Fair Work Ombudsman v Matcraft Pty Ltd & Ors
[2021] FCCA 272
•18 February 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272
File number(s): PEG 191 of 2020 Judgment of: JUDGE KENDALL Date of judgment: 18 February 2021 Catchwords: INDUSTRIAL LAW – Penalty hearing – admitted contraventions – failure to comply with Compliance Notice – factors for consideration. Legislation: Crimes Act 1914 (Cth), s 4AA
Fair Work Act 2009 (Cth), ss 539, 546, 550, 557, 716
Federal Circuit Court Rules 2001 (Cth), r 13.03C
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113
Australian Building and Construction Commissioner v J Hutchinson Pty Ltd T/A Hutchinson Builders (Hutchinson) [2019] FCA 667
Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301
Jordan v Mornington Inn Pty Ltd [2007] FCA 1384
Kelly v Fitzpatrick [2007] FCA 1080
Mornington Inn v Jordan [2008] FCAFC 70
Number of paragraphs: 105 Date of hearing: 15 February 2021 Place: Perth Counsel for the Applicant: Ms K Ruhl Solicitor for the Applicant: Fair Work Ombudsman Respondents: No appearance by or for the respondents ORDERS
PEG 191 of 2020 BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: MATCRAFT PTY LTD
First Respondent
PAUL RUTHENBERG
Second Respondent
LEANNE RUTHENBERG
Third Respondent
ORDER MADE BY:
JUDGE KENDALL
DATE OF ORDER:
18 FEBRUARY 2021
THE COURT DECLARES THAT:
1.The first respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.
2.The second respondent was involved, within the meaning of section 550(2) of the Fair Work Act 2009 (Cth), in the contravention by the first respondent of section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.
3.The third respondent was involved, within the meaning of section 550(2) of the Fair Work Act 2009 (Cth), in the contravention by the first respondent of section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.
THE COURT ORDERS THAT:
1.The first respondent take the steps that were required by the Compliance Notice, pursuant to section 545(1) of the Fair Work Act 2009 (Cth), within 28 days of this order, by:
(a)calculating the outstanding entitlements it was required to pay the Employee, including superannuation;
(b)paying the outstanding entitlements it was required to pay the Employee referred to in order 1(a) above, to the Employee;
(c)calculating and paying superannuation into the Employee’s nominated superannuation fund for additional superannuation contributions it was required to pay on the outstanding entitlements referred to in order 1(b) above (as required by clause 21.2 of the Vehicle Manufacturing, Repair, Services and Retail Award 2010); and
(d)preparing and producing to the applicant, a schedule outlining its calculation of the outstanding entitlements it was required to pay the Employee referred to in order 1(a) above, providing proof that the outstanding entitlements were rectified as set out in orders 1(b) and 1(c).
2.The first respondent pay interest on the amount ordered to be paid in order 1 above to the Employee pursuant to section 547(2) of the Fair Work Act 2009 (Cth), within 28 days of this order.
3.Within 90 days of this order, the first respondent pay a pecuniary penalty of $22,050 to the Commonwealth pursuant to section 546(1) of the Fair Work Act 2009 (Cth) for the contravention by the first respondent as set out in declaration 1 above.
4.Within 90 days of this order, the second respondent pay a pecuniary penalty of $4,410 to the Commonwealth pursuant to section 546(1) of the Fair Work Act 2009 (Cth) for his involvement (within the meaning of section 550 of the Fair Work Act 2009 (Cth)) in the contravention by the first respondent as set out in declaration 2 above.
5.Within 90 days of this order, the third respondent pay a pecuniary penalty of $4,410 to the Commonwealth pursuant to section 546(1) of the Fair Work Act 2009 (Cth) for her involvement (within the meaning of section 550 of the Fair Work Act 2009 (Cth)) in the contravention by the first respondent as set out in declaration 3 above.
6.The applicant have liberty to apply in the event the orders are not complied with
REASONS FOR JUDGMENT
JUDGE KENDALL
On 26 June 2020, the applicant, the Fair Work Ombudsman, filed an application in this Court claiming that the first respondent, Matcraft Pty Ltd, had breached s 716 of the Fair Work Act 2009 (Cth) (the “Act”). The applicant also claimed that the second respondent, Mr Ruthenberg, and the third respondent, Mrs Ruthenberg, were involved in the contravention as per s 550 of the Act.
On 23 October 2020, the parties filed a statement of agreed facts. Relevantly, the respondents admitted as follows:
24. The First Respondent admits that it contravened subsection 716(5) of the FW Act by failing to comply with the Compliance Notice.
25. The Second Respondent admits that:
(a) within the meaning of subsection 550(2) of the FW Act, he was, by way of his acts or omissions, directly or indirectly knowingly concerned in, or party to, the First Respondent’s contravention of subsection 716(5) of the FW Act by failing to comply with the Compliance Notice; and
(b) he is therefore to be treated under subsection 550(1) of the FW Act, as having himself contravened subsection 716(5) of the FW Act.
26. The Third Respondent admits that:
(a) within the meaning of subsection 550(2) of the FW Act, she was, by way of her acts or omissions, directly or indirectly knowingly concerned in, or party to, the First Respondent’s contravention of subsection 716(5) of the FW Act by failing to comply with the Compliance Notice; and
(b) she is therefore to be treated under subsection 550(1) of the FW Act, as having herself contravened subsection 716(5) of the FW Act.
The parties agreed to the Court making various declarations and orders in light of the admitted contraventions. The sole issue for the Court is what penalty, if any, should be imposed on each of the respondents for their respective contraventions.
BACKGROUND
It is not necessary to outline the facts of this matter in detail. However, some context is needed.
Matcraft is a manufacturing business. Mr Ruthenberg is a director and secretary of Matcraft. Mrs Ruthenberg is a director of Matcraft.
On 14 June 2019, the applicant received a request for assistance from an employee of Matcraft. The employee claimed that he had not been paid wages for his work as a full-time sewing machinist from 1 July 2017.
In July 2019, a Fair Work Inspector commenced an investigation in relation to Matcraft.
On 17 July 2019, Mr and Mrs Ruthenberg admitted that they had not paid the employee for the period between 1 July 2017 and 30 June 2019 and undertook to pay the employee pursuant to a payment plan from 19 July 2019. From 19 August 2019, Matcraft ceased making payments to the employee as required by the payment plan.
On 16 January 2020, the applicant issued a Compliance Notice to Matcraft pursuant to s 716(2) of the Act. The Compliance Notice stated that the Inspector had a reasonable belief that Matcraft had breached cl 33.4 of the Vehicle Manufacturing, Repair, Services and Retail Award 2010 (the “Award”) and required Matcraft to calculate and rectify any underpayments to the employee by 14 February 2020.
Matcraft did not respond to the Compliance Notice. Nor were any further payments made to the employee.
On 26 February 2020, the Inspector sent Matcraft a “Failure to comply with a Compliance Notice” letter. That letter requested a response by 4 March 2020. No response was provided.
On 29 May 2020, a further letter was sent to Matcraft requesting a response by 15 June 2020. No response was provided.
An amended letter was sent on 11 June 2020. No response was provided.
On 26 June 2020, the applicant commenced proceedings in this Court. It is noted that, by consent, Mr Ruthenberg was given leave to appear on behalf of Matcraft in these proceedings.
PROCEDURAL HISTORY IN THIS COURT
On 1 September 2020, the Court made orders by consent allowing the parties to file any affidavit evidence and written submissions prior to the hearing. The Court also ordered that the respondents file a notice of address for service by 4 September 2020. No notice of address for service was filed.
Pursuant to the orders dated 1 September 2020, the applicant filed an affidavit of Natalie Clare Roberts sworn 30 October 2020 and an outline of written submissions dated 11 December 2020. No materials were filed by or for the respondents.
On 1 February 2021, Chambers emailed the parties confirming the arrangements for the hearing. The parties were asked to confer about any objections to the evidence and whether any witnesses were required for cross-examination. On 10 February 2021, a solicitor for the applicant informed the Court that the parties had no objections to the evidence and no witnesses were required for cross-examination. The solicitor for the applicant also forwarded correspondence from Mr Ruthenberg and Mrs Ruthenberg stating, in effect, that they do not dispute any facts, that they intend to pay the employee, that they accept any penalty and that they did not intend to attend the hearing.
Notwithstanding this correspondence, on 12 October 2021 Chambers again wrote to the parties and confirmed the arrangements for the hearing. This is the usual practice now that hearing dates are regularly changed because of the evolving COVID-19 situation. Chambers advised that the applicant had leave to appear via Microsoft Teams and that the respondents were otherwise expected to attend in person.
In the afternoon of 12 October 2021, Mr Ruthenberg emailed the Court as follows:
You mention that the Respondents are “expected” to appear in Person at the Hearing for the awarding of Penalties in this case.
Does this mean that we are now “Required” to attend the Hearing on Monday 15th February at 11.30am.
We have notified the Court of the following.
1.The First, Second and Third Respondents (the Respondents) do not intend to file any affidavit evidence or written submissions in respect of penalty;
2.The Respondents do not intend to call any witnesses at the penalty hearing on 15 February 2021;
3.The Respondents do not intend to object to any evidence previously filed by the Fair Work Ombudsman.
We also notified the court that in respect of the above 3 points we would not be attending court and will accept the penalties as decided by Judge Kendall.
Please confirm if this is now a requirement of the Court that we attend.
Chambers responded that it was a matter for each respondent whether they chose to attend the hearing or not and otherwise confirmed that the hearing would proceed on 15 February 2021 at 11.30am.
At the commencement of the hearing on 15 February 2021, there was no appearance by or for any of the respondents. The Court made an order that the hearing proceed pursuant to r 13.03C(1)(e) of the Federal Circuit Court Rules 2001 (Cth) – that is, that the hearing proceed in the absence of the respondents.
In circumstances where the respondents were fully on notice of the date and time of the hearing and the correspondence indicates that they had consciously chosen not to attend and participate in these proceedings, the Court considered proceeding in their absence to be both reasonable and appropriate.
The materials before the Court are thus limited to the application filed 26 June 2020, the statement of agreed facts filed 23 October 2020, an affidavit of Natalie Clare Roberts sworn 30 October 2020, an outline of written submissions dated 11 December 2020 and the correspondence referred to above (which was marked as Exhibit 1).
PENALTY PRINCIPLES
As noted, the sole issue before the Court is whether a penalty should be imposed for the respondents’ contraventions. There is no dispute that s 716(5) of the Act is a “civil remedy provision”.
Sections 539(2) and 546(2) of the Act indicate the “maximum” penalty units that can be imposed on an individual and a corporate entity. These “maximum” penalties have been set by Parliament and should be used as a “yardstick” against which only the most severe contravention will attract the maximum penalty: Mornington Inn v Jordan [2008] FCAFC 70 at [41]-[46] (“Mornington Inn”).
Here, the maximum penalty units that can be imposed are as follows:
(a)against Matcraft, 150 penalty units; and
(b)against Mr Ruthenberg and Mrs Ruthenberg, 30 penalty units each.
What constitutes a “penalty unit” is determined by reference to s 4AA of the Crimes Act 1914 (Cth) as it stood at the time of the contravention in this case (i.e., 14 February 2020). At that time, s 4AA stated that a penalty unit was $210. Accordingly:
(a)the maximum penalty that can be imposed on Matcraft is $31,500; and
(b)the maximum penalty that can be imposed on Mr Ruthenberg and Mrs Ruthenberg is $6,300 each.
The Court notes that in this matter there is a single contravention. Hence, it is unnecessary to consider grouping as per s 557 of the Act. The second and third step as stated in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 (“NSH North”) are also not relevant in the circumstances of this case.
Accordingly, the Court’s task is to assess the appropriate penalty. In doing so, the Court has regard to a number of factors and considerations. There is no exhaustive list of factors. However, the following factors are relevant here:
(a)the nature, circumstances and extent of the contravention;
(b)the loss/consequences that arose from the contravention;
(c)the size of Matcraft and the history and the financial circumstances of the respondents;
(d)the degree of contrition shown, corrective action taken and cooperation demonstrated;
(e)the need to ensure compliance with minimum standards; and
(f)the need for specific and general deterrence. Relevantly, that deterrence is the “principal object” of imposing a penalty and the imposition of a penalty is not to serve a retributive function: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113 (“ABCC”)
(see, Kelly v Fitzpatrick [2007] FCA 1080 (“Kelly”))
The Court will also consider any proposed penalty amounts submitted by the parties: Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46. Here, the applicant submits that the appropriate penalty ranges for the respondents are:
(a)$19,845 to $22,680 for Matcraft; and
(b)$3,969 to $4,536 for each of Mr Ruthenberg and Mrs Ruthenberg.
The respondents did not provide any submissions as to penalty ranges. In correspondence sent to the Court, they indicated that they would accept whatever penalties were imposed.
Finally, once the Court has determined a penalty in light of the matters above, it will take “one final look” to determine whether the amount is proportionate to the contraventions. This is referred to as the “totality principle” whereby the Court undertakes “a final check” to ensure that the penalty is not unjust or out of proportion to the circumstances of the case: Mornington Inn at [42].
CONSIDERATION
Nature, circumstances and extent of the contravention and the loss/consequences that arose from it
There is a single contravention in this matter arising from a failure to comply with a Compliance Notice. The contravention arises from s 716(5) of the Act.
As explained in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), the purpose of s 716 of the Act is to provide an alternative to litigation. Section 716 is an informal mechanism whereby the applicant can identify potential contraventions of the Act and seek rectification without an employer having to admit liability.
One of the objects of the Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms. Section 716 encapsulates this objective by allowing employees to make a request for assistance which the applicant can then resolve through the use of s 716.
The nature of a failure to comply with s 716 of the Act strikes at the heart of the objects of the Act.
Here, the circumstances surrounding the contravention are less than satisfactory.
The Compliance Notice was issued on 16 January 2020. The Compliance Notice was issued as it appeared that Matcraft had not complied with the Award. It had not paid the employee (who, it is noted, did not speak English) any wages for the period between 1 July 2017 and 30 June 2019.
The circumstances that existed prior to the Compliance Notice being issued are also relevant. The Inspector first visited Matcraft on 17 July 2019 and Mr Ruthenberg admitted that he had not paid the employee. It was arranged for a “payment plan” to commence on 19 July 2019. That payment plan was satisfied for only one month. Matcraft then ceased paying instalments.
On 18 October 2019, two Inspectors visited Matcraft. Mr Ruthenberg admitted that he had been “expecting” a visit and knew the reason for the visit. Mr Ruthenberg stated that he hoped to make a “lump sum” payment and return to the payment plan structure in November 2019.
Three months after this visit, and five months after Matcraft had ceased making payments to the employee as per the agreed payment plan, the Compliance Notice was issued. It appears Matcraft did not pay the lump sum or return to the payment plan as suggested as the company decided the money should be spent on products for the business (rather than on their employee).
The Compliance Notice required that action be taken by 14 February 2020. No action was taken and no communication was made by Matcraft.
On 26 February 2020, the applicant issued the letter advising Matcraft that they had failed to comply with the Compliance Notice. That same day, an Inspector spoke to Mr Ruthenberg who advised that “he just couldn’t pay… by the date specified in the [Compliance Notice]”. Whether or not that was the case, this “excuse” does not justify ignoring the Compliance Notice.
The letter dated 26 February 2020 provided Matcraft with a further seven days to provide a response (including a “reasonable excuse for not complying with the Compliance Notice”). Matcraft did nothing.
On 29 May 2020, a further letter was sent to Matcraft which gave the company until 15 June 2020 to comply with the notice or provide a “reasonable excuse”. Again, Matcraft remained silent.
Ms Ruhl for the applicant confirmed at the hearing that Matcraft has still not complied with the Compliance Notice despite this litigation and despite the fact that all of the respondents have admitted to contravening the Act. Indeed, as Exhibit 1 demonstrates, both Mr Ruthenberg and Mrs Ruthenberg “agree to make full restitution” to the employee. Mr and Mrs Ruthenberg agreed to pay the employee when visited by the Inspector. They made some repayments and then ceased. Accordingly, their agreement carries little weight.
The circumstances surrounding the contravention are entirely unsatisfactory. Matcraft was given a number of opportunities to comply with the notice and it continued to ignore or disregard those opportunities. The respondents were clearly aware of the Compliance Notice and the non-compliance but took no active steps to engage with the applicant. Had Matcraft done so, court proceedings would have been avoided.
While no submissions were advanced in relation to the “deliberateness” of the contravention, the Court is nonetheless of the view that the respondents were well aware of their non-compliance and, in the case of Mr Ruthenberg, purported to take active steps to “avoid” communication with the applicant (see, Annexure NCR-4 of the affidavit of Natalie Clare Roberts sworn 30 October 2020).
The Court is also of the view that the circumstances that led to the Compliance Notice being issued (noting, in particular, that Mr Ruthenberg admitted that he had not paid the employee for a significant period, that undertakings were not followed through and that conscious and considered decisions were made to prioritise other matters over the employee’s core right to wages) evidence very poor conduct and a cavalier approach to what are important and much needed legal obligations. Had the respondents acted with any regard for basic workplace obligations, the need for the Compliance Notice would have been eradicated. Instead, they chose, in effect, to “see just how long they could continue” not doing what they were legally required to do.
The respondents’ behaviour (and the circumstances surrounding the contravention) point to entirely unacceptable conduct. It demonstrates a disregard for minimum workplace standards and the applicant’s role as a regulator.
The extent of the contravention is ongoing. Matcraft has not yet complied with the Compliance Notice.
Placing this to one side, at the time these proceedings had commenced Matcraft had been in contravention of the Act since at least 14 February 2020. That is, the extent of the contravention at the time that this proceeding commenced was some four months. This too is entirely unacceptable.
The nature and extent of the contravention and the circumstances surrounding the contravention warrant a penalty in the high range.
The loss/consequences that arose from the contravention
The contravention in issue here is the failure to comply with the Compliance Notice.
In effect, any contravention of s 716 of the Act renders otiose the purpose of the provision to prevent litigation. Hence, the substantial loss that flows from the contravention is reflected in the fact that the respondents’ actions have undermined the effectiveness of the Act (in particular s 716 of the Act).
The applicant submits that the employee whose request for assistance formed the basis of the Compliance Notice was denied wages for 83 weeks. The amount owing is estimated at $52,000. The applicant submits that the Court should be satisfied that, had Matcraft complied with the Compliance Notice (and the contravention did not arise), a substantial amount of money would have been paid to the employee. Accordingly, the employee’s loss “flows from the breach before the Court”. The applicant also refers to the vulnerability of the particular employee, contends that he was “exploited” and submits that this adds to the seriousness of the loss.
The Court accepts that the employee here was vulnerable (he did not speak English) and thus more easily exploited. Matcraft’s failure to pay the employee for over 18 months is serious and entirely unacceptable.
The Court accepts that the underlying alleged contravention which forms the basis of the Compliance Notice (and the circumstances surrounding it – including vulnerability and the loss that flowed from it) is to be given some weight. However, proper consideration of this issue is (and has been) best considered in the context of the circumstances surrounding the contravention.
It is noted that the loss and consequence of the contravention in this matter to the employee is, again, the loss of confidence in the utility and effectiveness of the Act and s 716. In particular, the effectiveness of such a provision for vulnerable employees like the employee. The employee took some time to make a request for assistance from the applicant. In circumstances where the employee is in the same position as he was when he made the request for assistance (over 18 months ago), the loss and consequences flowing from the contravention are such that the public (and other vulnerable employees) may consider the process too burdensome.
In light of the above, the loss and consequences which arise from the contravention warrant a penalty in the mid-range.
Matcraft’s size and the respondents’ history and financial circumstances
There is no evidence that Matcraft or Mr Ruthenberg or Mrs Ruthenberg have previously been found to have contravened the Act.
It is noted that the size of a business does not excuse it from its statutory obligations: Kelly at [30]. However, a business’s financial circumstances, and its capacity to pay a penalty, may have some weight in determining whether to mitigate penalty. Such a consideration does not, however, negate the need and importance for deterrence: Jordan v Mornington Inn Pty Ltd [2007] FCA 1384.
The respondents have put no evidence before the Court as to their financial circumstances. The Court does note that throughout the affidavit of Ms Roberts there are various references to Matcraft having financial issues, “no money… to pay outstanding wages”. It is also explained that the company has “nowhere to get money” because “the house is mortgaged”.
The Court accepts that Matcraft was suffering financial issues which required it to down size.
In relation to Mr Ruthenberg and Mrs Ruthenberg, the applicant provided evidence that the Ruthenbergs hold the title to one property. That property is mortgaged. The applicant also provided a “Property Profile Report” for the Ruthenberg’s property. That report estimated that the value of the property was approximately $890,000. However, that estimate had the following caveat:
Estimated Value as at 26 October 2020. An automated valuation model estimate (Estimated Value) is a statistically derived estimate of the value of the subject property. An Estimated Value must not be relied upon as a professional valuation or an accurate representation of the market value of the subject property as determined by a valuer. For further information about confidence levels, please refer to the end of this document.
The valuation confidence level was “low”.
In light of the report’s lack of reliability, the Court places no weight on it.
On the materials before the Court, there is nothing to indicate that the Ruthenbergs will suffer financial hardship if a penalty of any range is imposed.
Accordingly, evidence as to the respondents’ financial circumstances does little to assist them in determining the amount of any penalty that is imposed.
The degree of contrition shown, corrective action taken and cooperation demonstrated
There has been no apology or expression of remorse from the respondents.
There has also been an absence of any corrective action aimed at rectifying the non-compliance. Matcraft has taken no steps to comply with the Compliance Notice notwithstanding the commencement of these proceedings.
It is further noted that the applicant gave Matcraft numerous opportunities to take corrective action. Nothing was done. It appears corrective action was not a priority. For example, Matcraft used available funds to purchase materials as opposed to paying their employee. Further, Matcraft chose to stop the payment plan and not return to it despite indicating that it would do so.
While Exhibit 1 states that the respondents will “accept” any penalty and “agree” to make full restitution to the employee, the Court simply does not place weight on this evidence of contrition or remorse. As noted above, the “agreement” to make full restitution lacks credibility given previous conduct.
The lack of contrition and corrective action that has been shown warrants a penalty in the mid-high range.
The applicant submits that a discount of 10 per cent is appropriate in light of the cooperation the respondents have shown in filing the statement of agreed facts.
The applicant refers to Mornington Inn wherein it is stated:
76 ...a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability:
(a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or
(b) has indicated a willingness to facilitate the course of justice.
Here, the acceptance of wrongdoing (by filing the statement of agreed facts) is, in the absence of contrition, superficial in the Court’s view.
Further, the filing of the statement of agreed facts is not evidence of a willingness to facilitate the course of justice to any significant degree. While it has reduced the time and costs spent litigating this matter, it appears that the reason the respondents agreed to the contravention was because they eventually accepted the inevitable. However, the Court does accept that this has at least ensured that this matter can be resolved efficiently and without further expense.
Accordingly, a discount of 10 per cent is to be provided for the respondents’ cooperation.
The need to ensure compliance with minimum standards
Section 716 of the Act is designed to provide the applicant with non-litigious alternatives to ensuring compliance with minimum standards. It provides a process whereby an employer can rectify any breaches without admission or further action being taken in relation to those breaches. It also gives an employer the opportunity to challenge any notice.
The failure to comply with a compliance notice in circumstances where there was an option to challenge the notice demonstrates a complete disregard for the core purpose of the relevant statutory provision and for the Act’s objective to ensure that employees receive minimum standards and entitlements.
On the basis of the above, a penalty in the mid-range is appropriate.
The need for specific and general deterrence
As noted above, the primary objective of a penalty in proceedings such as these is deterrence. In ABCC, the Full Federal Court stated:
98. Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is primarily, if not wholly, protective in promoting the public interest in compliance: Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076 at 52,152 [42]; Commonwealth v Director, FWBII at [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ). The principal object of a pecuniary penalty is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene; both specific and general deterrence are important: Chemeq at [90]; Ponzio at [93]. A pecuniary penalty for a contravention of the law must be fixed with a view to ensuring that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [66]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at 265 [62]-[63]…
In relation to general deterrence, it is important to send a message that contraventions of the sort under consideration here are serious and not acceptable.
A contravention of s 716 not only undermines the purpose of the provision itself (to avoid litigation and foster compliance informally and more efficiently), it also undermines the applicant’s effectiveness as a regulator. Compliance notices are a means by which the applicant can carry out its statutory function without having to litigate.
Accordingly, a penalty must be sufficient to reinforce the role of the regulator and encourage timely corrective action and compliance with notices issued under s 716 of the Act.
Ms Roberts affidavit annexes an Industry Profile Report for the Vehicle Manufacturer Repair and Services Industries. In NSH North, it was explained that a report of a similar nature (in that case relevant to the hospitality industry) “may be given appropriate weight insofar as it establishes that there are problems in the industry which render general deterrence of substantial and continuing importance in fixing civil penalties for the contraventions in this case”.
The Industry Profile Report indicates that the industry dispute rate is “moderate”. Only 1.5 per cent of compliance notices issued by the applicant are in relation to this industry. The Court gives minimal weight to the need to impose a penalty for general deterrence in this industry as a whole.
Accordingly, in relation to general deterrence, a penalty in the mid-range is appropriate
In relation to specific deterrence, each of the respondents are first time offenders. Nonetheless, the Court accepts the applicant’s submission that the lack of remorse and contrition shown by the respondents and, in the Court’s view, the fact that the respondents each put the business needs ahead of their employee, warrants a sufficient penalty to deter future contraventions: Australian Building and Construction Commissioner v J Hutchinson Pty Ltd T/A Hutchinson Builders (Hutchinson) [2019] FCA 667.
It is further noted that Matcraft still operates and that the Ruthenbergs are still directors of the company. The evidence also shows that there are other employees at Matcraft.
On the basis of the above, specific deterrence warrants a penalty in the mid-range.
Assessment of Penalty and Totality
As noted above, the applicant submits that the appropriate penalty ranges for the respondents are:
(a)$19,845 to $22,680 for Matcraft; and
(b)$3,969 to $4,536 for each of Mr Ruthenberg and Mrs Ruthenberg.
It is noted that the Inspector explained to Mrs Ruthenberg and Mr Ruthenberg separately what was required by the Compliance Notice. Neither of them took any action. Accordingly, they are both equally but separately liable for the contravention. Each will be the subject of a penalty at the same level as that imposed on Matcraft.
The Court has considered that a penalty in the mid-high range is appropriate and there has been little established by way of mitigation. Allowing for a 10 per cent discount for cooperation, the Court considers a penalty of 70 per cent of the maximum penalty to be appropriate. In circumstances where the respondents have shown no contrition and their contravention remains ongoing, it is necessary to impose a meaningful penalty.
Accordingly, an appropriate penalty is:
(a)$22,050 for Matcraft; and
(b)$4,410 for each of Mr Ruthenberg and Mrs Ruthenberg.
The final task for the Court is to examine “one final time” whether the penalty arrived at “appears to be wrong” and ensure that it is “not oppressive”: Mornington Inn.
The respondents have not filed anything that demonstrates that a penalty of any proportion would be oppressive. Nonetheless, the Court has considered whether the penalties here are unjust or out of proportion.
Here, the contravention continues. The respondents have taken no action to remedy the contravention and the Court places limited weight on their stated intention to do so. The Court considers that the penalty imposed is proportionate in light of the ongoing nature of the contravention and the factual basis which informed the Compliance Notice being issued in the first place and the conduct thereafter.
No reduction on the basis of totality is necessary.
OTHER MATTERS
The statement of agreed facts indicates that the respondents agree to the declarations that the respondents have each contravened the Act. The Court is satisfied that it is appropriate for declarations to be made. They will be made in the terms sought.
The parties also agreed to orders requiring Matcraft to comply with the Compliance Notice within 28 days. It is indeed unfortunate that an order of that sort is even required. Section 716 is designed to prevent orders of that sort. Nevertheless, the order will be made. Non-compliance is not something that the respondents should take lightly.
CONCLUSION
The Court has determined that the appropriate penalty to be imposed on each of the respondents is as follows:
(a)$22,050 for Matcraft; and
(b)$4,410 for each of Mr Ruthenberg and Mrs Ruthenberg.
The applicant asks that this penalty to be paid within 28 days. Notwithstanding a lack of evidence before the Court, many businesses have been affected by the COVID-19 pandemic. The Court will thus grant the respondents 90 days within which to pay the imposed penalties.
The remaining declarations and orders the Court makes are those which the parties agreed to in the statement of agreed facts and will be made in the terms sought.
I certify that the preceding one hundred and five (105) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Kendall. Associate:
Dated: 18 February 2021
20