Fair Work Ombudsman v Kingsford Carwash Pty Ltd and Anor (No.2)

[2012] FMCA 1210

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v KINGSFORD CARWASH PTY LTD & ANOR (No.2) [2012] FMCA 1210

INDUSTRIAL LAW – Failure to pay basic wage and casual loadings – 62 casual employees at carwash café – significant underpayment of minimum rates over 7 months – employer entering voluntary winding up before penalty hearing – proceedings not stayed against general manager – penalties totalling $9,000 imposed on manager.

Corporations Act 2001 (Cth), s.500(2)
Fair Work Act 2009 (Cth), ss.45, 546, 550, 557
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), Sch.16 item 15
Workplace Relations Act 1996 (Cth), ss.182(3), 185(1)

Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560, [2008] FCAFC 8
Fair Work Ombudsman v Kensington Management Services Pty Ltd (No.2) [2012] FMCA 586
Fair Work Ombudsman v Kingsford Carwash Pty Ltd & Anor [2012] FMCA 464
Kelly v Fitzpatrick (2007) 166 IR 14, [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550

Applicant: FAIR WORK OMBUDSMAN

First Respondent: KINGSFORD CARWASH PTY LTD
(ACN 134 064 387) 

Second Respondent: ELLIOT BAN

File Number: SYG 1350 of 2011

Judgment of: Smith FM

Hearing date: 22 November 2012

Delivered at: Sydney

Delivered on: 18 December 2012

REPRESENTATION

Counsel for the Applicant: Mr Y Shariff

Solicitors for the Applicant: Fair Work Ombudsman

Counsel for the Second Respondent: Mr M Sahade

Solicitors for the Second Respondent: Trinity Legal

ORDERS

1. The proceeding is adjourned indefinitely as against the first respondent by reason of the stay imposed by s.500(2) of the Corporations Act 2001 (Cth), with liberty to any person with an interest to apply to the Court for further directions in relation to the proceedings against that respondent.

2. The Court declares that the second respondent, Elliot Ban, was a person involved within the meaning of s.550 of the Fair Work Act 2009 (Cth) in contraventions by the first respondent, Kingsford Carwash Pty Ltd, of the following provisions:

   (a)item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (‘the Transitional Act’), by failing to pay 62 employees employed as car washers (‘the employees’) from 6 to 31 December 2009 a basic periodic rate of pay at least equal to the transitional standard Federal Minimum Wage (FMW), in contravention of subsection 182(3) of the Workplace Relations Act 1996 (Cth);

   (b)item 5 of Schedule 16 of the Transitional Act, by failing to pay the employees in relation to that period the transitional standard default casual loading, in contravention of subsection 185(1) of the Workplace Relations Act 1996 (Cth);

   (c)section 45 of the Fair Work Act 2009 (Cth), by failing to pay the employees from 1 January 2010 to 17 July 2010 a basic rate of pay at least equal to the rate of pay prescribed by subclauses 33.4 and item A.2.5 of Schedule A to the Vehicle, Manufacturing, Repair, Services and Retail Modern Award 2010 (‘the Modern Award’); and

   (d)section 45 of the Fair Work Act 2009 (Cth), by failing to pay the employees over that period the guaranteed casual loading percentage prescribed by clause 41 and item A.2.5 of Schedule A to the Modern Award.

3. A penalty of $4,500 is imposed on the second respondent, Elliot Ban, under ss.546(1) and 550(1) of the Fair Work Act 2009 (Cth) for his involvement in the contraventions declared in (2)(a) and (c).

4. A penalty of $4,500 is imposed on the second respondent, Elliot Ban, under ss.546(1) and 550(1) of the Fair Work Act 2009 (Cth) for his involvement in the contraventions declared in (2)(b) and (d).

5. The penalties payable under the above orders be paid to the Commonwealth pursuant to s.546(3) of the Fair Work Act 2009 (Cth).

6. These orders shall take effect on the twenty‑eighth day after they are pronounced. 

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 1350 of 2011

FAIR WORK OMBUDSMAN

Applicant

And

KINGSFORD CARWASH PTY LTD ACN 134 064 387 

First Respondent

ELLIOT BAN

Second Respondent

REASONS FOR JUDGMENT

1. In this application, the Fair Work Ombudsman sought the imposition of penalties on an employer, Kingsford Carwash Pty Ltd (‘Kingsford’), and its general manager, Mr Ban, for their failure to pay most of their staff the minimum wage required under Commonwealth legislation between 6 December 2009 and 17 July 2010.  For various periods between these dates, they employed 62 casual part-time workers, mostly foreign students on student visas, at a manual car washing establishment, and paid most of them a total flat rate of $10.84 for each hour of their work, when the law required them to be paid more than $17 an hour.  The total of the underpayments over this period was $99,646.74, in relation to which six of the employees were paid $27,715.40 in May 2011 in response to the Ombudsman’s investigation.

2. The Ombudsman’s investigation was protracted, as was the present application which was filed on 28 June 2011.  At the request of the parties, I embarked upon a preliminary hearing to determine some ‘nice’ legal questions as to the exact source of the respondents’ obligations to pay a minimum wage with casual loading, based upon agreed facts and some additional evidence.  This produced a judgment which I published on 22 June 2012 (see Fair Work Ombudsman v Kingsford Carwash Pty Ltd & Anor [2012] FMCA 464). I also made findings that Mr Ban was liable for penalty as an accessory, under s.550 of the Fair Work Act 2009 (Cth).

3. I then appointed a hearing for 16 August 2012 to make formal orders on liability, and to determine the penalties to be imposed on both respondents. However, on 8 August 2012, a meeting of Kingsford’s members, directors, secretary, and creditors – in effect, Mr Ban’s father and sister – resolved to wind up the company voluntarily. Mr Wily was appointed liquidator, and the present proceedings were, and remain, automatically stayed as against Kingsford, pursuant to s.500(2) of the Corporations Act 2001 (Cth).

4. The parties have agreed, correctly, that the proceedings could proceed against Mr Ban only.  For this purpose, the penalty hearing was adjourned to 22 November 2012, because the Court was informed that Mr Ban was attending a funeral overseas.

5. My present judgment therefore addresses only the imposition of penalties in relation to Mr Ban’s involvement in Kingsford’s contraventions, the precise identification of which was explained in my earlier judgment.  It is unnecessary for me to repeat my conclusions, which involved an examination of the language of two awards and other possible sources for a minimum hourly rate of pay and casual loading for employees of the present type at the relevant times. In effect, I found that there had been numerous contraventions of the following four separate provisions in relation to the employees’ entitlements to basic wages and loadings:

   a)item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (‘the Transitional Act’), by failing to pay 62 employees employed as car washers (‘the employees’) from 6 to 31 December 2009 a basic periodic rate of pay at least equal to the transitional standard Federal Minimum Wage (FMW), in contravention of subsection 182(3) of the Workplace Relations Act 1996 (Cth);

   b)item 5 of Schedule 16 of the Transitional Act, by failing to pay the employees in relation to that period the transitional standard default casual loading, in contravention of subsection 185(1) of the Workplace Relations Act;

   c)section 45 of the Fair Work Act, by failing to pay the employees from 1 January 2010 to 17 July 2010 a basic rate of pay at least equal to the rate of pay prescribed by subclauses 33.4 and item A.2.5 of Schedule A to the Vehicle, Manufacturing, Repair, Services and Retail Modern Award 2010 (‘the Modern Award’); and

   d)section 45 of the Fair Work Act, by failing to pay the employees over that period the guaranteed casual loading percentage prescribed by clause 41 and item A.2.5 of Schedule A to the Modern Award.

6. As is apparent, these four groups of contraventions relate to two periods.  In the first period, in December 2009, the relevant wage and loading entitlements were derived from the basic Federal Minimum Wage prescribed for all types of workers not covered by any award.  That minimum wage had been in force since at least 2008 under the Workplace Relations Act 2006 (Cth), and was continued under transitional arrangements after the enactment of the Fair Work Act in 2009. The combined basic wage rate with casual loading which was applicable to the 62 relevant employees was $17.17 per hour. After this ‘bridging period’, the same total wage continued to be payable to the employees until 30 June 2010, when it was adjusted to $18.15, pursuant to transitional provisions of the Modern Award.

7. In fact, as was ultimately agreed between the parties, in the period from 6 December 2009 to 17 July 2010, Kingsford paid 54 of the 62 employees a wage rate of $10.84 per hour. Five employees were paid $13 per hour, one employee was paid $11 per hour, one employee was paid $14 per hour and one was paid $15 per hour. None of the employees were paid a casual loading. 

8. The differential between the actual rate paid by Kingsford and the obligatory minimum wage was therefore considerable.  It is now agreed that Kingsford underpaid its labour force by a total amount of $99,646.74 over the full period of contraventions alleged by the Ombudsman.  As I noted in my first judgment, in practical effect, the relative significance of the now admitted underpayments was unaffected by the nice points which were argued before me at the first hearing. 

9. The bottom line undoubtedly is that the managers of Kingsford failed to pay most of its workforce 37 per cent of the prescribed minimum Federal wage and casual loading for unskilled labour not covered by an award, which has been a feature of Australian industrial law since the Work Choices reforms in 2006.  Moreover, this scale of exploitation involved a particularly vulnerable group of foreign students, who were probably struggling to support themselves under visa conditions limiting their permitted hours of work.  If Kingsford had not been taken into liquidation, it would have faced maximum penalties of $33,000 for each contravention, together with orders that it compensate the affected employees.  Mr Ban now faces maximum penalties of $6,600 for each contravention, and no compensation orders.

10. In strict logic, Kingsford repeatedly contravened the legislation requiring payment of the minimum wage on innumerable separate occasions over the whole of the relevant period. Every underpayment to every employee on every payday involved two contraventions, in relation to each employee’s entitlement to a basic hourly rate and casual loading. However, as with previous legislation, the Fair Work Act contains a provision which requires a court when imposing penalties to aggregate the number of contraventions for which penalty may be imposed. Section 557(1) provides:

    557   Course of conduct

    (1)For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:

    (a)the contraventions are committed by the same person; and

    (b)the contraventions arose out of a course of conduct by the person.

11. In the present proceedings, the Fair Work Ombudsman accepted that this provision requires the aggregation of very numerous contraventions into the four groupings which I have described above, by reference to the four separate statutory sources of the entitlements to basic wage rate and loading which applied over the period of the underpayments. 

12. Mr Ban’s counsel did not take issue with this, but invited a further aggregation of contraventions under a recognised generally available sentencing discretion.  He submitted that, in effect, Kingsford had committed only one offence in relation to all 62 employees over the whole of the seven month period, which was to overlook the amount of the minimum Federal basic wage.

13. In Fair Work Ombudsman v Kensington Management Services Pty Ltd (No.2) [2012] FMCA 586, I recently discussed the basis upon which the statutory aggregation applies, and how it should relate to the application of the additional sentencing discretion:

    16.…[The statutory aggregation] was explained by Gray J in Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223, where his Honour said:

    The object of s.178(2) appears to be that a party bound by an award and pursuing a course of conduct involving repeated acts or omissions, which would ordinarily be regarded as giving rise to a series of separate breaches, should not be punished separately for each of those breaches.  If such a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another. 

    17.These observations tend to suggest that normally it is appropriate to impose separate penalties for breaches of different entitlement provisions, even where they all ‘arose out of a course of conduct’ by the employer, in the sense that they all shared a common cause or background. Numerous judgments of this Court and the Federal Court have proceeded on that basis. They usually arrive at separate penalties for multiple failures to pay separate types of entitlements, and then address the possibility that the resultant penalties might, in aggregate, exceed an amount which is ‘just and appropriate’ in all the circumstances, by applying a ‘totality principle’ which might require further adjustment of the penalties (see Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [5]‑[9], [43]).

    18.However, beyond the statutory aggregation of contraventions under s.719(2), and before applying the ‘totality principle’, the sentencing discretion also allows a further aggregation of penalties for groups of different contraventions forming part of one course of conduct.  A discretion to do this has been said to arise: 

    “where a number of acts of a similar nature committed by one or more defendants were connected with one another, in the time and place of their commission or by their common purpose, in such a way that they could fairly be regarded as forming part of the same transaction or criminal enterprise” (see Construction, Forestry, Mining and Energy Union v Williams (2009) 262 ALR 417, [2009] FCAFC 171 at [15], quoting Lord Diplock in Director of Public Prosecutions v Merriman [1973] AC 584 at 607). 

    19.The mere presence of a ‘course of conduct’ for the purposes of the statutory aggregation of contraventions repeated over a period of time usually does not necessarily lead to a further aggregation under this principle, and there is a need to identify something which justifies it. The authorities clearly hold that the adoption of a further grouping or aggregation of penalties is discretionary (cf. Mornington Inn (supra) at [58]). In Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39, Middleton and Gordon JJ said:

    [39]As the passages in Williams 262 ALR 417 explain, a “course of conduct” or the “one transaction principle” is not a concept peculiar to the industrial context. It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry. Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions.

14. In Kensington (supra), I declined to reduce the number of penalties imposed beyond the statutory aggregation, notwithstanding that all of the underpayments in that case were attributable to a pervasive ignorance of the changing legal obligations on the employer.  I said: “that reason does not reflect to the excuse of Kensington, but reveals a continuing failure adequately to appreciate and respond to the changing sources of its employees’ entitlements under law”.I concluded that it was appropriate to impose separate penalties arising from changes to the statutory sources of the same entitlements, because “there was a failure by Kensington over a period of time before and during the employment of Mr Walder and Ms Kilbourne to review and consider the propriety of how they were paid, in the light of current industrial legislation and the terms of its own Greenfields Agreement”.Its culpability was therefore repeated, and compounded, over the period in which wages were repeatedly underpaid.

15. I might have been inclined to take the same approach in the present case.  However, the Ombudsman’s written submissions on penalty submitted:

    37.In addition to the course of conduct provisions set out above, the applicant accepts that some of the contraventions (namely, the failure to pay minimum rates of pay in accordance with the FMW and casual loading in accordance with the transitional default casual loading and Modern Award) have common elements and this should be taken into account when considering an appropriate penalty to ensure that the second respondents is not punished more than once for the same or substantially the same similar conduct.

    Groupings of Contraventions

    38.The applicant submits that, based on the facts in this case, the second respondent has the benefit of subsection 719(2) and section 557 of the FW Act in relation to repeated breaches of each provision regarding each of the Employees. Accordingly, in circumstances where each of the identified 62 contraventions of each of the provisions listed in the table in paragraph 34 above relate to multiple employees, the course of conduct provisions in subsection 719(2) and section 557 of the FW Act should be applied, thereby reducing the number of potential contraventions from 248 (4 contraventions multiplied by 62 employees) to 4.

    39.In addition to reducing the number of contraventions as set out in the paragraph directly above, it is submitted that where a legislative change, or a change in industrial instrument coverage has meant that separate contraventions have been alleged under different legislation (that is the Transitional Act and FW Act, arising from contraventions of the FMW and the Modern Award) it is necessary for the Court to consider whether there was in fact a single course of conduct or a common element straddling the contravention periods for the purpose of determining penalty.

    40.The applicant submits that the second respondent should not be penalised more than once for the same conduct arising out of the legislative changes. The applicant submits that this should to apply to both:

    (a)the failure to pay the minimum rates of pay provided by the FMW during the First Contravention Period and the Modern Award during the Second Contravention Period, which arose out of the one decision by the first respondent to pay the Employees flat rates of pay of either $10.84, $11.00, $13.00, $14.00 or $15.00; and

    (b)the failure to pay the employees the Default Casual Loading during the First Contravention Period, or the casual loading prescribed by the Modern Award during the Second Contravention Period, which arose out of one decision by the first respondent, to not pay the Employees any casual loading at all.

    41. Accordingly, the applicant submits that the grouped contraventions listed in paragraphs 40(a) and (b) above should be regarded as two separate contraventions.

    42.Other than as outlined in paragraphs 38 to 41 above, the applicant submits that the course of conduct or common element provisions do not otherwise reduce the number of contraventions.

    43.Therefore, the applicant submits that the Court should consider that the maximum penalty it could impose on the second respondent is $13,200.

1. With some hesitation, I am prepared to accept the Ombudsman’s submission that the determination of an appropriate penalty on Mr Ban should proceed on the basis that his conduct reveals only two offences.  I do not accept Mr Ban’s submission that he should face only one penalty.

2. The Fair Work Ombudsman’s written submissions on penalty addressed headings taken from the well-known list of sentencing considerations suggested in this area by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7, and summarised by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14, [2007] FCA 1080 at [14]. The list of considerations can guide, but is not a substitute for “the unrestrained statutory discretion” (cf. Gyles J in Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at [11]). Ultimately, I must arrive at an amount within the range of penalties provided in the legislation which is proportionate to the gravity of the offences committed and also takes into account other sentencing considerations including deterrence (cf. Graham J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560, [2008] FCAFC 8 at [54]). The matters which become determinative in each case differ according to the particular circumstances, and judgments of the Full Court have emphasised the discretionary nature of the power to impose civil penalties for breach of industrial legislation, and have supported a mental process of ‘instinctive synthesis’ (cf. Australian Ophthalmic Supplies Pty Ltd v McAlary‑Smith (supra) at [27]).

3. The non‑exhaustive list of considerations suggested in the above authorities is: 

   ·The nature and extent of the conduct which led to the breaches; 

   ·The circumstances in which that conduct took place; 

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

   ·Whether there had been similar previous conduct by the respondent; 

   ·Whether the breaches were properly distinct or arose out of the one course of conduct; 

   ·The size of the business enterprise involved; 

   ·Whether or not the breaches were deliberate; 

   ·Whether senior management was involved in the breaches; 

   ·Whether the party committing the breach had exhibited contrition; 

   ·Whether the party committing the breach had taken corrective action; 

   ·Whether the party committing the breach had cooperated with the enforcement authorities; 

   ·The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and

   ·The need for specific and general deterrence. 

4. I have considered all of these matters, and propose to address them in the course of a discussion of what I regard as the significant circumstances of the contraventions, the situation of Mr Ban, the need for deterrence, and mitigating considerations, before explaining the penalties which I have arrived at. 

5. I have above and in my earlier judgment explained the nature and extent of the conduct which led to the breaches.  In short, Kingsford conducted its car washing business based upon an egregious exploitation of a labour pool of very vulnerable foreign students.  Looked at objectively, the nature and extent of the contraventions exhibits a very high degree of culpability.

6. In my earlier judgment, I summarised the evidence showing Mr Ban’s management position in Kingsford’s business, which led to my finding that he was an accessory to the contraventions within the provisions of s.550 of the Fair Work Act. I said:

   8.In his Defence, Mr Ban admitted that he was employed by Kingsford Carwash as its general manager, was responsible for ‘the overall direction, management and supervision’ of the company, and determined its employees’ terms and conditions of employment.  He also admitted that he was aware of the engagement of the identified employees, of their duties, and of the amounts paid to them.  Under cross-examination, Mr Ban said that he did not take steps to determine whether an award applied to a car washer or detailer, and that he had determined the rate of $10.84 “from a previous amount that I had in my head which I believe I had investigated previously” (transcript 23.3.12 p.86).  He said he was unaware that casual employees were entitled to a casual loading.  He said that “I obviously didn’t take enough steps” to determine the appropriateness of $10.84 as the minimum wage to be paid to car washers from 2009.

7. An assessment of Mr Ban’s responsibility for the contraventions requires some additional discussion of the background to the company.  Regrettably, very little of this background was volunteered by Mr Ban, and no evidence was led from its proprietors or company officers, or from the franchisor of its business model and lessor of its premises, or from its current liquidator, to elucidate the background and financial circumstances of the business.  Only a very sketchy picture emerges from fragments of Mr Ban’s evidence, from ASIC records, and from some other investigations of the Ombudsman.

8. Mr Ban agreed that he had previously conducted the same business under the same franchise and lease arrangements and through different corporate vehicles, before Kingsford commenced its business in 2009.  Between 2005 and 2009 the carwash café was conducted by Banwash Pty Ltd, of which Mr Ban was a director and shareholder with his father.  The business was continued by another company, KKLean Pty Ltd, before Kingsford took over.  Both of those companies were wound up or de-registered in circumstances which are obscure, but which appear to have been preceded by some complaints by employees to industrial agencies. 

9. The original five year lease to Banwash Pty Ltd from Mr Anthony Sahade commenced on 16 December 2005, and was guaranteed by Mr Ban and his father.  The second five year lease was to Kingsford Carwash Pty Ltd and commenced on 1 January 2010.  As with the earlier lease, it required the tenant to use the premises “strictly for the operation of the Crystal Car Wash Café in accordance with and limited by the Crystal Car Wash Café System”, and gave Mr Anthony Sahade and his related companies unlimited rights to attend the premises to inspect “the general business operations of the Lessee, its flow and turnover of customers, the Lessee’s sales, and any other matter in connection with the business operations of the Lessee on the Premises”. 

10. The second lease was executed by Mr Ban as company secretary, and by his sister as director.  ASIC searches show that Kingsford was incorporated in November 2008 with Mr Ban’s sister as sole shareholder, and that Mr Ban’s father replaced Mr Ban’s sister as director on 28 July 2011.  As I have noted, Mr Wily was appointed liquidator on a creditors voluntary winding up, upon a resolution dated 8 August 2012.  On a visit to the premises by Ombudsman inspectors on 14 August 2012, the business appeared to be operating, Mr Ban’s father appeared to be managing it, and a receipt was issued in the ABN of Kingsford.  In his evidence at the penalty hearing, Mr Ban said that the business was still operating at the premises, but that it was being run by “the franchisor” Crystal Car Wash Café Pty Ltd, and that he had no current role.  He said that, although he was the director of a new company, LAAC Pty Ltd, which had its registered office at the same premises, the business of the new company was “working with my uncle. It’s traffic controlling in crane operations”.

11. Notwithstanding my suspicions that the above pieces of evidence point to the possibility that other persons might share responsibility for Kingsford’s systematic underpayment of its workforce, I accept Mr Ban’s evidence which was emphatic as to his sole responsibility as general manager over the relevant period.  He denied that his father or sister had any role in the setting of the wages and terms for the employees of Kingsford, and said “that was my responsibility”.

12. However, he gave guarded and vague responses to questions which attempted to explore how the obligation to pay at least the Federal minimum wage was overlooked by him.  The gist of Mr Ban’s evidence at both hearings was that that he could not remember how or when he originally set the wages for the Kingsford employees at $10.84 an hour, nor what investigations he made into the minimum wage rates required under law at that time and subsequently.  He said that he knew that there was a minimum rate set by law, and that it was his responsibility to be aware of changes to the basic rate of pay.  He denied being aware that he was paying much less than the minimum rate, and explained the rate fixed by him:  “I believe it was from a previous amount that I had in my head which I believe I had investigated previously”.  He said that he was unaware that there was a loading payable to casual employees.  He denied being put on notice of a need to conform to industrial laws, in the course of complaints which were made when the business was operated by Banwash Pty Ltd during 2008. 

13. I do not accept suggestions in his affidavits, which attempted to excuse the underpayments on the basis that Mr Ban had believed that he was free to fix any wage which was acceptable to his workers, because “the car wash business was award free”.  In his oral evidence, Mr Ban made no claim to have been so advised by any professional or other business advisor, and suggested that he had made his own imperfect researches on the internet.  He repeatedly conceded that he knew that there was, at least, a minimum basic rate prescribed for his workers under law at the time of these contraventions, and claimed that he thought that the minimum rate was less than the rate which he was paying.

14. Although I am not fully persuaded that Mr Ban was not conscious that he was paying his employees much less than the basic Federal minimum wage, ultimately I consider it sufficient to assess the degree of his culpability on the basis that his conduct displayed, at least, gross irresponsibility as to one of the most important legal obligations on a substantial employer of unskilled labour.  In my opinion, his evidence has provided no excuse which should mitigate the objective seriousness of the contraventions.

15. Other potentially mitigating considerations in the assessment of Mr Ban’s conduct are also, in my opinion, of little strength. 

16. Mr Ban pointed to the fact that in May 2011, on the eve of the commencement of the present prosecution, he paid in cash from the takings of Kingsford a total amount of $27,715.40 to six of its underpaid employees whom he was able to locate at that time.  The Ombudsman’s inspectors are understandably suspicious of this claim, because it was not corroborated by the presentation of any of the company’s accounts recording these transactions.  However, receipts purportedly signed by Song Sichen, Kian Hou Lee, Hemchandran Balaji, Tajinder Singh, Pradeep Maharajan, and Walid Farah, were tendered in evidence, and I am prepared to accept that these payments were probably made. 

17. However, I reject Mr Ban’s suggestion in his affidavit that the $71,931.34 balance of the underpayments to the other 56 employees has resulted in their being ‘underpaid slightly’.  To adopt such a characterisation indicates a state of mind which is totally unacceptable and far from contrite.  Nor, in my opinion, am I able to give much weight to Mr Ban’s general apology which was included in his affidavit.  In circumstances such as the present, a person in Mr Ban’s position should be expected to demonstrate more by way of ‘contrition’ and ‘corrective action’ than this. 

18. However, Mr Ban has disclaimed knowledge of Kingsford’s financial position, as to whether there was money to pay these arrears.  He showed no concern whether the affected employees could obtain government compensation upon the insolvency of the company, which is something which I doubt.  He has taken no steps to inform the Court as to Kingsford’s current financial position bearing on the prospects of recovery of underpayments by these or other employees in the course of its insolvency.  He said that he had not considered at all whether he could find money to pay the unpaid workers elsewhere than in the finances of Kingsford.  He said that he “was told while I was overseas” that the company was going to be placed into liquidation, and appears to think that this excuses his lack of knowledge about the insolvency. 

19. In my opinion, Mr Ban’s “cooperation with the enforcement authorities” has brought limited benefits to the public purse and to the promotion of compliance with industrial legislation.  Although there was a degree of cooperation by Kingsford with the Ombudsman’s investigation into its wages records and practices prior to the commencement of the present application, it was also attended by elements of stalling and denial and unfulfilled promises of rectification.  After the proceedings were commenced, no useful admissions were made until the eve of the hearing on liability, by which time the Ombudsman had been required to prepare and file his full case on liability.  The Ombudsman was also required to produce most of his witnesses for cross-examination at both the hearings. 

20. I remain mystified as to the practical benefits to either Kingsford or Mr Ban from the technical disputes which they raised about the coverage clauses of awards, and which occupied the hearing on liability and my subsequent reserved judgment.  This tactic now appears only to have allowed the postponing of inevitable findings of liability and penalty in relation to Mr Ban, and – on the part of Kingsford – an opportunity for it to avoid through insolvency the inevitable court orders imposing substantial penalties and compensation orders.  The points decided by me in my judgment have no real significance in terms of quantification of penalty, and it must now be assumed that an exact quantification of the underpayments is of only academic interest in the insolvency of the employer.

21. In the circumstances which I have described above, I consider that the penalties to be imposed on Mr Ban should be significantly influenced by considerations of both specific and general deterrence.  Mr Ban’s evidence of his protracted recklessness as to his obligations as an experienced manager of an employer of unskilled labour invites a substantial penalty, which will remind him in the future to make himself aware of wage rates required to be met by law.  I consider that he will need this deterrent in the course of his future business career, even assuming that he has, indeed, abandoned all involvement in car washing businesses.

22. I also consider that my determination of penalty in relation to Mr Ban’s conduct needs to send as strong as possible a message to other proprietors and managers of similar businesses.  The circumstances of the present case demonstrate that there is a need to remind all employers, and their responsible managers, that there has been provision in Commonwealth legislation since 2006 for a basic minimum rate of pay for unskilled work, whether permanent or casual, and whether part-time or full-time.  No Australian business should be able to think that it can make its profits by disregarding the requirements of these laws.

23. Weighing up all the above considerations, in the light of all of the evidence and submissions which have been presented to me by the parties, I have concluded that I must impose penalties on Mr Ban which are at the higher end of the range provided under the legislation.  I accept, however, that they should not be at the highest level, by reason of the absence of a prior record of similar contravening conduct, a degree of cooperation and restitution, and my concern that other people who have influenced Mr Ban’s behaviour may also have contributed to Kingsford’s contravening conduct. 

24. On balance, I consider that a penalty of $4,500 would be appropriately imposed on Mr Ban in relation to each of the two groups of contraventions for which the Ombudsman seeks the imposition of separate penalties.

25. The total of these penalties is $9,000, which I do not consider requires further reduction under the ‘totality’ principle.  I do not consider that this amount would be disproportionate to Mr Ban’s over-all responsibility for all of Kingsford’s contraventions.  He has not presented any information as to his financial position, which might show that this level of penalty would operate oppressively or inappropriately in his personal circumstances.

26. The penalties should be made payable to the Commonwealth, and become enforceable 28 days after the publication of this judgment. 

27. I shall therefore make the declaration and orders set out at the commencement of this judgment. 

28. I would observe that nothing in this judgment should prevent further investigation by the Fair Work Ombudsman, ASIC, or any other law enforcement agency, into the circumstances in which the persons who were in control of Kingsford Carwash Pty Ltd took that company into external administration on 8 August 2012, and thereby avoided the imposition of substantial penalties and compensation orders arising from the contraventions which are the subject of the present proceedings.  Those circumstances were not investigated before me, and they are not explained by any evidence tendered before me.  Necessarily, they have not had a bearing on the penalties which I have imposed on Mr Ban for his involvement in the contraventions. 

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Smith FM

Date:  18 December 2012