Fair Work Ombudsman v McGrath & Anor

[2010] FMCA 315

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v MCGRATH & ANOR [2010] FMCA 315

INDUSTRIAL LAW – Civil penalty proceedings – employer failing to lodge AWAs within 14 days – whether AWAs were not ‘actually received’ by post by contractor of Workplace Authority – liability of directors as persons involved – failure to establish knowledge and intentional participation in essential ingredients of contravention – consequential liability for employer’s contraventions of applicable provisions of NAPSA not established – application dismissed.

Workplace Relations Act 1966 (Cth), ss.182, 195, 326, 333, 340, 342, 344, 345, 347, 407, 719, 727, 728, Sch.8 Part 3
Evidence Act 1995 (Cth), s.140

Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd and Others (No.2) (1999) 95 FCR 302
Briginshaw v Briginshaw (1938) 60 CLR 336
Dowling v Kirk & Ors [2007] FMCA 2106
Giorgianni v The Queen (1985) 156 CLR 473
Musgrave v Australian Competition & Consumer Commission; Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17
Qantas Airways Ltd v Gama (2008) 167 FCR 537
Yorke v Lucas (1985) 158 CLR 661

Applicant: FAIR WORK OMBUDSMAN

First Respondent: MATTHEW MCGRATH

Second Respondent: GARY CARPENTER

File Number: SYG 1554 of 2009

Judgment of: Smith FM

Hearing dates: 2 & 3 March 2010

Date of Last Submission: 26 March 2010

Delivered at: Sydney

Delivered on: 21 May 2010

REPRESENTATION

Counsel for the Applicant: Mr L Innes

Solicitors for the Applicant: Sparke Helmore

Counsel for the Respondents: Ms A Perigo

Solicitors for the Respondents: Beverley Foster & Associates

ORDERS

1. The application is dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 1554 of 2009

FAIR WORK OMBUDSMAN

Applicant

And

MATTHEW MCGRATH

First Respondent

GARY CARPENTER

Second Respondent

REASONS FOR JUDGMENT

1. The Fair Work Ombudsman seeks orders imposing pecuniary penalties on Mr McGrath and Mr Carpenter, as persons involved in contraventions of the Workplace Relations Act 1996 (Cth) by their company, McCarvis Pty Ltd (‘McCarvis’). The Fair Work Ombudsman’s standing to seek these orders, and the continuing relevance of the Workplace Relations Act after the commencement of the Fair Work Act 2009 (Cth) are not challenged, and it is unnecessary for me to trace the laws which have this effect.

2. McCarvis employed about 52 casual employees at different times between 2005 and 2008, in a business trading as Southbound Protective Services.  It provided security services in the Southern Highlands and Illawarra regions of NSW, mainly to clients of the Chubb Security network.  Following the loss of that source of work, a creditors’ voluntary liquidator was appointed on 19 January 2009 (see exhibit DP35).  At all relevant times, Mr McGrath and Mr Carpenter were the company’s directors who conducted its day to day management from offices in Moss Vale and Wollongong.  They were both involved to some degree in personnel matters, including the determination of general conditions and remuneration of employees, and the engagement and supervision of particular employees. 

3. When the WorkChoices legislation introduced provision for individual Australian Workplace Agreements in 2006, the directors of McCarvis adopted a form of AWA which would, if brought into operation, exclude an employee’s entitlements under the Security Industry (State) Award (“the NAPSA”).  This award would otherwise have provided the employee’s entitlements as a ‘notional agreement preserving State award’, taking effect as a collective agreement under Sch.8 Part 3 of the Workplace Relations Act (see cl.38A(2)). The company’s standard form of AWA provided for casual employment at a flat hourly rate of remuneration, without overtime, casual loadings, or additional rates for working at night or on weekends or on public holidays, and without any annual leave entitlements. Mr McGrath has claimed that the company could not afford to pay the NAPSA conditions of employment, and that it therefore offered new employees casual employment for work only during business hours under the NAPSA, or full hours of work under the AWA. I am not persuaded that, in fact, such a choice was always offered to new employees, and, in any event, it might appear to have offered a Hobson’s choice, in the context of patrol work in the security industry.

4. Mr Price, a workplace inspector, later examined all the employee records held by the company’s liquidator, and compared them with the official ‘Phoenix’ data base of AWAs received by the relevant statutory authorities.  His summary of these records, which I accept, shows a confused state of affairs in relation to the lodgement of AWAs by McCarvis between 2006 and 2008.  Although more than 40 employees had been paid under the terms of the company’s standard AWA and not the NAPSA, the Phoenix records showed only that 12 AWAs had been received in April, July and August 2006, and that none were recorded as being received subsequently.  The employees’ files contained some, but not all, of the letters which confirmed receipt of the 12 AWAs, and no other evidence of acknowledged lodgements.  No copies of employer declarations under s.344 were found in any of the files, even in those where lodgement undoubtedly occurred. In relation to the 12 confirmed lodgements, no copy or original of the AWA was found on the employee’s file.  Some, but not all, of the other employees’ files contained copies of signed AWAs, and eight of them contained a signed original AWA. 

5. When interviewed by Mr Price, Mr McGrath claimed that the company had followed a general practice that “usually within two working days we’d try and send them, so we’ll just put them in an A4 size envelope and post them away”.  He acknowledged that they did not receive official receipts for AWA’s made in the later period, but both directors have maintained their belief that all McCarvis AWA’s were posted by one of themselves or by some other agent of the company to the correct post office box number at Marrickville. 

6. Mr McGrath and Mr Carpenter did not dispute Mr Price’s calculations, based on the NAPSA, of entitlements not paid to three employees whose AWAs were not recorded on Phoenix, Messrs Wales, Feberwee and Smith (“the three employees”).  They also did not dispute ‘breach notices’ served on McCarvis, which alleged breaches of various statutory requirements in relation to the making and lodgement of these three employees’ AWAs, and which demanded underpayments calculated on the basis that their employment was, in law, governed by the NAPSA.  The two directors signed ‘compliance undertakings’ on behalf of McCarvis in relation to Mr Feberwee and Mr Smith, and the company made the first payments under schedules set out in them.  The company also made a payment to Mr Wales at that time.  However, the Fair Work Ombudsman now alleges that further amounts due to be paid to Mr Feberwee and Mr Smith, totalling $15,433.15 and $10,549.35 respectively, have remained outstanding since the company went into liquidation.  In addition, an amount of $1,523.93 is alleged to be owing to Mr Wales, but it is unclear whether the underpayments to which this relates were covered by the payment made to him.

7. When responding to the breach notices on behalf of their company, Mr McGrath and Mr Carpenter wrote on 8 September 2008:

   After careful review with our Accountant and Solicitor we wish to rectify the breach by paying the amounts you have specified, even though we all believe that it was not entirely our fault as we have no control of documents after they have left our possession. We have put in place procedures to rectify the previous problem so this event should never occur again.

The alleged contraventions

1. The Fair Work Ombudsman’s present application was filed on 30 June 2009.  It relies upon contraventions by the employer company of only one of the statutory requirements in relation to AWAs, being the obligation to lodge an AWA pursuant to s.342.  It alleges that this contravention was repeated in relation to each of the AWAs of the three employees.  As against each of Mr McGrath and Mr Carpenter, the Fair Work Ombudsman seeks the imposition of three penalties under ss.407 and 728, as persons involved in those contraventions.

2. The application also alleges that, as a result of the employees being paid reduced remuneration under AWAs which never became legally operative, there were consequential breaches of the Act and the NAPSA, which required the payment of various species of entitlements to each of the three employees. The ‘applicable provisions’ which are relied upon are ss.182(1) and 195(1) of the Workplace Relations Act in relation to basic periodic rate of pay and casual loadings, and cll.11.2.3, 22.1.1 and 21.3 of the NAPSA in relation to pro-rata paid annual leave, additional hourly rates, and overtime (“the consequential breaches”). The amended application seeks the imposition on each of Mr McGrath and Mr Carpenter of numerous penalties under ss.719 and 728, for their involvement in these breaches. Although the original application sought orders against them for the payment of outstanding entitlements to the three employees, this relief was not pursued.

Liability for involvement in a contravention of s.342

1. Section 342 provided after 1 July 2007:

   342  Employer must lodge certain workplace agreements with the Workplace Authority Director

   (1)If an AWA, an employee collective agreement or a union collective agreement has been approved in accordance with section 340, the employer must lodge the agreement, in accordance with section 344, within 14 days after the approval.

   (2)If a union greenfields agreement has been made, the employer must lodge the agreement, in accordance with section 344, within 14 days after the agreement was made.

   (3)Subsections (1) and (2) are civil remedy provisions.

2. The process of lodgement was explained in ss.344 and 345:

   344  Lodging of workplace agreement documents with the Workplace Authority Director

   (1)The employer in relation to a workplace agreement lodges the workplace agreement with the Workplace Authority Director if:

   (a)the employer lodges a declaration under subsection (2); and

   (b)a copy of the workplace agreement is annexed to the declaration.

   (2)An employer lodges a declaration with the Workplace Authority Director if:

   (a)the employer gives it to the Workplace Authority Director; and

   (b)it meets the form requirements mentioned in subsection (3).

   Note: Sections 137.1 and 137.2 of the Criminal Code create offences for providing false or misleading information or documents.

   (3)The Workplace Authority Director may, by notice published in the Gazette, set out requirements for the form of a declaration for the purposes of paragraph (2)(b).

   (4)A declaration is given to the Workplace Authority Director for the purposes of subsection (2) only if the declaration is actually received by the Workplace Authority Director.

   Note: This means that section 29 of the Acts Interpretation Act 1901 (to the extent that it deals with the time of service of documents) and section 160 of the Evidence Act 1995 do not apply to lodgement of a declaration.

   (5)The Workplace Authority Director is not required to consider or determine whether any of the requirements of this Part (other than Division 5A) have been met in relation to the making or content of anything annexed to a declaration lodged in accordance with subsection (2).

   345  Workplace Authority Director must issue receipt for lodgement of declaration for workplace agreement

   (1)If a declaration is lodged under subsection 344(2), the Workplace Authority Director must issue a receipt for the lodgement.

   (2)The Workplace Authority Director must give a copy of the receipt to:

   (a)the employer in relation to the workplace agreement; and

   (b)if the workplace agreement is an AWA—the employee; and

   (c)if the agreement is a union collective agreement or a union greenfields agreement—the organisation or organisations bound by the agreement.

3. The effect of these provisions is that an employer committed a breach of the civil remedy provision under s.342(1), if it is established that an AWA was made with an employee, and was not then lodged within 14 days after the date of its signature by the employee (see ss.326, 333(a), and 340(1)).  Lodgement required the ‘giving’ of a valid declaration attaching a copy of the AWA, by the employer to the designated statutory authority.  By reason of s.344(4), such ‘giving’ only occurred “if the declaration is actually received” by the authority. 

4. It was not contested before me that a contravention by an employer of s.342(1) could be found to have occurred without proof of any intention by the employer to fail to lodge an AWA within 14 days, or of knowledge that lodgement would not or did not occur within the 14 day period.  A contravention by an employer could be established, even if, for example, a failure of the statutory authority to ‘actually receive’ the AWA within the designated period was the fault of the postal service or some other agency outside the control of the employer.  This ‘strict’ liability, or exclusion of an ingredient of mens rea on the part of an employer, would appear to be implicit from the terms of s.344(4).  However, as I shall explain, the strict liability of the employer is in contrast with the subjective element required to be established before liability can be attached to a person involved in the employer’s contravention.

5. The provisions extracted above were also in effect prior to 1 July 2007, but the statutory authority for the receipt of AWAs was the Office of Employment Advocate.  It was required only to verify that the employer’s declaration met formal requirements, and then to issue a receipt.  Under the amendments applying subsequent to 1 July 2007, this task was given to the Workplace Authority, which was also given the added role of examining AWAs against a statutory ‘fairness test’ under s.346M. 

6. Under both versions of the legislation, an AWA came into operation as the legal source of the employee’s entitlements upon the date of its lodgement, and took effect at that date even if the formalities in relation to its making had not been complied with, and even if no decision had been made that it passed the fairness test.  In this respect s.347 provided at the relevant times:

   347  When a workplace agreement is in operation

   (1)A workplace agreement comes into operation on the day the agreement is lodged.

   (2)A workplace agreement comes into operation even if the requirements in Divisions 3 and 4 and section 342 have not been met in relation to the agreement.

   (2A)If:

   (a)an employer and an employee or employees of the employer, or an organisation of employees, make a workplace agreement (within the meaning of section 333); and

   (b)the employer does not lodge that workplace agreement (the unlodged agreement), but subsequently lodges a declaration under subsection 344(2); and

   (c)the declaration purports to identify as parties to a workplace agreement:

   (i)     the employer who lodged the declaration; and

   (ii)     at least one employee, class of employees or organisation; and

   (d)the employer and the other parties identified in the declaration are parties to the unlodged agreement; and

   (e)a document that is different from the unlodged agreement is attached to the declaration;

   then:

   (f)the unlodged agreement comes into operation as a workplace agreement at the time the declaration is lodged; and

   (g)the document that is attached to the declaration does not come into operation as a workplace agreement.

7. The effect of the reference to the “requirements” of s.342 in s.347(2) is not entirely clear, and was not the subject of any submissions to me.  However, in my opinion, when read in the light of subsections (1) and (2A), it has the effect that an AWA became legally operative even if it was lodged, in the sense of ‘actually received’, after the 14 day period specified in s.342, and notwithstanding that the delay exposed the employer to prosecution for contravention of s.342.  However, a properly executed AWA would not take any legal operation, including to exclude the operation of a NAPSA, if it was never lodged with the relevant authority, whether before or after the 14 day deadline.  This seems to be the consequence of s.347(1), in relation to which s.347(2) appears to provide only an embellishment.

8. After the introduction of the fairness test, a duly lodged AWA could cease to operate as a result of a determination of the Workplace Authority, but it is unnecessary for me to examine the provisions which had this effect.  No submissions were made to me whether the standard form of AWA executed by employees of McCarvis Pty Ltd was ever determined not to pass the fairness test, nor whether it would have passed the test if a determination were made.   There is no evidence whether Mr McGrath or Mr Carpenter were aware of the introduction of the fairness test, nor whether they expected their AWA to be favourably assessed under that test.  It was not put to them in cross-examination that they might have been motivated to withhold lodgement of their AWAs during 2007, due to a concern about the introduction of the fairness test.   I therefore would not find that any such motivation existed.

9. Under s.407(1), the Court has power to order a person who contravened the civil penalty provision in s.342(1) to pay a pecuniary penalty which, in the case of an individual in the present circumstances, is 30 penalty units or $3,300.00. 

10. That power is extended beyond the employer to third persons who are involved in the contravention, by the provisions of s.728 (see s.727(1)(b) and (c)).  Section 728 has always provided:

    728  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 treated as having contravened that provision.

    (2)For this purpose, 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.

11. This duplicates the language of a provision of the Trade Practices Act 1974 (Cth) which imposed relational liability for involvement in civil contraventions of that Act, and was addressed by the High Court in Yorke v Lucas (1985) 158 CLR 661. It was accepted by the parties before me, and has been settled by authority, that the principles identified in Yorke v Lucas and derived from jurisprudence concerning accessories to criminal conduct, have direct application to s.728 (see Dowling v Kirk & Ors [2007] FMCA 2106 at [23]).

12. In Yorke v Lucas, Mason ACJ, Wilson Deane and Dawson JJ explained paragraph (a) at 667:

    … a person will be guilty of the offences of aiding and abetting or counselling and procuring the commission of an offence only if he intentionally participates in it. To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime.

13. On this construction, the requirement of mens rea is also implicit in s.728(b) and (d), even if it is not explicit in the language of those paragraphs. 

14. In relation to paragraph (c), their Honours said in Yorke v Lucas at 670, that a person cannot be ‘knowingly concerned’ in a contravention “unless he has knowledge of the essential facts constituting the contravention”, and that a ‘party to a contravention’ must “be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention”.

1. In Giorgianni v The Queen (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. As Gibbs CJ said at 483:

   The failure to make such inquiries as a reasonable person would have made is not equivalent to knowledge; it is not enough to render a person liable as a secondary party that he ought to have known all the facts and would have done so if he had acted with reasonable care and diligence. That is so even when the offence is one of strict liability, so that the actual perpetrator may be convicted in the absence of knowledge.

2. 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.

3. 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.

4. Referring to offences of aiding and abetting and counselling and procuring, Wilson, Deane and Dawson JJ said at 506:

   Those offences 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.

5. Applying these principles of accessorial liability under s.728 in relation to a contravention of s.342, it becomes necessary for the Fair Work Ombudsman to establish more than the ingredients of the principal contravention, i.e. that, in fact, the three employees’ AWAs were not actually received by the Workplace Authority within 14 days after the date of their signature.  He must also establish that Mr McGrath and Mr Carpenter had actual knowledge of, or were wilfully blind to, facts showing that each of the three AWAs signed by the three employees would not be received within that period, and that they intended to assist or encourage the events which produced that outcome. 

6. Proof that one of the directors of McCarvis taking responsibility for personnel matters had an intention personally to withhold or prevent lodgements by the company, or to delay lodgements until after that period, or had an intention to assist or encourage another person to achieve this outcome, might be enough to satisfy s.728 in relation to that director.  So too might be proof that there was a common design or shared intention that the AWAs would not be lodged by the company, either at all or within the required period.  However, merely establishing awareness by either or both of the directors of facts allowing “the possibility or even probability” that lodgement by the company would not occur within that period would not be enough.  Establishing an awareness only after the expiry of the lodgement period that actual receipt had not occurred within that period or at all, would certainly not be enough.  It is necessary for the Workplace Ombudsman to establish knowledge on the part of each of Mr McGrath and Mr Carpenter of some circumstance which showed that the AWAs would not be lodged within the specified time, and their possession of that knowledge must be accompanied by a state of mind revealing an intention to participate in the ensuing contravention by the employer.

7. The onus of proof in relation to these facts is placed on the Workplace Ombudsman, and is governed by “the rules of evidence and procedure for civil matters” (see s.729 of the Workplace Relations Act). One of the rules of evidence is found in s.140 of the Evidence Act 1995 (Cth):

   140  Civil proceedings: standard of proof

   (1)In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.

   (2)Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to 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.

   The considerations raised by s.140(2) include those which are often cited as the ‘Briginshaw test’ (see Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362, and Qantas Airways Ltd v Gama (2008) 167 FCR 537 at [110], [123]-[132]). In the context of an application for civil penalties, they point strongly against drawing factual conclusions based only on “inexact proofs, indefinite testimony, or indirect inferences”.

8. As I shall explain, although I am persuaded on the balance of probability that the AWAs of Messrs Wales, Smith and Feberwee were not actually received by the relevant authorities within 14 days after they were made, I have not been persuaded that this occurred with knowledge by either of the directors that the AWAs would not be received by the Authority within that period, and with an intention by either of them to achieve, assist or encourage this outcome.

The procedures for receiving AWAs

1. Mr Price’s investigations and correspondence with the directors of McCarvis assumed the reliability of an online official database of AWAs lodged with the relevant authority, known as Phoenix, when asserting that the AWAs signed by Messrs Wales, Smith and Feberwee had not been lodged with the Employment Advocate or Workplace Authority.  Mr McGrath and Mr Carpenter do not contend that this database, or any other official record, has ever shown that the AWAs were received, and there is no evidence suggesting this.  I accept Mr Price’s evidence based on his repeated searches of Phoenix, and find that it is probable that at all relevant times no acknowledgement of receipt of the three AWAs by or on behalf of the relevant authorities has been entered into this database.  This conclusion tends to be confirmed by further recent searches conducted by Ms Johnson. 

2. Mr McGrath and Mr Carpenter did, however, challenge the reliability of the Phoenix database, and submitted that I could draw no inferences of non-lodgement based on assumptions as to the regularity of the administrative procedures for recording the receipt of AWAs in Phoenix.

3. Evidence as to these procedures was given by Ms Johnson, who has held various roles within the Office of the Employment Advocate and its successors, including the Workplace Authority.  From October 2009 she held a position requiring her to “have knowledge of the lodgement process of AWAs and Individual Transitional Employment Agreements”, and she is currently employed in the office of the Fair Work Ombudsman.  I accept that she has general knowledge of the administrative processes for receiving AWAs which were in place in March and April 2007 in the Office of the Employment Advocate during the period when Mr Wales’ AWA was required to be lodged, and in December 2007 and January 2008 in the Workplace Authority during the period when the AWAs of Messrs Smith and Feberwee were required to be lodged.  She gave all her evidence in an honest and conscientious manner and I accept her evidence, albeit subject to its inherent weaknesses.

4. Ms Johnson gave evidence, which was not challenged, that she recently conducted searches of Phoenix and other records of the relevant authorities in relation to the lodgement of AWAs by McCarvis for Messrs Wales, Smith and Feberwee, and other employees.  These confirmed Mr Price’s earlier investigations, showing 12 AWAs were received from McCarvis during 2006.  She said: “I was not able to find any record of AWAs lodged by McCarvis during 2007 or 2008.”  She found a record of an ITEA being lodged in August 2008.  She also found records in the ‘lodgement exceptions database’ of two rejected lodgements, which were “processed by the lodgement exceptions team on 21 June 2006 and 8 August 2006”.  In relation to these, the database recorded: “no declaration forms – sent back with rejection letter”.

5. A substantial weakness in drawing inferences from omissions in the data consulted by Mr Price and Ms Johnson, and from the procedures for making entries into them, is that Ms Johnson had no knowledge of the manner in which the receipt of mail addressed to the two relevant authorities had been actually handled in practice.  This was an activity which she said the two authorities had contracted to a business known as ‘Salmat Business Force’ formerly HBA Homes Procedure Ltd (‘the contractor’).  She said that there was “a fairly lengthy contract that goes with our relationship”, but did not tender a copy.  She said: “basically, they receive lodgements, and they issue all receipts and notices that go with those lodgements”.  No witness was called from the contractor’s business, to give evidence as to the procedures actually followed by it at relevant times when clearing the designated postal boxes, and when handling the mailed AWAs addressed to the relevant authorities on their behalf.

6. The procedure which Ms Johnson understood the contractor to be expected to follow was explained in her affidavit:

   11.The external contractor was required to sort the lodgements received by post on the basis of whether they met the legislative requirements for lodgement, namely that the employer had lodged a completed declaration form together with a copy of the relevant AWA as required under the Workplace Relations Act 1996 (Cth) (“the WR Act”).

   12.If an AWA sent by post met the lodgement requirements of the WR Act, the external contractor would scan a copy of the lodgement. The scanned files were then uploaded by the external contractor onto the OEA’s and WPA’s online database. To external clients this database is known as “Workplace Agreements Online”. Internally, this database is known as “Phoenix”.

   13.The function of the Phoenix database system is to receive and maintain data including the declaration and associated agreement.

   14.Once an AWA was uploaded into the Phoenix database, a receipt acknowledging lodgement of the AWA was generated in the Phoenix system.  A receipt was generated for both the relevant employer and employee affected by the AWA lodgement.

   15.Once a receipt was generated, data was sent from Phoenix to the external contractor where the receipt was printed and then mailed to the relevant employer and employee.

   16.Where an AWA sent by post failed to meet the lodgement requirements of the WR Act, the external contractor would send the lodgement to the WPA for further processing by the lodgement exceptions team.

   17.The lodgement exceptions team would process the rejected lodgement and provide the lodgement contact with a letter outlining why the lodgement had been rejected (“rejection letter”).

7. She summarised the procedure in her oral evidence in reply:

   Paper lodgements are received at our mail box.  We have two.  One in Marrickville and one in Matraville and our mailbox is administered by the contractor.  The contractor processes all our lodgements, so opens them up, puts them into the system – Phoenix system.  If they can’t process them, say, for whatever reason, the ABNs not there, as an example, they would then scan that document and put it onto our file system and then they would record the receipt of that correspondence and let us know that we have it to process, and then the system has all the information, then the receipt is generated and then sent by the contractor through the post to the parties of the agreement.

8. However, in cross-examination, Ms Johnson readily conceded that she was not a witness from the office of the contractor, she did not have responsibility for their actions, she had never been to their office which was in ‘off-site’ premises, and really did not know what they did when handling in-coming mail on behalf of the relevant authorities.  She said that ‘some 337-odd thousand’ AWAs had been lodged during the period of WorkChoices, and that “in my experience” the databases were reliable.  She said: “to my knowledge, the contractor issued all receipts for all lodgements”, and “to my knowledge, every agreement ever received, whether valid or not, has a record. It’s either in Phoenix, or in our lodgement exceptions spreadsheet.” 

9. However, she did not know whether the contractor kept its own records of daily mail receipts, before its employees reviewed the adequacy of the documents received by it, and scanned and recorded them in Phoenix if they appeared to meet the statutory requirements.  She said that an official database of rejected AWAs was not kept by the contractor, but: “if for instance, the declaration was illegible, or we couldn’t read the ABN, the contractor couldn’t automatically process that so we would receive it for follow-up.  And that would get logged in our lodgement exceptions spreadsheet.”  Ms Johnson was unable to say whether any complaints were received about the contractor’s performance of its contract, and she does not appear to have held a position at the relevant times in 2007 and 2008 where she was responsible for supervising the contractor’s performance of its contract.

10. I have carefully considered the evidence of the administrative procedures for recording the lodgement of AWAs, and accept that they were intended to record and notify decisions that documents met the requirements for receipt identified in ss.344 and 345, whether made by the officers of the relevant authorities or by their contracted agent.  While there is no evidence that any complying AWAs posted by an employer other than McCarvis and placed by postal authorities in the designated post boxes was ever overlooked or misplaced within the offices of the contractor or the relevant authority, such a possibility cannot be overlooked, given the volume of documents which were being processed and the absence of a witness directly responsible for supervising the mail handling procedures of the contractor at the relevant times.  Ms Johnson’s evidence did not persuade me that the absence of an entry in the Phoenix data base should always be treated as conclusive that the contractor did not receive a complying AWA on behalf of a relevant authority. 

11. However, Ms Johnson’s evidence provides substantial support for the that inference, and I accept on the evidence before me that the administrative system for recording the receipt of complying AWAs in the Phoenix database generally achieved a high degree of reliability.  I would be prepared to draw a conclusion of non-lodgement at the required standard of proof, if there was also evidence that the employer’s business procedures, business records, and recollections of relevant officers and employees concerning its lodgement of AWAs, showed deficiencies which tended to confirm an inference of non-lodgement arising from the contents of Phoenix.

12. In the present case, Mr Price’s investigations of McCarvis’ general employee records and procedures, and the evidence of its two directors about these matters, tends, in my opinion, to support the probability that, in fact, the present three AWAs were never posted to the relevant authorities, and for that reason were not received by them.  I shall identify the weaknesses in the evidence of Mr McGrath and Mr Carpenter below.  The general deficiencies in their company’s business and recording practices are manifest from Mr Price’s summary of its records, and from the state of the files which are in evidence.  His summary schedule of the total picture suggests that it would be improbable that the significant number of AWAs made by McCarvis employees which are not recorded in Phoenix were all misplaced or overlooked in the offices of the relevant authorities or their contractor, after due dispatch and receipt by post in all cases.  The oral and documentary evidence of McCarvis’ procedures and records in relation to lodgements is far from satisfactory, and fails to persuade me that there is a probability that the unrecorded AWAs, including those of Messrs Wales, Smith and Feberwee, were posted to the relevant authorities in time for them to be received within the statutory 14 day period.  It points towards the likelihood that the Phoenix data base provides a correct record of lodgements for the purposes of the present case.

13. As I shall explain below, taking into account the particular evidence about the making and lodgement of the AWAs of Messrs Wales, Smith and Feberwee, I would conclude on the balance of probabilities that these AWAs were never ‘actually received’ by the relevant authorities within the 14 days periods required under s.342(1) or at any other time. That conclusion is enough to support findings of strict liability contraventions by the employer under s.342, but it is not enough to establish relational liability of a director of the employer under s.728.  Moreover, the evidence establishing generally a probable non-receipt of AWAs by the relevant authorities, even if it also suggests a probability that the AWAs were never in fact posted or otherwise forwarded to the relevant authorities, is insufficient to identify any particular officer or agent of the employer as a person knowingly and intentionally participating in the occurrence of that contravention. 

14. It therefore becomes necessary closely to examine the evidence about the making of each of the three AWAs, and to consider the involvement of each of Mr McGrath and Mr Carpenter in relation to this, before arriving at a conclusion whether either of them intentionally participated in any of the employer’s contraventions of s.342(1).

The employment of Mr Wales

1. Mr Wales did not give evidence in the proceedings, and the circumstances of his employment and of the making and lodgement of his AWA were only cursorily addressed by the parties.

2. The employer’s records examined by Mr Price showed that he was employed from 11 March 2007 until 30 September 2007, and was paid at the rate provided in the employer’s standard form of AWA.  Documents on his McCarvis file show that he completed an application for employment on 15 March 2007, which was received by Mr Carpenter.  Mr Price found on Mr Wales’ file one copy of the employer’s standard form of AWA with original handwritten insertions and signatures.  It is dated 14 March 2007, and shows the signatures of Mr Wales, Mr Carpenter and a witness on that day.  It was, therefore, required to be lodged with the Office of the Employment Advocate on or before 29 March 2007.  In it, Mr Wales agreed to be employed for one year on the basis of “casual (No minimum hours per week)” at a rate of $20 per hour but “where I am the trainee I will be paid at $13 per hour”.  The agreement expressly excluded or modified various protected award conditions.

1. Mr Price did not find in the employer’s records any copy of a completed employer declaration under s.344, nor any record that such a form had been posted to or received by the Workplace Authority with a copy of the AWA.  Nor did the ‘Phoenix’ database show these documents having been received at any time.

2. In his interview by Mr Price on 13 August 2008, Mr McGrath said that their general procedures for lodging AWAs was to fill out the employer’s declaration and “put it in the post and send it away” with the AWA, not keeping a copy of the declaration but keeping the original AWA.  He said he was aware of “bits and pieces” of the requirements for making and lodging AWAs, including that “they have to be lodged”.  He said: “usually within two working days we’d try and send them, so we’ll just put them in an A4 size envelope and post them away”.  In his interview, he was not asked to give details of the person or persons who were expected to do these things on behalf of McCarvis, either generally or in relation to the AWAs of Messrs Wales, Smith and Feberwee.  Nor was he challenged to explain why these or other AWAs did not appear to have been received by the relevant authorities.

3. Mr McGrath told Mr Price that Mr Wales “came to us” through a government employment agency: “they approached us, that he was looking for work and he needed a new start and all that sort of stuff so we gave him a go”.  He confirmed that “exactly the same” process he had explained generally in relation to the lodgement of AWAs had been followed in relation to Mr Wales, and was not asked to indicate whether he had any personal involvement in that process.

4. In his oral evidence to the Court, Mr McGrath confirmed that McCarvis kept its administration records in its Mittagong office, and that for most of the time he “was down in Wollongong”.  He said the company had employed Mr Davis as office manager “at the very early part”, and that they also had an employee, Mr Hellier, who “just sort of ran errands, and bits and pieces, and run sheets, and things like that.”  In relation to the April 2006 AWAs, he said that Mr Davis “sent them off”.  He agreed with the general proposition which was put to him by his counsel, without objection:

   And Mr McGrath, to the best of your knowledge, you sent off – when you entered into an Australian Workplace Agreement with an employee, you sent that agreement off to the Office of the Employment Advocate?

   --- That’s correct

5. In relation to Mr Wales, Mr McGrath said that he was interviewed by Mr Carpenter and himself.  He gave no specific evidence, in chief or under cross-examination, as to the lodgement or non-lodgement of Mr Wales’ AWA.  In effect, his evidence maintained that he believed that this AWA and other AWAs were being posted promptly by other people in the McCarvis’ Mittagong office.  I found nothing in his evidence nor in other evidence before me from which I would conclude, on the balance of probabilities, that he did not have this belief at all relevant time.

6. For his part, in an interview with Mr Price on 13 August 2008, Mr Carpenter gave the following account of the making and lodgement of Mr Wales’ AWA:

   Mr Carpenter:  He came to our office through Mission Employment, the two Mission Employment ladies that were running his case approached us first and we organised an interview with Sid.  That was arranged for Sid.  Sid came through the interview process and after we went through the interview process the two ladies from Mission Employment, I believe they came back a day or so later to see how he went.

   Mr Price:Okay, excellent.  And then from when you had the interview, when did you then get Sidney to sign some contract?

   Mr Carpenter:  Well, he wanted to start straight away, so, the normal, the employment form and the AWA that we had in place at the time, we went through both scenarios, told him about the seven days and everything and he said oh I want to start straight away because he found it hard to get a job.  I told him that he had to wait, to take the documents and wait the seven days or whatever it is, plus I also told him that he had to get Mission Employment’s okay that he was allowed to come to work for us because they were sure that he was fit for whatever reason or (inaudible) at the time whatever is, but Sid pleaded that he wanted to start straight away, so it was a bit of a rushed process that one.

   Mr Price:Okay and once he signed the AWA what was the process?

   Mr Carpenter:  Well I think he started virtually the next night.

   Mr Price:The next night? And…

   Mr Carpenter:  Or the day after, yeah.

   Mr Price:And when did you guys do the AWA?

   Mr Carpenter:  Well with the paperwork, it all gets signed off, Matt signs it, I sign it, (inaudible) the application form and then it would have been put in the out tray and there you go and it would have been witnessed normally.  We get our supervisor that’s around during the day to witness any signatures so I would have been, Mark Elliott, or Dale Williams would have witnessed it.

   Mr Price:yep.

   Mr Carpenter:  And then I, within a week whatever’s in the out tray is off.

   Mr Price:Do you know exactly where you sent that AWA to?

   Mr Carpenter:  Not off the top of my head, it was a place in Marrickville, (inaudible), a manager of ours that was working at the time, Mick Davis, set it up and he just left all the addresses.

7. Mr Carpenter told Mr Price that Mr Davis had initiated the general use of AWAs:

   Mr Carpenter:  we used to, Matt and I worked for him, for another company, and when we took on the business, he provided assistance when we started, he started as our, virtually as our operations manager, yeah, so…

   Mr Price:Okay, and so he was the one responsible initially, for starting the AWAs?

   Mr Carpenter:  Well, it was his idea and he said ‘I’ll get this ball rolling and I and it might be beneficial to both parties’, so we said ‘yeah go for it’.

   Mr Price:Go for it?

   Mr Carpenter:  And he contacted the relevant parties, I remember I was in the room the day he made the phone calls and he jotted it all down and said this is the way we should, we’ll be going so…

   Mr Price:Okay, going back, once they get sent away at the end of the week, if you have any new employees start, did you ever receive any documentation back?

   Mr Carpenter:  At the beginning, the first lot we sent, we got ‘em, we got a certificate type of thing, with a registered number, I remember there was about June 06 or July 06 we, I don’t know who did it, whether I signed off on it and or Mick had sent it, we’d sent a lot away and they came back because there was, Part C wasn’t filled out or a form was left out, so that was rectified, we filled that out and resent it and then from then we never received anything back.

8. As with Mr McGrath, Mr Carpenter showed some awareness of the need to lodge AWAs.  He told Mr Price:

   Mr Price:Okay, do you explain again what’s your knowledge of the process of the approval process for AWAs, so when you’d send them away, what do you know about what happens?

   Mr Carpenter:  Well, no one’s ever been, ever sort of told us how it goes, other than the documents and all of them have been sent but yeah its compile it and send it away.

9. In his oral evidence in chief, Mr Carpenter maintained that he had followed the same procedure in relation to the lodgement of Mr Wales’ AWA as had been followed in 2006.  He said:

   And once the AWA was signed by Mr Wales, what happened to it?

   ---- Well, then I signed it and Mr Hellier signed it and then I printed the declaration form with all the company details and filled that out with the company details and company mailing address.  It would have been placed in an A4 envelope, stamped.

   And what address was on the envelope?

   ---- It would have been the same address as what was printed off the computer before.

   And then once it was placed in the envelope and addressed, what happened to it?

   ---- I would take it of the tray at the end of the day or by the Thursday, whatever it was that week, and I would stop at Main Street Mittagong and deposit it in the red postage box.

10. The suggestion of reconstruction in this evidence was not explored in cross-examination.  Given the lapse of time and other aspects of his evidence to which I shall refer below, I was not confident that he had any actual recollection of posting this AWA, nor, indeed, any particular AWA.  However, I did not conclude that Mr Carpenter did not now genuinely believe that he had posted some AWAs, nor that at all relevant earlier times he did not have the belief that he or someone else within McCarvis was attending to the required lodgement by post of copies of its AWAs. 

11. Generally, I concluded that Mr Carpenter and Mr McGrath were attempting honestly to give evidence with hindsight about office procedures which were probably haphazard, unsupervised, and deficient.  I concluded, from all the evidence, that it was most likely that neither Mr Carpenter nor Mr McGrath had given much attention to the need for continuing compliance with the procedures followed in 2006 in relation to the lodgement of AWAs. 

12. It was not put to Mr Carpenter in cross-examination, nor to Mr McGrath, that either of them was conscious during 2007 and early 2008 that copies of AWAs with the employer’s declaration might not be being posted by someone in the McCarvis office, nor that these two men, either separately or in agreement, had adopted a conscious policy of not posting AWAs, or had otherwise assisted or encouraged this with the intention that they would not be lodged.  For that reason, I am hesitant to draw any conclusions of intentional participation in a contravention of s.342, merely from circumstantial evidence pointing perhaps only to a picture of haphazard or careless compliance procedures in relation to AWAs being followed by Messrs McGrath and Carpenter, after the departure of the office manager who had introduced their AWAs in 2006. 

13. Both Mr McGrath and Mr Carpenter freely acknowledged that they were inexperienced as businessmen, and did not have any procedures for checking that compliance with legislative requirements was occurring.  As Mr Carpenter said at the end of his cross-examination:

    Mr Carpenter does – or did McCarvis have any quality assurance, or processes in place to ensure that the proper procedure was being followed?

    ---- As in administration?

    Yes?

    ---- No.

    Nothing at all?

    ---- We were security guards.

    Okay.  So you didn’t have anything in place that would, sort of, check to see if proper processes were being followed?

    ---- No.

    No, okay.  You’re a small business…

    ---- We tried to do it the best way we could.

14. The general evidence of Ms Johnson which I have discussed above, assisted by the state of the McCarvis records as summarised by Mr Price, points towards an inference that in fact Mr Wales’ AWA was never actually received by the Office of the Employment Advocate within the 14 day period required by s.342.  For the reasons explained above, not only did the evidence of Mr McGrath and Mr Carpenter about this fail to persuade me to make the contrary finding, but it also points to the possibility that a copy of Mr Wales’ AWA was never posted with an employer’s declaration.   Assessing all the evidence, I am satisfied on the balance of probabilities that a contravention of s.342 on the part of McCarvis has been established in relation to this AWA.  For reasons discussed above, and further below, I am not, however, satisfied that this occurred with the intentional participation of either of these directors.

The employment of Mr Smith

1. Mr Smith gave evidence in affidavit and orally.  A record of his interview by Mr Price on 6 August 2008 was also in evidence. His evidence was not substantially challenged, and I accept it generally.  It can be summarised shortly.

2. Mr Smith was personally acquainted with Mr McGrath, who was aware of his previous employment as a licensed security officer.  When he telephoned Mr McGrath in December 2007 and asked if employment was available, Mr McGrath told him that “he could pretty much start me right away”.  They arranged for Mr McGrath to attend Mr Smith’s home near Dapto on 18 December 2007 during his birthday party, with “the paperwork”.  Mr McGrath also lived in that locality.  According to Mr Smith, the McCarvis’ forms of AWA and employment application were quickly discussed and completed, signed by Mr Smith and Mr McCarvis, and witnessed by Mr Smith’s wife.  

3. For reasons which were not clarified with the witnesses, although the AWA and Mr McGrath’s signature are dated 18 December 2007, the signatures of Mr Smith and his wife are dated 19 December 2007.  My impression from the evidence of all the witnesses, is that probably Mr McGrath gave the documents to Mr Smith and briefly explained the main features of the AWA to him in a brief conversation in Mr Smith’s garage during the party, and then left him and his wife to sign them.  They did this, probably inserting an incorrect date, and gave them to Mr McGrath who signed them with a different pen and inserted the correct date.  According to Mr Smith, Mr McGrath then put the documents in his car, and they all rejoined the birthday party. 

4. I find that the AWA was probably made on 18 December 2007, and was therefore required to be lodged with the Workplace Authority on or before 2 January 2008.

5. The documents on Mr Smith’s McCarvis file included his AWA dated 18 December 2007, with original handwritten insertions and signatures.  It also contained copies of his qualifications, a tax file declaration, and his application for employment.  However, it contained no evidence that the AWA had ever been copied, or posted or otherwise sent to the Workplace Authority, or received by the Workplace Authority with or without the necessary employer’s declaration.  There was no evidence elsewhere in the McCarvis documents received from its liquidator that any of these actions were taken by anyone.  The Phoenix database does not show it as having been received.

6. Mr Smith commenced work for McCarvis, and its records show his employment lasting from 19 December 2007 until 1 June 2008.  It is unnecessary for me to examine the nature of his duties, the details of his remuneration, and the circumstances of his employment coming to an end.  During his employment he was not given a copy of the AWA which he had signed, nor any document or other information showing whether or not it was ever lodged with the relevant authority.  He seems to have been unaware that this was required, and told Mr Price that “it wasn’t until later, (in) May (2008), that I actually started ringing up some Government agencies and try to find out things about AWAs”.  He said: “they never told me about the AWA, I just signed it and that was pretty much it”. 

7. Mr Smith gave evidence that Mr McGrath was the person he dealt with regularly about “the day to day running of my shifts”, but he had some contacts with Mr Carpenter at staff meetings and when he could not contact Mr McGrath.  He said that he spoke to Mr Carpenter about “payroll and rostering issues”, and that “I formed the view that Gary was in control of payroll, bills, and the general finances of the company”.  His own contacts with Mr Carpenter seem to have concerned a superannuation issue.

8. In short, Mr Smith’s evidence established the making of his AWA and that it passed into the possession of Mr McGrath on the day of its making, but he provided little evidence assisting proof of the circumstances in which it was not lodged within the time required.

9. I have above considered the general evidence of Mr McGrath and Mr Carpenter about the general practices of McCarvis in relation to the lodgement of AWAs, when addressing Mr Wales’ AWA. 

10. In relation to Mr Smith’s AWA specifically, Mr McGrath gave a description to Mr Price of completing the AWA at Mr Smith’s birthday party which was consistent with Mr Smith’s evidence.  He confirmed that he “took them that day” after the documents were signed, but was not asked to trace the further handling of the AWA within McCarvis, nor as to his personal involvement in that process.  He told Mr Price that he believed that the general process for lodgement of AWAs he had described to Mr Price had been followed.

11. In his oral evidence in chief, Mr McGrath confirmed that the AWAs of Messrs Smith and Feberwee had been executed at the birthday party on 18 December 2007, and gave the following account of what he did with them:

    …So you’ve got the two signed AWAs with you, Mr McGrath.  What did you do with them then?

    ---- I went and placed them in the car and then returned to the party.

    Okay, and what did you do with the AWAs after that?

    ---- The next business day, I actually took them back up to Mittagong, placed them in the mail tray and Gary dealt with it from there.

    And where’s the mail tray located?

    ---- On Gary Carpenter’s desk.

    Okay, and what happens to the mail at McCarvis, when there’s mail in the mail tray?

    ---- As in how is it posted?

    Yes.

    ---- Gary will drop it in the mailbox in Mittagong, on his way home.

    Okay, you said that you placed it in the – placed the two AWAs in the tray the next business day?

    ---- Mm.

    When were you next at the Mittagong office?

    ---- At least two or three days later.

    Okay, did you see them in the mail tray at that point?

    ---- No, nothing was there.

    Did you see anything in the mail tray?

    ---- No, nothing.  We didn’t have a lot of mail.

12. This account was not objected to, nor shaken in cross-examination.  There was no substantial challenge to Mr McGrath’s evidence that he believed generally that AWAs were being posted promptly, and no attempt to establish that he ever intended to assist or encourage the non-lodgement of AWAs.  It was put to him:

    Is there any reason why receipts for certain AWAs wouldn’t be received?

    --- We judge – as they were – we were working we just didn’t notice that they weren’t coming in. It’s our own fault, negligence I guess.

13. In relation to Mr Carpenter’s involvement in Mr Smith’s AWA, Mr Carpenter told Mr Price that “he didn’t have much to do with” how Messrs Smith and Feberwee came to be employed, and he made no suggestion to Mr Price that he was personally involved in the making or handling of the AWAs signed by these men. 

14. In his oral evidence in chief, he said:

    Can you tell me about their AWAs?

    ---- Yes, they were the same AWAs as everyone else.  Mr McGrath arranged a meeting to meet up with the two gentleman to go through the AWAs and give them the option to sign up the AWA or go on to the state award and they were produced back to me in the office.

    And once you got those two signed AWAs what did you do?

    ---- Went to the website and printed out the declaration form and filled it in and mailed it away as I did with Mr Wales.

15. Under cross-examination, he said that he had an actual recollection of seeing the documents in his mailing tray, and “that they were completed and they were sitting there. All I had to do was to print the declaration form and put the company’s details on that with the amount of AWAs that were there.” He maintained that he did this, and posted the AWAs.  However, a note of uncertainty emerged:

    Okay, and then you’ve posted these AWAs?

    ---- Yes.

    Right.  I understand that process; that’s how you’ve explained it?

    ---- Correct.

    Okay, is there any reason why copies of these AWAs weren’t taken?

    ---- No.

    No reason why copies weren’t taken?

    ---- I normally copied what I did.

    Right, Okay?

    ---- Now…

    But in this instance you didn’t do that?

    ---- I can’t recall.  They were there, completed, the declaration form was filled in…

    Yes?

    ---- and then whether I copied them on, I can’t recall.

    You can’t remember that?  Okay.

    ---- On some occasions I did and you will probably find that they are mainly the ones that I handled in the entirety.

    Yes?

    ---- But maybe with Matthew doing it, maybe I thought he did, but I’m not too sure.

    Okay, but in this instance you sent the originals of the AWAs?

    ---- I believe so, yes.

    Ok, thank you very much.

    Smith FM: Well, I can’t restrain myself here.  Mr McGrath, if you sent the original by post, how did it come to be found in the employee files?

    ---- Well, it, they must have been photocopied.

    Smith FM: Well, we seem to have an original of Mr Wales’ agreement, at least, on the files.

    ---- Yes, well I don’t know how they would’ve….

    Smith FM: How would you explain that?

    ---- Maybe I’ve picked up the wrong one.

1. I do not accept the positive evidence given to the Court of Messrs McGrath and Carpenter that the AWAs of Messrs Smith and Feberwee were taken to the Mittagong office and posted from there by Mr Carpenter within three days.  I consider that this is a reconstruction of past events which, in fact, they cannot now recall clearly.  For reasons already explained generally above, and taking into account all the evidence specifically about Mr Smith’s AWA, I am persuaded on all the evidence that it is more probable than not that, in fact, Mr Smith’s AWA was never actually received by the Workplace Authority, and was probably never forwarded by anyone on behalf of McCarvis.  However, notwithstanding these findings, I am not satisfied that either Mr Carpenter or Mr McGrath had the required state of mind to attract liability under s.728 in relation to the employer’s contravention of s.342.   I shall explain that conclusion further below.

The employment of Mr Feberwee

1. Mr Feberwee’s evidence is before the court in the form of an affidavit, oral evidence, and a recorded interview with Mr Price on 6 August 2008.  I make the same assessments of its contents as I made concerning Mr Smith’s evidence.

2. Mr Feberwee is Mr Smith’s younger brother-in-law, and was also a licensed security officer.  He approached Mr McGrath at Mr Smith’s birthday party on 18 December 2007, or by phone earlier that day, and said: “I’m after some work if you have any”.  Mr McGrath said: “As a matter of fact I do have some work”. They then met at the party, and completed the McCarvis form of AWA and an employment application at the same time as Mr Smith’s documents were completed.  One copy of the McCarvis AWA was signed, and witnessed by Mrs Smith, and is now found on Mr Feberwee’s file.  Like Mr Smith’s AWA, it is dated 18 December 2007, as is Mr McGrath’s signature, but Mr Feberwee and Mrs Smith’s signatures are dated 19 December 2007.  This discrepancy was also not clarified by the witnesses.  Mr Feberwee’s recollection of events at the birthday party appears not to be good, but it seems probable that the signed AWA was given back to Mr McGrath and dealt with by him at the party, in the same manner as Mr Smith’s AWA.

3. I find that Mr Feberwee’s AWA was probably made on 18 December 2007, and was therefore required to be lodged with the Workplace Authority on or before 2 January 2008.

4. The McCarvis records concerning Mr Feberwee show that he was employed from 19 December 2007 until 27 June 2008.  His file contains various documents, including the original AWA, but no evidence suggesting that the AWA was ever lodged with the Workplace Authority.  The Phoenix data base contains no record that this happened.

5. Like Mr Smith, Mr Feberwee worked from the McCarvis’ Unanderra base, and he rarely visited its Mittagong office.  He was not given a copy of the AWA, nor any evidence showing its lodgement with the Workplace Authority.  Like Mr Smith, he was unaware of what formalities should have been followed by his employer in relation to an AWA, and was grateful to have the employment on the terms offered by Mr McGrath.  He told Mr Price: “I didn’t even know that they had to be lodged somewhere, I just thought it was an agreement between the employer and the employee”.  He gave evidence that he dealt with Mr McGrath “all the time regarding the day to day running of my shifts”.  He told Mr Price that he knew Mr Carpenter to be Mr McGrath’s “business partner and that’s pretty much all I know about him”, and his oral evidence revealed that he had very little contact with Mr Carpenter.

6. In short, as with Mr Smith’s evidence, Mr Feberwee’s evidence established the making of his AWA, and that it passed into the possession of Mr McGrath on the day of its making, but little more.

7. I have above considered the evidence of Mr McGrath and Mr Carpenter about their general practices in relation to the lodgement of AWAs, and I have also recounted their evidence concerning the making and lodgement of the AWAs of Mr Smith and Mr Feberwee. 

8. In his interview with Mr Price, Mr McGrath was not asked any questions specifically about the making and lodgement of Mr Feberwee’s AWA, and his involvement in these things.  However, his description of Mr Smith’s birthday party was consistent with Mr Feberwee’s evidence about the making of the AWA.  The interview appears to have proceeded on the basis that Mr McGrath believed that the general process for lodgement of AWAs he had described to Mr Price had been followed in all cases, by persons within McCarvis whom he was not asked to identify.

9. In his oral evidence in chief, Mr McGrath recalled that it was Mr Smith who telephoned him before the birthday party, and told him that “both of these guys were looking for work”.  This seems quite likely, but nothing turns upon how, in fact, he was told about Mr Feberwee’s interest in employment by McCarvis.  Mr McGrath confirmed that the AWA was made in the same manner and at the same time as Mr Smith’s, and he gave the evidence about putting them both “on Gary’s tray. I didn’t post anything”, which I have extracted above.

10. Mr Carpenter told Mr Price that “he didn’t have much to do with” how Messrs Smith and Feberwee came to be employed, and made no suggestion that he was personally involved in the making or handling of the AWAs signed by these men.  In his oral evidence to the Court, he gave the evidence about finding the AWAs in his “mailing tray” and posting them, which I have extracted above.

11. Essentially, therefore, the evidence raises no relevant distinctions concerning the lodgement of the AWAs of Messrs Smith and Feberwee.  It is appropriate for me to arrive at the same conclusions of fact in relation to each of them, both as to a contravention of s.342 by the employer, and my failure to be satisfied as to intentional participation in this by either of Messrs McGrath and Carpenter.   It remains for me to further explain the latter conclusion.

Conclusions in relation to directors’ s.342(1) contraventions

1. The Fair Work Ombudsman’s case for establishing the liability of Mr McGrath and Mr Carpenter for McCarvis’s breaches of s.342(1) in relation to the AWAs of Messrs Wales, Smith and Feberwee was presented to the Court on an assumption that the requirements of s.728 could be satisfied by pointing to their responsibilities as directors of McCarvis to ensure compliance with the statutory obligations of the employer.  The Fair Work Ombudsman identified the evidence suggesting that defective attention to these obligations had occurred within the business during 2007, and showing that, in effect, this had been conceded by the directors.  However, the Fair Work Ombudsman gave little attention in the course of the hearing, or in final oral and written submissions, to analysing the ingredient facts of the employer’s contraventions concerning the non-lodgement of these three AWAs within their respective 14 day lodgement periods, nor to identifying evidence establishing that each of the directors had knowledge of those facts at relevant times, and was an intentional participant in the occurrence of each contravention.

2. Thus, in the Fair Work Ombudsman’s written submissions filed after the hearing, it was submitted:

   23.The respondents admitted in oral evidence that they were each:

   ·    joint directors of McCarvis;

   ·    in charge of all employees of the corporation;

   ·    able to hire employees and negotiate conditions of employment;

   ·    able to terminate the employment of employees;

   ·    responsible for payment of all employee wages;

   ·    signatories of cheques, including wages cheques;

   ·    in control of the corporation finances at all time.

   24.The respondents provided oral evidence admitting they accessed information from the Workplace Authority website and understood that an AWA was required to be executed, lodged and receipted.  The respondents admitted to having previously participated in the valid lodgement of McCarvis employee AWAs.

   25.The respondents provided oral evidence admitting they were jointly responsible for the negotiation, execution and lodgement of all McCarvis employee AWAs.

   26.The respondents provided oral evidence admitting that their contravening actions in relation to this matter were voluntary and arose due to a lack of due diligence.

   27.The respondents provided oral evidence of their understanding of the application of the NAPSA to McCarvis employees who were not covered by an operational AWA.

   28.Inspector Price, as well as Messrs Feberwee and Smith provided evidence that the respondents were the only people with whom they had contact with in relation to this matter. At no time have the respondents made reference to any other individual who could be responsible in relation to the contraventions alleged by the applicant.

   ….

   30.Both respondents had knowledge of the essential elements that went to properly lodging an AWA.  Both respondents provided evidence that they were jointly responsible for such activity.

   31.Both respondents admitted knowledge of the Workplace Authority’s practice of issuing lodgement receipts for AWAs.  Both respondents admit to not following or making enquiries when such receipts were not received in respect of the complainant’s AWAs.

   32.Lack of due diligence on the part of the respondents is not a defence to their actions of not lodging AWAs, nor for paying employees under inoperative AWAs.

   33.In the case of each separate respondent, individual liability depends upon the accessory associating himself or herself with the contravening conduct.  That is, the accessory should be linked in purpose with the perpetrator.  Further, that the accessory must participate or assent to the contravention.

   34.Though Mr Carpenter admitted in oral evidence that he was personally responsible for mailing the complainants’ AWAs, Mr McGrath admitted in oral evidence that he was aware of AWA lodgement procedures.  Additionally, Mr McGrath made further admissions that he was aware that lodgement receipts had not been received in relation to the complainants’ AWAs.  Mr McGrath’s admitted knowledge sufficiently connects him to the contravention of the complainants’ AWAs not being mailed by Mr Carpenter.

3. However, in my opinion, the matters pointed to in these submissions are insufficient to establish the liability of either of the directors as accessories to their company’s contravention, in accordance with the principles I cited at the beginning of this judgment.  As the extracts from Giorgianni show, it is insufficient to point to evidence, whether by way of admission or otherwise, that the records and practices of McCarvis in relation to ensuring compliance with s.342(1) were deficient, and that the deficiencies were “due to a lack of due diligence” on the part of its directors, even if a high degree of reckless disregard for statutory obligations is revealed by the company’s directors. 

4. In my opinion, the Fair Work Ombudsman’s case has suffered from the defect described by Lindgren J in Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd and Others (No.2) (1999) 95 FCR 302 at [187]:

   Unfortunately, the ACCC's submissions in relation to the issue of accessory liability have not addressed the critical issue raised by the authorities of the state of mind of the supposed accessory in relation to particular pleaded contraventions. In its submissions the ACCC has, at least generally, simply referred to the evidence of the positions and conduct of the respective alleged accessories without attempting to show that that evidence establishes the intention and knowledge as well as the "involvement" required in respect of any particular contravention.

5. There was, in the present case, no examination of “the state of mind of each of (Mr McGrath and Mr Carpenter) separately in relation to each alleged contravention”, but, rather, an assumption “that merely being a director of (McCarvis) and being involved in (its employment) activities was sufficient to attract the operation of (s.728) in relation to any contravention on the part of (McCarvis) that occurred during the time that (they) were involved in (McCarvis’ employment) activities”. (compare Musgrave v Australian Competition & Consumer Commission; Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17 at [134])

6. Had the state of mind of the two directors at the relevant times been squarely addressed, some of the points made by the Fair Work Ombudsman might appear to point against, rather than towards, an intention by anyone working for McCarvis that these AWAs would not be lodged within the statutory period.  Thus, the previous lodgements during 2006, the disarray of the company’s records and procedures after the departure of its original office manager, the two directors’ vague knowledge of the employer’s obligations, their lack of inquiry into the absence of receipts, their later admission of the company’s deficiencies, and their apparent lack of business management skills, tend to point to the directors being reckless about ensuring compliance with the statutory obligations of the company, rather than their being intentional participants in the three particular contraventions which are the subject of these proceedings. 

7. Although the circumstantial evidence summarised in Mr Price’s schedule of the company’s employee records might point to more than this, it is also consistent with other equally possible reasons for the non-lodgements which would not have involved any person being an intentional participant.  No attempt was made to establish that the directors had knowingly allowed, adopted or participated in a general policy or practice of withholding lodgements, and that they were aware that this practice would be followed in relation to the lodgement of each of these three AWAs.  Certainly, this was never put to either of them.  Nor were they cross-examined to establish that either of them had knowledge that any of these particular AWAs would not be received within 14 days, and intended to allow, achieve, assist or encourage this outcome.  Such a state of mind must squarely be put to a respondent who enters the witness box in a proceeding such as the present.  Assessing both the circumstantial evidence and the oral evidence of Messrs McGrath and Carpenter in relation to each of the employer’s contraventions, I was left unsatisfied as the mental elements required under s.728 at the requisite level of satisfaction.

8. Assessing all of the evidence, I have not been persuaded that the circumstantial evidence shows more than that the directors and other employees of McCarvis were responsible during 2007 for haphazard keeping of business records and unsatisfactory office practices for ensuring compliance with statutory requirements.  The casual office procedures in relation to lodgement of AWAs suggested by the evidence left a strong possibility that both Mr McGrath and Mr Carpenter overlooked their responsibilities to ensure lodgement within time, and that the employer’s contraventions occurred through oversight or confusion by the person or persons who should have copied and posted these AWAs to the relevant authorities.  These failings, rather than the intentional actions of any person, may have led to the failures to lodge these three AWAs within the 14 day period.   I have not been persuaded to find otherwise on the balance of probabilities.

9. As I have said above, my general assessment of the evidence of Mr McGrath and Mr Carpenter is that at relevant times they each may have believed that either they or someone else had been attending to the requirement to lodge these AWAs.  Other staff had, in the past been involved in this.  Although Mr McGrath and Mr Carpenter claim to have believed that Mr Carpenter was usually attending to this in the course of his work at the Mittagong office after the departure of Mr Davis, there were special features of the making and handling of the AWAs of Messrs Wales, Smith and Feberwee which could have led to some confusion or oversight.  For the reasons I have pointed to, including some elements of unconvincing reconstruction in their oral evidence, I am unpersuaded that, in fact, Mr Carpenter posted these three AWAs.  However, my lack of persuasion as to these parts of his evidence does not lead me to reject his or Mr McGrath’s credibility entirely.  I am not led to infer a consciousness by either of them that they had knowingly and intentionally caused or assisted or encouraged any of the three AWAs not to be lodged within the required 14 day periods.

10. Specifically in relation to Mr McGrath’s involvement in the employer’s contraventions, I can find nothing in the evidence which allows me to conclude that Mr McGrath had knowledge, at relevant times, of anything which would have shown him that any of these three AWAs would not be dispatched and received as required.  The application therefore fails as against him, due to the absence of knowledge of an essential ingredient of the employer’s contravention.

11. Specifically in relation to Mr Carpenter’s involvement, although I have not accepted his evidence that he did post each of these AWAs, I would not conclude that Mr Carpenter consciously gave untrue evidence as to this. I have concluded that his evidence was a reconstruction of events of which, in truth, he has no real recollection but wishes to believe.  I also consider that he has given a reconstruction of his general practices in relation to posting AWAs which cannot be accepted with any confidence, in the face of the circumstantial evidence pointing to the probability that, in fact, several AWAs were not posted, and for that reason they were not received.  However, my lack of persuasion by his evidence, does not lead me to conclude that, at the relevant times, he was knowingly involved in a failure to post these particular AWAs promptly, nor that he was otherwise an intentional participant in the employer’s contravention of s.342(1).  My rejection of his evidence of posting these AWAs does not necessarily prove a consciousness, at the relevant past time, that the AWAs would not be posted to the relevant authorities.  This was not squarely put to him, and it would in my opinion be unsafe for me to draw such an inference in the present case. 

12. Contrary to the submissions of the Fair Work Ombudsman, I find it impossible to identify in the correspondence between Mr Price and the directors of McCarvis an admission of personal involvement, including an element of intentional participation, in the employer’s contraventions of s.342(1) concerning these three AWAs.  I have above extracted their letter when responding to the breach notices.  It might carry an admission that McCarvis had contravened a strict liability provision of the Act, but it made no admissions referrable to the issues arising under s.728.  Nor have I found any other admission on the part of Mr McGrath and Mr Carpenter which assists the Fair Work Ombudsman to establish that the involvement by either of them in the failure to lodge the AWAs within 14 days occurred with their intentional participation in that outcome.

13. I have for all the above reasons not been persuaded that either Mr McGrath or Mr Carpenter should be found liable under s.728 for any contravention by McCarvis of s.342(1) in relation to the AWAs of Messrs Wales, Smith or Feberwee.

The consequential contraventions

1. On my above opinion as to the effect of s.347(1) and (2), and my findings that they were never lodged, the AWAs of the three employees never came into legal operation.  That circumstance had the result that the employees were mistakenly paid only the entitlements provided in their AWAs, that the NAPSA became the relevant source of their entitlements, and that the employer became liable under s.719 in relation to its failure to observe the identified clauses of the NAPSA.  It is unnecessary to set out the terms of the clauses relied upon by the Fair Work Ombudsman, nor the particulars of their non-observance by the employer, since no issue is taken that the alleged consequential breaches of these provisions would have occurred on the part of the employer.

1. The applicability of the provisions of ss.182 and 185 to these three employees is less clear, and was not explored in any submissions made to me.  Rather, counsel for the Fair Work Ombudsman appeared to concede that these guaranteed minimum entitlements might not arise, if the NAPSA applied.  Whether this is the effect of this complex legislation is obscure to me, and I prefer not to make any findings about this in the absence of submissions explaining the convoluted definitional structure of these sections and their relationship with the equally convoluted provisions giving effect to NAPSAs.

2. In any event, as I understood him, counsel for the Fair Work Ombudsman conceded when opening his case, and never resiled from the position, that Messrs McGrath and Carpenter could not be attached with liability under s.728 for any of the alleged contraventions of entitlement provisions, if they were not found liable for the employer’s contraventions of s.342.  It appeared to me that this concession was properly founded, since they could not have intentionally participated in the making of underpayments to the employees arising from the failure to lodge the AWAs, without having knowledge of and intentional participation in the actions or omissions which produced that outcome.  Absent their having knowledge and intention that the AWAs would not be lodged so as come into legal operation, it would not be possible for the Fair Work Ombudsman to establish intentional participation in an essential ingredient of any breach of an ‘applicable provision’ in the circumstances of the present case.   An essential ingredient of the employer’s liability, was the disproof of operative AWAs, in circumstances where the employees had each made AWAs which prima facie governed their entitlements.

3. I therefore am not persuaded that the Fair Work Ombudsman has established any of its allegations of liability under the Act on the part of the respondents.

4. The application should therefore be dismissed.

I certify that the preceding one hundred and six (106) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate:  Michael Abood

Date:  21 May 2010