act (Compliance Notice):
(a)by sending the Compliance Notice by registered post to the registered office of the First Respondent; and
(b)by sending an email to the Second Respondent at [email protected] attaching a copy of the Compliance Notice.
10.Pursuant to section 716(2) of the FW Act, the Compliance Notice required the First Respondent:
(a)by 20 November 2019, to take the following action to remedy the direct effects of the Contraventions (Specified Action):
(i)classify Mr Nguyen as a full-time Cook grade 4, Mr Premachandra as a full-time Cook grade 5 and Ms Nguyen as a casual Food and Beverage Attendant grade 2;
(ii)identify each employee employed by the First Respondent who was not paid (but was required by the Restaurant Award to be paid) each entitlement that is the subject of the Contraventions;
(iii)identify the number of hours each of the employees worked during the Employment Period in respect of which the entitlement was required to be paid by the Restaurant Award;
(iv)identify the amounts the First Respondent paid to the employees during the Employment Period in respect of each entitlement;
(v)calculate the amounts the First Respondent should have paid to the employees during the Employment Period in respect of each entitlement;
(vi)make payment to the employees of the difference between the amounts referred to in sub paragraphs (a)(iv) and (a)(v) above;
(vii)make a record of the information and amounts referred to in sub paragraphs (a)(iii) to (a)(v) above and the amount of the payment referred to in sub paragraph (a)(vi) above (Underpayment Rectification Information);
(viii)calculate additional superannuation contributions required by clause 30.2 of the Restaurant Award in respect of the amounts required to be paid to the Employees as a result of the steps set out in sub paragraphs (a)(i) to (a)(vii) above; and
(ix)in relation to each of the employees who is owed such additional superannuation contributions, pay such additional superannuation contributions to the chosen Superannuation Fund of the employees; and
(b)by 27 November 2019, to produce reasonable evidence of having taken the Specified Actions, including:
(i)in relation to each employee, and in respect of each contravention that concerns the employee, a schedule that sets out the Underpayment Rectification Information;
(ii)in relation to each such employee, a schedule that sets out the additional superannuation contributions calculated for the employee and paid to the employees’ Superannuation Fund in accordance with sub paragraphs (a)(viii) to (a)(ix) above; and
(iii)proof that full payment has been made to each employee identified at sub paragraph (a)(ii) above of the payment(s) required to be made by sub paragraphs (a)(vi) and (a)(ix) above, such as a bank transfer showing the transfer of funds to the employee and their superannuation fund, or a copy of the employer’s payroll records showing the payment(s).
11.The Compliance Notice met the requirements set out in section 716(3) of the FW Act.
12. The First Respondent failed to:
(a) take the Specified Action by 20 November 2019; and
(b)produce to the Applicant reasonable evidence of compliance with the Compliance Notice by 27 November 2019.
13.By reason of the matters set out in paragraph 12 above, the First Respondent failed to comply with the Compliance Notice and thereby contravened section 716(5) of the FW Act.
D. RECORD KEEPING
14.At all relevant times, pursuant to section 535(1) of the FW Act, the First Respondent was required to make and keep records prescribed by the Fair Work Regulations 2009 (Cth) (FW Regulations) for a period of 7 years in respect of its employees.
15.By reason of the matters set out in paragraphs 4(a), (b) and 14 above, the records which the First Respondent was required to make and keep pursuant to regulation 3.36 of the FW Regulations included:
(a)records of any leave that Mr Nguyen and Mr Premachandra took; and
(b)the balance (if any) of Mr Nguyen and Mr Premachandra’s entitlement to that leave from time to time.
16.The First Respondent failed to make, and keep for seven years, records of the kind pleaded in paragraph 15 above in respect to Mr Nguyen and Mr Premachandra.
17.By reason of the matters pleaded at paragraphs 14 to 16 above, the First Respondent contravened section 535(1) of the FW Act by failing to make and keep employee records prescribed by the FW Regulations for a period of 7 years in respects of its employees.
E. PAY SLIPS
18.Pursuant to section 536(1) of the FW Act, and by reason of the matters set out in paragraphs 4(a) to 4(c) above, the First Respondent was required to give the Employees a pay slip within one working day of making payment to the Employees in relation to the performance of work.
19.The First Respondent did not give the Employees pay slips within one working day of making payments to them in relation to the performance of work during the Employment Period.
20.By reason of the matters set out in paragraphs 18 and 19 above the First Respondent contravened section 536(1) of the FW Act.
F.ACCESSORIAL LIABILITY
Involvement in contravention of section 716(5) of the FW Act
21.By reason of the matters set out in paragraphs 3 and 9 above, at all relevant times the Second Respondent was a person who was responsible for ensuring that the First Respondent complied with the Compliance Notice.
22.By reason of the matters set out in paragraph 21 above, the Second Respondent:
(a)had actual knowledge that the Compliance Notice was given to the First Respondent; and
(b)had actual knowledge that the First Respondent failed to comply with the Compliance Notice within the timeframe specified; and
(c)was an intentional participant in the First Respondent’s failure to comply with the Compliance Notice.
23.By reason of the matters pleaded in paragraphs 21 to 22 above, the Second Respondent:
(a)was involved, within the meaning of section 550(2)(c) of the FW Act, in the contravention by Hoi An of section 716(5) of the FW Act; and
(b)by reason of section 550(1) of the FW Act, is taken to have contravened section 716(5) of the FW Act.
Involvement in contravention of section 536(1) of the FW Act
24.At all relevant times, the Second Respondent knew that:
(a) the Employees were employed by the First Respondent;
(b)the Employees received payments from the First Respondent for work performed during the periods set out in paragraph 4(a) to 4(c); and
(c)the First Respondent did not issue pay slips to the Employees within one working day of making payments to them in relation to the performance of work.
25.By reason of the matters pleaded in paragraph 24 above, the Second Respondent:
(a)was involved, within the meaning of section 550(2)(c) of the FW Act, in the contravention by Hoi An of section 536(1) of the FW Act; and
(b)by reason of section 550(1) of the FW Act, is taken to have contravened section 536(1) of the FW Act.
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 Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [91] as follows:
Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. There is no suggestion in the present case that the learned magistrate made any relevant error in her identification of the matters which she should consider in fixing penalties.
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, the first respondent breached:
(a)s.716(5) of the Act by failing to comply with the compliance notice;
(b)s.535(1) of the Act by failing to make and keep employee records prescribed by reg.3.36 of the Fair Work Regulations 2009 (“the Regulations”); and
(c)s.536(1) of the Act by failing to give pay slips to the employees within one working day of making payment to them for the performance of work
and the second respondent was involved in those breaches.
Step 2: single course of conduct
The parties agreed that the respondents are entitled to the benefit of s.557(1) of the Act, such that the contraventions of s.535(1) and s.536(1) of the Act are taken to constitute a single contravention of each provision, even though each contravention concerned three employees.
There was obviously only one contravention of s.716(5) of the Act.
Step 3: grouped breaches
The parties did not propose that there be any further grouping, and I agree that none is appropriate.
Therefore, the contraventions, after applying the single course of conduct provisions and grouping requirements, are as follows:
Contravention of the FW Act First Respondent Second Respondent Section 716(5) – failure to comply with compliance notice 1 contravention 1 contravention Section 536(1) – failure to provide pay slip within one working day of payment 1 contravention 1 contravention Section 535(1) – failure to make and keep records as prescribed 1 contravention N/A
Step 4: the appropriate penalty for the breaches
a. the nature and extent of the conduct which led to the breach
In relation to the compliance notice contravention, the respondents admitted in the statement of agreed facts that the first respondent was given the compliance notice and did not comply with it within the specified time. The second respondent admitted in the statement of agreed facts that he was involved in that contravention.
In relation to the pay slip contravention, the respondents admitted in the statement of agreed facts that the first respondent was required to give the employees pay slips within one day of paying them but did not do so. The second respondent admitted in the statement of agreed facts that he was involved in that contravention.
In this context, I note that, in Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012] FMCA 258, it was held at [67] that:
… Pay slips provide the most practical check on false record keeping and underpayments, and allow for genuine mistakes or misunderstandings to quickly be identified. Without proper pay slips employees are significantly disempowered, creating a structure within which breaches of the industrial laws can be easily perpetrated.
The Ombudsman submitted in relation to the pay slip contravention that:
34.Having regard to the length of time that the Employees were employed by the First Respondent (between approximately eighteen months and three and a half years) and did not receive payslips …, the Respondents’ contraventions spanned a considerable period of time.
35.As a result of the Respondent’s failure to provide payslips, the Employees were denied the opportunity to monitor their wages and ensure they were being paid correctly. This takes on particular significance when considered in the context of a restaurant operating primarily at night and on weekends, when the Employees were entitled to various shift penalties and, at least in the case of Ms Nguyen (who was employed on a casual basis), varying wages each week.
(footnotes omitted)
The respondents maintained that pay slips were available on request, and were in fact provided when requested. However, the law requires more than that. It imposes a positive obligation on employers to make and provide pay slips to employees, within one day of payment, whether the employees request pay slips or not.
In relation to the record keeping contravention, the respondents admitted in the statement of agreed facts that the first respondent was required to make and keep records prescribed by the Regulations for seven years, but did not do so in respect of Mr Nguyen or Mr Premachandra.
In this context, I note that, in Fair Work Ombudsman v Zillion Zenith International Pty Ltd & Anor [2014] FCCA 433, it was held at [76] that:
… One of the principal objects of the FW Act is the maintenance of an effective safety net of employer obligations, and effective enforcement mechanisms. The failure to keep records by the respondents which is admitted arguably undermines and frustrates the attainment of that object…
Similarly, in Fair Work Ombudsman v Touchpoint Media Pty Ltd & Anor [2018] FCCA 2615, it was held at [14] that:
…Obviously the failure to keep records undermines the capacity of employees to pursue their entitlements, and undermines the capacity of the authorities to enforce compliance. In my view, these are serious breaches as well.
[footnote omitted]
b. the circumstances in which that conduct took place
The Ombudsman submitted that:
… the Employees were vulnerable in that they were all foreign nationals working in Australia pursuant to visas. Mr Nguyen was on a subclass 482 visa (Temporary Skill Shortage), Mr Premachandra was on a subclass 457 visa (Temporary Work (Skilled)) and Ms Nguyen was on a subclass 500 visa (Student). The Courts have previously recognised that visa workers are generally a vulnerable category of employee, and the Applicant submits that such categorisation applies to the Employees in this matter.
(footnotes omitted)
The respondents did not dispute that submission and I accept it.
c. the nature and extent of any loss or damage sustained
As discussed above, because there was no cross-examination, the court is not in a position to assess the amount of the underlying underpayments, if any. The failure to comply with the compliance notice detracted from the efficacy of the system regulating workplace behaviour. The failure to keep the required records and the failure to provide pay slips made it more difficult to ascertain the amounts owing, if any, to the employees.
d. whether there had been similar previous conduct
It was not suggested that either of the respondents had contravened any workplace laws previously.
e. whether the breaches arose out of the one course of conduct
This was discussed above.
f. the size of the business enterprise involved
The size of the business is largely irrelevant. 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" (citation 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. …
In her written submissions, the Ombudsman said:
42.It is well established that the size and financial circumstances of an employer do not exculpate contraventions of workplace laws.
43.In any event, there is no evidence presently before the Court regarding the First Respondent’s financial circumstances. The Applicant will consider any evidence adduced by the Respondents in this regard.
(footnotes omitted)
In their written submissions, the respondents said:
23.The Respondents submit that the size of the company was relatively small. Ultimately, Mr Hapugasdeniya was the only director, and the company only had between 6 to 7 employees at any one time, some of whom were part-time or casual.
24.Hoi An only traded for approximately four years, and ultimately failed because it was unprofitable.
(footnotes omitted)
g. whether or not the breaches were deliberate
In her written submissions, in relation to the compliance notice breach, the Ombudsman said:
26.The First and Second Respondents were aware of the Compliance Notice, the requirement to comply with the Compliance Notice and the timeframe for compliance.
27.Over a period of approximately seven months, the First Respondent and, through his involvement, the Second Respondent, were provided with multiple opportunities to comply with the Compliance Notice (and then rectify the First Respondent’s non-compliance once the due dates for compliance had passed) including:
(a)the emails that FWI Skeels sent to Frank Piccolo (Mr Piccolo) of PKD Partners, the First Respondent’s accountants, on 6 December 2019;
(b)the email that FWI Skeels sent to John Fotiadis (Mr Fotiadis) of PKD Partners on 15 December 2019;
(c)the letter that FWI Skeels sent to the Second Respondent dated 14 May 2020; and (d) the email that FWI Skeels sent to the Second Respondent dated 22 May 2020.
28.On 20 December 2019, PKD Partners provided its amended calculations to the Applicant. According to the calculations, the total amounts owed to or on behalf of Mr Pramachandra, Mr Nguyen and Ms Nguyen were $29,070.09, $12,015.85 and $29,824.37 respectively (inclusive of superannuation). Despite this, the Second Respondent sent FWI Skeels an email dated 28 July 2020 indicating that Mr Nguyen had been paid $2,710 and Ms Nguyen had been paid the “amount claimed” (which, having regard to Ms Nguyen’s email dated 22 July 2019 in the same email chain, appears to have been in the vicinity of $1,000). While Mr Premachandra did not confirm receipt of any payments in the email chain, the Second Respondent stated in his email dated 28 July 2020 that “all staff received the monies owed from the company”.
29.Viewed in this context, the First and Second Respondents’ failure to comply with the Compliance Notice was deliberate.
(footnotes omitted)
In their written submissions, the respondents said:
25.The Respondents did not intentionally breach the Compliance Notice in the sense that they at least attempted to comply with the notice. This is evident from the communications which passed between the Applicant and those engaged by the Respondents:
(a)On 10 September 2019, the Mr Hapugasdeniya emailed the Applicant and provided the contact details for the accountants assisting the Respondents. This followed an email directly sent by the accountants which resulted in the Applicant requiring a formal authority; 19
(b)On 19 September 2019, Mr Hapugasdeniya sent an email to the Applicant enclosing numerous attachments. This included a letter from Hoi An’s accountant, PKD which referred to the Notice to Produce, and contained the documents they held;
(c)On 3 October 2019, an email from the Mr Hapugasdeniya with comments included on an email from the Applicant dated 30 September 2019;
(d)Further emails between the Applicant and the PKD between 13 and 19 November 2019 and 12 December and 20 December 2019.
26.Significant information was provided, by both Mr Hapugasdeniya and via PKD. Though the Respondents accept they did not take the action specified by the notice, this is not an instance where there was no engagement with the investigation. There were attempts made to at the very least, assist in the investigation process and documents were provided.
(footnotes omitted)
I consider that the failure to comply with the compliance notice was deliberate in the sense that the respondents had knowledge of its requirements and did not comply with it. Attempting to comply, and engaging with the investigative process, are not sufficient.
The Ombudsman did not make any specific submissions about whether the record keeping and pay slip contraventions were deliberate. The respondents said in relation to those matters:
27.In relation to Pay Slip Contravention and Records Contravention, Mr Hapugasdeniya has deposed that a bookkeeper had been engaged to prepare these. She was in fact an employee of the company’s accountant. The Respondents do accept that they did not provide the payslips to employees as required. However, the evidence is that they were prepared. Indeed, there is evidence that an employee asked for a pay slip and it was duly provided.
(footnotes omitted)
In these circumstances, I am satisfied that the record keeping and pay slip contraventions were deliberate. It was the first respondent’s responsibility, through the second respondent, to implement a system to keep and maintain for seven years all required records, and to provide pay slips within one day of payments to employees. There was no evidence that the first respondent implemented such a system.
h. whether senior management was involved in the breach
The Ombudsman argued that senior management was involved in the contraventions, as the second respondent was a director and secretary of the first respondent from 30 June 2015, and the sole director and secretary of the first respondent from 30 June 2018.
The respondents argued that, with such a small company, it was not appropriate to talk of senior management.
However, senior management being involved enables the court to be satisfied that the corporation itself, rather than a wayward, junior employee, was responsible for the contravention. This consideration applies equally to large and small corporations. In the present case, I am satisfied that senior management was involved, and that the contraventions were the contraventions of the first respondent.
i. contrition, corrective action and co-operation with the authorities
In her written submissions, the Ombudsman said:
44.As set out in paragraph 27 above, the Applicant made numerous attempts to engage with the Respondents in relation to the Compliance Notice. While the First Respondent produced a range of documents (under compulsion) in response to the Notice to Produce Records or Documents issued pursuant to section 712 of the FW Act during the investigation and prepared two sets of calculations, it failed to:
(a)rectify the errors in the second set of calculations set out in FWI Skeels’ letter dated 15 May 2020;
(b)meaningfully engage with the Applicant’s attempts to facilitate compliance or provide an extension of time on the basis of financial hardship; and
(c)provide evidence of payment being made to the Employees to rectify the direct effects of the contraventions set out in the Compliance Notice (apart from the email dated 28 July 2020 indicating that Mr Nguyen and Ms Nguyen had been paid comparatively nominal amounts).48
45.As at the date of filing these submissions, there is still no evidence before the Court of the First Respondent having rectified its non-compliance with the Compliance Notice. Further, there is no evidence before the Court of the First Respondent having implemented systems to ensure that it now complies with its obligations under Commonwealth workplace laws to its employees.
46.The Respondents’ engagement in these proceedings has been limited. Despite the Applicant commencing proceedings on 30 October 2021, a response and defence were not filed until 8 February 2021. While the Respondents entered into a SOAF, it was not for a period of approximately ten months after commencing proceedings, and not without putting the Applicant to the expense of preparing liability evidence and submissions. In these circumstances, the Applicant submits that a discount of 10% for cooperation is appropriate.
(footnotes omitted)
In their written submissions, the respondents said at [30]:
As submitted above, Mr Hapugasdeniya contacted each of the employees the subject of the allegations made. Ultimately, he arranged for additional payments to be made (which were modest) and two of the three agreed this had resolved any issue that they had.
(footnote omitted)
The respondents co-operated with the authorities by entering into a statement of agreed facts and agreeing to the declarations and orders set out at the commencement of these orders. Earlier, the respondents engaged with the Ombudsman’s investigative process, and provided some documents, albeit under compulsion.
As there was no cross-examination, the court is not in a position to assess whether there were any underpayments, or whether any underpayments have been rectified. The restaurant stopped trading in September or October 2019, shortly before or at the time when the compliance notice was issued. The respondents are therefore not able to show that they took corrective action by improving their systems for the calculation of wages, record keeping and providing pay slips.
I have some concerns about the respondents’ claims that the employees have said they are satisfied with the amounts they have received. The employees’ emails have the flavour of having been written under pressure. I make no finding to that effect, as the employees were not called as witnesses and the second respondent was not cross-examined. However, I am simply not in a position to find that there has been corrective action.
The Ombudsman noted that there was no statement of contrition in the second respondent’s affidavit. Indeed, it is full of excuses and criticism of other people.
The respondents argued that their contrition was evident from their agreement to the agreed statement of facts. I do not accept that submission. It seems more likely that the respondents agreed to the agreed statement of facts because they thought it would produce a better result for them.
j. the need to ensure compliance with minimum standards
In her written submissions, the Ombudsman said:
47.The Respondents’ failure to comply with the Compliance Notice undermines the FW Act’s enforcement framework and the safety net of entitlements it is designed to protect.50
48.The failure to comply with a notice properly issued by the Applicant is serious.51 The efficacy of statutory notices such as compliance notices will be hindered if recipients perceive that a failure to comply carries no meaningful consequences.52
49.The Courts have also consistently recognised the need to ensure compliance with minimum standards for record-keeping and payslips.53 Failure to comply with those requirements has the potential to undermine minimum standards, as proper record keeping and payslips play a central role in the capacity of the Applicant (as regulator) to monitor and enforce compliance with minimum standards.
:Fair Work Ombudsman v Tester [2021] FCCA 771 at [27].
:Fair Work Ombudsman v Tester [2021] FCCA 771 at [28] ; Fair Work Ombudsman v VS Investment Group Pty Ltd & Anor [2013] FCCA 208 at [51].
:Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No. 2) [2019] FCCA 2144 at [40].
The respondents did not specifically address this issue.
I accept the Ombudsman’s submissions on this point.
k. the need for specific and general deterrence
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]:
… 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)
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 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, the Ombudsman said:
51.The High Court has confirmed that deterrence, both specific and general, is either the sole or at least the primary objective of civil penalties.55
52.More recently the High Court has further explained in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3 at [116], that the “principal object” of deterrence depends on a penalty having the necessary “sting or burden … to achieve the specific and general deterrent effects that are the raison d’etre of its imposition”.
53.General deterrence must serve a purpose such that the penalty is not seen by others as just “the cost of doing business”.56 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”.57
54.As the Court observed in Fair Work Ombudsman v Soma Kitchen Pty Ltd (No 2) [2020] FCCA 2583 at [53], “Any contravention will damage the utility and effectiveness of the relevant statutory objectives and must be discouraged”.
55.Specific deterrence is directed at ensuring that a contravener is not prepared to embark upon the risk of engaging in the same contravening conduct in the future.58
56.General deterrence is of particular importance in this matter due to the poor compliance record of the hospitality industry,59 as well as the need for general deterrence against non-compliance with compliance notices and record-keeping and payslip obligations.
57. Specific deterrence is also an important consideration given:
(a)the First Respondent is still registered as a Company; and
(b)the Second Respondent is still the sole director and secretary of the Second Respondent, as well as the director and secretary of at least two other companies.60
:Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at 506, [55] (French CJ, Kiefel, Bell, Nettle and Gordon JJ) see also at 513, [79] Keane J agreeing with the plurality.
:Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 at [27].
:Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 at [93].
:Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 (AJR Nominees) at [50].
: Second Affidavit at [7] and LC-36.
: Second Affidavit at [5]-[6] and LC-34 – LC-35.
In their written submissions, the respondents said
31.Hoi An no longer trades and there is no evidence that Mr Hapugasdeniya is a director of any company that employees (sic) any other person than himself. Accordingly, it is submitted that the need for specific deterrence is low.
32.There has been media coverage of the Applicant’s prosecution of the Respondents in both industry press and in the Herald Sun.26 Mr Hapugasdeniya has been contacted by people he knows who have seen the publicity about the Respondents. To the extent that the Court considers that specific deterrence is a relevant consideration in this case, past and future publicity about the Applicant’s prosecution should be found to achieve that objective, together with the imposition of penalties set out below.
33.The Respondents accept that general deterrence is relevant in the current proceeding and submits that this would be achieved through a combination of the imposition of penalties set out below and the resulting media coverage that is likely to occur.
:Hapugasdeniya Affidavit at [47] – [48] and KH-05.
For the reasons discussed above in the authorities, I consider that it is appropriate that general deterrence be given significant weight in this matter. I also consider that specific deterrence should be given significant weight. Although the first respondent might not be trading at present, it has not been put into liquidation. Similarly, although the second respondent might have no employees at present, it is not beyond the realms of possibility that he will have employees in the future. The need for specific deterrence is particularly great, given the absence of any evidence of contrition on the respondents’ parts.
I do not consider that the media attention reduces the need for specific deterrence. In Fair Work Ombudsman v Priority Matters Pty Ltd (No 5) [2020] FCCA 901 at [184], Judge Driver said:
I accept that the impact of media coverage will operate to mitigate the penalty where the effect of the media coverage has been “adverse”. As discussed below, I do not accept that the media coverage has been adverse in the relevant sense.
(citation omitted)
His Honour went on to explain in [191] that:
… The impact of media coverage will only operate to mitigate the penalty where the effect of the media coverage has been “adverse” in the limited sense of being unfair or incorrect. Media coverage which is not unfair, inaccurate or misleading should not be taken into account as a factor mitigating against the grant of relief the Court might otherwise order in the circumstances, as the publicity is the mere and foreseeable consequence of the conduct engaged in.
(citations omitted) (emphasis added)
There was no suggestion that the media coverage in the present matter was unfair, inaccurate or misleading. Because the media coverage was not unfair, inaccurate or misleading, it was not adverse, in the necessary sense, even though the respondents no doubt felt that it was negative and embarrassing.
In the present case, the Ombudsman issued a press release. Judge Driver said of such press releases in Priority Matters:
188.It is appropriate for the Fair Work Ombudsman to issue press releases upon the institution of legal proceedings. Media coverage from the issue of such press releases will not ordinarily operate as a mitigating factor, and ought not do so in the circumstances of this case.
189.In Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) Gilmour J accepted that the media coverage which had taken place in that case would have had some negative impact upon the respondents both commercially and personally, but nevertheless did not regard that as a mitigating factor, citing it as “a common incident of the kind of unlawful conduct involved in this case”. His Honour stated at [47]:
Indeed, the publication of information about compliance activities is an important part of the applicant’s role as a regulator of workplace laws. A statutory function of the applicant is to promote compliance with the Act. Publicity of penalty proceedings is intended to deter others from contravening workplace laws.
(citations omitted)
Nevertheless, in Eva v Southern Motors Box Hill Pty Ltd (1977) 15 ALR 428; (1977) 30 FLR 213; (1977) 2 TPC 64; (1977) ATPR 40-026 Smithers J said at FLR 222 to 223:
But adverse publicity initiated by the prosecuting authority itself requires special consideration. If the matter is publicized ahead of the trial, and widely, and in terms likely to induce public censure of the parties concerned and those parties are in day-to-day business relationships with the public, then there is obvious danger of injury to the lawful business of the parties which from a practical point of view may have the effect of effectuating a cumulative punishment: cf Fisse, The Use of Publicity as a Sanction Against Business Corporations, (1971) 8 Melbourne University Law Review at pp 107, 109. In such a case an element has been injected into the situation which subjects the parties to more than the natural and probable consequences of mere publication of the fact that they are being prosecuted for named offences. In my view this is a case in which, by reason of the press release of the prosecuting authority, the danger of cumulative punishment along these lines is real and should be treated as part of the background against which the penalty should be assessed. And I have so treated it.
What that quotation does not encapsulate is that the media release in Southern Motors was not entirely accurate. That is sufficient to distinguish that case from the present case.
The issues in relation to media attention were thoroughly discussed by Hansen J in Cousins v Merringtons (No 2) [2008] VSC 340, where his Honour said:
59.It is necessary to say something about the relevance and effect of adverse publicity, in particular to consider what is properly to be regarded as “adverse” in this sense. It is also important to distinguish between publicity constituted or initiated by a press release of Consumer Affairs Victoria on the one hand, and articles in the media and the ophthalmic newspaper on the other hand. As to the former, it is in fact a function of the plaintiff under s 100(1)(i) of the FTA to educate and inform people on fair trading issues. As to the latter it is a legitimate function of the media, let alone an industry newspaper, to publicise decisions of the Courts.
60.Guidance as to the relevance of adverse publicity is provided by decisions of the Federal Court of Australia in prosecutions under the TPA to which I was referred by counsel for the plaintiff. They are Eva v Southern Motors Box Hill Pty Ltd;20 Trade Practices Commission v Cue Design Pty Ltd;21 Australian Competition and Consumer Commission v Nationwide News Ltd;22 Australian Competition and Consumer Commission v Nissan Motor Co (Australia) Pty Ltd.23 Although these cases concerned prosecutions which resulted in the imposition of fines while the present case is civil in nature and the relief sought does not include a monetary penalty, the reasoning is nevertheless apposite. In the above cases the question arose whether “adverse” publicity should be taken into account in mitigation of penalty. In the present case counsel for the first defendant submitted that the adverse publicity suffered by the first defendant, but logically also the second defendant, was to be taken into account in its, or their, favour in determining the nature and extent of the relief to be granted. In effect, to a greater or lesser extent relief could, and should, be limited on account of the adverse publicity.
61.The above cases indicate that “adverse” means unfair or incorrect reporting. They recognise that a prosecutor may issue a media release concerning a case but where that occurs before the trial “appropriate restraint in tone and content is required”24 to avoid the defendants suffering damage that would not have occurred had the media release been fair and accurate.25 Subject to that a reasonably worded, accurate news release serves a useful purpose; without it the media is left to make their own inquiries and compile their own summaries, which carries a risk of inaccuracy.26
62.In my view these statements, with which I respectfully agree, are equally applicable to the issue of adverse publicity in the present civil proceeding. So approaching the matter I have considered the press releases and articles referred to.
63.In my opinion there is no unfairness or inaccuracy in the press releases of Consumer Affairs Victoria nor in my opinion are they misleading in any respect. They are such as in their terms were appropriate to be published pursuant to the statutory function of informing people on fair trading issues and alerting the media in succinct terms to the commencement of the case and subsequently the decision on liability.
64.It is also to be borne in mind that publicity of the type complained of is foreseeable as the consequence of conduct such as that engaged in by the defendants. In truth the defendants are the authors of their own misfortune. That engaged in the offending conduct and then thumbed their nose at the attempts of the plaintiff to resolve the problems without resort to litigation.
65.In my opinion, also, no reasonable complaint could be made of the newspaper articles, including the industry paper. It was not alleged that they, or indeed the press releases, suffered from any particular unfairness or inaccuracy or misleading element. Rather, the submission was that taken together they constituted adverse publicity which ought be taken account of as a factor mitigating against the grant of relief as the Court may otherwise consider just in the circumstances. I reject the submission. In my view the publicity referred to was the mere and foreseeable consequence of the conduct engaged in. Were it otherwise, the fact of publicity of relevant matters by the moving party in the litigation or the media generally, might have the effect of limiting the exercise of statutory power conferred for the protection of the public.
:(1977) 15 ALR 428 at 436–437.
:(1996) ATPR 41-475, 41,834–41,836.
:(1996) ATPR 41-519, 42,507.
:(1998) ATPR 41-660, 41,352–41,353.
:Eva v Southern Motors Box Hill Pty Ltd (1977) 15 ALR 428 at 437.
:Australian Competition and Consumer Commission v Nissan Motor Co (Australia) Pty Ltd (1998) ATPR 41-660, 41,352.
:Trade Practices Commission v Cue Design Pty Ltd (1996) ATPR 41-475, 41,836.
In Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128; Gilmour J said at [46]:
There has been adverse media coverage of this case which I accept will have had some negative impact on the respondents both commercially and personally. I do not regard this as a mitigating factor. It is a common incident of the kind of unlawful conduct involved in this case.
In summary, where the media reports are not unfair, inaccurate or misleading, they need not be taken into account in assessing penalty. There was no suggestion that the media reports in the present case were unfair, inaccurate or misleading.
Other issues
The parties agreed that a discount for admissions was appropriate in this case.
In Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70, Stone and Buchanan JJ held at [75]:
A conventional consideration in assessing a discount in a criminal case for a plea of guilty is the stage in the proceedings at which the plea is entered. Normally, the maximum discount for this factor, sometimes thought to be 25%, is reserved for a plea made at the first reasonable opportunity …
In Fair Work Ombudsman v Bedington [2012] FMCA 1133 Jarrett FM held at [87]:
The cases indicate that a discount on the penalty to be imposed is appropriate where there has been co-operation and admissions early in the course of an investigation or soon after the commencement of proceedings. Such discounts range as high as 30% in some cases. …
In her written submissions, the Ombudsman said at [61]:
In the circumstances, considering the factors outlined above, the Applicant submits that it is appropriate to apply a reduction in the amount of 10% for each of the First and Second Respondents by reference to the principle of totality. This has been included in the tables above.
In their written submissions, the respondents said at [36]:
As a result of the cooperation shown by the Respondents in agreeing the SOAF, the Respondents submit that a discount for cooperation of 10% is appropriate.28
: Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 at [75]-[76].
I accept that it is appropriate to give a 10% discount for admissions in all the circumstances of this case.
Step 4: the appropriate penalty
The parties were in dispute about the appropriate penalty for each contravention. In my view the appropriate penalties are as follows:
First Respondent
Contravention of the FW Act Maximum penalty Maximum less 10% discount Penalty percentage Penalty amount Section 716(5) – compliance notice $31,500 $28,350 50% $14,175 Section 536(1) – pay slips $63,000 $56,700 50% $28,350 Section 535(1) – employee records $63,000 $56,700 40% $22,680 Total: $65,205 Second Respondent
Contravention of the FW Act Maximum penalty Maximum less 10% discount Penalty percentage Penalty amount Section 716(5) – compliance notice $6,300 $5,670 50% $2,835 Section 536(1) – pay slips $12,600 $11,340 50% $5,670 Total: $8,505.00
It seems to me that those penalties are appropriate in the light of all of the matters discussed above.
Step 5: the totality principle
In her written submissions, the Ombudsman said:
59.Once an appropriate penalty for each contravention is determined by the Court, the Court must examine the aggregate penalty to determine whether it is an appropriate response to the conduct which led to the breaches.
60.While the penalties must not be crushing or oppressive, they must nevertheless bear relativity to the seriousness of the conduct engaged in by the First and Second Respondents.61
61.In the circumstances, considering the factors outlined above, the Applicant submits that it is appropriate to apply a reduction in the amount of 10% for each of the First and Second Respondents by reference to the principle of totality. This has been included in the tables above.
62.The proposed orders and declarations the Applicant seeks are set out in Annexure A to these submissions.
:See Kelly at [30]; Merringtons at [23] per Gray J, [71] per Graham J, [102] per Buchanan J; FWO v Promoting U Pty Ltd & Anor [2012] FMCA 58 at [57].
In their written submissions, the respondents said:
38.Once an appropriate penalty for each contravention is determined by the Court, the Court must examine the aggregate penalty to determine whether it is an appropriate response to the conduct which led to the breaches.
39.The application of the totality principle is a final check to be applied to ensure that a final, total or aggregate penalty is not unjust or out of proportion to the circumstances of the case.29
40.In the circumstances and having regard to factors outlined above, the Respondents submit that it is appropriate to apply a reduction in the amount of 10% for each Respondent by reference to the principle of totality. This has been included in the tables above.
:Mornington Inn v Jordan [2008] FCAFC 70 at [42], cited with approval in Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No 2) [2020] FCCA 2583 at [25].
In other words, the parties agreed that a 10% reduction for totality was warranted in all the circumstances of this case. I also agree with that. Consequently, the total penalty for the first respondent will be $58,684.50 and the total penalty for the second respondent will be $7,654.50. There will be orders accordingly.
I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 3 March 2022
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