Fair Work Ombudsman v KTM Express (NSW) Pty Ltd
[2025] FedCFamC2G 12
•13 January 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v KTM Express (NSW) Pty Ltd [2025] FedCFamC2G 12
File number(s): SYG 1987 of 2023 Judgment of: JUDGE CAMERON Date of judgment: 13 January 2025 Catchwords: INDUSTRIAL LAW – breaches of civil remedy provisions of the Fair Work Act 2009 (Cth) – declarations of breach – imposition of pecuniary penalties – relevant considerations.
INDUSTRIAL LAW – Fair Work Act 2009 (Cth) - Compliance notice – contravention.
Legislation: Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) ss 539, 545, 546, 550, 716
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450
Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (2018) 264 FCR 155
Dafallah v Fair Work Commission (2014) 225 FCR 559
Fair Work Ombudsman v Pure Telecom Pty Ltd [2024] FedCFamC2G 664
Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492
Division: Fair Work Number of paragraphs: 29 Date of hearing: 15 October 2024 Place: Sydney Solicitor for the Applicant: Mr A Vas (Office of the Fair Work Ombudsman) Counsel for the First and Second Respondents: Mr S McIntosh Solicitor for the Respondents: Marsdens Law Group ORDERS
SYG 1987 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: KTM EXPRESS (NSW) PTY LTD
First Respondent
TERESA MAMONE
Second Respondent
ORDER MADE BY:
JUDGE CAMERON
DATE OF ORDER:
13 JANUARY 2025
THE COURT DECLARES THAT:
1.The first respondent contravened s.716(5) of the Fair Work Act 2009 (Cth) by failing to comply with a compliance notice issued on 7 March 2022.
2.The second respondent was involved, within the meaning of s.550(2) of the Fair Work Act 2009 (Cth), in the first respondent’s contravention of s.716(5) of that Act.
THE COURT ORDERS THAT:
1.The first respondent pay a pecuniary penalty of $6,000 for its contravention of s.716(5) of the FW Act.
2.The second respondent pay a pecuniary penalty of $1,200 for her involvement in the first respondent's contravention of s.716(5) of the FW Act.
3.The penalties be paid to the Commonwealth with 28 days.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE CAMERON
INTRODUCTION
This proceeding was brought by the Fair Work Ombudsman (Ombudsman) under the Fair Work Act 2009 (Cth) (FW Act). It principally concerns a contravention of the FW Act by the first respondent, KTM Express (NSW) Pty Ltd (KTM), in failing by 11 April 2022 to comply with a compliance notice issued on 7 March 2022 (Compliance Notice) pursuant to s 716(2) of the FW Act by Fair Work Inspector (FWI) Jason Lam. KTM is a company that operates a road transport business. The Notice alleged contraventions by KTM of the Road Transport and Distribution Award 2010 and Road Transport and Distribution Award 2020 (collectively, Awards) by not having made correct payments in respect of meal allowances, early work penalty rates, overtime rates and public holiday loadings. The contraventions arose out of the underpayment of KTM’s employee Antonio Marvello (Mr Marvello) over the course of his employment as a Transport Worker Level 4 from 26 November 2018 and 4 March 2021.
In a statement of agreed facts filed on 18 July 2024 (statement of agreed facts), KTM admitted that it contravened s 716(5) of the FW Act by failing to comply with the Compliance Notice, and the second respondent, Teresa Mamone (Ms Mamone), admitted that she was involved, within the meaning of s 550(2) of the FW Act, in that contravention. Ms Mamone is, and was at all relevant times, a director of KTM, and responsible for its operation, management and control.
It was agreed at the hearing of the present application that the amounts owing to Mr Marvello had been paid.
RELEVANT LEGISLATION AND RULES
The FW Act relevantly provides:
545 Orders that can be made by particular courts
Federal Circuit and Family Court of Australia (Division 2)
(1)The Federal Court or the Federal Circuit and Family Court of Australia (Division 2) may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.
(2)Without limiting subsection (1), orders the Federal Court or Federal Circuit and Family Court of Australia (Division 2) may make include the following:
(a)an order granting an injunction, or interim injunction, to prevent, stop or remedy the effects of a contravention;
(b)an order awarding compensation for loss that a person has suffered because of the contravention;
(c) an order for reinstatement of a person.
…
When orders may be made
(4) A court may make an order under this section:
(a) on its own initiative, during proceedings before the court; or
(b) on application.
…
550 Involvement in contravention treated in same way as actual contravention
(1)A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2)A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a)has aided, abetted, counselled or procured the contravention; or
(b)has induced the contravention, whether by threats or promises or otherwise; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.
716 Compliance notices
Application of this section
(1)This section applies if an inspector reasonably believes that a person has contravened one or more of the following:
…
(b) a term of a modern award;
…
Giving a notice
(2)The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a)take specified action to remedy the direct effects of the contravention referred to in subsection (1);
(b)produce reasonable evidence of the person’s compliance with the notice.
...
Person must not fail to comply with notice
(5) A person must not fail to comply with a notice given under this section.
(6) Subsection (5) does not apply if the person has a reasonable excuse.
At the time of the admitted contravention, ss 539(2) and 546(2) of the FW Act provided that the maximum pecuniary penalty that could be imposed on an individual for a contravention of s 716(5) of the FW Act was 30 penalty units. The maximum pecuniary penalty that can be imposed for contravention by a body corporate of the same civil penalty provisions is five times the maximum penalty units applicable to an individual: s 546(2) of the FW Act. At the time of the contraventions alleged by the Ombudsman a penalty unit was with $222: s 4AA of the Crimes Act 1914 (Cth). Therefore the maximum pecuniary penalty that might be imposed on KTM is $33,300 and the maximum penalty that might be imposed on Ms Mamone is $6,600.
STATEMENT OF AGREED FACTS
The Compliance Notice
On 7 March 2022, FWI Lam gave KTM the Compliance Notice by posting a copy of it to KTM’s registered office and by emailing a copy to Ms Mamone’s email address. The Compliance Notice required KTM to take specified actions to remedy the direct effects of the Contraventions by 4 April 2022, including by:
(a)calculating and paying amounts owed to Mr Marvello in respect of the Contraventions; and
(b)calculating superannuation contributions applicable to these amounts and paying them into Mr Marvello’s superannuation fund.
The Compliance Notice also required KTM to produce evidence of compliance by 11 April 2022. KTM failed to obey the Compliance Notice and as a result has contravened s 716(5) of the FW Act.
The amount KTM would have paid to Mr Marvello had it obeyed the Compliance Notice was $30,321.25 (Underpayment Amount).
Accessorial Liability of Ms Mamone
At all relevant times, Ms Mamone was:
(a)a director of KTM;
(b)responsible for KTM’s operation, management and control;
(c)responsible for ensuring that KTM complied with its legal obligations under the FW Act; and
(d)a shareholder of KTM.
On 24 March 2022, Ms Mamone replied to FWI Lam’s 7 March 2022 email serving the Compliance Notice. Between 24 March 2022 and 7 April 2022, FWI Lam and Ms Mamone communicated by telephone and email.
Ms Mamone was involved, within the meaning of s 550(2) of the FW Act, in the contravention by KTM of s 716(5) of the FW Act, and, by reason of s 550(1) of the FW Act, is taken to have herself contravened s 716(5) of the FW Act.
Relief Sought
By consent the parties seek declarations that:
(a)KTM contravened s 716(5) of the FW Act by failing to comply with the Compliance Notice issued on 7 March 2022; and
(b)Ms Mamone was involved, within the meaning of s 550(2) of the FW Act, in KTM’s contravention of s 716(5) of the FW Act by failing to comply with the Compliance Notice and is therefore taken to have herself contravened s 716(5) of the FW Act.
The parties also seek orders that:
(a)KTM pay a pecuniary penalty to the Commonwealth for its contravention of s.716(5) of the FW Act; and
(b)Ms Mamone pay a pecuniary penalty to the Commonwealth for her involvement in that contravention.
EVIDENCE
Applicant
The Ombudsman relied on an affidavit of FWI Lam affirmed 19 August 2024. FWI Lam deposed, relevantly, to the investigation; the Compliance Notice; and the respondents’ failure to obey the Compliance Notice. FWI Lam also deposed that Mr Marvello had advised that he had received the following payments from KTM in relation to the Compliance Notice:
(i)$3,000 on 3 August 2024, and
(ii)$2,000 on 12 August 2024.
Respondents
The respondents relied upon the affidavit of Ms Mamone sworn 20 September 2024. Ms Mamone deposed inter alia:
3I unreservedly acknowledge, and apologise, for the failure of [KTM] to comply with the direction of the [Ombudsman] and the compliance notice issued by the Ombudsman on 7 March 2022 …
4I also unreservedly acknowledge, and apologise for, the role that I played, as [KTM]'s Office Manager, in facilitating this failure. It should not have happened, and I am sorry that it did.
5I acknowledge that the consequences of the [KTM]'s, and my, actions in failing to adhere to the Compliance Notice have resulted in a failure to rectify the underpayment of wages to [Mr Marvello] in a timely manner.
6I express, to Mr Marvello, my deepest apologies for any harm, distress, inconvenience or grievance caused because of [KTM]'s and my failure to comply with the Compliance Notice. I also wish to extend this apology to the Ombudsman, its investigators and agents.
7Since the commencement of these Proceedings, I, on behalf of [KTM], have taken corrective action to remedy the underpayment of wages made by [KTM] and myself to Mr Marvello and to prevent any further contraventions of the [FW Act]….
…
10I fully understand and agree that these Proceedings have been brought because [KTM] did not comply with the Compliance Notice, and because I did not arrange for [KTM] to comply with the Compliance Notice. What I say below is not to detract from this at all, but rather to provide some insight into my incorrect thinking at the time, and to inform the Ombudsman and the Court that I understand that this thinking was incorrect, and that it will not be repeated by me or [KTM] in the future.
11During Mr Marvello's Employment, I wrongly believed that Mr Marvello was being paid correctly and in accordance with the Road Transport & Distribution Award 2010, and from 4 May 2020 until the end of his Employment, in accordance with the Road Transport & Distribution Award 2020 (together, the Awards).
12 My incorrect belief was informed by:
(a) the fact that the First Respondent had, during Mr Marvello's Employment, engaged Armelita Dela Torre (Ms Dela Torre) as a third-party bookkeeper;
i.Ms Dela Torre was referred to me by my old accountants. …
ii.During her engagement, Ms Dela Torre advised me on wage and payment issues that arose in the past and on training in 'Myob', the accounting software that we used. Due to her advice, I considered her to be knowledgeable and skilful.
iii.I was unaware that Ms Dela Torre was not applying the Awards correctly. … I now understand and agree that I should have checked on what Ms Dela Torre was doing, and that it was my responsibility to ensure that Ms Dela Torre was applying the Awards correctly.
(b) the fact that Mr Marvello was paid by the First Respondent in a combination of electronic funds transfers and cash payments (phrase not read)
(c) the cash payments to which I refer in the previous paragraph totalled about $250.00 for every Saturday worked and $250.00 for every public holiday worked (in addition to Mr Marvello's ordinary wages) over the course of Mr Marvello's Employment. These payments were intended by the First Respondent and me to cover Mr Marvello's entitlements to things such as holiday and public holiday; and
(d) my confusion as to whether Mr Marvello was a level 3 or level 4 employee under the Awards …
…
14The consequence of all the above was that when the Compliance Notice was issued to the First Respondent and to me, I was (wrongly) reluctant to accept its accuracy. This in turn led me to fail to cause the First Respondent to comply with the Compliance Notice. I now know and fully understand that this was not an acceptable response to the Compliance Notice. If I thought the Compliance Notice was wrong, I should have formally challenged the document through the means provided by the FW Act and its regulations. In the absence of taking such a step, I should have ensured that the First Respondent complied with the Compliance Notice (whether or not I harboured doubts about its accuracy).
15Thus, I accept, without reservation, that during Mr Marvello's Employment I ought to have better and more carefully understood whether the cash payments that the First Respondent was making to Mr Marvella were actually sufficient to cover any entitlement to penalty or overtime rates required to be paid by the Awards.
…
21In compliance with the Applicant's finding and the Compliance Notice, the First Respondent has commenced making payment of the Underpayment Amount. The following amounts have been paid:
(a) $3,000.00 on 3 August 2024;
(b) $2,000.00 on 12 August 2024;
(c) $5,000.00 on 16 August 2024;
(d) $5,000.00 on 29 August 2024; and
(e) $5,000.00 on 13 September 2024.
…
25Since the commencement of the Proceedings and the issue of the Compliance Notice by the Applicant, I, on behalf of the First Respondent, have taken the following corrective action to prevent any further contraventions of the FW Act:
(a)I have sought advice from a competent and skilful third-party provider, Employsure, to provide the First Respondent with information in respect to the modern awards applicable to its employees. … The matters about which we have sought advice includes:
i. advice on wages, over-time and allowances and penalty rates; and
ii. advice of all the combinations of shifts, including over-time and allowances, start and end times and ordinary hours that the First Respondent's employees work and how they are paid out.
(b) The arrangement with Employsure is as follows:
i. Employsure assesses the First Respondent's employment contracts and policies and is responsible for ensuring that they satisfy the relevant awards and requirements;
ii. Employsure provides the Fist Respondent with ongoing support in respect of employment relations, including updating contracts and policies to keep up with legislative changes; and
iii. Employsure provides the First Respondent access to 'BrightHR' which is an employee management software to assist with record-keeping and rosters.
(c) The engagement of Employsure will ensure that the First Respondent is up to date with all legislative changes and that their contracts are being regularly reviewed to ensure compliance with awards and legislation.
(d) In or around 2021, I also engaged, as a contractor for the First Respondent, a competent and skilful external accountant to ensure that all entitlements are properly paid. The accountant has the following qualifications and experience:
i. Bachelor of Commerce with a major in Accounting;
ii. Charted Accountant; and
iii. Registered taxation practitioner and agent.
(e) I have instructed the accountant to:
i.check off on payslips before they are sent;
ii.maintain up to date knowledge of the relevant and applicable modern awards; and
iii.ensure that the First Respondent's employees are being paid fairly and correctly and in accordance with the Award (where applicable).
CONSIDERATION
Generally
The purpose of civil penalties of the sort available under the FW Act is deterrence, not compensation: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at 195 [116]; Dafallah v Fair Work Commission (2014) 225 FCR 559 at 593 [140]. In Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (2018) 264 FCR 155 at 167 [19], the Full Court of the Federal Court said:
It is unnecessary to engage in any extended discussion of principle. Of particular significance is the recognition that deterrence (general and specific) is the principal and indeed only object of the imposition of a penalty — to put a price on contravention that is sufficiently high to deter repetition by the contravener and others who might be tempted to contravene the Act: French J in Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076 at 52,152, cited by the plurality in Commonwealth v Director of the Fair Work Building Industry Inspectorate (Civil Penalties Case) [2015] HCA 46; (2015) 258 CLR 482 at [55]. ...
In this case, the question of penalty is comparatively simple involving, in the case of each respondent, one contravention of s.716(5) of the FW Act. When determining the appropriate penalty to impose, regard should be had to all of the circumstances of the case guided by the various discretionary considerations discussed in authorities such as Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 at 460-461 [18]-[19], in order to arrive at a single result that is an instinctive synthesis of those various factors.
Particular considerations
I find the following to be considerations relevant to the imposition of penalties in this matter.
The nature and extent of the conduct which led to the breaches
The parties agreed that although there had been contact between them in the period leading up to the Compliance Notice’s deadline, KTM had failed to satisfy the notice’s requirements and Ms Mamone was involved in that failure. The consequence of such non-compliance was that Mr Marvello was not paid the amount owed to him according to the timetable imposed by the Compliance Notice and, in fact, payments in reduction of the sum owed were not commenced until more than 2 years after the Compliance Notice was served, which was some time after the payments ought to have been made in the ordinary course of Mr Marvello’s employment.
Significantly, however, the evidence does not suggest that the failure to act on the requirements of the Compliance Notice was part of a wider pattern of conduct or contumelious in nature. On that latter point, it was submitted by the Ombudsman that KTM’s conduct had been deliberate and in deliberate disregard of its obligations under the FW Act. That is not a state of mind that is to be assumed and needs to be proved, including by inferences drawn from the circumstances of a case, but in this matter I do not accept that the clear wording of the Compliance Notice was open to misinterpretation. Nonetheless, I accept that Ms Mamone believed that KTM had not underpaid Mr Marvello and so it ought not have had any exposure to the notice’s demand for payment. That approach was not one lawfully open to the respondents but the facts do not suggest an intention to ignore the material substance of the obligation identified by the notice, namely payment to Mr Marvello. The respondents’ difficulty is that they believed, I accept, they had discharged that obligation when in fact they had not.
Prior contraventions.
It was not suggested that either of the respondents had previously or subsequently contravened the FW Act.
Nature and extent of loss
The $30,321.25 owed to Mr Marvello was a significant portion of his total entitlements in the period 26 November 2018 to 4 March 2021 which, according to the Ombudsman’s 22 November 2023 letter to the respondents, and its attachments, amounted to $178,467.37. Were those figures to be annualised they would represent an underpayment of about $13,920 in respect of a total annual entitlement of about $79,318.
Corrective action, contrition and co-operation
Corrective action did not take place until this proceeding was commenced, which is a matter of some concern as Ms Mamone’s affidavit indicates that the accountant whose error appears to have led to the underpayment had as early as 2021 been replaced or given professional support by “a competent and skilful accountant”. Even so, once the proceeding was commenced at the end of last year, a defence admitting the contraventions was filed, procedural matters were dealt with by consent and the matter listed for an early hearing limited to questions of penalty. Further, the amount owed has been paid and Ms Mamone has expressed contrition in a most fulsome way. KTM has also manifested contrition in the manner appropriate to a corporate personality by addressing the fact of the contravention through remedying its effects and taking corrective action to prevent a repetition of the underlying underpayment and by retaining advisers to ensure that it better understands its obligations under the FW Act.
Overall, the respondents’ actions have significantly reduced the scope and duration of this proceeding. In recognition of this, a discount on penalties of 15% is appropriate.
Minimum standards
In Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492 at [7] Judge Emmett accepted the entirety of the Ombudsman’s submissions on penalty, which included the following:
42.… intentional failure to comply with a mandatory notice issued by the workplace regulator is “conduct … [which] undermines the utility and effectiveness of a fundamental object” [of] the FW Act. The failure to comply undermines and frustrates the powers conferred on Fair Work Inspectors, which are conferred for the purposes of providing an effective means of enforcing compliance with lawful minimum entitlements. There is a significant cost to the public by reason of the need to bring this matter before the court to enforce compliance.
I also agree with those sentiments and find that KTM’s failure to observe the requirements of the Compliance Notice undermines the utility of compliance notices as an effective mechanism for the efficient and cost-effective rectification of identified contraventions of the FW Act.
Deterrence
I repeat what I said in Fair Work Ombudsman v Pure Telecom Pty Ltd [2024] FedCFamC2G 664 at [41]:
The system of Compliance Notices is a welcome innovation but its value is undermined if employment market participants do not act in accordance with such notices. The Court should, by the penalties it imposes, discourage the respondents from repeating their contravening conduct and others from committing similar contraventions in the future.
The road transport industry is a large industry and its participants should not think that compliance notices can be put in a drawer and ignored as KTM appears metaphorically to have done. Closer to home, KTM remains in business and Ms Mamone remains involved in its operations and so their future conduct must be taken into account. Although the penalties to be imposed should reflect the need to send a message generally to the road transport industry, I believe that the need for specific deterrence is not large because Ms Mamone’s affidavit and KTM’s actions satisfy me that they have learned an expensive lesson.
Penalties
I find that KTM should pay a penalty of $6,000 for its breach of s.716(5) of the FW Act.
I find that Ms Mamone should pay a penalty of $1,200 for her accessorial breach of s.716(5) of the FW Act.
CONCLUSION
There will be declarations that the respondents contravened s.716(5) of the FW Act by failing to comply with the Compliance Notice.
KTM will be ordered to pay the Commonwealth a penalty of $6,000 within 28 days and Ms Mamone will be ordered to pay the Commonwealth a penalty of $1,200, also within 28 days.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 13 January 2025
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