Fair Work Ombudsman v Ozkorea Pty Ltd
[2018] FCCA 2350
•24 August 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v OZKOREA PTY LTD & ORS | [2018] FCCA 2350 |
| Catchwords: INDUSTRIAL LAW – Contraventions of the Fair Work Act 2009 – Contraventions of the Fair Work Regulations 2009 – failure to pay minimum entitlements under the Cleaning Services Award 2010 – failure to pay minimum wage under Award – failure to keep records – ACCESSORIAL LIABILITY – whether head contractor knowingly concerned with contraventions – knowledge of essential elements of facts going to contravention – knowledge of Award – no knowledge of exact wages paid necessary – actual knowledge imputed – accessorial liability established. |
| Legislation: Fair Work Act 2009 (Cth), ss.535(1), 535(2), 536(2), 550, 550(1), 550(2)(c) 793 Fair Work Regulations 2009 (Cth), regs.3.44, 3.44(6) Federal Circuit Court Rules 2001 (Cth), r.1.05(2) Federal Court Rules 2011 (Cth), rr.16.02, 16.04 Crimes Act 1900 (NSW) s.188 |
| Cases cited: ACCC v Giraffe World (No. 2) (1999) 95 FCA 1161 Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 Fair Work Ombudsman v No Brace Centre Pty Ltd & Ors [2010] FCCA 738 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | OZKOREA PTY LTD (ACN 603 658 804) |
| Second Respondent: | SUN GUN HWANG |
| Third Respondent: | PIONEER FACILITY SERVICES PTY LTD (ACN 163 765 9280) |
| Fourth Respondent: | PIONEER CONTRACTING SERVICES PTY LTD (ACN 164 009 036) |
| File Number: | LNG 31 of 2016 and LNG 32 of 2016 |
| Judgment of: | Judge McNab |
| Hearing date: | 4, 5, 6 and 7 December 2017 |
| Date of Last Submission: | 7 December 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 24 August 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr. Healy |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondents: | Mr. Snaden |
| Solicitors for the Respondents: | Robert James Lawyers |
ORDERS
By 4.00pm on 28 August 2018, the Applicant submit a minute of orders giving effect to these reasons.
The parties confer for the purpose of agreeing on orders regarding the filing of any evidence and/or submissions regarding penalty and costs.
The proceeding be fixed for a penalty hearing on 5 October 2018 at 10.00am.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
LNG 31 of 2016 and LNG 32 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| OZKOREA PTY LTD (ACN 603 658 804) |
First Respondent
| SUN GUN HWANG |
Second Respondent
| PIONEER FACILITY SERVICES PTY LTD (ACN 163 765 9280) |
Third Respondent
| PIONEER CONTRACTING SERVICES PTY LTD (ACN 164 009 036) |
Fourth Respondent
REASONS FOR JUDGMENT
Introduction
This decision concerns two proceedings: LNG 31/2016 and
LNG 32/2016 which were heard together. Each of the matters concern alleged breaches of the Fair Work Act 2009 (Cth) (‘the Act’) arising out of cleaning services performed at four Woolworths Ltd (‘Woolworths’) supermarket sites in Tasmania. The evidence was relied on by the parties for the purposes of both proceedings. The two proceedings involve adjacent time periods:
a)LNG 31/2016 concerns the period 1 January 2014 to 12 January 2015 (‘the First Period’); and
b)LNG 32/2016 concerns the period 13 January 2015 to 1 September 2015 (‘the Second Period’).
The Applicant’s position is that in the First Period Sun Gun Hwang
(‘Mr. Hwang’ and also referred to as ‘Mr. Hwang’ in documents filed by the Applicant) was a sole trader and in the Second Period, the sole director of OzKorea Pty Ltd (‘OzKorea’). Mr. Hwang and subsequently OzKorea was engaged by the Pioneer Respondents to carry out their obligations under an agreement between the Pioneer Respondents and Woolworths for cleaning services at numerous stores, which included four stores in Tasmania at Deloraine, George Town, Mowbray and Riverside (‘Woolworths Sites’).
The Second and Third Respondents in LNG 31/2016 and the Third and Fourth Respondents in LNG 32/2016, Pioneer Facility Services Pty Ltd (‘PFS’) and Pioneer Contracting Services Pty Ltd (‘PCS’) respectively, are members of the Pioneer Facilities Services group (‘the Pioneer Respondents’).
The work at the sites was habitually performed between midnight and
6 a.m. seven days per week (although workers did not generally work seven days per week).
PFS held a contract with Woolworths to provide cleaning services at four sites in and around Launceston, Tasmania (‘the Woolworths Contract’). It contracted with PCS for the supply of labour in connection with those services at the Woolworths Sites. PCS engaged two subcontractors to supply that labour. The details of the contractual relationship between Woolworths and PCS is set out at [10] below.[1]
[1] The substance of the detailed pleadings by the Applicant regarding the contractual relations between the Pioneer Respondents and Woolworths are agreed. Those pleadings are reproduced below at [76].
The Fair Work Ombudsman (‘FWO’) alleges that Mr. Hwang, the
First Respondent in LNG 31/2016, was the subcontractor in the First Period; however the Pioneer Respondents deny that engagement.
The parties are in agreement that OzKorea, the First Respondent in LNG32/2016, was the subcontractor in the Second Period but there is some dispute as to when PCS first engaged OzKorea. Mr. Hwang and OzKorea will be referred to collectively as “the subcontractors”.
The FWO alleges that Mr. Hwang and OzKorea breached minimum pay and other provisions of the Cleaning Services Award 2010 (‘Cleaning Award’) in respect of employees engaged at the Tasmanian sites.
The Applicant alleges that the money paid to the subcontractors by PCS was insufficient to meet the minimum rates and pay standards under the Cleaning Award given;
a)the number of employees who worked at the sites;
b)the hours worked; and
c)the time of day when the work was performed.
The FWO further submits that Mr Dickinson, the sole Director of PCS, was aware that the Award applied to employees of subcontractors and he knew that the amounts paid to the subcontractors were insufficient to meet the minimum pay standards under the Award. By reason of their knowledge, PFS and PCS are therefore accessorily liable for the contraventions by the subcontractors.
Background
The factual background as alleged by the Applicant in relation to the Woolworths Contract with the Pioneer Respondents is summarised in the Applicant’s Outline of Submissions at [6] – [12] as follows:
6.On 23 July 2012, Woolworths Limited (Woolworths) entered into a contract with RCS Cleaning Services Pty Ltd as trustee for RCS Cleaning Services Unit Trust trading as Swan Hill Commercial Cleaning (Swan Hill) for cleaning services at Woolworths stores in Tasmania (‘Woolworths Contract’), including stores at Deloraine, Georgetown, Mowbray and Riverside. The Woolworths Contract was signed by
Mr. Vince Legudi on behalf of Swan Hill.
7.On 18 March 2014, the Woolworths Contract was novated by agreement to the partnership of Frank Enterprises Trust & Gummow Holdings Trust & Sound Nominees Trust which trades under the name of PFS (‘Woolworths Novation Agreement’). The three Directors of PFS are Mr. Legudi (director of Sound Nominees Pty Ltd’, Mr. Aaron Dickinson (director of Gummow Holdings Pty Ltd) and
Mr. Frank Scarce (director of Frank Enterprises Pty Ltd). The Woolworths Novation Agreement was signed on behalf of PFS by Mr. Legudi, Mr. Dickinson and Mr. Scarce.
8.The three shareholders of PFS are Frank Enterprises Pty Ltd; Gummow Holdings Pty Ltd and Sound Nominees Pty Ltd.
9.PFS subsequently subcontracted the Woolworths Cleaning Services Agreement to PCS. PFS is the parent company to PCS. Mr. Dickinson is the sole Director of PCS. PCS is wholly owned by PFS.
10.Mr. Claus Hauth was employed by PFS (in the position of Operations Manager) and was the person who acted on behalf of the Pioneer Respondents in communications with Woolworths in respect of work performed at the Woolworths Sites.
11.Mr. Paul Donaldson was employed as a supervisor with the Pioneer Respondents for their operations in Tasmania.
12.OzKorea was incorporated on 13 January 2015. Mr. Hwang became its sole director, secretary and shareholder.
It is agreed that PCS subcontracted the Woolworths Contract to OzKorea to perform cleaning services at the various Woolworths Sites. The Applicant alleges that PCS subcontracted the Woolworths Contract initially to Mr. Hwang and later to OzKorea to perform cleaning services at the sites.
Mr. Hwang engaged a number of employees to do the cleaning work at the sites in order to meet the specifications agreed to by the
Pioneer Respondents. Among these employees were the following individuals who were the subject of underpayment as alleged in these proceedings:
a)Mr. Seunghun OK (‘Hoony’) who carried out cleaning work at the Mowbray and Riverside sites;
b)Mr. Sang Hwang Park (‘Alex)’, who carried out cleaning work at the Mowbray site;
c)Mr. Hyunjae Jung (‘Sam’), who carried out cleaning work at the Mowbray site; and
d)Mr. Saifullah Sidek who carried out cleaning work at Mowbray and Riverside sites (collectively ‘the Employees’).
Prior to 13 January 2015 the Employees were employed by Mr. Hwang. From 13 January 2015 the Employees who had been previously engaged by Mr. Hwang were engaged by OzKorea.
At all relevant times the employee’s minimum rates of pay were governed by the Cleaning Services Award 2010.
The Applicant pleads that Mr. Hwang (in LNG 31/2016), during the
First Period, contravened various terms of both the Cleaning Award and the relevant industrial legislation by failing to:
a)pay minimum hourly rates for work performed as pursuant to cl.16 of the Cleaning Award;
b)pay part time loading pursuant to cl.12(b)(iii) of the Cleaning Award;
c)pay permanent night shift penalty rate pursuant to cl.27.1(b) of the Cleaning Award;
d)pay Saturday penalty rates pursuant to cl.27.2(a) of the Cleaning Award;
e)pay Sunday penalty rates pursuant to cl.27.2(b) of the Cleaning Award;
f)pay public holiday rates pursuant to cl.27.3 of the Cleaning Award;
g)pay a minimum engagement period pursuant to cl.24.2(e) of the Cleaning Award;
h)pay overtime rates pursuant to cl.28.2 of the Cleaning Award;
i)pay Sunday overtime rates pursuant to cl.28.3 of the Cleaning Award;
j)engage underpaid employees in writing pursuant to cl.12.4(a) of the Cleaning Award;
k)pay wages weekly or fortnightly pursuant to cl.20.1 of the Cleaning Award;
l)ensure employees receive two consecutive full days off pursuant to cl. 24.5 of the Cleaning Award;
m)prepare and post a roster pursuant to cl.25.1 of the Cleaning Award;
n)make and keep records pursuant to s.535(1) of the Fair Work Act2009 (Cth) (‘Act’);
o)make and keep accurate records pursuant to s.535(2) of the Act;
p)ensure records were not false and misleading pursuant to reg.3.44 of the Fair Work Regulations 2009 (Cth) (‘FW Regulations’);
q)not make use of false or misleading records pursuant to reg.3.44(6) of the FW Regulations; and
r)give payslips pursuant to s.536(2) of the Act.
Allegations against OzKorea (Primary Contraventions)
The Applicant pleads that OzKorea (in LNG 32/2016), during the Second Period, contravened terms of the Cleaning Award and therefore s.45 of the Act by failing to:
a)pay minimum hourly rates for work performed as pursuant to cl.16 of the Cleaning Award;
b)pay part time loading pursuant to cl.12(b)(iii) of the Cleaning Award;
c)pay night shift loading pursuant to cl.27.1(b) of the Cleaning Award;
d)pay Saturday penalty rates pursuant to cl.27.2(a) of the Cleaning Award;
e)pay Sunday penalty rates pursuant to cl.27.2(b) of the Cleaning Award;
f)pay minimum engagement period pursuant to cl.24.2(e) of the Cleaning Award;
g)pay overtime rates pursuant to cl.28.2 of the Cleaning Award;
h)pay Sunday overtime rates pursuant to cl.28.3 of the Cleaning Award;
i)engage underpaid employees in writing pursuant to cl.12.4(a) of the Cleaning Award;
j)pay wages weekly or fortnightly pursuant to cl.20.1 of the Cleaning Award;
k)ensure employees receive two consecutive full days off pursuant to cl.24.5 of the Cleaning Award;
l)prepare and post a roster pursuant to cl.25.1 of the Cleaning Award;
m)make and keep records pursuant to s.535(1) of the Act;
n)make and keep accurate records pursuant to s.535(2) of the Act;
o)ensure records were not false and misleading pursuant to reg.3.44 of the FW Regulations;
p)not make use of false or misleading records pursuant to reg.3.44(6) of the FW Regulations; and
q)give payslips pursuant to s.536(2) of the Act.
The contraventions listed in [15] - [16] are admitted by OzKorea and
Mr. Hwang pursuant to the Statement of Agreed Facts executed
8 December 2016. The Pioneer Respondents do not admit the breaches by the subcontractors.
The Applicant alleges that Mr. Hwang (and he admits) that he (in
LNG 32/2016) was knowingly concerned in the contraventions within the meaning of s.550(1) of the Act. He admits that at all material times, he had the capacity to control, direct and influence the conduct of OzKorea in relation to:
a)wages and conditions paid and accorded to the employees;
b)the practices it adopted with respect to issuing pay slips; and
c)the keeping of employee records.
Allegations against the Pioneer Respondents
The Applicant alleges that, at all material times, the Pioneer Respondents had the capacity to control, direct and influence the conduct of
Mr. Hwang and later OzKorea in relation to the wages that were paid to the employees. The FWO alleges that this capacity arose from the contractual rights possessed by the Pioneer Respondents under the Woolworths Contract.
The Applicant alleges that at the time Mr. Hwang was engaged the Pioneer Respondents knew:
a)the rates paid to Mr. Hwang (through BTS Management K Pty Ltd (‘BTS’)) and OzKorea by the Pioneer Respondents under the subcontract;
b)the type of work performed on the Woolworths Sites;
c)that each of the Woolworths Sites were required to be cleaned seven days per week;
d)the number of hours that each cleaner was required to spend cleaning each of the Woolworths Sites;
e)the number of cleaners required to clean each of the Woolworths Sites;
f)the size of each of the Woolworths Sites; and
g)that the period during which cleaning work was being performed was between midnight and 6 a.m.
The knowledge referred to in paragraph [20] (c)-(g) above stems from, among other things:
a)the Woolworths Specification Document[2] - a document provided to Mr. Hwang and OzKorea by the Pioneer Respondents which stipulated the work to be done and the number of employees required to do the work;
b)the familiarity that employees and/or representatives of the Pioneer Respondents had with the stores in which work was being performed;
c)the complaints made from time to time by the managers of the Woolworths Stores about the standard of cleaning to employees of Pioneer; and/or
d)the response of the Pioneer Respondents to complaints as to the level of cleaning provided.
[2] Hwang Affidavit Exhibit SGH-01
In addition, it is said that, by virtue of the knowledge of the matters set out in [21] above, the Pioneer Respondents knew or should have known:
a)Mr. Hwang and OzKorea engaged employees to perform the work;
b)the employees engaged were required to work night shifts, Saturdays, Sunday and overtime;
c)Mr. Hwang and OzKorea were required to comply with relevant Commonwealth workplace legislation and industrial instruments in respect of the employees;
d)the Cleaning Award applied to the work being performed on the Woolworths Sites; and
e)Mr. Hwang and OzKorea were required to pay the minimum hourly rate, night shift loading, minimum engagement, Saturday rates, overtime rates and Sunday overtime rates fixed by the Cleaning Award.
The Applicant alleges that by reason of the matters set out at
[20]-[21] above the Pioneer Respondents:
a)knew, or should have known, that the amount paid under the Pioneer contract was insufficient for Mr. Hwang and OzKorea to pay the employees their minimum entitlements;
b)knew, or should have known, that the employees were not paid the rates required under the Cleaning Award as set out in [22](e) above; and
c)failed to take steps to ensure that:
i)the amounts paid to Mr. Hwang and OzKorea were sufficient to ensure they were enabled to comply with minimum standards under Commonwealth workplace relations legislation and industrial instruments; and
ii)Mr. Hwang and OzKorea otherwise complied with Commonwealth workplace laws.
The nub of the claims against the Pioneer Respondents is that that they did not pay the non- Pioneer Respondents sufficient money for the work that was performed at the Woolworth sites in order to ensure that the wages paid to workers complied with minimum standards under the Award.
It is alleged that the Pioneer Respondents were knowingly concerned in the contraventions of both Mr. Hwang and OzKorea within the meaning of s.550(2)(c) of the Act. By operation of s.550(1) of the Act, the
Pioneer Respondents are therefore taken to have committed those contraventions.
The underpayments in respect of each of the employees is set out at Annexure B of each Statement of Claim and total $20,733.83 for the First Period and $1,091.68 for the Second Period.
The Response of the Pioneer Respondents to the claims involving the subcontractors
The Pioneer Respondents contend that, in relation to the First Period, the evidence suggests that the First Respondent, Mr. Hwang, was not the employer of those said to have been underpaid. It is said that neither of the Pioneer Respondents contracted with Mr. Hwang for the performance of cleaning services at the Woolworths Sites and that the evidence establishes that, throughout the period relevant to that proceeding, PCS contracted to that end with a separate entity, BTS. It is contended that there is no evidence that BTS further subcontracted its work to Mr. Hwang. It is put that the more likely explanation is that
Mr. Hwang was engaged to—and did—manage that work on BTS’s behalf.
It is put that none of the contraventions of s.45 of the Act that are alleged against Mr. Hwang in that proceeding are proven and it therefore follows that there are no contraventions in which either of the Pioneer Respondents might properly be said to have been involved for the purposes of s.550 of the Act. They submit that the proceeding should be dismissed.
It is submitted (in the alternative by the Pioneer Respondents) that if
Mr. Hwang and subsequently OzKorea are properly to be regarded, in each proceeding, as the employer of those who are the subjects of the alleged underpayment, the question for the Court's consideration is whether the evidence substantiates the allegations of underpayment made in each case.
The Pioneer Respondents’ submissions regarding the claim that they are knowingly involved in any underpayments pursuant to s.550 of the Act are dealt with below.
Evidence relied on by the parties
The parties relied on:
a)an Affidavit of Kristen Desmond & Exhibit KD-1 – LNG 31/2016 sworn 23 June 2017;
b)an Affidavit of Kristen Desmond sworn 27 November 2017;
c)an Affidavit of Sang Hwang Park – LNG 31/2016 sworn 15 June 2017;
d)an Affidavit of Hyunjae Jung – LNG 31/2016 sworn 15 June 2017; and
e)an Affidavit of Sung Gun Hwang – LNG 31/2016 sworn 22 June 2017.
Evidence of the Pioneer Respondents
The Pioneer Respondents relied on the Affidavit of Frances Xavier Scarce (filed in LNG 31/2016) filed 3 October 2017.
Consideration
The three primary issues to be determined are:
a)whether the contraventions of the Act and FW Regulations alleged against Mr. Hwang/OzKorea are proven;
b)whether there is a relationship between Mr. Hwang/OzKorea and the Pioneer Respondents; and
c)if yes to (a) and (b), whether the Pioneer Respondents accessorily liable for the breaches of the minimum standards provisions pursuant to s.550 of the Act.
Are the contraventions alleged against Mr. Hwang/OzKorea proven?
I am satisfied that the matters alleged against Mr. Hwang and OzKorea have been proven. The admissions made in the Statement of Agreed Facts establishes that the breaches occurred. In the absence of a Statement of Agreed Facts, the evidence from Mr. Hwang, the workers whose evidence was received and Inspector Desmond, each establish that the relevant employees were paid flat rates of pay without regard to shift penalties applied to the hours habitually worked by those employees to clean stores between 3.00am and 6:00 am. In particular, I have regard to the evidence of Alex at [25] of his affidavit 15 June 2017; Sam’s affidavit 15 June 2017 at [21] and [23] and in relation to Saifullah and Hoony, the calculation is based on the sign-in records exhibited to Inspector Desmond’s first affidavit. I also refer to the evidence of
Mr. Hwang in his affidavit at [30]-[45] where he stated that:
a)he initially performed the majority of the cleaning work himself;
b)during this early period, as a result of his contacts through the Korean Students’ Association, Korean students at the University of Tasmania were recruited as employees
c)he employed the people who are referred to in the proceeding as having been underpaid during the First Period to deliver cleaning services at the Woolworth sites;
d)those employees performed cleaning duties at the Woolworths Sites;
e)during the First Period he paid all the employees a flat rate of either $14 or $15 per hour regardless of the day of work, the numbers of hours worked or the time of day that the work was undertaken;
f)the hours worked were determined in combination by the hours some store managers permitted access to the stores and the cleaning requirements under the Key Specifications.
g)the hours worked were generally after midnight between 3 AM and 6:30 AM. All the work was performed between 12 AM and 7 AM and the sites required cleaning seven days per week. The employees worked for the most part three or four days a week.
As was made plain in submissions made by counsel for the Applicant, the contraventions that concern the Pioneer Respondents are those going to breaches of minimum standards of pay (as opposed to record keeping and failure to provide payslips and the like).
The Pioneer Respondents have not challenged the evidence in relation to the rates of pay paid to each of the relevant employees. They do not admit the hours worked or the amounts actually paid to each employee. At [31] and [79] of his affidavit, Mr. Hwang deposed that he employed each of the relevant employees in his time as a sole trader and he was the person who dealt with employees when they were paid through OzKorea. There was evidence that another employee may physically pay the wages to each of those employees, however in my view this does not detract from the weight of the evidence; that each of those relevant employees was employed by Mr. Hwang/OzKorea in the relevant periods.
The evidence of each of the employees was supported by the sign-in records that they signed before commencing works at each of the supermarket sites. The evidence supports findings that the employees were employed on a part-time basis and working hours that attracted penalty rates. They were not paid penalty rates based on the evidence of Mr. Hwang. The employees also gave evidence that they were paid flat rates of pay ($14 per hour for employees other than Hoony, who was paid $15 per hour) and these rates did not have any regard for the times or particular days that were worked. Otherwise the claims made against Mr. Hwang and subsequently OzKorea which do not concern payments of minimum Award rates are admitted by Mr. Hwang.
Was there a subcontractor relationship or a relationship of some other kind between the Pioneer Respondents and Mr. Hwang/OzKorea?
In relation OzKorea, it is accepted by the Pioneer Respondents that OzKorea was nominated as a sub-contractor, invoiced PCS and was paid directly by PCS for cleaning services during the Second Period.
The position in relation to Mr. Hwang is somewhat more complicated and problematic.
Paragraph 3 of the Statement of Claim provides:
The First Respondent provided the cleaning service pursuant to a contract with the Third Respondent (Pioneer Contract).
Particulars
(a)The Pioneer Contract between the First Respondent and the Third Respondent was a verbal contract offered by
Claus Hauth in his capacity as Tasmanian State Manager for the Third Respondent in or around late 2013 or early 2014 to the First Respondent, and accepted by the First Respondent in respect of which the First Respondent agreed to clean the Woolworths Sites and a Kmart in Launceston;
(b)the First Respondent invoiced the Third Respondent for the work performed on the Woolworths Sites via another company, BTS K Management Pt Ltd (ACN 600 180 845) (BTS), and BTS paid monies to the First Respondent through Byungjin Kim (one of the First Respondent's employees) and Hyun Guen Song (a signatory to the bank account of one the First Respondent's other companies, OzK Enterprises Pty Ltd (ACN 135 547 705), who then paid the First Respondent and other employees of the First Respondent with the reference "Pioneer'';
(c)the First Respondent and his employees signed into the Woolworths Sites as representatives of "Swan Hill" or "Pioneer'' and Woolworths records listed the
First Respondent as an employee of the Second Respondent;
(d)"contractor cards" for the Woolworths Sites were issued to the First Respondent as well as his employees by the Second Respondent.
(e) …..
By their defence to the Statement of Claim relating to the First Period, the Pioneer Respondents simply deny the allegations in [3] and say further that Mr. Hwang was not a party to any contract with PCS to provide any cleaning services.
The evidence in chief of Mr. Hwang in relation to the arrangements for payment was vague. There does not appear that there was any direct payment as between the Pioneer Respondents and Mr. Hwang and the Pioneer Respondents were invoiced by BTS for work performed at the supermarkets.
Under cross examination, Mr. Hwang was asked about BTS and whether that was the company that Pioneer paid for cleaning. Mr. Hwang’s response was “I have no idea. I don’t know about BTS”. Mr. Hwang also gave evidence that he was introduced to Pioneer by a person named
Kyu Kim, with whom he had been involved in a cleaning business in the past and who ran the company BTS. He subsequently received a phone call from Mr. Donaldson, a supervisor employed by PFS, and
Mr. Hauth, Tasmanian State Manager of Pioneer in about November 2013.
Mr. Hwang stated at [13] – [20] of his affidavit, sworn 22 June 2017:
13I was told by the representative from Pioneer that they wanted me to provide cleaning services for some Kmart stores and Woolworth’s stores in Mowbray, Riverside, Deloraine and Georgetown (Woolworths Sites). I didn't want to do the cleaning work at the Woolworths stores in Deloraine and Georgetown because they were too far from my house in Launceston, and while I did not personally work at these stores, I arranged for cleaning work to be performed at these stores.
14In my discussions with Mr. Hauth from Pioneer he told me, amongst other things:
(a) the work that was required at the Woolworths Sites;
(b) the set amount that Pioneer would pay me in a lump sum, per site, to provide the cleaning services required at each store per fortnight;
(c) how I would access the Woolworths Sites; and
(d) when I could access the Woolworths Sites.
15In about November 2013 I was provided with a document with a 'Woolworths' logo on it, entitled Supermarket Cleaning Specifications (Woolworths Cleaning Specifications), for each store where I was to provide cleaning services. I do not remember how I was provided a copy of the Woolworths Cleaning Specifications, or who provided it to me.
…
17The Woolworths Cleaning Specifications, amongst other things, set out:
(a)which areas of each store were to be cleaned;
(b)the specific requirements for cleaning in each of these areas;
(c)how frequently the specific cleaning in each area was required; and
(d)the name and mobile number of Mr. Hauth in the 'contact details' field for each store.
18I agreed to provide the cleaning services for Pioneer at the Woolworths Sites and some Kmart stores (Pioneer Contract).
19.At all times during the period from 1 January 2014 to
12 January 2015 I operated my cleaning business as a sole trader providing cleaning services under the Pioneer Contract (Sole Trader Period).
20.I never received anything in writing from Pioneer (or anyone else) that set out our contractual arrangements for cleaning the Woolworths Sites during the Sole Trader Period, other than the Woolworths Cleaning Specifications.
Mr. Hwang also gave evidence that he and his employees signed into the stores as ‘Swan Hill’ or ‘Pioneer’ in reference to the company they worked for and were provided with a Woolworths identification card by Pioneer.[3]
[3] Affidavit of Sun Gun Hwang sworn 22 June 2017 [21] – [23].
On 1 May 2015 the solicitor for the Pioneer Respondents wrote to
Inspector Desmond, the FWO inspector, in response to a notice to produce documents relevant to the relationship between the Pioneer Respondents and Mr. Hwang, stating:
[i]n relation to the following entities, our client has instructed us that neither Pioneer nor its former or associated entities had a contractual relationship (or any relationship) with ... Sung Gun Hwang (ABN 48 870 809 298).
In my view, the statement that the Pioneer Respondents had no relationship with Mr. Hwang was incorrect. Counsel for the
Pioneer Respondents sought to qualify that position by saying that the Pioneer companies denied having a contractual or commercial relationship with Mr. Hwang. Counsel stated:
[t]here’s a big deal made in the Applicant’s reply submissions about how my clients have falsely proclaimed that they never had anything to do with Mr. Hwang. That’s – with respect, is nonsense; we’ve never said that. We’ve admitted in the defences that Mr. Hauth had occasion, from time to time, to deal with Mr. Hwang in relation to cleaning of the sites. It has never been denied that he had a role. Nor that we dealt with him. What has been denied is that we had a relationship. That is to say, a contractual or commercial relationship with
Mr. Hwang. We say that neither of the Pioneer Respondents did, and at the very least, it’s quite clearly the case that Pioneer Facility Services Proprietary Limited never did.
And in the absence of any direct commercial relationship between Pioneer Facility Services, on the one hand, and
Mr. Hwang or Oz Korea, on the other, how can it be said that Pioneer Facility Services Proprietary Limited was obliged in some way to ensure that which the Ombudsman complains was not ensured? In my submission, it can’t be said. Pioneer Facility Services can’t said to have been, by omission, concerned in or party to, whether knowingly or otherwise, any contravention that’s made out against Mr. Hwang or OzKorea.[4]
[4] Transcript 174.
The evidence of Inspector Desmond regarding the relationship between Mr. Hwang and the Pioneer Respondents is set out from [66] of her first affidavit:
[66]On 1 May 2015, I conducted a search of the VEDA database in relation to BTS Management, a company which also invoiced Pioneer for work performed on the Woolworths Sites…
[67]On 4 May 2015, during a telephone discussion with Mr. Hwang, I asked Mr. Hwang about
BTS Management and Kyu Kim. … Relevantly, we had a conversation with words to the following effect:Me: Who did you send invoices to?
Mr. Hwang: One went to Claus at Pioneer, and the other went to Kyu Kim.
Me: Who paid you?
Mr. Hwang: Pioneer paid Kyu and Kyu paid me because Pioneer would not register me as a contractor or open a file for me.
…
[69]On 2 September 2015, I received invoices from
BTS Management which confirmed that it did invoice Pioneer Contracting…[70]On 18 November 2015, in response to an NTP dated 9 November 2016, I received from the CBA various bank statements spanning periods throughout 2014 and 2015 for BTS Management (BSB: 064 162 Account Number: 11064775). These bank statements show the account holders as "Soon Yung Kwon" and "Hyung Kim". These bank statements confirm that BTS Management received lump sums from Pioneer Contracting (and sometimes Pioneer Facilities) in lump sums amounts of approximately $11,000 to $35,000 (with the reference "Salary Pioneer Contract PIONEER"). The bank statements also show that after receiving monies from "Pioneer", transfers were made to a CBA account with the reference "Kyu"…
I accept the evidence of Mr. Hwang at [13] – [23] of his affidavit sworn 22 June 2017 (referred to at [44] above). This demonstrates that he was contacted directly by Mr. Hauth, advised of the work to be performed and the pricing details for the work. He was also provided with the cleaning schedule which indicated what was required to be cleaned at each of the sites. There is further evidence that when the work was not performed to the standard required, Mr. Hauth visited Mr. Huang at the site to discuss this with him. There is no evidence that any person from BTS was contacted by any person from the Pioneer Respondents in relation to the performance of the work at the sites. I am satisfied that BTS was only involved as a means of providing an entity that could be paid and that the contract for services was initially between Mr. Hwang and subsequently between OzKorea and PCS. The Pioneer Respondent also referred to a company called MKVA Pty Ltd who invoiced PCS for cleaning work at the supermarkets in October 2014.[5] Mr. Hwang had no idea who that company was. No one from Pioneer explained how that company came to invoice for works and be paid by PCS and no one from Pioneer gave evidence to the effect that MKVA was the subcontractor appointed to clean the supermarkets. The existence of that company does not detract from Mr. Hwang’s evidence that he was approached and appointed to arrange the cleaning works at the supermarkets and that he employed staff to do that work.
[5] Exhibit R-1.
There is no doubt on the evidence that during the relevant period, prior to the incorporation of OzKorea, that employees employed by
Mr. Hwang were working at the supermarkets in Tasmania to the knowledge of Pioneer. This is established by sign-in records from the Woolworths Sites showing that Messrs. Hauth and Donaldson visited the Woolworths Sites with Mr. Hwang to inspect work done by him and his workers in each of those places. The employees signed in for work under the name Swan Hill or Pioneer.
Whatever the arrangements between BTS and Mr. Hwang, the relevant consideration is that there was a relationship between the Pioneer Respondents and Mr. Hwang to the extent that they knew that
Mr. Hwang was the person responsible for maintaining standards of cleaning and the employment of cleaners at the relevant stores. Further they knew that the monies paid to BTS were for the purpose of paying the employees of Mr. Hwang. For these reasons, I find that the Applicant has proven the contraventions as against Mr. Hwang and OzKorea and that there was a contract between PCS and Mr. Hwang (and subsequently OzKorea) for cleaning services at the supermarkets.
Evidence of underpayment.
Inspector Desmond gave evidence in relation to evidence of underpayments in her affidavit of 23 June 2017 from [85] - [96] as follows:
[85]During the Investigation, I formed the view that the amounts paid by Pioneer Contracting to Mr. Hwang were not sufficient to meet minimum entitlements under the Cleaning Services Award 2010 (Award). I formed this view on the basis of sample calculations which I undertook for the Mowbray store (Sample Calculations).
…
[87]From my review of the evidence, I formed the view that the Woolworths Sites at Mowbray and Riverside required at least two cleaners to do a three hour shift seven days per week, and that the shifts were generally worked from 3 am to 6 am, and that the Woolworths Sites at Deloraine and Georgetown required at least three cleaners to do a two hour shift seven days per week, and that the shifts were generally 5 am to 7 am. Mr. Hwang's Spreadsheet indicated that the Underpaid Employees worked
12 am to 3am at Kmart Launceston. The evidence I relied on to form this view is:(a) Mr. Hwang's Spreadsheet…;
(b) Woolworths Records…;
(c) my file note from my discussions with Hoony during my site visit to Mowbray on
19 December 2014…; and(d) file note from discussions with Anna Raey and Shane Rivett during site visits to Woolworths Sites at Georgetown and Deloraine during the period from 15 April 2015 to 29 June 2015...
[88]On this basis, I calculated an employee's minimum entitlements (excluding overtime) for a Part Time Level 1 Cleaning Services Employee under the Award for the period 1 December 2014 to
31 December 2014 (Sample Period).[89]My calculations showed that for the Sample Period the total entitlement for one employee who worked a three hour shift over the one month Sample Period was $2,366.40 (this affected the Woolworths Sites at Mowbray and Riverside, and Kmart Launceston). My calculations showed that for the Sample Period the total entitlement for one employee who worked a
two hour shift was $1,577.60 (this affected the Woolworths Sites at Georgetown and Deloraine)…[90]Therefore, the minimum entitlement for:
a. two employees at Mowbray was $4,732.80 per month ($2,366.40 x 2 employees);
b. two employees at Riverside was $4,732.80 per month ($2,366.40 x 2 employees);
c. two employees at Kmart Launceston was $4,732.80 per month ($2,366.40 x 2 employees);
d. three employees at Georgetown was $4,732.80 per month ($1,577.60 x 3 employees); and
e. three employees at Deloraine was $4,732.80 per month ($1,577.60 x 3 employees).
[91]On that basis, the total minimum Award entitlement for employees working at each of the Woolworths Sites (and Kmart Launceston) was $23,664 per month.
…
Accordingly, the Sample Calculations can be summarised as follows:
Total Award entitlement for the Sample Period month
Amounts paid by Pioneer Contracting for the Sample Period month
Shortfall
$23,664
$21,700
-$1,964
That calculation establishes that the amount paid by PCS for the work performed at each of the sites was not sufficient to allow Mr. Hwang and subsequently OzKorea to comply with obligations under the Act to pay employees their minimum work entitlements under the Award. The basis of the calculation has been established by the evidence.
The Pioneer Respondents challenged the evidence of
Inspector Desmond regarding a failure to pay sufficient monies to subcontractors to comply with obligations under the Act to pay minimum Award entitlements by an affidavit of Francis Xavier Scarce, a director of PFS. At [7] of that affidavit, Mr. Scarce deposed:
[7]Neither of the Pioneer Respondents, through their directors and relevant employees, had nor have any knowledge of the number of cleaners that OzKorea (or the previous contractor engaged by Pioneer to clean the relevant sites, BTS K Management Pty Ltd (BTS)) engaged to clean the four Woolworth sites. Nor do they know the hours that any such cleaners engaged to clean the four sites worked, or the amount that each or any of them was paid for doing so. They did not check the Woolworths site sign-in sheets or require copies of these sign-in sheets to be provided. All Pioneer was concerned about was whether the contractor was meeting the customer’s specifications for cleanliness of the sites.
Mr. Scarce gave this evidence, notwithstanding that he had made representations to Woolworths when tendering for the work in entirely contrary terms. The Specification of Works documents prepared for the Woolworths tender included the following:
Subcontractor selection
As part of our initial subcontractor selection process and ongoing management, we assess and review supplies on:
· Financial health
· Compliance with statutory requirements
· Service performance
· Competitiveness (e.g. using industry benchmarking)
· Innovation
· Sustainability
All subcontractors are required to provide proof of payment of legislative labour rates, in line with our own commitment to wages.
Preferred subcontractor agreements
When a subcontractor is selected, we put an agreement in place which ensures that alternative subcontractors cannot be substituted without our approval.
Performance management
We monitor ongoing subcontractor performance monthly against SLAs and KPIs. Our managers undertake inspections and audits of subcontractor work. Quarterly review meetings with all major subcontractors help drive innovation, efficiencies, consistent quality service and adherence to our clients’ requirements.[6]
[6] Affidavit of Kristen Desmond sworn 27 November 2017, 452.
Mr Scarce gave evidence that the Specification of Works documents prepared by PFS for the tender for the Woolworths Contract was not a true indicator of the time and working hours required to fulfil the specifications. That document (Schedule 5 to the Woolworths Contract)[7] set out the tasks to be performed, the hours that it would take to perform and the number of employees required.
[7] Exhibit 19.1A, Affidavit of Kristen Desmond, sworn 27 November 2017, 153 – 154.
Mr. Scarce gave evidence that document was only to be used as a pricing schedule in the tender process and was not to be used for carrying out the contract or reflective of the number of hours that it would take to clean the stores in accordance with the specifications.[8] He gave evidence that it was likely that the work could be performed in less time than that allowed for in the specifications document by experienced or motivated employees and indeed that was how money was made by subcontractors in this field of work. Mr. Scarce gave evidence that he had made an assessment that the work specified could be performed in fewer hours than those set out in the tender documents and at [13] of his affidavit gave evidence that:
[b]ased on my experience over 30 years as a leading cleaning contractor, I am of the view that the rate paid for the four stores was sufficient to pay the contractor's employees all their entitlements and, if run correctly and efficiently, would have been able to be performed profitably
[8] Transcript 128.
Mr. Scarce also gave evidence that in negotiating a price for the performance of works by a subcontractor, regard would be had by Pioneer to the stipulations in the Woolworths Contract for working out how many hours would have to be worked on particular days to comply with the specifications.[9]
[9] Transcript 134 [10].
At page 459 of the Supplier Response to the Tender, in response to the question from Woolworths to the Pioneer Respondents: “have you completed a site inspection for those sites for which you intend to submit an offer?”, it was stated:
[w]e have not undertaken a site inspection of all sites due to the volume and timeframe. Due to our existing experience and history with Woolworths across all brands we have an in-depth understanding of brand requirements and the layout of all stores. We have used our standardised equations based on square metre each at our pricing model to calculate our offer, and we are confident in its accuracy.[10]
[10] Affidavit of Kristen Desmond sworn 27 November 2017, 459.
Mr. Hwang gave evidence at the hearing that at each of the worksites generally six hours total work would be performed by two to three workers, Mr. Hwang was directed to sign-in forms signed by employees which showed less than six hours being worked on occasion.[11] I accept that there may have been some minor fluctuation in the total hours worked at each site, but also accept that in general six hours work was done at each site.
[11] Transcript 51 [1].
I accept that evidence of Inspector Desmond that the payments made to the subcontractors were not sufficient to cover the minimum Award rates payable to employees performing the work to ensure compliance with the specifications. The evidence of Mr. Scarce about how long it would take to perform the work was an estimate and the basis of his opinion was not set out. There was no computation prepared by Mr. Scarce which might explain how the amounts paid to the subcontractor might meet the minimum Award entitlements for employees performing the work, even in accordance with his speculation as to how long the work might take. I also accept that the relevant staff of Woolworths who assessed the tender for the contract would have a reasonable sense of how many hours work would be required to fulfil the specifications. I also accept that the specification of works prepared by PFS for the tender set out the reasonable calculation of the number of people needed and the hours to be worked to clean the site. This is based on the representation made by them set out at [59] above regarding the pricing of work.
Whatever happened as between BTS and Mr. Hwang does not undermine the argument that the rates paid to BTS in relation to the work performed by the relevant employees was less than the amount that could cover the minimum standards. The fact that BTS or Mr. Hwang may have been taking a portion of the monies paid to BTS before payment to the employees does not change the fundamental proposition that the rates paid to BTS were less than sufficient to cover the minimum Award payments for the relevant workers employed at the sites. I am confident in the view that the sums paid by PCS to the subcontractors would not have met minimum Award standards because the payments also had to cover superannuation, insurance, and other costs of employment. The calculations prepared by Ms. Desmond did not include those costs.
Accessorial liability of the Pioneer Respondents
In order for the Pioneer Respondents to be fixed with knowledge of the breaches, there must be some natural person who had knowledge of the essential ingredients of the breaches. Section 793 of the Act provides:
Liability of bodies corporate
Conduct of a body corporate
(1) Any conduct engaged in on behalf of a body corporate:
(a) by an officer, employee or agent (an official ) of the body within the scope of his or her actual or apparent authority; or
(b) by any other person at the direction or with the consent or agreement (whether express or implied) of an official of the body, if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the official;
is taken, for the purposes of this Act and the procedural rules, to have been engaged in also by the body.
State of mind of a body corporate
(2) If, for the purposes of this Act or the procedural rules, it is necessary to establish the state of mind of a body corporate in relation to particular conduct, it is enough to show:
(a) that the conduct was engaged in by a person referred to in paragraph (1)(a) or (b); and
(b) that the person had that state of mind.
Meaning of state of mind
(3) The state of mind of a person includes:
(a) the knowledge, intention, opinion, belief or purpose of the person; and
(b) the person's reasons for the intention, opinion, belief or purpose.
Disapplication of Part 2.5 of the Criminal Code
(4) Part 2.5 of Chapter 2 of the Criminal Code does not apply to an offence against this Act.
Note Part 2.5 of the Criminal Code deals with corporate criminal responsibility.
(5) In this section, employee has its ordinary meaning.
Section 550 of the Act provides:
Involvement in contravention treated in same way as actual contravention
(1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
Note: If a person (the involved person) is taken under this subsection to have contravened a civil remedy provision, the involved person's contravention may be a serious contravention (see subsection 557A(5A)). Serious contraventions attract higher maximum penalties (see subsection 539(2)).
(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.
In Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 (‘South Jin’), White J summarised the principles relevant to the question of whether a party has been knowingly concerned in a contravention. His Honour said:
227In order to be knowingly concerned in, or party to, a contravention, a person must have engaged in some conduct which “implicates or involves” him or her in the contravention, so that there is a “practical connection” between the person and the contravention: Qantas Airways Ltd v Transports Workers’ Union of Australia [2011] FCA 470; (2011) 280 ALR 503 at [324]-[325]. See also Construction, Forestry, Mining and Energy Union v Clarke [2007] FCAFC 87; (2007) 164 IR 299 at [26]. In Trade Practice Commission v Australian Meat Holdings Pty Ltd (1988) 83 ALR 299, Wilcox J at 357 quoted with approval the following passage from the judgment of the Full Court of the Supreme Court of Western Australia in Ashbury v Reid (1961) WAR 49:
The question which a Court should ask itself in determining whether an act or omission on the part of an individual comes within the terms of section 54 is whether on the facts it can reasonably be said that the act or omission shown to have been done or neglected to be done by the defendant does in truth implicate or involve him in the offence, whether it does show a practical connection between him and the offence.
The statement in Ashbury v Reid was also approved in R v Nifadopoulos (1988) 36 A Crim R 137 at 140 with the Court (Kirby ACJ, Maxwell and Carruthers JJ agreeing) saying that “a person cannot become criminally involved in an act made unlawful by mere knowledge or inaction on his part – some act or conduct on his part is necessary”.
228In Yorke v Lucas (1983) 49 ALR 672 at 681, the Full Court of this Court approved the following statement of Pennycuick V-C in Re Maidstone Buildings Provisions Ltd [1971] 1 WLR 1085 at 1092-3:
[T]he expression “party to” must on its natural meaning indicate no more than “participates in” or “concurs in”. And that, it seems to me, involves some positive steps of some nature.
See also Sent v Jet Corporation of Australia (1984) 2 FCR 201 at 208-9.
229In order for a person to have been knowingly concerned in a statutory contravention, that person must have been an intentional participant, with knowledge of the essential elements constituting the contravention: Yorke v Lucas (1985) 158 CLR 661 at 670. However, it is not necessary that a person with knowledge of the essential elements making up the contravention also know that those elements do amount to a contravention: Yorke v Lucas at 667; Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; (2003) 216 CLR 53 at [48]. An accessory does not have to appreciate that the conduct involved is unlawful: Australian Competition and Consumer Commissioner v Giraffe World Australia Pty Ltd (No 2) [1999] FCA 1161; (1999) 95 FCR 302 at [186].
230Actual knowledge of the essential elements constituting the contravention is required. Imputed or constructive knowledge is insufficient: Young Investments Group Pty Ltd v Mann [2012] FCAFC 107 at [11]; (2012) 293 ALR 537 at 541.
231Proof that a person had actual knowledge of each of the essential elements making up a contravention may be derived from direct evidence but more commonly will be a matter of inference from all the circumstances found to be proved. In some cases, actual knowledge can be inferred from the combination of a Respondent’s knowledge of suspicious circumstances and the decision by the Respondent not to make enquiries to remove those suspicions. Nevertheless it is actual knowledge which is required. In this respect, Wilson, Deane and Dawson JJ in Giorgianni v The Queen (1985) 156 CLR 473 at 505 said:
[A]lthough it may be a proper inference from the fact that a person has deliberately abstained from making an inquiry about some matter that he knew of it and, perhaps, that he refrained from inquiry so that he could deny knowledge, it is nevertheless actual knowledge which must be proved and not knowledge which is imputed or presumed.
And later (at 507-8):
The fact of exposure to the obvious may warrant the inference of knowledge. The shutting of one’s eyes to the obvious is not, however, an alternative to the actual knowledge which is required as the basis of intent to aid, abet, counsel or procure.
232The conclusion that a person has actual knowledge of the elements of a contravention by reason of that person’s knowledge of suspicious circumstances coupled with a deliberate failure to make enquiries which may have confirmed those suspicions requires consideration of the person’s knowledge of the matters giving rise to the suspicion, the circumstances in which the person did not make the obvious enquiry and the person’s reasons, to the extent that they are known, for not having made the enquiry. It is not every deliberate failure to make enquiry which will support the inference of actual knowledge. In several cases, including Official Trustee in Bankruptcy v Mitchell [1992] FCA 521, (1992) 38 FCR 364 at 371 and Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd [1994] FCA 1222, (1994) 123 ALR 681 at 693-4, this Court has referred with approval to a passage from the advice of Lord Sumner in Zamora (No 2) [1921] 1 AC 891 at 812-3 in which his Lordship noted two senses in which a person may be said not to know something because they do not wish to know it:
A thing may be troublesome to learn, and knowledge of it, when acquired, may be uninteresting or distasteful. To refuse to know any more about the subject or anything at all is then a wilful but a real ignorance. On the other hand, a person is said not to know because he does not want to know, where the substance of a thing is borne in upon his mind with a conviction the full details or precise proofs may be dangerous, because they may embarrass his denials or compromise his protests. In such a case he flatters himself that whereas ignorance is safe, ‘tiz folly to be wise, but there he is wrong, for he has been put upon notice and his further ignorance, even though actual and complete, is a mere affectation and disguise.
233In the former circumstance described by Lord Sumner, the person will not have actual knowledge of the matter. In the latter circumstance, the person does have that knowledge but deliberately refrains from asking questions or seeking further information in order to maintain a state of apparent ignorance. That is not a circumstance of constructive or imputed knowledge, but of actual knowledge reduced to minimum by the person’s wilful conduct: Richardson & Wrench at 694 (Burchett J).
234The requisite actual knowledge must be present at the time of the contravention. A later acquisition of knowledge of the essential matters is not sufficient.
235A company may be knowingly concerned in a statutory contravention. The knowledge of an officer of a corporation is imputed to the corporation: s 826 of the WR Act and s 793 of the Act.
[See also Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181 at [397]–[411]].[12]
[12] See also Fair Work Ombudsman v Nobrace Centre Pty Ltd & Ors [2010] FCCA 738 [280] – [365] per Judge A. Kelly for comprehensive review of the principles relating to accessorial liability and s.550 of the Act.
In order for a company to be found to be knowingly concerned in the statutory contravention, an officer, employee or agent must be identified as having engaged in the conduct or having knowledge of the conduct. It is put that the Applicant has failed to nominate a person (who is an officer, employee or agent) who has engaged in the conduct said to fix the body corporate with liability for the acts of that person. It has been put that there has been a failure on the part the Applicant to lead evidence about who it was that ought to have but did not do the things that are said to implicate the Pioneer Respondents in the wrongdoing of the subcontractors.
It is then said that if Mr. Dickinson is found to have been in a position such that the Court can attribute knowledge at large to the Pioneer Respondents then the Court cannot be satisfied that
Mr. Dickinson:a)knew that Mr. Hwang was the employer of the cleaners;
b)knew that the work done by cleaners was work to which the Cleaning Services Award applied;
c)had knowledge of the work that was done, the hours actually worked by particular employees, and the amount that should have been paid for that work under the Award;
d)knew that the cleaners were employed part-time and they were underpaid the part-time loading; and
e)knew what the employees were actually paid for the work.
Knowledge
The Pioneer Respondents submit that that they must have had actual knowledge of the contraventions and that it is not enough that the Respondent was equipped to work out that there are inconsistencies. The Respondents then went a step further, submitting that in in order to have actual knowledge it must have "subjectively accepted as true that which is believed"[13]
[13] Transcript 181.
The Pioneer Respondents cited R v Raad [1983] 3 NSWLR 344 (Court of Criminal Appeal, Street CJ, Lee and Foster JJ) as authority for that proposition. That case concerned the meaning of “knowing” in the context of s.188 of the Crimes Act 1900 (NSW) which provides:
whoever receives or disposes of or attempts to dispose of, any property, the stealing ware of amounts to felony, knowing the same to be stolen, shall be guilty of felony.
Counsel for the Pioneer Respondents referred to a passage from the judgment of Street CJ at 346 where His Honour stated (footnotes omitted):
[a]s I understand the purport of R v White, Bramwell B was putting to the jury a common sense meaning attaching to the word "knowing". It was a meaning which involves a state of belief such as to result in the believer in accepting the truth of that which he believes. It is a state of mind of far greater rate of confidence in the truth of that which is believed than the state of mind which could be described more accurately as mere suspicion. The law has been consistently accepted since
R v White as involving an actual belief of this degree of confidence in the truth of that which is believed. Belief of that degree is equivalent to knowledge under the section.
The decision appealed from involves a charge to a jury where a judge at first instance stated:
[t]he real issue in this case is whether the accused believe the van in question to have been stolen. The Crown has to prove that actual knowledge or belief. Strictly really only somebody who was there when the van was stolen could have actual knowledge, and that has never been suggested by anyone so far as this accused is concerned, and so the real issue in this trial is that of belief. Did he, when he received the van, believe it to have been stolen. If you find that at the time he suspected it to have been stolen and deliberately refrained from asking questions about its origin, then you are entitled to infer from that he believed at the time that it was stolen. But you do not have to. It is a matter for you, and therefore when I told you that the issue is whether he suspected to have been stolen and deliberately closed his eyes, that is not the final issue. That is a matter for you which you can take into account in determining the final issue, namely whether he believed the van to have been stolen. But the matter that which must be proved by the Crown is that he believed it to have been stolen at the time he received it.
The charge to the jury was found by the Court of Criminal Appeal to be an accurate statement of the law. It is plain from the terms of the charge to the jury that the Court can consider whether a person has turned a blind eye in determining whether a person believes that there has been a contravention (as opposed to being suspicious about a contravention having occurred). The Court accepts that a finding about the subjective state of mind of Mr. Dickinson is required in relation to each contravention.[14] In circumstances where Mr. Dickinson has not given evidence, that finding can only be made by drawing inferences from established facts.
[14] ACCC v Giraffe World (No. 2) (1999) 95 FCA 1161 [184]; ACCC v IMB Group [2003] FCAFC 17 [133] – [135].
It was put that the reference to Awards in an agreement where PFS contracted to comply with minimum Award standards is not a proper basis for inferring that a director of that company would know that an Award is in existence and that an Award applies. The
Pioneer Respondents went so far as to submit that that not only did the Fair Work Ombudsman have to establish that Mr. Dickinson had read the agreement but that he had “a subjective belief that the Award applied” i.e., he knew that the Award applied because he subjectively believed the Award applied. It is said that the Applicant has failed to establish that Mr. Dickinson knew that the Award applied.In my view this argument has no substance and there is no doubt that Mr. Dickinson had knowledge that the Award was in existence and applied and to suggest otherwise is fatuous. By signing Specification of Works as the director of a company (which was replete with references to the Award)[15] the Court is satisfied that Mr. Dickinson had knowledge that the Award applied to employees of subcontractors at the sites.[16] It is admitted in the defence to [8] that he is a person who believed or generally understood that the Cleaning Award applied in respect of the employment of employees engaged by PFS and PCS “and at least some other cleaning business in Australia” performing work in Australia. The issue of substance and concern to the Court is whether the evidence establishes that he has knowledge of the essential matters going to the contravention of the minimum pay standards.
[15] Set out at [81] – [93] below.
[16] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 [33] - [34].
Difficulties thrown up by pleadings
A considerable amount of time was spent debating the form of the pleading adopted by the Applicant in order to allege that the
Pioneer Respondents were knowingly involved in the contraventions. The Pioneer Respondents correctly referred to them as a “maze of cross-references”. The Applicant’s pleadings are in fact a response to the way that the Pioneer Respondents engaged subcontractors at the sites.Whilst they are lengthy, I set out below the relevant pleadings that go to the knowing involvement of the Pioneer Respondents in the contraventions. The pleadings in each of the respective proceedings are the materially the same and I have reproduced these pleadings in LNG 31/2016 (save that I have replaced the references to “Respondents” to the names of each party for greater ease of reference).
3.Mr. Hwang provided the cleaning services pursuant to a contract with PCS (Pioneer Contract).
Particulars
(a)The Pioneer Contract between Mr. Hwang and PCS was a verbal contract offered by Claus Hauth in his capacity as Tasmanian State Manager for PCS in or around late 2013 or early 2014 to Mr. Hwang, and accepted by Mr. Hwang in respect of which Mr. Hwang agreed to clean the Woolworths Sites and a Kmart in Launceston.
(b)Mr. Hwang invoiced PCS for the work performed on the Woolworths Sites via another company, BTS K Management Pt Ltd (ACN 600 180 845) (BTS K), and BTS K paid monies to Mr. Hwang through Byungjin Kim (one of Mr. Hwang's employees) and Hyun Guen Song (a signatory to the bank account of one Mr. Hwang's other companies, OzK Enterprises Pty Ltd (ACN 135 547 705), who then paid Mr. Hwang and other employees of Mr. Hwang with the reference "Pioneer'';
(c)Mr. Hwang and his employees signed into the Woolworths Sites as representatives of "Swan Hill" or "Pioneer'' and Woolworths records listed Mr. Hwang as an employee of PFS;
(d)"Contractor cards" for the Woolworths Sites were issued to Mr. Hwang as well as his employees by PFS;
(e)Copies of invoices, bank statements, emails, and records of Woolworths, PFS and PCS are available for inspection at the offices of the Applicant's solicitors upon request.
THE WOOLWORTHS CONTRACTS
The Second Respondent
4.The PFS, Pioneer Facility Services Pty Ltd (ACN 163 765 928), is and was at all relevant times:
(a)a company incorporated under the provisions of the Corporations Act 2001 (Cth) (Corporations Act);
(b)capable of being sued in its corporate name;
(c)a constitutional corporation within the meaning of section 12 of the Act;
(d)a national system employer within the meaning of section 14 of the Act
(e)a company with a principal place of business at Level 5, 256 Queen Street, Melbourne, Victoria;
(f)the operator of a commercial cleaning business;
(g)formerly known as "Pioneer Cleaning Australia" from 31 July 2013 until 17 December2014;and
(h)the parent company of PCS.
5.At all relevant times, PFS held a cleaning contract (Woolworths Contract) with Woolworths Limited (ACN 000 041 675) (Woolworths) to perform cleaning services at the Woolworths Sites (among others).
Particulars
(a)The Woolworths Novation Agreement novating the Woolworths Contract from RCS Cleaning Services Pty Ltd acting as trustee for RCS Cleaning Services Unit Trust trading as Swan Hill Commercial Cleaning (Swan Hill) was novated to PFS as Frank Enterprises Trust & Gummow Holdings Trust & Sound Nominees (ABN 24 140 305 508), which, since 17 December 2014, trades under the name Pioneer Facility Services.
(b)The Woolworths Contract was signed by Vince Legudi on behalf of Swan Hill and by Vince Legudi, Francis Xavier Scarce and Aaron Leigh Dickinson on behalf of PFS.
(c)The three directors of PFS are Vincent Legudi (director of Sound Nominees Pty Ltd), Francis Xavier Scarce (director of Frank Enterprises Pty Ltd) and Aaron Leigh Dickinson (director of Gummow Holdings Ply Ltd).
(d)The three shareholders of PFS are Frank Enterprises Ply Ltd (ACN 163 709 902), Gummow Holdings Pty Ltd (ACN 163 710 156) and Sound Nominees Ply Ltd (ACN 163 710 405).
6.At all relevant times during the Assessment Period, PFS subcontracted the Woolworths Contract to its subsidiary, PCS.
PCS
7.PCS, Pioneer Contracting Services (ACN 164 009 036), is and was at all relevant times:
(a)a company incorporated under the provisions of the Corporations Act;
(b)capable of being sued in its corporate name;
(c)a constitutional corporation within the meaning of section 12 of the Act;
(d)a national system employer within the meaning of section 14 of the Act;
(e)a company with a principal place of business at Level 5, 256 Queen Street, Melbourne, Victoria;
(f)the operator of a business engaging contract cleaners to perform cleaning services pursuant to contracts held by the PFS;
(g)a subsidiary of the PFS;
(h)a company which held a subcontract with the PFS to perform cleaning services at the Woolworths Sites (among others) (Woolworths Subcontract);
(i)a company which engaged contract cleaners to perform the cleaning services pursuant to the Woolworths Subcontract including, among others, Mr. Hwang under the Pioneer Contract; and
(j)the company which paid Mr. Hwang to perform the cleaning services under the Pioneer Contract.
OTHER PERSONS
8.Aaron Dickinson (Mr. Dickinson) is and was at all relevant times including during the Assessment Period:
(a)a director of PFS;
(b)Chief Executive Officer of PFS;
(c)an officer of PFS within the meaning of section 9 of the Corporations Act and for the purposes of section 793 of the Act;
(d)one of the persons who signed the Woolworths Contract on behalf of PFS;
(e)the sole director and secretary of the PCS;
(f)an officer of PCS within the meaning of section 9 of the Corporations Act and for the purposes of section 793 of the Act; and
(g)a person with knowledge of the existence of an industrial Award, and specifically, the Cleaning Services Award 2010 (Cleaning Award), and the fact that it applies to employees engaged to perform cleaning work.
9.At all relevant times, including during the Assessment Period, by reason of subsection 793(1) of the Act and paragraph 8 above, the conduct engaged in by, and knowledge of,
Mr. Dickinson, is taken to be conduct engaged in by, or knowledge of PFS and PCS.
10.Claus Hauth (Mr. Hauth) is and was at all relevant times including during the Assessment Period:
(a)employed by PFS in the position of Operations Manager;
(b)listed by PFS in its tender material as the contact person on behalf of PF for the purposes of the Woolworths Contract; and
(c)the person who acted on behalf of PFS in communications with Woolworths in respect of work performed at the Woolworths Sites;
11.At all relevant times during the Assessment Period, PCS held a subcontract with PFS to perform cleaning services at the Woolworths Sites.
12. At all relevant times during the Assessment Period, PCS engaged contract cleaners to perform the cleaning services pursuit to the Woolworths Subcontract including, amongst others, the OzKorea.
ACCESSORIAL LIABILITY OF PFS
139.Further to the matters pleaded in paragraphs 4 and 5 above, PFS:
(a)was directly engaged by Woolworths to carry out the work under the Woolworths Contract, ultimately performed by the Employees;
(b)kept copies of Woolworths "Contractor cards" issued in respect of work performed on the Woolworths Sites under the Woolworths Contract which indicated that Mr. Hwang and his Employees were:
(i) engaged by contractors other than Mr. Hwang, or
(ii) direct employees of PFS.
Particulars
Contractor cards for work performed for Woolworths were provided by PFS and PCS in respect of (relevantly) Seunghun Ok, Yongduck Jin, Jongwan Lee, Dohyung An, Shane Rivett, Diminity Brown, Anna Reay, Chad Burton, James Burton and Mr. Hwang.
140.By reason of the matter’s pleaded in paragraph 12 above, the conduct engaged in by Mr. Hauth as pleaded in paragraphs 10 and 11 above is taken to be the conduct of PFS.
141.By reason of the matters pleaded in paragraphs 4, 10, 11, 12 and 139 above, PFS knew or should have known (through its agents, employees and officers pursuant to section 793 of the Act):
(a)the rates paid to PFS under the Pioneer Contract;
(b)the type of work performed on the Woolworths Sites;
(c)that each of the Woolworths Sites were required to be cleaned 7 days per week;
(d)the number hours that each cleaner was required to spend cleaning each of the Woolworths Sites;
(e)the number of cleaners required to clean each of the Woolworths Sites; and
(f)the size of each of the Woolworths Sites.
142.By reason of the matters pleaded in paragraphs 139 to 141 above, PFS knew or should have known:
(a)Mr. Hwang engaged employees to perform the work;
(b)Mr. Hwang’s employees were required to work Night Shifts, Saturdays, Sundays and Overtime;
(c)Mr. Hwang was required to comply with Commonwealth workplace relations legislation and industrial instruments in respect of any of his employees;
(d)the Cleaning Award applied to the work being performed on the Woolworths Sites; and
(e)Mr. Hwang was required to pay the Minimum Hourly Rate, Night Shift Loading, minimum engagement, Saturday Rates, Sunday Rates, Overtime Rates and Sunday Overtime Rates.
143.By reason of PFS’s knowledge or purported knowledge of the matters pleaded in paragraphs 139 to 142 above, PFS:
(a)knew, or should have known that Mr. Hwang's employees were not paid the Minimum Hourly Rate, Part Time Loading, Night Shift Rate, Saturday Rate, Sunday Rate and Public Holiday Rates under the Cleaning Award;
(b)knew, or should have known that the amount paid to
Mr. Hwang under the Pioneer Contract was insufficient for PFS to pay his employees their minimum entitlements;
(c)provided PFS with the foundations and tools to avoid his obligations under Commonwealth workplace laws; and
(d)failed to take steps to ensure that:
(i) the amounts paid to Mr. Hwang were sufficient to ensure it was enabled to comply with minimum standards under Commonwealth workplace relations legislation and industrial instruments; and
(ii) Mr. Hwang otherwise complied with Commonwealth workplace laws.
144.By reason of the matters pleaded in paragraphs 4 and 139 to 143 above, PFS was involved (within the meaning of subsection 550(1) of the Act) in the following contraventions of Mr. Hwang:
(a) failure to pay the Minimum Hourly Rate pursuant to clause 16 of the Cleaning Award;
(b) failure to pay the Part Time Loading pursuant to clause 12.4(b)(iii) of the Cleaning Award;
(c) failure to pay the Night Shift Loading pursuant to clause 27.1(b) of the Cleaning Award;
(d) failure to pay the Saturday Penalty Rate pursuant to clause 27.2(a) of the Cleaning Award; and
(e) failure to pay the Sunday Penalty Rate pursuant to clause 27.2(b) of the. Cleaning Award.
ACCESSORIAL LIABILITY OF THE PCS
145.Further to the matters pleaded in paragraph 7 above, PCS:
(a)despite engaging Mr. Hwang under the Pioneer Contract, did not pay Mr. Hwang directly at any time throughout the Assessment Period;
(b)kept copies of Woolworths "Contractor cards" issued in respect of work performed on the Woolworths Sites under the Woolworths Contract which indicated that Mr. Hwang and his Employees were:
(i) engaged by contractors other than Mr. Hwang, or
(ii) direct employees of the PFS.
Particulars
Contractor cards for work performed for Woolworths were provided by PFS and PCS in respect of (relevantly) Seunghun Ok, Yongduck Jin, Jongwan Lee, Dohyung An, Shane Rivett, Diminity Brown, Anna Reay, Chad Burton, James Burton, and Mr. Hwang.
146.By reason of the matters pleaded in paragraphs 8 to 12 and 145 above, PCS knew or should have known:
(a)the rates paid to the Mr. Hwang under the Pioneer Contract;
(b)the type of work performed on the Woolworths Sites;
(c)that each of Woolworths Sites were required to be cleaned 7 days per week;
(d)the number hours that each cleaner was required to spend cleaning each of the Woolworths Sites;
(e)the number of cleaners required to clean each of the Woolworths Sites; and
(f)the size of each of the Woolworths Sites.
147.By reason of the matters pleaded in paragraphs 145 and 146 above, PCS knew or should have known:
(a)Mr. Hwang engaged employees to perform the work;
(b)Mr. Hwang’s employees were required to work Night Shifts, Saturdays, Sundays and Overtime;
(c)Mr. Hwang was required to comply with Commonwealth workplace relations legislation and industrial instruments in respect of any of his employees;
(d)the Cleaning Award applied to the work being performed on the Woolworths Sites; and
(e)Mr. Hwang was required to pay the Minimum Hourly Rate, Night Shift Loading, minimum engagement, Saturday Rates, Sunday Rates, Overtime Rates and Sunday Overtime Rates.
148.Notwithstanding the matters pleaded in paragraphs 145 to 147 above, PCS:
(a)knew, or should have known that Mr. Hwang’s employees were not paid the Minimum Hourly Rate, Part Time Loading, Night Shift Rate, Saturday Rate, Sunday Rate and Public Holiday Rates under the Cleaning Award;
(b)knew, or should have known the amount paid to
Mr. Hwang under the Pioneer Contract was insufficient for Mr. Hwang to pay his employees their minimum entitlements;
(c)provided Mr. Hwang with the foundations and tools to avoid its obligations under Commonwealth workplace laws; and
(d)failed to take steps to ensure that:
(i)the amounts paid to Mr. Hwang were sufficient to ensure it was enabled to comply with minimum standards under Commonwealth workplace relations legislation and industrial instruments; and
(ii)Mr. Hwang otherwise complied with Commonwealth workplace laws.
149.By reason of the matters pleaded in paragraphs 8 to 12 and 145 to 148 above, PCS was involved (within the meaning of subsection 550(1) of the Act) in the following contraventions of Mr. Hwang:
(a)failure to pay the Minimum Hourly Rate pursuant to clause 16 of the Cleaning Award;
(b)failure to pay the Part Time Loading pursuant to clause 12.4(b)(iii) of the Cleaning Award;
(c)failure to pay the Night Shift Loading pursuant to clause 27.1(b) of the Cleaning Award;
(d)failure to pay the Saturday Penalty Rate pursuant to clause 27.2(a) of the Cleaning Award; and
(e)failure to pay the Sunday Penalty Rate pursuant to clause 27.2(b) of the Cleaning Award.
In the course of closing submissions an agreed position was put that the conduct of Mr. Hauth would not be relied upon and that his knowledge should not be attributed to either of the Pioneer Respondents.[17] The pleading in relation to Mr. Hauth at [10] and [11] of the Statement of Claim was to the effect that he;
a)
was employed as an operations manager for the
Second Respondent;
b)was a contact person for the purposes of the Woolworths Contract;
c)had visited the Tasmanian sites; and
d)had spoken to Mr. Hwang regarding cleaning at the sites.
[17] Transcript 186 [25].
It follows that given that position adopted by the parties it is only the conduct of Mr. Dickinson that can be relied upon for the purposes of s.793 of the Act. No explanation was provided to the Court as to why the Applicant was no longer relying upon the evidence in relation to
Mr. Hauth’s involvement in the matter.It is said by the Pioneer Respondents that a difficulty is created for the Applicant by the form of the pleading as it relates to Mr. Dickinson. No conduct is pleaded against him in [8] of the First Period Statement of Claim and [14] of the Second Period Statement of Claim, save and except that he is:
a)a director, chief executive officer and officer of PCS;
b)one of the persons who signed the Woolworths Contract on behalf of Respondent PFS; and
c)a person with knowledge of the existence of the Industrial Award and the fact that it applies to employees engaged to perform cleaning work.
The pleading in [8] of the First Period Statement of Claim and in [13] -[14] of the Second Period Statement of Claim referred only to conduct which involves signing the Woolworths Contract on behalf of PFS. The only knowledge referred to is his knowledge of the existence of an Award and that it covered employees working on the sites.
Paragraph 146 of the Statement of Claim in LNG 31/2016 refers to those matters that the Pioneer Respondents know or should have known as a result of the matters pleaded in [8] – [12] of the Statement of Claim (the pleadings in [10] have no application as no reliance is placed on the conduct or knowledge of Mr. Hauth by reason of the concession referred to in [76] above). The Pioneer Respondents submit that the conduct of
Mr. Dickinson in simply signing the Woolworths Contract and having knowledge of the existence and application of the Award does not show that the he has the “state of mind”, as that expression is used in s.793 of the Act, to establish that the company has been involved in any way, by act or omission, directly or indirectly knowingly concerned, or involved in or party to the contravention pursuant to s. 550(2)(c) of the Act.
The Applicant’s submissions regarding the Woolworths Cleaning Services Agreement
The Applicant pointed to the fact that Mr. Dickinson signed the Woolworths Contract and the terms of the Woolworths Contract and the documents submitted by the Pioneer Respondents as part of the tender process for that contract as a means of fixing knowledge of the contraventions to the Pioneer Respondents. Clause 6 of that contract provides:
Subcontracting
6.1 Consent
(a)the Supplier must not subcontract or otherwise arrange for all or any part of its obligations under this Agreement to be performed by any other person without the written consent of Woolworths.
(b)for the purposes of clause 6.1 (a), Woolworths consents to the list of subcontractors set out in schedule 4.
(c)if Woolworths approves any sub-contractor pursuant to paragraphs (a) or (b) above, the Supplier must ensure that the sub-contractor does not further subcontract the performance of the Services. For the avoidance of doubt, this means that the supplier must not subcontract services at no more than 1 level.[18]
[18] Cleaning services will tab 17.1 page 9 to the affidavit of Kirsten Desmond sworn 27 November 2017.
Clause 11.1(e) provided:
[t]he supplier must ensure that no less than the applicable Award wages are paid to its Representatives working on the Sites.
“Representatives” is defined in the Woolworths Contract as:
Representative of party representative of a party includes an employee, agent, officer, director, auditor, advisor, partner, consultant, contractor or subcontractor.
The Pioneer Respondents submit that Hwang and Oz Korea as subcontractors are not entitled to Award wages (they say only employees are) and additionally the obligation is owed to Woolworths and not to those people. The Court notes that the plain intention of the clause is to ensure that all people doing work which is the subject of the Woolworths contract are paid no less than the applicable Award wages.
Attached to the Woolworths Contract (at page 30) was a document headed ‘Supermarket Cleaning Specifications: Key Requirements’ (‘the Key Requirements’). Clause 10 of the Key Requirements specified in relation to subcontracting:
10. Subcontracting
…
Under the terms of the RFP and the contract that will be issued, subcontracting is allowable subject to the approval of both Woolworths (sic). Only one tier is permitted. However, you are reminded that you assume all responsibility for any subcontractor you engage to perform any part of the services and it is your obligation to ensure that each subcontractor:
· Has the appropriate insurance workers’ compensation arrangements
· Meets all applicable government laws and regulations
· Pays its employees on time to the correct amount in accordance with the subcontracting requirements in the contract
· Verifies that its employees satisfy the requirements of the Department of Immigration Multicultural and Indigenous Affairs and provides you with any appropriate clearances.
Under Schedule 5 of the Woolworths Contract a table headed “Charges”[19] outlined when each of sites was scheduled to be cleaned Monday to Sunday and that two cleaners per day for a total of 6 hours.
[19] Affidavit of Kristen Desmond sworn 24 November 2017, 153.
The Applicant also points to the document titled “Request for Tender for Provision of Cleaning Services for Eastern and Western sites, the Eastern Western seaboard” (‘Tender Document’), submitted by
Swan Hill in January 2013 as a source of the Pioneer Respondent’s knowledge of Award entitlements and their commitment to overseeing contractors and Mr. Dickinson’s involvement in the day to day management of the businesses.[20][20] See ibid, 421.
Under the heading “Executive Summary” the Tender Document provided:
Pioneer Facility Services submits this tender response for the Delivery of Cleaning Services for Woolworths Eastern and Western Seaboard in accordance with the Cleaning Services Award 2010 (Modern Award) and all state legislative requirements.
At page 422, the Tender Document provides that Pioneer (formerly Swan Hill Commercial Cleaning) was:
established in 1986 and is 100% Australian owned by directors Frank Scarce, Vince Legudi and Aaron Dickinson. The company has an annual turnover of approximately $50 million.
The document further provides under heading “Account Management” that:
Woolworths will benefit from an executive management team with almost 30 years of commercial cleaning experience who are still actively involved in all areas of the business on a daily basis.
In response to a request from Woolworths in that document to outline the systems and processes that they have in place to ensure compliance with all industrial relations laws including “without limitation, payment of applicable Award wages, benefits and entitlements to representatives working on site”, the Pioneer Respondents responded:
Pioneer takes its responsibilities towards industrial relations very seriously. To ensure compliance we have developed an industrial relations policy. In addition to this policy, Pioneer complies with the modern Award in relation to all wage rates, benefits and entitlements. See “supplier attachments” section for our Industrial Relations Policy.[21]
[21] Affidavit of Kristen Desmond sworn 27 November 2017, 447.
The PFS Industrial Relations Policy, dated 30 June 2014, which bears the electronic signature of Mr Dickinson and notes his position as CEO provides as follows:
Aims and Objectives
We consider that good management of industrial relations is an important aspect of our business. To achieve this, we will:
· provide a safe and harmonious working environment which is conducive to keeping our workers content and achieving our operational goals
· comply with all applicable industrial laws, regulations, statutory obligations, award, agreements national and state codes of practice and guidelines
· monitor industrial relations performance in activities of subcontractors and suppliers and maintaining effective communication with them, while recognising their right to have their own industrial relations policies and arrangements.
At page 449 of the Tender Document, under the Pioneer Respondents’ response to Woolworths’ request to “provide details on the qualifications and relevant experience of key personnel to be engaged in the provision of supply and account management” the document stated:
Aaron Dickinson, Vince Legudi, Frank Scarce - Directors
Pioneer Facility Services benefits from the vast experience of its three Managing Directors. Aaron Dickinson has 22 years in the facilities management industry, and Frank Scarce and Vincent Legudi both have 29 years as Managing Directors at Pioneer, one of Australia’s largest facility services companies.
Aaron, Frank and Vince are responsible for implementing the company policies for all employees, as well as the everyday management of the organisation. Their key role is to:
·scrutinise, assess and monitor departments
·promote innovation to enhance service delivery
·ensure the work culture and environment is conducive to optimum employee productivity
·motivate employees by providing them with a defined career path and training opportunities.
In response to the question “[h]ow subcontractor’s staff get paid as per the legislative labour rates” the Tender Document provided at page 452:
Subcontractor selection
As part of our initial subcontractor selection process and ongoing management, we assess and review suppliers on:
· financial health
· compliance with statutory requirements
· service performance
· competitiveness (e.g. using industry benchmarking)
· innovation
· sustainability
All contractors are required to provide proof of payment of legislative labour rates, in line with our own commitment to wages.
Preferred subcontractor agreements
When a subcontractor is selected we put an agreement in place which ensures that alternative subcontractors cannot be substituted without our approval.
Performance Management
We monitor ongoing subcontractor performance monthly against SLAs and KPIs. Our managers undertake inspections and audits of subcontractors work. Quarterly review meetings with all major subcontractors help drive innovation, efficiencies, consistent quality service and adherence to our client’s requirements.
The Pioneer Respondents’ response to these materials is to the effect that these materials are irrelevant because they go to the contract as between PFS and Woolworths and not to the question of their knowledge of the amounts paid to employees performing the work in order for PFS to comply with the terms of the agreement between it and Woolworths.
In my view these materials do go to the knowledge of Mr. Dickinson and the Pioneer Respondents. In my view it is not open for the Pioneer Respondents to enjoy the benefits of the representations for the purposes of obtaining the contract in relation to which the underpaid employees were engaged by the subcontractors to perform work and then disclaim any reliance upon them when it is raised against them that these employees have not been paid in accordance with minimum standards. It is apparent that the directors of the Pioneer Respondents, including Mr. Dickinson, were aware of the need to ensure that minimum payments were made to employees of subcontractors.
Documents were provided by PFS to Woolworths where it was warranted that it would ensure compliance by subcontractors. In order to do so must have known the work performed, the cost of that work when measured against Award rates of pay, the amount paid to the subcontractors and whether that amount covered the cost of that labour. It was also warranted in the Woolworths Contract that Mr. Dickinson had a personal day-to-day involvement in the activities of the business and in particular in relation to ensuring compliance with Award provisions. I have assumed the truthfulness of these warranties and Mr. Dickinson has not given evidence that he did not conduct himself in accordance with the terms of the representations made by him in relation to his involvement in the management of the Woolworths contract. If the warranties and representations are true (as I have assumed them to be as Mr Dickinson has not given evidence to the contrary) then Mr. Dickinson and therefore the Pioneer Respondents knew the essential matters going to the breaches of the minimum pay provisions of the Award. Mr. Dickinson had access to the time records maintained by the relevant employees in order to actively ensure compliance with Award provisions and would therefore have been aware that they were employed on a part-time basis.
It follows that as Mr Dickinson, as a director of that company, was aware that the payments made to the subcontractors, whether that subcontractor was Mr. Hwang or Oz Korea, would not have satisfied the minimum standards. Mr. Dickinson did not give evidence in the proceeding and therefore did not give evidence that he had not conducted himself as he said he would in relation to his involvement in the operations and ensuring compliance with Industrial Awards.
In South Jin, White J found that a company (‘CTS’) and a director and majority shareholder of that company (‘Mr. Stroop’) were accessorily liable for underpayments of employees of a subcontractor (‘South Jin’). The contract concerned the collection of trolleys at Woolworths supermarkets. The Court held that CTS and Mr. Stroop were liable because Mr. Stroop knew that during particular periods, the sum paid to South Jin was insufficient to cover the minimum wages payable to employees.[22]
[22] Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 [371]
The Court did not require that Mr. Stroop have knowledge of the amounts actually paid to those employees. The Applicant urges the same approach and I accept that it is a correct approach. It will often be the case that it will not be possible to prove that a head contractor has actual knowledge of the sums paid to the employees of subcontractors. However, this does not mean that they do not have actual knowledge that the sums paid to the subcontractors are insufficient to meet the minimum employment standards of employees of the subcontractor. Further, I do not accept that it is a requirement that the head contractor be aware of the amount paid to each employee each pay period or the hours worked by each employee. In Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034, this position was outlined by Katzmann J who stated at [957] that:
…where an alleged accessory is aware of a system producing certain outcomes, and those outcomes constitute contraventions of the Act, it is unnecessary to show that the alleged accessory knew the details of each particular instance of those outcomes in order to the show the requisite knowledge.
Her Honour went on to state that if an employee covered by a contract worked weekends, a head contractor could be knowingly concerned in a failure to pay weekend penalties, even though the head contractor may not know the specific weekends or hours the employee worked.[23] In this case, PCS as the head contractor was aware of the work that needed to be done, the hours needed to be worked to achieve that result and the cost of that work when paid in accordance with Award standards.[24]
[23] Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 [957].
[24] Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 was referred to and approved in EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134 [15], [34].
In South Jin, Mr. Stroop managed the trolley collection operations of CTS, including subcontracting and had the day to day responsibility for its trolley collection operations (South Jin at [9]). The knowledge of
Mr. Stroop could be imputed to CTS pursuant to s.793 of the Act at [326].
In the present case given:
a)the representations made to Woolworths about Mr Dickinson’s level of involvement in the scrutiny of all facets of the Pioneer business;
b)the representations made to Woolworths about his active overseeing of arrangements with subcontractors including ensuring that each subcontractor complies with Award entitlement requirements; and
c)his signing a contract as a director of a company agreeing to ensure compliance by representatives with Award entitlements. The Court accepts that Mr Dickinson:
i)has knowledge of the application and operation of the Award;
ii)knew the amounts being paid to subcontractors by PCS;
iii)knew the number of hours required to be worked in order to fulfil the Woolworths Contract and the fact that the times when the work was performed would attract penalty payments; and
iv)knew the amounts paid to the contractors were insufficient to meet the minimum standards.
The Pioneer Respondents submit that in the absence of any direct commercial relationship between PFS and Mr. Hwang and/or OzKorea, PFS had no obligation to ensure that Mr. Hwang or Oz Korea complied with the minimum Award standards in relation to people employed by them. It is put that PFS could not be knowingly concerned in any contravention by those persons because there is no direct commercial relationship between them.[25] As has been found above, the Pioneer respondents did have a direct commercial relationship with
Mr Hwang and OzKorea.
[25] Transcript 170.
The Pioneer Respondents also submit that even if it is established that PFS was bound by the terms of the Woolworths Contract, that agreement does not compel either of the Pioneer Respondents to ensure that the amounts paid to subcontractors are of a particular level.[26]
[26] Transcript 176.
The crux of the submission is that the Pioneer Respondents cannot be held liable pursuant to s.550 of the Act because of an omission; that is, a failure to pay to subcontractors an amount sufficient to cover Award rates.
In my view, in the context of the factual setting presented by this case and the inferences arising from those facts, that omission to pay a sum sufficient to cover Award rates is an act which directly involves the Pioneer Respondents in the contraventions. I say this for the following reasons:
a)Mr. Dickinson was aware that Award rates were payable to employees (whether the Pioneer Respondents’ own or some other businesses’) performing cleaning work in supermarkets;
b)he knew this because PFS, the company of which he is the CEO, entered into the Woolworths Contract referring to that requirement, agreed to ensure compliance with the Award and he signed that contract; and
c)the company, of which he is a director, has, through itself and an associated entity, has been working in the cleaning business for in excess of 20 years and is therefore taken to know about the operation of Industrial Awards.
This case has been conducted by pleadings and as noted above the pleadings are detailed and particularised. The Federal Circuit Court Rules 2001 (Cth) do not deal directly with pleadings. Rule 1.05(2) of the Federal Circuit Court Rules states that when these rules are insufficient, the Court may apply the Federal Court Rules 2011 (Cth) (‘FCR Rules’) to the extent necessary to resolve ambiguity. Therefore, when pleadings are used, they are to comply with the requirements under Part 16 of the FCR Rules, particularly those under r.16.02: Cai v Tiy Loy & Co Ltd (No.2) [2015] FCCA 2924 [16]. Rule 16.0(4) of the FCR Rules states that ‘a party is not entitled to seek any additional relief to the relief that is claimed in the originating application’. This reflects the principle established at common law that relief must be determined based on the pleadings if these are the form chosen through which to seek relief, even where a party later attempts to have the case decided on a different basis: Banque Commerciale S.A., En Liquidation v. Akhil Holdings Ltd (1990) 169 CLR 279, 286 – 287.
In my view the reference to Mr Dickinson’s signing the Woolworths Contract in the pleadings is sufficient to enable the Court to look at the surrounding documents that were signed or submitted by the Pioneer Respondents and which were in evidence. It is open to the Court to utilise those documents as a basis for finding that Mr Dickinson had knowledge of the contraventions. The reference to the evidence in relation to the entry into the Woolworths Contract did not represent a departure from the pleadings such that it can be said that the case was conducted on a different basis to that which was pleaded.
For these reasons, the Court finds that PFS and PCS were knowingly concerned in the underpayment contraventions by Mr. Hwang and OzKorea within the meaning of s.550(1) of the Act.
The Court will make orders against the Respondents in the terms sought by the Applicant in each of the proceedings. The Court will make orders providing for the Applicant to supply the Court with a minute of orders which give effect to these reasons, fixing a time for submissions to be made in relation to penalties.
I certify that the preceding one hundred and eleven (111) paragraphs are a true copy of the reasons for judgment of Judge McNab
Date: 24 August 2018
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