Fair Work Ombudsman v Proplas Industries Pty Ltd and Anor and; Fair Work Ombudsman v Blacklight Investments Pty Ltd and Anor (No.3)
[2012] FMCA 130
•2 March 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v PROPLAS INDUSTRIES PTY LTD & ANOR AND FAIR WORK OMBUDSMAN v BLACKLIGHT INVESTMENTS PTY LTD & ANOR (No.3) | [2012] FMCA 130 |
| INDUSTRIAL LAW – Civil penalty provisions – default judgment – underpayments – principles and considerations relevant to penalty. |
| COSTS – Whether unreasonable act or omission – whether unreasonable act or omission caused other party to incur costs. |
| Industrial Relations Act 1979 (WA), ss.29(1)(b)(ii), 83(1), 84A(1)(a) Fair Work Act 2009 (Cth), ss.3(b) and (c), 44, 45, 557(1) & (2), 569(2), 570(1) & (2), 712, Schedule 16 Federal Magistrates Court Rules 2001 (Cth), r.13.03B, Schedule 1 Waste Management Award 2010 |
| Attorney-General v Tishy (1982) 30 SASR 84 Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2011] FCA 810 Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 CFMEUvAustral Bricks (Qld) Pty Ltd (2009) 178 IR 470; [2009] FMCA 143 Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd (1994) 127 ALR 673 Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 Workplace Ombudsman v Queensland Marine and General Insurance Management Pty Ltd and Ors [2011] FMCA 261 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | PROPLAS INDUSTRIES PTY LTD |
| Second Respondent: | BRENDAN RAYMOND LEPPARD |
| File Number: | PEG 253 of 2010 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | BLACKLIGHT INVESTMENTS PTY LTD |
| Second Respondent: | BRENDAN RAYMOND LEPPARD |
| File Number: | PEG 254 of 2010 |
| Judgment of: | Lucev FM |
| Hearing date: | 1 December 2011 |
| Date of Last Submission: | 7 February 2012 |
| Delivered at: | Perth |
| Delivered on: | 2 March 2012 |
REPRESENTATION
| Counsel for the Applicant: | Ms A Becroft |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| For the First Respondent in PEG253 of 2010: | No appearance |
| For the Second Respondent in each of PEG 253 of 2010 and PEG 254 of 2010 | Mr B Leppard in person |
ORDERS
PEG 253 of 2010
THE COURT ORDERS THAT:
The first respondent pay a penalty of $75,900, to be paid to the Commonwealth by 30 March 2012.
The second respondent pay a penalty of $17,820, to be paid to the Commonwealth by 30 March 2012.
The applicant’s costs of $1,779.50 to be paid by 30 March 2012 as follows:
(a)$889.75 by the first respondent; and
(b)$889.75 by the second respondent.
PEG 254 of 2010
THE COURT ORDERS THAT:
The second respondent pay a penalty of $14,520, to be paid to the Commonwealth by 30 March 2012.
The applicant’s costs of $1,779.50 to be paid by 30 March 2012 by the second respondent.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 253 of 2010
| FAIR WORK OMBUDSMAN |
Applicant
And
| PROPLAS INDUSTRIES PTY LTD |
First Respondent
| BRENDAN RAYMOND LEPPARD |
Second Respondent
PEG 254 of 2010
| FAIR WORK OMBUDSMAN |
Applicant
And
| BLACKLIGHT INVESTMENTS PTY LTD |
First Respondent
| BRENDAN RAYMOND LEPPARD |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This matter concerns two separate applications (PEGs 253 and 254 of 2010) under the civil penalty provisions of the Workplace Relations Act 1996 (Cth),[1] the Fair Work Act 2009 (Cth),[2] and the Workplace Relations Regulations 2006 (Cth).[3] These matters are now before the Court for the determination of penalty and costs.
[1] “WR Act”.
[2] “FW Act”.
[3] “WR Regulations”.
Earlier orders
On 13 July 2011 in PEG 253 of 2010 the Court entered default judgment against Proplas Industries Pty Ltd[4] and it sole director Mr Leppard under r.13.03B of the Federal Magistrates Court Rules 2001 (Cth).[5] The Court also ordered the production of certain employment records, and made a declaration of contravention as follows:
[4] “Proplas Industries”.
[5] “FMC Rules”.
4. Pursuant to s.16 of the Federal Magistrates Act 1999 (Cth) the First Respondent, and by reason of his involvement for the purposes of s.550 of the FW Act the Second Respondent, contravened:
(a) section 45 of the FW Act in relation to:
(i) Mr Donald Jones (Jones);
(ii) Mr Fawaz Rajab (Rajab); and
(iii) Mr Jamal Mohammed (Mohammed)
by failing to pay the minimum basic hourly rate of pay and casual loading as prescribed under the Waste Management Award 2010;
(b) item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) in relation to Ms Tamara Von Forslun (Von Forslun) by failing to pay the Minimum Conditions of Employment Act 1993 (WA) and the Australian Pay and Classification Scale;
(c) section 44 of the FW Act by failing to pay Von Forslun accrued and untaken annual leave on termination of employment pursuant to s.90(2) of the FW Act; and
(d) section 712(3) of the FW Act by failing to comply with a Notice to Produce Records or Documents (Contraventions).
The above declaration related to five contraventions because the failure to pay:
a)the minimum basic hourly rate of pay; and
b)the casual loading,
under the Waste Management Award 2010 are separate contraventions.
The Court went on to order that Proplas Industries pay compensation for loss suffered by employees as follows:
(5) The First Respondent pay the following amounts of compensation for loss suffered:
(a) $892.50 to Jones;
(b) $350 to Rajab;
(c) $357.61 to Mohammed; and
(d) $5,799.37 to Von Forslun,
by 10 August 2011.
The Court also made an order for production of records in the following terms:
(3) Pursuant to s.545(1) of the Fair Work Act 2009 (Cth) (FW Act) the First Respondent provide to the Applicant by 27 July 2011 the following documents for all employees performing work for the First Respondent in Western Australia during the period 18 August 2009 to 9 May 2010:
(a) records indicating age, classification and contact details;
(b) tax file declarations;
(c) all payslips, timesheets and other records indicating hours worked;
(d) records relating to the accrual of annual leave and records demonstrating any periods of annual leave taken; and
(e) records relating to the termination of any employee whose employment ended during the period specified.
In PEG 254 of 2010 default judgment was entered against Mr Leppard only under r.13.03B of the FMC Rules. The Court made the following declaration:
(3) Pursuant to s.16 of the Federal Magistrates Act 1999 (Cth) that, by reason of his involvement for the purposes of s.728 of the Workplace Relations Act 1996 (Cth) (WR Act) and s.550 of the Fair Work Act 2009 (Cth) (FW Act) respectively, the Second Respondent contravened:
(a) section 182(1) of the WR Act in relation to Mr Ryan Tomkins (Tomkins) by failing to pay the minimum basic hourly rate of pay payable under the preserved Australian Pay and Classification Scale (APCS) derived from s.12 of the Minimum Conditions of Employment Act 1993 (WA) (MCE APCS);
(b) item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) in relation to Mr Mohamed Nor (Nor) and Mr Hassan Ali (Ali) by failing to pay the minimum basic hourly rate of pay and casual loading as prescribed under the transitional MCE APCS; and
(c) section 712(3) of the FW Act by failing to comply with a Notice to Produce Records or Documents (Contraventions).
The above declaration related to five contraventions because the failure to pay:
a)the minimum basic hourly rate of pay; and
b)the casual loading under the MCE APCS,
are separate contraventions.
The Court also ordered that Mr Leppard pay compensation for loss suffered by employees as follows:
(4) The Second Respondent pay the following amounts by way of compensation for loss suffered:
(a) $228.96 to Tomkins;
(b) $1,323 to Nor; and
(c) $540 to Ali,
by 10 August 2011.
Orders were made against Mr Leppard only in PEG 254 of 2010 because Blacklight Investments Pty Ltd,[6] who were the first respondent in PEG 254 of 2010 had been deregistered with effect from on or about 27 May 2011,[7] and the Court determined that the proceedings against Blacklight Investments were therefore a nullity, and there was no necessity for the Court to make any further order concerning Blacklight Investments.[8]
[6] “Blacklight Investments”.
[7] Fair Work Ombudsman v Proplas Industries Pty Ltd & Anor and Fair Work Ombudsman v Blacklight Investments Pty Ltd & Anor [2011] FMCA 506 (“Proplas Industries (No. 1)”) at para.14 per Lucev FM.
[8] Proplas Industries (No. 1) at para.26 per Lucev FM.
A hearing as to penalty and costs
At a directions hearing on 22 July 2011 the matter was set down for a hearing as to penalty and costs on 6 October 2011, with orders for the filing of evidentiary material and outlines of submissions.
On 6 October 2011 Mr Leppard, who appeared on his own behalf in both matters as second respondent, was manifestly not fit to proceed with the hearing.
The Court therefore made orders as follows:
1. The penalty hearing be adjourned to 2:15pm on 1 December 2011.
2. No further application for adjournment of the proceedings by the second respondent be considered by the Court unless the application is supported by an affidavit of a medical practitioner or an allied health professional annexing a report as to the reasons for any further adjournments, and subject to:
(a) the medical practitioner or allied health professional attending this Court for cross-examination by the applicant; and
(b) the filing and service of the affidavit of the medical practitioner or allied health professional not later than 4:00pm on 28 November 2011.
When the matter came on for hearing on 1 December 2011 Mr Leppard again applied for an adjournment, this time for three months. That application was rejected, but, for the reasons set out in Fair Work Ombudsman v Proplas Industries Pty Ltd & Anor and Fair Work Ombudsman v Blacklight Investments Pty Ltd & Anor (No. 2),[9] the Court made the following orders:
[9] [2011] FMCA 976 at paras.16-20 per Lucev FM (“Proplas Industries (No. 2)”).
1. The applicant to file and serve:
(a) any further written submissions; and
(b) any further affidavits,
in relation to penalty and costs by 8 December 2011.
2. The [respondents] file and serve:
(a) submissions; and
(b) any affidavits,
in relation to penalty and costs by 27 January 2012.
3. The matter be determined on the submissions and affidavits relied upon, with no cross-examination on the affidavits, subject to sub-sections (4), (5) and (6) of section 64 of the Federal Magistrates Act 1999 (Cth).
4. Liberty to apply by 3 February 2012 to cross-examine deponent of affidavits filed with respect to penalty and costs.
5. Otherwise the matter be adjourned to 9.00am on 2 March 2012 for judgment as to penalty and costs.
Penalty – general principles and considerations
General principles concerning penalty
The federal courts have regard to general principles which have been developed in relation to the imposition of penalties, in matters under the WR Act and FW Act, and associated regulations, including the following:
a)fundamentally, the penalty must be proportionate to the gravity of the contravening conduct;[10]
[10] Attorney-General v Tishy (1982) 30 SASR 84 at 92 per Wells J; Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2011] FCA 810 at para.25 per Gilmour J (“ABCC”).
b)penalties are imposed for the following purposes:
i)punishment, proportionate to the offence and according to prevailing standards;
ii)personal or specific deterrence, assessing the risk of reoffending, and general deterrence, as a deterrent to others who might be likely to offend; and
iii)rehabilitation;[11]
c)the sentencing task is one of instinctive synthesis in which the court takes account of all relevant factors and arrives at a single result taking due account of all of those relevant factors;[12]
d)proportionality and consistency are a final check on the penalty assessed;[13]
e)courts may identify a range of factors appropriate to the assessment of penalty, but ought to be wary of the use of check lists which “give rise to the risk of transforming the process of instinctive synthesis into the application of a rigid catalogue of matters for attention”;[14] and
f)courts ought also be wary of comparing penalties from other cases when assessing the amount of penalty to be fixed.[15]
[11] Ponzio v B & P Caelli Constructions Pty Ltd and Ors (2007) 158 FCR 543 at 559-560 per Lander J; [2007] FCAFC 65 at para.93 per Lander J (“Ponzio”); ABCC at para.26 per Gilmour J.
[12] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 567-568 per Gray J and 572 per Graham J; [2008] FCAFC 8 at para.27 per Gray J and para.55 per Graham J (“Australian Ophthalmic Supplies”); Wong v The Queen (2001) 207 CLR 584 at 611-612 per Gaudron, Gummow and Hayne JJ; [2001] HCA 64 at paras.74-76 per Gaudron, Gummow and Hayne JJ; ABCC at para.27 per Gilmour J.
[13] Australian Ophthalmic Supplies FCR at 572 per Graham J; FCAFC at para.54 per Graham J; ABCC at para.28 per Gilmour J.
[14] ABCC at para.30 per Gilmour J; Australian Ophthalmic Supplies FCR at 579-580 per Buchanan J; FCAFC at paras.89-91 per Buchanan J.
[15] NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295 per Burchett and Kiefel JJ; ABCC at para.31 per Gilmour J.
General considerations relevant to assessment of penalty
Considerations which may be taken into account in assessment of penalty are well established and have been consistently applied by this Court.[16] Broadly, the relevant factors can be listed as follows:
[16] Examples include: Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 (“Mason”); Olsen v Sterling Crown Pty Ltd (2008) 177 IR 337; [2008] FMCA 1392 (“Sterling Crown); CFMEUv Austral Bricks (Qld) Pty Ltd (2009) 178 IR 470; [2009] FMCA 143; Workplace Ombudsman vGolden Maple Pty Ltd (2009) 186 IR 211; [2009] FMCA 664 (“Golden Maple”); Fair Work Ombudsman v Industrial Roadpavers (WA) Pty Ltd (2010) 194 IR 436; [2010] FMCA 204.
a)the nature and extent of the conduct which led to the contraventions;
b)the circumstances of the conduct (including deliberate defiance or disregard of Commonwealth workplace relations legislation);
c)the consequences of the contravening conduct;
d)the objects of Commonwealth workplace relations legislation;
e)whether the contraventions are distinct or arise from a single course of conduct;
f)deterrence, both general and specific;
g)relevant record of civil penalty contraventions;
h)the size and financial resources of the contravener;
i)co-operation with regulatory authorities (if any);
j)the contravener's contrition (if any);
k)the size of the prescribed penalty, and any recent increases to that prescription; and
l)the totality principle.
A number of the factors are relevant to the present matters and are therefore considered below.
PEG 253 OF 2010
In PEG 253 of 2010 the FW Ombudsman relies on the following evidence:
a)the affidavit of Kate Rebecca Walawski sworn 9 June 2011;[17]
b)the affidavit of Scott Clarke sworn 22 June 2011;[18] and
c)the affidavit of Mattison Staples sworn 24 June 2011.[19]
[17] “Ms Walawski’s Affidavit”.
[18] “Mr Clarke’s Affidavit”.
[19] “Mr Staples’ Affidavit”.
The FW Ombudsman also relies on the amended statement of claim filed on 16 May 2011.[20] With default judgment having been entered, and there being no defence filed, the facts asserted in the Amended Statement of Claim are taken by the Court to have been established.
[20] “Amended Statement of Claim”.
Mr Leppard filed an affidavit sworn 1 February 2012,[21] which was not filed in accordance with the timetable in the Court’s orders of
1 December 2011. Mr Leppard’s Affidavit was filed over seven weeks late. For reasons which will become apparent the lateness matters little in the final analysis, and the Court will not refuse to consider Mr Leppard’s Affidavit in the basis of lateness, noting that, in any event, the FW Ombudsman filed submissions in response to Mr Leppard’s Affidavit.
[21] “Mr Leppard’s Affidavit”.
Paragraphs 1-4 of Mr Leppard’s Affidavit are irrelevant as they dispute:
a)liability, which has already been determined; and
b)they do not go to issues to be considered in relation to the assessment of penalty.
As those paragraphs are irrelevant they will not be taken into consideration.
Paragraph 5 of Mr Leppard’s Affidavit asserts that:
a)he does not have any money or realisable assets;
b)his day-to-day living expenses are met by borrowings from family and friends; and
c)the FW Ombudsman’s media releases have contributed to losses of $32,500 from “investors”.
There is also some material in paragraph 5 of Mr Leppard’s Affidavit, which is inadmissible for the same reasons as paragraphs 1-4, in that it runs contrary to the default judgment already entered.
With respect to the admissible material it consists of nothing more than bare assertions, and is not supported by any evidence showing:
a)the diminution, dilution, depletion or realisation of assets to demonstrate that Mr Leppard does not have any money or realisable assets;
b)no evidence of the borrowings, either as to their amount, or if they are borrowings, their documentation as loans, or other evidence of the borrowing liability incurred, and no independent evidence of these matters; and
c)no evidence of the alleged media release by the FW Ombudsman.
There is therefore little, if any, weight which can be given to the assertions made in Mr Leppard’s Affidavit.
Nature and extent of the conduct
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)the contraventions represent a failure to provide basic and important statutory minimum entitlements under Commonwealth workplace relations laws;
b)the fundamental nature of the contraventions displays a disregard for statutory obligations;
c)the contraventions affected four employees who were employed by Proplas Industries, all of whom were underpaid;
d)three of the employees can be properly characterised as vulnerable employees, namely:
i)Jones, Rajab, and Mohammed, having previously been unemployed, were referred to Proplas Industries by an employment agency; and
ii)Mohammed, who is from a non-English speaking background;
e)Jones, Rajab, and Mohammed were employed as casuals, and as such their employment was precarious;
f)Proplas Industries received, and continues to receive, a benefit from the underpayments, having never repaid any of the amounts owed;
g)Mr Leppard was the sole director and secretary, and held 95 per cent of the shares of Proplas Industries;
h)Mr Leppard was responsible for the day-to-day management of Proplas Industries, and was responsible for determining and setting the terms and conditions for the employees; and
i)Proplas Industries and Mr Leppard were advised by the FW Ombudsman in approximately March 2010 that a complaint had been received, and, on or about 16 December 2010, were informed of the outcome of the FW Ombudsman’s determination concerning the failure to comply with statutory minimum requirements.
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
The Court accepts that the failure to pay minimum entitlements is a fundamental breach of a central object of Commonwealth workplace relations laws, and that the failure to comply with a notice to produce records or documents is a failure which precludes the FW Ombudsman from undertaking investigations which the FW Ombudsman is statutorily entitled to undertake with a view to ensuring compliance with minimum standards under workplace relations legislation.[22]
[22] FW Act, ss.44, 45 and 712.
In this case, the Court also accepts that, at least to some degree, the employees concerned might properly be characterised as vulnerable employees, having previously been unemployed, and employed by Proplas Industries as casuals. The fact that one of the employees affected was from a non-English speaking background might also have increased his vulnerability.
The Court also accepts that Proplas Industries has directly obtained a benefit by reason of its underpayment of the employees, and that Mr Leppard has indirectly obtained a similar benefit as he is the sole director and secretary, and holder of 95 per cent of the shares in Proplas Industries.
Circumstances in which the conduct took place
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)the employees were employed on a full-time casual basis;
b)the employees were employed by Proplas Industries for periods of between two days and six weeks;
c)the contraventions occurred throughout the entire period of employment; and
d)there is no evidence to suggest that any of the employees were particularly well versed in industrial and employment matters, or that they knew their rights under relevant industrial instruments.
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
The Court notes that the relevant periods of employment were quite short, but that the employees concerned were underpaid for the totality of those periods.
Although the employees exhibit characteristics of vulnerability, a finding that employees are vulnerable does not of itself support findings that:
a)the employees are exploited because of their vulnerability; and
b)any detriment suffered by the employees was an additional material detriment by reason of the employees’ vulnerability, that is, additional to what would otherwise have been the case for an employee who was not vulnerable.[23]
[23] Hanssen Pty Ltd v Jones (2009) 179 IR 57 at 67 and 68 per Siopis J; [2009] FCA 192 at paras.56-58 and 60-62 per Siopis J, followed in Golden Maple IR at 225 per Lucev FM; FMCA at para.15 per Lucev FM.
In the circumstances of this case it may be inferred that these employees were, at least to some degree, vulnerable, for reasons set out above, and suffered some additional material detriment because of their vulnerability, and the Court so finds.
Nature and extent of loss or damage
FW Ombudsman’ submissions
The FW Ombudsman submits that:
a)the underpayments based on:
i)the statutory minimum entitlements total $4,455.56; and
ii)the contractually agreed rates total $7,399.48;
b)the employees were underpaid between $350 and $5,799.37 (based on the safety net contractual entitlement rates), which is a significant amount of money for previously unemployed employees reliant on the minimum wage, and that the impact on the employees was therefore substantial; and
c)it is reasonable to conclude that the contraventions were not isolated to the period the subject of these proceedings, as the concurrent proceedings, Fair Work Ombudsman v Blacklight Investments Pty Ltd & Brendan Leppard,[24] relate to the non-payment of wages during an earlier period, being March, July and August of 2009.
[24] PEG 254 of 2010.
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
The nature of the loss and damage is, as indicated above, serious because it involves contravention of minimum standards of the most fundamental kind: the payment of wages and entitlements. The extent of the loss and damage ranges from the relatively insignificant, to the quite significant, a factor which is magnified to some degree by the fact that the employees concerned were previously unemployed, and that the wage entitlements which were unpaid were minimum rates and entitlements. Furthermore, it can be inferred that the failure to comply with the notice to produce records and documents inhibited the FW Ombudsman’s ability to determine the complete nature and extent of any loss or damage.
It is not possible on the evidence to draw the conclusion that the FW Ombudsman invites the Court to reach with respect to whether or not the underpayment contraventions were or were not isolated to the period the subject of these proceedings. The fact of the matter is that an allegation has been made with respect to a particular period, and it is that period which has been the subject of default judgment, and evidence with respect to penalty. If the FW Ombudsman considers that there have been other contraventions, or contraventions over an extended period, it had the opportunity to file, and took the opportunity to file, an amended statement of claim. If there are other contraventions, and if it is in the public interest to institute further proceedings, there is nothing to prevent a further application being made.
Similar previous conduct
FW Ombudsman’s submissions
The FW Ombudsman submits that Mr Leppard was:
a)involved in proceedings in 1989 concerning the non-payment of contractual entitlements;[25] and
b)the subject of an application for failure to comply with a notice to produce records or documents in 2003,[26]
and, therefore, Mr Leppard is a repeat wrongdoer.
[25] Rutley v Leppard trading as Instant Carpet Dry Cleaners (1990) 70 WAIG 2455 (“Rutley”).
[26] Logan-Scales v Leppard (2003) 83 WAIG 1665; [2003] WAIRC 08508 (“Logan-Scales”)
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
The decision in Rutley is that of a single Commissioner of the Western Australian Industrial Relations Commission[27], and is not in relation to breach of an industrial award or industrial instrument (which would have had to be determined by an Industrial Magistrate in the Industrial Magistrates Court of Western Australia), but rather a claim for a denied contractual benefit, which is a quasi contractual jurisdiction given to the WAIRC by the Western Australian Parliament.[28] Rutley is therefore not an example of contravention of a penalty type provision, but is more akin to a determination of a civil breach of contract claim. Rutley is therefore a case which the Court will not consider in determining whether or not there has been similar previous conduct for penalty purposes.
[27] “WAIRC”.
[28] See Industrial Relations Act 1979 (WA), s.29(1)(b)(ii) (“IR Act”), which gave the WAIRC specific jurisdiction to deal with applications by individual employees claiming that they have been denied a contractual benefit, whereas the enforcement of awards, industrial agreements and certain orders fell to the Industrial Magistrates Court of Western Australia under s.83(1) of the IR Act. The Full Bench of the WAIRC dealt with applications for contravention of a provision of the IR Act (as occurred in Logan-Scales): IR Act, s.84A(1)(a).
In Logan-Scales the most senior possible Full Bench of the WAIRC dealt with an application concerning the failure by Mr Leppard to comply with a notice to produce records or documents. The notice to produce was issued by a State government Industrial Inspector in connection with an alleged failure to pay wages to several employees. The WAIRC Full Bench concluded as follows:
The following facts as we find them are also relevant factors in determining the penalty to be imposed:-
(a) It is 17 months since the records were requested and three requests for production of documents over a 17 month period have not been complied with, and to all intents and purposes ignored.
(b) Further delay has been occasioned in these proceedings by the failure of Mr Leppard to obtain a legal practitioner’s or agent’s advice with any expedition.
(c) (i) Further delay has been caused by Mr Leppard failing to comply with an undertaking to produce the documents, given in open court, without explanation or apology.
(ii) He has treated this Commission in a contumelious manner.
(iii) He has treated public officers, mainly industrial inspectors, carrying out their duties under the Act, and his obligations under the Act, and the requests of those officers under the Act, with contempt.
(iv) He has treated the law of this State and his obligations thereunder with contempt.
(v) He has shown no remorse.
(vi) He has sought to delay and has delayed the meeting of his statutory obligations.
(vii) He has given no indication that he will meet those statutory obligations in the future and, in fact, has purported to say for the first time that he cannot. We do not, at this time, accept that he cannot.
This prolonged and unsatisfactorily explained course of conduct lasting over almost 17 months and consisting at its core, of three repeated contraventions or failures to comply with the Act requires a condign penalty.
The sort of contempt for his obligations and lack of remorse exhibited by the respondent would, in our opinion, merit the maximum penalty on each count, both to mark the seriousness of the contravention of the Act, and to deter others. That penalty for a person not an employee is $500.00. Mr Leppard is such a person.
However, there was no evidence of prior contraventions or failures to comply with the Act. Thus, we agreed to recognise that fact, and to reduce the penalty for that reason, on each contravention to $450.00, to be paid in accordance with s.84A(7) to the applicant. That is a total of $1,350.00.[29]
[29] Logan-Scales WAIG at 1667-1668 per Sharkey P and Coleman CC; WAIRC at paras.30-33 per Sharkey P and Coleman CC (with whom Beech SC agreed: WAIG at 1688, WAIRC at para.44).
The nature of the application in Logan-Scales was similar to that in these proceedings, and the conduct of Mr Leppard bears many similarities also. The contravention in Logan-Scales was of a provision of a State Act, the IR Act, which is similar to the failure to produce documents contravention in this case. In Logan-Scales Mr Leppard was penalised at 90 per cent of the maximum penalty, due to the gravity of the contravention and his conduct. Although the Logan-Scales contravention was under different legislation it ought not be excluded from consideration in assessment of penalty on that account,[30] but rather considered having regard to the following principles:
61 Barker J in Australian Building & Construction Commissioner v Construction Forestry Mining & Energy Union (No 2) (City Square) (2010) 199 IR 373 summarised at [47] the agreed applicable principles in that case. These are discussed as follows :
(a) Similar prior contraventions may be taken into account in assessing penalty, but cannot be given such weight as to lead to the imposition of a penalty that is disproportionate to the gravity of the instant contravention. To do so would be to impose a fresh penalty for past contraventions: Veen v The Queen (No 2) (1988) 164 CLR 465 at 477.
(b) However, similar previous contraventions may demonstrate that a respondent has a history of engaging in the particular conduct in question, that the penalties previously imposed were insufficient to deter the respondent from re-engaging in that conduct and that the respondent has failed to take adequate steps to prevent further contraventions. Previous contraventions may demonstrate that the respondent has manifested in the commission of the latest contravention a continuing attitude of disobedience of the law. In such a case, "retribution, deterrence and protection of society may all indicate that a more severe penalty is warranted": Veen (No 2) at 477.
(c) A sentencing court looks to the general record of conduct of the offender, his attitude to the law as disclosed by such conduct, apparent attempts at rehabilitation and similar considerations. Repeated conduct of a particular kind may lead to an identified need to provide some particularly persuasive form of deterrent against similar future conduct: Temple v Powell (2008) 169 FCR 169 at [64].
(d) A respondent is not to be punished again for the prior conduct. Prior conduct may diminish leniency by reason of good character, having an upward effect on penalty, albeit within the proper limits indicated by the circumstances of the immediately contravening conduct: R v McInerney (1986) 42 SASR 111 at 113.
(e) The effect of prior contravening conduct is more cogent if it has been the subject of conviction. If not, the prior conduct is still relevant but perhaps of less weight: McInerney at 113.
(f) Whether previous misconduct by branches in other states of a national organisation is relevant to fixing a penalty is a question of logic. In some cases, a pattern of conduct across the country may suggest a national culture of misconduct: Temple v Powell at [63].
(g) The quality of the conduct and its relevance to the industrial behaviour which the instant legislation seeks to address is determinative, not whether the prior conduct arose under different legislation or different provisions of the instant legislation: Stuart-Mahoney v CFMEU at [44] to [46].[31]
[30] Williams v Construction, Forestry, Mining and Energy Union (No 2) (2009) 182 IR 327 at 335 per Jessup J; [2009] FCA 548 at para.16 per Jessup J.
[31] ABCC at para.61 per Gilmour J, citing principles set out in Australian Building & Construction Commissioner v Construction Forestry Mining & Energy Union (No 2) (City Square) (2010) 199 IR 373 at 382-383 per Barker J; [2010] FCA 977 at para.47 per Barker J.
Having regard to the foregoing, Proplas Industries is a first-time contravener, and Mr Leppard a second-time contravener.
Whether the breaches arose out of the one course of conduct
FW Ombudsman’s submissions
The FW Ombudsman submitted that:
a)section 557(1) of the FW Act provides that for contraventions occurring on and after 1 July 2009,[32] where two or more breaches of an applicable provision are committed by the same person, and the breaches arose out of a course of conduct by the person, the breaches shall, for the purposes of the civil remedy provisions in ss.44(1) and 45 of the FW Act, be taken to constitute a single breach of the term;
b)breaches of a particular applicable provision in relation to a number of different employees may, depending upon the particular circumstances, attach the operation of s.557(1) of the FW Act,[33] and particularly relevant, is whether the breaches arose out of separate acts or decisions of the employer, or out of a single act or decision. The latter case will constitute a course of conduct but the former will not;[34]
c)in this case, that s.557(1) of the FW Act operates so as to limit those breaches to one breach of each applicable provision;[35]
d)section 557(1) of the FW Act cannot reduce the number of breaches to less than five (even if these arise out of a factual course of conduct), as it only applies to multiple breaches of the one applicable provision;
e)Proplas Industries and Mr Leppard have already obtained an advantage from components of the contravening conduct being characterised as part of a course of conduct by reason of ss.557(1) of the FW Act, thereby minimising the number of contraventions that can be penalised; and
f)the Court should consider that the maximum penalty it could impose on:
i)Proplas Industries is $33,000 for each of the 5 contraventions following single course of conduct considerations, being a total of $165,000; and
ii)Mr Leppard is $6,600 for each contravention, being a total of $33,000.
[32] Sub-item 16(1)(f) of Schedule 16 of the Transitional Act operates to include a contravention of item 5 of Schedule 16 of the Transitional Act in the list of civil remedy provisions under subsection 557(2) of the FW Act.
[33] Citing Clothing and Allied Trades Union v Snugglerite Industries Pty Ltd (1990) 34 IR 124 at 126 per Keely J.
[34] Citing Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 at 266-267 per Gray J (with whom Northrop J agreed at 245) (“Seymour”).
[35] Citing Quinn v Martin (1977) 16 ALR 141 at 143-5 per Smithers, Evatt and Keely JJ; Seymour FCR 241 at 266-7 per Gray J.
Respondents’ submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
The Court accepts that under s.557(1) of the FW Act the contraventions each arose out of a single course of conduct, and it is therefore appropriate to limit each contravention to one contravention of each applicable provision. That means that for both Proplas Industries and Mr Leppard there will be a maximum of five contraventions, in respect of which the maximum penalty which might be imposed is as set out by the FW Ombudsman in the above submissions.
Size of the business and capacity to pay
The FW Ombudsman has previously informally sought documentation as to the financial circumstances of Proplas Industries and Mr Leppard.[36]
[36] Ms Becroft’s 4 October 2011 Affidavit, paras.3, 6 and 34.
Proplas Industries failed to comply with a subpoena issued by the Court on or about 19 September 2011, requiring the production of various financial records.[37]
[37] Ms Becroft’s 4 October 2011 Affidavit, paras.26-34.
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)any sanction is to be imposed at a meaningful level;[38]
b)notwithstanding the size and financial circumstances of the business, Mr Leppard was the controlling mind of Proplas Industries and the decision-maker in relation to the contraventions;
c)it can be inferred from the evidence that the business was of a relatively small size. The small size of a business and lack of dedicated human resources personnel is not a particularly relevant matter on the question of penalty. An employer’s obligation to pay minimum entitlements arises regardless of their size and financial position. No reduction on penalty should be afforded because of this;[39]
d)in determining what monetary penalty to impose on an offender it is usual for a court to take into account the offender’s capacity to pay. However, difficulty in paying penalties should not prevent the Court from imposing penalties which are otherwise appropriate;[40]
e)there needs to be cogent evidence about the actual financial circumstances of a respondent in order for the Court to consider incapacity to pay in mitigation of a penalty,[41] and there is no evidence before the Court about the financial circumstances of Proplas Industries and Mr Leppard; and
f)to the extent that Proplas Industries and Mr Leppard may seek to rely on incapacity to pay penalties, the FW Ombudsman submits that this factor ought to have little, if any, effect in mitigation.
[38] Citing Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited [2001] FCA 383 at para.13 per Finkelstein J (in the context of deterrence) cited in Kelly v Fitzpatrick (2007) 166 IR 14 at 21 per Tracey J; [2007] FCA 1080 at para.28 per Tracey J (“Kelly”).
[39] Citing Cotis v MacPherson (2007) 169 IR 30 at 41 per Driver FM; [2007] FMCA 2060 at para.16 per Driver FM (“Cotis”); Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J at para.28 per Tracey J.
[40] Citing Lynch v Buckley Sawmills Pty Ltd (1985) 3 FCR 503 at 508 per Keely J; Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd (1994) 127 ALR 673 at 688 per Wilcox J; Cotisv Pow Juice Pty Ltd [2007] FMCA 140 at para.68 per Lloyd-Jones FM; Fair Work Ombudsman v Security Protection Services Pty Ltd & Ors (2010) 194 IR 96 at 112-113 per Turner FM; [2010] FMCA 252 at para.74 per Turner FM; Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at paras.27-29 per Driver FM (“Rajagopolan”).
[41] Citing McIlwain v Ramsey Food Packaging Pty Ltd (No. 4) (2006) 158 IR 181 at 217 per Greenwood J; [2006] FCA 1302 at para.98 per Greenwood J; Rajagopalan at para.29 per Driver FM (who recognised the need to adduce proper evidence of incapacity to pay for it to be a relevant consideration).
Proplas Industries’ and Mr Leppard’s submissions
There was no submission from Proplas Industries with respect to the size of the business or its capacity to pay any penalty.
Mr Leppard’s Affidavit makes assertions that he is impecunious, but there is no reliable evidence to this effect. Mr Leppard’s assertions are not supported by any documentary or independent evidence. In that sense, no proper evidence of incapacity to pay has been led by Mr Leppard.
Consideration
Properly evidenced, and for proper reasons, incapacity to pay may afford some relief by way of mitigation of penalty.[42] There is, however, in this case no evidence of incapacity to pay on the part of either Proplas Industries or Mr Leppard. Further, there is nothing in the size of the business which mitigates the failure to pay minimum entitlements or to produce records in accordance with statutory obligations.
[42] Workplace Ombudsman v KSN Engineering Pty Ltd (2009) 185 IR 316 at 322-323 per Lucev FM; [2009] FMCA 538 at paras.10 and 13 per Lucev FM; see also the extensive treatment of the issue in Sterling Crown IR at 352-356 per Lucev FM; FMCA at paras.58-76 per Lucev FM, and the various authorities referred to therein, including Federal Court authorities on penalties in trade practices and workplace relations cases.
Overall, nothing in the materials before the Court indicates that the size of the business or the capacity to pay of either Proplas Industries or Mr Leppard is a factor which warrants any reduction in the penalty which would otherwise be imposed.
Deliberateness of the breaches
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)the contraventions constitute a sustained and deliberate practice by Proplas Industries and Mr Leppard calculated to avoid compliance with statutory minimum obligations;
b)Proplas Industries and Mr Leppard were provided with ample opportunity to rectify the underpayments before these proceedings were commenced, first being advised during April 2010 of the complaints received, and then of the outcome of the FW Ombudsman’s investigation, on or about 16 December 2010, which found that there had been the contraventions now asserted; and
c)notwithstanding orders being made against him by the WAIRC for similar contraventions, several years later Mr Leppard has again committed contraventions dealing with the same obligations.
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
Having regard to:
a)the nature of the contraventions;
b)the relevant evidence led by the FW Ombudsman as to the nature of the contraventions;
c)the failure of Proplas Industries and Mr Leppard to put forward any evidence indicating that the breaches were not deliberate;[43]
d)the existence of a prior contravention (the Logan-Scales contravention) by Mr Leppard of a similar kind with respect to the production of records under a State law approximately eight years ago,
the Court considers that the contraventions were deliberate.
[43] Certain evidence, albeit very brief, from Mr Leppard which went to the availability of the requested records was ruled inadmissible: see para.20 above.
Whether or not there was a sustained and deliberate practice of avoiding compliance with statutory minimum obligations is not immediately discernable on the evidence before the Court. The contraventions in this case, at the maximum, cover a relatively short period of six weeks, and some further and more cogent evidence would be required to arrive at the conclusion that this was the “practice” of Proplas Industries and Mr Leppard. It is however, possible to conclude, based in particular upon the failure to subsequently pay statutory minimum entitlements, that there has been a course of conduct which deliberately avoids compliance with statutory minimum entitlements by Proplas Industries and Mr Leppard.
Involvement of senior management
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)Mr Leppard was the sole director and company secretary of Proplas Industries;
b)during the relevant period, Mr Leppard was the person with responsibility for determining and setting wage rates and conditions for the employees, and had direct knowledge of, and was involved in, the contraventions, and the contraventions by Proplas Industries are therefore directly attributable to the actions or omissions of Mr Leppard in his capacity as sole director and secretary of Proplas Industries;
c)despite receiving a contravention letter on 16 December 2010 which stated that Proplas Industries had breached Commonwealth workplace relations laws, Proplas Industries and Mr Leppard failed to rectify the underpayments;
d)Proplas Industries and Mr Leppard have not provided any evidence that the contraventions were attributable to any other person or agent of theirs; and
e)the high level of involvement by senior management is a factor which aggravates the seriousness of the contraventions in these proceedings.
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
As the sole director, company secretary, and holder of 95 per cent of the shares in Proplas Industries, Mr Leppard controlled Proplas Industries. Further, he was the manager responsible for dealing with workplace relations and employee issues. Whatever was done by Proplas Industries was either done by Mr Leppard or done at his behest. Senior management of Proplas Industries was therefore inextricably intertwined with the acts and omissions of Proplas Industries, and had direct knowledge of, and was involved in, those acts and omissions. The nature of senior management’s involvement in the acts and omissions of Proplas Industries makes the contraventions more serious than if senior management had not been involved.
Contrition, corrective action, co-operation with authorities
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)there is no evidence of any contrition shown by Proplas Industries and Mr Leppard for their contraventions, nor has corrective action been taken by Proplas Industries, despite attempts by the office of the FW Ombudsman to seek voluntary compliance;
b)none of the underpaid employees have been paid by Proplas Industries;
c)Proplas Industries and Mr Leppard have put the FW Ombudsman to significant time and expense in pursuing the matter; and
d)Proplas Industries and Mr Leppard have provided little or no co-operation to the FW Ombudsman, and have:
i)continued to fail to comply with a notice to produce records or documents;
ii)not made payment to employees, and
iii)have taken very few steps to assist the FW Ombudsman or the Court.
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
The Court accepts that:
a)the underpaid employees have not been paid;
b)the documents requested by the FW Ombudsman have not been produced;
c)there is no evidence of contrition or corrective action by Proplas Industries or Mr Leppard;
d)there is very little evidence of any co-operation with the FW Ombudsman; and
e)there are delays, attributable to Mr Leppard, in this matter being finalised, even allowing for the medical concerns which resulted in the adjournment of earlier hearings.
Insofar as there is a lack of contrition and corrective action, and very little co-operation with the FW Ombudsman, the conduct of Proplas Industries and Mr Leppard is amongst the worst that the Court has seen in recent years. The conduct of Proplas Industries and Mr Leppard in this regard is an aggravating factor in respect of penalty. The failure to comply with statutory obligations as to minimum entitlements and the requirement to produce records, the failure to co-operate with the FW Ombudsman, and the approach taken to this litigation by Proplas Industries and Mr Leppard, has caused significant additional expense to be borne by the FW Ombudsman, and by the Court, in getting the matter to this point. Where, as here, the lack of contrition and corrective action is egregious, and results in significant additional expense, the penalty to be imposed ought properly to reflect that fact.
Ensuring compliance with minimum standards
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)compliance with minimum standards is an important consideration in the present case, as one of the principal objects of Commonwealth workplace relations laws has been the maintenance of an effective safety net of employer obligations, and effective enforcement mechanisms;
b)the substantial penalties set by the Parliament for contravention of minimum entitlements reinforce the importance placed on compliance with minimum standards; and
c)given that three of the employees were unemployed immediately prior to commencing employment with Proplas Industries, they were in a vulnerable bargaining position, and it is therefore especially important that the minimum standards are enforced in this case.
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
In assessing the seriousness of the conduct by Proplas Industries and Mr Leppard, and what the level of penalty might be, the Court must have regard to the statutory purposes of the FW Act.[44] Relevantly, the objects of the FW Act include:
(b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and
(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system;[45]
[44] Golden Maple IR at 235 per Lucev FM; FMCA at para.63 per Lucev FM.
[45] FW Act, s.3(b) and (c).
In the context of the objects of the FW Act requiring compliance with minimum standards and facilitating enforcement of the FW Act:
a)deliberate contravention, both as to minimum payments and production of records, extending over a period of time, albeit relatively short, but in relation to multiple employees; and
b)continued unremedied non-compliance,
involves an undermining of the statutory objects and purposes of the FW Act set out above. In that context, the conduct of Proplas Industries and Mr Leppard warrants a meaningful penalty.
Specific and general deterrence
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)it is well established that “the need for specific and general deterrence” is a factor that is relevant to the imposition of a penalty under the FW Act,[46] and that both specific and general deterrence are important in the present case;
b)general deterrence is an important factor in circumstances where an employer has failed to pay minimum entitlements to its employees, especially where non-compliance is deliberate, and takes advantage of employees who are known to have characteristics of particular vulnerability. The law should mark its disapproval of the conduct in question, and set a penalty which serves as a warning to others;[47]
c)as for specific deterrence, Proplas Industries and Mr Leppard should be left in no doubt that failing to comply with minimum obligations, or to make any attempt to so comply, will not be tolerated, and that the failure to pay an employee any wages is a serious contravention. Proplas Industries and Mr Leppard have failed to rectify the underpayments and have not shown any contrition. In light of this conduct the need for specific deterrence is high; and
d)there is also a need to send a message to the community at large that the correct entitlements for employees must be paid, and that steps must be taken by employers, of all sizes, to ascertain and comply with minimum entitlements, as opposed to ignoring those obligations.
[46] Citing Mason at paras.26-59 per Mowbray FM.
[47] Citing Kelly IR at 20 per Tracey J; FCA at para.26 per Tracey J, and the cases cited therein. See also Ponzio FCR at 559-560 per Lander J; FCAFC at para.93 per Lander J.
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
A primary objective of penalties is deterrence.[48] Therefore, in imposing civil penalties, deterrence is a significant consideration.[49] It is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend.[50] Therefore it must be of a kind that demonstrates an appropriate assessment of the seriousness of the offending conduct.[51] This is a case in which specific deterrence looms large.[52]
[48] Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J; Leighton Contractors Pty Ltd v CFMEU (2006) 164 IR 375 at 391 per Le Miere J; [2006] WASC 317 at para.74 per Le Miere J; Sterling Crown IR at 351 per Lucev FM; FMCA at para.53 per Lucev FM.
[49] Ponzio FCR at 577 per Jessup J; FCAFC at para.164 per Jessup J
[50] Ponzio FCR at 559 per Lander J; FCAFC at para.93 per Lander J, citing Yardley v Betts (1979) 22 SASR 108; Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J.
[51] Ponzio FCR at 559 per Lander J; FCAFC at para.93 per Lander J.
[52] Contrast Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J.
In this case:
a)the conduct of Proplas Industries and Mr Leppard was deliberate;
b)the underpayments of the employees concerned have not been remedied;
c)the documents requested by the FW Ombudsman have not been produced;
d)documents the subject of a subpoena issued by this Court have not been produced to the Court by Proplas Industries;
e)there has been a lack of co-operation by Proplas Industries and Mr Leppard with the FW Ombudsman; and
f)Mr Leppard has a relevant prior contravention with respect to the failure to produce records upon request by a person statutorily entitled to do so, and failed to do so in circumstances quite similar to the circumstances in this case, including a lack of contrition and co-operation, and a disregard for the Court’s processes.
The Court further notes that there is no evidence that systems are in place to ensure that records are kept or able to be produced on request by Proplas Industries in the future.
This therefore is a case in which both specific and general deterrence, but particularly specific deterrence, must be taken into account when setting penalty at a meaningful level.
General deterrence is a significant factor in determining penalty where potentially vulnerable employees, including the low paid, or those with poor English, are engaged in an industry.[53]
[53] Rajagopalan at para.31 per Driver FM; Curyer v Bizpro SA Pty Ltd [2009] FMCA 30 at para.32 per Simpson FM. And see Flattery v Italian Eatery t/as Zeffirelli’s Pizza Restaurant (2007) 163 IR 14 at 29 per Mowbray FM; [2007] FMCA 9 at para.66 per Mowbray FM, where it was said: “In my view a clear message needs to be sent to both the Italian Eatery and the industry in general that underpayment of wages will not be tolerated.”
In relation to specific deterrence, the Court must assess the risk of Proplas Industries and Mr Leppard re-offending, bearing in mind that the business seemingly continues to operate, and that Mr Leppard appears to have had a number of small businesses over the last two plus decades.[54] Given his relevant prior contravention, and his exhibited attitude to his obligations, the risk of re-offending by Mr Leppard at some stage appears considerable, and hence there must also be some risk of Proplas Industries, of which Mr Leppard is the directing mind, re-offending.
Conclusions as to penalty
[54] Ponzio FCR at 559-560 per Lander J; FCAFC at para.93 per Lander J.
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)some of the breaches have common elements and this should be taken into account in considering an appropriate penalty to ensure that Proplas Industries and Mr Leppard are not punished more than once for the same or substantially similar conduct;
b)the contraventions fall into the following four distinct groups:
i)failure to pay the guaranteed basic periodic rate of pay;
ii)failure to pay a casual loading;
iii)failure to pay accrued and untaken annual leave entitlements on termination; and
iv)failure to comply with a notice to produce records or documents;
c)having fixed an appropriate penalty for each contravention or course of conduct, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the contraventions, and is not oppressive or crushing;[55] and
d)this is a case in which the penalty should be in the high range.
[55] Kelly IR at 21-22 per Tracey J; FCA at para.30 per Tracey J; Australian Ophthalmic Supplies FCR at 567 per, Gray J, 576 per Graham J and 583 per Buchanan J; FCAFC at para.23 per Gray J, para.71 per Graham J and para.102 per Buchanan J.
Proplas Industries’ and Mr Leppard’s submissions
There were no submissions from Proplas Industries or Mr Leppard. The admissible evidence from Mr Leppard did not relate to these issues.
Consideration
Civil penalties imposed in industrial law proceedings must be meaningful and consistent in light of other considerations to be taken into account when determining appropriate penalty. Where contraventions are serious, wilful and ongoing, both the Federal Court and this Court have endorsed a heavy-handed approach, particularly in light of increased penalties for contraventions in industrial law proceedings in the last decade.[56]
[56] Sterling Crown IR at 346 per Lucev FM; FMCA at paras.31-33 per Lucev FM; Finance Sector Union v Commonwealth Bank of Australia (2005) 147 IR 462 at 483 per Merkel J; [2005] FCA 1847 at para.72 per Merkel J; Commonwealth Bank of Australia & Anor v Finance Sector Union (2007) 157 FCR 329 at 364 per Branson J; [2007] FCAFC 18 at para.192 per Branson J.
The contraventions in this case fall into two categories, first, the failure to pay entitlements, and, second, the failure to produce documents. Proplas Industries and Mr Leppard are also in separate categories: Proplas Industries is a first time contravener of workplace relations laws, and Mr Leppard is a second time contravener, and a second time contravener specifically with respect to the failure to produce documents.
With respect to the failure to pay entitlements Proplas Industries is entitled to a significant reduction in penalty on the basis that it is a first time contravener. Mr Leppard is not entitled to such a reduction, or at least, not to any substantial reduction. The Court must nevertheless not lose sight of the fact that it is only his second contravention, and the last contravention was eight years ago. In relation to each of the contraventions with respect to failure to pay entitlements there is, at base, some overlapping conduct in relation to the cause of that failure, which warrants some further reduction. There ought be no reduction on account of matters such as the size of the business and capacity to pay, or contrition, corrective action and co-operation with authorities. Indeed, the failure to express contrition, and to take corrective action and co-operate with the authorities, together with the deliberateness of the breaches and the involvement of senior management in the contraventions elevated the need for an appropriate penalty to be applied. They also highlight the need for specific deterrence, and given that the failure with respect to payment of entitlements is non-compliance with minimum standards there is also a need for appropriate general deterrence. The entitlements contraventions fall within a broad penalty mid-range of 30 to 70 per cent as not being in the most serious category, nor being in the least serious category, of contravention. Although they are contraventions of minimum entitlements, accompanied by seriously unsatisfactory conduct, the contraventions themselves were over a relatively short period, and the amounts of money involved range from relatively insignificant to, viewed in the context of the individual concerned, one reasonably substantial sum. The contraventions are perhaps pushed up out of the low end of the mid-range because:
a)these are contraventions of minimum entitlements;
b)they relate to employees who exhibit some characteristics of vulnerability;
c)the employees have not been paid at all; and
d)especially, because of the conduct of Proplas Industries and Mr Leppard.
In the circumstances, there will be penalties with respect to the entitlements contraventions of:
a)45 per cent for Proplas Industries in relation to each of the four contraventions; and
b)50 per cent of the maximum penalty for Mr Leppard with respect to each of the four contraventions.
Therefore with respect to the four entitlements contraventions:
a)Proplas Industries’ penalty will be $14,850 for each contravention, a total of $59,400; and
b)Mr Leppard’s penalty for each of the four contraventions will be $3,300, being a total of $13,200.
With respect to the failure to produce documents similar considerations to those expressed above apply, save that the Court considers that:
a)the failure to produce documents is, possibly, more serious than the failure to pay entitlements, because the failure to produce documents prevents the FW Ombudsman from carrying out an investigation to determine whether or not an employee has been paid entitlements, minimum or otherwise; and
b)in the case of Mr Leppard, this is the second occasion on which he has contravened statutory obligations by failing to produce documents. The failure on this occasion is characterised by much the same conduct as on the first occasion, which was so concisely summarised in Logan-Scales in the passage set out above.[57]
[57] See para.42 above.
In the circumstances, the Court considers that the penalty for failure to produce records should, in the case of Proplas Industries be slightly higher than that with respect to the failure to pay minimum entitlements, and will be set at 50 per cent of the maximum penalty, that is, $16,500 for this contravention. Mr Leppard’s penalty must be set at a higher level because of the prior contravention, and the repetition of conduct of a similar nature to that which occurred in the contravention in Logan-Scales. The necessity for specific deterrence in the case of Mr Leppard, who simply appears to have no appreciation of the nature of his conduct or the requirement to comply with Commonwealth workplace relations laws, is high. Even on a second contravention of this type, and notwithstanding Mr Leppard’s conduct and the need for deterrence, the Court considered that a penalty of 90 per cent (see the Logan-Scales contravention) is too high in all the circumstances. A penalty of 70 per cent of the maximum is warranted with respect to this contravention, that is, $4,620.
With respect to PEG 253 of 2010 the total penalties to be imposed are therefore:
a)for Proplas Industries – $75,900; and
b)for Mr Leppard – $17,820.
The Court has considered the aggregate penalty, in its totality, and whilst appreciating that the penalties might be toward the higher end of that appropriate for contraventions of this kind, it does not consider that the aggregate penalties are disproportionate, oppressive or crushing.
PEG 254 of 2010
Essentially the same general factual matrix, and the same considerations, apply in PEG 254 of 2010 as applied in PEG 253 of 2010. There are however some factual differences, namely:
a)as Blacklight Investments has been de-registered, there is only one respondent, Mr Leppard, against whom a penalty can be imposed, and, as was submitted by the FW Ombudsman, de-registration is not a refuge from sanction for an officer of a de-registered company;
b)there are only four contraventions (allowing for course of conduct considerations) relating to three employees, and,
i)the type of employees are similar to those in PEG 253 of 2010, all being casual employees, two being previously unemployed, and two being non-English speaking; and
ii)three of the contraventions relate to failure to pay minimum entitlements, and one contravention relates to failure to produce documents; and
c)the amount of the underpayments was:
i)based on the statutory minimum entitlements, $1,986.06;
ii)based on the contractually agreed rates, $2,091.96; and
iii)between $228.96 and $1,323 for each of the employees.
There are minor factual differences in relation to the numbers of employees and the amounts of underpayment but these do not alter the nature and gravity of the contraventions, nor do they alter the seriousness of the conduct. In the circumstances, these are not factual differences which cause the Court to generally distinguish the assessment and quantum of penalty in PEG 254 of 2010 from that in PEG 253 of 2010. The penalty to be imposed on Mr Leppard will therefore be:
a)with respect to the minimum entitlements contraventions, 50 per cent of the maximum penalty, that is $3,300 for each contravention, being a total of $9,900 for the three contraventions; and
b)70 per cent of the maximum penalty for the failure to produce documents contravention, that is $4,620.
The total of the penalties in PEG 254 of 2010 payable by Mr Leppard is therefore $14,520.
The Court has considered the aggregate penalty, in its totality. The Court appreciates that the penalty might be toward the higher end of that appropriate for contraventions of this kind. However, it does not consider that the penalty is disproportionate, oppressive or crushing.
Costs
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)under the FW Act, the general approach is that each party must bear its own costs.
b)for the purposes of section 570(2)(b) of the FW Act on which the applicant intends to rely, the FW Ombudsman submits that two criteria must be fulfilled:
i)a party must have engaged in an unreasonable act or omission; and
ii)the unreasonable act or omission must have caused another party to incur costs in connection with this proceeding;[58]
c)once both of the above criteria have been satisfied then the Court may exercise its discretion and order a party to pay costs[59] by virtue of such unreasonable act or omission; and
d)whether a party has engaged in an unreasonable act or omission requires an objective analysis of the circumstances.[60]
[58] See Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 at 582 per Tamberlin, Gyles and Gilmour JJ; [2008] FCAFC 143 at para.28 per Tamberlin, Gyles and Gilmour JJ (“Clarke”), and more recently in Rentuza v Westside Auto Wholesale (2009) 190 IR 207 at 213 per Lucev FM; [2009] FMCA 1022 at para.26 per Lucev FM (“Rentuza”).
[59] Clarke FCR at 582 per Tamberlin, Gyles and Gilmour JJ; FCAFC at para.28 per Tamberlin. Gyles and Gilmour JJ.
[60] Rentuza IR at 213 per Lucev FM; FMCA at para.27 per Lucev FM; Australian and International Pilots Association v Qantas Airways Ltd (No.3) (2007) 162 FCR 392 at 402 per Tracey J; [2007] FCA 879 at para.32 per Tracey J (“Qantas Airways (No. 3)”).
In seeking an order for costs pursuant to section 570(2)(b) of the FW Act, the FW Ombudsman relies on:
a)Ms Walawski’s 9 June 2011 Affidavit;[61]
b)paragraphs 9-19 of the FW Ombudsman’s submissions relating to the default judgment application filed in these proceedings, which outline the procedural history of the matter;
c)the findings at paragraphs 8-9 and 11-14 of Proplas Industries (No. 1) regarding the conduct of Proplas Industries and Mr Leppard; and
d)Ms Becroft’s 30 November 2011 Affidavit.[62]
[61] Specifically paragraphs 5, 10, 14, 15, and 24.
[62] Specifically paras.4-9, 16, and 22-23.
The FW Ombudsman submits that:
a)the above documents and the paragraphs referred to sufficiently demonstrate that, by reason of acts or omissions of Proplas Industries and Mr Leppard, these were in the circumstances, unreasonable for the purposes of s.570(2)(b) of the FW Act;
b)in chronological order, the unreasonable acts or omissions by Proplas Industries and Mr Leppard referred to above were constituted by failures to attend the following:
i)a directions hearing on 7 February 2011;
ii)an adjourned mediation on 12 April 2011;[63] and
[63] The “adjourned mediation”.
iii)the interlocutory hearing of the FW Ombudsman’s application in a case for default judgement on 27 June 2011.
c)notwithstanding several requests by the FW Ombudsman, Proplas Industries and Mr Leppard also failed to file and serve a response or defence as required by orders made by the Court;
d)Proplas Industries and Mr Leppard at no stage provided explanations for the above non-appearances and failure to file and serve a response or defence by the deadlines laid down by the Court;
e)by virtue of the adjournments of the penalty hearing on 6 October 2011 and on 1 December 2011, Proplas Industries and Mr Leppard had an opportunity to obtain independent legal advice, and recommendations were also made by legal representatives of the FW Ombudsman throughout the course of the proceedings, encouraging Proplas Industries and Mr Leppard to obtain legal advice;[64]
[64] See in particular the affidavits (and specifically the letters and/or file notes annexed thereto) of: Kate Rebecca Walawski, sworn 9 June 2011 at paragraphs 11 and 22 (“Ms Walawski’s 9 June 2011 Affidavit”); Abby Becroft sworn 4 October 2011 at paragraph 3 (“Ms Becroft’s 4 October 2011 Affidavit”); and Abby Becroft sworn 30 November 2011 at paragraph 15 (“Ms Becroft’s 30 November 2011 Affidavit”).
f)as a result of Proplas Industries’ and Mr Leppard’s failure to attend the adjourned mediation, and failure to file and serve a response or defence in accordance with the orders made by the Court on 7 February 2011, the FW Ombudsman incurred costs by virtue of it having to request that the Court list the proceedings to obtain further directions, and subsequently attend same on 2 May 2011;
g)“unreasonable” does not necessarily mean conduct that is negligent, but rather requires that the conduct be measured against what a reasonable person would expect,[65] and it is submitted that a reasonable person would have appeared on the occasions referred to above, and would have complied with orders made by the Court;
[65] Workplace Ombudsman v Queensland Marine and General Insurance Management Pty Ltd and Ors [2011] FMCA 261 at para.32 per Burnett FM.
h)objectively, the conduct of Proplas Industries and Mr Leppard constituted unreasonable acts or omissions in the circumstances, and was not the most effective conduct of the litigation;
i)these unreasonable acts or omissions of Proplas Industries and Mr Leppard resulted in costs thrown away;
j)Ms Becroft’s 30 November 2011 Affidavit and the paragraphs referred to therein, in addition to those also relied upon in the FW Ombudsman’s submissions dated 5 August 2011, sufficiently demonstrate that by reason of the acts or omissions of Mr Leppard, these were in the circumstances unreasonable for the purposes of s.570(2)(b) of the FW Act;
k)
the unreasonable acts or omissions by the respondents post
5 August 2011 were constituted by the adjournment of the penalty hearing listed for 1 December 2011,[66] which resulted in costs thrown away;
l)the penalty hearing had since 22 July 2011, been set down for hearing on 6 October 2011. However, on the day the penalty hearing was adjourned to 1 December 2011, with specific orders made by the Court in the event Mr Leppard sought a further adjournment;[67]
m)paragraphs 3-5 of Ms Becroft’s 30 November 2011 Affidavit indicate that the FW Ombudsman had attempted to contact Mr Leppard some days prior to 1 December 2011 to discuss the forthcoming penalty hearing;
n)paragraph 6 of Ms Becroft’s 30 November 2011 Affidavit indicates that it was not until three days before the penalty hearing date that Mr Leppard finally responded to the FW Ombudsman and indicated he was intending to seek an adjournment. By this stage, the FW Ombudsman had already made preparations to attend on the penalty hearing;
o)Mr Leppard was on notice for some time prior to 28 November 2011 of what was required under the Orders in order to seek a further adjournment, but notwithstanding these requirements he failed to comply with paragraph 2 of the Orders, and the Court refused to grant the adjournment;
p)the unreasonableness relates not to the reasons upon which the application for adjournment was sought by Mr Leppard on 1 December 2011, but rather arises from the late timing of the application and consequent failure to comply with the Orders;
q)in the whole of the circumstances, the Court should exercise its discretion and order that Proplas Industries and Mr Leppard pay the FW Ombudsman’s costs thrown away as a result of making preparations for, and attending at, the penalty hearing which did not proceed on 1 December 2011; and
r)in the whole of the circumstances, the Court should exercise its discretion and order that Proplas Industries and Mr Leppard pay the FW Ombudsman’s costs thrown away by reason of the non-attendance at the adjourned mediation and the subsequent requirement of a further directions hearing on 2 May 2011.
[66] The “adjournment”.
[67] The “Orders”.
Proplas Industries’ and Mr Leppard’s submissions
Proplas Industries made no submissions as to costs.
Mr Leppard also made no submissions. However, Mr Leppard’s Affidavit might be construed as evidence in support of an implied submission that costs ought not be awarded against him because he is impecunious. For reasons otherwise set out above,[68] the Court considers that there was no, or no sufficient, evidence to prove Mr Leppard’s actual financial position put before the Court. Insofar as there is an implied submission that costs ought not be awarded against Mr Leppard because of impecuniosity, that submission fails on the facts. In any event, impecuniosity is not a reason for the Court not to award costs.[69]
[68] See para.23 above.
[69] Devarajan v Minister for Immigration and Multicultural Affairs [2001] FCA 1521 at paras.37-38 per Allsop J; Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792 at para.45 per Kenny J.
Consideration
Section 570 of the FW Act provides as follows:
(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) exercising jurisdiction 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.
Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.
(2) The party may be ordered to pay the costs only if:
(a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c) the court is satisfied of both of the following:
(i) the party unreasonably refused to participate in a matter before FWA;
(ii) the matter arose from the same facts as the proceedings.
In Hughes v Mainrange Corporation Pty Ltd (No. 2),[70] this Court observed as follows.
19. For the purposes of s.570(2)(b) two criteria must be fulfilled. They are:
a) that a party must have engaged in an unreasonable act or omission; and
b) that the unreasonable act or omission must have caused another party to incur costs in connection with the proceeding.
[70] (2009) 190 IR 351 at 355 per Lucev FM; (2009) FMCA 1044 at paras.19 to 21 per Lucev FM.
20. Whether a party has engaged in an unreasonable act or omission depends upon an objective analysis of the particular circumstances of the case.
21. The exercise of the discretion in s.570(2)(b) is not necessarily engaged because:
a) a party does not conduct litigation efficiently;
b) a concession is made late;
c) a party may have acted in a different or timelier fashion;
d) a party has adopted a genuine but misguided approach.[71]
[71] See also Clarke FCR at 582-583 per Tamberlin, Gyles and Gilmour JJ; FCAFC at paras.28 to 30 per Tamberlin, Gyles and Gilmour JJ.
Costs in this Court are ordinarily awarded on the basis of the scale in Schedule 1 to the FMC Rules and the Court refers to Pierson’s Pro-Health Pty Ltd v Silvex Nominees Pty Ltd & Ors (No 3).[72]
[72] [2010] FMCA 250 at paras.43-44 per Lucev FM.
The Court has a broad discretion as to the awarding of costs. In the circumstances of this matter, the failure to attend the adjourned mediation, and the failure to indicate a position well prior to the hearing of 1 December 2011, together with the failure to comply with the Court’s orders in respect of the 1 December 2011 hearing, which resulted in a requirement for further affidavits and submissions, and specifically in the case of the FW Ombudsman, further submissions on penalty and costs and a reply to Mr Leppard’s Affidavit, it is appropriate that the costs of the adjourned mediation and the hearing on 1 December 2011 be paid by Proplas Industries and Mr Leppard to the FW Ombudsman.[73] There will therefore be an order for costs, based on the scale in Schedule 1 to the FMC Rules in the total sum of $3,559 ($2,623 for the adjourned mediation, and $936 for a half day hearing on 1 December 2011), with the amount to be split between PEG 253 of 2010 and PEG 254 of 2010. Further, in PEG 253 of 2010 each of Proplas Industries and Mr Leppard will be responsible for half of the costs of that matter.
[73] Qantas Airways (No. 3); Welsh v Allblend Holdings Pty Ltd (No. 4) (2010) 196 IR 114 at 118 per Lucev FM; [2010] FMCA 521 at paras.19 and 20 per Lucev FM.
Conclusion and orders
The Court has concluded that:
a)in PEG 253 of 2010:
i)Proplas Industries pay a penalty of $75,900;
ii)Mr Leppard pay a penalty of $17,820;
b)in PEG 254 of 2010 Mr Leppard pay a penalty of $14,520;
c)the above penalties must be paid to the Commonwealth Consolidated Revenue Fund by 30 March 2012;
d)in PEG 253 of 2010 each of Proplas Industries and Mr Leppard, pay $889.75 for the FW Ombudsman’s costs; and
e)in PEG 254 of 2010 Mr Leppard pay the FW Ombudsman’s costs of $1,779.50.
The Court will make orders accordingly.
I certify that the preceding one hundred and two (102) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 2 March 2012
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