Fair Work Ombudsman v Procraft Group Pty Ltd (No 2)
[2024] FedCFamC2G 1369
•11 December 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Procraft Group Pty Ltd (No 2) [2024] FedCFamC2G 1369
File number(s): MLG 1149 of 2023 Judgment of: JUDGE J YOUNG Date of judgment: 11 December 2024 Catchwords: INDUSTRIAL LAW – FAIR WORK – where judgment entered in favour of applicant for contraventions of the Fair Work Act 2009 (Cth) – penalties sought – consideration of factors relevant to penalty – where underpayment has not been rectified – where respondents have not engaged in any proceedings – where conduct demonstrates deliberate disregard for obligations under the Act - penalties ordered pursuant to s 546(1). Legislation: Fair Work Act 2009 (Cth) ss 539(2), 545(1), 546(1), 546(2)(a), 550(1), 550(2), 716(5)
Federal Circuit Court and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 rr 4.03(3), 4.04(3)(a), 6.01, 13.04(2), 13.05, 17.05(2)(g)
Building and Construction General On-site Award 2020
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8
CFMMEU v ABCC [2018] FCAFC 97
Fair Work Ombudsman v Procraft Group Pty Ltd [2024] FedCFamC2G 256
Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290
Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68
Jordan v Mornington Inn Pty Ltd [2007] FCA 1384
Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65
The Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Trade Practices Commission v CSR Ltd [1990] FCA 762
Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582
Division: Division 2 General Federal Law Number of paragraphs: 47 Date of hearing: 8 November 2024 Place: Melbourne Solicitor for the Applicant: Mr Vas of Office of the Fair Work Ombudsman Solicitor for the Respondents: Did not participate ORDERS
MLG 1149 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: PROCRAFT GROUP PTY LTD AS THE TRUSTEE FOR BUSUTTIL TRUST
First Respondent
BRADLEY BUSUTTIL
Second Respondent
ORDER MADE BY:
JUDGE J YOUNG
DATE OF ORDER:
11 DECEMBER 2024
THE COURT ORDERS THAT:
1.Pursuant to s 546(1) of the Fair Work Act 2009 (Cth) (Act), the First Respondent pay a pecuniary penalty in the amount of $13,320 to the Commonwealth within 28 days of the date of these Orders.
2.Pursuant to s 546(1) of the Act, the Second Respondent pay a pecuniary penalty in the amount of $2,664 to the Commonwealth within 28 days of the date of these Orders.
3.The Applicant have liberty to apply on seven days’ notice in writing in the event of non-compliance with Order 1 or 2 herein.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE J YOUNG
Before the Court is an application by the Fair Work Ombudsman (FWO) for the imposition of penalties in respect of the First and Second Respondent’s contraventions of the Fair Work Act 2009 (Cth) (Act) as found in the default judgment entered by this Court on 20 March 2024: Fair Work Ombudsman v Procraft Group Pty Ltd [2024] FedCFamC2G 256 (Default Judgment).
PROCEDURAL HISTORY
The extensive procedural history of this matter is set out in the Default Judgment.
Upon admissions taken to have been made consequent upon the Respondents’ default pursuant to r 13.04(2) of the Federal Circuit Court and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Rules), the Court declared on 20 March 2024 that:
(a)the First Respondent contravened s 716(5) of the Act by failing to comply with a compliance notice given to it on 6 September 2022 (Compliance Notice); and
(b)the Second Respondent was involved in, within the meaning of s 550(2) of the Act, the First Respondent’s contravention of s 716(5) of the Act by failing to comply with the Compliance Notice.
(March Orders).
Additionally, pursuant to s 545(1) of the Act, the Court ordered that the First Respondent take the steps that were required by the Compliance Notice within 28 days of the March Orders being made by paying $4,569.88, plus interest in accordance with the applicable pre-judgement interest rate prescribed by the Federal Court of Australia, to Mr Jake Kelly (Employee); and provide evidence to the FWO of such amount as being paid. The March Orders further programmed the matter to a penalty hearing on 17 May 2024.
On 28 March 2024, the March Orders were amended pursuant to r 17.05(2)(g) of the Rules to rectify an issue with cross-referencing and for the provision of an order for the parties to file evidence and submissions on penalty (Amended March Orders).
In support of the application for the imposition of penalties, the FWO filed four affidavits. The affidavit of the Fair Work Inspector, Mr Semmler (FWI) filed 19 April 2024, evidences service on 8 April 2024 of the Amended March Orders and the Default Judgment by express post to the registered office of the First Respondent, which is also the Second Respondent’s postal address (Registered Office).
The affidavit of the FWO’s solicitor filed on 13 May 2024 evidences service on 19 April 2024 of a sealed copy of the FWO’s submissions on penalty and affidavit of the FWI by express post to the Registered Office. The same affidavit also evidences further attempts made by the FWO’s solicitor to draw the Respondents’ attention to the penalty hearing by way of email and letter by express post to the Registered Office and the Second Respondent’s email address.
On 15 May 2024, the Court emailed the parties notifying them that the penalty hearing listed for 17 May 2024 had been relisted to a date to be fixed.
On 17 June 2024, the Court emailed the parties notifying them that the penalty hearing was listed for 8 November 2024 at 10.00am.
The affidavit of the FWI filed on 6 November 2024 evidences service on 21 June 2024 of the Court’s email dated 17 June 2024 and the Amended March Orders on the Respondents to the Registered Office and the Second Respondent’s email address. That affidavit further evidences that the above documents were again forwarded to the Second Respondent’s email address on 22 October 2024.
In light of the above, I am satisfied that the Respondents were properly on notice of the Amended March Orders and the penalty hearing and that it was appropriate to proceed in their absence pursuant to r 13.06 of the Rules.
As at the date of hearing, neither the Court nor the FWO had received any communication from the Respondents. Furthermore, the FWO deposes that the First Respondent has not taken any of the actions required by the Compliance Notice or the Amended March Orders.
DOCUMENTS RELIED UPON
The FWO relies upon the following documents:
(1)the Application filed on 28 June 2023;
(2)the Amended Statement of Claim filed on 4 December 2023;
(3)the affidavit of Mr Vas filed on 19 February 2024;
(4)the affidavit of the FWI filed on 19 April 2024;
(5)the FWO’s written submissions filed on 19 April 2024;
(6)the affidavit of service of Mr Vas filed on 13 May 2024; and
(7)the affidavit of FWI filed on 6 November 2024.
The First and Second Respondent have not filed any material in relation to these proceedings or participated in them in any way.
THE CONTRAVENTIONS
Pursuant to the Default Judgment, the First and Second Respondents have been found to have contravened s 716(5) and s 550(1) of the Act respectively.
Section 716(5) and 550(1) of the Act are civil remedy provisions.
DETERMINATION OF PENALTIES
The Court’s power to impose pecuniary penalties resides in s 546(1) of the Act.
Section 546(1) permits the Court to impose a pecuniary penalty “that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.”
In light of the default admissions of the Respondents, that state of satisfaction exists. It falls to determine what level of penalty (if any) is appropriate as against the Respondents in light of the established contraventions.
The single contravention of s 716(5) by the First Respondent, being a corporation, attracts a maximum penalty of $33,300 (calculated based on the penalty unit amount which applied at the time of the contravention). The Second Respondent also engaged in a single contravention by their involvement pursuant to s 550(1) and as an individual also attracts a maximum penalty of $6,660: ss 546(2)(a) and 539(2).
The FWO submitted that an appropriate total penalty is:
(a)$23,310 to $26,640, being 70% to 80% of the maximum penalty, for the First Respondent’s breach of section 716(5) of the Act with respect of the Compliance Notice.
(b)$4,662 to $5,328, being 70% to 80% of the maximum penalty, for the Second Respondent’s involvement in the breach of section 716(5) of the Act with respect to the Compliance Notice.
Factors relevant to the Court’s discretion
As recently affirmed by the High Court of Australia, the purpose of a civil penalty under the regime provided by the Act is primarily, if not wholly, protective in the promotion of the public interest in compliance with the provisions of the Act and in deterrence of further contraventions: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [15]-[16] (Pattinson) citing the plurality in The Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 (“the Agreed Penalties Case”) and French J in Trade Practices Commission v CSR Ltd [1990] FCA 762 (CSR). An “appropriate” penalty being one that “strikes a reasonable balance between oppressive severity and the need for deterrence in a particular case”: Pattinson, [41].
The task of assessing what amount to impose involves the selection of a figure taking into account all factors relevant to the particular case: Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 611, [75] (Gaudron, Gummow and Hayne JJ); Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357, 373-375, [37] (Gleeson CJ, Gummow, Hayne and Callinan JJ); Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68, 84, [55] (Allsop CJ, Davies and Wigney JJ); Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25, 36 [44] (Jagot, Yates and Bromwich JJ) as cited by Snaden J at [26] in Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654. The oft cited decision of French J in CSR at [42] listed those factors relevant to an overall assessment of penalty, and were restated by the Full Court in CFMMEU v ABCC [2018] FCAFC 97 at [20] as follows:
...the nature, character and seriousness of the conduct; the loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and, any co-operation with the regulator and contrition.
This is not an exhaustive list. Further, each case warrants an “idiosyncratic” approach and a careful analysis of all relevant circumstances, as was stated in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J):
Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.
Nature of the conduct
The relevant conduct in the present case is the First Respondent’s failure to comply with the Compliance Notice and the Second Respondent’s involvement in that non-compliance, having been responsible to ensure that the First Respondent complied with its obligations under the Act at the relevant times. Compliance with the Notice required the First Respondent to prepare certain calculations and take specific remedial action by 21 October 2022 and provide reasonable proof of this to the FWO by 28 October 2022. The Respondents did not comply with the Compliance Notice. The subject matter of the Compliance Notice was the underpayment of one former Employee in the total amount of $4,569.88 for contraventions of the Building and Construction General On-site Award 2020 (Award) in relation to payment of annual leave and annual leave loading upon termination.
Loss
In this case, the underpayment has not been rectified. As a result of the First Respondent’s failure to comply with the Compliance Notice, the Employee has not received the amount owing to him under the Compliance Notice, being $4,569.88, almost three years after he ceased employment with the First Respondent and more than two years after the date specified in the Compliance Notice. I consider the absence of the Employee receiving their lawful entitlements to annual leave and annual leave loading is a relevant loss flowing from the contravention. There is also the wastage of public resources in pursuit of this matter, including the commencement of this litigation. These are all factors to be taken into consideration of the penalty in the present case.
Deliberateness
On 6 September 2022, the FWI sent by registered post a copy of the Compliance Notice to the First Respondent’s registered office at Level 2, 18 Montague St, Collingwood, Vic 3066 (as it then was). On the same day, a copy of the Compliance Notice was emailed to the Second Respondent’s business email address. Moreover, a process server left a copy of the Compliance Notice at the principal place of business where the Second Respondent’s wife accepted the Compliance Notice on behalf of the Second Respondent. I am therefore satisfied that the Respondents’ were aware of the Compliance Notice and the obligation to comply with it, including that failure to comply may lead to the FWO commencing proceedings seeking civil penalties and orders for compliance.
Further attempts were made by the FWO to contact the Respondents by email and phone in relation to the Compliance Notice on the following dates:
(a)31 October 2022;
(b)8, 11, 14, 21 and 28 November 2022;
(c)7 December 2022; and
(d)10 May 2023.
Despite being given ample time and multiple opportunities by the FWO to comply with the Compliance Notice and avoid litigation, the First Respondent failed to comply by the required date in the Compliance Notice or at all.
I accept the FWO’s submission that the First Respondent’s conduct in failing to comply with the Compliance Notice, coupled with its failure to engage in these proceedings, demonstrates a deliberate disregard for its obligation under the Act and the authority of the FWO as a regulator of Commonwealth workplace laws and that in light of the above matters the First Respondent’s non-compliance was deliberate.
Size of the business, management involvement and financial circumstances
There is no evidence before the Court as to the size of the First Respondent’s business or the financial circumstances of the Respondents.
In any event, the size and financial circumstances of an employer do not excuse an employer of its obligations to comply with workplace laws: Jordan v Mornington Inn Pty Ltd [2007] FCA 1384 at [99].
Corrective action, cooperation with the FWO and contrition
As set out above, the underpayment has not been rectified by the Respondents.
The Default Judgment was entered into on 20 March 2024 due to the lack of participation in the proceedings by the Respondents. In particular, the Respondents failed to take each of the following steps:
(a)file and serve a Notice of Address for Service as required by r 6.01 of the Rules;
(b)file and serve a Response and any Defence within 28 days of service as required by rr 4.03(3) and 4.04(3)(a) of the Rules;
(c)comply with an order of the Court in the proceedings, being order 2 of the orders of the Court dated 4 December 2023, in accordance with r 13.04(2)(b)(iii) of the Rules;
(d)attend the directions hearings on 4 October 2023, 16 October 2023, and 4 December 2023; and
(e)in light of the above, defend the proceedings with due diligence in accordance with r 13.04(2)(b)(vii) of the Rules.
The First and Second Respondent have failed to comply with order 7 of the Amended March Orders in that they did not file any evidence or submission relating to penalty.
I accept the FWO’s submission that the conduct of the Respondents in failing to engage at all with the current proceedings and failing to comply with their obligations to the Court, is a strong indication that they do not take this matter seriously and are not contrite.
For those reasons, I accept the submission that no discount ought be applied to any penalty ordered.
Compliance with minimum standards
An important consideration in this case is the need for compliance with the statutory framework. The statutory framework concerning compliance notices is an important mechanism for an inspector to deal with non-compliance with minimum entitlements in the Act as an alternative to commencing litigation. It also provides a means of early resolution and rectification without penalty.
The failure to comply with a statutory notice issued by the FWO is serious and such conduct ultimately undermines the Act’s enforcement framework and the safety net of entitlements it is designed to protect.
Deterrence
General deterrence must serve a purpose such that the penalty is not seen by others as just “the cost of doing business”: Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290, [27]. In order to be useful as a general deterrent, a penalty “should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by likeminded persons or organisations’: Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65, [93] (Lander J).
In my view, there is a need for general deterrence in this matter, to emphasise the importance of an effective compliance framework and at a sufficient level to impress upon other employers the importance of complying with the legal obligations owed to their employees.
I also consider this is a case where there is a need for specific deterrence. Although there is no evidence of whether the First Respondent currently employs any employees, it remains registered and the Respondents have demonstrated a disregard for their obligations under the Act by failing to comply with the Compliance Notice. Additionally, the First Respondent has failed to comply with order 3 and 4 of the Amended March Orders. Further, the Second Respondent remains the sole director of the First Respondent.
THE APPROPRIATE PENALTY
When all of the above factors are considered, I am satisfied that it is appropriate to impose a pecuniary penalty on the First Respondent for its contravention of s 716(5) and on the Second Respondent for their involvement in that contravention pursuant to s 550(1) of the Act.
Weighing all of the above factors, I consider it is appropriate to fix the penalty at 40% of the maximum for both the First Respondent and the Second Respondent, in the amounts of $13,320 and $2,664, respectively.
In my view, this is a proportionate response to the respective contraventions of ss 716(5) and 550(1) and strikes a reasonable balance between oppressive severity and the need for both general and specific deterrence in this particular case.
The FWO sought an order that the penalty be payable to the Commonwealth of Australia within 28 days of these orders.
For the reasons set out above, I make the orders set out at the commencement of this judgment.
I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of Judge J Young. Associate:
Dated: 11 December 2024
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