Fair Work Ombudsman v Invivo Group Pty Ltd - [2015] FCCA 1914

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v INVIVO GROUP PTY LTD & ORS

[2015] FCCA 1914

Catchwords:
INDUSTRIAL LAW – Contraventions of the Fair Work Act 2009 – s.323: failure to pay employees in full and at least monthly – s.535: failure to keep proper records – s.536: failure to give employees payslips within one working day of payment – declarations on admissions – penalties.

Legislation:
Corporations Act 2001, s.471B
Fair Work Act 2009, ss.12, 14, 323, 535, 536, 539, 546, 550, 701, 712
Fair Work Regulations 2009, regs.3.32, 3.33
Manufacturing and Associated Industries and Occupations Award 2010, cls. B.3.4, 14.1, 36.2, 40.7

Cases cited:
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8
Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (2015) ACSR 403; [2015] FCAFC 59
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7

Applicant:

FAIR WORK OMBUDSMAN

First respondent:

INVIVO GROUP PTY LTD (IN LIQ)
(ACN 159 703 492)

Second respondent:

JONATHAN PAUL WILLIAM STIELOW

Third respondent:

CLAUDIO SALVADOR LOCASO

File number:

MLG 934 of 2013

Judgment of:

Judge Riley

Hearing date:

12 June 2015

Date of last submission:

12 June 2015

Delivered at:

Melbourne

Delivered on:

15 July 2015

REPRESENTATION

Counsel for the applicant:

Mr McKenna

Solicitors for the applicant:

Office of the Fair Work Ombudsman

Counsel for the first respondent:

The first respondent did not appear

Solicitors for the first respondent:

The first respondent was not represented

Counsel for the second respondent:

The second respondent did not appear

Solicitors for the second respondent:

The second respondent was not represented

Counsel for the third respondent:

The third respondent appeared in person

Solicitors for the third respondent:

The third respondent was not represented

DECLARATION:

Based on the admissions made by the second respondent in the statement of agreed facts filed on 31 October 2014 and the admissions made by the third respondent in the statement of agreed facts filed on 23 December 2014, the court declares that the second and third respondents each contravened:
(a)s.323(1) of the Fair Work Act 2009, in that they were each involved within the meaning of s.550(1) of the Fair Work Act 2009 in the first respondent’s failure to pay in full at least monthly:
(i)Tim Amor;
(ii)Johnny Byrne;
(iii)Lorraine Murphy;
(iv)Maik Mylius;
(v)Edoardo Sangiorgio;
(vi)Marie-Isabell Schafhaupt;
(vii)Thomas Spengler;
(viii)Sarah Walsh; and
(b)s.535(1) of the Fair Work Act 2009, in that they were each involved within the meaning of s.550(1) of the Fair Work Act 2009 in the first respondent’s failure to keep records as prescribed by reg.3.32 and reg.3.33 of the Fair Work Regulations 2009 for:
(i)Tim Amor;
(ii)Rachel Blomeyer;
(iii)Johnny Byrne;
(iv)Jonathan Dowey;
(v)Lukas Martin;
(vi)Lorraine Murphy;
(vii)Maik Mylius;
(viii)Romain Poyet;
(ix)Edoardo Sangiorgio;
(x)Marie-Isabell Schafhaupt;
(xi)Thomas Spengler; and
(xii)Sarah Walsh; and
(c)s.536(1) of the Fair Work Act 2009, in that they were…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] FCCA 1914
Decision Date: 15 July 2015

CaseChat Overview and Summary

The Federal Circuit Court of Australia heard proceedings brought by the Fair Work Ombudsman against Invivo Group Pty Ltd (in liquidation), Jonathan Paul William Stielow, and Claudio Salvador Locaso. The dispute concerned admitted contraventions of the *Fair Work Act 2009* (Cth) by the first respondent, Invivo Group Pty Ltd, in relation to its employees. The second and third respondents, Mr Stielow and Mr Locaso, were directors of Invivo Group Pty Ltd and were alleged to have been involved in these contraventions. Proceedings against the first respondent were stayed due to its liquidation.

The court was required to determine the pecuniary penalties to be imposed on the second and third respondents for their involvement in the contraventions. These contraventions included failing to pay eight employees in full and at least monthly, failing to keep proper employee records, and failing to provide pay slips to employees. The court also needed to consider the extent to which these contraventions should be treated as a single course of conduct and how to apply the totality principle when determining the aggregate penalty.

In its reasoning, the court accepted the applicant's submission that the contraventions should be resolved into three distinct categories: failure to pay under section 323(1) of the *Fair Work Act*, failure to keep records under section 535(1), and failure to provide pay slips under section 536(1). The court considered various factors in determining the appropriate penalty, including the nature and extent of the conduct, the circumstances in which it occurred, the loss sustained by the employees, the deliberate nature of the breaches, the involvement of senior management, and the need for deterrence. The court noted that the employees were often young, inexperienced workers, including international students and backpackers, who were more susceptible to exploitation. It also highlighted that the directors paid themselves substantial amounts during the period the employees were underpaid or not paid at all.

The court ordered that the second respondent, Jonathan Paul William Stielow, pay a pecuniary penalty of $11,880, and the third respondent, Claudio Salvador Locaso, pay a pecuniary penalty of $11,880. These penalties were to be paid to the Fair Work Ombudsman for distribution to nine named employees, with any remaining balance to be paid to the Consolidated Revenue Fund of the Commonwealth. The penalties were to be paid within 28 days.

Orders

Orders of the court

Pursuant to s.546(1) of the Fair Work Act 2009, the second respondent pay pecuniary penalties of $11,880 in respect of the contraventions.

Pursuant to s.546(1) of the Fair Work Act 2009, the third respondent pay pecuniary penalties of $11,880 in respect of the contraventions.

Pursuant to s.546(3)(a) and (c) of the Fair Work Act 2009, the pecuniary penalties payable by the second and third respondents be paid to the applicant for distribution as follows:

(a) to Tim Amor, the sum of $2,333.84;

(b) to Johnny Byrne, the sum of $2,403.66;

(d) to Maik Mylius, the sum of $1,024.52;

(e) to Edoardo Sangiorgio, the sum of $2,222.05;

(f) to Marie-Isabell Schafhaupt, the sum of $2,647.11;

(g) to Thomas Spengler, the sum of $1,769.62;

(h) to Sarah Walsh, the sum of $1,206.82; and

(i) to the Consolidated Revenue Fund of the Commonwealth, the balance, including any amount payable to any of the above mentioned employees who the applicant cannot locate after reasonable enquiry.

The second and third respondents pay the pecuniary penalties within 28 days.

The applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.

FEDERAL CIRCUIT COURT

OF AUSTRALIA

AT MELBOURNE

MLG 934 of 2013

FAIR WORK OMBUDSMAN

Applicant

And

INVIVO GROUP PTY LTD (IN LIQ) (ACN 159 703 492)

First respondent

JONATHAN PAUL WILLIAM STIELOW

Second respondent

CLAUDIO SALVADOR LOCASO

Third respondent

REASONS FOR JUDGMENT

Introduction

This matter concerns the declarations to be made and the penalties to be imposed on the second and third respondents for their admitted involvement in certain contraventions of the Fair Work Act 2009. The proceedings against the first respondent were stayed pursuant to s.417B of the Corporations Act 2001 as the first respondent is in liquidation. The applicant and the second respondent filed one statement of agreed facts (“SOAF”), and the applicant and the third respondent filed another. The two SOAFs were almost identical. The SOAF filed in relation to the second respondent is set out verbatim in paragraphs 2 to 57 of these reasons, except that the differences in the SOAF filed in relation to the third respondent are also set out. In brief summary, the first respondent did not give pay slips to 12 employees or keep proper records in relation to them, did not pay eight of them the correct amounts and did not pay eight of them at least monthly. The second and third respondents were directors of the first respondent and were involved in the breaches.

Statements of agreed facts

On 27 June 2013, the applicant filed an application and statement of claim in this court against the respondents (statement of claim), in respect of a total underpayment of $35,408.45 by the first respondent to the following employees:

a) Tim Amor (Amor);

b) Rachel Blomeyer (Blomeyer);

c) Johnny Byrne (Byrne);

d) Jonathan Dowey (Dowey);

e) Lukas Martin (Martin);

f) Lorraine Murphy (Murphy);

g) Maik Mylius (Mylius);

h) Romain Poyet (Poyet);

i) Edoardo Sangiorgio (Sangiorgio);

j) Marie-Isabell Schafhaupt (Schafhaupt);

k) Thomas Spengler (Spengler); and

l) Sarah Walsh (Walsh).

(collectively, the employees).

ADMITTED CONTRAVENTIONS

On 21 March 2014, in an extraordinary general meeting, the first respondent passed a special resolution that it be wound up voluntarily and that liquidators would be appointed for the purpose of that winding up.

By reason of the liquidation described in paragraph 3 above, the proceeding is stayed against the first respondent (subsequently referred to as the liquidated company) by operation of s 471B of the Corporations Act 2001 (Cth).

The second respondent (in the third respondent’s SOAF, the third respondent) expressly admits to the liquidated company contravening the following provisions, and to his involvement in those contraventions:

a) section 323(1) of the Fair Work Act 2009 (Cth) (FW Act), by failing to pay amounts payable in relation to the performance of work to each of the following employees in full and at least monthly:

i) Amor;

ii) Byrne;

iii) Murphy;

iv) Mylius;

v) Sangiorgio;

vi) Schafhaupt;

vii) Spengler; and

viii) Walsh

(together, the s.323 employees);

b) subsection 535(1) of the FW Act, by failing to keep records for each of the employees, as prescribed by regs.3.32 and 3.33 of the Fair Work Regulations 2009 (Cth) (FW Regulations); and

c) subsection 536(1) of the FW Act, by failing to give each of the employees a pay slip within one working day of payment,

(collectively, the admitted contraventions).

UNDERPAYMENT AMOUNT

The second respondent (in the third respondent’s SOAF, the third respondent) agrees that the admitted contraventions resulted in underpayments to the s.323 employees in the aggregate amount of $14,964.04.

PARTIES AND EMPLOYEES

The Applicant

The applicant is and was at all times material to this proceeding:

a) a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to division 2 of part 5-2 of the FW Act;

b) a Fair Work inspector by force of s.701 of the FW Act; and

c) a person with standing under subsection 539(2) of the FW Act to apply for orders in respect of contraventions of civil remedy provisions under the FW Act.

The Liquidated Company

The liquidated company was at all relevant times:

a) a corporation registered in accordance with the Corporations Act 2001 (Cth);

b) capable of being sued in its corporate name;

c) a constitutional corporation within the meaning of s.12 of the FW Act;

a national system employer within the meaning of s.14 of the

FW Act;

e) contracted by Energy Efficient Technologies Pty Ltd (EETech) to install power boards in homes throughout Victoria as part of the Victorian Government’s Victorian Energy Efficiency Target Scheme (VEET Scheme);

f) a business which operated from 135 Chestnut Street, Cremorne Victoria (business); and

g) the employer of the employees during the following periods, which spanned 6 August 2012 to 19 February 2013:

i) Amor: 21 November 2012 to 7 December 2012;

ii) Blomeyer: 21 November 2012 to 7 December 2012;

iii) Byrne: 26 November 2012 to 15 December 2012;

iv) Dowey: 6 August 2012 to 15 December 2012;

v) Martin: 7 January 2013 to 26 January 2013;

vi) Murphy: 20 December 2012 to 4 January 2013;

vii) Mylius: 19 January 2013 to 26 January 2013;

viii) Poyet: 26 November 2012 to 22 December 2012;

ix) Sangiorgio: 1 February 2013 to 19 February 2013;

x) Schafhaupt: 31 January 2013 to 19 February 2013;

xi) Spengler: 3 December 2012 to 20 December 2012; and

xii) Walsh: 21 December 2012 to 4 January 2013,

(collectively, the employment period).

THE SECOND RESPONDENT (in the third respondent’s SOAF, the third respondent)

The second respondent (in the third respondent’s SOAF, the third respondent) at all relevant times:

a) is and was a natural person capable of being sued;

b) was, with the third respondent, (in the third respondent’s SOAF, the second respondent) the sole directors and shareholders of the liquidated company;

c) was a manager of the liquidated company with joint responsibility for the day to day running of the liquidated company’s operations;

d) knew that the employees were engaged by the liquidated company as power board installers during the employment period;

e) knew of the payment arrangements that the liquidated company applied with respect to the work performed by the employees;

f) knew that legislative minima imposed obligations on the liquidated company to pay employees hourly rates of pay within specified timeframes, and to provide other monetary and non-monetary benefits;

g) was, with the third respondent, (in the third respondent’s SOAF, the second respondent) responsible for payments to be made to the employees for work performed by the employees;

h) was, with the third respondent, (in the third respondent’s SOAF, the second respondent) responsible for ensuring that pay slips were issued to the employees on behalf of the liquidated company;

i) knew that the employees were not issued any pay slips by the liquidated company;

j) was, with the third respondent, (in the third respondent’s SOAF, the second respondent) responsible for the making and keeping of records on behalf of the liquidated company in relation to the employees; and

k) knew how, and the extent to which, records were kept by the liquidated company in respect of the employees.

10.

In addition to the matters alleged in paragraph 9 above, the second respondent (in the third respondent’s SOAF, the third respondent):

a) knew of, and was responsible for, setting and adjusting payments made to the employees on behalf of the liquidated company;

b) knew of the hours worked by the employees for the liquidated company;

c) knew of the amounts paid to the employees by the liquidated company; and

d) knew when amounts were paid to the employees by the liquidated company.

11.

By reason of facts agreed in paragraphs 9 and 10 above, the second respondent (in the third respondent’s SOAF, the third respondent):

a) was, with the third respondent, (in the third respondent’s SOAF, the second respondent) responsible in a practical sense for ensuring that the liquidated company complied with its legal obligations to its employees under the FW Act;

b) had actual knowledge of the factual matters which comprise the admitted contraventions; and

c) was, with the third respondent, (in the third respondent’s SOAF, the second respondent) a participant in the factual matters which comprise the admitted contraventions.

12.

The second respondent (in the third respondent’s SOAF, the third respondent) admits that at all material times he was involved in the admitted contraventions, because he:

a) aided, abetted, counselled or procured the admitted contraventions; and/or (in the third respondent’s SOAF, paragraph 12(a) is omitted)

b) has been, by his acts or omissions, directly or indirectly, knowingly concerned in or a party to each of the admitted contraventions,

and is therefore to be treated as having himself contravened each of the provisions set out in paragraph 5 above and detailed in paragraphs 20 to 37 below, in accordance with s.550(1) of the FW Act.

THE EMPLOYEES

13.

At all material times, during the employment period, the liquidated company employed each of the employees on a casual basis. (In the third respondent’s SOAF, this paragraph reads: “During the employment period, the employees were casual employees of the liquidated company.”)

14.

The employees were employed by the liquidated company to install powerboards free of charge in homes throughout Victoria as part of the liquidated company’s contract with EETech and performed duties (under supervision), including:

a) attending households on a door-to-door basis offering the free powerboards and installation;

b) upon obtaining the householders’ agreement, installing powerboards by plugging them into a powerpoint socket and in turn plugging electronic appliances (such as televisions and dvd players) into the powerboard;

c) taking photos of installed powerboards for auditing purposes; and

d) collecting customer information and authorisation for installation.

15.

At all material times, the s.323 employees:

a) were 21 years of age or older: Amor, Byrne, Murphy, Sangiorgio and Walsh (adult employees); or

b) were under 21 years of age: Mylius (19 years old); Schafhaupt (20 years old) and Spengler (19 years old) (junior employees).

APPLICATION OF THE MODERN AWARD

16.

By reason of the matters set out in paragraphs 13 and 14 above, the Manufacturing and Associated Industries and Occupations Award 2010 (Modern Award) covered and applied to the liquidated company and employees.

17.

By reason of their duties and responsibilities, the s.323 employees were at all relevant times classified within the Engineering/Manufacturing Employee – Level I (C14) classification under cl.B.3.4 of the Modern Award.

18.

At all material times, pursuant to cl.14.1 of the Modern Award, the liquidated company was required to pay each of the s.323 employees his or her ordinary base rate of pay plus a casual loading of 25% for work performed Mondays to Fridays, resulting in an ordinary casual hourly rate of:

a) $19.95 per hour for the adult employees;

b) $16.93 per hour for Mylius and Spengler (as 19 year old employees); and

c) $20.05 per hour for Schafhaupt (as 20 year old employees). (error in original).

19.

At all material times, pursuant to cl.40.7 of the Modern Award, the liquidated company was required to pay each of the s.323 employees time and a half for the first three hours and double time thereafter for overtime worked on Saturdays, resulting in a Saturday overtime casual hourly rate of:

a) for the adult employees:

i) $29.92 per hour for the first three hours; and

ii) $39.89 per hour thereafter;

b) for the 19 year old junior employees:

i) $25.40 per hour for the first three hours; and

ii) $33.87 per hour thereafter; and

c) for the 20 year old junior employees:

i) $30.08 per hour for the first three hours; and

ii) $40.11 per hour thereafter.

ADMITTED CONTRAVENTIONS

Contravention of subsection 323(1) of the FW Act (frequency of payment)

20.

At all material times, pursuant to subsection 323(1) of the FW Act, the liquidated company was required to pay the s.323 employees amounts payable to them in relation to the performance of work:

a) in full;

b) in money; and

c) at least monthly.

21.

During the employment period, the s.323 employees worked various hours for the liquidated company:

a) on Mondays to Fridays as listed in column B of annexure A; and

b) as overtime hours on Saturdays as listed in column D of

annexure A.

22.

The liquidated company was required to pay the s.323 employees an aggregate entitlement of $15,375.04 in respect of the hours worked during the employment period, as set out in column G of annexure A, being comprised of:

a) $11,346.22 in respect of the ordinary casual hourly rate, as set out in column C of annexure A; and

b) $4,028.82 in respect of the overtime hours worked, as set out in column E of annexure A.

23.

The liquidated company paid Edoardo Sangiorgio an aggregate amount of $411 in respect of all of the hours that he worked during the employment period, being 1 February 2013 to 19 February 2013, as follows:

a) $200 on 2 April 2013;

b) $123 on 5 April 2013; and

c) $88 on 15 April 2013.

24.

The liquidated company made no payments to any of the remaining seven s.323 employees in respect of any of the hours that they worked during their respective employment periods.

25.

By reason of the matters agreed in paragraphs 8(g) and 16 to 24 above, the liquidated company failed to pay the s.323 employees in full at least monthly.

26.

By reason of the matters agreed in paragraph 25 above, the liquidated company contravened subsection 323(1) of the FW Act (failure to pay contravention).

TOTAL OUTSTANDING AMOUNT

27.

By reason of the failure to pay contravention, the liquidated company underpaid the s.323 employees the amounts set out at column I of annexure A of this statement of agreed facts, totalling $14,964.04 (total outstanding amount).

28.

There has been no rectification of any of the total outstanding amount as at the date of filing this statement of agreed facts.

Contravention of s.535 of the FW Act (record-keeping)

29.

At all material times, pursuant to subsection 535(1) of the FW Act, the liquidated company was required to make and keep for seven years, employee records which are prescribed by the FW Regulations.

30.

At all material times, pursuant to reg.3.32 of the FW Regulations, the liquidated company was required to make and keep employee records that specified:

a) the name of the liquidated company and the names of the employees;

b) whether the employees’ employment was full-time, part-time, permanent, temporary or casual;

c) the date on which the employees’ employment began; and

d) the Australian Business Number of the liquidated company.

31.

At all material times, pursuant to reg.3.33 of the

FW Regulations, the liquidated company was required to make and keep employee records that specified:

a) the rate of remuneration paid to the employees;

b) the gross and net amounts paid to the employees;

c) any deductions made from the gross amount paid to the employees;

d) the hours worked by the employees; and

e) the details of the employees’ entitlements to loadings and penalty rates.

32.

The liquidated company failed to keep any records of the kind required by regs.3.32 and 3.33 of the FW Regulations.

33.

By reason of the matters agreed in paragraphs 29 to 32 above, the liquidated company contravened subsection 535(1) of the FW Act.

Contravention of s.536 of the FW Act (pay slips)

34.

At all material times, pursuant to subsection 536(1) of the FW Act, the liquidated company was required to give each of the employees a pay slip within one working day of payment with respect to work performed by the employees.

35.

The liquidated company made payments to the employees from time to time during the employment period as follows:

a) Blomeyer: one payment of $314 in the last week of December 2012;

b) Dowey: weekly payments of $300 save for the first week of his employment, in which he received no payment;

c) Martin: one payment of $1,320 on 4 February 2013;

d) Poyet: one payment of $360 in the last week of December 2012;

e) Sangiorgio: three payments as described in paragraph 23 above; and

f) the remaining employees: nothing at all.

36.

The liquidated company failed to give any of the employees any pay slips during the employment period.

37.

By reason of the matters agreed in paragraphs 21 and 34 to 36 above, the liquidated company contravened subsection 536(1) of the FW Act.

INVESTIGATION AND INSTITUTION OF PROCEEDINGS

38.

Between 6 February 2013 and 29 April 2013, the applicant received complaints from the employees regarding their employment with the liquidated company (complaints).

39.

The complaints included allegations relating to failures by the liquidated company to pay sufficient or any wages for time worked, for misclassification by the liquidated company of the employees’ employment relationships as independent contracting arrangements and for unlawful deduction of wages.

40.

On 5 March 2013, Senior Fair Work Inspector Brodie Smith (FW Inspector Smith) telephoned the second respondent and third respondent to inform them of the complaints.

41.

In the period from 6 March 2013 to 30 May 2013, the applicant conducted a full investigation into the complaints.

42.

During the course of the applicant’s investigation:

a) the second and third respondents participated in formal records of interview with the applicant; and

b) in response to a notice to produce records or documents issued by FW Inspector Smith pursuant to s.712 of the FW Act on

14 March 2014, the liquidated company produced to the applicant copies of documents relating to the employees’ employment, including agreements, individual detail forms and policies and procedures.

43.

On 31 May 2013, FW Inspector Smith sent a “contravention letter” to the liquidated company, care of the second respondent and third respondent, which:

a) advised that the applicant had determined that the liquidated company had contravened the Modern Award and the FW Act in respect of the employees, resulting in underpayments to the employees, and that the second and third respondents were involved in each of the contraventions;

b) stated the correct rates of pay required to be paid to the employees;

c) required that the liquidated company:

i) review its records and, within 14 days, advise FW Inspector Smith of the quantum of the underpayments owed to the employees based on the contraventions and correct rates of pay identified in the contravention letter; and

ii) rectify the underpayments and outstanding superannuation contributions calculated by the liquidated company; and

iii) provide evidence to FW Inspector Smith of such rectification; or

iv) otherwise provide details and evidence within 14 days of any dispute as to the applicant’s determinations of contravention, and notify the applicant of any such dispute within seven days; and

d) confirmed that the applicant may initiate litigation in respect of the contraventions identified in the contravention letter, including against the second and third respondents personally on the basis of their involvement in the liquidated company’s contraventions.

44.

The liquidated company did not quantify or rectify the identified underpayments as required by the applicant.

45.

On 20 June 2013, the applicant wrote to the liquidated company, second and third respondents to notify them that the applicant intended to commence proceedings against each of them in respect of the complaints.

46.

On 27 June 2013, the applicant commenced proceedings in this court against the first respondent (which was at that time not in liquidation), second respondent and third respondent seeking declarations and penalties.

47.

On 19 September 2013, the question of whether the first respondent (which was at that time not in liquidation) could defend the proceeding otherwise than by a lawyer was reserved by the court until after defences had been filed and the matter had been subject to mediation.

48.

On 18 October 2013, the second respondent and third respondent each filed a defence within the timeframe required by orders of the court, although the applicant indicated to each in writing that it considered the defences were not compliant with the rules of the court. The first respondent (which was at that time not in liquidation) did not file any response or defence.

49.

On 28 November 2013, the first mediation of the proceeding was held. The parties agreed to a further mediation on 24 January 2014 in order that the respondents could obtain legal representation.

50.

On 23 January 2014, Mr Cavanagh of Cavanagh Legal filed notices of address for service indicating that he was the legal representative on record for each of the respondents.

51.

On 24 January 2014, a further mediation of the proceeding was held. The parties agreed to a short further mediation by telephone on

18 February 2014.

52.

On 18 February 2014, the parties reached an in principle agreement regarding the future conduct of the proceeding, on a without prejudice basis.

53.

On 6 March 2014, the first respondent (which was at that time not in liquidation), second respondent and third respondent agreed in open correspondence to admit liability as alleged in the statement of claim (save for the alleged contravention of cl.36.2(f) of the Modern Award described in paragraphs 19 to 24 of the statement of claim) and enter into a statement of agreed facts.

54.

On 1 September 2014, the matter was the subject of further directions as a result of the parties being unable to reach agreement on a form of statement of agreed facts. The court made orders requiring each of the second and third respondents to file amended defences by 3 October 2014, and relisting the matter for further directions on 10 October 2014.

55.

Neither the second nor the third respondent filed an amended defence by 3 October 2014. (In the third respondent’s SOAF, this paragraph was omitted.)

56.

On 10 October 2014, the court made orders extending the time for the second and third respondent to file an amended defence to

24 October 2014. (In the third respondent’s SOAF, this paragraph was omitted.)

57.

The statements of agreed facts included an underpayment summary, which is set out as annexure A to these reasons.

Affidavit evidence

58.

In addition to the statements of agreed facts, the applicant relied upon the affidavits of:

a) Timothy Heath Amor sworn on 22 January 2015;

b) Lorraine Noreen Murphy affirmed on 21 January 2015;

c) Brodie Janelle Smith affirmed on 20 January 2015; and

d) Claudio Salvador Locaso sworn or affirmed on 4 December 2014.

59.

There was no cross examination of any of the deponents. I accept all of the affidavit evidence.

Approach to determining penalty

60.

The proper approach to determining penalty in cases such as this is as follows.

61.

The first step for the court is to identify each separate contravention involved.

62.

Where there are multiple contraventions, the second step is to consider whether any of the various contraventions constituted a single course of conduct, such that multiple breaches should be treated as a single breach.

63.

The third step is for the court to consider the extent, if any, to which two or more contraventions have common elements. A person should not be penalised more than once for the same conduct. The penalty imposed by the court should be an appropriate response to the contravenor’s conduct.[1] This is a separate process from the application of the totality principle.[2]

64.

The fourth step is for the court to consider the appropriate penalty for each breach, treating multiple breaches arising from a course of conduct as a single breach, and taking into account all of the relevant circumstances.

65.

The fifth step is for the court to apply the totality principle.

This requires the court to consider the aggregate penalty overall, and determine whether it is an appropriate response to the conduct which resulted in the breaches.[3] The court in this step makes an “instinctive synthesis”.[4]

66.

It should also be noted at this point that the second respondent did not attend the hearing before this court. The third respondent did attend the hearing without the benefit of legal representation. He made very brief oral submissions. Neither the second nor the third respondent filed written submissions.

67.

The applicant filed a written submission on penalty on 6 May 2015. However, in view of the decision of the Full Court of the Federal Court in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (2015) ACSR 403; [2015] FCAFC 59, I ordered that those submissions be removed from the court file and returned to the applicant. I also ordered that the applicant file a fresh submission on penalty by 4pm on 12 June 2015. That was done. The applicant’s new submissions omitted any statement about the appropriate range of penalty, and any agreed penalty and any specific outcome. Unfortunately, they also omitted the identification of any comparable cases.

Step 1: identifying the breaches

68.

Based on the admissions contained in the SOAFs, I am satisfied that the second and third respondents each contravened:

a) s.323(1) of the Fair Work Act 2009, in that they were each involved within the meaning of s.550(1) of the Fair Work Act 2009 in the first respondent’s failure to pay in full at least monthly:

i) Tim Amor;

ii) Johnny Byrne;

iii) Lorraine Murphy;

iv) Maik Mylius;

v) Edoardo Sangiorgio;

vi) Marie-Isabell Schafhaupt;

vii) Thomas Spengler; and

viii) Sarah Walsh;

b) s.535(1) of the Fair Work Act 2009, in that they were each involved within the meaning of s.550(1) of the Fair Work Act 2009 in the first respondent’s failure to keep records as prescribed by reg.3.32 and reg.3.33 of the Fair Work Regulations 2009 for:

i) Tim Amor;

ii) Rachel Blomeyer;

iii) Johnny Byrne;

iv) Jonathan Dowey;

v) Lukas Martin;

vi) Lorraine Murphy;

vii) Maik Mylius;

viii) Romain Poyet;

ix) Edoardo Sangiorgio;

x) Marie-Isabell Schafhaupt;

xi) Thomas Spengler; and

xii) Sarah Walsh; and

c) s.536(1) of the Fair Work Act 2009, in that they were each involved within the meaning of s.550(1) of the Fair Work Act 2009 in the first respondent’s failure to give a pay slip within one working day of payment to:

i) Rachel Blomeyer;

ii) Jonathan Dowey;

iii) Lukas Martin;

iv) Romain Poyet; and

v) Edoardo Sangiorgio.

Step 2: single course of conduct

69.

The various contraventions in respect of each employee extended over various periods of time. Nevertheless, the applicant said in her written submissions that:

32. As set out above in paragraphs 4 and 31, the Second and Third Respondents have admitted to engaging in multiple contraventions of a number of terms of the FW Act and FW Regulations over the duration of the Employees’ employment.

33. Section 557(1) of the FW Act provides that where two or more contraventions of a term of an applicable provision or civil remedy provision are committed by the same person, and the contraventions arose out of a course of conduct by the person, the contraventions are taken to constitute a single contravention of the provision.[5] Each of the Admitted Contraventions is within the scope of section 557.

34. The Applicant accepts that the Second and Third Respondents are entitled to the benefit of the course of conduct provision in relation to repeated breaches of each of the relevant provisions of the FW Act. It is accepted that the separate record keeping contraventions of FW Regulations 3.32 and 3.33 arise out of a single course of conduct by the Second and Third Respondents. Consequently, the Applicant accepts that there are three separate contraventions, namely:

(a) frequency of payment (including non-payment contraventions) (s.323(1));

(b) record keeping (s.535(1)); and

70.

The third respondent made no submissions about this issue.

71.

In view of the applicant’s concession in relation to the course of conduct consideration, I am prepared to proceed on the basis that all of the contraventions should resolve down to the three contraventions identified by the applicant.

72.

However, it should be noted that this was a significant concession on the applicant’s part. It would have been open, in my view, to consider that there was a single course of conduct in relation to each relevant employee for the payment contraventions, the payslip contraventions and the record keeping contraventions. The result would have been, on my count, 25 contraventions rather than three. Ultimately, however, it might have made no difference, in view of the grouping that may be undertaken in the next step.

Step 3: grouped breaches

73.

The applicant said in her written submissions in relation to this point that:

35. It is open to the Court to group separate contraventions together where the contraventions may be said to overlap with each other or involve the potential punishment of the Second and Third Respondents for the same or substantially similar conduct.[6]

36. In light of the distinct nature of the three contraventions listed in [34] above, it is the Applicant’s submission that the Court should not further group the contraventions.

74.

The third respondent made no submissions about this issue.

75.

I accept the applicant’s submission that it is not appropriate to further group the contraventions.

Step 4: the appropriate penalty for the breaches

76.

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.

(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.

77.

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:

Checklists 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.

78.

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.

The nature and extent of the conduct which led to the breach and the circumstances in which that conduct took place

79.

The applicant addressed these two factors together in her written submissions, as follows:

42. The Employees were Australian and foreign nationals. 10 of the 12 Employees were in Australia performing work pursuant to subclass 417 working holiday visas, and two were Australian university students performing work during the Christmas semester break period.[7]

43. The evidence shows that the demographic of the Liquidated Company’s workforce was in large part young, inexperienced workers, often university students or travellers. The business appears to have been aimed at recruiting backpackers and young workers.[9] Employees were only engaged for short duration, most being engaged for less than a month.[10] These circumstances facilitated the easy exploitation of workers who were more likely to have little or no understanding of their workplace rights.

44. Mr Amor and Ms Murphy depose in some detail in their affidavit material the nature of the work that they performed whilst employed by Invivo, which involved long hours, occasionally in hot conditions, and periods of time spent away from home.[11]

45. The Applicant submits that the failure to pay contraventions are particularly serious. Of the eight Section 323 Employees, seven were not paid at all for any of the work completed and one received 16% of his lawful entitlement.[12] The extent of the loss is described in some detail below. As such, the Applicant submits that the conduct which led to those contraventions were common practice in the business.

46. In the same period as the Admitted Contraventions were occurring, Invivo invoiced its supplier of powerboards a total of $623,329.93 in respect of installations carried out by employees of Invivo. According to the Profit and Loss Statement annexed to the sworn affidavit of Mr Locaso, for the period July 2012 through May 2013 the Second and Third Respondents paid themselves:

(a) in respect of Mr Stielow, a wage of $244,829.20 and superannuation contributions of $22,050; and

(b) in respect of Mr Locaso, a wage of $205,283.06 and superannuation contributions of $18,450.[13]

47. The severity of the underpayment contraventions was also aggravated by the Respondents’ record keeping practices. Invivo failed to make and keep records of the Employees’ hours and pay as required by the FW Regulations and the FW Act. On the occasions that Invivo did make a payment to its employees, it also failed to issue them with written pay slips in accordance with the the FW Act. In the absence of payslips or proper records of his installation work, Mr Amor felt “powerless” to vindicate his right to payment in discussions with Mr Stielow and his managers or to argue about what amount he ought to be paid.[14]

48. Contravention of these fundamental entitlements undermines the workplace relations regime as a whole and displays a disregard by the Second and Third Respondents of their statutory obligations.

80.

The third respondent told the court that the respondents did not have the correct paperwork because they engaged the employees as contractors, in accordance with industry practice. He said the employees were not paid because the respondents “paid by installs”.

81.

Obviously, the employees should not have been paid as contractors because they were, on the admissions, employees.

The nature and extent of any loss or damage sustained as a result of the breaches

82.

The applicant addressed this factor in her written submissions as follows:

49. The Applicant submits that the nature and extent of the loss suffered by the Employees is significant.

50. The underpayments to Section 323 Employees represent a serious breach of the Respondents’ obligations. Of the twelve Employees involved in this matter, the eight Section 323 Employees were underpaid a total of $14,964.04.[15] Seven employees (Amor, Byrne, Murphy, Mylius, Schafhaupt, Sprengler and Walsh) were underpaid a total of $12,741.99, being 100% of their entitlements whilst employed by Invivo. They were not paid at all in respect of any work they performed.[16] The remaining Section 323 Employee, Sangiorgio, received three payments totalling $411.[17] An amount of $2,222.05 remains outstanding to him.[18] This outstanding amount represents 84% of his full entitlement.

51. In the absence of proper time and wage records, the Applicant adopted a conservative approach to calculating the underpayments.[19] Consequently, the underpayment amounts may have been higher if proper records had been kept.

52. The Admitted Contraventions had a significant impact on the Employees. For each individual employee the amounts were not large, being less than $3,000, but the impact of those underpayments was significant. Mr Amor felt stressed and disempowered.[20] As a student, Mr Amor had to borrow money from his mother to be able to afford a short holiday to Bali following a long year of study and hard work.[21] He also had to get an advance from Centrelink which he repaid over the course of the year. These repayments placed him under additional financial pressure for some time following the contraventions.[22]

53. Ms Murphy intended to use her position at the First Respondent to tide her over financially until she was able to find work in her chosen profession.[23] She felt that she was being taken advantage of because she was a backpacker on a working holiday visa.[24] Her experience of working with the First Respondent left her with a great deal of uncertainty about her financial situation. She also had to borrow money from family as a result of not being paid.[25]

54. By contrast, in the period July 2012 to May 2013, the single greatest business expense for Invivo was the wages and super paid to Mr Stielow and Mr Locaso, being a combined total of $490,612.26 (or 70% of the total business expenses). In that period, Invivo reported:

(a) total revenue of $756,760.75;

(b) a gross profit of $313,199.82;

(d) a net operating loss of $381,731.56.[26]

55.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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