Fair Work Ombudsman v Northcoast Security Services Group Pty Ltd & Ors (No.3)
[2020] FCCA 521
•13 March 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v NORTHCOAST SECURITY SERVICES GROUP PTY LTD & ORS (No.3) | [2020] FCCA 521 |
| Catchwords: INDUSTRIAL LAW – Remedies – Whether the Fair Work Ombudsman (FWO) can apply for and be granted orders under s.545(2)(b) of the FW Act awarding compensation in relation to employees who had been underpaid – assuming FWO can be granted such orders whether such orders can be granted in the form of an order requiring payment of compensation to the FWO on terms that if the amount for compensation is paid to the FWO the FWO would pay out of amount it received the persons on account of whom compensation has been assessed – assuming such orders can be granted whether any orders to that effect should be granted in the circumstances of this case – orders made. INDUSTRIAL LAW – Remedies – Whether the loss for which an order for compensation can be made under s.545(2)(b) of the FW Act against a person involved in another’s contravention is limited to loss that is caused by that person’s conduct as an accessory – not so limited. |
| Legislation: Competition and Consumer Act 2010 (Cth), s.82(1) Corporations Act 2001 (Cth), s.500(2) Fair Work Act 2009 (Cth), ss.12, 45, 323, 539, 540, 541, 544, 545, 546, 547(2), 550(2), 556, 557, 559, 568, 700, 701 Federal Circuit Court of Australia Act 1999 (Cth), ss.14, 15, 16 |
| Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113 Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | NORTHCOAST SECURITY SERVICES GROUP PTY LTD (ACN 145 984 032) |
| Second Respondent: | KULDEEP CHOUHAN |
| Third Respondent: | RICKY JOHN NELSON |
| File Number: | SYG 3576 of 2014 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 3 October 2019 |
| Date of Last Submission: | 18 October 2019 |
| Delivered at: | Sydney |
| Delivered on: | 13 March 2020 |
REPRESENTATION
| Counsel for the Applicant: | Ms E Raper SC with Ms S McCarthy |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| No appearance by, or on behalf of, the First Respondent |
| Solicitors for the Second Respondent: | Mr M Elnajjar of Avondale Lawyers |
| Counsel for the Third Respondent: | Mr J Pearce |
| Solicitors for the Third Respondent: | WilliamsonBarwick |
ORDERS
Pursuant to s.546(1) of the Fair Work Act 2009 (Cth) (FW Act) the second respondent pay pecuniary penalties in the sum of $32,560 for his contraventions of s.45 and s.323(1) of the FW Act described in the declarations made on 10 May 2019 (Declarations).
The second respondent pay the pecuniary penalties referred to in order 1 to the Commonwealth of Australia within 28 days from the date of these orders.
Pursuant to s.546(1) of the FW Act the third respondent pay pecuniary penalties in the sum of $36,000 for his contraventions of s.45 of the FW Act described in the Declarations.
The third respondent pay the pecuniary penalties referred to in order 3 to the Commonwealth of Australia within 28 days from the date of these orders.
Pursuant to s.545(2) and s.547(2) of the FW Act the second and third respondents pay to the applicant $128,678.79.
The second and third respondents pay the amount referred to in order 5 within 28 days after the making of these orders.
Pursuant to s.545(1) of the FW Act, and subject to orders 8, 9, and 14, if the second or third respondents, or both, pay to the applicant in full the amount referred to in order 5, the applicant will within 28 days after the applicant receives the amount, make the following payments out of the amount the applicant receives:
(a)$1,173.75 to Kylie Marie Ashworth;
(b)$3,293.36 to Jay Ellington;
(c)$11,717.78 to John Griffiths;
(d)$41,607.02 to Chei Guevara;
(e)$529.43 to Timothy Hartmann;
(f)$114.07 to Timothy Hunter;
(g)$2,606.89 to Christopher Jackson;
(h)$6,461.55 to Alexander Kavgas;
(i)$413.76 to Michael Promnitz;
(j)$5024.31 to Robyn Roff;
(k)$10,921.25 to Aaron Sheppard;
(l)$460.43 to Anthony Smith;
(m)$33,300.83 to Uhlan Taurua; and
(n)$11,054.36 to Shane Thompson.
Subject to order 14, if the third respondent pays to the applicant some but not all of the amount referred to in order 5, the applicant will within 28 days after the applicant receives such amount, pay out of the amount the applicant receives amounts to the persons referred to in order 7 in proportion to the amounts referred to in order 7.
Subject to order 14, if the second respondent pays to the applicant some but not all of the amount referred to in order 5, the applicant will within 28 days after the applicant receives such amount, pay out of the amount the applicant receives amounts to the persons referred to in orders 7 and 12 in proportion to the amounts referred to in orders 7 and 12.
Pursuant to s.545(2) and s. 547(2) of the FW Act the second respondent pay to the applicant $1,108.56.
The second respondent pay the amount referred to in order 10 within 28 days after the making of these orders.
Pursuant to s.545(1) of the FW Act, and subject to orders 13 and 14, if the second respondent pays to the applicant in full the amount referred to in order 10 the applicant will within 28 days after the applicant receives the amount, make the following payments out of the amount the applicant receives:
(a)$98.23 to Kylie Marie Ashworth;
(b)$98.23 to Jay Ellington;
(c)$98.23 to John Griffiths;
(d)$98.23 to Christopher Jackson;
(e)$154.36 to Alexander Kavgas;
(f)$105.24 to Robyn Roff;
(g)$217.49 to Aaron Sheppard;
(h)$49.11 to Anthony Smith; and
(i)$189.44 to Shane Thompson.
Subject to order 14, if the second respondent pays to the applicant some but not all the amount referred to in order 10 the applicant will within 28 days after the applicant receives such amount pay out of the amount the applicant receives amounts to the persons referred to in orders 7 and 12 in proportion to the amounts referred to in orders 7 and 12.
To the extent the applicant is unable to locate any one or more of the persons referred to in orders 7 and 12 within the 28 days referred to in those orders the applicant will refund such of the amounts it would have paid to the person the applicant is unable to locate to the respondent or respondents who made a payment under orders 5 or 10.
The second and third respondents have liberty to apply on 14 days’ notice for an order that the applicant indemnify him or them, to the extent of payments he or they have made pursuant to orders 5 and 10, against any claim any of the employees identified in the amended statement of claim may make against the second or third respondents, or both of them, for the payment of the underpayments or deductions described in the amended statement of claim.
The parties have liberty to apply on such notice as the circumstances warrant in relation to the implementation of any of these orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3576 of 2014
| FAIR WORK OMBUDSMAN |
Applicant
And
| NORTHCOAST SECURITY SERVICES GROUP PTY LTD (ACN 145 984 032) |
First Respondent
| KULDEEP CHOUHAN |
Second Respondent
| RICKY JOHN NELSON |
Third Respondent
REASONS FOR JUDGMENT
Introduction
On 10 May 2019 I made declarations that the first respondent (Northcoast) contravened s.45 of the Fair Work Act 2009 (Cth) (FW Act), and that each of the second respondent, Mr Chouhan, and the third respondent, Mr Nelson, was involved in those contraventions.[1] I also made a declaration that Northcoast contravened s.323(1) of the FW Act, and that Mr Chouhan was involved in that contravention.
[1] Fair Work Ombudsman v Northcoast Security Services Group Pty Ltd & Ors (No.2) [2019] FCCA 1198
On 3 October 2019 I heard submissions on the question of penalties. I also heard submissions on whether the Court has power under s.545 of the FW Act to order that Mr Chouhan and Mr Nelson compensate the employees whom Northcoast underpaid.
In these reasons for judgment, therefore, I consider the question of the penalties Mr Chouhan and Mr Nelson should be ordered to pay.[2] I also consider whether the Court has power to make compensation orders of the sort the FWO seeks, and, if so, whether I should make the compensation orders the FWO seeks.
[2] Northcoast is in liquidation which means that the proceeding against it has been stayed because of s.500(2) of the Corporations Act 2001 (Cth)
Power to order pecuniary penalties and amount of penalty unit
Under s.546(1) of the FW Act this Court may, on application, order a person to pay a pecuniary penalty the Court considers is appropriate if the Court is satisfied the person has contravened a civil remedy provision. Under s.546(2) of the FW Act the pecuniary penalty the Court may impose must not, where the person is an individual, be more than “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2).”
The maximum penalty units specified in the table in s.539(2) of the FW Act for the contraventions of each of s.45 and s.323 of the FW Act is 60 penalty units. Under s.12 of the FW Act, “penalty unit” has the meaning given by s.4AA of the Crimes Act 1914 (Cth) (Crimes Act). It is common ground that, from 1 July 2009 until 27 December 2012, $110 was the penalty unit provided for by s.4AA of the Crimes Act, and from 28 December 2012 until 30 July 2015 the penalty unit provided by s.4AA was $170. That means that in the period of Mr Chouhan’s and Mr Nelson’s contravening conduct (3 February 2012 to 25 August 2013), the penalty unit changed from $110 to $170.
The applicant (FWO) submits that where contraventions consist of conduct that occurs before and after the day on which the value of a penalty unit has increased, the Court should apply the higher unit for the purpose of determining the maximum penalty that may be imposed for a particular transaction; but, when assessing the penalty, the Court should take into account the contravening conduct’s having occurred during the period in which there was a lower penalty.[3] The FWO relies on the judgment of Katzmann J in Fair Work Ombudsman v Grouped Property Services Pty Ltd (No.2).[4] I am, of course, bound by her Honour’s judgment, and I propose to apply the approach determined by her Honour.
[3] Applicant’s Outline of Submissions on Penalty, [21]
[4] Fair Work Ombudsman v Grouped Property Services Pty Ltd (No.2) [2017] FCA 557
Principles
Approach to assessing penalties
The FWO submits there are five steps involved in the assessment of penalties.[5] These are:
a)Identify each separate contravention, noting that each breach of an obligation under the FW Act, including each breach of a term of a modern award, is a separate contravention.
b)Apply s.557 of the FW Act to determine whether two or more, or any group of two or more contraventions, should be treated as a single contravention or single contraventions.
c)Consider the application of the common law one transaction principle; that is, consider whether there should be further adjustment to ensure that, to the extent of any overlap between the groups of separate aggregated contravention there is no double penalty.
d)Assess the appropriate penalty for each final individual group of contraventions, taken in isolation, and with reference to factors relevant to the assessment of penalties to ensure the penalties are an appropriate response to the conduct that led to the contraventions.
e)Finally, consider the principle of “totality”; that is consider whether the penalties, when viewed as a whole, are an appropriate and proportionate response to the contravening conduct viewed as a whole.
[5] Applicant’s Outline of Submissions on Penalty, [10]
The FWO submits this approach reflects what the Federal Court has held should be the approach to assessing penalties. Among the authorities on which the FWO relies is the following passage from the judgment of Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown:[6]
(1)Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2)Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3)Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4)Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5)Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23] [71] and [102].
[6] Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301, at [36]
Counsel for Mr Nelson submits the five steps for assessing penalties identified by the FWO “is, on the authorities, artificial”. Counsel submits that “the common law totality principle, in conjunction with the course of conduct principle, may be relied on to support the imposition of a single pecuniary penalty for multiple contraventions”.[7]
[7] Third Respondent’s Outline of Submission on Penalty & Other Orders, [10]
I have noted on another occasion that the third step contained in the passage from the judgment of Bromwich J in New Shanghai requires the Court to consider whether there is any overlap “between groups of separate aggregated contraventions” to ensure the same conduct is not penalised twice and, if there is an overlap, whether there should be “further adjustment”. Bromwich J did not expressly describe the nature of the adjustment that may need to be made to avoid a double penalty; but the passage suggests that the adjustment is to be made by further aggregation. That is apparent from the fourth step the passage identifies, namely, the consideration of “the appropriate penalty in respect of each final individual group of contraventions, taken in isolation” (emphasis added).
Given s.557 of the FW Act, there would appear to be no room for the operation of the “one transaction principle” to treat two or more contraventions of the FW Act as one contravention. That is what Bromwich J concluded in Fair Work Ombudsman v Lohr, where his Honour accepted the FWO’s submission that s.557 of the FW Act “is the express statutory manifestation of the one transaction or course of conduct principle”; that by “enacting s.557 Parliament has determined how multiple contraventions arising from a course of conduct are to be treated”; and that, once s.557 has been applied it is not open to “further consolidate the … contraventions into one contravention by applying that principle, in effect, again”.[8] The correct approach, therefore, appears to be that the one transaction principle is to be applied after a penalty has been (provisionally) assessed for two or more contraventions (including contraventions which, under s.557(1) of the FW Act, are to be treated as a single contravention); and it is to be applied by adjusting the penalties so assessed having regard to the degree of commonality between the conduct that constitutes each contravention. This point was made by the Full Federal Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union:[9]
[8] Fair Work Ombudsman v Lohr [2018] FCA 5, [33]
[9] [2017] FCAFC 113, at [114], [148] (Dowsett, Greenwood, and Wigney JJ)
The important point to emphasise is that the course of conduct principle, in the criminal context at least, does not operate to permit a sentencing judge to impose a single sentence in respect of multiple offences on the basis that the offences formed part of a course of conduct. Absent a statutory provision that provides otherwise, a sentencing judge is to impose a separate sentence, albeit with the option of concurrency, for each offence.
. . . .
The important point to emphasise is that, contrary to the Commissioner’s submissions, neither the course of conduct principle nor the totality principle, properly considered and applied, permit, let alone require, the Court to impose a single penalty in respect of multiple contraventions of a pecuniary penalty provision. . . . That is not to say that the Court can impose a single penalty in respect of each course of conduct. Likewise, there is no doubt that in an appropriate case involving multiple contraventions, the Court should, after fixing separate penalties for the contraventions, consider whether the aggregate penalty is excessive. If the aggregate is found to be excessive, the penalties should be adjusted so as to avoid that outcome. That is not to say that the Court can fix a single penalty for the multiple contraventions.
Although the FWO submits, consistently with authority, that a penalty should be assessed “for each final individual group of contraventions”, the FWO does not, in her written submissions, follow that approach. The FWO classifies the Contraventions into two categories, the first, and largest, being the eight groups of contraventions of s.45 of the FW Act (the Award Contraventions), and the second being the contraventions of s.323(1) of the FW Act (323 Contraventions); and makes two classes of submissions, one applying to the Award Contraventions without distinguishing between the eight distinct contraventions, and the other applying to the 323 Contraventions. Mr Chouhan and Mr Nelson follow the same approach.
Although the approach of the parties is convenient, I am bound to assess a penalty for each contravention, and then consider whether any adjustments should be made, first, under the “one transaction principle” and, then, under the “totality principle”.
Assessing penalty for single contravention – object of assessment
When assessing the amount of the pecuniary penalty the Court should order be paid it is useful to distinguish between the purpose or purposes for which pecuniary penalties are to be imposed and, given that purpose or purposes, the matters that may be relevant to assessing the penalty. As for the purpose of imposing pecuniary penalties, the Full Federal Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union said:[10]
Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is primarily, if not wholly, protective in promoting the public interest in compliance. The principal object of a pecuniary penalty is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene; both specific and general deterrence are important. A pecuniary penalty for a contravention of the law must be fixed with a view to ensuring that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business. In relation to general deterrence, it is important to send a message that contraventions of the sort under consideration are serious and not acceptable.
The question whether a pecuniary penalty involves an element of punishment remains somewhat controversial. To a certain extent, that debate appears to be more semantic or philosophical than real. It is sufficient to say that, accepting that the primary purpose of imposing a pecuniary penalty is to protect and deter, that purpose is achieved by imposing a punishment in the form of a pecuniary penalty.
[10] [2017] FCAFC 113, [98], [99] (citations omitted)
That the principal purpose of making an order for the payment of a pecuniary penalty is deterrence was confirmed by the plurality in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union:[11]
[T]he principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners.
[11] [2018] HCA 3, at [116] (Keane, Nettle and Gordon JJ)
Specific deterrence “aims to dissuade the particular individual from committing further offences by imposing sanctions which demonstrate the adverse consequences of criminal activity”, whereas general deterrence “aims to deter the general population from committing similar offences by instilling the fear of incurring similar sanctions”.[12] Specific and general deterrence both “involve behavioural responses”. Specific deterrence “refers to the reduction in reoffending that is presumed to follow from the experience of actually being punished”, whereas general deterrence relies on the threat of punishment to “discourage potential and actual criminals in the general public from committing crime”.[13]
[12] National Judicial College of Australia, General Sentence Principles accessed on 15 January 2020
[13] Apel R., Nagin D.S. (2014) “Deterrence”. In: Bruinsma G., Weisburd D. (eds) Encyclopedia of Criminology and Criminal Justice. Springer, New York, NY
Assessing penalty for single contravention – factors
In Kelly v Fitzpatrick,[14] Tracey J adopted what Mowbray FM in Mason v Harrington Corporation Pty Ltd identified as “a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty”.[15] The Full Federal Court identified those factors in The Non-Indemnification Personal Payment Case as follows:[16]
Relevant factors in the overall assessment of penalty were helpfully listed by French J in CSR. They have been adopted in many cases. For present purposes, they can be restated as follows: the nature, character and seriousness of the conduct; the loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and, any co-operation with the regulator and contrition.
[14] [2007] FCA 1080, [14]
[15] [2007] FMCA 7, [24]
[16] Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Non-Indemnification Personal Payment Case) [2018] FCAFC 97, at [20]
In ABCC v CFMEU the Full Federal Court provided the following guidance to assessing penalties:[17]
The fixing of a pecuniary penalty involves the identification and balancing of all the factors relevant to the contravention and the circumstances of the defendant, and making a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty.
In general terms, the factors that may be relevant when fixing a pecuniary penalty may conveniently be categorised according to whether they relate to the objective nature and seriousness of the offending conduct, or concern the particular circumstances of the defendant in question.
The factors relating to the objective seriousness of the contravention include: the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the defendant is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention.
The factors that concern the particular circumstances of the defendant, particularly where the defendant is a corporation, generally include: the size and financial position of the contravening company; whether the company has been found to have engaged in similar conduct in the past; whether the company has improved or modified its compliance systems since the contravention; whether the company (through its senior officers) has demonstrated contrition and remorse; whether the company had disgorged any profit or benefit received as a result of the contravention, or made reparation; whether the company has cooperated with and assisted the relevant regulatory authority in the investigation and prosecution of the contravention; and whether the company has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law.
[17] [2017] FCAFC 113, [100], [102]-[104] (citations omitted)
It would also be useful to refer to what the Full Federal Court said in the context of assessing pecuniary penalties for contraventions of the Trade Practices Act 1974 (Cth) in Flight Centre Ltd v Australian Competition and Consumer Commission (No.2):[18]
[T]he task is one that is evaluative, taking into account all the circumstances of the case, not to be reached mechanically or by some illusory process of exactitude, but rather by evaluation that is articulated to a point (but no further) that is useful and meaningful. One starts the process by giving proper weight to the statutory maximum as referable to the most serious kind of contravention.
[18] [2018] FCAFC 53, at [55]
Assessing penalty for multiple contraventions – “one transaction principle”
The FW Act contemplates that a person may engage in a course of conduct that contravenes a single civil remedy provision on multiple occasions, and also in conduct that contravenes two or more civil remedy provisions. Section 557 of the FW Act deals with the multiple contraventions of a single civil remedy provision, and s.556 deals with the contravention of two or more civil remedy provisions. Quite apart from s.557(1) and s.556 of the FW Act, however, the courts apply what is commonly referred to as the “one transaction principle” to determine whether adjustments should be made to penalties that have been assessed for multiple contraventions of a provision of the FW Act. Owen JA gave a useful statement of the principle in Royer v Western Australia:[19]
At its heart, the one transaction principle recognises that, where there is an interrelationship between the legal and factual elements of two or more offences with which an offender has been charged, care needs to be taken so that the offender is not punished twice (or more often) for what is essentially the same criminality. The interrelationship may be legal, in the sense that it arises from the elements of the crimes. It may also be factual, because of a temporal or geographical link or the presence of other circumstances compelling the conclusion that the crimes arise out of substantially the same act, omission or occurrences.
[19] [2009] WASCA 139, at [22]
Lockhart J stated the principle in the context of the imposition of penalties for contraventions of provisions of the Trade Practices Act 1974 (Cth) in Trade Practices Commission v Bata Shoe Company of Australia Pty Ltd:[20]
Guidance is given in the field of sentencing for criminal offences by the well-known principle that where several offences are heard together and arise out of the same transaction it is a sound working rule that the sentences imposed for those offences should be made concurrent; it is inappropriate to sentence consecutively when the offences were all really involved in the same episode . . .
[20] [1980] FCA 47; (1980) 44 FLR 149; (1980) ATPR 40-161, at 42, 277
The Full Federal Court recently confirmed the relevance of the “one transaction principle” in the assessment of multiple contraventions of a single civil remedy provision in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union:[21]
There is no doubt that, in an appropriate case involving multiple contraventions, the Court should consider whether the multiple contraventions arose from a course or separate courses of conduct. If the contraventions arose out of a course of conduct, the penalties imposed in relation to the contraventions should generally reflect that fact, otherwise there is a risk that the respondent will be doubly punished in respect of the relevant acts or omissions that make up the multiple contraventions.
[21] [2017] FCAFC 113, at [148] (Dowsett, Greenwood, and Wigney JJ)
There are two matters to note about the application of the “one transaction principle”. First, the principle does not relieve the Court from assessing a penalty for each contravention, even if the contravention arose out of a course of conduct. The Full Federal Court said this in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union in the passage I have already set out.[22] Second, “even if the contraventions are properly characterised as arising from a single course of conduct, a judge is not obliged to apply the principle if the resulting penalty fails to reflect the seriousness of the contraventions”.[23]
[22] [2017] FCAFC 113, at [114], [148] (Dowsett, Greenwood, and Wigney JJ)
[23] Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73, at [235] (Allsop CJ, Middleton and Robertson JJ)
Assessing penalty for multiple contraventions – “totality principle”
Finally, there is a related, but distinct,[24] principle known as the “totality principle”. Under that principle a sentencing judge is required “to impose a sentence or sentences which reflect the overall criminality of the offending for which the offender has been convicted”.[25] In R v Holder& Johnston Street CJ described the principle as follows:[26]
The principle of totality is a convenient phrase, descriptive of the significant practical consideration confronting a sentencing judge when sentencing for two or more offences. Not infrequently a straight-forward arithmetical addition of sentences appropriate for each individual offence considered separately will arrive at an ultimate aggregate that exceeds what is called for in the whole of the circumstances. In such a situation the sentencing judge will evaluate, in a broad sense, the overall criminality involved in all of the offences and, having done so, will determine what, if any, downward adjustment is necessary, whether by telescoping or otherwise, in the aggregate sentences in order to achieve an appropriate relativity between the totality of the criminality and the totality of the sentences.
[24] Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70, at [42], Stone and Buchanan JJ said: “For the purpose of the present discussion the general principle which appears to be relied upon by the appellant [i.e., the “one transaction” principle] may be accepted, although it is important to distinguish it from the application of the totality principle which is a final check to be applied to ensure that a final, total or aggregate, penalty is not unjust or out of proportion to the circumstances of the case.”
[25] Contin v The Queen [2012] VSCA 247, at [38]
[26] R v Holder& Johnston [1983] 3 NSWLR 245, at 260
The totality principle has been held to apply to the assessment of pecuniary penalties.[27] The application of the totality principle to the assessment of pecuniary penalties was recently confirmed by the Full Federal Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union:[28]
The totality principle, like the course of conduct principle, has its origins in criminal sentencing. . . .
The totality principle is sometimes confused or conflated with the course of conduct principle. That is perhaps not surprising because application of the totality principle may again result in a court adjusting what would otherwise have been consecutive or cumulative sentences to sentences that are wholly or partially concurrent. The proper approach, however, is to first consider the course of conduct principle and determine whether the sentences should be consecutive, or wholly or partly concurrent. Once that is done, the Court should then review the aggregate sentence to ensure that it is just and appropriate. That may require a further adjustment of the sentences: either by ordering further concurrency or, if appropriate, lowering the individual sentences below what would otherwise be appropriate.
While, in the criminal sentencing context, the totality principle is generally applied in cases involving sentences of imprisonment, it has been held to apply to the fixing of fines . . . . In the case of fines, the Court must fix a fine for each offence and then review the aggregate to ensure that it is just and appropriate. If the result of the aggregation of multiple fines is that the penalty is excessive, that may lead to the moderation of the fine imposed in respect of each offence . . . .
Once again, the important point to emphasise is that, in the criminal sentencing context, application of the totality principle does not authorise or permit the sentencing court to impose a single sentence for multiple offences.
[27] Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59, at [41]
[28] [2017] FCAFC 113, at [116]-[120] (Dowsett, Greenwood, and Wigney JJ) (citations omitted)
The contraventions
The effect of the declarations I made on 10 May 2019 is that each of Mr Chouhan and Mr Nelson was involved in Northcoast’s contraventions of, and, for that reason, are each to be taken to have contravened, s.45 of the FW Act, by Northcoast’s failing to pay:
a)two employees the minimum rates of pay prescribed by cl.14.1 of the Security Services Industry Award 2010 (Award) (minimum rates contraventions);
(a)ten employees their casual loading prescribed by cl.A.5.4 of Schedule A to the Award (casual loading contraventions);
(b)fourteen employees their Saturday penalty rates prescribed by cl.A.7.3 of Schedule A to the Award (Saturday rates contraventions);
(c)thirteen employees their Sunday penalty rates prescribed by cl.A.7.3 of Schedule A to the Award (Sunday rates contraventions);
(d)fourteen employees their night time penalties prescribed by cl.A.7.3 of Schedule A to the Award (night rates contraventions);
(e)ten employees their public holiday rates prescribed by cl.A.7.3 of Schedule A to the Award (public holiday contraventions);
(f)five employees their broken shift allowance prescribed by cl.15.1(a) of the Award (broken shift contraventions); and
(g)eight employees their overtime rates prescribed by cl.23.3 of the Award (overtime rates contraventions).
The additional effect of the declarations I made on 10 May 2019 is that Mr Chouhan was involved in Northcoast’s contraventions of, and, for that reason, is taken to have contravened, s.323(1) of the FW Act, by Northcoast’s failing to pay nine employees the amounts payable to them in relation to their performance of work in full (323 contraventions).
Grouping
The parties agree that s.557(1) of the FW Act operates to group Northcoast’s multiple contraventions of each of the separate terms of the Award as a single contravention, and also to group Northcoast’s multiple contraventions of s.323(1) of the FW Act as a single contravention. I agree that the contraventions should be so grouped, and I will assess penalties on that basis.
Award Contraventions – Mr Chouhan
I begin by identifying and weighing the relevant factors in relation to Mr Chouhan’s involvement in the Award Contraventions.
Nature and extent of contravening conduct
The contravening conduct consisted in Northcoast’s failure to pay to fourteen employees of Northcoast (Workers) amounts to which they were entitled under the Award. I made findings about the nature and extent of Mr Chouhan’s involvement in that failure in my reasons for judgment published on 10 May 2019 (earlier reasons).[29] Among the findings I made are the following:[30]
[29] Fair Work Ombudsman v Northcoast Security Services Group Pty Ltd & Ors (No.2) [2019] FCCA 1198, at [158]-[169]
[30] Earlier reasons, [84]
(a)Mr Chouhan interviewed persons for the purpose of determining whether those persons were suitable to carry on security activities on premises controlled by customers of Northcoast; Mr Chouhan offered those persons whom he considered would be suitable to carry on security activities at premises controlled by Northcoast customers work to carry out security activities at those premises; and before each person whom Mr Chouhan had engaged commenced his or her first shift, Mr Chouhan arranged to provide to such person a shirt that bore the Northcoast logo. I find Mr Chouhan undertook these activities in relation to Mr Hunter, Mr McCormack, Mr Guevara, Mr Griffiths, Mr Allen, and Mr Kavgas.
(b)Although there is no direct evidence of the person or persons who interviewed the no affidavit Workers, the evidence I have accepted shows that Mr Nelson was the only person other than Mr Chouhan who interviewed persons for the purpose of determining whether such persons should be engaged to carry on security activities on premises controlled by Northcoast customers. In the light of that evidence, I also find either Mr Chouhan or Mr Nelson interviewed the no affidavit Workers, engaged them to carry on security activities at premises controlled by Northcoast customers, and arranged to provide to such persons with a shirt bearing the Northcoast logo before they commenced their first shift.
(c)Mr Chouhan was responsible for instructing security guards each week of the dates on which, the times for which, and the places at which they would carry out security activities at premises controlled by Northcoast customers. Mr Chouhan did this in relation to Mr Hunter, Mr McCormack, Mr Guevara, Mr Griffiths, Mr Allen, and Mr Kavgas; and I find that Mr Chouhan did this in relation to the no affidavit Workers.
(d)Mr Chouhan corresponded with Ms Chadban-Smith if timesheets were missing or had not been provided.
(e)Ms Chadban-Smith provided to Mr Chouhan the payroll spreadsheets and draft invoices from Marsters Entourage and Collateral Damage; and Mr Chouhan checked whether the amounts claimed in the invoices matched the hours recorded in the timesheets by reference to which the amounts claimed in the invoices were calculated.
(f)Mr Chouhan was aware of the rates that were being paid to the Workers.
(g)Mr Chouhan was aware that the means by which persons who had been engaged to carry on security activities on premises controlled by Northcoast customers were paid, namely that:
(i)the so-called labour hire companies raised payroll invoices that reflected the aggregate amount payable to persons who carried on security activities at premises controlled by Northcoast customers for the period covered by the payroll invoices;
(ii)Northcoast paid the so-called labour hire companies the amounts claimed in the payroll invoices; and
(iii)the persons who had carried on security activities were paid out of the money Northcoast has paid to the so-called labour hire companies.
I also made the following findings:[31]
The next question is whether Mr Chouhan had knowledge of the facts that constituted Northcoast’s not paying to the Workers the amounts to which they were entitled under the Award. I find Mr Chouhan did have knowledge. Mr Chouhan directed the Workers to perform the work for which they had not been paid the amounts; Mr Chouhan periodically received the payroll spreadsheets that recorded the amounts that were to be paid to the Workers for the hours of work the payroll spreadsheets recorded they performed during the period covered by the payroll spreadsheets; and Mr Chouhan was aware of the system by which persons who carried on activities at premises controlled by Northcoast customers were paid. These findings are reinforced by Mr Chouhan’s acknowledgment in his second affidavit that he “had an understanding on the amount the guards were receiving”. On these findings alone, therefore, it follows that Mr Chouhan was a person involved in Northcoast’s contraventions of the Award and, therefore, of s.45 of the FW Act. . . .
. . . I find that, as at April 2012, Mr Chouhan was aware there was an award that applied to security guards whom he or Mr Nelson engaged to carry on security activities at premises controlled by Northcoast customers.
[31] Earlier Reasons, [160], [166]
The contraventions involved fourteen employees, and occurred from 3 February 2012 to 25 August 2013. The underpayments, and the number of Workers affected, are as follows:[32]
[32] Applicant’s Outline of Submissions on Penalty, Annexure B
Contraventions
Underpayment
Workers
Minimum rates
$121.20
2
Casual loading
$13,250.54
10
Saturday rates
$21,662.31
14
Sunday rates
$17,610.74
13
Night rates
$14,939.97
14
Public holiday rates
$3,536.17
10
Broken shift rates
$1,005.36
5
Overtime rates
$20,863.46
8
The underpayments, whether viewed in the aggregate ($92,989.75), or in relation to each employee (ranging from $294.86 to $29,650.75), or in relation to each entitlement, are significant. All these matters, including the findings I made in my earlier reasons, weigh in assessing penalties at the higher end of the scale.
In his written submissions Mr Chouhan submits his conduct arose from “a combination of a lack of knowledge” of what his “true obligations were”; that the “contraventions were not deliberate acts and did not arise from a calculated course of conduct to defraud employees of their entitlements”; and that Mr Chouhan “implemented the business model established by” Mr Nelson.[33] Mr Chouhan relies on an affidavit he made on 9 August 2019. He there deposes to his “inexperience”; to his turning to Mr Nelson for advice if “there were any ambiguities or uncertainties in my work which was not within the business structure/model”; to himself having to work as a security guard while employed by Northcoast; to there being “no motive or deliberate conduct” on his part in his involvement of the contraventions “which occurred inadvertently”; and to his not believing at the time he was responsible for dealing with the matters “that are the subject of these proceedings”.[34]
[33] Second Respondent’s Submissions, [12.a]. The submissions in fact refer to the “first respondent” having established a business model. I have taken that to be a reference to Mr Nelson.
[34] Affidavit of K Chouhan, 09.08.2019, [24]-[26]
None of the matters on which Mr Chouhan relies, even if I were to accept them, gainsay the findings I made in my earlier reasons relating to Mr Chouhan. The effect of those findings is that Mr Chouhan was involved in the contraventions, and he had knowledge of the essential elements of the contraventions.
Circumstances in which the contraventions occurred
The relevant circumstances in which the contraventions occurred included the use of a payment system by which an entity other than Northcoast paid the Workers. At the very least that had a tendency to confuse the Workers. Also relevant is that, as I found in my earlier reasons, Mr Chouhan had extensive experience in the security industry, having commenced in the industry in 2004,[35] and, by April 2012, Mr Chouhan knew that an award applied to the security guards whom he and Mr Nelson engaged to carry on security activities.[36]
[35] Earlier reasons, [14], [15]
[36] Earlier reasons, [166]
Mr Chouhan submits guards and patrons did not recognise him as “the person responsible for” Northcoast; he was “not the person most responsible for” Northcoast; although Mr Chouhan “concedes” he became aware of the Award in early 2012, it “can be inferred” he was not aware of the Award until after he commenced working with Northcoast and a complaint had been made; Mr Chouhan was not involved in the establishment of Northcoast; there were pre-established processes in place at the time he joined Northcoast; and Mr Chouhan was not involved in establishing the “labour hire companies”.[37]
[37] Second Respondent’s Submissions, [12.b.]
I do not accept Mr Chouhan only became aware of the Award when a complaint was made. In my earlier reasons I referred to Mr Chouhan having made a statutory declaration on behalf of Northcoast on 1 January 2012 which contained a cross in a box next to the words: “All security personnel employed by the company are paid in accordance with the relevant Industrial Award/Agreement”; and I found Mr Chouhan acquainted himself with the contents of the statutory declaration, and that his attention had been drawn to that part of the declaration that referred to awards or industrial agreements.[38] I also found it implausible that, given he had been in the security industry since 2004, Mr Chouhan, when he became a director of Northcoast in March 2011, would have been ignorant of the existence of an award that covered persons employed to carry on security services.[39]
[38] Earlier reasons, [167]
[39] Earlier reasons, [168]
I am prepared to accept that guards and patrons did not recognise Mr Chouhan as “the person responsible for” Northcoast, and he was “not the person most responsible for” Northcoast. Further, on the basis of the findings contained in my earlier reasons, I am also prepared to accept, and therefore find, that, although one of the controllers of Northcoast, Mr Chouhan nevertheless played a subordinate role to Mr Nelson.
Nature and extent of loss
The loss consists of the Workers not having been paid their entitlements under the Award. The underpayments are set out in annexure A to the FWO’s “Outline of Submissions on Penalty”. The Award underpayments total $92,989.75, $91,701.30 of which remains outstanding.[40] Eight of the Workers have been underpaid amounts exceeding $2,000, and two of the Workers have been underpaid in amounts exceeding $20,000. These are matters that weigh in favour of assessing penalty at the higher end.
[40] In her draft orders the FWO claims payment of $92,989.75. That does not take into account the $1,288.45 that has been paid to Mr Hunter.
Mr Chouhan submits the Workers who have been underpaid “were not exploited, manipulated or otherwise placed in a vulnerable position” by Mr Chouhan.[41] The basis of this submission appears to be that the Workers were paid according to a system Mr Chouhan did not devise. Mr Chouhan also submits the Court must be satisfied “that the vulnerability was exploited”.[42] It is not clear what Mr Chouhan means by the notions of vulnerability and the exploitation of such vulnerability. Whether or not the Workers were vulnerable and their vulnerability was exploited is not a matter that sheds light on whether the Workers suffered loss. They clearly have suffered loss to the extent they have not been paid their entitlements.
[41] Second Respondent’s Submissions, [12.c.]
[42] Second Respondent’s Submissions, [12.c]
Previous conduct by Mr Chouhan
It is common ground that Mr Chouhan has not previously been found to have contravened the FW Act or other workplace laws. As the FWO submits, however, this is not a mitigating factor; it is the absence of a matter which, had it existed, would weigh in favour of assessing penalty at a higher level.[43]
[43] Applicant’s Outline of Submissions on Penalty, [38], referring to Sayed v Construction, Forestry, Mining and Energy Union [2015] FCA 338, at [51]
Financial circumstances of Mr Chouhan
Mr Chouhan submits he has limited financial resources. In his affidavit Mr Chouhan deposes to holding assets worth $1,900 and having liabilities of $118,593.60. Although Mr Chouhan was not an employer, what has been said about the relevance of an employer’s financial resources applies to the relevance of the financial circumstances of a non-employer contravener, like Mr Chouhan. The relevance of an employer’s financial circumstances was considered by Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown:[44]
As was pointed out in Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254; 215 ALR 281 at [9]:
The size of the contravening companies and their respective capacities to pay a penalty were relied upon as factors in mitigation in the present case. Plainly, such factors can be relevant to the penalty that is necessary to deter the company from contravening the Act in the future. Size may also be relevant to general deterrence because other potential contraveners are likely to take notice of penalties imposed on companies of a similar size. However, a contravening company’s capacity to pay a penalty is of less relevance to the objective of general deterrence because that objective is not concerned with whether the penalties imposed have been paid. Rather, it involves a penalty being fixed that will deter others from engaging in similar contravening conduct in the future. Thus, general deterrence will depend more on the expected quantum of the penalty for the offending conduct, rather than on a past offender’s capacity to pay a previous penalty. I therefore respectfully agree with the observation of Smithers J, referred to by Burchett and Kiefel JJ in NW Frozen Foods, to the effect that, a penalty that is no greater than is necessary to achieve the object of general deterrence, will not be oppressive. I have approached the issue of corporate penalties on that basis. The penalties in relation to the individuals may need to be tempered by personal considerations.
The above principle quoted from Leahy Petroleum was summarised and endorsed by Heerey J in Jordan Leahy Petroleum [2007] FCA 1384; 166 IR 33 at [99], who noted that capacity to pay is less relevant than general deterrence. The Full Court endorsed that conclusion in Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383 at [69], and it has been applied many times since then. It may be regarded as settled law.
[44] Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301, at [106]-[107]
I accept Mr Chouhan has a limited financial capacity to pay, and that this is of some relevance to the assessment of penalty; but its relevance is limited.
Deliberateness of contraventions and involvement of senior management
I have already referred to the findings I made in my earlier reasons about Mr Chouhan’s knowledge and acts in relation to the hiring and payment of the Workers, and to my finding that Mr Chouhan was aware that an award applied to the employment of the Workers. The FWO referred to evidence she submits further support the contention that Mr Chouhan acted deliberately.[45] These findings, and the evidence to which the FWO refers, imply and support the conclusion that Mr Chouhan’s contravening conduct was deliberate.
[45] Applicant’s Outline of Submissions on Penalty, [44]
Mr Chouhan, however, submits that his conduct was not deliberate.[46] In his affidavit Mr Chouhan deposed:[47]
I am conscious and remorseful for not being strong enough to stop company practices as I came into a working environment and did not take the initiative to change them. There was no motive or deliberate conduct on my part in being involved in the said contraventions which occurred inadvertently, as I did not believe at the time that I was responsible for dealing with the matters that are subject to these proceedings. By way of example, retaining records as I understood was a task that the company accountant was responsible for . . . .
Similarly, the pay structures were not devised by me and were in existence at the time I commenced with Northcoast.
[46] Second Respondent’s Submissions, [12.g.]
[47] Affidavit of K Chouhan, 09.08.2019, [26], [27]
Mr Chouhan was cross-examined on this part of his affidavit. He accepted he had “knowledge of the fact that the amounts that were being paid [to persons Mr Chouhan had directed carry on security services] were not what those employees were entitled [to] on all occasions under the award”.[48] It appears Mr Chouhan’s submission is that his conduct was not deliberate because he followed a system that was devised by Mr Nelson. That circumstance, however, does not render Mr Chouhan’s contraventions inadvertent or accidental. Mr Chouhan’s involvement in Northcoast’s contraventions did not consist of his devising a system of payment; they consisted of giving effect to the payment of amounts to Workers that were less than the amounts to which they were entitled.
[48] T24.40
Co-operation, contrition, and corrective action
I have already set out a passage from Mr Chouhan’s affidavit in which he expresses remorse “for not being strong enough to stop company practices”. Mr Chouhan, however, does not express any remorse for his participating in those practices; and, presumably, he expresses no remorse because he has deposed that his contraventions were inadvertent. I have already found that Mr Chouhan’s contraventions were deliberate and, therefore, not inadvertent.
In his written submissions Mr Chouhan submits it appeared to him that Mr Nelson “was operating a successful and viable company”, and Mr Chouhan “was of the view there was no contrary conduct”.[49] These submissions are at odds with the findings I made in my earlier reasons that I have reproduced above, the Workers’ evidence to which the FWO refers in her written submissions,[50] and the evidence Mr Chouhan gave in cross-examination that he knew that the amounts that were paid to employees “were not what those employees were entitled [to] on all occasions under the award”.
[49] Second Respondent’s Submissions, [12.i.]
[50] Applicant’s Outline of Submissions on Penalty, [44]
Mr Chouhan has taken no steps, following the liquidation of Northcoast, to pay the outstanding amounts owing to the employees. Mr Chouhan, however, submits that he has taken active steps to ensure compliance in the future by leaving the security industry entirely, and is currently not employed in any managerial capacity.[51] While this may be relevant to specific deterrence, it is no answer to the FWO’s submission that Mr Chouhan has not compensated any of the Workers for their underpayments.
[51] Second Respondent’s Submissions, [12.i.]
Mr Chouhan also submits he did not take an active role in the “true employer argument”; that before the hearing he engaged in negotiations that were unsuccessful “primarily on the basis that there was no consensus regarding the grouping of contraventions”.[52] These matters, to the extent they are correct, do not manifest any relevant co-operation with the FWO.
[52] Second Respondent’s Submissions, [12.i.]
Compliance with minimum standards
The submissions the parties made about this factor overlap with submissions they made about the other factors, in particular the nature and extent of the contraventions, and deterrence.
Specific deterrence
Mr Chouhan is unemployed, and he has deposed to actions he has taken after the liability hearing.[53] There is no evidence to suggest there is a tangible risk Mr Chouhan will again contravene provisions of the FW Act. Specific deterrence, therefore, is not a matter that needs to be given any weight when assessing penalty.
[53] Affidavit of K Chouhan, 09.08.2019, [42]-[52]
General deterrence
The FWO submits that general deterrence in this matter “is informed by the existence of similar contravening conduct within the security services industry”. The FWO relies on a report prepared by the FWO’s office titled “Industry Profile and FWO interactions, Investigation and Security Services industry” which, the FWO submits, concluded New South Wales contained the highest number of disputes, “Investigation and Security Services” is in the top 10 category of number of disputes received by the FWO, and that the top five allegations in the security disputes overlap the contravening conduct I have found Northcoast engaged in.[54]
[54] Applicant’s Outline of Submissions on Penalty, [61]
I do not propose to rely on this report, or on the submissions the FWO makes on the basis of the report. First, the report appears to include, perhaps to a substantial degree, complaints that have not been the subject of any court determination. Second, there is a danger that the penalty will be set by reference to contraventions of persons other than the person in relation to which a pecuniary penalty is being assessed. Third, general deterrence as a factor is, at least in most, if not all, cases a significant factor in assessing penalty, irrespective of the identity of the industry in which the contravening conduct for which a penalty is being assessed occurred.
In the case of Mr Chouhan’s contraventions, the penalty should be set at a level that, having regard to the other circumstances relating to Northcoast’s contraventions, and Mr Chouhan’s involvement in those contraventions, of the FW Act, should signal to employers, and to persons involved in the management of companies that employ persons, that there will be a significant penalty to pay if they do not comply, or take steps necessary to ensure they comply, with provisions of the FW Act and, in particular, with the minimum requirements provided for by the FW Act and under instruments such as Awards that are enforceable under the FW Act.
Assessment of penalties
There are differences between the individual (although aggregated) Award contraventions in the extent of the underpayments, and the number of employees affected by the contraventions. Other things being equal, the lower the underpayment, or the fewer the Workers involved, the lower should be the amount for which the penalty should be assessed. In those circumstances, and keeping in mind what I have said in relation to the various factors, the following are the amounts for which I find it is appropriate to assess penalties before adjustments:
Contraventions
Underpayment
Workers
Penalty
Minimum rates
$121.20
2
$1,200
Casual loading
$13,250.54
10
$7,000
Saturday rates
$21,662.31
14
$7,500
Sunday rates
$17,610.74
13
$6,500
Night rates
$14,939.97
14
$6,500
Public holiday rates
$3,536.17
10
$1,500
Broken shift rates
$1,005.36
5
$1,500
Overtime rates
$20,863.46
8
$7,500
TOTAL
$39,200
323 contraventions – Mr Chouhan
These contraventions consist of Northcoast deducting amounts from the Workers purportedly for the costs of their work shirts.[55] I made the following findings in relation to Mr Chouhan’s involvement in those contraventions:[56]
Two of the Workers, Mr Griffiths and Mr Taurua, have given evidence of conversations with Mr Chouhan about the deduction from amounts owing to them for the cost of the shirts they were required to wear. That evidence, which I have accepted, satisfies me that in relation to at least Mr Griffiths and Mr Taurua, Mr Chouhan was aware that amounts had been deducted from payments due to them.
Three of the Workers – Mr Kavgas, Mr McCormack, and Mr Allen – noticed that the payslips they received recorded deductions. That affords a rational basis for inferring that all deductions were recorded in the payslips that were issued to the Workers. Given the findings I have made and the evidence I have otherwise accepted that:
(a)payments to Northcoast security guards, including the Workers, were made under a system that involved the preparation of payroll spreadsheets that provided for the recording of the amounts to which each security guard would be entitled based on the rates at which Northcoast had engaged the security guards to carry on security activities, and also provided for the recording of amounts that were to be deducted from amounts otherwise payable to the security guards; and
(b)the payroll spreadsheets were provided to both Mr Chouhan and to Mr Nelson for their approval, and, on their approval, payments were arranged to be made to the Northcoast security guard, including the Workers,
Mr Chouhan was aware that the deductions referred to in the ASC had been made out of amounts to which the Workers were otherwise entitled to be paid for the work they performed.
[55] Earlier reasons, [145]
[56] Earlier reasons, [175], [176]
The FWO also applies for interest. I am not satisfied that good cause has been shown for not making an order for interest under s.547(2) of the FW Act. Mr Nelson and Mr Chouhan, therefore, should also be ordered to pay interest.
Interest should be calculated by applying the rates prescribed by the Interest on Judgments Practice Note (GPN-INT) issued by the Federal Court of Australia. That practice note provides for an interest rate of 4% above the cash rate or rates last published by the Reserve Bank of Australia for the six-month period preceding the period for which interest is to be calculated. I have calculated interest on $91,701.30 from 1 July 2013 until 13 March 2020, being the day on which I propose to make orders in this matter, as follows:
Period Start
Period End
Days
Interest rate
Amount
1 July 2013
31 Dec 2013
184
7.0%
$3,235.93
1 Jan 2014
30 Jun 2014
181
6.75%
$3,069.48
1 Jul 2014
31 Dec 2014
184
6.5%
$3,004.79
1 Jan 2015
30 Jun 2015
181
6.5%
$2,955.80
1 Jul 2015
31 Dec 2015
184
6.5%
$3,004.79
1 Jan 2016
30 Jun 2016
182
6.0%
$2,736.01
1 Jul 2016
31 Dec 2016
184
6.0%
$2,766.07
1 Jan 2017
30 Jun 2017
181
5.75%
$2,614.74
1 Jul 2017
31 Dec 2017
184
5.5%
$2,542.51
1 Jan 2018
30 Jun 2018
181
5.5%
$2,501.06
1 Jul 2018
31 Dec 2018
184
5.5%
$2,542.51
1 Jan 2019
30 Jun 2019
181
5.5%
$2,501.06
1 Jul 2019
31 Dec 2019
184
5.5%
$2,542.51
1 Jan 2020
13 Mar 2020
73
5.25%
$960.23
TOTAL
$36,977.49
I have calculated interest on $790 from 1 July 2013 until 13 March 2020 as follows:
Period Start
Period End
Days
Interest rate
Amount
1 Jul 2013
31 Dec 2013
184
7.0%
$27.88
1 Jan 2014
30 Jun 2014
181
6.75%
$26.44
1 Jul 2014
31 Dec 2014
184
6.5%
$25.89
1 Jan 2015
30 Jun 2015
181
6.5%
$25.46
1 Jul 2015
31 Dec 2015
184
6.5%
$25.89
1 Jan 2016
30 Jun 2016
182
6.0%
$23.57
1 Jul 2016
31 Dec 2016
184
6.0%
$23.83
1 Jan 2017
30 Jun 2017
181
5.75%
$22.53
1 Jul 2017
31 Dec 2017
184
5.5%
$21.90
1 Jan 2018
30 Jun 2018
181
5.5%
$21.55
1 Jul 2018
31 Dec 2018
184
5.5%
$21.90
1 Jan 2019
30 Jun 2019
181
5.5%
$21.55
1 Jul 2019
31 Dec 2019
184
5.5%
$21.90
1 Jan 2020
13 Mar 2020
73
5.25%
$8.27
TOTAL
$318.56
The interest should be added to each Worker’s underpayment in proportion to the amount of each Worker’s underpayment. I have, therefore, allocated the interest I have calculated on the underpayments in proportion to the amount each Worker has been underpaid. I have adjusted by a matter of cents two of the amounts to ensure that the sum of the amounts payable to the Workers, including interest, equals the amounts I propose Mr Nelson and Mr Chouhan be ordered to pay under s.545(2)(b) of the FW Act as compensation for the underpayments resulting from the Award Contraventions and the 323 Contraventions.
Disposition
I propose to order:
a)pursuant to s.546 of the FW Act that Mr Chouhan and Mr Nelson pay the pecuniary penalties I have assessed they should pay, and that they pay the pecuniary penalties to the Commonwealth within 28 days after I make the orders;
b)pursuant to s.545(2)(b) and 547(2) of the FW Act that, in relation to the Award Contraventions, Mr Nelson and Mr Chouhan pay to the FWO $128,678.79, being the sum of the total underpayments of $91,701.30 and interest on the underpayments of $36,977.49;[115] and
c)pursuant to s.545(2)(b) and 547(2) of the FW Act that, in relation to the 323 Contraventions, Mr Chouhan pay to the FWO $1,108.56, being the sum of the contravening deductions of $790 and interest on that sum of $318.56.
[115] Because the liability of Mr Nelson and Mr Chouhan under the order for payment I propose to make will relate to the one set of losses, each of Mr Chouhan and Mr Nelson would be entitled to seek contribution from the other to the extent any one of them pays more than 50% of the amounts I propose to order they pay.
I also propose to order that, out of the money the FWO may receive from Mr Nelson or Mr Chouhan, the FWO pay those Workers whom the FWO locates the amount of each Worker’s underpayments or deductions, or a proportion of that amount, together with the interest I have allocated to each amount, but repay to Mr Nelson or Mr Chouhan so much of the money they have paid to the FWO in relation to those Workers whom the FWO may be unable to locate.
I certify that the preceding one hundred and thirty-eight (138) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 13 March 2020
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