Fair Work Ombudsman v Monochromatic Engineering Pty Ltd
[2017] FCCA 533
•23 March 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v MONOCHROMATIC ENGINEERING PTY LTD & ANOR | [2017] FCCA 533 |
| Catchwords: INDUSTRIAL LAW – Penalty hearing – small enterprise – relevant factors to be taken into account – Fair Work Ombudsman urged penalties to be imposed at the rate of 80% of sum unpaid – 20% ordered. |
| Legislation: Fair Work Act 2009 (Cth) Penalty Interest Rates Act 1983 (Cth) |
| Cases cited: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | MONOCHROMATIC ENGINEERING PTY LTD (ACN 007 274 044) |
| Second Respondent: | ZORAN CRVENKOVIC |
| File Number: | MLG 1309 of 2016 |
| Judgment of: | Judge Wilson |
| Hearing date: | 4 October 2016 |
| Date of Last Submission: | 22 November 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 23 March 2017 |
REPRESENTATION
| Solicitors for the Applicant: | Solicitor for Fair Work Ombudsman |
| No appearance on behalf of the first or second respondents |
ORDERS
The first respondent pay a penalty in the sum of 20% of the maximum sum payable ($108,000.00) namely, $21,600.00 within 60 days.
The second respondent pay a penalty in the sum of 20% of the maximum sum payable ($21,600.00) namely, $4,320.00 within
60 days.
The first and second respondents pay the costs of the applicant fixed in the sum of $4,718.00.
The applicant has liberty to apply on seven days’ notice in the event that any of the orders made in paragraphs 1, 2 or 3 are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1309 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| MONOCHROMATIC ENGINEERING PTY LTD (ACN 007 274 044) |
First Respondent
| ZORAN CRVENKOVIC |
Second Respondent
REASONS FOR JUDGMENT
Introduction
Consequent upon the entry of default judgment against Monochromatic Engineering Pty Ltd (“the first respondent”) and Zoran Crvenkovic (“the second respondent”) on 4 October 2016 and the making of various declarations, Fair Work Ombudsman (“FWO”) sought the imposition of penalties on each respondent for contraventions of the Fair Work Act 2009 (Cth) (“the Act”). The first respondent’s liability was direct. The second respondent’s liability was accessorial.
These are my reasons for imposing the penalties recorded below.
Synopsis
As against the first respondent, I impose a penalty of $21,600.00.
As against the second respondent, I impose a penalty of $4,320.00.
As against both respondents, I order costs of $4,718.00.
Short factual narration
The facts giving rise to this application were not disputed.
Despite repeated requests for their response, each respondent steadfastly refused to participate in any aspect of this proceeding including events subsequent to my making default declarations on
4 October 2016.
The facts were uncomplicated and were recorded in affidavit material prepared by the solicitor for FWO, Nikki Haig.
The first respondent operated a business that manufactured and repaired levelling lasers and alignment instruments. It traded as
“MCE Lasers”. The second respondent was at all relevant times a director of and majority shareholder in the first respondent.
During January 2015, the first respondent employed a person by the name of Jahangir Farzady whose employment was terminated in January 2015. Mr Farzady commenced litigation against the
first respondent asserting that he had been unfairly dismissed.
On 20 October 2015 a commissioner of Fair Work Commission
(“FWC”) found that Mr Farzady had been unlawfully dismissed by the first respondent and ordered the first respondent to pay Mr Farzady an amount in excess of $27,000.00 by 3 November 2015.[1] The
first respondent did not pay the amount ordered. Instead, on
10 November 2015 the second respondent commenced an appeal against the orders made on 20 October 2015 and concurrently sought a stay of those orders. On 19 November 2015 FWC stayed the orders made on 20 October 2015 conditional upon the first respondent paying the amount appealed against within one day. Unsurprisingly, the first respondent did not pay that amount. On 11 March 2016 further orders were made by FWC refusing the first respondent permission to appeal.
[1] Exhibit “NH-5” to the affidavit of Nikki Haig affirmed 27 September 2016.
Thereafter, FWO communicated with the second respondent (on behalf of the first respondent and in his personal capacity) with a view to ascertaining the respondents’ attitude towards paying the amount previously ordered. In her affidavit affirmed 27 September 2016,
Ms Haig deposed to a conversation between her and the
second respondent on 28 June 2016.[2] That conversation took place prior to the entry of default judgement against the respondents in this proceeding. At the time, Ms Haig was telephoning the
second respondent about the hearing of this proceeding then listed for 19 August 2016. During the course of the conversation the
second respondent made it abundantly plain to Ms Haig that he, in his personal capacity and on behalf of the first respondent, had no intention of participating in the proceeding. Ms Haig deposed to the second respondent using expressions such as “I’ve had enough with FWO”, “I’m not coming. I’m not responding, not interested. I am refusing it. Fair Work are Mafia, Nazi, Communists”, “I don’t recognise the court”[3] (to interpolate, the Federal Circuit Court of Australia).
[2] Paragraph 10 of the affidavit of Nikki Haig affirmed 27 September 2016.
[3] Ibid.
It may fairly be said that FWO extended considerable patience and latitude to the respondents in connection with this proceeding. Whether the second respondent recognised the jurisdiction of this Court in this proceeding, the undeniable fact remained that this Court did have jurisdiction to deal with this litigation under the Act.
Legal principles relevant to the imposition of penalties
In the course of making submissions about penalty on costs,
FWO provided recommendations in respect of the appropriate range of penalties to be imposed in this case.[4] That was consistent with the observations of the High Court in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate.[5]
[4] Applicant’s submissions on penalty and costs filed 22 November 2016.
[5] [2015] HCA 46.
The authorities in this field of jurisprudence are well-ploughed.
They may be briefly stated –
a)
first, any penalty to be imposed should be an appropriate
response to what the first respondent did. So much was held by the Full Court of the Federal Court of Australia in
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith;[6]
[6] [2008] FCAFC 8.
b)second, it is necessary for me to have regard to the maximum penalties that apply. That is because of the observations of the High Court in Markarian v The Queen[7] where the High Court held that maximum penalties are to be taken into account and balanced with all other relevant factors so as to provide a yardstick;
[7] (2005) 228 CLR 357 at [31].
c)
third, in Kelly v Fitzpatrick[8] (“Kelly”) Tracey J embraced a
[8] [2007] FCA 1080.
10-point non-exclusive list of factors relevant to the imposition of a penalty. His Honour held to like effect in Stuart-Mahoney
v Construction, Forestry, Mining and Energy Union.[9][9] [2008] FCA 1426 at [40].
Those points provide a useful list of factors that assist in weighing up key considerations. While useful, that list does not restrict the court about the matters that can be taken into account as was held in Sharpe v Dogma Enterprises Pty Ltd.[10] To some extent, the 10 points overlap and can be truncated, as I held in Fair Work Ombudsman v Raimondi Investments Pty Ltd& Anor[11] (“Raimondi”);
d)
fourth, each contravention is a separate contravention to be separately considered, as was held in Re Stephen Gibbs v the Mayor, Councillors and Citizens of the City of Altona[12] and
McIver v Healey;[13] and
e)fifth, to the extent that two or more contraventions have common elements, that is a matter to be taken into account in considering the appropriateness of the penalty in all the circumstances, reflective of the concept that a respondent should not be penalised more than once for the same conduct.
[10] [2007] FCA 1550.
[11] [2016] FCCA 1398.
[12] [1992] FCA 553 at [21].
[13] [2008] FCA 425 at [16].
In this case, two separate contraventions in respect of each respondent were the subject of the declarations that I made in October 2016.
Issues relating to general and specific deterrence are considered below.
Let me now address the factors relevant to penalty as embraced by Tracey J in Kelly.
Nature, extent and circumstances of the contravening conduct
The relevant contravening conduct was the first respondent’s failure to pay the sum ordered to be paid within the time so ordered and the second respondent’s failure to comply with various notices.
FWO contended that the contraventions in respect of which default judgment was entered were serious. It said the contraventions reflected deliberateness by the second respondent and through him the
first respondent not to comply with the orders made on
20 October 2015 and to produce documents in response to FWO’s request. Rather colourfully the solicitor for FWO submitted that the respondents’ conduct demonstrated “a deliberate disregard for the authority of the Commission and [FWO] as a regulator of Commonwealth workplace laws”.[14]
[14] Paragraph 34 of the applicant’s submissions on penalty and costs filed 22 November 2016.
To my mind, that submission confused several concepts. It is one thing to contend that the respondents did not “accept the umpire’s decision”, as Katzmann J put the position in Mayberry v Kijani Investments Pty Ltdas trustee for The Dawe Investments Trust Subway Wallsend trading as Subway[15] when failing to comply with the order of FWC by the date ordered. The imposition of a penalty is attracted for that conduct, especially when evidence points to deliberateness in refusing to comply or wilful disobedience in that regard. It is altogether different for FWO to urge me to impose penalties at the higher end of the range of available penalties on account of the respondents’ refusal to produce documents. While it is true that I have made declarations in respect of the contraventions of the obligation to produce documents, in and of itself that does not attract the imposition of a penalty at the higher end. It is easy enough to see how a respondent in the shoes of both respondents in this case may have refused to produce documents for several reasons, not the least of which was reliance upon a privilege against self-incrimination (fearing further prosecution consequent upon the voluntary production of documents to the regulator and the disclosure of information detrimental to their interests, which documentation they would not ordinarily have to give otherwise than under compulsion). I do not accept that it is legitimate for this Court to impose a penalty at the higher end of the range of penalties in the manner contended for by FWO by reason of the respondents’ failure to comply with a notice to produce. Any penalty associated with that failure is to be assessed in the normal way without any particular weighting in the manner submitted by FWO. FWO’s contention advanced in paragraph 41 of its submissions on penalty on costs was unacceptably broad, glib, non-specific and unattractive, to my way of thinking.
[15] [2011] FCA 1238.
Nature and extent of the loss or damage sustained
Rather self-evidently, FWO submitted that Mr Farzady was entitled to be paid the amount ordered by the date ordered and that the
first respondent has still not made that payment. That much is true.
In its written submissions, FWO went further by contending that the nature and extent of the loss arising from the respondents’ conduct extended beyond the loss suffered by Mr Farzady and “includes damage to the broader statutory objectives” under the Act.[16] I confess not to understand that submission. I do not follow how the matters to be taken into account when considering this issue, limited to the nature and extent of the loss “includes damage to the broader statutory objectives” under the Act.
[16] Paragraph 44 of the applicant’s submissions on penalty and costs filed 22 November 2016.
In many ways that contention makes no sense in fact or law. I decline to apply it.
The nature of the loss suffered was financial. No evidence was adduced indicating that the loss was anything but financial. The amount ordered included the sum unpaid plus 9.5% superannuation less tax. Beyond that, Mr Farzady was not entitled to any further monetary component. This was not a case where interest pursuant to legislation on unpaid amounts was applicable, such as amounts payable on monetary judgment sums under the Supreme Court Act 1986 (Vic), the
Penalty Interest RatesAct 1983 (Vic) or other comparable legislation. As to the extent of the loss, I have taken into account that the person entitled to be paid has not been paid since the date the order was made. The fact that the first respondent sought to appeal against the order made on 20 October 2015 was legitimate and I attach no weight to the fact that the appeal was not prosecuted. Nor is evidence available by which I could conclude that the appeal was a delaying tactic. As events transpired, the first respondent suffered a very considerable setback in the appeal process by being required to deposit the appealed amount as a condition to the granting of the appeal and to do so within one business day.
Any similar previous conduct
No evidence was put before me as to any hardship under which
Mr Farzady may have laboured consequent upon the first respondent’s failure to pay the amount ordered.
FWO conceded that the respondents had not previously been the subject of litigation by FWO for contraventions of workplace laws. That concession, such as it was, missed the point. The issue was not whether the respondents had been previously the subject of proceedings. The issue is whether evidence existed to the effect that the respondents had engaged in similar previous conduct. There was no such evidence. It fell to FWO to adduce such evidence if any existed.
It failed to do so. I have taken that into account in formulating appropriate penalties in this case.
Size of the business
Again, FWO conceded that no evidence was before me about the size of the first respondent’s business.
The “size of the business” considerations relevant include –
a)the size of the business’s assets and undertaking;
b)its turnover;
c)its payroll;
d)the number of its employees;
e)the location at which it operates; and
f)its client base.
Ordinarily, those matters go to establishing the size of any business. FWO conceded there was no evidence before the Court on those matters.
FWO submitted that in the absence of such evidence I was entitled to assume that there was no issue as to financial incapacity or that this factor should be attributed no weight in relation to the determination of penalty, citing a decision of a federal magistrate. I decline to follow that decision. I am not bound by it and in my opinion it makes no sense. It fell to FWO to put before me material about penalty.
Any failure to do so carried consequences to FWO, rather than to the respondents, because the existence or absence of that evidence bore upon the proofs in this case. I am not willing to proceed to assume there is no issue as to financial incapacity, something wholly different to considerations of the size of the relevant business.
Insofar as “size of the business” incorporates a consideration of the first respondent’s financial position, two decisions of the Federal Court of Australia are relevant to the imposition of a penalty. The first is Cotis v MacPherson[17] and the second is Kelly. In both of those cases it was held that an employer’s financial position at the time of contravention was not relevant to the question of penalty. To my mind, that reflects the good sense that all employers, irrespective of their size and financial position, are bound by the same workplace laws.
As I held in Raimondi, it is no more an answer to a failure to comply with workplace laws by contending that the business is small and impecunious than it is to contend the business is large and wealthy. Publicly listed companies that are employers must comply with workplace laws in precisely the same way as must natural persons who are employers.
[17] (2007) 169 IR 30 at [16].
At all relevant times the second respondent was a director of the
first respondent. He was the guiding mind of the company. The
first respondent could only do or refrain from doing any act if done or not done by him.
FWO submitted that the second respondent participated in the proceeding before FWC. The significance of that factor was not developed by FWO in its submissions. To my mind, the phenomenon of the second respondent participating in the event before FWC was equivocal and provided no guidance on the approach to be taken in this penalty proceeding.
Involvement of senior management
This factor addressed the involvement of senior management in the conduct leading to the orders about which complaint is now made in this proceeding. Whether the second respondent participated in the litigation before FWC was neither here nor there. He was free to take either course. A failure to participate may well have been his chosen path upon a careful consideration of the matter. It may have been accidental. I am in no position to tell. Conversely, a director in the shoes of the second respondent who may have participated in the proceeding before FWC, trenchantly fighting the claim,
is not to be viewed harshly for taking that approach. As in any litigation, a respondent is perfectly entitled to advance his, her or its position and it falls to the judicial officer (or quasi-judicial officer in the case of a commissioner of FWC) to make a determination based on conflicting evidence and propositions. I draw no adverse conclusion from a director’s participation or abstinence from participation in the proceeding before FWC.
Insofar as this factor points to any nefarious conduct being known to, acquiesced in or actively promoted by senior management, then that is one of a litany of factors that I must take into account which I have done in this case. However, the point assumes no stand-alone significance.
Contrition
FWO made a great deal of the absence of any contrition on the part of either respondent. FWO used the absence of contrition as a significant argument in support of its overall contentions that I should visit upon the respondents the upper range of penalties.
Some points must be made about FWO’s submissions in relation to this factor.
First, the only respondent relevant to the proceeding before FWC on
20 October 2015 was the first respondent. The second respondent to this proceeding was not a party to the litigation before FWC nor was he the subject of the orders made 20 October 2015. FWO submitted that “[t]here is no evidence that either of the Respondents have shown any contrition”.[18] That can only be a reference to the first respondent as the second respondent was a party to this litigation before me. He was not a party to the litigation before FWC. That makes it much more understandable that he may not have been contrite to date. Prior to my making the declarations last year, no orders existed against him. To my way of thinking, FWO over-stated the position when submitting that neither respondent has shown any contrition. Insofar as that submission may have a foundation, it is only maintainable in respect of the
first respondent.
[18] Paragraph 52 of the applicant’s submissions on penalty and costs filed 22 November 2016.
Second, FWO advanced a confusing submission that “the respondents’ failure to participate in the proceedings shows a clear disregard for the Court and no acceptance of any wrongdoing”.[19] Erroneously, the reference to “proceedings” (plural) merged the litigation before FWC with this proceeding before me and incorrectly stated that the respondents (plural) had failed to participate in those proceedings when, for reasons advanced above, there was no obligation on the second respondent to participate in the proceeding before FWC. He was not a party to it.
[19] Ibid.
In any event, I do not agree with the proposition that the failure of any party to participate in a curial hearing thereby demonstrates “a clear disregard for the Court”. Every day, routinely, respondents to all manner of litigation in this Court and in other courts across the Commonwealth of Australia do not appear or they do not participate in the litigation. Their non-participation is not indicative of a
“clear disregard for the Court”. Some are impecunious. Some suffer language impediments. Their non-appearance merely spells conduct that enables the Court to adopt a particular procedural option, usually leading to default judgment. In my opinion, FWO overstated the position very considerably in relation to this proposition.
That said, I do accept that the evidence did not reveal an apology from the first respondent. Whether anything is to be attached to that failure to apologise is something altogether different.
Expressed in other terms, the first respondent’s failure to offer an apology does not, in and of itself, necessarily drive me to the conclusion that the respondents (plural) are to be visited with a penalty at the higher range of penalty options. Any such submission would be doomed as nonsensical.
Corrective measures
FWO pointed out that no amount of the sum ordered on
20 October 2015 has been paid. I have taken that into account. However, as a stand-alone issue I do not attach the significance to this factor that FWO did when citing the authority referred to in
paragraph 51 of its written submissions.
Deliberateness
In its written submissions FWO did not address the question of the deliberateness of the breach, being one of the factors to which Tracey J referred in Kelly. That omission was curious as FWO placed heavy reliance on other aspects of the deliberateness of the respondents’ behaviour, mostly in respect of their failure to cooperate, their failure to be contrite and their failure to take corrective action. Insofar as the question of deliberateness has been subsumed by submissions on those other matters, I have taken them into account.
My rejection of the “no discount” submission
FWO contended that no discount on the question of penalties applied in this proceeding. No reason was given for that submission. To the extent that paragraph 53 of FWO’s written submissions is to be construed to mean that no discount applied because the respondents failed to participate in this litigation before me, I disagree. For reasons mentioned above, a party’s failure to participate in litigation may be deliberate, accidental, on advice or for any number of reasons. I am not willing to attach the significance that FWO has urged me to attach to the respondents’ failure to participate in this litigation. Their failure to participate led to the entry of default judgment. Whether or not they had participated in this litigation, I was required to consider the checklist set out in Kelly when assessing penalties, which I have done.
Ensuring compliance with minimum standards
FWO submitted that the need to ensure compliance with minimum standards was a very important consideration in this case.
In paragraph 54 of its written submissions, FWO wrote the following –
The Respondents [sic] failure to comply with the Commission Order serves to subvert the objectives of the FW Act by undermining the dispute resolution procedures set down by the FW Act and, therefore, undermining public confidence in the Commission as a means of obtaining an appropriate remedy.[20]
[20] Pages 9-10 of the applicant’s submissions on penalty and costs filed 22 November 2016.
To my mind, that submission dramatically overstated the position.
The Act provides a regime by which FWC is empowered to make an order of the sort made in this case on 20 October 2015.
The first respondent was required to make a payment by a particular date which it did not do. I find it impossible to accept that the act of not paying an amount by a particular date undermines public confidence in FWC or that it undermines the dispute resolution procedure provided for in the Act. Notwithstanding the conduct of the first respondent in this case by not paying the amount ordered by the date ordered, litigants continue to utilise the services of FWC, they continue to seek and obtain orders and FWO continues to apply to this Court for the imposition of penalties. Far from public confidence being undermined, the provisions of the Act are operating in the way they were intended to operate.
To like effect, the legislation makes provision for the consequence of a party in the shoes of the respondents in this case failing to comply with a notice to produce that was issued by a Fair Work Inspector.
The legislation takes effect according to its terms. I do not accept the submission by FWO that ignoring a notice to produce undermines the operation of legislation “to enforce the guaranteed safety net of terms and conditions of employees” as contended for.[21] The party that ignores a notice to produce thereby exposes himself or herself to the consequences of such conduct.
[21] Paragraph 57 of the applicant’s submissions on penalty and costs filed 22 November 2016.
At paragraph 62 of its written submissions, FWO contended that I should take the failure to comply with the notice to produce seriously, citing a decision of another judge of this Court who held that recipients of such notices should be left under no misapprehension about the obligations to comply with those notices. I do not agree. Casting the obligation in those terms imports obligations akin to strict liability. There is no such obligation. A notice to produce given pursuant to legislation will impose strict liability in respect of compliance only if the words of the legislation, properly construed, admit of such a result. I am not persuaded that a notice to produce is to be construed in those terms. None of the authorities to which FWO took me in written submissions remotely approximate such a result.
General and specific deterrence
The need for specific and general deterrence is a factor relevant to the imposition of a penalty, a proposition well-established by authority of the Federal Court of Australia, including the decision of Tracey J in Meadley v Sort Worx Pty Ltd.[22] As his Honour said, an employer is not entitled to unilaterally determine to ignore an order made by FWC.
I have taken that into account in fixing the penalty in this case.
[22] [2013] FCA 1012.
So far as specific deterrence is concerned, specific deterrence focuses on the likelihood of the infringing party being involved in a similar breach in the future as was held in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union.[23]
[23] (2008) 171 FCR 357.
No material was before me about the likelihood of the first respondent engaging in similar conduct in the future. Coupled with the absence of evidence about any similar previous conduct, it seems to me to be a fair construction of the facts of this case that this was a one-off incident.
Crushing or oppressive penalties
Penalties that are oppressive or crushing should be avoided, according to ordinary principles relevant to sentencing discretions.
Accessorial liability
Pursuant to the declarations I made previously, the second respondent has been declared to have been involved in the first respondent’s contraventions. The culpability of each respondent must be assessed individually, as was held in Fair Work Ombudsman v Ramsey Food Processing Pty Ltd.[24]
[24] [2012] FCA 408 at [8].
Monetary amount of the penalties
As against the first respondent, in respect of each of the two contraventions FWO submitted that I should impose a penalty at 80% of the maximum amount that could be imposed in this case, a total of $86,000.00.
As against the second respondent, in respect of each of the two contraventions FWO submitted that I should impose a penalty at 80% of the maximum amount that could be imposed in this case, a total of $17,280.00.
I refuse to follow those submissions.
The amount ordered by FWC was $27,124.76. FWO sought the imposition of a penalty almost three times the amount of the original order. Such a contention is wholly disproportionate and I refuse to make an order to that effect.
I do not accept the threshold proposition of FWO in this case that the contraventions are as egregious as FWO has contended, nor do I accept that the amount involved of such a magnitude that a penalty of almost three times the amount originally ordered is warranted.
In imposing a penalty I have taken into account all the matters that the decision in Kelly invited me to take into account. I have also taken into account principles of general and specific deterrence. Likewise, I have taken into account the amount of the order made by FWC, the fact that it has not been paid and remains unpaid, the length of time between the amount originally ordered and the date upon which I pronounce orders in relation of the penalty and I have taken into account the fact that the person entitled to the benefit of the order has been denied payment.
In my view the contravention is at the lower end of the range of monetary amounts to be imposed by way of penalty. In my opinion,
a penalty of no more than 20% is warranted in the circumstances of this case.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Judge Wilson
Date: 23 March 2017
Key Legal Topics
Areas of Law
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Employment Law
Legal Concepts
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Penalty
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Remedies
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