Fair Work Ombudsman v NSW Motel Management Services Pty Ltd and Ors (No.2)
[2019] FCCA 2638
•20 September 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v NSW MOTEL MANAGEMENT SERVICES PTY LTD & ORS (No.2) | [2019] FCCA 2638 |
| Catchwords: INDUSTRIAL LAW – Application for imposition of civil penalties – contraventions of the Fair Work Act 2009 (Cth) – respondents made certain admissions – findings made in relation to remaining issues – appropriate penalty for contraventions by respondents. |
| Legislation: Fair Work Act 2009 (Cth) ss.536, 546, 550, 551, 557, Evidence Act 1995 (Cth) s.191 Crimes Act 1914 (Cth) s.4AA |
| Cases cited: Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | NSW MOTEL MANAGEMENT SERVICES PTY LTD |
| Second Respondent: | MICHAEL PARKES |
| Third Respondent: | ROWENA SIOCO PARKES |
| File Number: | MLG 661 of 2016 |
| Judgment of: | Judge O'Sullivan |
| Hearing date: | 29 July 2019 |
| Date of Last Submission: | 29 July 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 20 September 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Avalone |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Counsel for the Respondents: | Ms Kapitaniak |
| Solicitors for the Respondents: | Stonier & Associates |
ORDERS
First Respondent
Pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (FW Act), the First Respondent pay penalties of $15,622.75 in respect of the contraventions set out in declarations 2(a) and 2(l) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $15,622.75 in respect of the contravention set out in declaration 2(b) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $8,700.00 in respect of the contravention set out in declaration 2(c) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $13,005.00 in respect of the contravention set out in declaration 2(d) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $28,627.75 in respect of the contravention set out in declaration 2(e) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $0.00 in respect of the contravention set out in declaration 2(f) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $15,622.75 in respect of the contravention set out in declaration 2(g) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $15,622.75 in respect of the contravention set out in declaration 2(h) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $28,627.75 in respect of the contraventions set out in declarations 2(i) and 2(j) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $13,005.00 in respect of the contravention set out in declaration 2(k) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $4,335.00 in respect of the contravention set out in declaration 2(m) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $10,838.00 in respect of the contraventions set out in declarations 2(o), 2(p) and 2(q) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $6,502.00 in respect of the contraventions set out in declarations 2(r) and 2(s) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $15,173.00 in respect of the contravention set out in declaration 2(t) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $14,347.75 in respect of the contravention set out in declaration 2(u) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the First Respondent pay penalties of $14,347.75 in respect of the contravention set out in declaration 2(v) of the Orders dated 22 August 2018.
Second Respondent
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $3,325.00 in respect of the contraventions set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contraventions of the First Respondent set out in declarations 2(a) and 2(l) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $3,325.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(b) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $2,040.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(c) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $3,060.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(d) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $8,160.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(e) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $0.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(f) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $5,100.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(g) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $5,100.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(h) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $8,160.00 in respect of the contraventions set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contraventions of the First Respondent set out in declarations 2(i) and 2(j) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $3,060.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(k) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $1,020.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(m) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $2,550.00 in respect of the contraventions set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contraventions of the First Respondent set out in declarations 2(o), 2(p) and 2(q) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $1,530.00 in respect of the contraventions set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contraventions of the First Respondent set out in declarations 2(r) and 2(s) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay penalties of $3,570.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to his involvement in the contravention of the First Respondent set out in declaration 2(t) of the Orders dated 22 August 2018.
Third Respondent
Pursuant to section 546(1) of the FW Act, the Third Respondent pay penalties of $2,040.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to her involvement in the contravention of the First Respondent set out in declaration 2(c) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Third Respondent pay penalties of $4,080.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to her involvement in the contravention of the First Respondent set out in declaration 2(u) of the Orders dated 22 August 2018.
Pursuant to section 546(1) of the FW Act, the Third Respondent pay penalties of $3,880.00 in respect of the contravention set out in declaration 3 of the Orders dated 22 August 2018 relating to her involvement in the contravention of the First Respondent set out in declaration 2(v) of the Orders dated 22 August 2018.
Other matters
Pursuant to section 546(3)(a) of the FW Act, the Respondents pay their respective penalty amounts in orders [1] to [33] to the Commonwealth, within 28 days of the date of the order.
The Applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 661 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| NSW MOTEL MANAGEMENT SERVICES PTY LTD |
First Respondent
And
| MICHAEL PARKES |
Second Respondent
And
| ROWENA SIOCO PARKES |
Third Respondent
REASONS FOR JUDGMENT
“…there are problems in the hospitality industry…a substantial problem with compliance…a growing industry with a reasonably vulnerable workforce characterised by youth, transience (reflected also in the high proportion of workers who are visa holders), language difficulties…employees …in a weak bargaining position and have limited ability to complain or seek rectification. The temptations and opportunity to exploit such a workforce require penalties of a scale that will help to deter …behaviour of [that] kind…”[1]
[1] Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 at [134]
This matter concerns the penalties that should be imposed on each of the respondents as a result of findings they had contravened various provisions of the Fair Work Act 2009 (Cth) (“the FW Act”) whilst operating a motel business.
On 20 July 2018, the Court published reasons for judgment in Fair Work Ombudsman v NSW Motel Management Services Pty Ltd & Ors (No 2) (2018) FCCA 1935 (“the Liability Decision”). The Liability Decision dealt with allegations against the respondents arising from the engagement of four employees.[2] The Employees, who were Filipino nationals, were engaged by the first respondent on what the applicant described as a “two for the price of one” basis at a number of regional motels in Victoria, New South Wales and the ACT.
[2] The engagement of at least one of those has been described in another case as “exploitative” see [2015] FWC 7932 at [4].
On 22 August 2018, declarations were made, to give effect to the findings in the Liability Decision, that the respondents had contravened various civil remedy provisions of the FW Act. Those declarations were made for the reasons set out in Fair Work Ombudsman v NSW Motel Management Services Pty Ltd & Ors (No 3) (2018) FCCA 2330 (“the Declarative Decision”).
The Court then fixed the proceedings for a penalty hearing and there was a timetable made for the filing of material by the parties. After a number of adjournments, the circumstances of which were dealt with in Fair Work Ombudsman v NSW Management Services Proprietary Limited & Ors (2019) FCCA 1055, the matter came before the Court for a penalty hearing on 29 July 2019.
The factual and procedural background is recorded in the Liability Decision at paragraphs [3] to [29] the S.O.A.F. and the amended S.O.A.F at Annexure A thereof. The Declarative Decision gave effect to the findings made in the Liability Decision. A useful summary (prepared by the applicant) of the declarations made therein is attached at Annexure A to these reasons.
For the purposes of these reasons terms defined in the Liability Decision and the Declarative Decision, which should be read in conjunction with these reasons, have the same meaning in these reasons unless otherwise indicated.
These reasons record why the penalties set out at the beginning of these reasons for decision are an appropriate penalty for the conduct engaged in by each of the respondents set out in the Liability Decision and as a result of the contraventions recorded in the Declarative Decision.
The penalty hearing
At the penalty hearing, the applicant was represented by Mr Avallone of Counsel. The respondents were represented by Ms Kapitaniak of Counsel.
The applicant relied on the amended S.O.A.F and a number of the affidavits that had been filed and were referred to in the Liability Decision. These included the affidavits of Mr Gagate, Ms Virata, Ms Monleon, Mr Tan, Inspector Hurrell and the second respondent.[3]
[3] see Table at Tab 5 of Court Book.
The applicant also relied on the:
a)affidavits of Mr Thomas filed on 31 August 2018 and 19 December 2018;
b)affidavit of Mr Gagate filed on 31 August 2018;
c)affidavit of Mr Tan filed on 31 August 2018;
d)the submissions filed on 16 November 2018, 19 December 2018 and 30 January 2019.
For the purposes of the penalty hearing the respondents relied on:
a)affidavit of Mr Lochlainn Parkes filed on 29 October 2018.
b)affidavit of the second respondent filed on 30 October 2018;
c)affidavit of the third respondent filed on 30 October 2018;
d)affidavit of Ms Paige Becker filed 26 November 2018;
e)affidavit of Mr Teifi Caron filed on 26 November 2018;
f)affidavit of Ms Melinda Ryan filed on 30 November 2018;
g)affidavit of Ms Patricia Blake filed on 30 November 2018;
h)affidavit of Ms Rochelle Caron filed on 4 December 2018;
i)affidavit of Ms Mari-Grace Santos filed on 5 December 2018;
j)affidavit of Mr Ponciano Santos filed on 6 December 2018; and
k)the submissions filed on 21 December 2018.
Issue arising from affidavits
For the purposes of the penalty hearing the respondents filed a number of additional affidavits. The applicant, in written submissions filed prior to the penalty hearing addressed what was said to be the “weight to be attributed to character evidence” (in those affidavits) and submitted that much of the evidence in the additional affidavits was “inadmissible”.[4]
[4] see supplementary submissions filed 19 December 2018.
The respondents’ written submissions filed 21 December 2018 addressed those issues raised by the applicant at paragraph [26] and submitted the applicant assumed “the law of evidence applies to evidence in penalty sentencing”.
Finally, the applicant’s submissions in reply filed 30 January 2019, referring to s.551 of the FW Act and the decision of the High Court of Australia in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46[5], maintained the Evidence Act 1995 (Cth) applied to these proceedings.[6]
[5] at paragraphs [55] to [57] thereof.
[6] see submissions in reply filed 30 January 2019 at paragraphs [15] to [16].
It is respectfully concluded, for the reasons set out in the applicant’s submissions and submissions in reply, that the respondents’ position in written submissions on this issue should be rejected. In any event, and as matters transpired, at the penalty hearing both counsel requested the Court to receive the affidavit evidence despite the various objections and deal with the objections by according the evidence such weight as is considered appropriate.
Summary of additional affidavit material
Affidavits of Mr Luke Thomas
Mr Thomas is employed by the applicant in the role of Team Leader, Fair Work Inspector, Overseas Workers, in the Compliance and Enforcement Operations Group. In his affidavit sworn on 31 August 2018 he deposed to ASIC, real property, property valuation and mortgage searches carried out on the respondents. Mr Thomas also deposed to compliance of the accommodation and food services industry and to a general report carried out in relation to 457 Visa holders.
In Mr Thomas’ affidavit filed on 19 December 2018 he responded to evidence contained in the affidavits of Mr Teifi Caron and Ms Rochelle Caron which are referred to below. Mr Thomas was not required for cross examination but at the penalty hearing, and by agreement of Counsel, it was made clear the ACT Motel business referred to in those affidavits was now defunct and a number of pieces of real property were held by a self managed superannuation fund.
Affidavit of Mr Rolando Gagate
Mr Gagate was employed by the first respondent from early 2013 to mid 2014. In his affidavit he deposed to working for the first respondent in Halls Gap, the effect of not being paid his wages, discussions held with the second respondent regarding his salary package, discussions he had with the second and third respondents regarding permanent residency, arguments between himself and his partner at the time over money, and details as to the termination of his employment with the first respondent.
Mr Gagate was cross examined via video link. He maintained the second respondent had told him not to discuss the details of his “salary” and that his view was he and Ms Virata were engaged as one “package”.
Affidavit of Mr Michael Tan
Mr Tan was employed by the first respondent from late 2012 to early January 2015. In his affidavit he deposed to his employment with the first respondent, his lack of sick leave, details of his wages, directions from the third respondent to under record his hours of work and the details of his termination of employment with the first respondent.
Mr Tan was also cross examined via telephone link. Mr Tan maintained his evidence that during his time at Queanbeyan he did not believe he had “control” over the hours he worked. Mr Tan agreed in cross examination that following the end of his employment he had been paid by the first respondent and received a letter of apology.
Affidavit of Mr Lochlainn Parkes
Mr Lochlainn Parkes, who was not required for cross examination, is the son of the second and third respondents. In his affidavit he deposed to the negative impact he observed these proceedings to have had on his parents and himself.
Affidavit of second respondent
The second respondent in these proceedings, deposed in his affidavit filed 30 October 2018 to the following matters:
a)the media coverage;
b)motel endorsement loss;
c)financial repercussions and predicament of (b);
d)current state of the business;
e)effect the proceedings have had on his family;
f)his current health;
g)his regret of his actions in relation to Mr Gagate and Mr Tan;
h)his cooperation with the applicant throughout the investigation and subsequent legal proceedings;
i)his corrective action; and
j)his response to the affidavits of Mr Tan and Mr Gagate.
The second respondent was cross examined and confirmed that he knew when Ms Virata’s employment was terminated she had been the primary visa holder for Mr Tan. The second respondent also confirmed there had been “adverse publicity” about the first respondent’s business before the commencement of these proceedings. The second respondent acknowledged he was an “experienced hotelier” said he knew the “ins and outs”, had been a President of a division of the Australian Hotels Association, an employer organisation and knew about Award rates.
Notwithstanding these acknowledgements he did not go on in his evidence to explain how given this he believed the first respondent could employ Mr Tan and Mr Gargate (as part of a two for one package or couple arrangement with Ms Monleon and Ms Virata respectively). When taken to his affidavit evidence on the impact of these proceedings on the first respondent’s business the second respondent said “business fluctuates”.
Finally, the second respondent was asked questions in cross examination about his affidavit evidence regarding the first respondent’s business which made plain that, inter alia, it had been realising assets to pay down debt, the income earnt from the Halls Gap property had been maintained since it was acquired and if it was sold now it would realise a nett profit. Importantly in relation to the need for the respondents to pay off debt the second respondent’s evidence was that they had brought that situation upon themselves.
Affidavit of the third respondent
The third respondent in these proceedings who was not required for cross examination, deposed in her affidavit to the:
a)history of her employment in Australia;
b)effect of the proceedings on her health; and
c)her response to Mr Gagate’s affidavit.
Affidavit of Ms Paige Becker
Ms Becker who was an employee of the second and third respondents was not required for cross examination. She deposed in her affidavit that she was employed between September 2005 and May 2009, at the former Embassy Motel in Deakin in the ACT as a receptionist and then as the functions coordinator. Ms Becker deposed to being paid above the award and receiving all her correct employee entitlements and enjoyed working for the second and third respondents.
Affidavit of Mr Teifi Caron
Mr Caron is the son-in-law of the second and third respondents’ and was not required for cross examination. He deposed in his affidavit of the financial and emotional effect these proceedings he observed had had on the second and third respondents.
Affidavit of Ms Melinda Ryan
Ms Ryan is currently employed by the first respondent as a conference and events coordinator and was not required for cross examination. Ms Ryan deposed in her affidavit to her positive experience of working with the second and third respondents and the effect she observed of these proceedings on the business and wellbeing of the second and third respondents.
Affidavit of Ms Patricia Blake
Ms Blake is a former employee of the second respondent and was not required for cross examination. Ms Blake deposed in her affidavit that she was paid above the award wage, received all her correct employee entitlements and said she had a positive working relationship with both the second and third respondents.
Affidavit of Ms Rochelle Caron
Ms Caron is the daughter of the third respondent and step daughter of the second respondent and was also not required for cross examination. In her affidavit Ms Caron deposed to the effect she observed the proceedings had had on the second and third respondents and her positive working experience she had while employed by the second and third respondents.
Affidavit of Ms Mari-Grace Santos
Ms Santos is a former employee of the second and third respondents and was not available for cross examination. She deposed in her affidavit that she was employed on a 457 visa and worked for the second and third respondents between 2013 until 2017. She deposed she was provided with all employee entitlements and was treated fairly throughout her employment with the second and third respondents.
Affidavit of Mr Ponciano Santos
Mr Santos is the husband of Ms Mari-Grace Santos and is also a former employee of the second and third respondent and as a result of an agreed amendment to his affidavit was not required for cross examination. Mr Santos deposed to having a positive working relationship with the second and third respondents, and observing the negative effect on them as a result of these proceedings.
Summary of affidavit material
The affidavit material, not surprisingly, was not of a great deal of assistance in resolving the competing positions of the parties on the appropriate penalty. Insofar as the applicant’s affidavit material was concerned (aside from the evidence of Mr Tan and Mr Gargate which addressed the impact of the contraventions on them) ultimately it was not controversial. In relation to the respondents’ affidavit material, this contained a good deal of self-serving and hearsay material on which little weight will be placed. It served (no doubt from their point of view) to illustrate how contrite the respondents were and why what went on here was an aberration. To the extent it was relevant most of it was in relation to the need for specific deterrence, corrective action, contrition and other factors relevant to accessing penalty and will be taken into account in that context.
Ultimately, the Court has proceeded on the basis that inadmissible evidence will not be taken into account and the remainder has been accorded such weight as it deserves.
Summary of position of the parties
The applicant now seeks orders against the respondents imposing civil penalties pursuant to s.546 of the FW Act for the contraventions recorded in the Declarative Decision. The respondents concede the contraventions warrant the imposition of a civil penalty but take issue with the submissions of, and the penalties sought by, the applicant.
Applicant’s position
In the applicant’s written submissions filed prior to the penalty hearing, it was contended that a “just reflection of the contravening conduct” would result in penalties of up to $295,000 for the first respondent, $59,000 for the second respondent and $10,000 for the third respondent.
Respondents’ position
In written submissions filed prior to the penalty hearing, the respondents describe the penalties sought by the applicant as excessive. The respondents’ written submissions addressed what was said to be their early and extensive admissions, contrition and corrective action, along with a number of other mitigating factors, before taking the position that a “moderate penalty” for each of them was “justified”. The respondents’ written submissions contended that two sentencing principles were of particular importance in this case. They were the value of general deterrence and that the Court should not punish separately acts which were in truth a course of conduct.[7] The respondents’ position was, taking into account what they said were all of the mitigating factors, a “modest penalty is all that can be justified”.
[7] see respondents’ submissions filed 21 December 2018 at paragraphs [2] to [3] where similar factors referred to.
Principles relevant to the determination of penalty
The applicant’s submissions filed 16 November 2018 identified how the principles of the determination of penalty should be applied.[8] Those submissions referred to Fair Work Ombudsman v NSH North Pty Ltdtrading as New Shanghai Charlestown [2017] FCA 1301 at [36]. In that decision it was recorded that the approach of the Court in determining penalties involves the following steps:
a)Step One: The Court is to identify the separate contraventions involved. For the purposes of s 539(2), each contravention of an obligation located in the FW Act constitutes a separate contravention of a civil remedy provision of the FW Act;[9]
b)Step Two: The Court should consider whether any of the breaches taken together constitute a single course of conduct pursuant to s 557(1) such that multiple contraventions should be treated as a single contravention;
c)Step Three: To the extent that two or more contraventions have common elements, this should be taken into account in considering what an appropriate penalty is in all the circumstances for each contravention. The respondents should not be penalised more than once for the same conduct. The penalties imposed by the Court should be an appropriate response to the respondents’ actions.[10] Importantly, this third task is distinct from, and in addition to, the final application of the “totality principle”;[11]
d)Step Four: The Court will consider an appropriate penalty to impose in respect of each contravention, whether a single contravention, a course of conduct, or group of contraventions, having regard to all of the circumstances of the case; and
e)Step Five: Having fixed an appropriate penalty for each contravention, the Court should then review the aggregate penalty so as to determine whether it is an appropriate response to the contravening conduct.[12] In doing so, the Court should apply an “instinctive synthesis” in making this assessment.[13] This final step is commonly known as the “totality principle”.[14]
[8] see paragraphs [14] to [130] of applicant’s submissions.
[9] Gibbs v The Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216, 223 (Gray J); McIver v Healey [2008] FCA 425, [16] (Marshall J).
[10]Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8, [71] (Graham J).
[11]Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70, [41]-[46] (Stone and Buchanan JJ).
[12] see Kelly v Fitzpatrick [2007] FCA 1080, [30] (Tracey J): Australian Ophthalmic Supplies, [23] (Gray J), [71] (Graham J) and [102] (Buchanan J).
[13] Australian Ophthalmic Supplies, [27] (Gray J), [55] and [78] (Graham J).
[14] see Fairwork Ombudsman v NSH North Pty Ltdtrading as New Shanghai Charlestown (2017) FCA 1301.
The parties’ submissions referred to the range of considerations “to which regard may be had” for the imposition of penalties.[15] The parties’ submissions referred to the non-exhaustive considerations Tracey J identified in Kelly v Fitzpatrick [2007] FCA 1080[16], which his Honour adopted from the judgment of Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7, as relevant to assessing the amount of penalties which were:
[15] see, for example, the applicant’s submissions at paragraphs [36] to [38] and the respondents’ submissions at paragraph [23].
[16] Ibid.
“a.the nature and extent of the conduct which led to the breaches;
b.the circumstances in which that conduct took place;
c.the nature and extent of any loss or damage sustained as a result of the breaches;
d.whether there had been similar previous conduct by the respondent;
e.whether the breaches were properly distinct or arose out of the one course of conduct;
f.the size of the business enterprise involved;
g.whether or not the breaches were deliberate;
h.whether senior management was involved in the breaches;
i.whether the party committing the breach had exhibited contrition;
j.whether the party committing the breach had taken corrective action;
k.whether the party committing the breach had cooperated with the enforcement authorities;
l.the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
m.the need for specific and general deterrence.”
Value of penalty unit
Under s.12 of the FW Act, a “penalty unit” has the meaning by s.4AA of the Crimes Act 1914 (Cth). Until 28 December 2012, a penalty unit was $110. So far as is relevant for present purposes, from that date, the value of a penalty unit was $170. As recorded in the Liability Decision the majority of the contraventions occurred in that latter period.
In my view, the maximum penalty to be applied in respect of each of the contraventions is to be assessed by reference to the higher amount. This is because by operation of the statutory course of conduct provisions in the FW Act much of the conduct in question is being treated as a single contravention and covers the period after the increase in the value of the penalty unit.[17]
[17] see Fair Work Ombudsman v Phua & Foo Pty Ltd [2018] FCA 137 at [31]
The contraventions
The applicant’s submissions filed 16 November 2018 helpfully contained an annexure (Annexure A) that identified each of the contraventions recorded in the Declarative Decision (for the reasons found in the Liability Decision).
For the purposes of these reasons it is useful to adopt that annexure which is Annexure A to these reasons as an accurate reflection of the identified contraventions.
Also at this stage it is important to note, as was documented in the applicant’s submissions[18] that no penalty was sought for the contraventions of s.323(1)(a) of the FW Act. For the reasons set out in those submissions that position will be accepted.
[18] see paragraph 11 submissions filed 16 November 2018.
Course of conduct & grouping
Section 557(1) of the FW Act provides as follows:
“For the purposes of this Part, two or more contraventions of civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if: (a) the contraventions are committed by the same person; and (b) the contraventions arose out of a course of conduct by the person.”
The parties agree that this is an important issue in determining a just and appropriate penalty in this case. However, they disagreed (in their written submissions at least) as to how the Court should give effect to the principle. The applicant’s written submissions filed 16 November 2018 address the issue at paragraphs [18] to [23]. The respondents took a different approach. In their written submissions filed 21 December 2018, the respondents’ position was set out as follows:
“5.If multiple contraventions arise from a single course of conduct or one transaction that fact is an important consideration in calculating the appropriate civil penalty.[19] This accords with the long-held rule against double punishment. Ultimately this principle is based on fairness. That rule was described by the High Court in the following terms:
To the extent to which two offences of which an offender stands convicted contain common elements, it would be wrong to punish that offender twice for the commission of the elements that are common. No doubt that general principle must yield to any contrary legislative intention, but the punishment to be exacted should reflect what an offender has done; it should not be affected by the way in which the boundaries of particular offences are drawn. Often those boundaries will be drawn in a way that means that offences overlap. To punish an offender twice if conduct falls in that area of overlap would be to punish offenders according to the accidents of legislative history, rather than according to their just deserts.[20]
6.This protection against double (or more) punishment should be reflected in the penalties the Respondents face in this case. The contraventions in this case are, for the most part, a text-book example of one transaction or decision that has led to many contraventions.
7.This is especially clear when one reviews the circumstances in which the contraventions concerning Mr Tan and Mr Gagate arose. Almost all of them[21] stem from a single, unlawful decision – namely the initial decision not to pay or not to pay adequately either of them. That one wrong decision necessarily attracted many separate contraventions. It had a compounding effect under the Act. A person who is not paid is underpaid and does not get pay slips, nor Saturday penalty rates, nor Sunday penalty rates, nor evening penalty rates, nor public holiday penalty rates, nor overtime, nor annual leave pay, nor annual leave loading and on and on the list goes. That is, from one act many contraventions flow. The penalty should be responsive to the one act, not to the number of contraventions which flow from it lest there be double or more punishment.
8.The Court ought not penalise the Respondents for each separate contravention where a single unlawful decision is the unifying cause. To do so would be to ignore the context in which they occurred and to punish separately actions that were plainly part of a single course of conduct. These contraventions being part of a single course of conduct should be reflected in the penalty in order to avoid disproportion. Given the facts of this case, the principle is enlivened and should loom large in the Court’s assessment of penalty for the vast bulk of the contraventions.”
[19] Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1 [39], [41].
[20] Pearce v R (1998) 194 CLR 610 at [40] per McHugh, Hayne and Callinan JJ
[21] Statement of Agreed Facts, paragraphs [15]-[99]
The applicant’s submissions in reply filed 30 January 2019 rejected the claim made in the respondents’ written submissions (but which was not pressed at the penalty hearing) that the contraventions ought be treated as a single transaction.[22]
[22] see paragraphs [3] to [4].
In Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No 2)[23] Buchanan J considered the application of s.719(2) of the Workplace Relations Act 1996, the legislative predecessor of s.557. He said as follows:
“On one view, the failure to make any of the required payments arose from a single course of conduct. They all arose from a determination by the respondents that no payment would be made upon the termination of employment of any of the employees, or the employees as a group. However, this approach gives insufficient attention to the separate legal character of the three forms of obligation earlier identified. I am satisfied that each of those forms of obligation requires separate recognition. I am not, however, satisfied that each individual example of defiance of an obligation is permitted separate recognition. In my view the individual examples, constituted by the failure to make payments to particular individual employees, arise out of a course of conduct in each of the three instances. Any penalty must be assessed taking that into account.”[24]
[23] Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No 2) [2012] FCA 408.
[24] Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No 2) [2012] FCA 408 at [2] the passage was approved by the Full Court in Rocky Holdings Pty Limited v Fair Work Ombudsman [2014] FCAFC 62 at [18].
In Rocky Holdings Pty Ltd v Fair Work Ombudsman [2014] FCAFC 62 (“Rocky Holdings”) the Full Court rejected the respondents submissions in that case, that where there were two or more contraventions of s.44 and two or more contraventions of s.45 of the FW Act by each respondent, s.557 of the FW Act should be applied so that each contravention of s.44 and s.45 was taken to constitute a single contravention.
Rocky Holdings has been applied in subsequent cases. In Fair Work Ombudsman v Lohr [2018] FCA 5 Bromwich J set out the approach that should be taken following the decision in Rocky Holdings at paragraphs [29] to [34].
In Fair Work Ombudsman v Construction, Forestry, Maritime, Mining and Energy Union (the Hutchison Ports Appeal) [2019] FCAFC 69 the majority in the Full Court referred at [62] to [78] to Rocky Holdings and the issue of the common law course of conduct. At [92] the Full Court noted the latter was “a tool of analysis” and a Court was “not compelled to utilise the principle”.
In summary, s.557 does not apply to contraventions of different terms even if such contraventions arise out of the course of conduct and even if the contraventions only affect one person. Instead, s.557 applies to multiple contraventions of the one term (of, for example, a modern award), even where it may affect two or more persons.
The provisions of s.557(1) of the FW Act do not apply to the adverse action contraventions in this case because for the reasons referred to in the applicant’s submissions they are not prescribed by s.557(2) of the FW Act.
Given the written submissions made by the respondents it is appropriate to note the guidance on the common law sentencing principle of a course of conduct provided in Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (The Nine Brisbane Sites Appeal) [2019] FCAFC 59 at [124]. In that case, and by reference to Transport Workers’ Union of Australia v Registered Organisations Commissioner (No 2) (2018) 363 ALR 464 at [84] - [91], the Full Court stated at [124] as follows:
“In Transport Workers’ Union of Australia v Registered Organisations Commissioner [No 2] [2018] FCAFC 203; 363 ALR 464 at [84]–[91], the Full Court, referring to other judgments of the Full Court, considered the application of the course of conduct principle in the assessment of pecuniary penalties. The principles include the following:
(1) The purpose of the common law course of conduct principle is to ensure that, having regard to the circumstances (factual and legal), a party is not penalised more than once for the same conduct.
(2) That phrase should not simplistically be adopted to transfer multiple contraventions into one contravention, or, necessarily, to impose one penalty by reference to one maximum amount.
(3) The principle cannot, of itself, operate as a de facto limit on the penalty to be imposed.
(4) The application of the principle must be informed by the particular legislative provisions relevant to the proceedings. In particular, weight must be given to the fact that the legislature has deliberately and explicitly created separate contraventions for each relevant action.
(5) The application and utility of the principle must be tailored to the circumstances.
(6) A judge is not obliged to apply the principle if the resulting penalty fails to reflect the seriousness of contraventions.
(7) The task is to evaluate the conduct and its course and assess what penalty is, or penalties are, appropriate for the contraventions.
(8) It is necessary to examine all the conduct and enquire how its course and its explanation factually and legally informs the imposition of penalties, in order to avoid double punishment.
[see Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Non-Indemnification Personal Payment Case) [2018] FCAFC 97 at [31]; Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; 357 ALR 55 at [231]–[236]; Construction, Forestry, Mining and Energy Union v Williams [2009] FCAFC 171; 262 ALR 417 at [16]–[19]; Australian Building and Construction Commissioner v Construction Forestry, Mining and Energy Union [2017] FCAFC 113; 254 FCR 68 at [148].”[25]
[25] The Full Court in Parker v Australian Building and Construction Commission [2019] FCAFC 56 also discussed the principles in relation to the common law course of conduct at [267]-[288].
In relation to the written submissions made on behalf of the respondents on this issue, it is important to recall that bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions.[26]
[26] see Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39.
To the extent the respondents’ written submissions contended that the “unlawful decision” and its consequences should be reflected in the penalty to avoid disproportion that can be taken into account when grouping and when the Court comes to consider the issue of totality.
However, as matters transpired at the penalty hearing in submissions before the Court, Counsel for the respondents’ took the position that her clients did not “quibble” with the applicant’s submissions[27] on the application of s.557 of the FW Act.
[27] see discussion in Parker v Australian Building and Construction Commission [2019] FCAFC 56 at [274] which the respondents’ Counsel conceded in final submissions was correct.
The applicant’s submissions filed 16 November 2018 set out, given the proper application of s.557 of the FW Act (noting it did not apply to the adverse action contraventions), the twenty one separate contraventions that resulted from the application of that provision.
The position of the applicant on the issue of the statutory course of conduct, which for the reasons set out above is accepted, is at Annexure B to these reasons.
I am satisfied that results in the respondents getting the proper benefit of s.557 for repeated breaches of the same applicable provision.
Grouping
The applicant addressed the issue of the appropriate grouping of the contraventions in submissions filed 16 November 2018 at paragraphs [24] to [31].
As with the position taken before the Court on the application of the statutory course of conduct, at the penalty hearing Counsel for the respondents said her clients did not “quibble” with the applicant’s position on the appropriate grouping of the contraventions.
The applicant’s submissions filed on 16 November 2018 set out at Annexure C the proposed grouping in light of its submissions. It is useful to reproduce Annexure C (from those submissions) as Annexure C to these reasons. This grouping results in sixteen separate contraventions for the first respondent. I am satisfied that grouping gives sufficient recognition to the inter relationship with the factual and legal elements of the contraventions for each of the respondents.
Given the approach in the authorities referred to above (and in the applicant’s submissions) in the circumstances of this matter and given the separate legal character of the obligations that were the subject of the contraventions recorded in the Declarative Decision, they should be grouped as follows:
a)first respondent:
Contravention Maximum penalty Annual leave $51,000 Annual leave on termination $51,000 Cashing out annual leave $51,000 Fair Work Information Statement $51,000 Minimum hourly rates $51,000 Saturday penalty rates $51,000 Sunday penalty rates $51,000 Public holiday penalty rates $51,000 Overtime rates $51,000 Evening penalty rates $51,000 Failing to prepare roster $51,000 Failing to make/keep records $25,500 False records $25,500 Pay slips $25,500 Adverse action – threat $51,000 Adverse action – direction $51,000 Total $739,500 b)second respondent:
Contravention Maximum penalty Annual leave $10,200 Annual leave on termination $10,200 Cashing out annual leave $10,200 Fair Work Information Statement $10,200 Minimum hourly rates $10,200 Saturday penalty rates $10,200 Sunday penalty rates $10,200 Public holiday penalty rates $10,200 Overtime rates $10,200 Evening penalty rates $10,200 Failing to prepare roster $10,200 Failing to make/keep records $5,100 False records $5,100 Payslips $5,100 Total $127,500 c)third respondent:
Contravention Maximum penalty Cashing out annual leave $10,200 Adverse action – threat $10,200 Adverse action – direction $10,200 Total $30,600
This would result in a possible maximum penalty for the first respondent of $739,500, $127,500 for the second respondent and $30,600 for the third respondent.
Nature and extent of conduct
For the purposes of these reasons, it is only necessary to note that the applicant’s written submissions filed 16 November 2018 addressed this factor at paragraphs [39] to [55]. The respondents’ written submissions filed 21 December 2018 address this consideration at paragraph [24]. The applicant joined issue with those contentions in submissions in reply filed 30 January 2019 at paragraphs [11] to [14].
The Liability Decision set out the background to, and the nature of, the contravening conduct by the respondents.[28] As the applicant’s submissions noted the Declarative Decision recorded the contraventions that, for each of the respondents, had either been admitted or were found proven in the Liability Decision.
[28] see Annexure A for details of contraventions.
The nature of the contraventions demonstrate a failure to provide minimum entitlements and to comply with basic requirements under the FW Act. The offending conduct by the respondents was a concerning array of contraventions of the FW Act including underpayments totalling $134,535.68, unauthorised cashing out of annual leave, breaches of record keeping and pay slip requirements, and adverse action contraventions.
Given the findings in the Liability Decision on adverse action it is important to note:
“[t]he opportunities for adverse action to be taken in a way that undermines entitlements to the benefits of workplace instruments [or laws] are widespread in today’s labour market…[a] clear message needs to be sent that a contravention will be accompanied by a substantial cost”[29]
[29] see Construction, Forestry, Mining and Energy Union v State of Victoria No. 2 [2013] FCA 1034 at [135].
Circumstances in which conduct took place
The applicant’s submissions filed 16 November 2018 address this factor at paragraphs [56] to [65].
As recorded in the Liability Decision the circumstances surrounding the employment of both Mr Gagate and Mr Tan were redolent with the possibility of exploitation.
The benign paternalism that characterises the purported explanations of the respondents in their written submissions[30] for their reasons for engaging Mr Gagate and Mr Tan belied the practical reality that through ignorance or mala fides the respondents (and in particular the second respondent) would have thought either arrangement was appropriate.
[30] see paragraph 24 of respondents’ submissions filed 21 December 2018 where it was claimed that the conduct that led to the breaches was a “misguided attempt to assist the workers to come to Australia for a better life.”
The adverse action contraventions occurred in aggravating circumstances which were in the shadow of the applicant’s investigation.
Nature and extent of loss or damage
The applicant’s submissions filed 16 November 2018 address this factor at paragraph [66] to [74].
The underpayments of $134,535.68 for Mr Gagate and Mr Tan occurred over 22 months and the size of the loss speaks for itself where the employees concerned were reliant on or should have been able to expect to receive at least their minimum entitlements under the FW Act.
The other contraventions including the adverse action contraventions illustrate the loss that is occasioned when the protections afforded against such unlawful conduct are ignored and those who could (and should) expect to enjoy that protection are left exposed to such unlawful conduct.
Similar previous conduct
The applicant’s written submissions filed 16 November 2018 address this factor at paragraphs [75] to [76]. The respondents’ written submissions filed 21 December 2018 contended there was “no other previous conduct of a similar character”.[31] However, those submissions should be considered in light of the following:
“The absence of any evidence of previous contraventions by the respondent means, as Jessup J pointed out in Murrihy (No 2), that the respondent’s conduct must be measured in and of itself, without reference to previous conduct. I do not consider this as some kind of positive factor in the respondent’s favour, which seemed to be the implication from the respondent’s submissions. Especially in relation to unlawful discrimination, where the true reasons for conduct are often difficult to uncover, one cannot simply infer, as the respondent seemed to suggest the Court might, that this kind of conduct has not occurred before within the CFMEU. Nor can one infer that it has. Rather, the conduct stands to be assessed for what it has been found by the Court to be. In my opinion absence of evidence about prior contraventions that have been litigated and determined simply means there is no evidence of that nature which might otherwise have contributed to an increase in the penalty to be imposed.”[32]
[31] see paragraph [24].
[32] Sayed v Construction, Forestry, Mining and Energy Union [2015] FCA 338 at [51].
Accordingly, I will assess the relevant penalty in this case on the basis that the respondents have not previously engaged in similar conduct. But that in, and of itself does not warrant a discount.
Course of conduct
Matters relevant to this consideration have already been addressed earlier in these reasons.
Size of business
The applicant’s written submissions filed 16 November 2018 address this factor at paragraphs [77] to [85]. The respondents’ written submissions filed 21 December 2018 on this issue were at paragraph [28].
It is well established that the size and financial circumstances of the respondents’ do not exculpate breaches of workplace laws.
In submissions before the Court Counsel for the applicant, relying on his client’s written submissions, contended the evidence before the Court clearly demonstrated the financial and non financial difficulties the respondents’ complained of were “not a consequence of these proceedings”.
Whilst size of the business and its financial circumstances might be relevant to the question of the size of the penalty that should operate in order to properly give effect to specific deterrence[33] there is also the issue that in considering the size of any penalty that capacity to pay is of less relevance than is the objective of general deterrence.[34]
[33] see Australian Competition and Consumer Commission v Penital Limited [2018] FCA 491 at [52]
[34] see GlennJordan v Mornington Inn Pty Ltd [2007] FCA 1384 at [99]
Whether breaches deliberate
The applicant’s submissions filed 16 November 2018 address this factor at paragraphs [86] to [91].
In this case the second respondent was the guiding mind of the first respondent. In the Liability Decision findings were made as to the second respondent’s awareness (given his statements in the record of interview with officers of the applicant) of the requirements under the FW Act. As the Liability Decision also records the adverse action contraventions whilst not deliberate were clearly reckless.
As stated in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181 at [131] where “any degree of awareness of the actual or potential unlawfulness of the conduct is proved then… the contravention is necessarily more serious.”
Accordingly, a level of penalty appropriate to those contraventions should be imposed.
Whether senior management involved
The applicant’s written submissions filed 16 November 2018 address this factor at paragraphs [92] to [94].
As noted in the Liability Decision, the second and third respondents are directors of the first respondent. The second and third respondents were at all material times involved in the day-to-day operations of the first respondent.
The second and third respondents were found to be accessorially liable for their involvement in a number of the contraventions by the first respondent. The Liability Decision addressed the controversy on those issues at paragraphs [328] to [366].
In this case there is no doubt that the senior management of the first respondent were involved in the contraventions as set out in the Liability Decision and recorded in the Declarative Decision.
Contrition, corrective action & co-operation
The applicant’s submissions filed 16 November 2018 address the issue of contrition at paragraphs [95] to [102]. The respondents’ submissions filed 21 December 2018 address the issue at paragraphs [12] to [16].
The applicant’s submissions filed 16 November 2018 address the issue of co-operation at paragraphs [103] to [108].
The underpayments were rectified in July 2016. The second and third respondents have both said they were embarrassed and ashamed as a result of the allegations made in these proceedings. It should also be acknowledged that the second respondent has sent a letter of apology to both Mr Gagate and Mr Tan.
The applicant was critical of the respondents as to whether, to the extent that they had done what was referred to above, it was either genuine or belated and merely affected for the purposes of the penalty proceedings. However, the applicant didn’t gainsay that there had been co-operation with enforcement authorities by the first respondent. It could hardly do otherwise.
The respondents’ written submissions on this issue were redolent with the same overweening attitude that sought to downplay the reason for the unlawful conduct in the first place (i.e. the claim it was to give the Employees a chance at a better life).
Whilst the attitude of the respondents may be distasteful, as was recognised by the applicant, the first respondent is entitled to a discount for its cooperation, notwithstanding the protracted nature of the proceedings.
Third Respondent
Provision contravened | Description of contravention | Maximum penalty | Discount | Maximum after discount | Range sought (%) | Range sought ($) | ||||
| 1 | S 44, FW Act (row (t)) | Cashing out annual leave Cashing out paid annual leave in a manner not compliant with section 92 FW Act | $10,200 | 0% | $10,200 | 20-30% | $2,040 - $3,060 | |||
| 2 | S 340(1)(a), FW Act (row (v)) | Adverse action (threat to terminate) Taking adverse action because an employee exercised a workplace right | $10,200 | 0% | $10,200 | 40-50% | $4,080 - $5,100 | |||
| 3 | ss 340(1)(a) & 340(1)(b), FW Act (row (w)) | Adverse action (direction to under-record hours) Taking adverse action because an employee exercised, or to prevent an employee from exercising, a workplace right | $10,200 | 0% | $10,200 | 40-50% | $4,080 - $5,100 | |||
| TOTAL | $30,600 | $30,600 | $10,200 - $13,260 | |||||||
| Percentage of maximum penalties | 33.33% - 43.33% | |||||||||
| TOTAL (including 20% totality reduction) | $8,160 - $10,608 | |||||||||
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