Fair Work Ombudsman v Liquid Fuel Pty Ltd

[2015] FCCA 2694

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v LIQUID FUEL PTY LTD & ORS [2015] FCCA 2694

Catchwords:
INDUSTRIAL LAW – Contraventions of Workplace Relations Act 1996 and Fair Work Act 2009 – admitted contraventions by first respondent – question of involvement of second, third and fourth respondents in that conduct – whether accessorily liable – knowledge – wilful blindness.

Legislation:

Fair Work Act 2009 (Cth) ss.45, 345, 349, 531, 535, 536, 550

Workplace Relations Act 1996 (Cth) ss.128, 185, 728

The Zamora (No 2) [1921] 1 AC 801
Australian Securities and Investments Commissions v Adler [2002] NSWSC 171
Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365
Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 2) [2010] FCA 1156
Yorke v Lucas (1985) 158 CLR 661
Australian Competition & Consumer Commission v Giraffe World Australia Pty Ltd (1999) 95 FCR 302
Rural Press Ltd v Australian Competition & Consumer Commission (2002) 118 FCR 236
Heydon v NRMA Ltd (2000) 51 NSWLR 1
Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17
Fair Work Ombudsman v McGrath (2010) 239 FLR 313
Fair Work Ombudsman v AM Retail Solutions & Anor(No.4) [2010] FMCA 525
Fair Work Ombudsman v Pocomwell Limited (No 2) [2013] FCA 1139
Fair Work Ombudsman v Devine Marine Group Pty Ltd [2013] FCA 1135
Potter v Fair Work Ombudsman [2014] FCA 187
Fair Work Ombudsman v Al Hilfi [2012] FCA 1166
Giorgianni v The Queen (1985) 156 CLR 473
Macquarie Bank Limited v Sixty Fourth Throne Pty Ltd [1998] 3 VR 133
Pereira v Director of Public Prosecutions (1988) 82 ALR 217
Rafferty v Madgwicks (2012) 203 FCR 1
Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342
Roper v Taylor's Central Garages (Exeter) Ltd [1951] 2 TLR 284

Applicant: FAIR WORK OMBUDSMAN

First Respondent:

LIQUID FUEL PTY LTD

ACN 127 489 776

Second Respondent: XIN ZHANG

Third Respondent: LINDA QU

Fourth Respondent: NIAN LI

File Number: MLG 559 of 2013

Judgment of: Judge O'Sullivan

Hearing dates: 20 & 21 July 2015

Date of Last Submission: 21 July 2015

Delivered at: Melbourne

Delivered on: 8 October 2015

REPRESENTATION

Counsel for the Applicant: Mr Tracey

Solicitors for the Applicant: Fair Work Ombudsman

Counsel for the Respondents: Mr Burmeister

Solicitors for the Respondents: Stamford Lawyers

ORDERS

THE COURT DECLARES THAT:

1. On the basis of the Amended Statement of Agreed Facts filed 24 December 2014, the first respondent contravened:

   (a)subsection 182(1) of the Workplace Relations Act 1996 (Cth) (WR Act) in that it failed to pay the Employees a rate at least equal to the basic periodic rate of pay payable to them under the Australian Pay and Classification Scale derived from the Vehicle Industry – Repair, Services and Retail Award 2002 (Vehicle Industry Pay Scale) from 25 August 2008 to 30 June 2009;

   (b)item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Transitional Act) and subsection 182(1) of the WR Act in that it failed to pay the Employees a rate at least equal to the basic periodic rate of pay payable under the Vehicle Industry Pay Scale from 1 July 2009 to 31 December 2009;

   (c)subsection 185(2) of the WR Act in that it failed to pay the Employees a casual loading at least equal to the casual loading payable under the Vehicle Industry Pay Scale from 25 August 2008 to 30 June 2009;

   (d)item 5 of Schedule 16 of the Transitional Act and subsection 185(2) of the WR Act in that it failed to pay the Employees a casual loading at least equal to the casual loading payable under the Vehicle Industry Pay Scale from 1 July 2009 to 31 December 2009;

   (e)section 45 of the Fair Work Act 2009 (Cth) (FW Act) in that it failed to pay the Employees casual rates for a console operator (aged 20 years or over) in accordance with clause 36.3 of the Vehicle Manufacturing, Repair, Services and Retail Award 2010 [MA000089] (Modern Award) from 1 January 2010 to:

   (i)5 August 2012 in respect of Mr Singh; and

   (ii)8 July 2012 in respect of Mr Verma;

   (f)section 45 of the FW Act in that it failed to pay the Employees transitional penalty rates for work performed on Saturdays, Sundays and Public Holidays in accordance with clauses A.7.3 and 36.3 of the Modern Award from 12 July 2010 to:

   (i)5 August 2012 in respect of Mr Singh; and

   (ii)8 July 2012 in respect of Mr Verma;

   (g)section 45 of the FW Act in that it failed to pay the Employees overtime rates in addition to their ordinary rate of pay for hours worked in excess of an average of 38 hours per week or 10 hours per day in accordance with clause 36.3 of the Modern Award between:

   (i)4 April 2011 and 13 November 2011 in respect of Mr Singh; and

   (ii)22 February 2010 and 24 June 2012 in respect of Mr Verma;

   (h)regulations 19.4(1), 19.4(2), 19.11(2) and 19.11(4) of the Workplace Relations Regulations 2006 (WR Regulations) by failing to make and keep, a record of:

   (i)the hours worked by Sukhpal Singh from 24 October 2007 to 24 August 2008; and

   (ii)the gross amounts paid to Sukhpal Singh from 24 October 2007 to 24 August 2008;

   (i)subsection 535(1) of the FW Act from 1 January 2010 to 24 June 2012 by failing to make and keep a record of the number of overtime hours worked by each of the Employees each day, or when the Employees started and ceased working overtime hours, in accordance with regulation 3.34 of the Fair Work Regulations 2009 (FW Regulations);

   (j)regulation 19.20(3) of the WR Regulations by failing to include the following information on the pay slips issued to the Employees from 25 August 2008 to 30 June 2009 in accordance with regulation 19.21 of the WR Regulations:

   (i)the Employee’s full name;

   (ii)the Employee’s ordinary hourly rate of pay;

   (iii)the number of ordinary hours worked by the Employee during the pay period;

   (iv)the casual loading payable to the Employee;

   (v)the amount of any superannuation contribution that the First Respondent:

   A.has made for the benefit of the Employee; or

   B.is liable to make;

   in relation to the period to which the pay slip relates.

   (k)subsection 536(2)(b) of the FW Act by failing to include the following information on the pay slips issued to the Employees between 1 July 2009 and 22 July 2012:

   (i)the Employee’s full name in accordance with regulation 3.46(1)(b) of the FW Regulations;

   (ii)the Employee’s ordinary hourly rate of pay and number of hours during the period worked at that rate in accordance with regulation 3.46(3) of the FW Regulations;

   (iii)the amount of the superannuation contribution that the First Respondent:

   A.has made for the benefit of the Employee during; or

   B.is liable to make in relation to; and

   C.the period to which the pay slip relates, and the name, or name and number, of any fund to which the contribution was or will be made, in accordance with regulation 3.46(5) of the FW Regulations.

2. The fourth respondent was for the purposes of s.728 of the WR Act and s.550 of the FW Act involved in the contraventions of the first respondent admitted in order 1.

3. The second and third respondents were for the purposes of s.728 of the WR Act and s.550 of the FW Act involved in the contraventions of the first respondent admitted in order 1(h) to (k).

THE COURT ORDERS THAT:

1. The proceedings be adjourned for a penalty hearing on a date to be fixed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 559 of 2013

FAIR WORK OMBUDSMAN

Applicant

And

LIQUID FUEL PTY LTD

ACN 127 489 776

First Respondent

XIN ZHANG

Second Respondent

LINDA QU

Third Respondent

NIAN LI

Fourth Respondent

REASONS FOR JUDGMENT

1. These proceedings concern the question of whether a number of people are liable as accessories for breaches of workplace legislation by a business they ran. Those breaches affected two employees who came to Australia from India on student visas and received less than 60% of what they were entitled to. Each of the individuals effectively say they are not liable as accessories to those breaches because they did not know what was going on was wrong. However:

   “A thing may be troublesome to learn, and the knowledge of it, when acquired, may be uninteresting or distasteful. To refuse to know any more about the subject or anything at all is then a wilful but a real ignorance. On the other hand, a man is said not to know because he does not want to know, where the substance of a thing is borne in upon his mind with a conviction that full details or precise proofs may be dangerous, because they may embarrass his denials or compromise his protests. In such a case he flatters himself that where ignorance is safe, ‘tis folly to be wise, but there he is wrong, for he has been put upon notice and his further ignorance, even though actual and complete, is a mere affectation and disguise.”[1]

   [1] See The Zamora (No 2) [1921] 1 AC 801 at 812-3 referred to with approval in Australian Securities and Investments Commissions v Adler [2002] NSWSC 171 at [209] and Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342.

2. The Fair Work Ombudsman (the applicant) commenced these proceedings against Liquid Fuel Pty Ltd ACN 127 489 776 (the first respondent) and three other respondents by application and statement of claim filed on 26 April 2013.

3. The applicant alleged inter alia that two former employees of the first respondent had been underpaid in contravention of the Workplace Relations Act 1996 (Cth) (the WR Act), the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (the Transitional Act) and the Fair Work Act 2009 (Cth) (the FW Act).

4. The applicant also alleged that Xin (also known as Kevin) Zhang (the second respondent), Linda Qu (the third respondent) and Nian Li (the fourth respondent) were involved in those contraventions and separately liable as accessories for the contraventions committed by the first respondent pursuant to s.728 of the WR Act and s.550 of the FW Act.

5. The first respondent operated a business that ran a BP Service Station in Berwick Victoria (the Site). Mr Sukhpal Singh and Mr Sunil Verma (the Employees) were employed by the first respondent at the Site between October 2007 until February 2013 and December 2008 until April 2013 respectively as casual console operators.

6. The second and third respondents are married and were managers of the business operating at the Site. The fourth respondent, who lives in Toorak, is the father and father-in-law respectively of the third and second respondents respectively and a director of the first respondent which operated the business at the Site.

7. The first respondent has made full admissions in relation to the allegations made against it in the statement of claim. The parties have subsequently filed a ‘Amended’ Statement of Agreed Facts (S.O.A.F.) for that purpose and seek that the Court, at an appropriate time make the requisite declarations and any orders by way of penalty against the first respondent for the admitted contraventions.

8. In so far as the allegations made against the second, third and fourth respondents of involvement in and liability as accessories for the above mentioned contraventions by the first respondent are concerned they are denied and liability on that basis was contested.

9. One of the questions that arises for consideration in this case is whether one or all of the respondents have actual knowledge of the essential matters for the purposes of s.728 of WR Act and s.550 of the FW Act based on suspicion and inference such as to ground a finding of accessorial liability on the basis of wilful blindness.

Procedural Background

1. The application and statement of claim were filed 26 April 2013. The proceedings first came before His Honour Judge Burchardt on 27 May 2013. Orders were made referring the parties to mediation which took place on 17 June 2013. Further interim orders were made on 27 August 2013, 1 October 2013 and 28 November 2013. In the last mentioned orders the parties were directed to file a S.O.A.F which they subsequently did on 17 January 2014.

2. The second to fourth respondents each filed an affidavit on 5 February 2014. Further orders were made on 21 February 2014 and 17 March 2014. Orders made 24 July 2014 set out a timetable for filing of submissions and in orders made 22 August 2014 a timetable for filing submissions in respect of liability was set out. As His Honour was unavailable the matter came before the Court as currently constituted on 27 November 2014. On that day the matter was listed for trial on 20 July 2015 on the question whether the second to fourth respondents were liable as accessories to the first respondent’s admitted contraventions under s.728 of the WR Act and s.550 of the FW Act.

Admitted background facts

1. Whilst the liability of the second to fourth respondents for involvement in the admitted contraventions by the first respondent was disputed the following background facts were not. The first respondent admits:

   ·contraventions of WR Act and Transitional Act and failure to pay basic periodic rate of pay;

   ·contraventions of WR Act and Transitional Act, failure to pay casual loading;

   ·contraventions of FW Act and relevant modern award for failing to pay correct rate;

   ·contraventions of FW Act and relevant modern award for correct Saturday, Sunday and Public Holiday rates;

   ·contraventions of FW Act and relevant modern award for overtime rate;

   ·contraventions of WR Regulations for record keeping;

   ·contraventions of FW Act for record keeping; and

   ·contraventions of WR and FW Act for pay slips.

2. The second respondent is married to the third respondent and both have a Master of Business qualification from Monash University.

3. The fourth respondent is the father of the third respondent and father in-law of the second respondent. The fourth respondent is a director and secretary of the first respondent, he is also a holder of 50% of the shares in Liquid Investment & Development Pty Ltd, the sole shareholder of the first respondent.

4. The second and third respondents had joint responsibility for the day to day running of the first respondent’s operations at the Site.

5. The second, third and fourth respondents were aware that the Employees were engaged by the first respondent on a casual basis as console operators. They were also aware of the wages being paid to the Employees.

6. The second and third respondents consulted with the fourth respondent in relation to setting and adjusting the wage rate for each of the Employees. The fourth respondent is aware of, and responsible for, setting and adjusting wages for the Employees.

7. The second and third respondents were aware of the hours worked, the amounts paid to each of the Employees and they were both responsible for issuing pay slips.

8. The second and third respondents were both responsible for the making and keeping of records on behalf of the first respondent in relation to the Employees; and were aware of how, and the extent to which, records were being kept.

9. The fourth respondent agreed to participate in a recorded interview with the applicant which was conducted on 7 November 2012. In the interview he stated that he had a PhD and was a lecturer at Swinburne University until around 2010. The fourth respondent stated in the interview that he was not involved in the day to day operation of the business at the Site, but took care of major decisions, including the salary of the Employees.

10. The fourth respondent also indicated that the second and third respondents graduated from Monash University with a Master of Business in 2007 and could not find a good job. The fourth respondent said they asked him about setting up a business, following which the fourth respondent made some enquiries and then purchased the business at the Site for $1.8 million. The fourth respondent also stated that neither he, nor the second and third respondents made any enquiries about employee entitlements when the first respondent took over the business at the Site. He stated that he became aware of the relevant modern award applicable to the Employees in around June 2012 after receiving a letter from the applicant.

11. The fourth respondent stated that the second and third respondents managed the day to day operation of the business at the Site and that their duties involved interviewing potential employees, purchasing goods and dealing with suppliers, managing rosters, managing payroll, including inputting hours worked and paying employees, issuing pay slips to employees, and keeping timesheets and other records on behalf of the first respondent.

12. The fourth respondent also stated that the second and third respondents consulted with him about how much the Employees should be paid, the total weekly wage expenditure and when terminating any employees.

Accessorial liability

1. Given the dispute over whether the second to fourth respondents were accessorily liable it is timely to note that section 550 of the FW Act (as well as its predecessor s.728 of the WR Act) provides that:

   “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.”

2. In relation to each of the second, third and fourth respondents, section 728(1) of the WR Act and section 550(1) of the FW Act provide that a person who is involved in a contravention of a civil remedy provision is treated as having contravened that provision. If such involvement is found, the Court may award a penalty in respect of those respondents.

3. A person is “knowingly concerned” in a contravention if he or she has knowledge of the essential facts constituting the contravention and is an intentional participant in it, the necessary intent being based on knowledge of the essential elements of the contravention (See Yorke v Lucas; Australian Competition & Consumer Commission v Giraffe World Australia Pty Ltd (1999) 95 FCR 302; Rural Press Ltd v Australian Competition & Consumer Commission (2002) 118 FCR 236; Heydon v NRMA Ltd (2000) 51 NSWLR 1). The accessory need not know that the conduct constituted a contravention (See ACCC v Giraffe World at 346 [186]; Rural Press v ACCC at 282, 283 [159], [160]; Heydon v NRMA at 109 [334]).

4. In Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17, speaking of the equivalent provisions to s.728 and s.550 in the Trade Practices Act 1974, the Full Court of the Federal Court said:

   “133For a person to be involved in a contravention within the meaning of s 75B(1)(c) of the Act, a person must be an intentional participant in the contravention, the necessary intent being based upon knowledge of the essential elements of the contravention: see Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 670. Thus, while it is not necessary to establish that the individual Respondents had knowledge that there was a contravention of a provision of Pt V of the Act, it is necessary to demonstrate that each individual Respondent had knowledge of each of the essential elements of the contravention.

   134In order to establish whether any of the individual Respondents was involved in a contravention, it is necessary to examine the state of mind of each of them separately in relation to each alleged contravention…

   135It is not necessary to establish any subjective element in relation to a contravention of Pt V of the Act. A contravention may be committed unintentionally. That is to say, a person may contravene a provision of Pt V even though that person does not have knowledge of all of the essential elements that constitute the contravention. However, before any accessorial liability will arise, it is necessary to establish the subjective element of knowledge of each of the essential elements of the contravention. That knowledge may be constructive in the sense that it may be possible to show wilful blindness in relation to the elements of a contravention. However, absent a finding of wilful blindness, it is necessary to establish actual knowledge on the part of a person to whom it is sought to sheet home accessorial liability in respect of a contravention of Pt V.”

1. The authorities establish that in order for a person to have accessorial liability, he or she must be a knowing participant or in other words:

   a)must have knowledge of the essential facts constituting the contravention;

   b)must be knowingly concerned in the contravention;

   c)must be an intentional participant in the contravention based on actual not constructive knowledge of the essential facts constituting the contravention – although constructive knowledge may be sufficient under s.550(2)(c) in cases of wilful blindness; and

   d)need not know that the matters in question constituted a contravention.

2. These matters were addressed by Smith FM in Fair Work Ombudsman v McGrath[2]; and also in Fair Work Ombudsman v AM Retail Solutions and Anor (No 4).[3] In McGrath, His Honour examined the authorities as to the evidence necessary to establish that a person is “knowingly concerned”. His Honour held as follows at paragraphs [24] to [27]:

   [2] (2010) 239 FLR 313 at [19]-[30].

   [3] [2010] FMCA 525.

   “In Giorgianni v R (1985) 156 CLR 473, which was applied in Yorke v Lucas, it was made clear in relation to a strict liability offence, which could be established against a principal offender by proving an omission to take a required action, that the requirement of intentional participation by an accessory did not allow the accessory to be convicted merely by showing a negligent, reckless, or irresponsible failure by him to be aware of an essential fact and to ensure the taking of the required action.

   …

   The judgments in Giorgianni recognised that in some circumstances a finding of “wilful blindness” might be sufficient. However, as Gibbs CJ said at 487:

   However connivance, or wilful blindness, is only relevant to the liability of a secondary party to an offence because it virtually amounts to knowledge. Recklessness, in the sense of not caring whether the facts exist or not, would be relevant only if it too was virtually equivalent to knowledge, in other words only if it amounted to wilful blindness.

   [26] Mason J explained “wilful blindness” at 495:

   It is enough if the defendant has deliberately shut his eyes to a relevant fact or has deliberately abstained from obtaining knowledge by making an inquiry for fear that he may learn the truth. (emphasis added)”

3. In Fair Work Ombudsman v Pocomwell Limited (No 2) [2013] FCA 1139 His Honour Barker J of the Federal Court said:

   “265.The applicant alleges that the second, third and fourth respondents were involved in the alleged contraventions by the first respondent, within the meaning of s 550(2)(c) of the FW Act. That provision states:

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

   ...

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

   ...

   266.The second, third and fourth respondents deny they were knowingly concerned in or party to any contravention by the first respondent.

   267.The third and fourth respondents in particular deny knowing the rigs had majority Australian crews (assuming that were the case).

   268.The third and fourth respondents draw attention to what was said in Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 (Yorke v Lucas) at 670 (Mason ACJ, Wilson, Deane and Dawson JJ), that for a person to be involved in a contravention of s 75B(c) of the Trade Practices Act 1974 (Cth) a person must be an intentional participant in the contravention, the necessary intent being based upon knowledge of the essential elements of the contravention. See also Fair Work Ombudsman v McGrath [2010] FMCA 315; (2010) 195 IR 190 at [23] in respect of s 550 of the FW Act.

   269.These respondents also draw attention to what was said in Australian Competition and Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17 at [135] to the effect that before any accessorial liability will arise, it is necessary to establish the subjective element of knowledge of each of the essential elements of the contravention. The Court there noted that knowledge may be constructive in the sense that it may be possible to show wilful blindness in relation to the elements of the contravention, but absent such a finding it is necessary to establish actual knowledge on the part of the person to whom it is sought to sheet home accessorial liability in respect of a contravention.

   270.The third and fourth respondents also say that there was a lack of evidence to show that they were “linked in purpose” with the first respondent in committing any contravention: see Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473 at 494 (Mason J).

   271.The third and fourth respondents say that unless the rigs are fixed platforms, the alleged contraventions of the minimum wage order and the Award can succeed only if either of them was a “majority Australian-crewed ship”. In those circumstances they submit that the essential elements of the contraventions of which they needed to have knowledge include that the vessels had majority Australian crews. Without that element there is no contravention.

   272.These respondents note that the applicant may say that the majority Australian crew requirement only goes to jurisdiction and is not an essential element of the contraventions – so that it is not something of which the third and fourth respondents need to have knowledge to be liable as accessories. They say this raises the question of what matters ought to be regarded as the essential elements of an offence or contravention for the purpose of the rule in Yorke v Lucas.

   273.They say they have not been able to find any decision directly on point so they deal with it by reference to principle and here cite Thompson v The Queen [1989] HCA 30; (1989) 169 CLR 1 (Thompson) and R v Abdulla [2010] SASC 52; (2010) 200 A Crim R 365 (Abdulla).

   274.Further, they say there is no evidence either directly or from which inferences can be drawn that any of the second, third or fourth respondents had actual knowledge that a majority of the crew of either rig were Australian residents.

   275.They point out that regs 1.15B and 1.15E had not been made when, between March and July 2009, the third respondent first agreed to provide painters to Maersk.

   276.They also say there is no evidence to indicate that the third and fourth respondents became aware of the regulations once they were made or once they commenced on 1 January 2010.

   277.There is nothing, they say, to suggest that the third and fourth respondents turned their minds to whether the rig Nan Hai VI was “majority Australian-crewed” at that time either. The same can be said in relation to the Maersk Discoverer.

   278.The third and fourth respondents also say they were not wilfully blind and there is no occasion for a Jones v Dunkel inference to be drawn against them.

   279.Notwithstanding these submissions, I accept those of the applicant that, if there were contraventions, the elements of it were known by the second, third and fourth respondents. The contraventions constitute the failure to comply with the requirements of the Award. If there were findings that the rigs constituted a fixed platform in each case, or that the rigs constituted a “majority Australian-crewed ship”, then those findings go to the jurisdiction of the Court, not a question of primary liability under knowing involvement. I accept the applicant’s submission in that regard that the decisions in Thompson and Abdulla are not to the point.

   280.Similarly, I accept the applicant’s submission that the fact that the relevant respondents did not know about the requirements for a fixed platform or a majority Australian-crewed ship was irrelevant to the question of knowing involvement. What they did know was that they were arranging for men to work as painters on rigs in Australia’s EEZ on contracts at low rates. The evidence justifying that finding is ample and need not be repeated in detail.

   281.The elements of a relevant contravention go to whether or not minimum wages required to be paid were in fact paid and whether or not the individual respondents were aware of what was proposed to be paid to each of the painters. In that regard, there is no doubt that each of the second and fourth respondents, as the guiding minds of the first and third respondents respectively (the second respondent as agent for the first respondent), actively organised the hiring of the painters and negotiated the terms of payment. Thus, the second, third and fourth respondents were fully aware of the facts that would have constituted a contravention of the FW Act, if such contravention had been proved.”

4. In Fair Work Ombudsman v Devine Marine Group Pty Ltd [2013] FCA 1135 His Honour White J of the Federal Court considered, in the context of a strike out application, the approach to accessorial liability under the WR Act and FW Act at paragraphs [42] to [47].

5. Later in Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 (Devine Marine) His Honour reviewed the relevant principles for the purpose of accessorial liability and the approach bearing upon the requisite intention and knowledge for a finding of accessorial liability.[4] His Honour stated at paragraphs [176] to [186]:

   [4] See paragraphs [176] to [188].

   “176.Although the general principles relating to accessorial liability are settled, their application in a case such as the present is not without difficulty. In order to aid, abet, counsel or procure the relevant contravention, the person must intentionally participate in the contravention with the requisite intention: Yorke v Lucas [1985] HCA 65; (1984) 158 CLR 661 at 667. In order to have the requisite intention, the person must have knowledge of “the essential matters” which go to make up the events, whether or not the person knows that those matters amount to a crime: Yorke v Lucas at 667. Although it is necessary for the person to be an intentional participant and to have knowledge of the matters or things constituting the contravention, it is not necessary for the person to know those matters or things do constitute a contravention: Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213; (2002) 118 FCR 236 at [159]- [160]. That is to say, it is not necessary that the accessory should appreciate that the conduct in question is unlawful. The Full Court in Rafferty v Madgwicks [2012] FCAFC 37; (2012) 287 ALR 437 summarised the position in this respect at [254]:

   [W]hile the identification of the elements of a contravention requires careful legal analysis, “[i]n order to know the essential facts, and thus satisfy s 75B(1) ... and like provisions, it is not necessary to know those facts are capable of characterisation in the language of the statute” ... This is another aspect of the longstanding principle that it is not necessary for a person to “recognise” the contravention as such, or explicitly to think about the relevant legislation that their actions may contravene ...

   177.Actual, rather than imputed, knowledge is required. So much was made clear in Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473 at 506-7 by Wilson, Deane and Dawson JJ:

   ... [Offences of aiding and abetting and counselling and procuring] require intentional participation in a crime by lending assistance or encouragement. They do not, of course, require knowledge of the law and it is necessary to distinguish between knowledge of or belief in the existence of facts which constitute a criminal offence and knowledge or belief that those facts are made a criminal offence under the law. The necessary intent is absent if the person alleged to be a secondary participant does not know or believe that what he is assisting or encouraging is something which goes to make up the facts which constitute the commission of the relevant criminal offence. He need not recognize the criminal offence as such, but his participation must be intentionally aimed at the commission of the acts which constitute it. It is not sufficient if his knowledge or belief extends only to the possibility or even probability that the acts which he is assisting or encouraging are such, whether he realizes it or not, as to constitute the factual ingredients of a crime. If that were sufficient, a person might be guilty of aiding, abetting, counselling or procuring the commission of an offence which formed no part of his design. Intent is required and it is an intent which must be based upon knowledge or belief of the necessary facts. ...

   178.The notion of being “knowingly concerned” in a contravention has a different emphasis from that of aiding, abetting, counselling or procuring” a contravention. To be knowingly concerned in a contravention, the person must have engaged in some act or conduct which “implicates or involves him or her” in the contravention so that there be a “practical connection between” the person and the contravention: Construction, Forestry, Mining and Energy Union v Clarke [2007] FCAFC 87; (2007) 164 IR 299 at [26]; Qantas Airways Ltd v Transport Workers’ Union of Australia [2011] FCA 470; (2011) 280 ALR 503 at [324]- [325].

   179.As indicated, these principles are not in doubt. The more difficult question arises from their application to the circumstances of this case and, in the identification of the essential facts about which an accessory must have actual knowledge.

   180.Counsel submitted that it was necessary for the FWO to establish that Capt Devine had actual knowledge of the following matters:

   (a) That Mr James and Mr Kouka performed work for DMG;

   (b) That Mr James and Mr Kouka were employees of DMG;

   (c) The nature of the work performed by Mr James and Mr Kouka;

   (d) That Mr James and Mr Kouka were entitled to be paid minimum wages; and

   (e) That Mr James and Mr Kouka were not paid the minimum wages.

   181.Counsel then contended that it was not necessary for the FWO to establish that Capt Devine had knowledge of the following matters:

   (a) That a particular Award applied to the work performed by Mr James and Mr Kouka;

   (b) The specific entitlements arising under that Award;

   (c) The particular hours worked by Mr James and Mr Kouka.

   182.Counsel drew attention, quite fairly, to Potter v Fair Work Ombudsman [2014] FCA 187. In that case, Cowdroy J held that knowledge by the accessory that a particular industrial award, the Clerical and Administrative Employees (State) Award (the Clerical NAPSA), was applicable was an essential element of accessorial liability in respect of the underpayment of award entitlements. Cowdroy J held:

   [80] The primary submission of the FWO is that Mrs Potter did not need to know that the Clerical NAPSA applied; rather, the only essential fact was that the Employees were not remunerated at the rate set under the provisions of the Clerical NAPSA. This is said to be because it is not necessary that an accessory know that an offence has been committed: Giorgianni v R [1985] HCA 29; (1985) 156 CLR 473 at 506.

   [81] Knowledge that the Clerical NAPSA applied to the Employees is not identical to knowledge that a failure to pay the Employees in accordance with the Clerical NAPSA constitutes a breach of a civil remedy provision, although it is undeniable that the difference is a small one. The Court finds that, to be an accessory to the underpayment contraventions, Mrs Potter must have known the Clerical NAPSA applied to the Employees. It is not difficult to imagine a situation in which directors of a company honestly but mistakenly arrange for the company’s employees to be paid under an incorrect award. There would be no doubt that the company had underpaid its employees, and by virtue of that fact, contravened the FW Act. If the position were as the FWO submits however, the directors would be liable as accessories to those contraventions simply because they knew how much the employees were being paid and because they had knowledge of the existence of the applicable award, even though they honestly believed that such award did not apply.

   (Emphasis added)

   183.As can be seen, Cowdroy J considered that the alleged accessory must have actual knowledge not only of the existence of the relevant Award but that it applied to the employees in question. If it were otherwise, accessories such as the directors of an employing company who knew of the existence of an award but genuinely believed it to be inapplicable, would nevertheless be found liable as accessories.

   184.Besanko J considered a similar question in the context of a summary dismissal application in Fair Work Ombudsman v Al Hilfi [2012] FCA 1166. The allegation in that case was that Coles Supermarkets Ltd was liable as an accessory in respect of the underpayment of wages to trolley collectors employed by a subcontractor. Coles submitted that the FWO had to establish that it had actual knowledge of the following matters:

   (i) that the four employees who were the subject of the claim were employed by Mr Ali Hilfi during the relevant period;

   (ii) that the Cleaning Services Award 2010 applied to the employment of those employees;

   (iii) that the work of each of the employees gave rise to the specific entitlements alleged;

   (iv) that the employees were not paid those entitlements by Mr Al Hilfi.

   Ultimately, it was not necessary for Besanko J to decide the correctness of the position asserted by Coles, but he did say (at [44]) that there was “a good deal of force” in its submission.

   185.In Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v John Holland Pty Ltd [2009] FCA 274; (2008) 180 IR 350 at [44], Greenwood J considered the question of accessorial liability in relation to the alleged assistance to a company contravening a provision of the Workplace Relations Act 1996 (Cth) requiring employers, in defined circumstances, to permit a right of entry to unions. Greenwood J held that the applicant had to establish that the defendant “had knowledge that the permit holders enjoyed a right of entry and, notwithstanding that knowledge, he set about engaging in the contravening conduct” (at [45]). Although addressed to a different point, the decision in John Holland also supports the views expressed by Cowdroy J in Potter and by Besanko J in Al Hilfi.

   186.Counsel for the FWO submitted that Potter should be distinguished because of the nature of the issue being considered by Cowdroy J. The putative accessory in that case was aware of the Clerical NAPSA but said that she considered it to be inapplicable because of registered Australian Workplace Agreements. Counsel submitted that, in that circumstance, it was understandable that Cowdroy J considered that actual knowledge that the Clerical NAPSA applied was essential for the establishment of accessorial liability.”

6. Having referred to inter alia decisions, Potter v Fair Work Ombudsman [2014] FCA 187 and Fair Work Ombudsman v Al Hilfi [2012] FCA 1166. His Honour concluded:

   “187. In my opinion, Potter cannot be distinguished on this basis. The FWO submission does not give effect to the requirement that the accessory’s involvement be intentional. That is the real issue to which Cowdroy J’s reasoning was directed. Without knowledge that an Award is applicable, it is difficult to see how a finding could be made that the accessory had intentionally participated in the contravention: see Yorke v Lucas at 670.

   188.As the respondents were not represented, the Court did not have the benefit of full argument on these issues. Nevertheless, I consider that the claims of accessorial liability in this case should be determined in accordance with the principles stated in Potter and Al Hilfi. That is because knowledge that there is an award which is applicable which prescribes minimum rates or entitlements is a factual element necessary for the establishment of the accessory’s intention.”

1. His Honour then went on to consider the liability of the alleged accessories in the case before him, finding one was[5] and the other wasn’t[6] involved in the contraventions.

   [5] See paragraph [196] – [197].

   [6] See paragraph [204] – [205].

2. Importantly, in Devine Marine His Honour noted:

   “189.It is helpful to recall the declaration sought by the FWO in respect of the accessorial liability of Capt Devine. By [80.9] of the 2ASC, the FWO seeks (relevantly) a declaration that Capt Devine was involved in DMG’s contravention of s 45 of the FW Act, “by failing to pay the applicable minimum hourly rates” to Mr James and Mr Kouka and by failing to pay “Saturday penalty rates” and “Sunday penalty rates” to Mr James and Mr Kouka.

   190.The essential facts amounting to DMG’s contraventions of which Capt Devine had to have actual knowledge were therefore that there were “minimum hourly rates” which were “applicable” to Mr James and Mr Kouka, and that there were “penalty rates” to which they were entitled in respect of their work on Saturdays and Sundays.

   191. In relation to the hourly rates, Capt Devine had to know that there were prescribed hourly rates which were applicable to Mr James and Mr Kouka and that DMG was paying the men less than those rates. In my opinion, this requires the FWO to establish actual knowledge by Capt Devine that:

   (i) Mr James and Mr Kouka performed work for DMG;

   (ii) That they did so as employees;

   (iii) That their work was governed by an industrial award (whether or not he knew of the name of the award);

   (iv) That the award stipulated minimum rates of pay; and

   (v) That the amounts DMG paid to Mr James and Mr Kouka were less than those minimum rates.

   192.In relation to the weekend penalty rates, the FWO must, in addition to (i), (ii) and (iii) establish that Capt Devine had knowledge that the applicable award prescribed weekend penalty rates and that the amounts DMG paid to Mr James and Mr Kouka for their weekend work were less than those rates. Unless Capt Devine had actual knowledge of those matters, it cannot be said that he was aware of the essential matters constituting DMG’s contraventions.”

3. It is hard to reconcile what His Honour said in Devine Marine with what was said in Giorgianni v The Queen (1985) 156 CLR 473 at page 506 to 507 where the High Court said:

   “….[Offences of aiding and abetting and counselling and procuring] require intentional participation in a crime by lending assistance or encouragement. They do not, of course, require knowledge of the law and it is necessary to distinguish between knowledge of or belief in the existence of facts which constitute a criminal offence and knowledge or belief that those facts are made a criminal offence under the law. The necessary intent is absent if the person alleged to be a secondary participant does not know or believe that what he is assisting or encouraging is something which goes to make up the facts which constitute the commission of the relevant criminal offence. He need not recognize the criminal offence as such, but his participation must be intentionally aimed at the commission of the acts which constitute it. It is not sufficient if his knowledge or belief extends only to the possibility or even probability that the acts which he is assisting or encouraging are such, whether he realizes it or not, as to constitute the factual ingredients of a crime. If that were sufficient, a person might be guilty of aiding, abetting, counselling or procuring the commission of an offence which formed no part of his design. Intent is required and it is an intent which must be based upon knowledge or belief of the necessary facts.(emphasis added)”

4. In Giorgianni v The Queen (1985) 156 CLR 473 it was noted that it was necessary to distinguish between knowledge of existence of facts which constitute the offence and knowledge that the facts are made an offence.

5. Under the FW Act modern awards (and the entitlements that arise there under) apply by statutory force. However in Devine Marine it seems White J held at [187] that inter alia knowledge an award was applicable was necessary for the purposes of establishing knowledge to ground a finding of accessorily liability. On one view this appears to conflate the distinction between knowledge of facts (or the acts which constitute the offence) and knowledge of the law (i.e. the award) applying. The question that arises from this approach in Devine Marine is if knowledge of the law (in accordance with the authorities referred to above) is not required then why would knowledge that the FW Act, Regulations or that the relevant modern award applies be required. Nevertheless it is a decision of a superior Court and I am bound to apply it.

Overview of position/s on question of accessorial liability

Respondents position

1. It is the position of the second, third and fourth respondents that it is not enough to show that a respondent knows what an employee receives and that an industrial instrument exists, it must also be shown that the relevant respondent knew it applied to the employee or that they had actual knowledge of the relevant matters for that respondent to be liable as an accessory.

2. In this case it is the position of the second to fourth respondents that the applicant cannot establish the specific sort of knowledge such as that referred to in the above mentioned paragraphs in Devine Marine as necessary to ground accessorial liability on their part in this case.

3. The respondent’s position in submissions filed before the trial was:

   “15.The relevant provisions are the subject of recent Federal Court of Australia authority, which this Court is bound to follow. Relevantly, it is bound to follow the decisions of Cowdroy J in Potter and White J in Devine Marine.

   16.In Potter, Cowdroy J confirmed the following (in the context of a prosecution for relevant contraventions):

   (a)accessorial liability requires actual knowledge of the essential facts that constitute the primary contravention; and

   (b)in this context, actual knowledge of the industrial instrument(s) in question, and actual knowledge that those instruments applied to the relevant employees are both “essential facts”.

   17.Among other things, for accessorial liability to be established, it is not enough to show that a respondent knows what an employee receives and that the instrument(s) exists.  It must also be shown is that the respondent knew (at the time of the alleged contravention) that the instrument(s) applied to the employee.

   18.This reasoning was adopted with approval by White J in Devine Marine. His Honour confirmed that Cowdroy J’s reasoning in Potter was directed at ensuring that accessorial liability is confined to cases whether the putative accessory’s actions are intentional.

   …

   B4.    Potter is not distinguishable

   20.At paragraphs [11] to [18] of the FWO Liability Submissions, the FWO submits that Potter is distinguishable from the present case. That submission is based on the submission that the level of actual knowledge required by Cowdroy J is only required where the respondent has made reasonable enquiries as to the existence of an underlying industrial instrument.

   21.With respect, this is an incorrect interpretation of Potter. Cowdroy J is unambiguous when he finds:

   “To be ‘knowingly concerned’ in a contravention, the alleged accessory must have actual knowledge of the essential facts that constitute the contravention.

   …

   “The Court finds that, to be an accessory… Mrs Potter [the respondent] must have known the Clerical NAPSA [the applicable instrument] applied to the Employees.”

   22.His Honour goes on to describe the requisite mental element as follows:

   “…that Mrs Potter be shown to have had actual knowledge at that time that the Clerical NAPSA applied to the Employees.”

   23.His Honour does not qualify his conclusions with any proviso to the effect that the exclusion from liability applies only to a respondent who has acted with due care, nor that the ratio be limited in application to Mrs Potter’s facts. 

   24.If Cowdroy J had intended the proviso to apply, it would not have been necessary for his Honour to consider (as he did ) the potential effect of wilful blindness to that fact (because a respondent who acts wilfully cannot logically be found to have taken due care). 

   25.Moreover, White J (when applying Potter) confirms that the gravamen of Cowdroy J’s reasoning was that a putative accessory who acts without intent cannot be liable. The test is for intent, not a lack of care. 

   26.Because Potter is not distinguishable, the balance of the FWO Liability Submissions do not assist this Court’s analysis. To wit, at paragraphs [19] to [45] of the FWO Liability Submissions, the FWO analyses and applies various authorities as though Potter has no application.

   27.By way of illustration, the FWO in the FWO Liability Submissions suggests that the present case should be decided in light of the High Court’s decision in Yorke v Lucas. This ignores the fact that the decision in Potter is expressly based on the ratio in that case. This means that Potter is consistent with Yorke, and it is not open for this Court to consider it in a different context.

   28.Each of the authorities cited by the FWO must be read in light of Potter. When that is done, none of them add to the analysis. Each authority repeats the accepted proposition that, to be liable as an accessory, a respondent must have had knowledge (at the time of the alleged contravention) of each essential fact underpinning the contravention. 

   29.At paragraph [17] of the FWO Liability Submissions, the FWO contends that the existence of additional safety net entitlements in the present case allows this Court to distinguish Potter. Even if this proviso applied to Cowdroy J’s finding (and there is nothing in the judgment to suggest it does), the application of such a proposition to the present case would have no effect on the outcome because the Alleged Accessories had no actual knowledge of any of the employees’ entitlements (those pleaded, or the additional safety net under them). 

   B5.    Alleged Accessories did not have the requisite knowledge

   30.The FWO submits that each Alleged Accessory did in fact have the actual knowledge sufficient to satisfy the test described by White J in Devine Marine.

   Actual knowledge the FWO must prove

   31.At [191] of Devine Marine, White J applies the principles relating to accessorial liability. Adopting his Honour’s method of analysis, the FWO must prove the following facts in relation to each Alleged Accessory. For the purpose of this analysis, only those mental elements that have not been admitted are listed.

   32.In respect of contraventions relating to failures to pay basic periodic rates of pay, the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)that Messrs Singh’s and Verma’s work for Liquid Fuel was governed by an industrial award (Award Application); and

   (b)that the applicable award stipulated minimum rates of pay; and

   (c)that the rates paid by Liquid Fuel were less than those minimum rates of pay.

   33.In respect of contraventions relating to failures to pay casual loadings, the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Award Application; and

   (b)that the applicable award stipulated that casual employees were to be paid a loading; and

   (c)that the rates paid by Liquid Fuel to Messrs Verma and Singh were insufficient to satisfy the casual loading obligation.

   34.In respect of contraventions relating to failures to pay casual “Monday to Friday rates” the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Award Application; and

   (b)that the applicable award stipulated minimum rates of pay for casual employees; and

   (c)that the rates paid by Liquid Fuel to Messrs Verma and Singh were less than the minimum rates of pay for casual employees.

   35.In respect of contraventions relating to failures to pay penalty rates,  the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Award Application;

   (b)     that the applicable award stipulated penalty rates; and

   (c)that Messrs Singh and Verma worked such hours as to be entitled to be paid penalty rates; and

   (d)that the rates paid by Liquid Fuel to Messrs Verma and Singh were insufficient to satisfy the penalty rate obligation.

   36.In respect of contraventions relating to failures to pay overtime rates, the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Award Application; and

   (b)that the applicable award stipulated higher rates of pay for overtime hours; and

   (c)that Messrs Singh and Verma worked overtime hours within the meaning of the award; and

   (d)that the rates paid by Liquid Fuel to Messrs Singh and Verma were insufficient to satisfy the overtime rate obligation.

   37.In respect of contraventions relating to failures to make or keep employee records, the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)that Messrs Singh’s and Verma’s work for Liquid Fuel was governed by legislation (Legislative Coverage); and

   (b)that the applicable legislation stipulated that Liquid Fuel was obliged to make and keep prescribed employee records in relation to Messrs Singh’s and Verma’s employment; and

   (c)that Liquid Fuel did not make and/or keep those records.

   38.In respect of contraventions relating to failures to keep records of overtime hours worked, the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Legislative Coverage; and

   (b)that the applicable legislation stipulated that Liquid Fuel was obliged to make and keep prescribed records in relation to overtime hours worked by Messrs Singh and Verma; and

   (c)that Messrs Singh and Verma worked overtime hours within the meaning of the legislation; and

   (d)that Liquid Fuel did not make and/or keep those records.

   39.In respect of contraventions relating to failures to include prescribed particulars on pay slips, the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Legislative Coverage; and

   (b)that the applicable legislation stipulated that Liquid Fuel was obliged to provide Messrs Singh’s and Verma’s pay slips; and

   (c)that each pay slip was required to contain certain prescribed information; and

   (d)that Liquid Fuel did not provide Messrs Singh and Verma with compliant pay slips.

   Standard to which the FWO must prove actual knowledge

   40.The FWO must prove actual knowledge on the balance of probabilities. In determining whether it is satisfied, the Court must take into account:

   (a)     the nature of the cause of action or defence; and

   (b)     the nature of the subject-matter of the proceeding; and

   (c)     the gravity of the matters alleged.

   FWO’s case regarding actual knowledge

   41.The facts in support of the FWO’s submissions that each Alleged Accessory had the requisite level of actual knowledge are limited to the following:

   (a)The fact that Mr Zhang obtained a Master of International Business degree from Monash University, which course of study included “a subject in human resource management”. This is the only evidence of Mr Zhang’s knowledge. The FWO has filed evidence relating to the human resources subject in question.   The FWO’s own evidence discloses the content of that subject. It is limited to strategic human resources theory and does not deal at all with regulation or compliance;

   (b)the fact that Ms Qu obtained a Master of Marketing degree from Monash University, which course of study included “a subject in human resource management”. The subject in question is the same as that undertaken by Mr Zhang;

   (c)Ms Qu’s having obtained a Bachelor of Commerce degree from the University of Melbourne. The FWO’s evidence discloses Ms Qu’s academic transcript. That document reveals that, in completing her degree, Ms Qu undertook a course of study absent any unit that is likely to have dealt with industrial relations;

   (d)the fact that, for 12 months, Ms Qu worked in a position covered by an enterprise agreement. No evidence has been filed in support of the proposition that Ms Qu knew had any knowledge of this industrial coverage and the FWO cannot realistically assert that all employees covered by industrial instruments are aware of their rights (lest the FWO undermine her own existence). Moreover, the evidence goes no further than to suggest coverage by an enterprise agreement, whereas the requisite knowledge relates to legislation and awards;

   (e)a statement by Ms Qu, in the affidavit she made on 4 February 2014, to the effect that workplace laws represent an area of difficulty for her because of her background and lack of business experience. This statement suggests a lack of knowledge by Ms Qu. To the extent that it does suggest knowledge on the part of Ms Qu, it is limited to her knowledge as at the date of the affidavit (being after the date on which the FWO must prove knowledge to establish liability);

   (f)a similar statement by Mr Li in the affidavit he made on 4 February 2014. The same problems identified in the previous paragraph infect this submission;

   (g)the fact that Mr Li was, until his retirement in early 2010, a “highly qualified academic”. Mr Li’s field of expertise is mathematics. To suggest that specialised knowledge in that field is sufficient to discharge the FWO’s onus in relation to actual knowledge of industrial matters is, with respect, far-fetched; and

   (h)the fact that in the course of his academic career Mr Li had been covered by enterprise agreements.  The same problems identified in sub-paragraph (d) above apply to this submission.

   Analysis

   42.At the very least, the FWO has to prove that each Alleged Accessory had, at the time of Liquid Fuel’s contraventions, actual knowledge of the Award Application and/or Legislative Coverage. It is not able to do so in relation to any of them. 

   43.At paragraph [53] of the FWO Liability Submissions (which were prepared in light of the judgment in Potter), the FWO presents its position as to knowledge as follows:

   …[I]t is reasonable to infer that both the Third and Fourth Respondents were aware not only of the existence of Australian workplace laws but also had the capacity to find and apply the relevant industrial instruments.

   44.This submission conveniently identifies the following problems:

   (a)First, the FWO’s task is not limited to showing actual knowledge of the existence of “Australian workplace laws” as an abstract concept. Rather, the FWO must prove, inter alia, actual knowledge of each of the matters referred to in Part B5 hereof; and

   (b)moreover, the FWO does not discharge its burden by merely proving that the Alleged Accessories had “the capacity to find and apply the relevant industrial instruments”. It must prove actual knowledge.

   45.To the extent that the FWO alleges that the Alleged Accessories were “wilfully blind” to the requisite knowledge, the FWO must still show that the Alleged Accessory had actual knowledge (albeit by inference). It cannot do so. To the contrary, the evidence and submissions paint a picture of industrial naïveté and negligence on the part of each Respondent. 

   46.To be sure, the FWO has reached the same conclusion. The FWO submits that the contraventions were not deliberate, “…but rather involved a careless disregard for the Employees’ entitlements”.

   47.    Consistent with that conclusion, the FWO relies on:

   (a)the Respondents’ failure to take any steps to “to determine what obligations were actually owed to the Employees at any time between purchasing the business in 2007 and the FWO’s investigation in 2012”;

   (b)“the Respondents’ own conduct in failing to take any steps to ascertain or seek advice about their obligations at any stage prior to the investigation conducted by the [FWO]”; and

   (c)“the Respondents’ focus on their own business interests without due regard for their lawful obligations”.

   48.In relation to Liquid Fuel, the lack of actual knowledge is moot because its liability is strict. In the case of each Alleged Accessory, however, the lack of actual knowledge provides a complete excuses from liability.

   B6.    Conclusion re liability

   49.This Court is bound to follow Potter and Devine Marine.  It follows that the FWO must prove the Alleged Accessories’ actual knowledge of the matters in Part B5 hereof. The FWO cannot do so.

   50.    It follows that none of the Alleged Accessories are liable…”

Applicant’s position

1. The applicant’s position in submissions filed before the trial was the second, third and fourth respondents had sufficient knowledge in order to fulfil the necessary factual elements consistent with the provisions in Devine Marine.[7]

   [7] See paragraphs [6] and [7] of applicant’s further submissions as to penalty and liability.

2. In submissions filed on 8 August 2014 the applicant addressed the issue of the accessorial liability of the second, third and fourth respondents,[8] as well as addressing “the legislation and principles”.[9] The applicant’s submissions were:

   [8] See paragraph [11] – [54].

   [9] See paragraph [19] – [35].

   “13. The Applicant contends in the present matter that the Alleged Accessories are liable as they were jointly the “hands and brain” of the Business, and it was through their human agency that the First Respondent perpetrated all of the contraventions that it has admitted: see Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 2) (2010) 201 IR 234, [2010] FCA 1156 at [198]–[200].

   …

   17.No efforts were made by any of the Respondents to make any enquiries about or to consider the First Respondent’s obligations towards the Employees at any stage between purchasing the Business in 2007, and the investigation by the Office of the Applicant in 2012. If such efforts had been made, the Respondents would have found that they were underpaying the Employees not only pursuant to the applicable instruments, but also by comparison to the federal and national minimum wage which applies as a minimum safety net for award and agreement free employees (Applicant’s Submissions on Penalty, para 12 and Attachment E). In other words, significant underpayment contraventions would have arisen in respect of the Employees regardless of the particular instrument that applied, for the rates paid by the First Respondent to the Employees fell well below even the most basic minimum wage requirement in the national system. The Alleged Accessories were each involved in setting and adjusting the wage rates paid to the Employees (SOAF paras 11(g), 12(g) and 13(f)), and it is as a result of their complete abrogation of their responsibility in respect of the First Respondent’s employment obligations that the contraventions occurred.

   …

   37.The Applicant submits that the evidence establishes that the Second and Third Respondents had knowledge of the essential facts of each of the contraventions by the First Respondent, and knowingly participated in these contraventions by reason of their conduct as outlined in paragraph 7 above, and paragraphs 47 to 54 below.

   38The Applicant further submits that the evidence establishes that the Fourth Respondent had knowledge of the essential facts of the minimum rate and casual loading contraventions by the First Respondent, and knowingly participated in these contraventions by reason of his conduct as outlined in paragraph 8 above, and paragraphs 47 to 54 below.

   39It is not a fact or element of any of the contraventions admitted by the First Respondent that the contravention occurred knowingly or recklessly (contrast sections 345 and 349 of the FW Act). Ignorance of the law is no defence where the person has knowledge of the essential facts constituting the contraventions as identified above.

   40.It is clear from Yorke v Lucas and the other authorities concerning accessorial liability referred to at paragraphs 25 to 33 above that it is not necessary to know that the conduct was unlawful.

   41.The Applicant respectfully submits that a finding that it is necessary for the Respondents to know that a particular award or industrial instrument applied, in circumstances where irrespective of the applicable industrial instrument, underpayment contraventions would have occurred (see Applicant’s Submissions on Penalty, para 12 and Attachment E) would offer all business operators a purported defence by way of ignorance and negligence of employment obligations.

   42.The Potter decision is also not easily reconcilable with the essential facts relating to the record keeping and pay slip contraventions, whereby the logical extension of the requirement to know the applicable instrument would be to know that there were regulatory requirements particularising record keeping and pay slip obligations. This would be tantamount to requiring knowledge of the law as an essential fact of the contravention, thereby permitting ignorance as an excuse for non–compliance, contrary to the established authority.

   43.In this case, the law prohibits an employer from paying an employee less than their minimum entitlements, and requires that proper records are made and kept and that payslips are issued with the requisite information. A contravention arises from a failure to do these acts. The obligations imposed by the law or industrial instrument are contravened by the Respondents’ conduct; however, the legal obligation or requirement being contravened is not an essential fact or element of the contravention.

   44.To hold otherwise conflates knowledge of the law, or the existence of the law, with the essential facts amounting to contravention of that law. It is clear from the authorities set out above that accessorial liability for a contravention does not require knowledge of the law that is contravened. All that is required is knowledge of, and intentional participation in, the conduct that constitutes the contraventions. In this case that conduct was the underpayment of the Employees’ entitlements, the failure to make and keep adequate records and provide payslips containing the information required by law. It is not necessary in the present case to establish that the Alleged Accessories were aware of the particular instrument or provision which determined the Employees’ entitlements and which was contravened.

   …

   Conduct of the Alleged Accessories

   46.In the present case, the Second and Third Respondents had joint and primary responsibility for the management of the Business, including all dealings with and in relation to the Employees, and consulted with the Fourth Respondent in his capacity as director to set and adjust the Employees’ wages. The Business was purchased by the Fourth Respondent for the express purpose of being operated by the Second and Third Respondents when they found they could not obtain employment to their satisfaction after completing their Masters of Business, and in this respect the Applicant submits that the Alleged Accessories were “linked in purpose” in the operation of the Business in the pursuit of their own interests: see Giorgianni v R (1985) 156 CLR 473 at 479–480.

   47.The Second and Third Respondents were responsible for issuing pay slips and making and keeping employee records on behalf of the First Respondent, along with rostering the Employees and calculating and paying employee wages based on the hours worked. The contraventions occurred through the conduct of the Second and Third Respondents, along with the Fourth Respondent in respect of the minimum rate and casual loading contraventions, due to his involvement in the determination of the Employees’ rates of pay, and their collective failure in enquiring about and applying the minimum employment obligations in respect of the Business.

   48.Despite the fundamental responsibility of an employer to provide minimum entitlements to its employees, the Alleged Accessories, as the collective “hands and brain” of the Business failed to take any steps to ascertain or comply with the First Respondent’s obligations, and it was through their human agency that the First Respondent perpetrated all of the contraventions that it has admitted: see Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 2) (2010) 201 IR 234, [2010] FCA 1156 at [198]–[200]. The Second to Fourth Respondents were not unwittingly involved in any aspect of the contraventions but were at all times in positions of control regarding the operation of the Business and it is by their actions and omissions that each of the contraventions occurred.

   …

   50.While the Fourth Respondent acknowledges the “variation in the laws” which he asserts “has been a challenge” in respect of ensuring compliance (Li Affidavit para 7), indicating some awareness of legal requirements relating to the employment of employees, he failed to take even the simplest steps to seek advice or assistance regarding the First Respondent’s obligations, nor did the Second or Third Respondent in their capacity as Managers of the Business and of the Employees.

   51.    The Third and Fourth Respondents’ evidence that:

   “Workplace laws have a difficult area for me to manage and understand given my background and my lack of business experience” (Qu Affidavit para 15); and

   “Workplace laws have been and remain a very difficult area for me to manage and understand given my background and lack of business experience (Li Affidavit para 23)

   is particularly difficult to accept given the evidence concerning their respective backgrounds in the McLeod Affidavit. In addition to the Third Respondent’s qualification as a Master of Marketing from Monash University (which course included a unit in human resource management), she has a Bachelor of Commerce from the University of Melbourne and spent a year from June 2004 to June 2005 working for then Senator Tsebin Tchen as an Electorate Officer Band A covered by the Members of Parliament Staff (Commonwealth) Certified Agreement 2003–2006 (McLeod Affidavit paras 9(d)–(g) and 15).

   52.The evidence shows that the Fourth Respondent has been connected with Australia’s Swinburne University (Swinburne) as a highly qualified academic since at least 1994. On 31 January 2010 he retired from Swinburne as a lecturer in mathematics. For much of that time, the Fourth Respondent’s employment was covered by industrial agreements made in accordance with the WR Act or the FW Act (McLeod Affidavit paras 11–14).

   53.From this evidence it is reasonable to infer that both the Third and Fourth Respondents were aware not only of the existence of Australian workplace laws but also had the capacity to find and apply the relevant industrial instruments.

   54.The Applicant submits that the failure of the Alleged Accessories, as the operators of the First Respondent’s Business, to take any steps to ascertain its obligations and ensure compliance, ought not in effect provide a defence to their involvement in contraventions which would not have occurred but for their actions and omissions, as this would not only undermine the purpose of the accessorial liability provisions, but the very objects of the WR Act and the FW Act. To paraphrase the High Court in Hamilton v Whitehead (1988) 166 CLR 121, 128, the fundamental purpose of the FW Act – ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions – would be seriously undermined if the hands and brains of an employer were not answerable personally for contraventions which they themselves have perpetrated on behalf of the employer.

   D.      CONCLUSION

   55.The Alleged Accessories were the actors in the conduct constituting the contraventions, had knowledge of all the material circumstances  and were at all times responsible for determining how the Business operated and what employment entitlements were afforded to the Employees. It was by the Alleged Accessories’ actions and omissions that the contraventions occurred. On this basis, the Applicant submits that they were knowingly concerned in or party to the contraventions by the First Respondent.”

3. In submissions upon which it also relied at trial (but which were filed 8 August 2014) the applicant’s position was:

   “7.The evidence confirms that the Second and Third Respondents were at all relevant times:

   (a)managers of the First Respondent with joint responsibility for the day to day running of its operations, the Business having been purchased for this purpose after they could not find suitable employment upon completing their Masters in Business;

   (b)responsible for interviewing employees;

   (c)     aware that the Employees were engaged by the First Respondent on a casual basis as Console Operators during the relevant period, and the Second Respondent interviewed and employed Mr Verma on behalf of the First Respondent (Verma Affidavit para 8);

   (d)aware of the wages paid to the Employees by the First Respondent;

   (e)     involved in consulting with the Fourth Respondent to set and adjust the wage rate paid to each of the Employees;

   (f)required to report to the Fourth Respondent on total weekly wage expenditure for the Business;

   (g)responsible for managing staff rosters and aware of the hours worked by each of the Employees;

   (h)responsible for managing payroll, including hours worked and paying the Employees;

   (i)aware of the amounts paid to each of the Employees by the First Respondent;

   (j)jointly responsible for issuing pay slips to the Employees;

   (k)     aware of the information included in the payslips issued to the Employees;

   (l)jointly responsible for the making and keeping of records, including timesheets, on behalf of the First Respondent in relation to the Employees; and

   (m)aware of how, and the extent to which, records were kept by the First Respondent in respect of the Employees

   by reason of which it is alleged, and has been admitted, that they were each involved in the underpayment, record keeping and pay slip contraventions by the First Respondent pursuant to section 728 of the WR Act and section 550 of the FW Act (SOAF paras 11–12, 73–76, 81(c)(iv) and 81(c)(vii)).

   8.The evidence further shows that the Fourth Respondent was at all relevant times:

   (a)a director and secretary of the First Respondent;

   (b)aware that the Employees were engaged by the First Respondent on a casual basis as console operators during the relevant period;

   (c)     aware of, and responsible for, setting and adjusting wages for the Employees on behalf of the First Respondent; and

   (d)a director and holder of 50% of the shares in Liquid Investment & Development Pty Ltd, the sole shareholder of the First Respondent

   by reason of which it is alleged, and has been admitted, that he was involved in the underpayment of minimum rates and casual loadings to the Employees pursuant to section 728 of the WR Act and section 550 of the FW Act (SOAF paras 13 and 77–78).

   …

   47.The Second and Third Respondents were responsible for issuing pay slips and making and keeping employee records on behalf of the First Respondent, along with rostering the Employees and calculating and paying employee wages based on the hours worked. The contraventions occurred through the conduct of the Second and Third Respondents, along with the Fourth Respondent in respect of the minimum rate and casual loading contraventions, due to his involvement in the determination of the Employees’ rates of pay, and their collective failure in enquiring about and applying the minimum employment obligations in respect of the Business.

   48.Despite the fundamental responsibility of an employer to provide minimum entitlements to its employees, the Alleged Accessories, as the collective “hands and brain” of the Business failed to take any steps to ascertain or comply with the First Respondent’s obligations, and it was through their human agency that the First Respondent perpetrated all of the contraventions that it has admitted: see Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 2) (2010) 201 IR 234, [2010] FCA 1156 at [198]–[200]. The Second to Fourth Respondents were not unwittingly involved in any aspect of the contraventions but were at all times in positions of control regarding the operation of the Business and it is by their actions and omissions that each of the contraventions occurred.

   49.As distinct from Potter, this is not a case where it can be said that there was any honest but mistaken belief regarding the applicable obligations, without which no contraventions would have occurred. The underpayment contraventions in this case were so serious that significant underpayments would have arisen irrespective of which instrument applied, even compared to the most base level entitlement of the federal/national minimum wage which underpins the safety net for employees. This indicates a complete dereliction of duty by the Alleged Accessories as business operators.

   50.While the Fourth Respondent acknowledges the “variation in the laws” which he asserts “has been a challenge” in respect of ensuring compliance (Li Affidavit para 7), indicating some awareness of legal requirements relating to the employment of employees, he failed to take even the simplest steps to seek advice or assistance regarding the First Respondent’s obligations, nor did the Second or Third Respondent in their capacity as Managers of the Business and of the Employees.

   51.    The Third and Fourth Respondents’ evidence that:

   “Workplace laws have a difficult area for me to manage and understand given my background and my lack of business experience” (Qu Affidavit para 15); and

   “Workplace laws have been and remain a very difficult area for me to manage and understand given my background and lack of business experience (Li Affidavit para 23)

   is particularly difficult to accept given the evidence concerning their respective backgrounds in the McLeod Affidavit. In addition to the Third Respondent’s qualification as a Master of Marketing from Monash University (which course included a unit in human resource management), she has a Bachelor of Commerce from the University of Melbourne and spent a year from June 2004 to June 2005 working for then Senator Tsebin Tchen as an Electorate Officer Band A covered by the Members of Parliament Staff (Commonwealth) Certified Agreement 2003–2006 (McLeod Affidavit paras 9(d)–(g) and 15).

   52.The evidence shows that the Fourth Respondent has been connected with Australia’s Swinburne University (Swinburne) as a highly qualified academic since at least 1994. On 31 January 2010 he retired from Swinburne as a lecturer in mathematics. For much of that time, the Fourth Respondent’s employment was covered by industrial agreements made in accordance with the WR Act or the FW Act (McLeod Affidavit paras 11–14).

   53.From this evidence it is reasonable to infer that both the Third and Fourth Respondents were aware not only of the existence of Australian workplace laws but also had the capacity to find and apply the relevant industrial instruments.

   54.The Applicant submits that the failure of the Alleged Accessories, as the operators of the First Respondent’s Business, to take any steps to ascertain its obligations and ensure compliance, ought not in effect provide a defence to their involvement in contraventions which would not have occurred but for their actions and omissions, as this would not only undermine the purpose of the accessorial liability provisions, but the very objects of the WR Act and the FW Act. To paraphrase the High Court in Hamilton v Whitehead (1988) 166 CLR 121, 128, the fundamental purpose of the FW Act – ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions – would be seriously undermined if the hands and brains of an employer were not answerable personally for contraventions which they themselves have perpetrated on behalf of the employer.”

4. The applicant’s submissions filed prior to the trial in relation to Devine Marine were:

   “B. ACCESSORIAL LIABILITY

   4.The Applicant refers to the Federal Court decision, Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 (Devine Marine), handed down by Justice White on 12 December 2014.

   5.In Devine Marine, Justice White upheld the reasoning of Justice Cowdroy in the decision of Potter v Fair Work Ombudsman [2014] FCA 187 in relation to accessorial liability but held that it was not necessary for the accessory to know the name of the applicable award. Justice White stated at paragraph 188 of Devine Marine:   

   “knowledge that there is an award which is applicable which prescribes minimum rates or entitlements is a factual element necessary for the establishment of the accessory’s intention.” [Emphasis added]

   Then at paragraph 194, Justice White stated:

   “As noted earlier, I do not consider it necessary for the FWO to establish that Capt. Devine knew the name of the particular award applicable to the work being performed by the Fijians: it is sufficient for the FWO to establish that Capt. Devine knew that an award was applicable.”

   6.The Applicant submits that the Second, Third and Fourth Respondent’s had sufficient knowledge in order to fulfil the necessary factual elements consistent with the reasoning of Justice White in Devine Marine as set out in the Applicant’s Submissions as to Liability filed on 8 August 2014. 

   7.In paragraphs 51 and 52 of the Applicant’s Submissions as to Liability filed on 8 August 2014, the Applicant relied upon the qualifications of the Third and Fourth Respondents in establishing their level of knowledge. In addition, the Applicant relies upon the qualifications of the Second Respondent, in particular the Second Respondent obtaining a Masters of International Business from Monash University which included a subject in human resource management (see paragraph 9 of Fair Work Inspector Sally McLeod affirmed and filed on 13 June 2014.”

Xin Zhang (Second Respondent)

1. In his affidavit affirmed 4 February 2014 the second respondent deposed:

   “4.I have been involved in the business since Nian Li purchased it in 2007.

   5.I was initially an employee of the business and became a manager of the business in about 2010.

   6.My substantive role in the business is to oversee the operational aspect of the business. My role involves day to day tasks such as purchasing goods and dealing with suppliers, restocking, managing petrol deliveries and overseeing fuel tank and fuel pump readings.

   Contraventions

   7.I only became involved in the tasks set out in paragraph 6 above in about late 2010. Prior to that date, my role was to manage the cool room, restock of shelves and customer service.

   8.In January 2011, Linda gave birth to our first child. During the time leading up to the birth and the time after the birth, I began to take on some of the roles that Linda would normally attend to. Linda still attended to some tasks. 

   9.It was not until June 2012 that I first became aware of the complaint by Mr Singh and Mr Verma.

   10.I have no involvement in the financial affairs of the business as this is dealt with by Nian Li. He is aware of the state of affairs of the business and at the time the complaints were made, he said that he would attend to the matters.

   My Role in the Contraventions

   11.As a manager of the business, I am responsible for managing the logistical and operational aspects of the business.

   12.I do not involve myself with workplace laws given that the scope of my work is on the delivery of goods and services of the business.

   13.I can honestly say that any failure to meet the business’ industrial obligations were not intentional.

   14.The contraventions were not deliberate. The contraventions were the result of an oversight by the business.”

Closing submissions

1. In closing after each of the second to fourth respondents had been cross-examined it was submitted by the applicant that the Court should find the evidence of each of the second, third and fourth respondents strained the bounds of credulity. It was submitted that their evidence revealed they had contrived in an attempt to show they knew nothing, they were not witnesses of truth, and their evidence was riddled with inconsistencies both individually and collectively.

2. Counsel for the applicant submitted the second, third and fourth respondents asked the Court to accept that they were ignorant and this was inconsistent with and unbelievable given their own backgrounds. The applicant asked the Court to find each of the second to fourth respondents deliberately refrained from making inquiries as to their responsibilities and were wilfully blind.

3. In summary Counsel for the applicant asked the Court to find that the second to fourth respondents’ evidence left no other conclusion open than that they had engaged in a “connivance” and by deliberate shutting their eyes the Court should infer they were wilfully blind (in the sense referred to in the authorities)[13] sufficient to ground liability on each of their parts as an accessory to the contraventions of the first respondent.

   [13] See paragraph [27] to [41] above and paragraph 80.

4. In the event the Court did not make that finding, Counsel for the applicant acknowledged in light of the approach in Potter v Fair Work Ombudsman [2014] FCA 187 and Devine Marine (which Counsel for the applicant submitted was wrongly decided) the applicant would face difficulties making out the requisite actual knowledge for the fourth, second and third respondents on all allegations save for the record keeping and pay slip contraventions by the latter two respondents.

5. Counsel for the respondents submitted that whilst the second to fourth respondents had operated a suburban petrol station particularly badly the Court was bound to follow Devine Marine and the Court could not be satisfied in light of the approach set out therein that individually the second to fourth respondents had the requisite knowledge to ground liability as an accessory.

6. Whilst acknowledging the Court could find his clients were wilfully blind in closing Counsel for the respondents relied on the written submissions that had been filed. It was submitted the second to fourth respondents knew “mechanical things” and knew the rates paid to the Employees but did not know they were not correct.

7. Relying on submissions filed on behalf of the respondents Counsel noted to the extent the applicant sought to show the respondents were wilfully blind it could not do so. Instead it was submitted the evidence painted a picture of industrial naiveté and negligence on the part of each respondent but not accessorial liability.

8. In reply Counsel for the applicant, whilst maintaining the submission that the Court could find sufficient or actual knowledge established on the basis of wilful blindness on the part of each of the second to fourth respondent, conceded in light of the evidence that it faced very difficult challenges given Devine Marine in establishing liability in the event the Court did not find knowledge on the basis of wilful blindness.

Consideration

1. Each of the second to fourth respondents was cross examined. As was effectively conceded in submissions on their behalf it was apparent each had ruminated extensively on their involvement in the events at issue in the liability trial and the evidence they would give on those matters.

2. Counsel for the respondent in final submissions accepted the Court could find the second, third and fourth respondent were not witnesses of great credit. Given the evidence of each of the respondents this acknowledgment was sensible.

3. Whilst it was clear from their evidence each of the second to fourth respondents had come to recognise the unlawful aspects of the conduct of the first respondent and were embarrassed by this, it was far from clear whether that was only because the unlawful conduct had been discovered or for some other reason/s. On balance I find it was the former.

4. Overall the evidence of each of the respondents’ witnesses left the clear impression they sought to minimise their own involvement and knowledge of critical matters to the issue of accessorial liability. Many parts of their evidence was self-serving and I am satisfied a retrospective rationalisation of their conduct.

5. In my view indicative of the unsatisfactory nature of much of the evidence of the second, third and fourth respondents was that each of them asked the Court to accept that people with Masters level or above tertiary qualifications were effectively ignorant of matters which would either be or should be self-evident or prompt them to make inquiries.

6. Illustrative of the unsatisfactory nature of much of the evidence of the relevant respondents was the record of interview by the fourth respondent with officers of the applicant which contained the following exchange:

   “Q40.…Would you be able to explain your role and responsibilities with your business and company with regards to BP Berwick and Liquid Fuel?

   A1: Yeah. I’m a director of the company and I don’t do the daily business but if the company has some major decision made, I’m needed to take care of.

   Q41. Okay. So you’re involved in major decisions?

   A1:   Yes.

   Q42. Okay. What would they be? What would be an example of that?

   A1: For example, is a workers salary, our salary is determined by me. (sic)

   Q43. So that would be any employee, you would be making decisions on what the rate of pay would be?

   A1: Yes. Is my daughter and son in law, they interview some, you know, potential employees they they’ve feel, you know, satisfied and talk to me and how much and (sic) –

   Q44. Make a decision?

   A1:   We should pay them, yeah.

   …

   A1. Yeah. And so then we made – I made a decision, you know, to buy this business for our kids. And before that – after that we also need a interview with BP, the headquart and that interview, you know, they didn’t tell you – ask us to learn some employment, the laws about employment things so we just follow the former business owner to give the money to the employees so this is I think is we made a mistake. We didn’t do any, you know, the education about Fair Work’s laws and the workers employment…

   Q53. Yeah.

   A1: And at the end, the computer screen shows how much you need to pay, then you insert the money and the money – the machine gives you change and you take the grocery out so I don’t think, you know, this is very skilful, as a master skill needed for employee so we just see consult with other service station salary situations or wages situations, so we decided, you know, is just a little bit high as a service station to give the employees money.

   Q54. What –

   A1:So this is what we did, you know, I think this is the wrong thing, you know. We should have – but at that time there was no government tell, you know, somebody’s or, you know, some information channels where can contact to set up proper – appropriate the wages schemes.

   …

   Q72. Right. Did you spend any time, you or your daughter or your son-in-law, before working in the business or any prior handover period?

   A1: Yes, is about a couple weeks is the former owners present, he spent about a couple of hours a day I think and then…

   …

   Q91.They were still working. What arrangements were there specifically? Like what did you agree on with them and I’m talking about if we’ve got previous employees who’ve been there a long time, they might have some entitlements such as long service leave or annual leave, you might have had some casuals, so I’m just interested to know how you managed the prior employees coming over to your business? Were there any? And if there were how did you manage that?

   A1: I think, you know, most, you know, previous employee’s, you know, we kept them unless, you know, they voluntary, you know, they want to leave or they did something wrong like stealing money’s, you know all of them, most of them, just we kept them.

   Q92. You kept them?

   A1:   Yeah.

   …

   Q94. So do you understand the difference between a casual employee and a full-time and part-time employee? The differences between those?

   A1: Not exactly. We know that casual should be a little bit higher so wages should be higher. If it is a permanent employees, you know, just as a normal salary.

   …

   Q126.With – you were talking before, you said that they interviewed people, so they will tell you what people they want to employ?

   A1: Yes.

   Q127. So they would – what about sacking or firing people or terminating employment? They make those decisions or do you make them jointly?

   A1:   Yeah, they first they talk to us.

   Q128. They talk to you, so they Consult you and say. Okay

   A1: Yeah, we terminate a couple in employees and so I asked them why they say shared me the video record and they – and this stole the cigarettes, some of them just stole money.

   …

   Q132. How the staff are organised to work through those staff rosters. Are they organised by Linda or Kelvin or are they – do they come to you and say “This is how we want to manage the people and how we want them to work during the day” Is that their decision or your decision?

   A1: Is formally is my decision, but they just, you know, *0:35:43:9 this week, you know, so we need more employment or something like that I know for details, I don’t know really.

   …

   Q159. Yep. 

   A1: We couldn’t find – it’s harder to find this and also I mentioned it before, we before we conducted this business we were not advised to contact which government body to do the business properly so it’s -

   Q160. Yep its -

   A1: In some sense its Fair Work is very good at, you know, the institution or government body to educate the business people, you know, so it – if we did it, you know, some – get some education in these things, it won’t happen, it wouldn’t happen *0:43:01:0.

   …

   Q291. Okay. So in terms of Kelvin and Linda, how are they to know what their responsibilities are in terms of providing records, for keeping records, how will they know when a payslip is to be given or whether or not certain records can be kept. How are they aware of that?

   A1: They’re aware of – I think the former employer, former business owner, you know, told us that, so we just follow…

   …

   Q459. Who is responsible for the cost of the drive off?

   A1: the cost is I don’t know, I think case-by-case, if we – like some people, some employee just really was reading some email or something, you know, in this case, we ask them to pay, you know, their responsibility.

   Q460. And how do they pay for that? How does that happen? Does it –

   A1: I just took some money from the salary or something like that.

   …

   Q502. Do you know the training rate?

   A1.    I don’t know the exact amount of money should have paid.

   Q503. Did you get that rate from the modern award? Or is this a rate you have determined yourself or you’ve got it elsewhere?

   A1: Just got from elsewhere, you know, what is normal in those situation, in the job market. I didn’t check the award.

   Q504. Would the timesheet – do they sign a timesheet each day? When they start, when they finish. Your employees?

   A1.    I’m not sure.”

7. In order to find the second to fourth respondents were liable as accessories to the admitted contraventions by the first respondent it is necessary to consider whether or not any direct knowledge on the part of those respondents can be established or alternatively whether the circumstances themselves are sufficiently deliberate as to indicate a deliberate abstinence from obtaining knowledge creating a finding of wilful blindness.

8. The respondents’ submissions addressed the “actual knowledge” the applicant had to prove in light of the principles set out in Devine Marine. The applicant didn’t take issue with that summary. It was as follows:

   “32.In respect of contraventions relating to failures to pay basic periodic rates of pay, the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)that Messrs Singh’s and Verma’s work for Liquid Fuel was governed by an industrial award (Award Application); and

   (b)that the applicable award stipulated minimum rates of pay; and

   (c)that the rates paid by Liquid Fuel were less than those minimum rates of pay.

   33.In respect of contraventions relating to failures to pay casual loadings,  the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Award Application; and

   (b)that the applicable award stipulated that casual employees were to be paid a loading; and

   (c)that the rates paid by Liquid Fuel to Messrs Verma and Singh were insufficient to satisfy the casual loading obligation.

   34.In respect of contraventions relating to failures to pay casual “Monday to Friday rates”  the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Award Application; and

   (b)that the applicable award stipulated minimum rates of pay for casual employees;  and

   (c)that the rates paid by Liquid Fuel to Messrs Verma and Singh were less than the minimum rates of pay for casual employees.

   35.In respect of contraventions relating to failures to pay penalty rates,  the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Award Application;

   (b)     that the applicable award stipulated penalty rates; and

   (c)that Messrs Singh and Verma worked such hours as to be entitled to be paid penalty rates; and

   (d)that the rates paid by Liquid Fuel to Messrs Verma and Singh were insufficient to satisfy the penalty rate obligation.

   36.In respect of contraventions relating to failures to pay overtime rates,  the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Award Application; and

   (b)that the applicable award stipulated higher rates of pay for overtime hours; and

   (c)that Messrs Singh and Verma worked overtime hours within the meaning of the award; and

   (d)that the rates paid by Liquid Fuel to Messrs Singh and Verma were insufficient to satisfy the overtime rate obligation.

   37.In respect of contraventions relating to failures to make or keep employee records,  the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)that Messrs Singh’s and Verma’s work for Liquid Fuel was governed by legislation (Legislative Coverage); and

   (b)that the applicable legislation stipulated that Liquid Fuel was obliged to make and keep prescribed employee records in relation to Messrs Singh’s and Verma’s employment; and

   (c)that Liquid Fuel did not make and/or keep those records.

   38.In respect of contraventions relating to failures to keep records of overtime hours worked,  the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Legislative Coverage; and

   (b)that the applicable legislation stipulated that Liquid Fuel was obliged to make and keep prescribed records in relation to overtime hours worked by Messrs Singh and Verma; and

   (c)that Messrs Singh and Verma worked overtime hours within the meaning of the legislation; and

   (d)that Liquid Fuel did not make and/or keep those records.

   39.In respect of contraventions relating to failures to include prescribed particulars on pay slips,  the FWO must prove that the relevant Alleged Accessory had actual knowledge:

   (a)     of Legislative Coverage; and

   (b)that the applicable legislation stipulated that Liquid Fuel was obliged to provide Messrs Singh’s and Verma’s pay slips; and

   (c)that each pay slip was required to contain certain prescribed information; and

   (d)that Liquid Fuel did not provide Messrs Singh and Verma with compliant pay slips.”

9. The applicant relied on inter alia the qualifications of each of the second to fourth respondents along with the evidence of the Employee’s and the uncontested evidence of the inquiries they had made and the response to those by the respondents to ground the submission the Court should find each of them were wilfully blind.

10. In closing submission Counsel for the applicant tendered a document which was headed ‘Principles Concerning Wilful Blindness’. As well as setting out extracts from Giorgianni v The Queen (1985) 156 CLR 473, Macquarie Bank Limited v Sixty Fourth Throne Pty Ltd [1998] 3 VR 133, Pereira v Director of Public Prosecutions (1988) 82 ALR 217 and Rafferty v Madgwicks (2012) 203 FCR 1 that document contained the following submission:

    “9.From those authorities, the following propositions are established:

    a.if it is necessary to prove that a person had actual knowledge of an essential matter:

    i.   it will not be sufficient to merely establish that they could have made reasonable enquiries to establish the fact but chose not to do so;

    ii. nor will it be sufficient to establish that the person was negligent or reckless in failing to make such enquiries;

    b. to prove that a person had actual knowledge of an essential matter it will be sufficient if it can be shown that there were facts from which it can be inferred to the requisite standard of proof that the person had knowledge of the actual or likely existence of the relevant matter, with;

    i.   such an inference being drawn where there are facts which establish that the person deliberately shut their eyes to what was going on in a manner that amounted to connivance; but

    ii. regardless of whether one can establish the person deliberately shut their eyes, one must still establish that the person knew facts from which it can be inferred that they had knowledge of the actual or likely existence of the relevant fact.

    10. It would not be sufficient to establish that the Second to Fourth Respondents could have easily found out whether the First Respondent was paying in accordance with the Modern Award, or that they were each negligent or recklessly indifferent as to whether the First Respondent was complying with any applicable Modern Award. 

    11. It would be sufficient to establish wilful blindness if the Court accepts that there were facts known to the Second, Third and/or Fourth Respondents from which it can be inferred that if they each did not know that an award applied to the First Respondent prescribing wages and entitlements for its employees, that was because they each had deliberately ‘shut their eyes’ and refrained from making that inquiry to avoid finding out what it can be inferred they otherwise believed to be the actual or likely existence of that fact.”

1. Counsel for the respondent did not suggest that was not an accurate summary of what was necessary to find wilful blindness. In Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342 His Honour White J of the Federal Court considered the issue of accessorial liability for contraventions of the Corporations Act 2001 (Cth). At paragraph [397] to [411] of that decision His Honour addressed the general principles as to involvement as an accessory including in relation to wilful blindness.

2. In this case despite his attempts to suggest otherwise it is quite plain from the evidence and I find that the fourth respondent was very much involved in running the business of the first respondent at the Site. In his evidence and in the interview with the applicant he made a number of observations that he was involved in those matters although on many occasions he also sought to distance himself as much as he possibly could. However I reject his efforts to distance himself from the business run by the first respondent (of which he was a director) and particularly his efforts to downplay involvement in the business at the Site and the employment of the Employees.

3. I don’t accept the characterisation that Counsel for the respondents sought to put on the interview with the fourth respondent. Counsel for the respondents had submitted the evidence disclosed a patent lack of knowledge on the part of the fourth respondent. I reject that ex post facto characterisation and find in light of all of the evidence that it did disclose knowledge of matters sufficient to give rise to the suspicion that the fourth respondent who has a PhD in mathematics deliberately refrained from making obvious inquiries and deliberately sought to play on that to deny accessorial liability.

4. It is inherently unlikely given the investment he made in the first respondent and his background that his evidence where he sought to distance himself from the operation of the business should be accepted. I reject his evidence including the evidence in the transcript of the interview with the applicant to that effect as a mere contrivance for the purpose of this litigation.

5. The fourth respondent’s evidence left the clear impression that by a pretence a former lecturer in mathematics with a PhD confronted with the Employees enquiries regarding wages affected ignorance of the laws that applied. The fourth respondent’s evidence that he was concerned about the finance of the business at the Site belies the veracity of his claims that he was not aware of the first respondent’s obligations to the Employees.

6. In this case I am satisfied it is possible to infer actual knowledge on the part of the fourth respondent from a combination of suspicious circumstances and a failure to make enquiries. The application of industrial laws and awards is well known. The fourth respondent’s own evidence about his time as a lecturer at Swinburne University and his membership of a union disclosed as much. In my view it is inherently unlikely given the fourth respondent’s background that he could have no knowledge of industrial regulation or the award obligation and to the extent he suggested he did so I am satisfied in light of his background and on all of the evidence it was a contrivance, a deliberate shutting of the eyes or calculated ignorance on his part.

7. In my view this is one case that can be seen to fall within the very few cases whereby his knowledge could be construed by his wilful blindness. In that regard the instances of the fourth respondent’s wilful blindness relate to the question of him being informed of the relevant matters as referred in the authorities set out earlier. On all the evidence I am satisfied the fourth respondent given his background and the circumstances in this case “deliberately abstained from obtaining knowledge by making an inquiry for fear that he may learn the truth”.[14]

   [14] Giorgianni v The Queen (1985) 156 CLR 473 at 495.

8. I accept the applicant’s evidence, reject the evidence of the respondents witnesses and find on the balance of probabilities that the only rational inference available from the evidence as to the fourth respondent’s background, involvement in and control over the business run by the first respondent was one of wilful blindness.[15] I accept the applicant’s submission the fourth respondent was wilfully blind.

   [15] See Pereira v Director of Public Prosecutions (1988) 82 ALR 217.

9. In all the circumstances, I am prepared to infer that the only rational inference is that the fourth respondent had the requisite knowledge of “the essential elements of the contraventions” by the first respondent. As the director of the first respondent he exhibited a measure of wilful blindness in the sense in which that expression is explained in the authorities. I am persuaded that the fourth respondent deliberately avoided making inquiries for fear that he would discover the truth.

10. In Roper v Taylor's Central Garages (Exeter) Ltd [1951] 2 TLR 284 it was said:

    “There is a vast distinction between a state of mind which consists of deliberately refraining from making inquiries, the result of which the person does not care to have, and a state of mind which is merely neglecting to make such inquiries as a reasonable and prudent person would make…The case of shutting the eyes is actual knowledge in the eyes of the law; the case of merely neglecting to make inquiries is not knowledge at all…”

11. However in relation to the second and third respondents, on the evidence before the Court I am not able to come to a similar conclusion on all allegations given their respective roles in the business and that it was clear from their evidence and I find that they deferred to the fourth respondent. Nonetheless that is not the end of the matter in so far as the question of their liability is concerned.

12. The evidence was the second and third respondents were responsible (following liaison with the fourth respondent) for the day to day running of the business at the Site operated by the first respondent. They were responsible for adjusting and paying wages and issuing payslips as well as keeping records under the direction of the fourth respondent. The second to fourth respondents knew the wages that the first respondent was paying and what was included on the payslips.

13. In relation to pay slips and employment records, these were responsibilities that the second and third respondents assumed at the Site. The applicant’s position was that the evidence demonstrated they had the necessary requisite knowledge for the Court to find they were involved in the first respondent’s contraventions of those provisions. The respondents’ submissions on this issue have been set out earlier. The difficulty with the respondents’ submissions is that they elevate and make it effectively a requirement that the requisite knowledge be tantamount to knowledge of the legal consequences of these facts.

14. The second and third respondents were clearly on notice of the queries made by the Employees regarding their rights and entitlements and I am satisfied undertook to look into them. In his evidence before the Court the second respondent claimed 14 times he could not remember matters put to him in cross examination. The third respondent also affected a lack of recall which left the clear impression open that this claimed inability was rather an attempt to avoid answering direct and for her case inconvenient questions. I am satisfied they each engaged in affecting or contriving to affect ignorance of relevant matters.

15. I accept the applicant’s submission that:

    “7.The evidence confirms that the Second and Third Respondents were at all relevant times:

    (a)managers of the First Respondent with joint responsibility for the day to day running of its operations, the Business having been purchased for this purpose after they could not find suitable employment upon completing their Masters in Business;

    (b)responsible for interviewing employees;

    (c)     aware that the Employees were engaged by the First Respondent on a casual basis as Console Operators during the relevant period, and the Second Respondent interviewed and employed Mr Verma on behalf of the First Respondent (Verma Affidavit para 8);

    (d)aware of the wages paid to the Employees by the First Respondent;

    (e)     involved in consulting with the Fourth Respondent to set and adjust the wage rate paid to each of the Employees;

    (f)required to report to the Fourth Respondent on total weekly wage expenditure for the Business;

    (g)responsible for managing staff rosters and aware of the hours worked by each of the Employees;

    (h)responsible for managing payroll, including hours worked and paying the Employees;

    (i)aware of the amounts paid to each of the Employees by the First Respondent;

    (j)jointly responsible for issuing pay slips to the Employees;

    (k)    aware of the information included in the payslips issued to the Employees;

    (l)jointly responsible for the making and keeping of records, including timesheets, on behalf of the First Respondent in relation to the Employees; and

    (m)aware of how, and the extent to which, records were kept by the First Respondent in respect of the Employees

    …”

16. For the same reasons as set out earlier in relation to the fourth respondent[16] I find that the only rational inference available from the evidence is the second and third respondents had the requisite knowledge that proper records were not kept and knew what was included on the payslips as they prepared them. The Court finds on the evidence, they knew what they were doing. I find that they were both knowing participants in not keeping the required records and in compiling the pay slips without including the required details. I reject the claims made by the second and third respondents that they didn’t know what was going on.

    [16] see for example paragraphs 86-89 above

17. Given the above I am satisfied on the evidence the second and third respondents as persons responsible for pay slips and record keeping, had actual knowledge of the matters referred to at paragraphs 37 to 39 of the respondent’s submissions.

Conclusion

1. Accordingly and for the reasons set out above I will make declarations as to the liability of the first to fourth respondents. The proceedings will be adjourned to a hearing to consider what penalties should be imposed on the first to fourth respondents.

I certify that the preceding ninety-eight (98) paragraphs are a true copy of the reasons for judgment of Judge O'Sullivan

Date: 8 October 2015