Fair Work Ombudsman v Port Douglas Investments as trustee for the Theo Sourlos Family Trust & Anor
[2018] FCCA 488
•21 February 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v PORT DOUGLAS INVESTMENTS AS TRUSTEE FOR THE THEO SOURLOS FAMILY TRUST & ANOR | [2018] FCCA 488 |
| Catchwords: INDUSTRIAL LAW– Awards – breach of award – contravention of FW Act – breach admitted –pecuniary penalty –penalty to be paid to the Commonwealth. |
| Legislation: Fair Work Act 2009 (Cth), ss.45, 405, 570 |
| Cases cited: Commonwealth of Australia v The Director of Fair Work Building Industry Inspectorate (2015) HCA 46 Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | PORT DOUGLAS INVESTMENTS ACN 161 533 491 AS TRUSTEE FOR THE THEO SOURLOS FAMILY TRUST NO.2 |
| Second Respondent: | THEO SOURLOS |
| File Number: | BRG 586 of 2017 |
| Judgment of: | Judge Vasta |
| Hearing date: | 21 February 2018 |
| Date of Last Submission: | 21 February 2018 |
| Delivered at: | Brisbane |
| Delivered on: | 21 February 2018 |
REPRESENTATION
| Solicitor for the Applicant: | Fair Work Ombudsman |
| There being no appearance by or on behalf of the Respondent |
ORDERS
That the First Respondent pay a penalty in the sum of $45,000.00 for contravention of s.405 of the Fair Work Act.
The Second Respondent pay a penalty in the sum of $9,000.00 for his involvement in the First Respondent’s contravention of s.405 of the Fair Work Act.
That pursuant to ss.546(3)(a) of the Fair Work Act, the First Respondent and the Second Respondent each pay their respective pecuniary penalties to the Commonwealth within twenty-eight (28) days of these Orders.
That the Applicant has liberty to apply on seven (7) days’ notice in the event that any of the preceding Orders are not complied with.
That there be no Order to costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
No. BRG 586 of 2017
| FAIR WORK OMBUDSMAN |
Applicant
And
| PORT DOUGLAS INVESTMENTS ACN 161 533 491 AS TRUSTEE FOR THE THEO SOURLOS FAMILY TRUST NO.2 |
First Respondent
| THEO SOURLOS |
Second Respondent
REASONS FOR JUDGMENT
(Ex tempore)
By application filed in this Court on 23 June 2017, the Fair Work Ombudsman sought declarations that the Respondent, Port Douglas Investments Proprietary Limited as trustee for Theo Sourlos Family Trust No. 2 and the Second Respondent, Theo Sourlos, have declarations made that they had breached the Fair Work Act 2009 (Cth) (“the FW Act”), in particular s.405 of the FW Act. The application also sought pecuniary penalties against both Respondents for such breaches.
The background to this matter was this. A woman by the name of Ms Baker was employed to work at the First Respondent’s café business; firstly as an assistant and later as a manager. She worked for that business between 15 September 2014 till about 9 November 2015. She was terminated at that time.
Around 19 November 2015, some ten days or so later, Ms Baker lodged an application to the Fair Work Commission for a remedy for unfair dismissal.
That application was heard and determined on 22 July 2016. Senior Deputy President Richards found that, amongst other things, Ms Baker had been unfairly dismissed and was entitled to compensation in the amount of $6,200.
The order of the Fair Work Commission required that amount to be paid within seven calendar days. The compensation amount was not paid within those seven days.
On 9 August 2016, the First Respondent company made an application to vary the order to pay in instalments beginning from 1 September 2016. The Fair Work Commission declined to vary the order and insisted that it be paid.
The compensation amount remained unpaid after 1 September 2016.
On 5 September 2016, the First Respondent company sought an extension to comply with the order. No extension was granted. Nothing then occurred.
On 7 April 2017, Ms Baker telephoned the Fair Work Ombudsman’s advice line regarding the unpaid compensation amount. Following the receipt of Ms Baker’s telephone call, Fair Work inspector Jason Lam then made inquiries.
He spoke to Ms Baker on 20 April 2017 and explained that he was going investigate the non-payment of that order. She told him, “I still have not received the money.”
On 14 July 2017, he spoke to Ms Baker and she said she had received $2,200, a part payment, from the Second Respondent.
Officer Lam spoke on 28 April 2017 to the Second Respondent, Mr Sourlos, who is, in effect, the real entity behind the corporate entity which is the First Respondent.
During that telephone conversation, the second Respondent said words to the effect to Mr Lam, “No, I haven’t paid her and I am not paying her anything further... I have no intention of paying.” He did give Inspector Lam his email address.
On 9 May 2017, in response to an email from Inspector Lam, the Second Respondent sent Inspector Lam an email giving his address and requesting that Inspector Lam call him.
On 10 May, Inspector Lam did call the Second Respondent and during that conversation the second Respondent said words to the effect, “She will get nothing out of me.”
On 11 May, Inspector Lam sent a letter to the Second Respondent titled, “Determination of Contravention”, which advised the second Respondent that Inspector Lam had determined that the First Respondent had not complied with the Fair Work Commission Order and, as a consequence, had contravened s.405 of the FW Act
On 26 May 2017, Inspector Lam received an email from the Second Respondent attaching a letter that advised, in effect, the First Respondent was the Trustee of the Theo Sourlos Family Trust No. 2. This caused Inspector Lam to speak to the Second Respondent on 31 May 2017.
During this telephone conversation, the Second Respondent said words to the effect, “The FWC Order should be in the name of Port Douglas Investments, and not the trustee” and “I will not be paying any more money.”
On 19 June, the Fair Work Ombudsman caused a letter to be sent to both Respondents informing them of the intention to commence this proceeding. That letter is in the affidavit of Ms Eleftheriadis, and is annexure AE1. The statement of claim was filed as well in these proceedings.
The matter came before me on 17 July. On that occasion a Mr Zwar appeared for both Respondents. I ordered that the Respondents file a notice of address, file and serve a response and any defence and, once that happened, that the Applicant would file and serve a reply. I adjourned the matter for directions on 28 August 2017.
On that day, there had been no such compliance with my orders at all. The Fair Work Ombudsman filed a number of affidavits, and filed an application in a case seeking default judgment.
On 28 August 2017, I was in Court. Ms Dwight, a solicitor for the Fair Work Ombudsman, was here and there was an attempt to telephone the Second Respondent but he was not answering the telephone. Because there had been a default I then ordered that default judgment be entered for the Applicant against the First Respondent, and had made certain orders subsequent to that and I set the penalty hearing for today, 10.00am on 21 February 2018.
I also ordered that the Applicant pay the amount of $4,000.00 that was still owed to Ms Baker with respect to the order of the Fair Work Commission.
It seems that after I made that order, that the compensation amount was then paid in full to Ms Baker; that is, that the other $4,000.00 was paid.
On 13 September, my Chambers received an unsolicited letter from the Second Respondent addressed in these terms:
“Dear Your Honour,
I am the second Respondent in proceedings brought by the Fair Work Ombudsman listed in February 2018.
You are in no doubt aware that I ensured that Ms Baker was paid all of her outstanding $6,200 in gross wages well within the 6 month period negotiated by my former solicitor, Mr Michael Zwar and the Fair Work Commission.
It was always my understanding that Mr Zwar had reached agreement with Ms Eleftheriadis on behalf of the Ombudsman that the outstanding debt will be paid off in 6 months. I have never disputed liability for that debt, even though of course it was incurred by the first Respondent which was the trading entity at the relevant time.
I am not in a position to be able to afford to pay any more money and it has been a great strain to even be able to meet the amount ordered by the member in 2016.
I am not able to afford legal representation for the final hearing in this matter although it does seem that I have complied with all of the orders made, short even prior to the Ombudsman seeking those orders before you on the last occasion.
In the circumstances, I respectfully ask you forego any further penalty in this matter.”
Attached to his letter was an affidavit that was never filed from Mr Zwar who gives his version of the dealings with the Fair Work Ombudsman and talks about the fact that he said that the debt could be paid in twelve months and that he was told on 23 June that the Commission will not accept a plan for repayment of more than six months.
I take that with some grain of salt because 23 June was the day in which the Commission had filed this application. It does not seem that there had been real contact by the Respondents until the Fair Work Ombudsman had told the First and Second Respondent that they were commencing this action.
The strange thing is that Mr Zwar says in the affidavit that he was never told that proceedings had already been commenced.
On 28 June, the solicitor swears he had this conversation, with the Fair Work Ombudsman stating that the first instalment will be made on 1 July and this has the effect of avoiding necessity for proceedings. He was told it was not sorted and that the Fair Work Ombudsman needed to know the dates and whether the amounts were gross and net, and Mr Zwar said, “So as far as we are concerned, the matter is concluded and there is no need for any proceedings, and if I have to, I will go on oath to this effect.” And the conversation concluded.
The strange thing is that Mr Zwar appeared before me on 17 July 2017 and nothing of the sort was said to me on that date. There is no notation to that and instead of complying with the Orders that I made, the Second Respondent seemed to have simply avoided them.
I did make an order in Chambers on 21 November 2017 detailing when submissions were to be filed in relation to penalty, but the Respondents did not make any submissions as to penalty.
Last Friday, 16 February, my Chambers received an email from Mr Sourlos, the Second Respondent, which was addressed,
“Good morning, I have now my medical certificate and both my letters to the Court explaining my situation. Thank You”.
The letter dated 9 February, read:
“Your Honour,
I am refer to my letter written to you on 13 September 2017 which I trust is on the Court file.
I note that the matter is coming on for hearing on 21 February 2018. However, for a variety of reasons I simply cannot attend and will have to rely on this letter and the affidavit of my previous solicitor Michael Zwar as well as the letter of 13 September 2017.
I cannot afford legal representation and as I stated previously I was simply not able to pay the gross amount of $6,200 to Ms Baker immediately after the Fair Work determination in 2016.
I endeavour to borrow the money and ultimately did so and rather than pay by 6 monthly instalments which I understood was the result of direct discussions between Mr Zwar and Ms Eleftheriadis on behalf of the Fair Work Ombudsman instead, I was able to borrow the full amount and discharge it immediately…”
Which is strange because there was $4,000.00 still outstanding at the time I made the default Orders on 24 August, but in any event I return to the letter,
“…In addition to being financially pressured I am also currently ill and not able to fly. A medical certificate is attached herewith.
I trust these matters can be taken into Your Honour’s consideration when it comes to the issue of any penalty in this matter as it was never my intention on the part of Port Douglas, the first Respondent or myself to wilfully ignore the orders of the Commission.”
And then there is a letter from a Dr Wan Sabag that simply says,
“To whom it might concern,
In my opinion, Mr Theo Sourlos, aged 57 years, is suffering from a medical condition that unables (sic) him to travel for the next three month.
Yours sincerely”
It does not say what that medical condition is but, in any event, it does not particularly matter.
I have taken into account everything that Mr Sourlos has said regarding this matter.
However, the sequence of events is clear that the Respondents were simply going to defy the order of the Fair Work Commission. It took the intervention of the Fair Work Ombudsman to start to get some measure of compliance with an order of the Commission by the Respondents, and even then when the Fair Work Ombudsman intervened, there was again a stubborn reluctance to comply with the order.
It was only when the threat of action pursuant to s.405 of the FW Act occurred that the Respondents actually started to talk in proper terms. I acknowledge that there was a part-payment later in the proceedings to Ms Baker, but that was after the matter had already come before me.
There was no mention at any time on 17 July 2017 that the First and Second Respondents had already paid or had started to pay the sum, or that there was no need for these proceedings at all. So everything that has been said by the Second Respondent and Mr Zwar in that affidavit has to be taken, firstly with a grain of salt, and secondly, where it conflicts with the evidence given by the Fair Work Ombudsman, I quite properly prefer the evidence of the Fair Work Ombudsman.
It is trite to say that there are a number of principles that guide the determination of these penalty hearings. They have been outlined in a number of often repeated authorities. I do, however, believe that really the starting point is what was said by the High Court in the Commonwealth of Australia v The Director of Fair Work Building Industry Inspectorate (2015) HCA 46 where, at paragraph 55, the Court said,
“…whereas criminal penalties import notions of retribution and rehabilitation, the purpose of the civil penalty, as French J explained in Trade Practices Commission v CSR Limited, is primarily if not wholly protective in promoting the public interest in compliance.”
And, quoting that case, the High Court cited this passage:
“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution or rehabilitation, within the sense of the Old and New Testament moralities that imbue much about criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]
… The principle, and I think probably the only, object of the penalties imposed by s76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act.”
In Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7 (“the Pangea Case”) that was looked at by then Federal Magistrate Mowbray, a list of factors was enumerated to assist the Court in looking at relevant matters. Whilst that list is not exhaustive, it is also not to be seen as some form of checklist to be slavishly followed as if to come up with some sort of mathematical formula for the calculation of such penalties.
It seems to me that the overriding consideration here, notwithstanding everything that has been said and everything I have already mentioned, is that this was a deliberate defiance of an order of the Fair Work Commission.
The Fair Work Commission is set up to ensure that there is a harmonious industrial relation regime in this country. It is meant to be a Commission that can sort out the sort of problems that arose between the First and Second Respondent and Ms Baker.
Whilst people may not always agree or like the decisions of such a Commission, it is an integral part of not only the industrial relations landscape but also of the Rule of Law. Respect for the institution is paramount and where there has been disrespect, the sort of matters that the High Court have spoken of are absolutely paramount.
The Court must, in imposing penalty, make a very loud statement that the Fair Work Commission must be respected. Section 405 must be a section by which the Court shows its absolute displeasure at any disrespect shown by any party towards the Fair Work Commission.
It is quite obvious to me that this money would not have been paid to Ms Baker if it had not been for the beginning of proceedings by the Fair Work Ombudsman. It is the fact that Ms Baker has been paid that is really the only saving grace for the two Respondents in this matter, and that is the reason why I would not be imposing the maximum on either of the Respondents.
In looking at all matters, I am of the view that the Court should order that the First Respondent pay a penalty of $45,000.00 for its contravention of s.405, and the Second Respondent pay a penalty of $9,000.00 for his involvement for his involvement in the First Respondent’s contravention.
Those penalties may be seen as somewhat steep, but in my view they are totally justified. The institution of the Fair Work Commission must be respected and contraventions of its orders in such a deliberate and blatant way cannot be understated, and I impose those penalties. As I say, if it had not been for the payment of the money, I would have imposed the maximum penalty.
The Fair Work Ombudsman has also made submissions as to the payment of costs in this matter. Section 570 of the FW Act says that:
“ (1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.
Subsection (2) relevantly says,
“ (2) The party may be ordered to pay the costs only if:
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the cost”.
What has been submitted to me is that there were two unreasonable acts.
They are, firstly, the failure to comply with the Fair Work order or to make any payment whatsoever from the time that the Fair Work Commission made the order; to when they declined to vary the order; to the time when Inspector Lam spoke to the Second Respondent on three occasions and was told in no uncertain terms that there would not be any payment. Such an unreasonable act, it was submitted, has meant that the Fair Work Ombudsman had to institute these proceedings.
The second unreasonable act is that the failure to engage in these proceedings; that is, to comply with the orders that I had made to file responses and affidavits. It is submitted that this has caused the Fair Work Ombudsman to come to this Court to seek default judgment. In effect, it has caused two unnecessary Court proceedings that would not have been needed if the Respondents had not acted unreasonably.
There is much force in what has been said. However, it seems to me that those actions which are deemed to be unreasonable are the exact same actions that I have taken into account in setting what I consider to be the appropriate pecuniary penalty.
In my view, the unreasonable act has to be something other than what the actual contravention of the FW Act is.
Whilst it may be true that the second unreasonable act identified by the Fair Work Ombudsman does not fall into that category, in many ways such an unreasonable act, whilst it has meant that there is a default judgment, has meant that there is not the same sort of costs that would be incurred in setting up a statement of agreed facts and going backwards and forwards until the other side has come up with something that both sides agree can come to this Court.
In all of those circumstances, given that s.570 is a discretionary provision, I decline to make any orders for costs.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Judge Vasta
Date: 14 May 2018
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