Fair Work Ombudsman v J.D. Chapel Nominees Pty Ltd (in liq)
[2024] FedCFamC2G 85
•7 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
Fair Work Ombudsman v J.D. Chapel Nominees Pty Ltd (in liq) [2024] FedCFamC2G 85
File number: MLG 2846 of 2021 Judgment of: JUDGE RILEY Date of judgment: 7 February 2024 Catchwords: INDUSTRIAL LAW – contraventions – failure to comply with notices to produce – penalties. Legislation: Fair Work Act 2009 ss.535, 546(1),550(1)(2), 557 and 712(3); Schedule 1 item 18(2)
Fair Work Regulations 2009 reg.3.33(2) and (3)
Cases cited: Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450; (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13
ABCC v CFMEU (No 2) [2010] FCA 977
Australian Building and Construction Commissioner v Construction, Forestry Mining and Energy Union (2018) 262 CLR 157
Basi v Namitha Nakul Pty Ltd (No 2) [2023] FCA 671
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 326 ALR 476; 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 2476; [2015] HCA 46
Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364
Director of the Fair Work Building Industry Inspectorate v Construction Forestry, Mining and Energy Union (Quest Apartments and Greek Community Centre) [2016] FCA 1262
Fair Work Ombudsman v Bedington [2012] FMCA 1133
Fair Work Ombudsman v Lohr (2018) 158 ALD 457; (2018) 356 ALR 424; [2018] FCA 5
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301
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
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Sayed v Construction, Forestry Mining and Energy Union (No 2) [2015] FCA 338
Division: Division 2 General Federal Law Number of paragraphs: 262 Date of hearing: 1 December 2023 Place: Melbourne Counsel for the Applicant: Jim McKenna Solicitor for the Applicant: Office of the Fair Work Ombudsman First Respondent No appearance Counsel for the Second Respondent: James Tierney Solicitor for the Second Respondent: DSA Law Counsel for the Third Respondent: Angus Galbraith Solicitor for the Third Respondent: Willon Legal Solicitor advocate for the Fourth and Fifth Respondents: Chris Spain Solicitor for the Fourth and Fifth Respondents: Wotton + Kearney ORDERS
MLG 2846 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: J.D. CHAPEL NOMINEES PTY LTD
(ACN 619 945 729) (in liquidation)
First RespondentKERI TAIAROA
Second RespondentMATTHEW SANGER
Third RespondentNICHOLAS ACCOUNTING MANAGEMENT SERVICES PTY LTD (ACN 068 949 959)
Fourth RespondentNICHOLAS NICOLAOU
Fifth Respondent
ORDER MADE BY:
JUDGE RILEY
DATE OF ORDER:
7 FEBRUARY 2024
THE COURT ORDERS THAT:
1.Pursuant to s.546(1) of the Fair Work Act 2009 (“the Act”), the second respondent pay to the applicant pecuniary penalties in the amount of $41,368 for his involvement in failures to keep employee records in contravention of s.535(1) of the Act by:
(a)Hotel Boogie Pty Ltd (ACN 128 105 162);
(b)The Elwood Lounge Pty Ltd (ACN 082 636 557;
(c)La La Land Australia Pty Ltd (ACN 097 646 314);
(d)Athina Windsor Nominees Pty Ltd (ACN 136 758 613);
(e)M.C. Bar Group Pty Ltd (ACN 160 421 607); and
(f)Blue Bar 330 Pty Ltd (ACN 099 826 356).
2.Pursuant to s.546(1) of the Act, the third respondent pay to the applicant pecuniary penalties in the amount of $26,893 for his involvement in failures to keep employee records in contravention of s.535(1) of the Act by:
(a)Hotel Boogie Pty Ltd (ACN 128 105 162);
(b)The Elwood Lounge Pty Ltd (ACN 082 636 557;
(c)La La Land Australia Pty Ltd (ACN 097 646 314);
(d)Athina Windsor Nominees Pty Ltd (ACN 136 758 613);
(e)M.C. Bar Group Pty Ltd (ACN 160 421 607); and
(f)Blue Bar 330 Pty Ltd (ACN 099 826 356).
3.Pursuant to s.546(1) of the Act, the fourth respondent pay to the applicant pecuniary penalties in the amount of $34,020 for failure to comply with written notices to produce issued and served upon it in contravention of s.712(3) of the Act.
4.Pursuant to s.546(1) of the Act, the fifth respondent pay to the applicant pecuniary penalties in the amount of $35,154 for his involvement in contraventions of s.712(3) of the Act for failure to comply with written notices to produce issued and served upon:
(a)Nicholas Accounting Management Services Pty Ltd (ACN 068 949 959);
(b)J.D. Chapel Nominees Pty Ltd (ACN 619 945 729);
(c)Number 17 Pty Ltd (ACN 106 601 781);
(d)Hotel Boogie Pty Ltd (ACN 128 105 162);
(e)The Elwood Lounge Pty Ltd (ACN 082 636 557);
(f)La La Land Australia Pty Ltd (ACN 097 646 314);
(g)Athina Windsor Nominees Pty Ltd (ACN 136 758 613);
(h)M.C. Bar Group Pty Ltd (ACN 160 421 607); and
(i)Blue Bar 330 Pty Ltd (ACN 099 826 356).
THE COURT ORDERS BY CONSENT THAT:
5.There be no order as to costs or interest.
6.The applicant be at liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the court’s records.
Note: 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 is an application for penalties in respect of certain contraventions of the Fair Work Act 2009 (“the Act”).
The applicant is the Fair Work Ombudsman (“the FWO”). The FWO investigated a group of eight companies referred to as the La La entities for the period from 1 July 2017 to 6 August 2019. One of the companies was JD Chapel Nominees Pty Ltd (“Chapel”), which is the first respondent. That company went into liquidation after this proceeding was commenced. It has now been deregistered. Consequently, no penalties are sought against it.
The other seven La La entities went into liquidation before this proceeding was commenced. Consequently, they were not named as parties to this proceeding and no penalties are sought against them. The entities are:
(a)Number 17 Pty Ltd (ACN 106 601 781) (“Number 17”);
(b)Hotel Boogie Pty Ltd (ACN 128 105 162) (“Hotel Boogie”);
(c)The Elwood Lounge Pty Ltd (ACN 082 636 557) (“Elwood Lounge”);
(d)La La Land Australia Pty Ltd (ACN 097 646 314) (“La La Land”);
(e)Athina Windsor Nominees Pty Ltd (ACN 136 758 613) (“Athina Windsor”);
(f)MC Bar Group Pty Ltd (ACN 160 421 607) (“MC Bar”); and
(g)Blue Bar 330 Pty Ltd (ACN 099 826 356) (“Blue Bar”).
The second respondent is Mr Keri Taiaroa. He was the owner or part owner and director of six of the La La entities, being:
(a)Hotel Boogie;
(b)Elwood Lounge;
(c)La La Land;
(d)Athina Windsor;
(e)MC Bar; and
(f)Blue Bar.
Mr Taiaroa has admitted that he was involved within the meaning of s.550 of the Act in contraventions by those six companies of s.535(1) of the Act by failing to make and/or keep for seven years records that set out:
(a)the hours worked by casual or irregular part-time employees as required by reg 3.33(2) of the Fair Work Regulations 2009 (“the Regulations”); and
(b)the entitlements to loadings, allowances or penalty rates that employees were entitled to be paid as required by reg 3.33(3) of the Regulations,
(“the record keeping contraventions”).
The third respondent is Matthew Sanger. He was the General Manager and responsible for the day to day management of each of:
(a)Hotel Boogie;
(b)Elwood Lounge;
(c)La La Land;
(d)Athina Windsor;
(e)MC Bar; and
(f)Blue Bar.
Mr Sanger has admitted that he was involved within the meaning of s.550 of the Act in the record keeping contraventions by those six companies.
The fourth respondent is Nicholas Accounting Management Services Pty Ltd (“NAMS”). It provided accounting services to the La La entities. The FWO served a notice to produce on NAMS on 3 October 2019. NAMS admitted that it contravened s.712(3) of the Act by failing to comply with the notice to produce.
The fifth respondent is Nicholas Nicolaou. Mr Nicolaou was a director and the principal adviser of NAMS. On 6 August 2019, the FWO served notices to produce on:
(a)Chapel;
(b)Number 17;
(c)Hotel Boogie;
(d)Elwood Lounge;
(e)La La Land;
(f)Athina Windsor;
(g)MC Bar; and
(h)Blue Bar.
He admitted that he was involved within the meaning of s.550 of the Act in:
(a)NAMS’ contravention of s.712(3) of the Act by failing to comply with the notice to produce served on it; and
(b)the contraventions of s.712(3) of the Act by:
(i)Chapel;
(ii)Number 17;
(iii)Hotel Boogie;
(iv)Elwood Lounge;
(v)La La Land;
(vi)Athina Windsor;
(vii)MC Bar; and
(viii)Blue Bar,
for failing to comply with written notices to produce issued and served upon each of those companies.
LIABILITY DECLARATIONS
On 12 May 2023, the court made declarations on liability based on admissions as follows:
THE COURT DECLARES THAT, having regard to the admissions made by the second, third, fourth and fifth respondents in the statements of agreed facts filed in this proceeding:
1.Pursuant to s.550 of the Fair Work Act 2009 (“the Act”), the second respondent was involved in contraventions of s.535(1) of the Act for the failure to make and keep, for seven years, employment records:
a.that set out the hours worked by casual or irregular part-time employees as required by reg 3.33(2) of the Fair Work Regulations 2009 (“the Regulations”); and
b.that set out the entitlements to loadings, allowances or penalty rates that employees were entitled to be paid as required by reg 3.33(3) of the Regulations,
by each of:
c. Hotel Boogie Pty Ltd (ACN 128 105 162);
d. The Elwood Lounge Pty Ltd (ACN 082 636 557);
e. La La Land Australia Pty Ltd (ACN 097 646 314);
f. Athina Windsor Nominees Pty Ltd (ACN 136 758 613);
g. MC Bar Group Pty Ltd (ACN 160 421 607); and
h. Blue Bar 330 Pty Ltd (ACN 099 826 356).
2.Pursuant to s.550 of the Act, the third respondent was involved in contraventions of s.535(1) of the Act for the failure to make and keep, for seven years, employment records:
a.that set out the hours worked by casual or irregular part-time employees as required by reg 3.33(2) of the Regulations; and
b.that set out the entitlements to loadings, allowances or penalty rates that employees were entitled to be paid as required by reg 3.33(3) of the Regulations,
by each of:
c. Hotel Boogie Pty Ltd (ACN 128 105 162);
d. The Elwood Lounge Pty Ltd (ACN 082 636 557);
e. La La Land Australia Pty Ltd (ACN 097 646 314);
f. Athina Windsor Nominees Pty Ltd (ACN 136 758 613);
g. MC Bar Group Pty Ltd (ACN 160 421 607); and
h. Blue Bar 330 Pty Ltd (ACN 099 826 356).
3.The fourth respondent contravened s.712(3) of the Act by failing to comply with a written notice to produce issued and served upon it on 3 October 2019.
4.Pursuant to s.550 of the Act, the fifth respondent was involved in:
a. the fourth respondent’s contravention identified in declaration 3; and
b. contraventions of s.712(3) of the Act by:
i. JD Chapel Nominees Pty Ltd (ACN 619 945 729);
ii. Number 17 Pty Ltd (ACN 106 601 781);
iii. Hotel Boogie Pty Ltd (ACN 128 105 162);
iv. The Elwood Lounge Pty Ltd (ACN 082 636 557);
v. La La Land Australia Pty Ltd (ACN 097 646 314);
vi. Athina Windsor Nominees Pty Ltd (ACN 136 758 613);
vii. MC Bar Group Pty Ltd (ACN 160 421 607); and
viii. Blue Bar 330 Pty Ltd (ACN 099 826 356),
for failing to comply with written notices to produce issued and served upon each entity on 6 August 2019.
MATERIAL RELIED UPON:
At the penalty hearing, the FWO relied upon:
(a)her application filed on 8 November 2021;
(b)her statement of claim filed on 8 November 2021;
(c)the FWO and Mr Taiaroa’s statement of agreed facts filed on 20 August 2022;
(d)the affidavit affirmed by Lee Pace on 14 October 2022, and, in particular, exhibit 1 to that affidavit being the Excel spreadsheet “Backpayment Calculations conducted by NAMS”;
(e)the affidavit sworn by Jason James Rhodes on 14 October 2022;
(f)the affidavit affirmed by Joshua Michael Fahey on 14 October 2022;
(g)the liability court book filed on 8 May 2023;
(h)the FWO and Mr Sanger’s statement of agreed facts filed on 10 May 2023;
(i)the FWO, NAMS and Mr Nicolaou’s statement of agreed facts filed on 11 May 2023;
(j)the affidavit sworn by Jason James Rhodes on 13 June 2023, and, in particular, annexture JJR-27 to that affidavit, being a Fair Work Ombudsman report titled “Industry Profile and Fair Work Ombudsman Interactions for the Pubs, Taverns and Bars Industry”;
(k)the FWO’s written submissions on penalty filed on 15 August 2023;
(l)her written submissions in reply on penalty filed on 9 October 2023;
(m)the supplementary court book filed on 24 November 2023;
(n)the FWO’s list of authorities filed on 24 November 2023; and
(o)her supplementary list of authorities emailed to chambers on 1 December 2023.
At the penalty hearing, Mr Taiaroa relied upon:
(a)the FWO and his statement of agreed facts filed on 20 August 2022;
(b)the affidavit affirmed by him on 12 September 2023; and
(c)his written submissions on penalty filed on 12 September 2023,
At the penalty hearing, Mr Sanger relied upon:
(a)the FWO and his statement of agreed facts filed on 10 May 2023;
(b)his outline of submissions filed on 12 September 2023; and
(c)the affidavit affirmed by him on 27 November 2023.
At the penalty hearing, NAMS and Mr Nicolaou relied upon:
(a)the FWO, NAMS and Mr Nicolaou’s statement of agreed facts filed on 11 May 2023;
(b)the affidavit sworn by Mr Nicolaou on 17 February 2023; and
(c)NAMS and Mr Nicolaou’s submissions on penalty filed on 30 October 2023.
MAXIMUM PENALTIES
Section 546(1) of the Act provides that this court may order a person to pay a pecuniary penalty for a breach of a civil remedy provision. Subsection 546(2) of the Act provides that the penalty cannot be more than the amount calculated in accordance with s.539(2) of the Act for an individual, and five times that amount for a corporation. The amounts are expressed in terms of penalty units, which, at relevant times were worth $210.
In the present case, the maximum penalties were:
(a)for a breach by an individual of s.535(1) of the Act:
(i)before 15 September 2017: 30 penalty units or $6,300; and
(ii)after 15 September 2017: 60 penalty units or $12,600, and
(b)for a breach of s.712(3) of the Act:
(i)by an individual: 60 penalty units or $12,600; and
(ii)by a corporation: 300 penalty units or $63,000.
The FWO said at paragraph 46 of her submissions filed on 15 August 2023 that the maximum total penalties for the contraventions of the Act by each of the respondents were:
(a)for Mr Taiaroa: between $75,600 and $151,200, for 12 contraventions of section 535(1) of the Act;
(b)for Mr Sanger: between $75,600 and $151,200, for 12 contraventions of section 535(1) of the Act;
(c)for NAMS: $63,000, for one contravention of section 712(3) of the Act; and
(d)for Mr Nicolaou: $113,400, for nine contraventions of section 712(3) of the Act.
The figure of $75,600 for Mr Taiaroa and Mr Sanger seems to have been calculated on the basis that all of their 12 contraventions occurred before 15 September 2017: 12 X $6,300 = $75,600.
Conversely, the figure of $151,200 for Mr Taiaroa and Mr Sanger seems to have been calculated on the basis that all of their 12 contraventions occurred after 15 September 2017: 12 X $12,600 = $151,200.
The figure of $63,000 for NAMS is self-explanatory.
The figure of $113,400 for Mr Nicolaou seems to have been based on each of his nine contraventions occurring after 15 September 2017, which is correct: 9 X $12,600 = $113,400.
However, Mr Taiaroa’s and Mr Sanger’s contraventions did not occur entirely either before or after 15 September 2017. None of the parties made submissions on what the actual maximum penalties for each of Mr Taiaroa and Mr Sanger were.
The FWO returned to this issue at paragraph 91 of her written submissions. The FWO’s point seems to have been that 10% of Mr Taiaroa’s contravention occurred before 15 September 2017 and 90% afterwards. The FWO’s submissions seemed to suggest that would lead to a maximum penalty for Mr Taiaroa calculated as follows.
(a)10% X 12 X $6,300 = $7,560 plus
(b)90% X 12 X $12,600 = $136,080
Total: = $143,640
In Mr Sanger’s case, the FWO submissions state that about 14% of Mr Sanger’s contraventions occurred before 15 September 2017 and 86% afterwards. The FWO’s submissions seemed to suggest that would lead to a maximum penalty for Mr Sanger calculated as follows.
(a)14% X 12 X $6,300 = $10,584 plus
(b)86% X 12 X $12,600 = $130,032
Total: = $140,616
However, the authorities are not entirely supportive of dividing up the period of the contravention in that way. In Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557, Katzmann J said:
396Thus, in the present case, for those contraventions that occurred before 28 December 2012, a penalty unit is $110, and for those that occurred on and after that date it is $170. Some of the contraventions, however, occurred both before and after the increased penalty came into effect. The Ombudsman submitted that, where contraventions involve a course of conduct spanning the period both before and after the increase, the higher amount should apply or at least be taken into account. She relied on R v White (BC9101745, NSWCCA, 25 July 1991, unreported), a case in which the Court of Criminal Appeal was concerned to determine the maximum penalty for a conspiracy to defraud the Commonwealth of sales tax which had occurred over a period of time during which the maximum penalty had increased. In that case, Gleeson CJ, with whom Hunt J agreed, said (at 12):
“The question whether the relevant maximum penalty in the present case was the penalty as amended or the penalty prior to amendment is one to be answered by reference to the intention of Parliament, which in turn is to be discerned by the application of the ordinary principles of statutory construction. I can see no reason to attribute to Parliament an intention that the amended maximum penalty should apply only in cases where the conspiracy in question was first entered into subsequent to the amendment, and should not apply to conspiracies that were on foot at the time of the amending legislation. In particular I can see no reason for concluding that Parliament intended that conspiracies pursued following the amendment would be punished more severely if they were entered into after the amendment, and less severely if they were entered into prior to the amendment.”
397 Lee J, with whom Gleeson CJ and Hunt J agreed, observed that “it would not be inappropriate” for a sentencing judge to bear in mind an increase in penalty that has taken place during the currency of the conspiracy and take it into account in fixing sentence (at 11).
398 While the analogy is not a perfect one, I conclude that by parity of reasoning the same principle applies to contraventions of the FW Act involving a course of conduct which began before the amendment and continued after it came into effect.
399 It follows that, save for the contraventions of ss 535(2) and 536(1), the maximum penalties are these:
“(1) for each contravention that occurred entirely before 28 December 2012: $33,000 for GPS and $6,600 for Rosario;
(2) for each contravention that occurred entirely on or after 28 December 2012: $51,000 for GPS and $10,200 for Enrico and Rosario; and
(3) for each contravention that involved conduct that occurred both before and after 28 December 2012: $51,000 for GPS and $10,200 for Rosario.”
Ultimately, Katzmann J decided in Grouped Property Services that the maximum penalty where the contravention spanned the period before and after an increase in penalty was calculated on the basis that the whole contravention occurred after the increase in the penalty.
In Basi v Namitha Nakul Pty Ltd (No 2) [2023] FCA 671, Halley J held that:
80 The contraventions of the respondents took place at various times between 19 July 2016 and 27 August 2018. In Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 at [394]-[401], Katzmann J considered that for contraventions spanning a period in which penalty units increased, the higher amount could apply but that the Court should take into account that a lower penalty amount was initially applicable: Her Honour stated at [396]-[398] that this was consistent, by parity of reasoning, with the approach to sentencing for criminal offences in R v White (unreported, Supreme Court of New South Wales Court of Criminal Appeal, Gleeson CJ, Lee CJ at CL and Hunt J, 25 July 1991).
81 With respect, I agree that this is an appropriate approach to adopt. Any attempt to apply a proportionate allocation between two or more periods would likely provide an illusory level of precision. It would be dependent on the acceptance of a series of implicit assumptions as to the relative seriousness and extent of the conduct giving rise to the contravention in each period. Moreover, it might well be said that higher penalty units applicable at the conclusion of the conduct, provide the best measure of the legislative assessment of the penalties necessary to achieve specific and general deterrence given the continuation of the conduct into that period.
Arguably, applying Grouped Property Services and Basi, the maximum penalty for each of Mr Taiaroa and Mr Sanger would be $151,200, but in fixing penalty, it would be appropriate to take into account that, for part of the period of offending, the penalty was lower.
PROPOSED PENALTIES
The FWO and the second to fifth respondents all filed statements of agreed facts in which they proposed that the court should impose penalties on the second to fifth respondents pursuant to s.546(1) of the Act within certain ranges.
The FWO and Mr Taiaroa filed a statement of agreed facts on 20 August 2022 in which they proposed a penalty for Mr Taiaroa within the range of $34,474 to $41,368.
The FWO and Mr Sanger filed a statement of agreed facts on 10 May 2023 in which they proposed a penalty for Mr Sanger within the range of $20,881 to $28,475.
The FWO and NAMS and Mr Nicolaou filed a statement of agreed facts on 11 May 2023 in which they proposed penalties for:
(a)NAMS within the range of $28,350 to $34,020; and
(b)Mr Nicolaou within the range of $26,989 to $35,154.
Essentially, the FWO argued for penalties at the higher end of the agreed ranges and the respondents argued for penalties at the lower end.
In terms of the calculation, the FWO provided the following table in her submissions filed on 15 August 2023:
Respondent Portion of maximum penalties for contravention(s) Discount and/or summary Recommended penalty range Second:
Mr Taiaroa50-60% for record keeping contraventions Less 20% for early admissions, less 40% for totality (overlap) $34,474 to $41,368 Third:
Mr Sanger27.5-37.5% for record keeping contraventions Less 10% discount for admissions, less 40% discount for totality (overlap) $20,881 to $28,475 Fourth:
NAMS50-60% for NAMS Notice to Produce contravention Less 10% discount for admissions $28,350 to $34,020 Fifth:
Mr Nicolaou15-25% for Notice to Produce contraventions regarding:
1. JD Chapel;
2. Number 17 Pty Ltd (in liq)Less 10% discount for admissions $26,989 to $35,154 40-50% for Notice to Produce contraventions regarding:
3. Hotel Boogie Pty Ltd (in liq);
4. Elwood Lounge Pty Ltd (in liq);
5. La La Land Australia Pty Ltd (in liq);
6. Athina Windsor Nominees Pty Ltd (in liq);
7. MC Bar Group Pty Ltd (in liq); and
8. Blue Bar 330 Pty Ltd (in liq)Less 10% discount for admissions, less 30% discount for totality 40-50% for Notice to Produce contravention regarding NAMS Less 10% discount for admissions, no discount for totality
The parties did not provide actual calculations, but the following seems to be what they meant.
For Mr Taiaroa, the maximum penalty was thought to be $143,640. Fifty per cent of that figure is $71,820. Giving a 20% discount from that figure for admissions gives a figure of $57,456. Giving a 40% discount from that figure for totality gives $34,474.
Sixty per cent of $143,640 is $86,184. Giving a 20% discount from that figure for admissions gives a figure of $68,947. Giving a 40% discount from that figure for totality gives a figure of $41,368.
Hence, for Mr Taiaroa, the proposed range was $34,474 to $41,368.
For Mr Sanger, the maximum penalty was thought to be $140,616. Twenty-seven point five per cent of that figure is $38,669. Giving a 10% discount from that figure for admissions gives a figure of $34,802. Giving a 40% discount from that figure for totality gives a figure of $20,881.
Thirty-seven point five per cent of $140,616 is $52,731. Giving a 10% discount from that figure for admissions gives a figure of $47,457. Giving a 40% discount from that figure for totality gives a figure of $28,475.
Hence, for Mr Sanger, the proposed range was $20,881 to $28,475.
For NAMS, the maximum penalty was $63,000. Fifty per cent of that figure is $31,500. Giving a 10% discount from that figure for admissions gives a figure of $28,350.
Sixty per cent of $63,000 is $37,800. Giving a 10% discount for admissions from that figure gives a figure of $34,020.
Hence, for NAMS, the proposed range was $28,350 to $34,020.
For Mr Nicolaou, the maximum penalty was $113,400, being $12,600 X 9. The FWO distinguished between three categories of contraventions by Mr Nicolaou being the notice to produce contraventions:
(a)regarding Chapel and Number 17;
(b)regarding:
(i)Hotel Boogie;
(ii)Elwood Lounge;
(iii)La La Land;
(iv)Athina Windsor;
(v)MC Bar; and
(vi)Blue Bar; and
(c)regarding NAMS.
In relation to category (a), the proposed range was 15% to 20% less 10% for admissions. The calculation is as follows. Fifteen per cent of $12,600 is $1,890. Giving a 10% discount from that figure for admissions gives a figure of $1,701. As there were two contraventions in category (a), $1,701 needs to be multiplied by two, giving a figure of $3,402.
Twenty-five per cent of $12,600 is $3,150. Giving a 10% discount from that figure for admissions gives a figure of $2,835. As there were two contraventions in category (a), $2,835 needs to be multiplied by two, giving a figure of $5,670.
In relation to category (b), the proposed range was 40%-50% less 10% for admissions and less 30% for totality. Forty per cent of $12,600 is $5,040. Giving a 10% discount from that figure for admissions gives a figure of $4,536. Giving a 30% discount from that figure for totality gives a figure of $3,175.2. As there were six contraventions in category (b), $3,175 needs to be multiplied by six, giving a figure of $19,051.
Fifty per cent of $12,600 is $6,300. Giving a 10% discount from that figure for admissions gives a figure of $5,670. Giving a 30% discount from that figure for admissions gives a figure of $3,969. As there were six contraventions in category (b), $3,969 needs to be multiplied by six, giving a figure of $23,814.
In relation to category (c), the proposed range was 40% to 50% less 10% for admissions. Forty per cent of $12,600 is $5,040. Giving a 10% discount from that figure for admissions gives a figure of $4,536. Fifty per cent of $12,600 is $6,300. Giving a 10% discount from that figure for admissions gives a figure of $5,670.
Therefore, for Mr Nicolaou:
(a)the bottom of the range was calculated as follows: $3,402 + $19,051 + $4,536 = $26,989; and
(b)the top of the range was calculated as follows: $5,670 + $23,814 + $5,670 = $35,154.
The FWO said in footnotes 29 and 30 to her written submissions that the proposed penalty for category (a) was different to the proposed penalty for category (b) because:
(a)category (a) is “Different to the range for the contraventions involving the Six Involved La La Entities’ NTPs because the documents required by those NTPs only came to the FWO’s attention as a result of the Australian Taxation Office assistance in seizing NAMS’ records”; and
(b)category (b) is “Different to the range for the contraventions involving the JD Chapel and Number 17 NTPs because no documents were provided by the NTP due dates, and some documents were not provided at all, and only came to the FWO’s attention as a result of the Australian Taxation Office assistance in seizing NAMS’ records.”.
In view of the High Court’s decision in the matter of Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; [2015] HCA 46, it may be appropriate to impose penalties within the ranges proposed by the parties. French CJ and Kiefel, Bell, Nettle and Gordon JJ said in that case at paragraph 58:
...Subject to the court being sufficiently persuaded of the accuracy of the parties’ agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and, for the reasons identified in Allied Mills, highly desirable in practice for the court to accept the parties’ proposal and therefore impose the proposed penalty. To do so is no different in principle or practice from approving an infant’s compromise, a custody or property compromise, a group proceeding settlement or a scheme of arrangement.
(footnotes omitted)
Similarly, in Director of the Fair Work Building Industry Inspectorate v Construction Forestry, Mining and Energy Union (Quest Apartments and Greek Community Centre) [2016] FCA 1262, Tracey J said at paragraph 23:
The principles which emerge from the joint judgment of Burchett and Kiefel JJ (Carr J agreeing) in NW Frozen Foods were summarised by Branson, Sackville and Gyles JJ in Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [51] as follows:
“(i)It is the responsibility of the Court to determine the appropriate penalty to be imposed… .
(ii)Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another.
(iii)There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravenor have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed.
(iv)The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise will usually be given greater weight than its views on more “subjective” matters.
(v)In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so.
(vi)Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court’s view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range.”
THE PURPOSE OF CIVIL PENALTIES
In Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450; (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 96 ALJR 426; (2022) 314 IR 301; [2022] HCA 13, the plurality of the High Court said that:
[9]Under the civil penalty regime provided by the Act, the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act. In that context, the penalties fixed by the primary judge were appropriate because they were no more than might be considered to be reasonably necessary to deter further contraventions of a like kind by Mr Pattinson, the CFMMEU or others. They represented a reasonable assessment of what was necessary to make the continuation of the CFMMEU’s non-compliance with the law, amply demonstrated by the history of its contraventions, too expensive to maintain
[10]The Full Court’s critical error was that it was distracted by a concern, drawn from the criminal law, that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a “notion of proportionality”, in the sense in which the Full Court used that term, in a civil penalty regime. Further, and relatedly, their Honours were misled by the view that the Act required that the maximum penalty be reserved for only the most serious examples of the offending comprehended by s 349(1), and that this principle could prevent the court from imposing the maximum penalty even though a penalty in that amount might reasonably be considered to be necessary to deter future contraventions of a like kind. Nothing in the text, context or purpose of s 546 requires that the maximum penalty be reserved for the most serious examples of misconduct within s 349(1). What is required is that there be “some reasonable relationship between the theoretical maximum and the final penalty imposed”. That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others.
…
[15]Most importantly, it has long been recognised that, unlike criminal sentences, civil penalties are imposed primarily, if not solely, for the purpose of deterrence. The plurality in the Agreed Penalties Case said :
“[W]hereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
‘Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”
(footnotes omitted)
PROPORTIONALITY
In Pattinson, the High Court addressed the question of proportionality as follows:
[40]Nothing in the text, context or purpose of s 546 of the Act suggests that the Full Court’s “notion of proportionality” inheres in the court’s task, pursuant to s 546, to fix a penalty which it considers to be an “appropriate” penalty. The discretion conferred by s 546 is, like any discretionary power conferred by statute on a court, to be exercised judicially, that is, fairly and reasonably having regard to the subject matter, scope and purpose of the legislation. In a civil penalty context, Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission said:
“[I]nsistence upon the deterrent quality of a penalty should be balanced by insistence that it ‘not be so high as to be oppressive’. Plainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression.”
[41]It may therefore be accepted that s 546 requires the court to ensure that the penalty it imposes is “proportionate”, where that term is understood to refer to a penalty that strikes a reasonable balance between deterrence and oppressive severity. It is in this sense that the Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd used the term “proportionality”, when their Honours said:
“If it costs more to obey the law than to breach it, a failure to sanction contraventions adequately de facto punishes all who do the right thing. It is therefore important that those who do comply see that those who do not are dealt with appropriately. This is, in a sense, the other side of deterrence, being a dimension of the general deterrence equation. This is not to give licence to impose a disproportionate or oppressive penalty, which cannot be done, but rather to recognise that proportionality of penalty is measured in the wider context of the demands of effective deterrence and encouraging the corresponding virtue of voluntary compliance.” (Emphasis added)
[42]However, the Full Court’s “notion of proportionality” derived from Veen [No 2] is something quite different. That notion cannot be reconciled with the decisive statements in the Agreed Penalties Case that civil penalties are not retributive, but rather are protective of the public interest in that they aim to secure compliance by deterring repeat contraventions. To introduce considerations drawn from theories of retributive justice into the application of s 546 of the Act undermines the primary significance of deterrence.
…
[50]This Court’s reasoning in the Agreed Penalties Case is distinctly inconsistent with the notion that the maximum penalty may only be imposed in respect of contravening conduct of the most serious kind. Considerations of deterrence, and the protection of the public interest, justify the imposition of the maximum penalty where it is apparent that no lesser penalty will be an effective deterrent against further contraventions of a like kind. Where a contravention is an example of adherence to a strategy of choosing to pay a penalty in preference to obeying the law, the court may reasonably fix a penalty at the maximum set by statute with a view to making continued adherence to that strategy in the ongoing conduct of the contravenor’s affairs as unattractive as it is open to the court reasonably to do.
(citations omitted)
APPROACH TO DETERMINING PENALTY
Bromwich J summarised the proper approach to determining penalty in cases such as this in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 at paragraph 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 paragraphs 26 to 57 and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at paragraph 14. That list is as follows, (with paragraph letters inserted):
(a)The nature and extent of the conduct which led to the breaches.
(b)The circumstances in which that conduct took place.
(c)The nature and extent of any loss or damage sustained as a result of the breaches.
(d)Whether there had been similar previous conduct by the respondent.
(e)Whether the breaches were properly distinct or arose out of the one course of conduct.
(f)The size of the business enterprise involved.
(g)Whether or not the breaches were deliberate.
(h)Whether senior management was involved in the breaches.
(i)Whether the party committing the breach had exhibited contrition.
(j)Whether the party committing the breach had taken corrective action.
(k)Whether the party committing the breach had cooperated with the enforcement authorities.
(l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
(m)The need for specific and general deterrence.
The court must, of course, be mindful of the caution expressed by the High Court at paragraph 19 of Pattinson as follows:
It may readily be seen that this list of factors includes matters pertaining both to the character of the contravening conduct (such as factors 1 to 3) and to the character of the contravenor (such as factors 4, 5, 8 and 9). It is important, however, not to regard the list of possible relevant considerations (29) as a “rigid catalogue of matters for attention” (30) as if it were a legal checklist. The court's task remains to determine what is an “appropriate” penalty in the circumstances of the particular case.
FN 29:See also Re HIH Insurance Ltd (In prov liq) and HIH Casualty and General Insurance Ltd (In prov liq); Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 at 114-116 [126]; Kelly v Fitzpatrick (2007) 166 IR 14 at 18-19 [14].
FN 30: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 580 [91]. (citations omitted)
In respect of each of Mr Taiaroa, Mr Sanger, NAMS and Mr Nicolaou, 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.
MR TAIAROA
Step 1: identifying the breaches
As stated above, Mr Taiaroa was involved in contraventions of the Act by each of:
(a)Hotel Boogie;
(b)Elwood Lounge;
(c)La La Land;
(d)Athina Windsor;
(e)MC Bar; and
(f)Blue Bar,
for their failures to make and keep, for seven years, employment records that:
(a)set out the hours worked by casual or irregular part-time employees as required by reg. 3.33(2) of the Regulations; and
(b)set out the entitlements to loadings, allowances, or penalty rates that employees were entitled to be paid as required by reg.3.33(3) of the Regulations.
Step 2: single course of conduct
The FWO said in her submissions on this step that:
Record keeping contraventions – Second and Third Respondents
17.Each time an employer fails to make and/or keep an employment record required by section 535(1) of the FW Act, there is a separate contravention.
18.In this matter, each of Mr Taiaroa and Mr Sanger admitted that the Six Involved La La Entities each failed to make and/or keep, for seven years, employment records required by section 535(1) of the FW Act.
19.It is not possible to identify the number of separate occasions on which the Six Involved La La Entities failed to make and/or keep, for seven years, employment records required by section 535(1) of the FW Act records (sic), precisely because the Six Involved La La Entities failed to make and/or keep those records. However, Mr Taiaroa admits that each of the Six Involved La La Entities employed at least between 33 and 87 employees across 8 bars. This is consistent with documentary evidence. Accordingly, it is reasonable to infer the Six Involved La La Entities failed to make and/or keep, for seven years, employment records required by section 535(1) of the FW Act records (sic) with respect to each of those employees and there was therefore a very substantial number of contraventions.
20.That said, Justice Bromwich’s step 2: statutory course of conduct, is of assistance in establishing the relevant number of contraventions in this matter, addressed below.
…
23.Section 557(1) of the FW Act provides that, for specified contraventions of the FW Act, two or more contraventions of a term of the same civil remedy provision will be treated as a single contravention where those contraventions were committed by the same person and arose from the same course of conduct.
24.Contraventions that arise out of a single act, decision or omission by a person may be treated as a single contravention where this is a single course of conduct. Contraventions that arise out of separate acts, decisions or omissions of a single person or multiple people should not be treated as single contraventions arising out of a single course of conduct.
Record keeping contraventions – Second and Third Respondents
25.Item 18(2) of Schedule 1 to the FW Act provides that conduct engaged in before 15 September 2017 is to be treated as constituting a separate contravention from conduct engaged in on or after 15 September 2017 for the purposes of section 557 of the FW Act (course of conduct). The Audit Period in this matter was from 1 July 2017 to 6 August 2019. Therefore, the contraventions that took place from 1 July 2017 to 14 September 2017 are to be treated as separate under section 557 of the FW Act from those that took place from 15 September 2017 to 6 August 2019.
26.As identified in the declarations of 12 May 2023, Mr Taiaroa and Mr Sanger were involved in contraventions of:
(a)section 535(1) of the FW Act for the failure to make and/or keep, for seven years, employment records that set out the hours worked by casual or irregular part-time employees as required by regulation 3.33(2) of the FW Regulations; and
(b)section 535(1) of the FW Act for the failure to make and/or keep, for seven years, employment records that set out the entitlements to loadings, allowances or penalty rates that employees were entitled to be paid as required by regulation 3.33(3) of the FW Regulations.
27.It is submitted that regulation 3.33(2) and regulation 3.33(3) of the FW Regulations place separate obligations on employers and give rise to separate contraventions of section 535(1) of the FW Act.
28.The FWO submits that the contraventions of each of the Six Involved La La Entities are separate from each other because the Six Involved La La Entities are each different legal persons.
29.Accordingly, taking into account the operation of section 557(1) of the FW Act, the FWO submits that each of Mr Taiaroa and Mr Sanger was involved, within the meaning of section 550 of the FW Act, in 24 separate courses of contravening conduct, being the multiple of the:
(a) Six Involved La La Entities;
(b) two separate contraventions relating to different FW Regulations; and
(c) two contravention periods.
(footnotes omitted)
Mr Taiaroa did not dispute those submissions. I accept them.
Step 3: grouped breaches
The FWO said in her written submissions that:
32.In addition to the statutory course of conduct provision, it is appropriate for the Court to consider the application of common law course of conduct principles where the contraventions involve common elements or can be said to overlap with each other.14
33.The common law course of conduct principle does not operate as a limit on the penalties that the Court may impose in respect of multiple, related contraventions and the Court is not obliged to apply it if doing so would fail to reflect the seriousness of the contraventions.15 For example, in a case involving contraventions of a modern award, the mere fact that the contraventions arose out of the employer paying a flat rate of pay does not justify aggregating contraventions of separate clauses.16
34.The common law course of conduct principle also does not mean that two or more contraventions occurring in a single course of conduct should be treated as a single contravention, and does not necessarily mean that the Court should impose only one penalty in relation to multiple contraventions.17
35.The Court may have regard to the principle of grouping when applying common law course of conduct principles where there is an interrelationship between the legal and factual elements of two or more contraventions.18
Record keeping contraventions – Second and Third Respondents
36.Although the application of section 557 results in 24 separate courses of conduct in respect of each of Mr Taiaroa and Mr Sanger, the FWO accepts that it is appropriate to group some of the contraventions that involve common elements, namely those involving two separate contravention periods by reason of Item 18(2) of Schedule 1 to the FW Act. Accordingly, the FWO submits that each of Mr Taiaroa and Mr Sanger was involved, within the meaning of section 550 of the FW Act, in 12 separate groups of contraventions for the purposes of penalty.
37.The FWO submits that the separate legal status of each of the Six Involved La La Entities means that it is not appropriate to group the separate contraventions in relation to each of those entities for the purposes of imposing a penalty on each of Mr Taiaroa and Mr Sanger. Relevant to the legal elements,19 section 535(1) provides “an employer must make, and keep for 7 years, employee records of the kind prescribed by the regulations in relation to each of its employees”. There were six separate employers in this matter, which each failed to make and keep the required records, being the Six Involved La La Entities.20
38.Relevant to the factual elements,21 each of the Six Involved La La Entities employed different employees22 and in different businesses.23
39.The FWO submits that any remaining overlap in the contravening conduct by Mr Taiaroa and Mr Sanger has been taken into account in the application of the totality principle, addressed at paragraph [44] below.
FN 14: Pearce v R (1998) 194 CLR 610; [1998] HCA 57 at [40] per McHugh, Hayne and Callinan [JJ]; Johnson v R (2004) 205 ALR 346; [2004] HCA 15 at [27]-[34] per Gummow, Callinan and Heydon JJ; Merringtons at [46], [72] per Graham J and [93] per Buchanan J.
FN 15: Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (the Nine Brisbane Sites Appeal) (2019) 286 IR 336 at [12] per Allsop CJ, [124] per Rangiah J, Griffiths J agreeing; Fair Work Ombudsman v Construction, Forestry, Maritime, Mining and Energy Union (the Hutchison Ports Appeal) [2019] FCAFC 69 at [90]-[92] per Ross J.
FN 16: See, eg, Fair Work Ombudsman v Lohr [2018] FCA 5; (2018) 356 ALR 424 at 439 [34]; Fair Work Ombudsman v Safecorp Security Group Pty Ltd (No 3) [2019] FCCA 1756 at [44]-[45]; Fair Work Ombudsman v IE Enterprises Pty Ltd [2021] FCA 60 at [17], [80].
FN 17: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; (2017) 254 FCR 68 at 99-100 [148] per Dowsett, Greenwood and Wigney JJ; Menon at [80] per White J; Australian Building and Construction Commissioner v Australian Workers’ Union [2021] FCA 861; (2021) 308 IR 195 at 211 [66]; cf Fair Work Ombudsman v Construction, Forestry, Maritime, Mining and Energy Union [2019] FCAFC 69 at [90]-[92] per Ross J, [181] per Rangiah J.
FN 18: Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39 (Cahill) at [41].
FN 19: Cahill at [41].
FN 20: Taiaroa SOAF at [2], [4], [6], [8], [10] and [12], Sanger SOAF at [2], [4], [6], [8], [10] and [12].
FN 21: Cahill at [41].
FN 22: Taiaroa SOAF at [2], [4], [6], [8], [10], [12] and Schedule 1.FN 23: Taiaroa SOAF at [2(e)], [4(e)], [6(e)], [8(e)], [10(e)] and [12(e)], Sanger SOAF at [2(e)], [4(e)], [6(e)], [8(e)], [10(e)] and [12(e)].
FN 24: NAMS/Nicolaou SOAF at [2], [4], [6], [8], [10], [12], [14], [16] and [17].
FN 25: Cahill at [41].
FN 26: First Rhodes Affidavit at [10], annexure JJR-3 and at [22], annexure JJR-9.Mr Taiaroa agreed with the FWO’s proposed grouping. The effect of that grouping is that Mr Taiaroa’s contraventions were reduced from 24 to 12. I accept that is appropriate, for the reasons given by the FWO.
Step 4: the appropriate penalty for the breaches
(a) the nature and extent of the conduct which led to the breach
Mr Taiaroa was involved in the failure by each of six companies to make and keep for seven years two types of the required pay records for a number of employees for the period July 2017 to August 2019, being a period of more than two years.
Mr Taiaroa conceded at paragraph 11 of his written submissions that record keeping contraventions are inherently serious. That is not least because they impact on the capacity of employees and the FWO to calculate and enforce the correct entitlements of employees.
(b) the circumstances in which that conduct took place
The contraventions took place in the hospitality industry. Mr Taiaroa was engaged in the hospitality industry for 36 years, for 25 of which he was an employer or manager.
Mr Taiaroa said that, at the time covered by the audit, he was busy helping his partner with two home births and was busy with other major litigation.
(c) the nature and extent of any loss or damage sustained
The FWO made various indirect and not well substantiated claims that the La La Entities had underpaid staff significantly over a period of time. For example, the FWO noted that Mr Nicolaou told a Fair Work inspector that the La La Entities had underpaid staff about $130,000 over a period of four or five years. However, the FWO continued, because of the offending, in that proper records were not kept, the FWO was unable to ascertain the extent of the underpayments and take the appropriate enforcement action. (Obviously, it is possible for employees to keep their own records. However, as a matter of reality, they are unlikely to do so in a thorough and methodical way.)
On the other hand, Mr Taiaroa submitted that there was no loss or damage as a result of the contraventions, being the failure to make and keep the required employee records.
In the present case, the court is only called upon to determine the penalties for Mr Taiaroa’s record keeping contraventions. The court cannot penalise Mr Taiaroa for any underpayments. That is because the FWO has not made any formal allegations of underpayments, and has not proved any underpayments.
It follows that there was no relevant loss or damage, apart from making it difficult if not impossible for the FWO to determine whether there were any underpayments. That is so even though one may reasonably suspect that there was substantial loss and damage in the form of underpayments to particular employees.
(d) whether there had been similar previous conduct
The FWO did not allege that Mr Taiaroa had previously contravened any workplace laws. Mr Taiaroa said in his submissions on penalty filed on 12 September 2023 at paragraph 13 that:
Mr Taiaroa has 36 years of experience in the hospitality industry, including 25 years as an employer or manager. He has not previously contravened the FW Act.10 This is a significant factor in his favour.
FN 10: Affidavit of Mr Keri David Taiaroa, 11 September 2023 [12]-[13].
In fact, Mr Taiaroa’s affidavit said at paragraph 13 that he had “not previously been the subject of any proceedings by the Applicant or its predecessors for any contraventions of workplace laws.” That is not the same thing as saying that he had never contravened the FW Act. It may be that he simply had not been discovered.
Be that as it may, there is no evidence before the court that Mr Taiaroa had previously contravened any workplace laws.
However, the FWO submitted that this is a neutral, not a mitigating factor, relying on Sayed v Construction, Forestry Mining and Energy Union (No 2) [2015] FCA 338 at paragraph 51 and Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 at paragraph 177.
In Sayed, Mortimer J, as her Honour then was, said at paragraph 51:
The absence of any evidence of previous contraventions by the respondent means, as Jessup J pointed out in Murrihy (No 2), that the respondent’s conduct must be measured in and of itself, without reference to previous conduct. I do not consider this as some kind of positive factor in the respondent’s favour, which seemed to be the implication from the respondent’s submissions. Especially in relation to unlawful discrimination, where the true reasons for conduct are often difficult to uncover, one cannot simply infer, as the respondent seemed to suggest the Court might, that this kind of conduct has not occurred before within the CFMEU. Nor can one infer it has. Rather, the conduct stands to be assessed for what it has been found by the Court to be. In my opinion absence of evidence about prior contraventions that have been litigated and determined simply means there is no evidence of that nature which might otherwise have contributed to an increase in the penalty to be imposed.
In NSH, Bromwich J said at paragraph 177:
… As with all of the respondents, reliance was placed on a lack of prior contraventions, which was said to entitle her to a significant discount on penalty as a first-time contravener, relying on Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; 147 IR 462; 224 ALR 467 at [44]. In that case, Merkel J observed that the penalty imposed would have been significantly higher if the respondent bank had been involved in other relevant contraventions or if there had been specific evidence of actual financial harm suffered by employees as a result of the unlawful conduct. The first aspect was absent for the present respondents, but the second aspect was not. The harm in this case was real and substantial. In any event, a first time contravention does not, as a matter of principle or practice, always require a substantial discount for a first-time contravener. That is especially so in a case involving very serious contraventions over a considerable period of time. These submissions were also a part of the foundation for the assertion that a 25% discount, rather than 20%, was appropriate, which has already been rejected.
It follows that a lack of prior convictions does not entitle Mr Taiaroa to a discount, though prior convictions might have warranted an increase in his penalties.
(e) whether the breaches arose out of the one course of conduct
This point has been addressed above.
(f)the size of the business enterprise involved
Mr Taiaroa conceded in his written submissions that each of the La La Entities were substantial businesses.
(g) whether or not the breaches were deliberate
The FWO said in her submissions filed on 15 August 2023 that:
Record keeping contraventions
74.Mr Taiaroa has admitted that he knew that records of hours worked by casual or irregular part time employees and entitlements to loadings, allowances and penalty rates were not kept, that he was active in the management of the companies and bars, and that he was a person responsible, in a practical sense, for ensuring that the Six Involved La La Entities complied with their obligations under the FW Act.
…
76.Despite Mr Taiaroa’s and Mr Sanger’s knowledge of the record keeping failures of the Six Involved La La Entities and their respective roles within the businesses run by the Six Involved La La Entities, neither of them took appropriate steps to ensure the required records were made and/or kept. The FWO submits that this demonstrates, at worse, a deliberate act to conceal potential underpayments from the employees and regulator or, at best, a reckless indifference as to their obligations as managers of employing businesses and the implications of failing to meet those obligations.
(footnotes omitted)
Mr Taiaroa said in his written submissions filed on 12 September 2023 that:
15.Mr Taiaroa has made admissions as to his state of knowledge of the conduct constituting the contraventions.11 However, those admissions are not inconsistent with a finding that his conduct was not deliberate.
16.Mr Taiaroa states that for a period that included the Audit Period, he was not intimately across the details of his businesses.12 It can be accepted that Mr Taiaroa’s contravening conduct betrayed a lack of care and an indifference for his responsibility for ensuring that the La La Entities complied with their obligations under the FW Act.
17.Contrary to the Ombudsman’s submissions,13 the mere fact that Mr Taiaroa and the Third Respondent, Mr Sanger, had knowledge of the record-keeping failures at the relevant La La Entities, and failed to take appropriate steps to ensure records were kept, is not a basis for inferring that this was a deliberate act to conceal potential underpayments.
18.The Court should not accept that there was any deliberate basis for the inadequate record-keeping by Mr Taiaroa in an attempt to distort or minimise the First and Second Respondent’s obligations to its employees.14
FN 11: Statement of Agreed Facts, [17]-[21].
FN 12: Taiaroa Affidavit, [24].
FN 13: Applicant’s Submissions on Penalty, [74].
FN 14: Applicant’s Submissions on Penalty, [76].The facts that Mr Taiaroa was aware that the required records were not kept, and that he was responsible for ensuring that they were kept, is enough to establish that the record keeping failures were deliberate on his part. However, that does not mean that Mr Taiaroa’s record keeping failures were part of a deliberate strategy to underpay workers. It is simply not known whether any workers were in fact underpaid, although there is obviously grounds for suspicion in that regard.
(h) whether senior management was involved in the breach
It was common ground that Mr Taiaroa was a director and involved in the management of each of the six La La Entities. It was not disputed that senior management was involved in the breaches by the La La entities. However, the present question concerns Mr Taiaroa’s personal liability. As Mr Taiaroa is not a corporate entity, the question of whether senior management was involved in the contravention does not apply.
(i)(j)(k)Contrition, corrective action and co-operation with the authorities
In Fair Work Ombudsman v Bedington [2012] FMCA 1133 Jarrett FM held at paragraph 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. …
The FWO said in her written submissions filed on 15 August 2023 that:
78.The presence or absence of contrition is a relevant consideration to penalty.73 Notwithstanding the admissions made in the respective SOAFs, there is nothing before the Court as of the date of these submissions that indicates either Mr Taiaroa or Mr Sanger is contrite.
79.The Six Involved La La Entities are all in liquidation, so there is no way for them, as corporate bodies, to take any corrective action.
80.The decisions of this Court (and its predecessor) have repeatedly emphasised that the specific characteristics of any cooperation relied upon by a respondent should be carefully considered to determine its weight as a mitigating factor. For example, it is important to consider whether cooperation was "early and active" and/or "meaningful".74
Record keeping contraventions
81.The Taiaora SOAF was filed many months before the liability hearing in this matter was due to be heard, and well before the FWO filed any liability evidence. This greatly reduced the public resources the Court and the FWO would otherwise have expended preparing for a contested hearing with regards to the allegations against Mr Taiaroa. Mr Taiaroa’s cooperation in making admissions in the Taiaroa SOAF is a mitigating penalty factor.
FN 73: Fair Work Ombudsman v Mai Pty Ltd [2016] FCCA 1481, [145]-[146].
FN 74: Fair Work Ombudsman v Pioneer Personnel Pty Ltd [2017] FCCA 3223, [47].Mr Taiaroa said in his affidavit affirmed on 12 September 2023 at paragraph 11 that:
I regret that the record-keeping conducted by the entities in question, for which I was responsible, was insufficient, and I offer my sincere apology to this Court and to the Fair Work Ombudsman.
Mr Taiaroa said in his written submissions filed on 12 September 2023 that:
19.Mr Taiaroa has apologised to the Court and to the Ombudsman for his contraventions of the FW Act.15 He has a clear understanding of the importance of keeping adequate employee records.16 He has displayed substantial and genuine remorse and contrition. This should be given significant weight in determining an appropriate penalty.
20.Mr Taiaroa cooperated with the Applicant and in the conduct of these proceedings. The Applicant has shown meaningful engagement with the Court.
21.At an early stage of the proceedings, more than a year ago, Mr Taiaroa admitted the contraventions and entered into the SOAF with the Ombudsman.17
22.By his early admission of liability, his acceptance of responsibility and his significant remorse, the Ombudsman has been spared the time, cost and inconvenience in prosecuting a trial as to liability, and Mr Taiaroa has displayed a genuine willingness to facilitate the course of justice.18 These matters weigh heavily in Mr Taiaroa’s favour in determining the appropriate penalty.
FN 15: Taiaroa Affidavit, [11].
FN 16: Taiaroa Affidavit, [20]-[23].
FN 17: Statement of Agreed Facts, 19 August 2022.
FN 18: Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70, [74]-[76].
In her written submissions in reply, the FWO said that:
19.The Taiaroa penalty submissions address contrition, cooperation with authorities and corrective action at paragraphs [19] to [22]. It is there contended that these matters weigh heavily in Mr Taiaroa’s favour in determining the appropriate penalty.
20.The FWO broadly agrees and, accordingly, has proposed a 20% discount for early admissions. As identified in the FWO primary submissions on penalty in the table at [11] and at [91(a)], that discount has been factored into the agreed penalty range.
21.In Mornington Inn Pty Ltd v Jordan,7 Justices Stone and Buchanan set out the basis upon which a discount is made for an admission of liability and the circumstances as follows:
[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 […]
[76]As Branson J has pointed out (see Alfred v Walter Construction Group Ltd [2005] FCA 497) the rationale for providing a discount for an early plea of guilty in a criminal case does not apply neatly to a case, such as the present, where a civil penalty is sought and the case proceeds on pleadings. Nevertheless, in our view, it should be accepted, for the same reasons as given in Cameron, that a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.”
22.It is recognised that Mr Taiaroa has now also expressed some regret for the record keeping of the entities in question.8 However, this may be tempered somewhat by Mr Taiaroa’s failure to acknowledge the full consequences of these contraventions.9 Additionally, Mr Taiaroa made admissions following a mediation and some 9 months after the proceeding was commenced. Accordingly, this is not a case which would warrant a discount of greater than 20%.
FN 7: [2008] FCAFC 70; (2009) 168 FCR 383 at [76].
FN 8: Affidavit of Keri David Taiaroa affirmed 12 September 2023 at [11].FN 9:Taiaroa penalty submissions at [11] as is addressed further below at [C.23] to [C.25].
The FWO relied in oral submissions on Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70, where Stone and Buchanan JJ said:
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 although, as was indicated in Cameron at [23] – [24] there is no obligation to make an early plea to a charge which wrongly particularises the substance to which the charge relates.
76.As Branson J has pointed out (see Alfred v Walter Construction Group Limited [2005] FCA 497) the rationale for providing a discount for an early plea of guilty in a criminal case does not apply neatly to a case, such as the present, where a civil penalty is sought and the case proceeds on pleadings. Nevertheless, in our view, it should be accepted, for the same reasons as given in Cameron 209 CLR 339, that a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.
77.A respondent who admits liability will spare itself the unnecessary cost of a contested hearing. Its motivation, therefore, should not be regarded as unduly altruistic. Depending on the stage at which liability is admitted it may or may not relieve an applicant of the bulk of the cost of preparing for a trial. In a case such as the present where the provisions of the Act (see s 824) effectively denied the applicant its costs if successful it would be unsatisfactory if a respondent could insist upon a large discount in circumstances where it had forced an applicant to incur most of the costs of preparing for a trial but avoided that expense itself. The respondent (the applicant below) was compelled to prepare and reveal its whole evidentiary case. We were told from the Bar table that the appellant’s Defence was filed after the respondent’s affidavit evidence had been provided. Even after it had the advantage of seeing the applicant’s evidentiary case the appellant denied liability. It did not, as it might have, even then judiciously admit matters which, as it later accepted, could not really be contested. The judge was not informed of its change of position until two weeks before the trial was to begin. It is impossible to resist a conclusion that the appellant was finally moved by its assessment of the strength of the case against it rather than any desire to facilitate the course of justice.
The FWO orally submitted that Mr Taiaroa’s expression of regret did not reach the level discussed in Mornington.
Mr Taiaroa’s expression of regret was minimalistic, though he did go on to say in his affidavit that proper record keeping was very important for employees. He described the record-keeping as insufficient, when it was grossly inadequate. He apologised to the court and the FWO but not to the employees whose employment records he did not ensure were properly kept. That is, Mr Taiaroa did not apologise to the people most affected by the contraventions.
Mr Taiaroa sought to explain his failures by describing his personal circumstances at the time of offending. However, this sounds like he is saying “poor me”, rather than expressing a recognition that he has harmed other people by not ensuring their employer kept proper records.
All in all, Mr Taiaroa’s attempt at contrition does not appear to be genuine, but reflects a desire to minimise the penalty he will receive.
Having said that, Mr Taiaroa did make admissions, and thereby spared the FWO and the court the burdens associated with a liability hearing.
It was not primarily Mr Taiaroa’s responsibility to take corrective action, as he was not the actual employer. The La La entities were. Nevertheless, Mr Taiaroa was a director of those entities, and in theory at least could have directed them to take corrective action. The circumstances of the La La entities going into liquidation were not explained to the court. There was no evidence about their statements to the liquidator about the nature of their debts. It may be that they disclosed to the liquidator that they owed $X in outstanding employee entitlements. On the other hand, the La La entities may have had other, entirely unrelated debts. In any event, the FWO has not established that there was any need for corrective action, because, without records, the FWO was unable to establish that anyone had been underpaid.
(l) the need to ensure compliance with minimum standards
The FWO said in her written submissions filed on 15 August 2023 that:
84.Making and keeping employment records is one of the minimum requirements for any Australian employer. In Fair Work Ombudsman v Malevi Pty Ltd & Ors (Malevi) the predecessor of this Court found that it was the respondents’ responsibility to ensure records were made and kept, and that such a responsibility was not met by outsourcing record keeping to a bookkeeper without checking the bookkeeper maintained records. The Court in Malevi accepted that most of the records were kept, and that most of those records which were not kept were for one-hour trials only, so found the record keeping contraventions in Malevi were at the lower end of the scale.
…..
87.The FWO submits that each of Mr Taiaroa’s and Mr Sanger’s conduct is more serious than that of the respondents in Malevi because:
(a)the Six Involved La La Entities did not make and/or keep necessary records of hours worked by casual or irregular part-time employees (required by FW Regulation 3.33(2)) or entitlements to loadings, allowances or penalty rates (required by FW Regulation 3.33(3) for any of those employees;
(b)as set out at paragraphs 60 and 61 above, the FWO was therefore unable to pursue any underpayment contraventions and ensure employees received their minimum entitlements under the FW Act;
(c)Mr Taiaroa knew such records were not made and kept; …
…
(footnotes omitted)
Mr Taiaroa said in his written submissions filed on 12 September 2023 at paragraph 23 on this point that:
The Respondents acknowledge that there is a need to ensure compliance with minimum employment standards, including in respect of record-keeping. The Respondents submit that such a need would be met in this case by the imposition of a penalty at the low end of the parties’ agreed range.
(m) the need for specific and general deterrence
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 paragraph 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 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 paragraph 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 paragraph 9:
… even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law’s disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ….
In her written submissions on penalty, the FWO submitted in relation to general deterrence that:
48.The FWO, as the national workplace regulator, is in an informed position to offer submissions as to the effect of contraventions in an industry, and the level of penalty necessary to achieve compliance.36 Such submissions must, of course, be considered on their merits.37
49.The FWO’s report, Industry profile and FWO interactions38 provides that, between July 2017 and December 2022, which covers from the Audit Period to the most recent available information, the Pubs, Taverns and Bars industry:
(a)was given a “high” rating for industry disputes with the FWO;
(b)was involved in 1,772 disputes with the FWO despite having only 5,170 employing businesses (compared with, for example, the Cafes and Restaurants Industry which had 44,332 employing businesses in the same period);
(c)had more disputes located in Victoria than anywhere else; and
(d)was the subject of $1,300,935 in money recovered by the FWO for employees.
50.The Federal Court has accepted that reports such as that referred to in the preceding paragraph are “relevant and may be given appropriate weigh insofar as it establishes that there are problems in the [relevant] industry which render general deterrence of substantial and continuing importance in fixing civil penalties for the contraventions… The existence and prevalence of such conduct usefully informs the exercise of the Court’s discretion.”39
51.Record keeping failures in contravention of section 535(1) of the FW Act and failures to comply with notices to produce in contravention of section 712(3) of the FW Act are particularly serious because such conduct can frustrate the FWO’s investigation of contraventions and the determination of unpaid entitlements.40
52.Ensuring compliance with record keeping requirements is vital to ensuring employees are remunerated according to minimum standards,41 especially in the Pubs, Taverns and Bars industry, which covered the La La Entities, where, as set out above, there are high levels of disputes. Indeed, proper record keeping is considered “the bedrock of compliance”.42 In particular, the failure to keep records of hours and times worked can have the effect of masking numerous contraventions, including with respect to employers’ obligations under section 62 of the FW Act regarding reasonable additional hours. Further, the failure to keep records of loadings, allowances or penalty rates mean that employees and the regulator are left in the dark as to whether minimum payment obligations have been met.
53.Compliance powers conferred on fair work inspectors, including the power to issue a statutory notice to produce, are central to the successful discharge of the FWO’s functions under section 682 of the FW Act.43 Where a recipient of a notice to produce fails to comply with it, whether deliberately or otherwise, the effectiveness of the notice as an enforcement tool is undermined, as is the FWO’s ability to effectively enforce compliance with the FW Act.44
54.Contraventions of minimum standards for record keeping requirements and notices to produce under the FW Act undermine the workplace regime as a whole, and penalties should be imposed at a meaningful level for the Court to denounce the respondents’ conduct, to encourage compliance in the Pubs, Taverns and Bars, particularly in Victoria, where the La La Entities were located, and to create a financial incentive to change from non-compliant practices.
FN 36: Agreed Penalties Case at [60].
FN 37: Agreed Penalties Case at [61].
FN 38: Second Rhodes Affidavit at [8], annexure JJR-27.
FN 39: See New Shanghai at [134].
FN 40: Fair Work Ombudsman v Zucco Farming Pty Ltd & Anor [2019] FCCA 1277 at [94].
FN 41:See New Shanghai at [112] to [113] and Fair Work Ombudsman v Rubee Enterprises Pty Ltd & Anor [2016] FCCA 3456 at [52]-[53].
FN 42:Fair Work Ombudsman v Dosanjh [2016] FCCA 923 at [46]; Fair Work Ombudsman v ACN052 182 180 Pty Ltd & Anor [2013] FCCA 688 at [20]; Fair Work Ombudsman v Soleimani & Anor [2014] FCCA 2380 at [55].
FN 43:Fair Work Ombudsman v NoBrace Centre Pty Ltd (In Liquidation) (ACN 121 556 447) & Ors (No.2) [2019] FCCA 2970 (NoBrace) at [100].
FN 44:See NoBrace at [100]; Fair Work Ombudsman v Nerd Group Australia Pty Ltd (No.3) [2012] FMCA 891 at [11]-[12].
In her reply submissions on penalty filed on 30 October 2023, the FWO said that:
36.The Sanger penalty submissions at [57] to [60] contend that Mr Sanger should receive appropriate recognition and a significant reduction in overall penalty by reason of his admissions. It is there said that his conduct evinces remorse and contrition, a credible expression of regret and a willingness to facilitate the course of justice. At [77], Mr Sanger quantifies the discount he seeks for contrition and corrective action to be 20%.
37. Here again, the FWO refers to In Mornington Inn Pty Ltd v Jordan,17 and the submissions made at [C.19] to [C.22] above. However, in contradistinction to Mr Taiaroa, Mr Sanger:
(a) has filed no evidence in support of his contrition;
(b) only made admissions four days prior to the scheduled liability hearing (as compared to Mr Taiaroa’s admissions some 9 months earlier).
38. Regarding the lack of evidence from Mr Sanger as to his contrition, Kiefel J observed at [10] in BHP Steel (AIS) Pty Ltd v Construction, Forestry, Mining and Energy Union [2001] FCA 336:
"Whilst the lack of an apology is not an aggravating circumstance, such as might increase the penalty, the making of an apology can operate to reduce a penalty, at least where it can be seen to render it unlikely that the conduct will be repeated in the future. The respondent has elected not to take that course."
39. As to the timing of Mr Sanger’s admissions, admissions made late in the proceedings may be afforded less weight (or no weight) as evidence of contrition and cooperation with the regulator.
40. Here, the FWO recognises that it would be appropriate for Mr Sanger to receive a discount on penalties for his admissions. For the reasons identified above and at [82] of the FWO primary submissions on penalty, that discount should be no more than 10%, rather than 20%.
(footnotes omitted)
In oral submissions, Mr Sanger outlined the timeline leading to his statement of agreed facts. The FWO filed a statement of claim on 8 November 2021, which included allegations that Mr Sanger was responsible for ensuring Chapel fulfilled its legal obligations under the Act. On 9 May 2022, Mr Sanger filed a defence in which he denied having any responsibilities in relation to Chapel. An unsuccessful mediation occurred on 9 June 2022. The matter was listed for liability hearing on 15 May 2023. On 16 March 2023, the FWO filed her submissions on liability, in which she abandoned her claim that Mr Sanger was responsible for ensuring Chapel fulfilled its legal obligations under the Act. On 10 May 2023, the FWO and Mr Sanger filed a statement of agreed facts, which did not include any liability in respect of Chapel.
The FWO did not dispute that timeline. I accept Mr Sanger’s submission that his relatively late admissions were the product of the FWO’s relatively late withdrawal of the allegations in respect of Chapel. I consider that Mr Sanger should get credit for his admissions, and the timing of them should not count against him. That is, Mr Sanger has co-operated with the authorities.
In relation to contrition, Mr Sanger said in his affidavit affirmed on 27 November 2023 that:
6.I have tried to cooperate with the Fair Work Ombudsman (FWO) by entering the SOAF. I accept responsibility for my liability as set out in the SOAF and I do regret the situation that it has caused for those affected like the Court and the FWO.
7.I sincerely apologise to the Court and to the FWO for my involvement in the contraventions and the situation it caused for them.
Like Mr Taiaroa, there is no evidence that Mr Sanger apologised to the people affected most by the contraventions: the employees. His apology appears to me to be formulaic, and designed to minimise the penalty he might receive rather than a genuine expression of remorse.
There was no suggestion that it was for Mr Sanger to take corrective action.
(l) The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
The FWO’s general submissions on this topic are set out above in relation to Mr Taiaroa. In addition, the FWO noted that Mr Sanger knew of the system by which the required records were not made and kept. Mr Sanger did not make any specific submissions on this topic. I accept the FWOI’s submissions on this issue.
(m) The need for specific and general deterrence.
The general authorities on deterrence and the FWO’s general submissions on deterrence are set out above.
In relation to specific deterrence in relation to Mr Sanger, the FWO said in her submissions filed on 15 August 2023 at paragraph 56 that:
Mr Sanger is involved in the manufacturing of alcoholic products, an industry adjacent to the Pubs, Taverns and Bars industry. Whilst there is no evidence before the Court to suggest he is involved in the employment of any employees, it is reasonable to infer that this is at least a possibility by reason of his current business ventures, and potential future business ventures. It is therefore appropriate for the Court to include specific deterrence of Mr Sanger in its considerations of penalty.
(footnote omitted)
The affidavit of Jason James Rhodes sworn on 13 June 2023 states that personal name and company searches show that Mr Sanger was the current director and secretary of Curatif Operations Pty Ltd, a canned cocktail business.
Mr Sanger said in his submissions filed on 11 September 2023 that:
Specific deterrence
…
63. There has been contrition on the part of the Mr Sanger as noted above.
64.Mr Sanger ceased his employment and involvement with the relevant entities and bars/venues in January 2019 and over 6 months before the ‘Audit Period’ concluded.
65.The Six Involved La La Entities, and necessarily the bars/venues operated by them, are all in liquidation and no longer operate.
66. The circumstances are such that the harm will not likely occur again.
67.The fact that Mr Sanger is a director of a company which produces canned cocktails does not provide a basis to aggravate deterrence specifically. As noted by the FWO, there is no evidence before the Court to suggest he is involved in the employment of any employees.
68.Mr Sanger therefore submits that the need for specific deterrence is not at the higher end of the scale in this case.
General deterrence
69. Whilst it is important that clear messages must be sent to the public that contraventions of workplace laws are serious matters, any such message must be regulated by the nature of the contravening conduct.
70. General deterrence is an important and relevant consideration in assessing penalty in order to mark the disapproval of the conduct in question and to act as a warning to other employers.
71. General deterrence in this case must entail a proper consideration of all of the circumstances.
72. Moreover, Mr Sanger’s admission of culpability had the effect of releasing the FWO’s resources thereby permitting them to be used to increase the likelihood that other contraveners would be detected and brought before the courts. This has the effect of increasing deterrence.
73. Accordingly, the penalty to be imposed should take account of the requirement of general deterrence, but a lower level of general deterrence then submitted by the FWO given the circumstances of these contraventions.
Mr Sanger said in his affidavit affirmed on 27 November 2023 that he is 42 years old and, at paragraph 8, that:
My involvement in these proceedings has enabled me to appreciate and understand the employee record keeping obligations under the Fair Work Act 2009. I now understand and appreciate the extent of the employee record keeping obligations, their importance and the need to closely monitor compliance.
Other issues
Mr Sanger said in paragraph 79 of his written submissions filed on 11 September 2023 that:
Further, it is noted that the venue managers responsible for the day-to-day management of the entities, venues/bars the subject of these proceedings have not been prosecuted despite their involvement. In those circumstances the concept of parity may loom large as Mr Sanger himself was an employee like them.
The FWO said in her reply submissions at paragraph 42 that:
The principle of parity has no such role here. Mr Sanger admits to being involved in various contraventions of section 535(1) of the FW Act for the purpose of section 550 of the FW Act. There is no basis for the Court to find that any venue manager was involved in these contraventions. Rather, Mr Sanger had a practical connection with the system by which:
(a) employees of the Six Involved La La Entities were directed to work rostered shifts at bars operated by those entities; and
(b) the Six Involved La La Entities did not make and/or keep records for a period of seven years setting out the matters required by FW Regulations.
I accept the FWO’s submissions on this point. There is simply no evidence on which the court could find that the venue managers were involved in any contraventions. Any such finding would be entirely speculative.
The appropriate penalty for Mr Sanger
Mr Sanger did not stand to benefit directly from the contraventions by the La La entities.
There was no acceptable evidence of loss or damage, except for the practical impossibility of the FWO and employees enforcing their rights.
There was no evidence of any previous contraventions by Mr Sanger.
His breaches were deliberate.
The statement of agreed facts was entered into late in the piece but that was at least partly because the FWO did not withdraw an unfounded allegation until late in the piece.
Mr Sanger did not display genuine contrition.
There is a need for general deterrence in this case. As Mr Sanger is only 42 years old, and is a director of a business (although it is unknown whether it employs any staff), there is a need for specific deterrence.
Although the court should not impose a crushing penalty, Mr Sanger provided no evidence of his financial circumstances. The court is therefore not in a position to know whether any particular level of penalty would be crushing.
As discussed above, the FWO and Mr Sanger treated the maximum penalty as $140,616 in total for his twelve contraventions. I am prepared to that figure as the maximum. I consider that the nature of his contraventions calls for a total penalty of 37.5% of the maximum, resulting in a total penalty of $52,731. However, from that, I consider that a 15% reduction for admissions is appropriate. That results in a total penalty of $44,821.
Step 5: the totality principle
The FWO submitted in paragraph 44 of her submissions filed on 15 August 2023 that:
The FWO submits that the Court should apply the totality principle as follows:
…
(b) Mr Sanger: an appropriate penalty for his involvement in the contraventions of the Six Involved La La Entities is between 27.5 and 37.5% of the maximum, with a 10% discount for admissions, and a further 40% discount for totality, to take into account the overlap between the contraventions.
Mr Sanger said in his written submissions filed on 11 September 2023 that:
The totality principle requires the Court, once it has made a judicial evaluation of what it considers to be an appropriate aggregate penalty, to examine one final time, the aggregate penalty in order to determine whether it appears wrong and that it is an appropriate response to the conduct which led to the breaches and is not oppressive or crushing. The Court should apply an ‘instinctive synthesis’ in making this assessment.
I accept that the FWO’s submission that there should be an allowance of 40% for totality. That brings the total penalty down to $26,893.
NAMS
Step 1: identifying the breaches
NAMS contravened s.712(3) of the Act by failing to comply with a written notice to produce issued and served upon it by the FWO on 3 October 2019.
Step 2: single course of conduct
As NAMS’ contravention consisted of a single act, the course of conduct provisions do not apply.
Step 3: grouped breaches
Similarly, as NAMS’ contravention consisted of a single act, there is nothing to group.
Step 4: the appropriate penalty for the breaches
(a) The nature and extent of the conduct which led to the breaches.
In her submissions filed on 15 August 2023, the FWO said:
66.The NAMS [notice to produce] required the production of specified records and/or documents by 21 October 2019. The failure by NAMS to comply with this [notice to produce] included:
(a) failing to produce documents that were required to be produced under the NAMS [notice to produce] by 21 October 2019;
(b) providing records or documents to the FWO that were required to be produced under the NAMS [notice to produce] that had not previously been produced to the FWO after 21 October 2019; and
(c) failing to produce various records and documents prior to these being seized on 29 January 2020 from a computer at the NAMS office during an inspection conducted under s 709 of the FW Act.
67. NAMS, as an accounting business, may be easily distinguished from other types of businesses that might not be expected to have the same level of knowledge of regulatory and statutory requirements. The Court may infer NAMS’ knowledge of the importance of complying with regulatory practices and statutory requirements such as complying with an NTP, and hold it to the standard expected of an accounting firm.
(footnotes omitted)
(b) The circumstances in which that conduct took place.
NAMS said in its written submissions filed on 30 October 2023 that it provided bookkeeping services for the La La entities as an external service provider. NAMS submitted it had no authority to provide documents in response to the notice to produce issued to it without the approval and consent of Mr Taiaroa.
In oral submissions, the FWO noted that, in paragraph 19(b) of its defence, NAMS said that:
…save to say that [NAMS] was engaged by [Mr Taiaroa] on behalf of JD Chapel and the Liquidated La La Entities in:
i. around 1997 to provide bookkeeping, compliance and taxation services including preparation and lodgement of taxation returns and business activity statements with the Australian Taxation Office (ATO) (Compliance Services);
ii. around May 2019 to collate information which the Applicant requested from the First Respondent and Liquidated La La Entities as part of its investigation, calculate potential historical underpayments to its staff, and to process payments to its former and current workers (Payroll Services);
iii.around 6 August 2019 to collate information in response to the JD Chapel [notice to produce] and Liquidated La La Entities’ [notices to produce] ([notice to produce] Services),
they otherwise deny the allegations in paragraphs (c) and (d);
Particulars
…
On or around 6 August 2019, [Mr Nicolaou] rang [Mr Taiaroa] after receiving the JD Chapel [notice to produce] and Liquidated La La Entities’ [notices to produce] and was instructed by [Mr Taiaroa] to provide the [FWO] with the documents already in [NAMS’] possession as being used to calculate potential historical underpayments to staff of [Chapel] and the Liquidated La La Entities, and to process payments to their former and current workers.
The FWO argued that, in those circumstances, NAMS had ample authority to comply with the notice to produce served on it. NAMS did not dispute that in oral submissions. I accept the FWO’s submissions in this regard.
NAMS also claimed that its principal, Mr Nicolaou, had personal issues at the relevant time, consisting of his partner giving birth prematurely on 15 November 2019, and the notice to produce being served on 3 October 2019. According to the statement of agreed facts, NAMS’ notice to produce had to be complied with by 21 October 2019. That is, the NAMS notice to produce had to be complied with more than three weeks prior to the premature birth. The premature birth is therefore irrelevant.
NAMS also submitted that Mr Nicolaou’s wife had a difficult pregnancy and required periods of hospitalisation. I accept that these circumstances could have caused Mr Nicolaou stress and anxiety in October 2019. However, in the absence of more detailed evidence, I do not consider that these circumstances warrant any significant discount.
(c) The nature and extent of any loss or damage sustained as a result of the breaches.
The FWO argued at paragraph 69 of her submissions filed on 15 August 2023 that:
NAMS’ failure to comply with the NAMS [notice to produce] … undermined the FWO’s ability to investigate contraventions of the FW Act, such as the record keeping contraventions in this matter, leading to a loss to the public for the extra resources required to establish those contraventions, including the site visit involving multiple FWO and Australian Taxation Office staff.
(footnote omitted)
NAMS argued in its written submissions that there was no loss or damage in NAMS not complying with the notice to produce, because the documents sought to be produced did not exist.
The FWO noted in oral submissions that NAMS conceded in the statement of agreed facts that it had not produced the documents required to be produced by 21 October 2019 and a number of those documents had in fact been seized during the course of unannounced site visit to NAMS’ office on 29 January 2020. That is, the documents did exist.
NAMS submitted orally that there was not a neat, complete set of documents. That may be so. However, there were clearly documents that did answer the notice to produce that NAMS did not provide in response to the notice to produce. I accept the FWO’s submissions about loss and damage.
(d) Whether there had been similar previous conduct by the respondent.
It was not suggested that NAMS had ever been found to have contravened any workplace laws in the past.
(e) Whether the breaches were properly distinct or arose out of the one course of conduct.
NAMS had only one contravention, so this issue does not apply.
(f) The size of the business enterprise involved.
NAMS said in its submissions on penalty filed on 30 October 2023 that:
[NAMS] is a small business, and [Mr Nicolaou] is the sole director. Financial penalties imposed may have adverse implications for the viability of the ongoing business operated in the name of [NAMS].
Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at paragraph 28:
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level”.
(footnote omitted)
Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at paragraph 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.
The FWO did not dispute that NAMS is a small business. However, as Kelly and Rajagopalan show, it does not really make a difference.
Having said that, penalties should not be crushing. However, NAMS did not provide any evidence of its financial circumstances, so the court is in no position to assess whether any particular penalty would be crushing.
(g) Whether or not the breaches were deliberate.
The FWO said in her submissions filed on 15 August 2023 at paragraph 77 that:
FWI Rhodes and FWI Pace had extensive communications with Mr Nicolaou, explaining what records were required by the La La NTPs and the NAMS NTP. Mr Nicolaou had control of those records and chose not to provide them. Mr Nicolaou’s deliberate behaviour in preventing records being produced in response to the La La NTPs and the NAMS NTP is an aggravating penalty factor. (footnote omitted)
NAMS may have attempted to address the issue of deliberateness by saying that the required documents did not exist and that it was not authorised to provide the documents. Both those arguments were rejected above. I am satisfied that NAMS’ contravention was deliberate.
(h) Whether senior management was involved in the breaches.
Mr Nicolaou is and was the principal and sole director of NAMS. He was totally involved in the breach by NAMS.
(i)(j)(k) Contrition, corrective action and co-operation with the authorities
The FWO said in her submissions filed on 15 August 2023 at paragraph 83 that:
The NAMS and Nicolaou SOAF was filed in the week before the 4 day liability hearing was listed, by which time the FWO had expended considerable public resources in substantial preparation for that hearing, including the filing of extensive liability evidence several months earlier. However, the FWO accepts that the admissions made in the NAMS and Nicolaou SOAF did ultimately mean that the liability hearing was not required with regards to the allegations against NAMS and Mr Nicolaou. Accordingly, NAMS and Mr Nicolaou’s cooperation in making admissions in the NAMS and Nicolaou SOAF is a mitigating penalty factor, albeit of limited weight on account of the timing of the SOAF.
NAMS and Mr Nicolaou did not deal with the issues of contrition, corrective action and co-operation with the authorities in their written or oral submissions.
In relation to co-operation with the authorities, NAMS and Mr Nicolaou entered into a statement of agreed facts on 11 May 2023, four days before the liability hearing. NAMS admitted the essential elements of the contravention, thus sparing the parties the burden of a trial on liability.
Admissions can sometimes be a sign of contrition, or alternatively, they can be a recognition of the strength of the opposing case or an attempt to reduce the eventual penalty. In the present case, there is nothing to indicate that NAMS, or its director, Mr Nicolaou, feels any contrition. He swore an affidavit on 17 February 2023 that did not contain even the minimal regret expressed by Mr Taiaroa and Mr Sanger. His counsel said at the hearing that, if Mr Nicolaou had his time again, he would have complied with the notices to produce. However, that falls a long way short of genuine contrition.
NAMS and Mr Nicolaou did not take any corrective action, for example, by providing the required documents after the due date. Documents were seized by the FWO about two months later during an unannounced site visit to NAMS.
(l) The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
The FWO said in her submissions dated 15 August 2023 that:
88.Failure to comply with NTPs frustrates the effective exercise of the powers of the FWO, particularly the investigative power of FWO inspectors, to ensure a minimum safety net of fair and enforceable minimum terms and conditions, which is one of the most important objects of the FW Act.
89.The failure of NAMS to comply with the NAMS NTP and Mr Nicolaou’s involvement the failure to comply with the NAMS NTP and the La La NTPs is an aggravating factor for NAMS and Mr Nicolaou because accountancy is a sophisticated profession and the Court may reasonably expect accounting firms and their principals to comply with minimum standards for compliance with statutory notices, and order appropriate penalties to deter the failure by accounting firms to comply with those minimum standards.
(footnotes omitted)
NAMS did not address this issue in its written or oral submissions.
(m) The need for specific and general deterrence.
The FWO’s general submissions on deterrence are set out above In relation to NAMS specifically, the FWO said in her submissions filed on 15 August 2023 at paragraph 57 that:
NAMS is a currently registered company and continues to operate its accounting business. Accordingly, there is some risk of similar contravening conduct by NAMS in the future, so specific deterrence is a relevant consideration when considering penalty in respect of NAMS.
(footnotes omitted)
NAMS did not address deterrence in its written or oral submissions.
The appropriate penalty for NAMS
There was loss or damage in that NAMS’ failure to comply with the notice to produce impacted on the FWO’s ability to fulfil its function of investigating workplace conduct.
There was no evidence that NAMS has previously been found to have breached workplace laws.
NAMS’ breach was deliberate, and senior management was involved in the breach.
NAMS co-operated with the FWO by making admissions and entering into a statement of agreed facts a few days before the liability hearing. This spared the FWO and NAMS the burdens of a contested liability hearing. However, as the admissions were made so late in the piece, a good deal of effort had already gone into trial preparation. It follows that NAMS ought not receive the maximum discount for admissions.
NAMS took no corrective action and did not show any genuine contrition.
NAMS is still in business, thus indicating that a significant measure of specific deterrence is required. NAMS is an accounting practice, and should have had the basic professional competence to comply with legal requirements of the FWO.
For NAMS, the maximum penalty is $63,000. I consider that NAMS’ offending warrants a penalty of 60% of the maximum, being $37,000. I accept the FW’s submission that a 10% reduction is warranted for admissions, giving a penalty of $34,020.
Step 5: the totality principle
As there was only one contravention by NAMS, there is no overlapping to consider in relation to totality. All in all, I consider that the figure of $34,020 is the appropriate penalty for NAMS.
MR NICOLAOU
Step 1: identifying the breaches
Mr Nicolaou was involved in NAMS’ breach of s.712(3) of the Act.
In addition, Mr Nicolaou was involved in the breaches of s.712(3) of the Act by each of:
(a)Chapel;
(b)Number 17;
(c)Hotel Boogie;
(d)Elwood Lounge;
(e)La La Land;
(f)Athina Windsor;
(g)MC Bar; and
(h)Blue Bar.
Step 2: single course of conduct
There was no dispute that Mr Nicolaou was involved in nine contraventions and did not dispute the FWO’s submission that none of them were part of a single course of conduct.
Step 3: grouped breaches
In its written submissions dated 15 August 2023, the FWO submitted in relation to Mr Nicolaou that:
41.The FWO submits that the separate legal status of each of NAMS and the Eight La La Entities means that it is not appropriate to group the separate contraventions in relation to each of them for the purposes of imposing a penalty on Mr Nicolaou. Relevant to the legal elements, section 712(3) of the FW Act gives the power to an inspector to require a “person” to produce a record or document. Each of the La La NTPs was issued separately to each of the eight separate La La Entities, and the NAMS NTP was issued separately from those.
42.The FWO submits that any remaining overlap in the contravening conduct is taken into account in the application of the totality principle, addressed at paragraph [44] below.
(footnotes omitted)
Mr Nicolaou did not dispute those submissions.
Step 4: the appropriate penalty for the breaches
(a) The nature and extent of the conduct which led to the breaches.
The FWO said in her submissions filed on 15 August 2023 that:
64.The La La NTPs each required the production of specified records and/or documents by 21 August 2019. The failure by NAMS to comply with this NTP included:
(a) failing to produce documents that were required to be produced under the La La NTPs by 21 August 2019;
(b) providing records or documents to the FWO that were required to be produced under the La La NTPs that had not previously been produced to the to the FWO after 21 August 2019; and
(c) failing to produce various records and documents prior to these being seized on 29 January 2020 from a computer at the NAMS office during an inspection conducted under section 709 of the FW Act.
65. The documents that were required to be produced under the NTPs issued to each of JD Chapel and Number 17 were produced to the FWO after 21 August 2019. Other documents that were required to be produced under the NTPs issued to each of Hotel Boogie, Elwood Lounge, La La Land, Athina Windsor, MC Bar and Blue Bar were not produced to the FWO at all, but were among the records seized on 29 January 2020 from a computer at the NAMS office during an inspection conducted under section 709 of the FW Act.
66. The NAMS NTP required the production of specified records and/or documents by 21 October 2019. The failure by NAMS to comply with this NTP included:
(a) failing to produce documents that were required to be produced under the NAMS NTP by 21 October 2019;
(b) providing records or documents to the FWO that were required to be produced under the NAMS NTP that had not previously been produced to the FWO after 21 October 2019; and
(c) failing to produce various records and documents prior to these being seized on 29 January 2020 from a computer at the NAMS office during an inspection conducted under s 709 of the FW Act.
…
68. Mr Nicolaou was in the role of advising the La La entities. As a principal accountant, the Court may infer that Mr Nicolaou is not a naïve small business owner, unaware of regulatory practises. Instead, the FWO submits that the Court may infer that Mr Nicolaou was a sophisticated business person, and should be held to higher standards of statutory compliance.
(footnotes omitted)
Mr Nicolaou did not dispute that description.
(b) The circumstances in which that conduct took place.
This topic is discussed above in relation to NAMS.
(c) The nature and extent of any loss or damage sustained as a result of the breaches.
The FWO said in her submissions dated 15 August 2023 at paragraph 69 that:
NAMS’ failure to comply with the NAMS NTP and Mr Nicolaou’s involvement in the failure to comply with the NAMS NTP and La La NTPs undermined the FWO’s ability to investigate contraventions of the FW Act, such as the record keeping contraventions in this matter, leading to a loss to the public for the extra resources required to establish those contraventions, including the site visit involving multiple FWO and Australian Taxation Office staff.
Otherwise, this topic is discussed above in relation to NAMS.
(d) Whether there had been similar previous conduct by the respondent.
There was no evidence that Mr Nicolaou had previously been found to have contravened any workplace laws.
(e) Whether the breaches were properly distinct or arose out of the one course of conduct.
This topic was discussed above.
(f) The size of the business enterprise involved.
This topic is not relevant, as Mr Nicolaou is an individual.
(g) Whether or not the breaches were deliberate.
The FWO said in her submissions filed on 15 August 2023 at paragraph 77 that:
FWI Rhodes and FWI Pace had extensive communications with Mr Nicolaou, explaining what records were required by the La La NTPs and the NAMS NTP. Mr Nicolaou had control of those records and chose not to provide them. Mr Nicolaou’s deliberate behaviour in preventing records being produced in response to the La La NTPs and the NAMS NTP is an aggravating penalty factor. (footnote omitted)
This topic is discussed above, in relation to NAMS. I am satisfied that Mr Nicolaou’s breaches were deliberate.
(h) Whether senior management was involved in the breaches.
Mr Nicolaou is a natural person, so this consideration has no application.
(i)(j)(k) Contrition, corrective action and co-operation with the authorities
This topic is discussed above in relation to NAMS.
(l) The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
This topic is discussed above in relation to NAMS.
(m) The need for specific and general deterrence.
The FWO’s general submissions on deterrence are set out above. In relation to Mr Nicolaou specifically, the FWO said in her submissions filed on 15 August 2023 at paragraph 57 that:
Mr Nicolaou is the director of NAMS, and the principal of NAMS’ accounting business. There is some risk of similar contravening conduct by Mr Nicolaou in the future and, accordingly, specific deterrence is a relevant consideration when considering penalty.
(footnote omitted)
Mr Nicolaou did not address deterrence in his written or oral submissions.
Appropriate penalty for Mr Nicolaou
There was loss or damage in that Mr Nicolaou’s involvement in the failures to comply with the notices to produce impacted on the FWO’s ability to fulfil its function of investigating workplace conduct.
There was no evidence that Mr Nicolaou has previously been found to have breached workplace laws.
Mr Nicolaou’s breach was deliberate.
Mr Nicolaou co-operated with the FWO by making admissions and entering into a statement of agreed facts a few days before the liability hearing. This spared the FWO and Mr Nicolaou the burdens of a contested liability hearing. However, as the admissions were made so late in the piece, a good deal of effort had already gone into trial preparation. It follows that Mr Nicolaou ought not receive the maximum discount for admissions.
Mr Nicolaou took no corrective action and did not show any genuine contrition.
Mr Nicolaou is still in business, thus indicating that a significant measure of specific deterrence is required. Mr Nicolaou is an accountant, and should have had the basic professional competence to comply with legal requirements of the FWO.
For Mr Nicolaou, the maximum penalty is $113,400 in total, or $12,600 for each of the nine contraventions.
I consider that Mr Nicolaou’s offending in relation to the Chapel and Number 17 notices to produce warrants a penalty of 25% of the maximum, being $3,150 per contravention. I accept the FW’s submission that a 10% reduction is warranted for admissions, giving a penalty of $2,835 per contravention. As there were two contraventions, the total penalty for these two breaches is $5,670.
I consider that Mr Nicolaou’s offending in relation to the other six La La entities’ notices to produce warrants a penalty of 50% of the maximum, being $6,300 per contravention. I accept the FW’s submission that a 10% reduction is warranted for admissions, giving a penalty of $5,670 per contravention. As there were six of these contraventions, the total penalty for these contraventions is $34,020.
I consider that Mr Nicolaou’s offending in relation to the NAMS notice to produce warrants a penalty of 50% of the maximum, being $6,300. I accept the FW’s submission that a 10% reduction is warranted for admissions, giving a penalty of $5,670.
Step 5: the totality principle
The FWO submitted in paragraph 44(d) of her submissions filed on 15 August 2023 in respect of Mr Nicolaou that:
… an appropriate penalty for his involvement in the NAMS NTP contravention and each of the Eight La La Entities’ NTP contraventions is:
(i) with respect to the JD Chapel and Number 17 NTPs, between 15 and 25% of the maximum, with a 10% discount for admissions but no further discount with respect to totality;
(ii) with respect to the NTPs for the Six Involved La La Entities, between and 50% of the maximum, with a 10% discount for admissions and a discount of 30% for totality, to take into account the overlap between the contraventions; and
(iii) with respect to the NAMS NTP, between 40 and 50% of the maximum with a 10% discount for admissions and no further discount for totality because there is no overlap of the NAMS NTP contravention with any other contraventions.
(footnotes omitted)
I accept that there should be no discount for totality in relation to the Chapel, Number 17 and NAMS notices to produce. However, I also accept that there should be a 30% reduction for totality in relation to the other La La entities notices to produce. That means that the figure of $34,020 needs to be reduced by 30%, which results in a figure of $23,814. To that needs to be added the figures of $5,670 and $5,670 giving a total penalty of $35,154.
There will be orders accordingly.
I certify that the preceding two hundred and sixty-two (262) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 7 February 2024
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