Fair Work Ombudsman v Jenni International Pty Ltd

[2019] FCCA 2971

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v JENNI INTERNATIONAL PTY LTD & ANOR [2019] FCCA 2971

Catchwords:
INDUSTRIAL LAW – Accessorial liability – whether the Second Respondent was knowingly concerned in the First Respondent’s contraventions – contraventions of the General Retail Industry Award – underpayment of non-Australian citizen employees.

Legislation:

Fair Work Act 2009 (Cth), ss 44, 45, 90(2), 535(1), 536(1), 545(1), 547(2), 550(1), 550(2)(c), 559

Fair Work Regulations 2009 (Cth), regs 3.32, 3.33, 3.34, 3.36, 3.37, 3.40
Federal Circuit Court Rules 2001 (Cth), r 13.03A(2)

Cases cited:

Australian Building and Construction Commissioner v Parker [2017] FCA 564
Fair Work Ombudsman v A to Z catering Solution Pty Ltd & Anor [2018] FCCA 2299
Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014[ FCA 1365
Fair Work Ombudsman v Group Property Services Pty Ltd [2016] FCA 1034
Fair Work Ombudsman v Hu (No. 2) [2018] FCA 1034
Fair Work Ombudsman v Lohr [2018] FCA 5
Fair Work Ombudsman v Safecorp Security Group Pty Ltd [2017] FCCA 388
Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456
Parker v Australian Building and Construction Commissioner [2019] FCAFC 56
Potter v Fair Work Ombudsman [2014] FCA 187

Applicant: FAIR WORK OMBUDSMAN

First Respondent: JENNI INTERNATIONAL PTY LTD (ACN 161 787 140)

Second Respondent: JORDAN SHAN

File Number: MLG 2715 of 2017

Judgment of: Judge McNab

Hearing date: 29 April 2019 and 3 May 2019

Date of Last Submission: 31 May 2019

Delivered at: Melbourne

Delivered on: 18 October 2019

REPRESENTATION

Counsel for the Applicant: Mr Tracey

Solicitors for the Applicant: Fair Work Ombudsman

No appearance by the First Respondent

The Second Respondent appearing in person

THE COURT DECLARES THAT:

1. The Second Respondent was involved, within the meaning of subsection 550(1) of the Fair Work Act 2009 (Cth) (FW Act), in all of the First Respondent's contraventions declared by the Court on 27 July 2018, namely contraventions of:

   (a)section 45 of the FW Act by:

   (i)failing to pay Mr Geonsang Park (Mr Park) the minimum rate of pay prescribed by clause 17 of the General Retail Industry Award 2010 (Retail Award);

   (ii)failing to pay Ms Narae Yang (Ms Yang) the minimum rate of pay prescribed by clause 12. 7 of the Retail Award;

   (iii)failing to pay Mr Park and Ms Yang (together, the Employees) the Saturday penalty rate prescribed by clause 29.4(b) of the Retail Award;

   (iv)failing to pay the Employees the Sunday penalty rate prescribed by clause 29.4(c) of the Retail Award;

   (v)failing to pay Mr Park the Evening Work penalty rate prescribed by clause 29.4(a) of the Retail Award;

   (vi)failing to pay Mr Park the public holiday penalty rate prescribed by clause 29.4(d) of the Retail Award;

   (vii)failing to pay Mr Park for overtime worked on a Monday to Saturday as prescribed by clause 29.2(a) of the Retail Award;

   (viii)failing to pay the Employees for overtime worked on a Sunday and Mr Park for overtime worked on a public holiday as prescribed by clause 29.2(c) of the Retail Award;

   (ix)failing to pay Ms Yang for overtime worked outside of her part-time hours as prescribed by clause 29.2(b) of the Retail Award;

   (x)failing to provide Mr Park with two consecutive days off per week as prescribed by clause 28.11 of the Retail Award;

   (xi)failing to provide Mr Park with three consecutive days off per four week period as prescribed by clause 28.13 of the Retail Award;

   (xii)failing to vary in writing Ms Yang's part-time hours as prescribed by clause 12.3 of the Retail Award;

   (b)section 44 of the FW Act by failing to pay the Employees their accrued annual leave on termination as required by section 90(2) of the FW Act;

   (c)section 535(1) of the FW Act by failing to make and keep employee records as prescribed by FW Regulations 3.32, 3.33, 3.34, 3.36, 3.37 and 3.40; and

   (d)section 536(1) of the FW Act, by failing to provide pay slips to the Employees within one working day of paying an amount to them in relation to the performance of work.

THE COURT ORDERS THAT:

1. Pursuant to section 545(1) of the FW Act that the Respondents, jointly and severally, pay compensation of $13,997.28 to the Applicant (being the total underpayment outstanding), with the Applicant to:

   (a)pay the following amounts within 21 days of receipt of the compensation to:

   (i)Mr Park $9,147.30 (or 65% of any amount paid by Jenni and Mr Shan if it is less than the full amount owing);

   (ii)Ms Yang $4,849.98 (or 35% of any amount paid by Jenni and Mr Shan if it is less  than the full amount owing);

   (b)in the event the Applicant cannot locate Mr Park or Ms Yang, pay the applicable amount to the Commonwealth within a further seven days pursuant to section 559 of the FW Act.

2. Pursuant to section 547(2) of the FW Act that within 21 days:

   (a)the Respondents, jointly and severally, pay interest to the Applicant on the amounts referred to in Order 2 at the Federal Court of Australia's pre-judgment interest rate

   (b)applying at the date of these orders (being $712.61in respect of Mr Park and $384.41 in respect of Ms Yang); and

   (c)the Applicant thereafter to pay the Interest to the Employees within 14 days of receipt or otherwise in accordance with Order 2(b) above.

3. The matter be listed to the Federal Circuit Court of Australia in Melbourne on 14 February 2020 at 10.00am for a further hearing to determine the penalties and other orders that should be imposed upon the Respondents.

4. The Applicant is to file and serve evidence and submissions on the issue of penalty by 4pm 10 January 2020.

5. The Respondents are to file and serve any evidence and submissions on the issue of penalty by 4pm 24 January 2020.

6. The Applicant is to file and serve any evidence or submissions in reply by 4pm 31 January 2020.

7. The parties have liberty to apply.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 2715 of 2017

FAIR WORK OMBUDSMAN

Applicant

And

JENNI INTERNATIONAL PTY LTD (ACN 161 787 140)

First Respondent

JORDAN SHAN

Second Respondent

REASONS FOR JUDGMENT

(As Corrected)

Introduction

1. This matter originated by an application filed by the Fair Work Ombudsman (‘FWO’) on 12 December 2017.

2. By that application, the FWO sought orders against the First Respondent (‘Jenni International’), being a corporation operating Dae Bark Mart. Dae Bark Mart was a grocery store selling Asian foods and liquor at 342 Flinders St, Melbourne.

3. The FWO alleged that Jenni International was in breach of the General Retail Industry Award 2010 (‘Retail Award’) and the Fair Work Act 2009 (Cth) (‘the Act’). The FWO relied on the evidence of two employees of Jenni International: Mr Geonsang Park and Ms Na Rae Yang (collectively, ‘the Employees’).

4. The FWO, in its statement of claim filed 12 December 2017, asserted that Jenni International was in contravention of:

   a)clause 17 of the Retail Award, by failing to pay Mr Park the minimum rate of pay prescribed;

   b)clause 12.7 of the Retail Award, by failing to pay Ms Yang the minimum rate of pay;

   c)clause 29.4(a) of the Retail Award, by failing to pay Mr Park the Evening Work penalty rate;

   d)clause 29.4(b) of the Retail Award, by failing to pay the Employees the Saturday penalty rate;

   e)clause 29.4(c) of the Retail Award, by failing to pay the Employees the Sunday penalty rate;

   f)clause 29.4(d) of the Retail Award, by failing to pay Mr Park the public holiday penalty rate;

   g)clause 29.2(a) of the Retail Award, by failing to pay Mr Park for overtime worked on a Monday to Saturday;

   h)clause 29.2(b) of the Retail Award, by failing to pay Ms Yang for overtime worked outside of her part-time hours;

   i)clause 29.2(c) of the Retail Award, by failing to pay the Employees for overtime worked on a Sunday and Mr Park for overtime worked on a public holiday;

   j)clause 28.11 of the Retail Award, by failing to provide Mr Park with two consecutive days off per week;

   k)clause 28.13 of the Retail Award, by failing to provide Mr Park with three consecutive days off per four week period;

   l)clause 12.2 of the Retail Award, by failing to agree in writing Ms Yang’s part-time hours upon commencement of her employment;

   m)clause 12.3 of the Retail Award, by failing to vary in writing Ms Yang’s part-time hours;

   n)section 44 of the Act by failing to pay the Employees their accrued annual leave on termination as required by section 90(2) of the Act;

   o)section 535(1) of the Act by failing to make and keep employee records as prescribed by regulations 3.32, 3.33, 3.34, 3.36, 3.37 and 3.40 of the Fair Work Regulations 2009 (Cth) (‘the Regulations’); and 

   p)section 536(1) of the Act, by failing to provide pay slips to the Employees within one working day of paying an amount to them in relation to the performance of work.

5. The FWO also sought orders against the Second Respondent (‘Mr Shan’). The FWO alleged that Mr Shan was ‘knowingly concerned in or party to’ the contraventions alleged against Jenni International (other than [4](m)) pursuant to s 550(2)(c) of the Act.

6. Mr Shan was a director of Jenni International at the relevant time of the FWO’s investigation. Mr Shan has also been involved in other ventures:

   a)Mr Shan advised Mr Rollins that he had a real estate business;

   b)Mr Shan was the sole director and secretary of Jenny Global Pty Ltd (from 10 March 2017 to 21 December 2017);

   c)Mr Shan was the sole director and secretary of Jade Fast Pty Ltd (from 3 August 2016 to 21 December 2017 and was reappointed joint director and secretary on 2 March 2018); and

   d)Mr Shan was the sole director and secretary of Selina’s Fund Pty Ltd (from 3 August 2016 to 2 February 2018).

7. Mr Shan, further, worked as an economics professor at Victoria University. At trial, Mr Shan put it that his specialisation was in macro-economics and international finance. The FWO noted that he has been published in the following articles:

   a)Jordan Shan, Alan Morris and Fiona Sun ‘Immigration and Unemployment: New Evidence from Australia and New Zealand’ (1999) 13(2) International Review of Applied Economics, 133;

   b)Gary Gang Tian and Jordan Shan ‘Do Migrants Rob Jobs?: New evidence from Australia’ (1999) 39(2) Australian Economic History Review, 133; and

   c)Jordan Shan and Jianhong Qi ‘Independent Directorship and Corporate Performance: Some Further Testing from the China Case’ (2007) 1(4) Modern Applied Science, 22.

Procedural history

1. This matter originated by an application filed by the FWO on 12 December 2017.

2. The matter was listed for directions on 13 February 2018. On that day, there was no appearance by or on behalf of Jenni International or Mr Shan. Orders were made for Jenni International to file and serve a notice of address and to file and serve a response prior to the next return date on 20 March 2018.

3. At the return of the matter on 20 March 2018, Mr Shan represented himself and claimed that he appeared on the behalf of Jenni International. Further orders were made reiterating that Jenni International and Mr Shan file and serve a notice of address on this day, and their response by 14 May 2018.

4. Jenni International did not file or serve a notice of address or a response as ordered.

5. Mr Shan filed his notice of address for service on 21 March 2018 and his response on 15 May 2018. By this response, he opposed the making of orders on the basis of:

   1. prejudice, unfair

   2. defamation.

   3. misuse of public relations.

   4. mislead the public and the court.

6. Mr Shan, under the heading ‘Further orders sought by the respondent/s’, sought orders that:

   1. struck out the application by Fairwork

   2. apology from Fairwork

   3. Financial compensation

7. The orders of 20 March 2018 listed the matter for hearing on 27 July 2018.

8. On 13 July 2018, the FWO filed an Application in a Case. By this application, the FWO sought default judgment against Jenni International and Mr Shan due to their purported failures to comply with several of the orders of 13 February 2018 and 20 March 2018, Mr Shan’s failure to comply with the Federal Circuit Court Rules 2001 (Cth) (‘the Rules’) and both Respondent’s failure to defend the proceedings with due diligence.

9. On 25 July 2018, Mr Shan filed a further affidavit with exhibits in support of his application to have the matter struck out.

10. On 27 July 2018 when the matter returned to hearing, I entered judgment against Jenni International pursuant to rule 13.03A(2) of the Rules. This was on the basis that the evidence supported a finding that the company had not defended the proceeding with due diligence and had failed to comply with orders. Judgment was given ex-tempore and Mr Shan was in Court when those reasons were delivered. In those reasons I noted that whilst Mr Shan sought to appear on behalf of Jenni International, he was not currently a director and only had a 10% shareholding in the company. Accordingly, he was not granted leave to appear on behalf of Jenni International. Summary judgment was not entered against Mr Shan given he had filed material and participated in the process, albeit in a limited fashion.

11. The effect of summary judgment having been entered against Jenni International is that Jenni International was found to have been in breach of the contraventions listed in [4], above.

12. As a consequence of these findings, the issue of Mr Shan’s liability was adjourned to 31 August 2018, with Mr Shan to file and serve an amended response and defence by 24 August 2018.

13. On 31 August 2018, further machinery orders were made; and the matter was listed for a one day hearing on 29 April 2019.

14. The matter was heard on 29 April 2019 and adjourned part-heard until 3 May 2019. On 3 May 2019, orders were made for Mr Shan to file closing submissions by 4pm 17 May 2019 and for the FWO to file any response by 4pm 31 May 2019.

15. Upon receipt of those closing submissions, the matter was reserved pending delivery of judgment.

Orders sought by the FWO

1. The FWO, by [108] of their ‘Outline of Submissions on Liability’, seek a finding that Mr Shan was involved in all of the contraventions listed in [4] other than [4](m).

2. If such a finding by this Court is made, the FWO seeks, by their final orders handed up in Court on 29 April 2019, that Jenni International and Mr Shan be jointly and severally liable for $13,997.28 to be paid to the FWO (and then be disbursed to Mr Park and Ms Yang for their underpayments). The FWO seeks that interest be applied to this sum.

3. The FWO also seeks orders that the matter be listed to determine the penalties and any other orders that should be imposed on the Respondents.

The hearing

1. The matter was heard on 29 April 2019 and 3 May 2019. The proceeding was conducted with Mr Shan appearing by telephone. He advised the Court that he was in Malaysia and had a medical condition and other commitments that prevented him from appearing. He appeared unrepresented. All reasonable efforts were made by the Court and the Applicant to accommodate Mr Shan.

Evidence relied upon by the Applicant

1. The FWO relies on the following material:

   a)the Application filed on 12 December 2017;

   b)the Statement of Claim filed on 12 December 2017;

   c)an affidavit of Clint Adam Rollins affirmed on 13 November 2018;

   d)an affidavit of Narae Yang sworn on 9 November 2018; and

   e)an affidavit of Geonsang Park affirmed on 12 June 2018.

2. The FWO summarised the evidence on which it relies at [50] to [55]:

   50. It is not controversial that Mr Shan knew the Employees and their respective duties as “stock staff” and as a cashier at the Business. Mr Shan frequently sent the staff, including the Employees, group text messages throughout their employment providing instructions, rosters, rewards and warnings.28 For example, in group text messages sent to Ms Yang, Mr Shan recognises duties performed by Mr Park (who was also known as “Park”) and Ms Yang:

   (a) “Guys tonight we had so many deliveries and Namgon, John and Park have done a good job good boys!”;

   (b) “last night John, Park and Kyle have done a good job because floor is clean and desk is clean and stock were filled”;

   (c) “Douglas and I and out [sic] weekend cashier girls all were impressed”; and

   (d) “All cashier people please always check the till money first and then clean desk and fridges…Narae does really well for all these.”

   51. It is also clear from the evidence that Mr Shan managed the day-to-day operation of the Business. The evidence before the Court is that:

   (a) Mr Shan took over the Business from a Korean owner in around May 2016;

   (b) until the end of August 2016, Thomas was the manager at the Business. Mr Shan had asked Thomas to set up a package getting all the employees’ details, TFN forms and IDs;

   (c) Mr Shan managed the Business from approximately 26 August 2016 and for the remaining duration of each Employees’ employment. In a text message from Mr Shan to Ms Yang dated 25 August 2016, Mr Shan states “Hello this is Jordan, your boss at DaeBart mart”. On 26 August 2016, Mr Shan sent Ms Yang a text message stating “Thomas has gone on a holiday overseas and so from now on, you need to speak to me for our shop business. I will text you what I would want you to do because it is not easy to have a staff meeting”;

   (d) from September 2016 a friend of Mr Shan’s, named Douglas, assisted in managing the Business however he was not in charge. In a text message from Mr Shan to Ms Yang dated 4 September 2016, Mr Shan states “From Monday tomorrow, my Chinese friend, Douglas will help is with ordering new products, pricing and relocate our product shelf – I want to make some changes and so we can increase sales. Please support Douglas and listen to him for some changes. He will be in our store regularly from tomorrow. Thank you! Boss Jordan”;

   (e) Mr Shan retained overall management of the Business and direction of the staff, as evidenced by the group text messages sent to Ms Yang and the other staff. Ms Yang’s evidence is that Douglas did not give her instructions and the Employees continued to report to Mr Shan.

   52. At all relevant times, Mr Shan knew the rates paid to the Employees and was involved in setting their rates of pay:

   (a) Mr Shan advised FWI Rollins during the investigation that -

   (i) the previous owner had provided a note to Thomas that said they paid employees $11 per hour and that he trusted the previous owner; and

   (ii) he had discussed with Thomas increasing the employees’ pay by $1 per hour;

   (b) Mr Shan increased Mr Park’s pay in November 2016 from $12 to $12.50 per hour; and

   (c) Mr Shan increased Ms Yang’s pay from $10 to $11 per hour towards the end of her employment.

   53. Mr Shan was involved in processing the Employees’ pay:

   (a) after Thomas left the Business, Mr Shan asked Ms Yang for her bank details, which she texted to him on 27 August 2016. Ms Yang was subsequently paid by bank transfer;

   (b) Ms Yang’s bank statements show wage deposits from “Jordan Dae Bark Mart” and “Jenni Intern Jordan daebark”;

   (c) Mr Park’s bank statements show wage deposits from “Dae Bark Mart Thomas”, “Jordan daebark mar Jenn Intern” and “Dae Bark Mart Jordan”;

   (d) in text messages to staff and Ms Yang, Mr Shan states the occasions when he will pay individuals a “bonus”. See for example the text message dated 14 September 2016, where Mr Shan states “Recently everyone works hard and I have paid you small bonus for this week’s pay to your bank” and dated 21 November 2016, where Mr Shan states “Today I will calculate your time card and pay you. And I will put $50 extra ton [sic] thank you”.

   54. Mr Shan knew the hours worked by the Employees and was involved in setting the Employees’ rosters. Mr Shan also knew of the variation to Ms Yang’s hours in November 2016. Evidence supporting this includes:

   (a) as set out at paragraph 53(d), Mr Shan sent a text message to Ms Yang stating “I will calculate your time card…”;

   (b) Ms Yang’s evidence that:

   (i) for most of her employment, she worked 9.30am to 4.00pm on Saturday and Sunday, as was posted in the advertisement for the job;

   (ii) in late October or early November, Mr Shan showed her the times he would like her to work on a timetable and asked if she could work those hours, she said she could;

   (iii) she was not provided anything in writing confirming the hours she was required to work upon commencement or when her roster permanently changed in November 2016;

   (iv) Mr Shan would visit the Business once or twice each weekend that she worked. Mr Shan mostly stayed in his office, sometimes would give her instructions, and would normally stay at the Business for a few hours;

   (v) on occasions Mr Shan asked her to stay back and work later than her rostered hours; and

   (vi) Mr Shan had an excel spreadsheet of the hours worked by staff on his computer in the office.

   (c) Mr Park’s evidence that:

   (i) he usually worked six days a week from 9.30am to 4.30pm on Monday to Wednesday and 4.30pm to midnight on Thursday to Saturday, as was posted in the advertisement for the job;

   (ii) he worked on the AFL Grand Final and Melbourne Cup public holidays on 30 September 2016 and 1 November 2016;

   (iii) Mr Shan was at the Business most of the days he worked, usually in the afternoon;

   (iv) when there was work required to be done outside of his normal hours he called Mr Shan and asked permission to work this time. Also sometimes Mr Shan would ask him to work more hours; and

   (v) in late October or early November, Mr Shan made a roster and asked Mr Park if it was ok if he worked on Sunday too, he said that it was;

   (d) on 9 September 2016, Mr Shan sent a group text message to Ms Yang stating “I’m looking for girls who do cashier job for us because it is good for the shop. I will try to keep your hours the same as before and I will talk to you next week”;

   (e) on 30 October 2016, Mr Shan sent a group text message to Ms Yang with a photo of a new roster;

   (f) on 4 November 2016, Mr Shan sent a message to Ms Yang stating “can you work 6 or 7 days?”;

   (g) the Employees recorded the times they worked on a Chinese time sheet by using an analogue time machine. The Employees stamped their time sheet when they started their shift using the machine and stamped their time sheet when they finished working; and

   (h) the completed time sheets were kept in Mr Shan’s office. In a text message to Ms Yang, Mr Shan asks “Can you find time cards for Mina and Emma? And put them on my desk in the office?”

   55. The Employees’ original roster was set out in their respective job advertisements. While there is no direct evidence of Mr Shan recruiting the Employees, the Applicant submits the Court should infer that Mr Shan gave instructions for the Employees to be hired and consequently knew the hours they were engaged to work. This is supported by the fact that:

   (a) Mr Shan instructed both Ms Yang and Mr Park to post advertisements and recruit staff during their employment; and

   (b) on 1 September 2016, Mr Shan sent a group text message to Ms Yang stating “Anyone who can suggest a girl who can work for me as the cashiers for Mondays to Fridays?”

Evidence relied upon by the Respondent

1. Mr Shan gave limited evidence at trial or by affidavit. By an affidavit filed 1 February 2019 and titled ‘My responses /affidavit’, Mr Shan stated:

   1. Anyone who accuses another party and makes a legal proceeding against another party must give evidences to support their allegat'1ons. In this case for the matter marked above, it is FWO who should provide legal and direct evidences and more importantly the admissible evidences to support their claims.

   2. And in this case the respondent opposes and dismisses the evidences supplied from FWO in particular, the time cards FWO provided.

   3. The evidences are simply inadmissible because the time cards had been either manually altered, or were filled in blank time slots by the worker, to suit the claims of the applicant. Please refer to Exhibits#4 and 5.

   4. The evidences are more inadmissible also because the time cards has no signatures of the duty manager - not consistent with the business routine practice- and hence are deemed to be fake ones. The correct and genuine timecards as samples are in Exhibits 1 and 2.

   5. So the evidences (time cards) are from the workers themselves, they (evidences) are not the ones used by the business hence one question this - where did the cards come from?

   6. In any case, despite a huge amount of documents that FWO has provided, nothing and nowhere one can see - in these documents- direct evidences how much was paid and what the pay rate the employees received. There is no direct and admissible evidences to show that the respondent has involved in the pay packages for the employees. Please refer to Exhibits 3 and 6 where it shows the respondent has nothing to do with the pay rates.

   7. The time cards produced by FWO cannot be not approved and acknowledged by business management. All calculations from FWO were "analyzed", or calculated from their own notes -which cannot proof true facts- in fact from a speculation and or from fake and inadmiss"1ble sources.

   8. Conclusion: the so-called "underpayment" allegation therefore cannot be established because it has no material, legal and admissible, more importantly genuine but not fake ones to support the claims, hence the application should be dismissed.

2. A significant part of Mr Shan’s evidence in chief on 3 May 2019 involved a complaint about a media release prepared by the FWO and published prior to the proceedings being issued. That media release is not relevant to the determination of whether Mr Shan was knowingly involved in Jenni International’s contraventions.

3. Under cross examination, Mr Shan stated that he could not remember sending the text messages supplied by Ms Yang or that he told Mr Rollins that he knew the role of Ms Yang or Mr Park. He similarly denied remembering being sent the Restaurant Industry Award 2010 in relation to a previous FWO investigation into a separate company Mr Shan was involved in.

4. When questioned on his knowledge about the existence of industrial awards, Mr Shan accepted that there was a minimum wage in Australia. Upon being asked how he knew this, Mr Shan stated that introductory economics textbooks mention minimum wages and how minimum wages create unemployment for society.

5. Mr Shan claimed that the reason his name is on the payment descriptions is because he was instructed by the manager that the Employees were owed money. He described himself as a bookkeeper in this respect.

6. Mr Shan relies on Mr XueDao Xiao who, on behalf of Mr Shan, filed an affidavit on 18 April 2019. Mr Xiao deposed in this affidavit that he works as a part time consultant and as assistant manager for Dae Bark Mart. Mr Xiao deposed that as assistant manager, he rarely saw Mr Shan at the shop and that Mr Shan did not manage the shop nor did he recruit or negotiate with the employees.

7. Mr Xiao also gave oral evidence on 3 May 2019. He handed up a statement which became Exhibit R1. This statement, upon which he gave oral evidence, stated that Mr Shan never managed the business and did not advertise or interview prospective employees. Mr Xiao stated that Mr Shan messaged the Employees due the managers having poor English skills and that his text messages were ‘more about rules and encouragements’.[1] Mr Xiao further stated ‘I received [the text messages] too and I never received a text from him which was about payment rates’.[2]

   [1] Exhibit R1, [5.3].

   [2] Exhibit R1, [5.3].

8. Mr Xiao, under cross examination, stated that he had never seen the global messages to Ms Yang and he was referring to different messages than the ones Ms Yang received.

Submissions

Submissions of the Applicant in relation to the liability of Mr Shan

1. The FWO submits that, per Fair Work Ombudsman v Lohr [2018] FCA 5 (Bromwich J) (‘Lohr’), the Court can rely on the declarations made against the company as proof that a contravention has occurred. The question is, therefore, whether Mr Shan was involved in each of the contraventions listed in [4] (other than [4](m)).

2. In oral submission, the FWO stated that two elements must be shown:

   a)first, that Mr Shan had knowledge of the essential matters; and

   b)second, that Mr Shan was an intentional participant in those contraventions.

3. The FWO contends that it is not necessary to show that Mr Shan had specific knowledge of the Retail Award or its individual provisions. The Court was referred to the Fair Work Ombudsman v Group Property Services Pty Ltd [2016] FCA 1034 (‘Grouped Property Services’),[3] Australian Building and Construction Commissioner v Parker [2017] FCA 564,[4] Fair Work Ombudsman v Hu (No. 2) [2018] FCA 1034,[5] and Fair Work Ombudsman v A to Z catering Solution Pty Ltd & Anor [2018] FCCA 2299.[6]

   [3] Katzmann J.

   [4] Flick J.

   [5]  Rangiah J.

   [6] Manousaridis J.

4. The FWO particularly relied on Parker v Australian Building and Construction Commissioner [2019] FCAFC 56 at [248] where it is said:

   Given that part of the basis for the finding of liability on the part of the CFMEU under s 50 arose from the conduct of Messrs Parker, Kera, Michael Greenfield, Collier, Darren Greenfield, Sloane, Taylor and Auimatagi in not complying with the Joint Development Agreement, that finding must inevitably lead to a finding of accessorial liability on the part of each of these eight individuals for precisely the same conduct. Declarations to that effect should be made.

5. The FWO makes this submission noting that there is divergent authority which requires a higher level of knowledge. If the Court decides that specific knowledge is necessary, the FWO argues that Mr Shan can be shown to have known of the existence of the Retail Award by virtue of his wilful blindness. That is, Mr Shan deliberately refrained from asking questions or making enquiries.

Submissions of the Respondent

1. Mr Shan made submissions orally and by his submissions of 19 March 2019 and 11 April 2019 and his closing submissions filed 14 May 2019 (‘Mr Shan’s closing submissions’).

2. Mr Shan asserts that he was not the manager or had a managerial role at Dae Bark Mart. He states that the witnesses gave evidence that he did not hire or negotiate with Mr Park and Ms Yang about wages, that he did not make supply orders or provide daily supervision and that he did not do ‘statistical works on the time sheets’.[7] Mr Shan submits that not only do Mr Park and Ms Yang note there was ‘another manager’, but that Mr Park and Ms Yang admit that Mr Shan was a “boss” rather than a “manager”.[8]

   [7] Respondent’s closing submissions, filed 14 May 2019, 5 [8.2].

   [8] Respondent’s closing submissions, filed 14 May 2019, 5 [8.4]-[8.5].

3. Mr Shan impugns the FWO’s statement that ‘the question is more about whether Mr Shan has involved any contravention with underpaying his workers, not about whether he was a manager’.[9] Mr Shan says this is an ‘outrageous and hollow accusation’.[10]

   [9] Respondent’s closing submissions, filed 14 May 2019, 5-6 [9].

   [10] Respondent’s closing submissions, filed 14 May 2019, 6 [9.1].

4. Mr Shan submits that the time sheets of Mr Park and Ms Yang are inadmissible. He asserts this because the time sheets are not signed, which he claims is contrary to the business routine and practice. Mr Shan claims that because the workers took screenshots of the payslips in an office which they were not allowed in, the evidence is inadmissible as it is stolen.

5. Mr Shan also says that the payslips have been altered and that the FWO has admitted this.

6. Mr Shan also appears to argue that the payslips are not accurate as they do not reflect cash payments made to Mr Park and Ms Yang. He quotes Mr Park’s statement that ‘sometimes [Mr Shan] handed over me an envelope with cash or sometimes via bank transfer’ in support of this argument.[11] He further states that despite calling these cash payments bonuses in his text messages, they were by virtue of being paid ‘almost’ weekly, wages.[12]

   [11] Respondent’s closing submissions, filed 14 May 2019, 7 [10.11].

   [12] Respondent’s Response, filed 11 April 2019, [5].

7. Mr Shan asserts that the evidence led by the FWO cannot be relied on due to the arguments which I have summarised above.

8. Mr Shan appears to be asserting that the Court should give weight to the evidence of Mr Xiao. Mr Shan at [13] of his closing submissions militates against the FWO submissions that little weight should be given to Mr Xiao’s evidence.

9. Mr Shan denies underpaying workers. He also claims to have been unaware of Australia’s award system. At trial Mr Shan maintained that his specialisation as a professor of economics was not in industrial law or Australia’s award system and thus he did not know of it. He stated that he specialised in international finance and in the area of exchange rate – areas which, Mr Shan says, have nothing to do with Australia’s industrial award system.

10. In response to the FWO’s Outline of Submissions, Mr Shan states that the structure of Dae Bark Mart is that the manager is the ‘officer in effective control who has his or her full power for hiring workers and decide their wages’.[13]

    [13] Respondent’s closing submissions, filed 14 May 2019, 9 [1.7].

11. Mr Shan also argues that Lohr and Fair Work Ombudsman v Safecorp Security Group Pty Ltd [2017] FCCA 388 (‘Safecorp’) are factually different and should not be relied upon in this matter. Mr Shan claims that Jenni International was not afforded procedural fairness, so the ability to rely on the declarations in respect of Jenni International cannot be supported by Lohr or Safecorp.

12. With respect to being accessorily liable, Mr Shan cavils with the FWO’s statement that it is unnecessary to show that Mr Shan had knowledge of the Award or its items. Mr Shan makes further arguments with respect to text messages he sent to Mr Park and Ms Yang. The first text message stated ‘please leave your sheets on my desk’. Mr Shan does not remember sending this message and cannot find it on his phone. Even if he did remember sending the message, he says it is nothing other than proof of him rule setting on the prompting of the manager. He claims “my desk” was a vague phrase but clearly ‘it is NOT my desk but for the manager’.[14] He further claims ‘guys, good work tonight’ and ‘clean the fridge’ were messages he passed on from the manager.[15]

    [14] Respondent’s closing submissions, filed 14 May 2019, 11 [13.6].

    [15] Respondent’s closing submissions, filed 14 May 2019, 11 [13.7].

13. Mr Shan argues against the claim that he was wilfully blind, saying at page 11 of his closing submissions (at [8] and [11]):

    It is so ironic and silly for FWO to accuse me for the contravention through two areas - my investments in few other businesses and my academic publications in the unemployment issues.

    It is even more shocking and misleading that I am blamed for knowing the Award from my publications, for they need to read my papers carefully, because the papers were dealing with aggregate and macro-economic data and NO WHERE I had mentioned about the Award details and they are not my research areas at all!

Consideration

1. The Court proceeds on the basis that the Court can rely on the declarations made against Jenni International as proof that those contraventions had occurred: Lohr at [22].

2. Due to summary judgment having been given against Jenni International, the issue at trial was whether Mr Shan ‘has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention’, pursuant to s 550(2)(c) of the Act.

3. The matter was, therefore, conducted to determine whether Mr Shan was knowingly concerned in Jenni International’s contraventions.

Principles of law

1. The FWO says that Mr Shan was involved pursuant to s 550(2)(c):

   (2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:

   (a) […]

   (b) […]

   (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

   (d) […].

2. As mentioned earlier, the FWO stated that two elements must be shown:

   a)first, that Mr Shan had knowledge of the essential matters; and

   b)second, that Mr Shan was an intentional participant in those contraventions.

3. The FWO outlined the authorities on the necessary level of knowledge to satisfy s 550(2)(c) at [20] to [34] of their Outline of submissions on Liability, filed 8 February 2019.

4. I accept the submissions of the FWO that the standard of knowledge contained in Fair Work Ombudsman v Group Property Services Pty Ltd [2016] FCA 1034, Australian Building and Construction Commissioner v Parker [2017] FCA 564 and Fair Work Ombudsman v Hu (No. 2) [2018] FCA 1034 and Fair Work Ombudsman v A to Z catering Solution Pty Ltd & Anor [2018] FCCA 2299 is appropriate.

5. As stated in Group Property Services at [1019]:

   Where the contravention is a failure to pay award rates, an accessory must know what rates are being paid but need not know that the rates which were paid were below the rates prescribed by the applicable award. As White J acknowledged in [Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456] at [229], “[a]n accessory does not have to appreciate that the conduct involved is unlawful”.

Was Mr Shan knowingly involved?

1. It is apparent that Mr Shan has knowledge of the rates paid to the Employees. Mr Shan requested Ms Yang’s bank details on 27 August 2016 after which she received her wage payments, paid electronically, and accompanied by descriptions of “Jordan Dae Bark Mart” and “Jenni Intern Jordan daebark”. Mr Park’s bank statements showed similar messages, and Mr Park gave evidence – which I accept – that he discussed a pay raise with Mr Shan. Mr Shan also told Inspector Rollins that when he took over the business he was left a note that the Employees were paid $11 per hour and that he had discussed increasing their pay by $1 per hour.

2. Further, the text messages supplied by Ms Yang show that Mr Shan was heavily involved in the business: he texted Ms Yang to say that she would receive a ‘small bonus’ for working hard.

3. There is significant text-message based evidence of Mr Shan’s knowledge and involvement of other aspects of the business. These text messages from Mr Shan, some of which are outlined in the FWO’s summary, recognise the duties of Mr Park and Ms Yang. Mr Park gave cogent and believable evidence that Mr Shan instructed Mr Park to work particular hours (sometimes on public holidays or on Sundays), and occasionally Mr Shan asked Mr Park to stay back and work longer hours. Ms Yang provided similar messages from Mr Shan and gave oral evidence consistent with these messages and Mr Park’s evidence.

4. I do not accept Mr Shan’s or Mr Xiao’s claims that Mr Shan was merely passing on these messages. These messages were not merely ‘about rules and encouragements’ as Mr Xiao asserts. This is clear from when reading all the messages, particularly Mr Shan’s message seeking to hire a new staff member. Nor are these messages consistent with his payment to the Employees (in cash and by electronic transfer) or the evidence given by Ms Yang, Mr Park or Inspector Rollins by affidavit or orally. I further note that Mr Xiao had not seen the impugned messages, and that his evidence that Mr Shan was merely passing on messages related to other messages not before the Court. I lastly note that Mr Shan repeatedly stated during cross examination that he could not remember sending these texts as they occurred some period ago.

5. The evidence summarised by the FWO at [50] to [55] of the Outline of submissions on Liability, filed 8 February 2019 is largely un-contradicted by Mr Shan. As noted earlier, Mr Shan made much of a FWO press release and gave this issue significant focus of his submissions on 3 May 2019. As stated to Mr Shan during the trial, this matter was not relevant to whether he was knowingly involved in Jenni International’s contraventions. In a similar vein, Mr Shan complained that the time cards provided by Mr Park and Ms Yang are inadmissible. While I do not accept this submission, I note that such finding is immaterial here as that evidence goes to whether there has been a contravention by Jenni International. Jenni International had the opportunity to provide records of the hours that the Employees worked but did not do so.

6. Mr Shan did challenge the FWO’s evidence when he claimed that his role was more akin to a “boss” than a “manager”. Mr Shan claimed that he was separated from active participation in the business by managerial staff. This argument was an extension of his claim that he was only sending the text message to staff on the advice of others. As noted above, the messages cannot be accurately characterised this way and his claim more generally is contradicted by the evidence of Mr Park, Ms Yang and Inspector Rollins.

7. Mr Shan further complains that the FWO have not calculated the bonuses and “meal money” paid to the staff as offsetting the underpayment. I accept the FWO’s submissions this claim should be rejected. His submissions of 19 March 2019 on this issue appears contrary to his claims of non-involvement:

   4.1 […] [The Employees] were clearly told at the start [of their employment] that the “meal money” is part of their pay and the industry Award has not excluded meal money as the part of the pay as it is not a fridge [sic] benefit for a grocery.

   4.2 cash payments are also part of the pay as they were told at the start. […]

   4.3 furthermore, they only admitted few “extra pays” but in fact they regularly received cash payments as part of wages they received. In fact, they requested cash payments as part of their wages for their own benefits. Exhibit 5 provides the notes of our cash payments to the staff.

   5.1 They also requested some pay in cash because “I need cash to pay my friends and clear bills”

   (emphasis added)

8. It is difficult to reconcile the submission that the employees of Jenni International were told that “meal money” was not covered under the award where Mr Shan had separately told the Court he did not know about the award system in Australia. Irrespective of that comment, Mr Shan’s complaint only serves to highlight the evidence of Mr Park and Ms Yang that Mr Shan determined their bonuses, texted them about their performance and why they deserved the bonus and then paid that bonus to them.

9. On the basis of the evidence before me, I accept that Mr Shan had knowledge of the essential matters making up Jenni International’s contraventions of the Retail Award as outlined in [4] (other than [4](m)). I also find to the requisite standard that by his actions he was an intentional participant in these contraventions.

10. While I do not need to make a finding on whether Mr Shan was truly ignorant of Australia’s industrial award system, I do not accept that a business owner who has previously been investigated by the FWO (and was supplied a copy of the Restaurant Award in relation to that investigation) and was previously a professor of economics in Australia was unaware of Australia’s industrial award system and the regulation of wages by industrial awards.

Conclusion

1. The evidence establishes that Mr Shan knew of the essential facts making up Jenni International’s contraventions and was involved in those contraventions. The email communications from Mr Shan to employees indicate a level of involvement in the business such that he knew these things.

1. The Court will make Orders sought by the FWO, and the matter will return 14 February 2020 at 10am to determine the penalties imposed upon the First and Second Respondents.

I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Judge McNab

Associate:

Date: 18 October 2019

Corrections

Order 1(a)(xii) which read as follows be removed:

(xii) failing to agree in writing Ms Yang's part-time hours upon commencement of her employment as prescribed by clause 12.2 of the Retail Award;