Fair Work Ombudsman v Indian Food Catering Pty Ltd

[2019] FCCA 1471

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v INDIAN FOOD CATERING PTY LTD & ANOR [2019] FCCA 1471

Catchwords:
INDUSTRIAL LAW – Application seeking declatory relief and penalties for contravention of s.405 of the Fair Work Act 2009 (Cth) – consideration of the appropriate penalty for contravention against the first and/or second respondent – no penalty imposed against the second respondent – penalty imposed against the first respondent.

COSTS – Whether the requirements of s.570(2) of the Fair Work Act 2009 (Cth) have been made out – no order for costs made in respect of either party.

Legislation:

Fair Work Act 2009 (Cth), ss.392, 405, 546, 566, 570

Cases cited:

Mayberry v Kijani Investments Pty Ltd as trustee for The Dawe Investments Trust Subway Wallsend trading as Subway [2011] FCA 1238

Applicant: FAIR WORK OMBUDSMAN

First Respondent: INDIAN FOOD CATERING PTY LTD (ACN 605 633 350 )

Second Respondent: DHARMA REDDY GUMMI

File Number: SYG 615 of 2019

Judgment of: Judge Street

Hearing date: 30 May 2019

Date of Last Submission: 30 May 2019

Delivered at: Sydney

Delivered on: 30 May 2019

REPRESENTATION

Counsel for the Applicant: Ms L Saunders

Solicitors for the Applicant: Fair Work Ombudsman

Counsel for the Respondents: Mr A Guy

Solicitors for the Respondents: Pannu Lawyers

DECLARATIONS

1. A declaration that the First Respondent contravened section 405 of the Fair Work Act 2009 (Cth) by contravening a term of the Fair Work Commission Order.

2. A declaration that the Second Respondent was involved, within the meaning of section 550 of the Fair Work Act 2009 (Cth), in the First Respondent’s contravention of section 405 of the Fair Work Act 2009 (Cth).

ORDERS

1. Grant leave to the Respondents to file in Court the two Affidavits of Dharma Reddy Gummi affirmed on 28 May 2019 and the Court directs that the Affidavit without annexures be electronically filed.

2. An order pursuant to subsection 545(2) of the Fair Work Act 2009 (Cth), that the First Respondent and the Second Respondent, jointly and severally, pay the Applicant $5,008.00 within 28 days of these orders.

3. Pursuant to section 547(2) of the Fair Work Act 2009 (Cth) that the First Respondent and the Second Respondent, jointly and severally, pay the Applicant interest at the applicable pre-judgment rate from the amount outstanding in Order 2 date of these orders.

4. Within 14 days of receipt of payments by the Respondents the Applicant first pay Mr Singh the outstanding amount plus interest before allocation of payments to the outstanding penalty and in the event that the Applicant cannot locate Mr Singh, the applicant is to pay any amount received pursuant to the orders made by the Court to the consolidated revenue fund of the Commonwealth.

5. Pursuant to section 546(1) of the Fair Work Act 2009 (Cth), that there be imposed a penalty on the First Respondent for the contravention of section 405 of the Fair Work Act 2009 in the amount of $5,000.00 to be paid to the Commonwealth.

6. That interest is also to run at the pre-judgment interest rate on the outstanding penalty from the date of these orders.

DATE OF ORDER: 30 May 2019

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 615 of 2019

FAIR WORK OMBUDSMAN

Applicant

And

INDIAN FOOD CATERING PTY LTD (ACN 605 633 350 )

First Respondent

DHARMA REDDY GUMMI

Second Respondent

1. This is an application within the Court’s jurisdiction under s 566 of the Fair Work Act 2009 (Cth) (“the Act”) for declarations in respect of a contravention of the Act and for the imposition of penalties. These proceedings were commenced on 14 March 2019 and came before the Court at first instance on 11 April 2019.

2. Affidavit evidence has been read on behalf of the applicant in respect of two affidavits by Ina Maica Rodriguez affirmed 10 April 2019 and 28 May 2019, an affidavit by Christine Maree Cox affirmed 25 May 2019 and an affidavit by Baldhir Singh affirmed 27 May 2019. Two affidavits have been read by the second respondent, one in his capacity as a director of the first respondent affirmed 28 May 2019 and the second in relation to his personal affairs affirmed 28 May 2019. The second respondent also gave oral evidence in relation to the first respondent’s business, the salary and wages component identified in the profit and loss statement and there being three employees in respect of the business which is continuing.

3. To the substantial credit of the respondents, there has been agreement in respect of declaratory relief concerning the contravention of s 405 of the Act. Section 405 of the Act provides:

   A person to whom an order under this Part applies must not contravene a term of the order.

4. On 14 September 2018, the Fair Work Commission made an order pursuant to s 392 of the Act for the payment by the first respondent in the amount of $18,000.00 (less applicable taxation) in six instalments. Those instalments were to take place from 28 September 2018 to 28 February 2019. The first respondent did not make payments as required in accordance with the order of the Fair Work Commission and these proceedings were then commenced on 14 March 2019.

5. At the time the proceedings were commenced, only a sum of $5,000.00 had been paid pursuant to the orders made by the Fair Work Commission. Since the making of the Court’s orders on 11 April 2019, there has been an additional payment made bringing the total to $7,000.00. It is common ground, applying the applicable taxation rate, that the balance outstanding under the order made by the Fair Work Commission is currently $5,008.00. That reflects the taking into account of the taxation that the order expressly identified qualified the obligation to pay the $18,000.00.

6. The agreed set of facts are as follows:

   A. THE APPLICATION

   1.On 4 March 2019, the Applicant filed an Application and Statement of Claim in this Court against the First and Second Respondents, in respect of the First Respondent’s contravention of a term of an order of the Fair Work Commission (FWC) and the Second Respondent’s involvement in that contravention.

   B. ADMITTED CONTRAVENTION

   2.The First Respondent admits to contravening section 405 of the Fair Work Act 2009 (Cth) (FW ACT), by contravening a term of an order of the FWC made on 14 September 2018 pursuant to section 392 of the FW Act that required payment of compensation in the amount of $18,000 (less applicable taxation) to Mr Baldhir Singh (Mr Singh) in monthly instalments ending 28 February 2019 (Admitted Contravention).

   3.The Second Respondent admits he was involved, within the meaning of section 550 of the FW Act, in the First Respondent’s Admitted Contravention, as described in paragraph 2 above.

   C. THE PARTIES AND THE EMPLOYEE

   The Applicant

   4.The Applicant, the Fair Work Ombudsman, has standing and authority to bring these proceedings and seek orders under the FW Act.

   The First Respondent

   5.The First Respondent, Indian Food Catering Pty Ltd, is and was at all relevant times:

   (a)a proprietary limited company incorporated under the Corporations Act 2001 (Cth) and registered since 4 May 2015;

   (b) a company, which carried on a business operating a restaurant trading as Amritsari Dhaba in Doonside, New South Wales.

   The Second Respondent

   6.The Second Respondent, Dharma Reddy Gummi, is and was at all relevant times:

   (a)the sole director and sole secretary of the First Respondent;

   (b)the operative and controlling mind of the First Respondent; and

   (c) the person responsible for ensuring that the First Respondent complied with the order of the FWC referred to in paragraphs 12 and 13 below.

   The Employee

   7. In or about September 2016, Mr Singh commenced employment with the First Respondent as a cook on a fulltime time basis.

   8. On 27 March 2018, the First Respondent terminated Mr Singh’s employment.

   D. FAIR WORK COMMISSION PROCEEDING

   9.On 12 April 2018, Mr Singh lodged an application for an unfair dismissal remedy with the FWC pursuant to section 394 of the FW Act in respect of the termination of his employment by the First Respondent.

   10.On 14 August 2018, the FWC found that the termination of Mr Singh’s employment was harsh, unjust or unreasonable within the meaning of section 387 of the FW Act.

   11.    On 14 September 2018, the FWC found that:

   (a)     reinstatement of Mr Singh was inappropriate; and

   (b) that an award of compensation to Mr Singh was appropriate.

   12. On 14 September 2018, the FWC made an order pursuant to section 392 of the FW Act against the First Respondent (FWC Order).

   13. The FWC Order required the First Respondent to pay Mr Singh $18,000 less applicable taxation (FWC Order Amount) in six instalments of $3,000 (less applicable taxation) each, by each of the following dates:

   (i)      28 September 2018;

   (ii)     28 October 2018;

   (iii)    28 November 2018;

   (iv)    28 December 2018;

   (v)     28 January 2019; and

   (vi)    28 February 2019.

   14. On 14 September 2018, the FWC sent a copy of the FWC Order to the First Respondent.

   15. The First Respondent did not make the required payments to Mr Singh by the required dates as specified in paragraph 13 above.

   16. The First Respondent has paid Mr Singh amounts totalling $7,000 (gross) as follows:

   (a)     $1,000 on 26 October 2018;

   (b)     $250 on 12 November 2018;

   (c)      $500 on 28 November 2018;

   (d)     $250 on 3 December 2018;

   (e)     $1,000 on 18 December 2018;

   (f)      $1,000 on 29 January 2019;

   (g)     $1,000 on 26 February 2019; and

   (h)     $2,000 on 27 May 2019.

   17. The First Respondent admits it contravened section 405 of the FW Act.

   E. ACCESSORIAL LIABILITY

   18.    The Second Respondent, is and was at all relevant times:

   (a)     the controlling mind of the First Respondent;

   (b)principally responsible for the management of the First Respondent;

   (c) the person who terminated Mr Singh’s employment, on behalf of the First Respondent; and

   (d) was the person responsible for ensuring that the First Respondent complied with the FWC Order.

   19. The Second Respondent had knowledge of the following factual matters at all relevant times:

   (a)     that the FWC Order was made on 14 September 2018;

   (b)that the FWC Order required the First Respondent to pay Mr Singh the FWC Order Amount in six instalments as set out in paragraph 13; and

   (c)that the First Respondent did not pay Mr Singh in accordance with the terms of the FWC Order as set out in paragraph 13 above.

   20.The Second Respondent admits that he was involved, within the meaning of section 550 of the FW Act, the First Respondent's contravention admitted in paragraph 17 above.

7. In determining whether or not to make a penalty order under s 546 of the Act, the Court must consider whether it is appropriate to make a penalty order and can only do so if it is satisfied that the relevant person has contravened a civil penalty provision. The Court cannot impose more than the maximum penalty pursuant to s 546(2) of the Act. The factors the Court must take into account in determining whether a penalty is appropriate and in determining the quantum of a penalty to be imposed are not in dispute.

8. The Court must take into account the separate contraventions that have occurred and the nature and extent of the conduct and circumstances in which the contraventions took place. Given the agreement of facts by the parties, it is not necessary for the Court to address the nature and extent of the circumstances in great detail.

9. It is, however, apparent that, at the time the order was made by the Fair Work Commission, the corporate entity was already in a position of considerable financial difficulty. It is apparent that the corporate entity’s financial difficulty is the reason why there was a payment regime put in place for instalments. The affidavit evidence read by the respondents supports there being real financial difficulties faced by the first respondent and a profit and loss statement has been admitted into evidence showing that the corporate entity is trading at a loss.

10. The facts agreed identified that the second respondent has accepted that he was deliberately involved in the contravention. It was a single contravention. No issue of grouping arises. The Court has also taken into account the nature and extent of the loss. Mr Singh was obviously a vulnerable employee in respect of whom there is still outstanding a relevant balance which would be of considerable significance to him. The Court has also taken into account the admitted deliberateness of the conduct. The first respondent was, in essence, the corporate vehicle of the second respondent.

11. In relation to contrition and corrective action, it is apparent that steps have been taken to try and comply with the order of the Fair Work Commission. These are proceedings brought in circumstances where an entity that was in financial difficulty is being exposed to a further penalty to be imposed for failure to comply with the financial obligations to make payments. Whilst there are extremely important principles to be taken into account in ensuring general compliance with the orders made by the Fair Work Commission, it is one where the Court must take into account the circumstances in a particular case.

12. In this case, it was apparent that there was an entity already in financial difficulty. There is force in the submissions advanced by the applicant that it is apparent that the first respondent was managing its creditors and selectively making payments. Nonetheless, the reality is that there were financial difficulties. These are significant factors in the circumstances of the present case in considering the extent of contrition and corrective action. Further, if the first respondent were to be placed into liquidation, there is the real risk that a liquidator could seek recovery from Mr Singh of the payments made to him as a preference. This is a further factor to be taken into account in the context of this case.

13. The Court accepts, from the affidavit evidence that has been read, that there has been genuine contrition by the first respondent in respect of the failure to comply with the Fair Work Commission order. The Court also accepts, on the evidence before the Court, that there has, in fact, been real and genuine cooperation with the enforcement authorities in relation to the financial difficulties of the first respondent in complying with the Fair Work Commission order and that there has been cooperation in relation to the proceedings that were then brought, understandably, by the applicant to ensure that the Fair Work Commission’s order was complied with.

14. The agreed statement of facts and admissions identify a significant factor in the circumstances of the present case to be taken into account. The size and financial circumstances of the business is one in respect of which there are principles identifying the importance of making minimum standards for employees. That has no application to the circumstances of the present case. Rather, it is the importance of ensuring that orders of the Fair Work Commission are complied with, whether the business is large or small, that is a relevant and significant factor in the circumstances of the present case in considering whether a penalty should be imposed in respect of the first respondent as well as in relation to the second respondent.

15. The reference to “minimum standards”, for the reasons that have just been given by analogy, applies to the making of orders by the Fair Work Commission which is part of the enforcement regime under the Act and does, as Ms Saunders of counsel submitted, have a very important role to play in protecting employees.

16. The Court must also take into account general deterrence which is of considerable significance in relation to ensuring compliance with orders of the Fair Work Commission. In relation to specific deterrence, it is apparent that the respondents in the present case have been faced with circumstances of financial difficulty. Whilst the second respondent has had the benefit of a separate consulting job as well as running the Indian restaurant business conducted by the first respondent, he has no other assets and his means are, on the face of the evidence before the Court, parlous. The Court must also take into account the totality principles. The Court has taken into account the maximum penalty that can be imposed under s 405 of the Act as identified in the applicant’s submissions.

17. Taking into account all the above factors, the Court is satisfied that it is appropriate to impose a penalty on the first respondent and the Court fixes that penalty in the amount of $5,000.00.

18. Taking into account all those principles and, in particular, the parlous circumstances of the second respondent, the Court is not satisfied that it is appropriate to impose a penalty on the second respondent. The evidence before the Court, which the Court accepts, is that the second respondent has had continuing financial difficulties and has, in fact, been using his own funds and it appears his wife’s funds in endeavouring to meet obligations of the first respondent.

19. The Court also takes into account that, while very significant for Mr Singh, the amount remaining outstanding, even at the time of commencement of the proceedings, was not significant. Where a person in financial difficulties is met with a knowing involvement in conduct contravening s 405 of the Act and where that conduct arises from financial difficulties of the entity, the subject of that order is one in which the Court is entitled to take those circumstances into account in determining whether, notwithstanding the importance of the principles the Court has referred to, it is appropriate in the circumstances of the case to make any penalty order.

20. For the above reasons, the Court is not satisfied in the circumstances of the present case that it is appropriate to make any penalty order against the second respondent.

21. In relation to the issue of costs, counsel on behalf of the applicant drew the Court’s attention to the decision of Katzmann J in Mayberry v Kijani Investments Pty Ltd as trustee for The Dawe Investments Trust Subway Wallsend trading as Subway [2011] FCA 1238. That decision is clearly distinguishable from the circumstances of the present case, but there has been evidence led in respect of the financial difficulties faced by the first respondent. It is for the applicant to prove that the requirements of s 570(2) of the Act are made out in order to depart from the principles identified in s 570(1) of the Act.

22. The Court is not satisfied in the circumstances of the present case that the applicant has established that costs have been incurred due to the unreasonable act or omission caused by the respondents. The Court is not satisfied that this is an appropriate matter in which to depart from the general principle in relation to costs being borne by the respective party. Accordingly, the Court will make no order as to costs.

23. The Court notes that, in the orders sought by the applicant, there were steps for further enforcement if there has been no compliance and there were steps identified in respect of which payments were to be made within a period of 28 days. It is apparent on the evidence before the Court that imposing an obligation to pay the amounts within 28 days is, of itself, likely to give rise to further difficulties. It is apparent that the first respondent has been endeavouring to make payments and the first respondent needs to comply with the existing obligation to pay the outstanding balance of $5,008.00 to the applicant which will be paid to Mr Singh. That is a payment that should be made first by the respondents. The order against the corporate entity in respect to the payment of the penalty is one that obviously may be the subject of a period of time before it is paid.

1. The Court also notes that there is interest running on the current amount outstanding in respect to the order made by the Fair Work Commission and proposes to order that interest be paid on the amount of the Court orders reflecting that outstanding amount. The Court is also of the view that it has power to order that interest be paid at the same rate in respect of the penalty if it is not paid within a 28 day period so that interest will continue to run.

2. The Court is not satisfied that it is appropriate, however, to require the matter to be brought back before the Court given the amounts involved.

3. Ms Saunders on behalf of the applicant submitted that it was appropriate for the Court to make orders in relation to the component of the $18,000.00 to be paid by the first respondent to the Australian Taxation Office. There is an obligation under the tax legislation for the first respondent to do so. The Court sees no reason to make a further order in that regard.

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Judge Street

Date: 28 June 2019