Fair Work Ombudsman v Mt Infinity Pty Ltd
[2024] FedCFamC2G 460
•20 May 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v MT Infinity Pty Ltd [2024] FedCFamC2G 460
File number(s): SYG 1239 of 2023 Judgment of: JUDGE STREET Date of judgment: 20 May 2024 Catchwords: FAIR WORK –section 715 Compliance Notice - café - penalty corporate employer $25,000 – penalty director $5,000 Legislation: Fair Work Act 2009 (Cth) Cases cited: Australian Building and Construction Commission v Pattinson [2022] HCA 13
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25
Australian Ophthalmic Supplies Pty Ltd v McAlary – Smith (2008) 165 FCR 560
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Anor [2015] CLR 482; [2015] HCA 46
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 428
Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Fair Work Ombudsman v Jetstar Airways Ltd [2014] FCA 33
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301
Kelly v Fitzpatrick (2007) 166 IR 14
Masson v Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7
Trade Practices Commission v CSR Ltd [1990] FCA 521
Division: Division 2 General Federal Law Number of paragraphs: 40 Date of hearing: 20 May 2024 Place: Sydney Solicitor for the Applicant: Mr A Fiorenza of the Fair Work Ombudsman Solicitor for the Respondents: Mr J Bui of JB Solicitors ORDERS
SYG 1239 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: MT INFINITY PTY LTD (ACN 618 307 228)
First Respondent
MIAH GOLAM TAREQUE
Second Respondent
ORDER MADE BY:
JUDGE STREET
DATE OF ORDER:
20 MAY 2024
THE COURT ORDERS THAT:
1.The affidavit of Miah Golam Tareque affirmed on 3 May 2024 is to be filed on the Commonwealth Court’s portal before the close of business today.
2.Pursuant to section 546(1) of the Fair Work Act 2009 (Cth), within 90 days:
(a)The first respondent pay to the Fair Work Ombudsman a pecuniary penalty of $25,000.00 for the contravention declared on 8 December 2023; and
(b)The second respondent pay to the Fair Work Ombudsman a pecuniary penalty of $5,000.00 for his involvement within the meaning of section 550(2) of the Fair Work Act 2009 (Cth) in the contravention declared on 8 December 2023.
3.Liberty is granted to the applicant to apply on seven (7) days’ notice if these orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
JUDGE STREET
INTRODUCTION
This was a penalty hearing in relation to contravention orders that were made in respect of a s 715 compliance notice (“the compliance notice”) under the Fair Work Act 2009 (Cth) (“the FW Act”) which was issued on 5 May 2022 to the first respondent as an employer to two employees, Panagiotis Kouroupis and Chrystalo Kostis (collectively “the employees”). The first respondent’s time for compliance with the s 715 notice expired on 3 June 2022.
On 2 August 2023, these proceedings were commenced seeking declarations in respect of the contraventions and orders for compensation and a penalty. On 8 December 2023, consent orders were made as a result of an agreed statement of facts made on behalf of the respondents that identified and admitted the contravention in respect of the compliance notice and admitted the knowing involvement of the second respondent, being the sole director of the first respondent, in the contravention. The Court made orders on 8 December 2023 fixing the matter for a penalty hearing. Order 8 of the orders made on 8 December 2023, identified a requirement for the filing of affidavit evidence and was not complied with by the first and second respondents. Further orders were made on 26 April 2024 that also provided a timetable for the filing of evidence which identified a requirement for the first and second respondents to file affidavit evidence by 3 May 2024.
An affidavit of the second respondent dated 3 May 2024 has been admitted into Court today, although not filed in accordance with the order made on 26 April 2024, and the Court received a partial explanation as to difficulties in filing of the same. Although, the affidavit of the second respondent was admitted into evidence subject to two sentences not being read in paragraph 48, the affidavit can best be described as obfuscating by the second respondent in respect of his asset and his liability position, as well as that of the first respondent, and in respect of the respondents capacity to have paid the outstanding entitlements in respect of employment periods for Ms Kostis from 29 March 2021 to 27 June 2021 and for Mr Kouroupis from 22 February 2021 to 27 June 2021.
The affidavit of the second respondent was less than candid in terms of his true asset position, that of the first respondent, and the respondents capacity over points of time to have paid the outstanding employee entitlements. The Court heard exculpatory evidence by the second respondent seeking to suggest that his solicitor had told him not to make the payments when he clearly had adequate funds and that his solicitor would fix it. That evidence is not accepted.
There are similar excuses that were apparently raised in the context of compliance with a defective notice that was issued at an earlier point of time and withdrawn but clearly put the first and second respondent on notice in respect of the outstanding entitlements. That purported notice was dated 6 December 2021. Explanations were advanced that there was a need for an extension of time because his accountant was not available. There was no apparent grasp by the second respondent as to his responsibility to ensure that these employees’ entitlements were paid and paid fully on time. Subject to the $2,800 payments that have more recently been made to each of the two employees, the respectively large sum that has been outstanding for a substantial period of time.
The evidence of the second respondent in relation to the financial position of the first respondent was far from satisfactory. No ATO records at all were tendered in relation to the relevant entity, and it emerged in the course of evidence that it has been a treated as a trustee for a super fund by the second respondent. The financial records that were belatedly tendered, including further records after questions raised by the court as to the nature of accounts, showed that over the period identified in exhibit C, which was from the 22 January 2024 until 8 May 2024, the second respondent has preferred his own interests rather than making payments that he could have made from funds in that account to the employees whose entitlements have been outstanding over a substantial period.
There was further evidence in relation to a refinancing of a Waterloo property owned by the second respondent in 2023 including the acquisition of a Punchbowl property, and paying development costs rather than the employees. The second respondent engaged in a refinancing in 2023 which reflects an equity capacity that he must have had in respect of that Waterloo property, over the period, from the date that the employees’ entitlements were outstanding until acquisition of the Punchbowl property. In these circumstances, the Court finds that there has been a deliberate course of conduct by the second respondent to fail to engage with the duty of the first respondent and his obligation as a director to cause the first respondent to make payments of the employees outstanding entitlements.
The deliberateness of the conduct in the present case by the respondents is at the most serious end of the spectrum in terms of conduct. The second respondent, in response to attempts to ascertain whether the first respondent would comply with the compliance notice, being the one issued on 5 May 2022, conveyed on two occasions deliberate intent not to comply with the same, on one occasion asserted the employees seeking to recover their entitlements were engaging in a form of shoplifting and that it was a matter of theft by them from him.
The conduct of the respondents is not adequately explained by the fact that the second respondent had an injury in 2013 and went onto a disability pension and is the subject of a certificate identifying that he has anxiety and depression and takes what was described as a cocktail of medications. The second respondent’s health and personal circumstances are most unfortunate, but they do not provide a satisfactory explanation for the deliberate failure by the first respondent to comply with the compliance notice issued under s 715. The Court finds that up until 8 May 2024, the first and second respondent had funds from which payment could have been made had they seen it fit to do so. There was a further asset identified in a record from Centrelink that indicates that there are, in fact, café fit-out equipment, owned by the first respondent, said to be of a value of $73,000 which the Court finds could also have been realised at any time over the entire period from the time when the café was closed to date, for the first respondent to meet the outstanding entitlements of the employees.
The Court does not propose to revisit the orders that were made on 8 December 2023 by consent providing a substantial period of time for the respondents to make the payment of the outstanding entitlements and to make the superannuation calculations and payments. However, the Court does not accept on the evidence of the second respondent, that the respondents lacked or currently lack the capacity to make those payments.
Mr Bui submitted on behalf of the second respondent that the Court should find a capacity lacking today to make those outstanding payments to the employees. The Court does not make such a finding. The second respondent is the owner of two properties, and he has identified engaging in significant expenses to acquire and then develop the Punchbowl property. For the reasons already given, the Court finds that the respondents had a capacity to draw down on his Waterloo property to make payments if the respondents had sought to do so and/or could have taken steps to realise the fit-out equipment owned by the first respondent. The Court places very little weight on the alleged apology and regret by the respondents in respect of the contravention by the first respondent and involvement in the contravention by the second respondent. The conduct of the respondents speaks otherwise.
CHRONOLOGY
The history of the matter is as follows.
Date Event 17 March 2017 The first respondent becomes a registered company and the operator of a café. The second respondent is the sole director of the company. March 2017 The second respondent receives a Total and Permanent Disability payment related to a back injury in 2013. 23 March 2020 Due to COVID-19 affects, the first respondent receives government support through the Job Keep scheme. 22 February 2021 – 11 October 2021 The first respondent contravened the Restaurant Industry Award 2020 and the National Employment Standards under the Fair Work Act 2009 (Cth). 22 February 2021 – 27 June 2021 The first respondent failed to pay Mr Kouroupis the minimum rates of pay in respect of his ordinary hours worked between 22 February 2021 and 27 June 2021 under the Award. 29 March 2021 – 27 June 2021 The first respondent failed to pay Ms Kostis the minimum rates of pay in respect of her ordinary hours worked between 29 March 2021 and 27 June 2021 under the Award. 9 July 2021 – 11 September 2021 NSW Health Order for ‘No Dining’ imposed and the café did not open. 15 October 2021 The café closes. 2 November 2021 The FWO receives a Request for Assistance from Mr Kouroupis on behalf of himself and his wife, Ms Kostis. 6 December 2021 A purported compliance notice issued to the Firs Respondent by post and email. 5 May 2022 The earlier purported compliance notice was withdrawn, and a new compliance notice was issued. 26 May 2022 The second respondent has a conversation with an Officer of the FWO and stated that he maintains his stance and will not be complying with the Compliance Notice. 30 May 2022 The second respondent accuses Mr Kouroupis and Ms Kostis of shoplifting and will not comply with the compliance notice. 3 June 2022 The first respondent failed to calculate and rectify the underpayments set out in the compliance notice. 30 June 2022 The ATO assessed the second respondent as having a taxable income of $59,810. 2 August 2023 Proceedings commenced. 15 August 2023 The second respondent receives Centrelink Statement for Disability Pension. The first respondent is identified as having assets valued at $73.623 and the second respondent is identified as having property in India. No disclosure of other real property. 8 December 2023 Statement of Agreed Facts signed by both parties, orders were made, and the respondents did not comply with order 8 made on 8 December 2023 in relation to the filing of their evidence. As at that $2, 800 has been paid to each of the employees 22 December 2023 and 22 January 2024 The second respondent, on behalf of the first respondent made payments of $350 to each employee. 20 February 2024 The affidavit of Christine Cox dated this date, identified that the first respondent has repaid $2,100 owed to each employee. 26 April 2024 Order 2 made on this date is not complied with by the respondents in respect of filing affidavit evidence. 3 May 2024 The affidavit of the second respondent is affirmed and not filed. August 2025 The second respondent submits that he will not able commence making repayments after this period. EVIDENCE
The Court received into evidence the affidavit of Ms Cox dated 20 February 2024 that identified the background circumstances in respect of the issue of the notice on 5 May 2022. Those circumstances as the Court has referred to identify the issue of an earlier withdrawn notice that obviously reflects no contravention but does very much put the respondents on notice in respect of the outstanding obligations and adds to the gravity of the deliberateness of the conduct in failing to make the outstanding payments to which those employees were entitled.
The Court also received into evidence the affidavit of the second respondent dated 3 May 2023, subject to two sentences, which for the reasons the Court has given, the Court regards as a less than candid identification of the true financial position of the respondents and their respective capacity to pay the outstanding entitlements. The second respondent’s affidavit and oral evidence reflects a dissembling in relation to the asset position of and capacity to pay by the respondents. It is sufficient to indicate that the Court asked the second respondent whether it is the position that he had funds prior to the refinancing which he could have drawn down upon from the Waterloo property to meet the payments of the employees, to which his initial answer was no, and after some further questions by the Court, when pressed the second respondent changed the answer to that question to yes. The first negative answer was clearly untrue and impacts adversely upon the second respondent’s credit.
It is not necessary to descend further into the second respondent’s evidence and his attempt to exculpate the respondents responsibility by suggesting that he acted on advice of a lawyer not to make payments. The Court rejects the whole of that evidence as not being credible. The Court does not regard the second respondent’s injury or his depression or anxiety and his cocktail of medications as being a genuine mitigating factor in the present case, given in particular the dissembling in relation to the respondents’ assets and capacity to pay. It is not necessary the Court to descend further in relation to the material that was tendered or the unsatisfactory evidence of the second respondent concerning the Centrelink statement.
The applicant put on submissions that helpfully identified the factual background, and the Court also helpfully received detailed submissions on behalf of the respondents. The applicant’s initial approach in relation to penalty, prior to the conclusion of the evidence, was one that identified that there had been a level of cooperation in relation to the agreed statement of facts dated 8 December 2023 in respect of these proceedings. The Court accepts that there must be a discount from the maximum penalty in relation to that cooperation. Full cooperation would ordinarily result in a reduction in the order of 20 per cent from the maximum. The maximum penalty in relation to the first respondent is $33,300. The maximum penalty for the second respondent is $6,660. The applicant originally advanced submissions suggesting a range of penalty in the order of 55 to 65 per cent and a further discount of 15 per cent from that figure in relation the possible penalty amounts of the first and second respondent.
As a result of the evidence that was adduced from the second respondent, the Court inquired of the applicant as to whether or not the applicant now pressed for a penalty amount reflecting the 15 per cent discount and some further small discount from the maximum given the seriousness of the conduct and the now apparent capacity to pay. Mr Fiorenza on behalf of the applicant identified that the applicant did now seek to press for a higher penalty than identified in the submissions dated 12 March 2024. The Court notes that at the commencement of the hearing the Court identified its concern in respect of the gravity of the conduct that had been engaged in and the possibility of capacity to pay and identified the obvious deficiency in the affidavit of the second respondent dated 3 May 2024 and the impact this may have on penalty in a range above that advanced by the applicant. Mr Bui, consistent with proper practice, did seek to supplement, by oral evidence, the affidavit evidence to identify the asset position and capacity to pay, but for the reasons already given, that evidence by the second respondent was not persuasive and made clear the capacity to pay and contradicted the affidavit evidence of the second respondent. Mr Bui, endeavoured to identify the respondents position in its best possible light, but the second respondent was an unsatisfactory witness and revealed the gravity of the conduct by the respondents in not paying the employees.
APPROACH TO PENALTY
The relevant approach to penalty has been helpfully summarised by the submissions of the applicant relevantly as follows:
(1)The Court may impose pecuniary penalties pursuant to section 546 of the FW Act if it is satisfied there has been a contravention of a civil remedy provision (including 716(5) of the FW Act).
(2)The primary purpose of civil penalties is to promote the public interest in compliance and to attempt to put a price on a contravention that is sufficiently high to deter repetition by the contravener and by others who are in a position to contravene legislation: see Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Anor [2015] CLR 482; [2015] HCA 46 at [55], citing Trade Practices Commission v CSR Ltd [1990] FCA 521 at [40]: see also Australian Building and Construction Commission v Pattinson (Pattinson) [2022] HCA 13 at [15]-[17]. To achieve this end, the Court should fix a penalty that “it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions of the Act”: see Pattinson at [71].
(3)A penalty must be proportionate, such that it “strikes a reasonable balance between deterrence and oppressive severity: see Pattison at [41]…..
(4)The fact that the Court has a broad discretion to assess the appropriate penalty, the approach to penalty and the factors the Court may take into account when setting a penalty, (see Kelly v Fitzpatrick (2007) 166 IR 14 (Kelly) at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary – Smith (2008) 165 FCR 560 (Ophthalmic Supplies) at [23], [71] and [102]; Masson v Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7) are well established: see Fair Work Ombudsman v Jetstar Airways Ltd [2014] FCA 33 at [28]; Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301 at [36]; Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 428 at [64]; Ophthalmic Supplies at [91]. It includes matters relevant to both the character of the contravening conduct and of the contravener: see Pattinson at [19]. Each penalty factor has the potential to have an aggravating or mitigating impact on determining the appropriate penalty to be imposed: see Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [64]; Pattinson at [19].
(5)These proceedings concern a single contravention of section 716(5) of the FW Act by the First Respondent. Pursuant to section 550 of the FW Act, the Second Respondent was involved in this contravention.
(6)Pursuant to section 539(2) of the FW Act, the Court may impose the following maximum penalties:
(a)$33,300 for a contravention of section 716(5) of the FW Act by the First Respondent; and
(b)$6,600 for a contravention of section 716(5) of the FW Act by the Second Respondent.
(7)The maximum penalty is a relevant consideration but “does not constrain the exercise of discretion under s564… beyond requiring “some reasonable relationship between the theoretical maximum and the final penalty imposed”. Pattison at [10], citing Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25; [2016] [156]. The “reasonable relationship” should be considered by reference to the need for deterrence. Pattison at [55].
FINDINGS AND CONCLUSIONS
General Deterrence
Turning to the penalty to be imposed in the present case, the Court first addresses the issue of general deterrence. There was data tendered by the applicant that identifies that the café industry has a significant percentage as a matter of generality in terms of failure to comply with obligations and notices. The data contained was annexed to the affidavit of Ms Cox and relevantly identified for all industry class results cafés and restaurants in respect of a very large number of businesses had a significant percentage in relation to the need for the issue of compliance notices, being 18.4 per cent. The Court finds that this is an industry in respect of which there is a very real need for general deterrence in respect of the failure to comply with a s 715 notice.
The s 715 notice is a core provision in the FW Act to facilitate compliance and steps for payment of the entitlements of employees under that Act. It is an extremely important provision, and compliance with that provision is central to the ability of the Fair Work Ombudsman to ensure employers comply with the provisions of the FW Act. Being in an industry where there has been identified a significant need to ensure compliance, the Court gives considerable weight to the need for general deterrence in approaching penalty in relation to the contravention of the s 715 notice and involvement in the contravention. General deterrence in this case warrants a sufficient a sting to ensure compliance by employers in this industry with a compliance notice.
The circumstances of the present case, involve a notice that was issued but which was defective and then the compliance notice was issued on 5 May 2022, the subject matter of the contravention and involvement in the contravention. This background is a matter must be taken into account in relation to the seriousness and deliberateness of the contraventions in the present case. This is not the position where the first respondent, the employer, had been given little notice or limited opportunity to comply prior to the compliance notice. The Court accepts the submission of the applicant that there is a need to send a message to employers and company directors in general that a failure to comply with a s 715 compliance notice will not be tolerated by the Courts, the community or by the Fair Work Ombudsman. Accordingly, there is a very real need to discourage the high level of noncompliance that appears to have occurred in the café and restaurant industry, and the general deterrence in respect of this type of contravention in this industry is one that must be discouraged by an appropriate level of penalty.
Specific Deterrence
In relation to specific deterrence, the evidence adduced was that the café was closed on 15 October 2021 and that there was an impact of COVID on the café and that the first respondent is not conducting any business at the moment of the kind that gave rise to the s 715 notice, which the Court takes into account. However, the conduct of the respondents in the present case reflects a deliberate failure to comply with the notice and the respondents engaging with communications foreshadowing that intention not to comply prior to the expiry of the compliance notice and engaging in assertions that the employees in pressing for their entitlements were engaging in shoplifting and that the second respondent was the subject by those employees of theft. That assertion and foreshadowed non-compliance are aggravating matters in relation to the contravention by the respondents which the Court takes into account. The deliberateness of the failure to comply by the first respondent and involvement of the second respondent reflects a very real need for specific deterrence.
The depression, anxiety and cocktail of medications and, indeed, being on the disability pension from an injury in 2013 are not factors in the present case that diminish the very real need for specific deterrence for the first and second respondents. There must be a sufficient sting in the fixing of the penalty to discourage the respondents from failing to comply with a contravention notice. The finding that the Court has made that there has been capacity to make payment to the employees of the outstanding entitlements over the substantial period of time that has elapsed, reinforces that need for specific deterrence. The Court accepts the applicant’s submissions that there is clearly a risk the respondents may in the future be engaged in the need for compliance with workplace laws. The Court has taken into account the partial payments made. The second respondent was intricately and knowingly involved in the contravention by the first respondent and the Court finds that there is a real need for a level of penalty which will deter both respondents from engaging in any such future conduct.
Circumstances and Deliberateness of the Contravening Conduct
In respect of the deliberateness of the contravening conduct in the circumstances, it is the case that the employees made a complaint to the Fair Work Ombudsman in November 2021 requesting assistance, and on 6 December 2021, a defective purported notice under section 715 was issued requiring compliance by January 2022. There was a chain of communications by the second respondent apparently seeking indulgence because of his accountant having alleged responsibility for calculations and meeting of those entitlements. Those communications reflect a complete lack of understanding by the second respondent as to it being his responsibility as the sole director of the first respondent to ensure that the first respondent met that the employees outstanding entitlements were met without the need for the issue of a valid s 715 notice.
However, the respondents having been put on notice by the defective notice issued on 6 December 2021, this impacts on the gravity of the circumstances and deliberateness of the conduct that then occurred following the issue of the notice the subject of the contravention on 5 May 2022 and knowing involvement. The communications that took place on 26 May 2022 and 30 May 2002 identify a deliberate intention not to comply by the respondents. The conduct of respondents in that regard is at the most serious end of gravity in terms of deliberate noncompliance of the notice, the time for which compliance expired on 3 June 2022.
Co-operation and Corrective Action
In relation to cooperation and corrective action, the Court does accept that there have been payments made to each employee totalling $2,800.00 of part of the entitlements the subject of the orders made on 8 December 2023. There are, however, substantial amounts still owing to the employees and relatively are significant amounts for the employees which has been outstanding now for almost three years. The cooperation and corrective action was not full cooperation. Not only was there a failure to comply with the s 715 notice, these proceedings were commenced on 2 August 2023, and it was not until 8 December 2023 that there were consent orders and a consent statement agreed of facts.
The conduct of the respondents is also one where, although order 8 was made for the filing of affidavit evidence on 8 December 2023, the respondents did not comply with that order. There was a partial explanation for the further failure to comply with the order made on 26 April 2024 in terms of the provision of evidence. However, as the Court has identified, the evidence that was ultimately put on was not candid and in oral evidence demonstrated a capacity by the respondents had they chosen to do so, to prioritise and attend to payment of these significant amounts for the two employees outstanding over a very substantial period of time. The cooperation does warrant a discount in the order of 15 per cent from the maximum penalty, but this is not a case where it should be the full 20 per cent discount.
The Court has taken into account the payments that have been made identified in the affidavit of Ms Cox and that there is a consent order in place for the continuation of payments together with interest and calculations to be performed for payment of superannuation that the respondents must still comply with. The Court appreciates that the second respondent has put his home at Waterloo on the market and that he is seeking to sell the same, and that from the proceeds he will be able to pay out these entitlements at an earlier point of time. It would have also been open to the respondents not to engage in the transactions that gave rise to the draw down on the Waterloo property, the purchase of the Punchbowl property or to sell the plant and equipment and to have prioritised payments of the significant outstanding amounts for the two employees.
Nature and Extent of loss
The Court has taken into account the nature and extent of the loss being as at the date of the submissions $4,821.29 to Ms Kostis and $7,927.13 to Mr Kouroupis. The Court regards the period of time over which the amounts have been outstanding is greater than that identified by the applicant because these entitlements were earned in the period from 22 February 2021 to 27 June 2021 for Mr Kouroupis and 29 March to June 2021 for Ms Kostis, and it is almost June 2024. The compliance notice reflected outstanding entitlements to which the employees were entitled under the Restaurant Industry Award 2020 and the National Employment Standards, and for individual employees. The failure to pay the entitlements which they have under the Act is significant and substantial, and the Court in fixing penalty directs itself to ensure compliance with the notice, albeit the loss is relevant in respect of that contravention and the knowing involvement contravention.
It is also the case that the applicant has had to engage in bringing of these proceedings which would not have been required had the first respondent complied with the compliance notice, and as stated, the second respondent was intricately involved with, and knowingly involved in, the contravention by the first respondent.
Importance of Compliance with Minimum Standards
In relation to the importance and compliance with minimum standards, the applicant emphasised the significance of the modern awards and the provisions of the FW Act to safeguard employees’ rights as well as the importance of the National Employment Standards as minimum obligations, again, to protect employees. The core role of the compliance notice is of considerable importance as a mechanism to ensure compliance with the FW Act and the rectification of underpayments to employees.
Size of the Business
In relation to the size of the business, the Court accepts that the first respondent’s café business has come to an end and the circumstances of the second respondent in respect of his back injury in 2013 and the cocktail of medications he takes as well as his anxiety and depression are unfortunate. However, those circumstances do not lessen the need for deterrence in relation to this industry as a matter of general deterrence as referred to above and the need for specific deterrence in respect of the respondents. That the former business was small and has ended, with other losses for first respondent and the second respondent, is taken into account.
Financial Capacity
In terms of financial capacity, the Court has for the reasons already given made findings as to capacity to pay and the unsatisfactory nature of the evidence of the respondents and attempted dissembling in respect of the capacity to pay, which are also aggravating factors in the context of the imposition of a penalty. The Court is alive to the need to avoid a penalty that is crushing or oppressive. However, the history of the capacity of the respondents to have paid these outstanding entitlements must be taken into account.
This is a case in terms of involvement of senior management where it was the second respondent who was the corporate mind and was knowingly involved as admitted through s 550 of the FW Act in the convention by the first respondent.
In relation to the submissions advanced on behalf of the respondents, they were clearly on notice from the commencement of the hearing as to the Court’s concern as to the gravity of the conduct being beyond that identified in the submission served by the applicant and the risk of a greater penalty being imposed. The respondents’ submissions made explanations identifying the COVID-19 period and the suffering of other losses in relation to the business venture, as well as the second respondent’s physical and mental health and being the subject of permanent disability payments.
The evidence of the respondents was less than candid. It did not squarely identify the first respondent as a trustee of a self-managed super fund, let alone provide the actual financial records of the first respondent or tax records relating to the first respondent. The records provided by the second respondent in respect of bank accounts relating to himself and the first respondent were only extracted after questions from the bench, and then only after further questions was the account evidence in exhibit C extracted which revealed an obvious financial capacity that had not been the subject of any identification in the affidavit of the second respondent and is at odds with the submissions advanced in respect of want of capacity to pay. The Court accepts there may have been some significant loss to the respondents in terms of the collapse of the business and that COVID-19 no doubt contributed, as well as the poor physical and mental health of the second respondent, but these factors do not lessen the gravity of the conduct in the circumstances of the present case where there was capacity to pay the outstanding entitlements to the employees and the respondents attempted to represent otherwise.
The submissions advanced relating to capacity and consequence of possible liquidation were obviously founded on the limited evidence that had been provided. The further evidence does not support the contentions advanced as to lack of capacity to pay and reveal a want of credibility of the second respondent as to the true fiscal positions of the respondents. The explanations as to past injury and poor mental health and medications are not an excuse for the contraventions in this case. The Court takes into account that the second respondent does have a health condition and he is on a disability pension and does take medications, but these matters do not explain away the gravity of the conduct of the respondents in the present case and are not in this case mitigating factors. The submission advanced that the first respondent had no capacity to pay the unpaid employee entitlements, the Court finds is not true. This deflection from the true fiscal position of the respondents also impacts on the gravity of the conduct of the respondents in the circumstances of the present case and the need to protect.
The admissions and acknowledgements of contraventions and apology proffered through the second respondent ring hollow in relation to the conduct actually engaged in by the respondents. The Court finds that this is a case where it is necessary to impose a pecuniary penalty order that carries the necessary general and specific sting in relation to the conduct of the respondents. The Court was given less than candid evidence about fiscal positions and capacity to pay of the first respondent and the second respondent. While the Court accepts there are probably other creditors and that the second respondent has probably engaged in taking money from relatives, these considerations do not diminish the fact that the respondents have prioritised their own interests over the interests of the employees the subject of the s 715 notice and their unpaid entitlements. As indicated above the consent orders are not ones that the Court proposes to revisit. However, the Court is of the view that a significant penalty is appropriate to be imposed on each respondent taking into account all of the above factors and are fair and reasonable to protect the public interest from future contraventions of the Act. The penalties must discourage the aggravating conduct of the kind that occurred in this case to protect the said public interest, being the twice foreshadowed intended non-compliance, at the time required for compliance alleging theft by the employees in seeking their outstanding entitlements and less than candid evidence as to capacity to pay by the respondents.
Accordingly, the Court determines that after allowing a 15 per cent discount from the maximum penalty in respect of the first respondent, the appropriate penalty amount would be in the order of $28,350. Taking into account all the circumstances and the above factors, the Court is satisfied that it is appropriate to impose a penalty on the first respondent in the sum of $25,000 to be paid within 90 days by the first respondent. In relation to the second respondent, taking into account a discount of 15 per cent, reflects an appropriate penalty would be in the order of $5,661.00. The Court is satisfied that it is appropriate, taking into account all the above factors and circumstances, to reduce the penalty for the knowing involvement by the second respondent in the sum of $5,000 to be paid within 90 days. The Court is satisfied that these penalties reflect an appropriate balance between deterrence and oppressive severity. The Court finds that the penalties imposed reflect a reasonable relationship between the maximum and the respective penalty imposed.
It is for these reasons the Court makes the above orders.
I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Street. Associate:
Dated: 28 May 2024
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