Fair Work Ombudsman v Jorgensen (No.3)
[2018] FCCA 1235
•10 May 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v JORGENSEN (No.3) | [2018] FCCA 1235 |
| Catchwords: INDUSTRIAL LAW – Sentencing – Contempt of Court – Figurative purging of contempt – mitigating factors – actual imprisonment imposed – Costs – discretion exercised not to award costs. |
| Legislation: Fair Work Act 2009 (Cth), s.570 |
| Cases cited: AGL Energy Limited v Hardy (No. 3) [2017] FCA 952, |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | LEIGH ALAN JORGENSEN |
| File Number: | BRG 1032 of 2017 |
| Judgment of: | Judge Vasta |
| Hearing date: | 10 May 2018 |
| Date of Last Submission: | 10 May 2018 |
| Delivered at: | Brisbane |
| Delivered on: | 10 May 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms E.S. Wilson QC Ms Hartigan |
| Solicitors for the Applicant: | Ashurst Australia |
| Counsel for the Respondent: | Mr S.C. Holt QC Ms Gover |
| Solicitors for the Respondent: | Lillas & Loel Lawyers |
ORDERS
AND UPON THE COURT FINDING that the Respondent was found in contempt of Orders made by His Honour Judge Jarrett on 3 May 2018
THE COURT ORDERS:
That the Respondent, LEIGH ALAN JORGENSEN be sentenced to a period of imprisonment in the Lotus Glen Correctional Centre for a period of twelve (12) months, to be served immediately and upon the balance of $84,956.75 being paid to the Fair Work Ombudsman, with such monies to then be remitted to the relevant employees with in a further 28 days from the date of these Orders, the Respondent be released from prison on 20 May 2018 with the balance of his sentence to be wholly suspended.
That there be no order as to costs.
That the Oral Application for bail pending an appeal be dismissed.
That the Oral Application for a stay of the Order for twenty-four (24) hours be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 1032 of 2017
| FAIR WORK OMBUDSMAN |
Applicant
And
| LEIGH ALAN JORGENSEN |
Respondent
REASONS FOR JUDGMENT
(As Corrected)
(Ex tempore)
Leigh Alan Jorgensen, you have been convicted of nine counts of contempt of an order of Judge Jarrett that was made on 24 July 2015 and extended on 30 July 2015.
The facts of the matter, as I found them, are these:
a)that you were conducting a business called Trek North Tours which was operating in Cairns. You had a number of employees.
b)Complaints or other matters came to the attention of the Fair Work Ombudsman.
c)The Fair Work Ombudsman made investigations and came to certain conclusions. In doing so, the Fair Work Ombudsman both asked you to give them certain documents and also issued you with compliance notices.
d)Those compliance notices were, in effect, an order for you to rectify the funds that the Fair Work Ombudsman identified as having been underpaid to the employees.
e)You did not comply with the compliance notice. You did not comply with the notice to produce documents.
This meant that the Fair Work Ombudsman then launched proceedings in this Court. The matter came before Judge Jarrett and His Honour made numbers of directions, had mentions of the matter, but eventually, for reasons I have previously gone into, came to a conclusion that you had defaulted in your conduct of the proceedings, and His Honour consequently then held a default hearing.
The conclusion of that default hearing ended up with His Honour ordering that the company, Trek North Tours, pay a pecuniary penalty of $55,000.00 and that you personally pay a pecuniary penalty of $12,000.00. There was also an amount just under $30,000.00 that his Honour ordered you to pay, which was the sum contained in a number of compliance notices.
Now, you did not particularly like that judgment and to a number of persons it has either been described by you as some form of joke or that it was ridiculous, and you even told the Court that these persons were never employees and that you would never pay such a ridiculous fine.
The way in which you have structured your companies was that the business Trek North Tours was actually operated by two companies utilising two bank accounts;
a)one, in your name trading as Trek North Tours, and
b)the other from an account from another company that you had set up called Yubnub Proprietary Limited.
Moneys can be seen going into and out of the Trek North Tours and the Yubnub accounts at various times to meet the expenses of Trek North Tours.
You had also set up a family trust. That family trust had a bank account secured by your home which gave the family trust, but in reality, you personally, a line of credit of some $260,000.00.
You also had another bank account under the Commonwealth Bank as well as a MasterCard.
As I detailed when I made my findings on the contempt matters, you used all five accounts as if they were yours to do with what you wanted, and you used the accounts in such a way as to ensure that the smallest amount of debt was held against those accounts so as to minimise the interest that you were paying.
This meant that there were times that the trust paid bills of the business and at semi-regular occasions you cleared the bank accounts of Trek North Tours and Yubnub to deposit into the family trust to get that balance either as close to zero as possible, or on some occasions to have the balance in the black, thereby minimising the amount of interest that you were paying.
It became obvious from things that you had said that, because the Fair Work Ombudsman was taking this action against you, you believed that the resulting negative publicity really hurt the business of Trek North Tours. You blamed that publicity on a downturn in work from that business.
On 1 July 2015, you started another business called Trek North Safaris. Trek North Safaris now operated the Yubnub account and you rebranded the Yubnub account as Yubnub Pty Ltd trading as Trek North Safaris.
What then occurred was that you simply kept running the business as if it were the same business as Trek North Tours. What that meant was that, whilst to authorities such as ASIC, the Fair Work Ombudsman and other authorities, it appeared as if Trek North Tours was still trading, in fact, there was another business operating, Trek North Safaris, and not Trek North Tours. To the general public it was exactly the same, as it were, business as usual. The accounts from such providers as Queensland Rail, Skyrail and so on were still being sent to Trek North Tours when, in fact, that business had ceased to trade.
The judgment that His Honour made was delivered on 19 June 2015. It was obvious then that your business Trek North Tours owed that money. Still, notwithstanding that, there was no attempt at payment, nor was there any appeal or any other action taken by you to try and set aside the default judgment and orders made by His Honour Judge Jarrett.
By July 2015, it became obvious to the Fair Work Ombudsman that moneys were going out of the accounts that Trek North Tours were operating, though it seems the Fair Work Ombudsman was unaware of the existence of Trek North Safaris as that time.
The Fair Work Ombudsman approached Judge Jarrett ex parte and asked for a Freezing Order on the Trek North Tours bank account and on the Yubnub account. Those orders were made. Notwithstanding those orders, there was a payment made from that account on or around 26 or 27 July. At that stage it was not known whether or not you were aware of the orders.
On 30 July, some six days after the order was made, you appeared by telephone before His Honour Judge Jarrett, who was facing an application to extend the orders. On that occasion there was mention made by the barrister appearing for the Fair Work Ombudsman of the payment that had come out of that account already.
At page 7 of that transcript His Honour then remarked to you:
“Thank you, Mr Jorgensen. What's your position?”
Your answer was:
“My position, your Honour, is I was aware of those orders a few days ago, but I did notice that it allowed for general business.”
And his Honour cut you off and said:
“No, no. I don't want you to address the transfer. As the barrister has quite properly said, you may wish to take advice about that, and there are ways and means in which you can provide evidence to the court about what, on its face, might be a breach of the orders, so you're probably best not to say anything about that because you need to understand that if the court concludes that you breached the order, the penalty notice that was attached to the front of the order wasn't there for fun. It's a - well, there may well be serious consequences if the court concludes that you have breached the order, including sending you to jail, so it's best that you don't say anything about this just yet until you've had the benefit of legal advice. Do you understand that?”
And you replied:
“Yes, I do, your Honour.”
He asked you about what you planned to do about the orders and whether or not you were going to take any form of action to have the order set aside. You said that you would, but eventually you did not do anything of that nature.
His Honour explained again the Freezing Order, and did say to you that it may be that the best thing for you to do is simply to pay the amounts that you owe, and there would be no need for such a freezing order.
Maybe because of the admonition, and the warning that His Honour had given, on 3 August you decided to pay the $12,000.00 personal pecuniary penalty order. You did so, and that meant that the freezing orders that were against your personal accounts were now lifted.
However, it meant that the freezing orders against the Yubnub account and the Trek North Tours account were still in force. This meant that you could not deal with that account at all unless it came within the exceptions. The exception was that any payment be made in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred.
What you did from 4 August was make nine other withdrawals from the accounts which you paid into the family trust account. Those sums totalled over $41,035.56 mostly from the Yubnub account, but one payment was made from the Trek North Tours account. Those payments, as I say, went into the family trust account. Prima facie, that was a breach of the order.
You attempted in my Court to justify that by saying that the way in which you conduct business was as I have previously recounted; that is, that any business expenses made by the trust had to be repaid by the business, but you wanted that to happen in an ad hoc way so as to keep the interest payments, that you would have to make, down.
As I recounted when I convicted you, there were a number of problems with this.
a)those payments cannot be said to have been ordinary business payments;
b)There was no loan agreements or any form of documentation which would show how it was that those items that you paid could be business expenses.
You attempted to point to two payments made by the trust account; one for some $24,000.00 and the other for some almost $10,000.00 to Queensland Rail and to Skyrail that had been made by the trust account. You argued that any sums that you were putting into the account of the trust account was simply repaying the loan that the trust had made to the business.
In your evidence you could not, when asked to identify each of the sums, give me any business expense to which that sum related. It was difficult to do so when each of the nine transactions had the effect of clearing the Yubnub account or the Trek North Tours account.
As I found, these were not business expenses. At most, there was an obligation on the business to repay the trust. That obligation is not a business expense.
But even if it were a business expense, it was a business expense that had to be done in the ordinary and proper conduct of the business. As I also found, such a method by which there are no loan agreements; that there is no record kept of what the expenses are; and there is a simple clearing of the bank accounts to ensure that the debit accounts of either your MasterCard or the family trust are as close to zero as possible, is not a proper way in which to conduct business.
But I found an even more alarming aspect to this.
Under the freezing orders, those expenses could only be made on behalf of Trek North Tours. As all those expenses were made after 1 July 2015, it is quite clear to me that those were not business expenses of Trek North Tours any longer. Those were business expenses of Trek North Safaris.
Trek North Tours had been left to wither and die on the vine. This is evidenced by the letter that your accountant from India wrote where he said:
“Trek North Tours effectively ceased to trade in March of 2015.”
So it seems Trek North Tours still stayed on some form until Trek North Safaris took over on 1 July 2015.
What this meant was that the breaching of the orders was clearly meant to frustrate the proper course of justice and frustrate the Fair Work Ombudsman from being able to recover the pecuniary penalty as well as the money from the compliance notice that a Court had lawfully ordered your company to pay.
What instead you did was simply go on as usual and, because this company was left to wither on the vine, you wound it up just after the middle of 2016, meaning that there was no way, in a legal sense, that the Fair Work Ombudsman could ever have the pecuniary penalty paid, nor could the compliance notices and those employees who had been underpaid ever be paid.
Such action by you was quite blatant. You knew the consequences, having been given that admonition from Judge Jarrett, and yet simply went about doing what it is that you felt you could do.
Such a contempt must be met with the sternest possible condemnation from the Court. What you have done is orchestrate and structure a series of companies and businesses so as to be able to ensure that the Fair Work Ombudsman was never going to be able to have the judgment made by Judge Jarrett satisfied. In this way you achieved your aim that you had stated to this Court that Trek North Tours would never pay such a “ridiculous fine”.
That is not a decision for you to make. That is a decision for a Court to make. Yet you took that out of the reach of the Court. Whilst I have looked at all of the authorities and had regard to all of them, and I accept that prison is a last resort in contempt cases, there is no other sanction that this Court could impose to signify the deprecation with which, not just this Court, but all of society must view the contempt that you have committed.
In saying that, I must now also take into account quite a number of mitigating factors. In the week since I pronounced judgment, it does seem to me that you have had quite a changed view. The affidavit which has been filed in this case shows an insight that was simply not present during the time that you gave evidence, nor, obviously, present in the years leading up to this matter being heard by me.
You have paid into the trust account of your solicitor the amount that Trek North Tours was ordered to pay as a pecuniary penalty and ordered to pay pursuant to the compliance orders. In short, it is a sum of just under $85,000.00.
In your affidavit, you say that you have given an irrevocable authority to your solicitors for that to be paid to satisfy those matters that are outstanding. There is no legal obligation upon you to do so. The orders made by this Court were to be satisfied by Trek North Tours. That company has now been wound up, and so the orders are of a nullity in some ways.
That means that this gesture by you is extremely significant. It has, as I said during the course of argument to your barrister, had the effect, almost, of purging the contempt.
As your barrister said to me, it does not really matter what I now do with you. The moneys will be paid to the Fair Work Ombudsman. The judgment debts will be satisfied. The compliance notices will be paid. That is quite significant.
And because, unlike a normal criminal matter where persons can make reparations in some ways, try and give some restitution for their criminal act, what you are charged with is not so much a crime against a penal statute; you are charged with contempt and you have been convicted of contempt.
And the contempt is withdrawing money from frozen bank accounts so as to defeat what the Fair Work Ombudsman had every right to do, and that is to grab whatever money was in the account of Yubnub or Trek North Tours to try and satisfy the judgment.
By making those funds available, it means that the source of the contempt now has, in effect, gone away.
I have also taken into account those matters in your affidavit which show to me that you have had a reality check over the last seven days. There is nothing more sobering to a man to realise that all the chickens have come home to roost, and that he is now staring into the abyss, for him to take some stock of what it is that he is doing and where he is going in life.
And that process has started for you. Not before time, mind you, but at least it has started. And I am satisfied that you are not the same person today that you were a week ago when you were giving evidence before me.
I have taken into account that you have become a very useful member of society; that you are still running that same small business; that you are employing five people at the moment; and that you can, at peak season, employ up to 10 people. Those persons whom you employ speak very highly of you. They regard you very highly. That is something that I do take into consideration.
I take into consideration as well, because I was privy to your financial position during the course of the trial, that the step you have taken in putting the nearly $85,000.00 into your solicitor’s trust account is, financially, a very significant matter for you.
Whilst the Court must punish and the punishment must be appropriate, nothing that I have said, when looking at the mitigating factors, derogates in any way from how serious I view this contempt.
For the nine counts of contempt, I sentence you to 12 months imprisonment.
That means you will serve time in prison from this afternoon until Sunday week, and then, upon that money being paid, you will be released from custody for the balance of the 12 months, to be of good behaviour for the remaining 355 days.
I have looked at the question of costs in this matter.
The Fair Work Ombudsman seeks that you pay the sum of $245,505.69 as indemnity costs. The Fair Work Ombudsman has argued that the indemnity costs should follow the event. If I am not going to order indemnity costs, the Fair Work Ombudsman submits that I should order that you pay costs in the sum of $63,953.71.
As I have remarked in the course of argument, I do find this a somewhat perplexing part of the sentencing process. I have been helpfully referred to the decision of AGL Energy Limited v Hardy (No. 3) [2017] FCA 952, where O’Callaghan J said, at paragraph 7:
“7. I do not read any of the relevant cases as suggesting that there is an inflexible or normal rule that indemnity costs should be awarded in contempt cases. To that extent, I accept the submission of Mr Hardy’s counsel to that effect. The decision whether to award costs and, if so, on what basis, in contempt cases, like other cases, is always discretionary. But the fact that many of the cases say that it may nonetheless be a “common” or “usual” practice to do so is not necessarily inconsistent with the fact that, in all cases, the starting point is an unfettered discretion…”
I accept what his Honour said.
I am not of the view that s.570 of the Fair Work Act 2009 (Cth) (“the FW Act”) is relevant in this case. That is because this proceeding is something that transcends the FW Act. It may have started as a Fair Work matter, and whilst s.570 talks about that section relating to “all matters arising from a matter in this Act”, a contempt of Court, in my view, is something that does transcend all the statutes to which it may apply.
It goes to the heart of justice, and heart of the acceptance of the Rule of Law. Therefore, it is a matter for my discretion as to whether I ought impose costs.
In this case, I have taken into account that the imposition of the costs is not simply a matter of the costs following the event. The imposition of the costs will be a further punishment upon you.
You are facing the indignity of spending the next 10 days in jail. For a person with your background and hitherto unblemished character, that is an incredible punishment to be giving to you. However, if there had not been for those mitigating factors, you would have been doing the whole 12 months, so what you have done has really, certainly, been to your benefit.
But I take into account this factor that weighs very heavily on my mind, and that is that you are a small business owner, in a tourism industry. The city of Cairns relies very heavily on the tourism industry, and you are employing five other people.
It is really in the best interests of the community that such a business still be allowed to flourish as much as it possibly can. To award costs against you may have a deleterious effect on that business. Having regard to your financial position, as I saw it during the trial, I have no doubt that it not may, but would, definitely, be deleterious to the functioning of that business, and the ripple effect may not be what is intended here.
What has been intended here is that you be punished; that a sign be sent to everyone who ever thinks about defying a Court order that it is not worth it, because the Courts will come down very hard upon you.
This has been a life-changing experience for you. To impose costs would also mean the loss of your business. Sending you to prison and having you lose your business seems to me to be too harsh a punishment, and not what the community expects in a matter such as this.
Because my discretion is unfettered, I decline to make any award as to costs.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Judge Vasta
Date:17 May 2018
CORRECTIONS:
Representation: Ashurst Australia as Solicitor for the Applicant instead of Fair Work Ombudsman.
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