Fair Work Ombudsman v Hu & Ors

[2020] HCATrans 11

[2020] HCATrans 011

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B53 of 2019

B e t w e e n -

FAIR WORK OMBUDSMAN

Applicant

and

TAO HU

First Respondent

MARLAND MUSHROOMS QLD PTY LTD

Second Respondent

TROY MARLAND

Third Respondent

NATIONAL FARMERS FEDERATION

Fourth Respondent

Application for special leave to appeal

KIEFEL CJ
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 14 FEBRUARY 2020, AT 10.08 AM

Copyright in the High Court of Australia

____________________

MR J.L. BOURKE, QC:   If the Court pleases, I appear with my learned friends, MS J.M. FIRKIN, QC and MS E. RAPER, SC, for the applicant.  (instructed by Clayton Utz Lawyers)

MR P.D. TUCKER:   May it please the Court, I appear with my learned friend, MR N.J. DERRINGTON, for the second and third respondents.  (instructed by HopgoodGanim Lawyers)

KIEFEL CJ:   There is no appearance for the first and fourth respondents.  Yes, Mr Bourke.

MR BOURKE:   If the Court pleases.  This matter raises an important special leave question:  where an essential element of a contravention is a mixed question of fact and law, whether the pickers in question were casual employees, is it enough to know the relevant facts from which a legal characterisation or legal label of casual employment could be made or is it just enough to know the underpinning facts from which that conclusion can be made?

KIEFEL CJ:   Mr Bourke, ground 1 is critical for your purposes, is it not?  Grounds 2 and 3 – you only reach them if you are successful in relation to ground 1.

MR BOURKE:   Ground 2 will still be operative in relation to Ms Hu because our case against her was that, if our construction of clause 15 is correct, there were then subsequent breaches of the time‑based clauses in the award.

KIEFEL CJ:   It would not be operative in relation to the Marland ‑ ‑ ‑

MR BOURKE:   Correct.

KIEFEL CJ:   ‑ ‑ ‑ unless accessorial liability is found.

MR BOURKE:   Correct.  But, we say, ground 3 has an independent life in that ground 3, we say, the finding of the primary judge that the farm manager knew that there was being underpayments of the pickers should have been sufficient essential fact.

EDELMAN J:   It is a similar issue to ground 1.

MR BOURKE:   It overlaps.

EDELMAN J:   Yes.

MR BOURKE:   But they are in truth still ‑ ‑ ‑

KIEFEL CJ:   Where is the real question of public and general importance?  Does it reside in ground 2?

MR BOURKE:   We would say also ground 1.  The issue of ‑ ‑ ‑

KIEFEL CJ:   How is that if it is a question of mixed fact and law?  Essentially, the matter here resolves on the facts, regardless of the law. 

MR BOURKE:   Because, in our submission, it is not clear from an application of Yorke v Lucas whether you need to know the legal characterisation of what could be said to be essential facts or just the underpinning facts in which you could place the legal label.

EDELMAN J:   Does it not depend on what the offence is?

MR BOURKE:   It may.  But, in our submission, on a proper analysis of Yorke v Lucas, when knowledge of the law is not a defence, it is only knowledge of the essential facts.  You do not need to know whether those essential facts translate into causing a contravention.  We say there is a fundamental error in the primary judge, and the majority, approaching the case that it was not enough simply to know the relevant indicia in which you could form the view there was casual employment.  You actually had to prove that the accessory in his or her own mind knew that they were casuals as the legal label.

EDELMAN J:   Is not the difficulty with that, that for a contravention of section 45, there must be knowledge of sufficient facts to know that there is going to be a contravention of a term of a modern award?

MR BOURKE:   In our submission, that should not be a requirement for accessorial liability.  It should only be, coming back to Yorke v Lucas, what are the essential facts to be known?  There should be no requirement to make legal conclusions in order to engage what would then be, in terms of accessorial liability, section 550. 

EDELMAN J:   So an employer, who knew of facts that would have established that somebody was a casual employee rather than, say, a part‑time employee, but that legal characterisation might be very finely balanced, and the employer believed, subjectively, that the person was a part‑time employee and paid on that basis rather than as a casual employee, that employer would still have sufficient knowledge, on your approach, to be an accessory. 

MR BOURKE:   Correct, because otherwise you are having a defence of ignorance of the law is an excuse.  Section 45 starts as a strict liability provision for primary liability and, in our submission ‑ ‑ ‑ 

EDELMAN J:   It is not strict liability for secondary liability, is it?

MR BOURKE:   Yes, but when you go to secondary we say as long as you know the sufficient facts from which a conclusion should be made, that the award was engaged, that should be sufficient.  And could we also add in relation to question 1, this is going to come up time and time again – not just in terms of underpayment claims, involving awards, enterprise agreements, national employment standards, but the status of an employee – whether they are permanent, casual or independent contractors – is engaged throughout the Fair Work Act, in various protections that are provided. 

EDELMAN J:   You accept, as I understand it, that the meaning of knowledge is unlike the requirement of knowledge for accessory liabilities, say, to a breach of trust, is only actual knowledge but not any lower degree of knowledge.

MR BOURKE:   It is actual knowledge.  It is not implied knowledge.  We accept that.

KIEFEL CJ:   It is not suspicion?

MR BOURKE:   Correct.  No, it has to be actual knowledge.

KIEFEL CJ:   That is the finding against you.  The finding was suspicion, was it not?

MR BOURKE:   The finding was suspicion, but if we win on question 1, we overcome that because ‑ ‑ ‑ 

KIEFEL CJ:   Because you say the essential facts are different. 

MR BOURKE:   Because the primary judge found that, for example, Mr Marland knew exactly the same indicia ‑ that is variable hours, unpaid leave entitlements ‑ that were relied upon by the primary judge for him placing the casual – the legal label – on the pickers as casuals.  So we proved knowledge of the exact indicia that the primary judge relied upon to place the legal label and we say that is not required under Yorke v Lucas, that extra step. 

KIEFEL CJ:   Mr Bourke, Justice Bromberg’s dissent, did it relate to ground 1 or just to ground 2?

MR BOURKE:   Solely ground ‑ ‑ ‑

KIEFEL CJ:   Ground 2?

MR BOURKE:   Question 2.

KIEFEL CJ:   Yes, I thought so. 

MR BOURKE:   Yes.  Could we move to the public interest aspect, question 2.  We say the construction – we start by accepting this is not a construction point under an award, but we say it has real public importance because it ‑ ‑ ‑

EDELMAN J:   If you are right, then it does not just apply in relation to a Yorke v Lucas approach to section 45.  It applies across the board to every single instance where there is accessorial liability to a civil penalty or a criminal offence.

MR BOURKE:   Correct.  And we point out in our submissions the exact formulation of 550 of the Fair Work Act is replicated in, for example, the Australian Consumer Law and the Corporations Law.  It is a live issue for all essentially statutory provisions that are dealing with accessorial liability, as well as a massive issue in the industrial space.

Then we go to question 2.  You have got a pivotal clause ‑ an award that covers agriculture, dealing with the most – it is accepted in the submissions – extremely vulnerable people to exploitation, that is, pieceworkers that are frequently transient workers often here on working visas and the Federal Court’s construction is that, if you have a piecework rate, no matter how token, no matter how non‑compliant with the award, they still remain a pieceworker because you made a piecework agreement, even though ‑ ‑ ‑

EDELMAN J:   Your construction is if you pay them at the wrong rate, then they are no longer a pieceworker.

MR BOURKE:   Correct.

EDELMAN J:   How can that be right?

MR BOURKE:   Because, in our submission, in order to avoid what is otherwise the mandatory obligations of the time‑based pay provisions you have to meet the strict compliance in order to create a piecework agreement that meets clause 15.

EDELMAN J:   The time‑based pay arises because they are a pieceworker; they are not a pieceworker because they are paid by a particular amount.

MR BOURKE:   The time‑based pay would apply, unless they are a pieceworker, and we say in order to become a pieceworker you need to make an agreement that complies with clause 15.

KIEFEL CJ:   Is that not rather circular reasoning?

MR BOURKE:   In our submission, it is not.  The award starts with – in the absence of a piecework agreement, you have the protections of the time‑based provisions.  Then clause 15 permits an employer to remove an employee out of that regime and make them a pieceworker, but it sets up protections.  One of those protections is the piecework rate needs to be at a certain level, as well as protections such as in writing and not entered by way of coercion.  And, in our submission ‑ ‑ ‑

EDELMAN J:   One answer might be if you pay a pieceworker below the rate that is required, it is not that they are no longer a pieceworker, it is that you are required to pay them at the proper rate.

MR BOURKE:   And there are a number of issues that fall out from that.  One is normally a worker can simply look at the award, know how many hours they have worked and know what their entitlements are.  If you have got a defective piecework rate, a pieceworker, realistically, is not able to work out what their true entitlements are because it is going to be unrealistic to expect that a pieceworker will know what the correct piecework rate is.

The primary judge, himself, indicated this is not an easy task.  He looked at the nature of the workforce, the type of picking conditions, in order to assess what was the correct piecework rate.  That is an unrealistic

task that a pieceworker could ever do.  That is the type of information that only an employer would know and, we say, if they get that wrong, they lose the benefits of clause 15 and that worker remains under the time‑based regime.

We say that is a critical issue because it goes to the fundamental aspect of how they are going to be paid and it is across the agricultural sector which is a massive sector.  You are talking, as we have said, of extremely vulnerable people for starters, in our submission, it has only got worse with the construction adopted by the Federal Court. 

Can we move to question 3?  That comes back to Yorke v Lucas.  What does it mean to know the essential facts?  The primary judge found that the farm manager knew that the pickers were being underpaid.  We say that should have been enough to visit liability on the corporate entity, Marland Mushrooms, but the primary judge found that that liability did not visit on Marland Mushrooms because the manager did not know the status of the employees.

We say that should not be an essential fact.  All you need to know is that there are under award payments being made and you are participating in that.  The current approach of the Federal Court in rejecting that argument has simply raised to, we say, an unnecessary level, the amount of essential matters that need to be known by an accessory, particularly in an underpayments case.  Unless there are any other matters.

KIEFEL CJ:   Yes, thank you.  Yes, Mr Tucker.

MR TUCKER:   May it please the Court, can I address question 1 first?  In our submission, the question, itself, is largely answered in paragraph 16 of the applicant’s principal outline which is at application book 121.  The postulate is that there is nothing incorrect about the test from Yorke v Lucas which said for somebody to be responsible on an accessorial liability basis they must know all of the essential matters that go up to the contravention of statute or offence and must engage in some act or omission directed towards one of the matters that makes up the contravention.  At paragraph 16 of the applicant’s outline, it is stated that it is enough that somebody might know facts from which they could quote “could be determined”.  In the first sentence:

that legal characterisation could be determined.

In this case, his Honour found – and I do not believe there is a dispute about this – and it is at 159 of his reasons – that the case articulated by the applicant was that the Marland parties had to know the rate to which the employees were entitled to be paid and that they were not being paid in accordance with that entitlement. 

His Honour went on, at paragraph 170 of the judgment, which is at 49 and 50 of the application book, to set out the four requirements.  The third requirement was that:

(3)      The employee was employed on a casual basis.

And what flowed from that is that you could determine that they are entitled to be paid $22.86 per hour or, to put it another way, that an average competent employee could pick, at a pick rate, which being paid at the piece rate from HRS Country, would entitle them or enable them to earn $22.86 per hour.

Now, without knowing that, without knowing that they are casual employees, you cannot know that the piece rate has to provide a sufficient level to enable them to earn $22.86 per hour, so one absolutely has to know that they are a casual employee, because if they are a full‑time or a part‑time employee, they are entitled to the equivalent rate of $18.87.  So that is fundamental, and that is the short reason why.

As your Honour Justice Edelman said, in various cases the question will vary.  As the plurality of the Full Federal Court said, when citing Justice White’s short exegesis from Devine Marine setting out the principles, which are not in dispute ‑ this is at application book page 88, the:

principles are not in doubt.  The more difficult question arises from their application to the circumstances of this case ‑

EDELMAN J:   Well, in a way the applicant is putting a principle in doubt, and on the applicant’s case, the Yorke v Lucas test is a test of knowledge of the essential factual elements of the offence.  And I think your submission is that it is knowledge of the essential elements of the offence, whether they be factual or legal, if they are essential to proving liability.

MR TUCKER: Yes. One can think of other examples, like section 30 of the Australian Consumer Law, two subsections of which provide, for example, that a person is proscribed from making a false representation concerning an interest in land, or the lawful purpose to which land may be put. Now, if those are the sine qua non, then those things must be proved as a matter of actual knowledge on the part of the person who is asserted to have ‑ asserted to be a secondary participant.  The same conclusion was reached in the Full Federal Court in Rafferty’s Case, concerning knowledge that the parties had entered into a franchise agreement.

Again, as your Honour Justice Edelman said, each case will vary, and it is difficult, we would submit, to suggest the Court could be capable of enunciation of an overarching principle in every case, given the inherent variability of the question.  But in this case, because the case was run on the basis that the Marland parties had to know the award, and had to know that the employees were entitled to be paid $22.85 an hour, or, it is a little bit more complicated, at a piece rate which would enable an average competent employee to pick at a rate which would achieve that hourly rate, then they had to know that they were casual employees, and there was no escaping that.  And so the Full Federal Court plurality at 39 of the reasons, where they said that his Honour correctly pointed that out, was entirely correct.  Again, as your Honour was wont to say‑ ‑ ‑

EDELMAN J:   In essence, your submission is that probably one of the most core or essential elements of the offence is knowing they are paid at the wrong rate.

MR TUCKER:   Yes.

EDELMAN J:   You cannot know they are paid at the wrong rate unless you know whether they are a casual employee.

MR TUCKER:   Exactly.  In relation to question 2, it is a pure construction argument.  That ordinarily would not trouble this Court unless there was a particular reason for the grant of special leave.  And we submit, in any event, the primary judge and the plurality’s construction was correct because the applicant’s construction requires reading in things that are not there.  Indeed, an antecedent of this award is set out in Justice Bromberg’s dissent at paragraph 84 of the reasons of the Full Federal Court decision.

KIEFEL CJ:   What was his Honour’s ‑ how did his Honour diverge from the majority on ground 2?

MR TUCKER:   Well, his Honour found a construction that was different in substance to that advanced by the applicant.  He said that there simply was not an agreement, because in his Honour’s construction, if the piece rate was inadequate it simply was not an agreement at all.  It was not, as the applicant would have it, then a channel, whereby one would find a contravention under section 45 which would lead to other results. 

KIEFEL CJ:   So the failure to make an agreement in compliance is the contravention itself, is that ‑ ‑ ‑ 

MR TUCKER:   Well, he said there was no contravention as I read it, or as we read his reasons, he said there was simply no agreement. 

KIEFEL CJ:   Does the applicant seek to take up Justice Bromberg’s point?

MR TUCKER:   As we apprehend the submissions, no.  They would not say that there was no agreement as such.  But at application book 107, the point that I was seeking to make a moment ago, was that his Honour Justice Bromberg set out an antecedent of this award and set out clause 15.6 which provided:

In no case will a full‑time, part‑time or casual employee working under a piecework agreement be paid less than the prescribed ordinary rate payable to the employee for the hours of worked performed.

That was extracted in the final award in this case.  On the construction ventured by the applicant, it would put back something even wider than that.  And we say that reading those words as in, particularly in the history of this award, is simply unwarranted. 

In relation to the third question, your Honours, in our submission, it appears to proceed upon a misapprehension of the primary judge’s reasons at 263 to 266 of his Honour’s judgment and that is at application book 68.  Now, what his Honour there said, and this is at line 11:

I infer from Mr McKeon’s email that he knew that whatever piecework rate was being paid by HRS Country (which must have been less than $1.05 per kg), it was inadequate to allow the average competent employee to earn at least $22.85 per hour at a pick rate in the vicinity of 21.85 kg per hour. 

This is really a matter of simple mathematics.  At 21.85 kg per hour, at a $1.05 per kg, that is $22.66.  Marland Mushrooms was paying HRS Country $1.05, so that is why his Honour says, well, it could not have been more than $1.05.  But, as we said in the footnotes to our outline, if they had been paid at a full‑time or part‑time rate that would have been $18.87, or $18.83, which is about 87 cents per kilogram – well less than $1.05 per kilogram that Marland Mushrooms was paying.

The significance of the reciting of that figure of $22.85 is evident, again, when one looks at application book page 50, in paragraph 170 of the reasons because what follows on from knowing that they are a casual employee, is that they are entitled to that number.  That is why his Honour concludes at 266 of the reasons, it is fatal that Mr McKeon does not know that they are a casual employee because unless he knows that, he does not know they are entitled to $22.85 per hour.  Otherwise, if the Court is

minded to grant special leave, we rely on what we have said in the cost conditions ‑ ‑ ‑

KIEFEL CJ:   Yes, thank you, Mr Tucker.  Do you have anything in reply, Mr Bourke? 

MR BOURKE:   Yes, thank you.  My learned friend does not dispute that there is a clear ramification in terms of the application of Yorke v Lucas.  There is application in terms of accessorial provisions across a number of statutes.  And a critical point is:  where is the starting point in analysing the essential elements?  Is it that this is just a case‑by‑case analysis?  Or is it that your starting point is you only need to know the essential facts?

My learned friend said that our case was built around knowing casualness.  That is not correct.  We ran in front of the Full Court, for example, in ground 12, that a system of non‑compliance, knowledge of that was enough, and we also relied upon heavily the 7 February meeting between the Fair Work Inspector and Mr Marland where the inspector said the rate was inadequate for compliance and needed to be increased and we built a case to show that he knew, Mr Marland, that it was not increased.

In terms of question 2, the fact that there was a change in the drafting of 15.6 in terms of a bedrock guarantee of minimum payments did not change the issue in terms of what level of compliance is required of a piecework agreement in order to be effective.  Does it still need to meet the other requirements of clause 15?  And we dispute the reading of paragraph 263.  The earlier part, which is on page 68, was not read to the court.  The primary judge said:

The content of the email of 19 June 2014 suggests that Mr McKeon did not merely have a suspicion that HRS Country’s piecework rate was inadequate, but knew it was inadequate.  I infer that that was why he encouraged Ms Hu to engage in such subterfuge and deception.

So he knew it was inadequate and that is the basis of our question 3, and we say that knowledge should have been enough.  If the Court pleases.

KIEFEL CJ:   Yes, thank you.

We do not consider that there is sufficient reason to doubt the correctness of the decisions of the courts below.  Special leave is refused. 

AT 10.35 AM THE MATTER WAS CONCLUDED