Fair Work Ombudsman v Raimondi Investments Pty Ltd
[2016] FCCA 1398
•5 April 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v RAIMONDI INVESTMENTS PTY LTD & ANOR | [2016] FCCA 1398 |
| Catchwords: INDUSTRIAL LAW – failure by first respondent to pay sum ordered by the Fair Work Commission – sum ordered in default of appearance – insolvency of first respondent – accessorial liability of second respondent as director of first respondent – payment eventually made by second respondent the day after this proceeding was commenced – 10 points to be considered when imposing penalty for failing to pay sum ordered by the Fair Work Commission on time – issues of general and specific deterrence – whether contravention deliberate – whether financial hardship relevant – allegations that employee who had been summarily terminated had breached fiduciary duties to the first respondent – allegations of theft and misuse of confidential information – penalties ordered – penalties imposed are significantly lower than those urged by the Fair Work Ombudsman. |
| Legislation: Corporations Act 2001 (Cth), s.50AA Fair Work Act 2009 (Cth), s.405 |
| Cases cited: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | RAIMONDI INVESTMENTS PTY LTD |
| Second Respondent: | MARIA RAIMONDI |
| File Number: | MLG 2157 of 2014 |
| Judgment of: | Judge Wilson |
| Hearing date: | 24 March 2016 |
| Date of Last Submission: | 24 March 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 5 April 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms F. Knowles |
| Solicitors for the Applicant: | The Office of the Fair Work Ombudsman |
| Ms M. Raimondi appearing as director of the First Respondent |
| The Second Respondent appearing in person |
THE COURT DECLARES THAT:
The second respondent was involved (within the meaning of subsection 550(2) of the Fair Work Act 2009 (“FWA”)) in a contravention of s.405 of the FWA by failing to comply with the Fair Work Commission Order.
THE COURT ORDERS THAT:
Pursuant to s.546(1) of the FWA, a pecuniary penalty of $5,100.00 be imposed on the second respondent in respect of her involvement (within the meaning of subsection 550(2) of the FWA) in the contravention declared in paragraph 1 above.
Pursuant to subsection 546(3)(a) of the FWA, the pecuniary penalty imposed be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days.
The applicant have liberty to apply on seven days’ notice in the event that Order 3 is not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2157 of 2014
| FAIR WORK OMBUDSMAN |
Applicant
And
| RAIMONDI INVESTMENTS PTY LTD |
First Respondent
| MARIA RAIMONDI |
Second Respondent
REASONS FOR JUDGMENT
(As revised from transcript)
Introduction
By application filed in this Court on 24 October 2014, the
Fair Work Ombudsman (“FWO”) sought orders against
Maria Raimondi (“the second respondent”) in the nature of penalties. In essence, FWO contended that a company called
Raimondi Investments Pty Ltd (“the first respondent”) employed Danielle Louise Hardy as a hairdresser between 21 January 2012 and
30 January 2014 and that the first respondent unfairly terminated
Ms Hardy’s employment. After Ms Hardy brought a proceeding in
Fair Work Commission (“FWC”) against the first respondent on
2 June 2014, orders were made in relation to that unfair termination.[1]
The first respondent was ordered to pay Ms Hardy $6,050.60 within
14 days of 2 June 2014.[2]
[1] Affidavit of Prudence Beasley affirmed 18 September 2015 at Annexure “PB-01”.
[2] Affidavit of Prudence Beasley affirmed 18 September 2015 at Annexure “PB-01”.
FWO contended in this proceeding that the first respondent failed to pay Ms Hardy the sum ordered against it within the time ordered, and that the first respondent paid the sum ordered the day after this proceeding was commenced. The first respondent was placed into liquidation on 15 March 2015. At all relevant times, the
second respondent was the first respondent’s sole director, shareholder and secretary. The second respondent was the first respondent’s controlling mind and thereby controlled the first respondent for the purposes of s.50AA of the Corporations Act 2001 (Cth). FWO contended that the first respondent became liable to a maximum penalty of $51,000.00 for its failure to comply with the orders made on
2 June 2014.[3] FWO further contended that the second respondent was liable to a maximum penalty of $10,200.00 for her failure to pay the sum ordered on 2 June 2014.[4]
[3] Applicant’s submissions on penalty filed 15 October 2015 at [17].
[4] Ibid.
Relevant factual setting
The second respondent did not give evidence before FWC on
2 June 2014. Orders were made in her absence. The orders made on
2 June 2014 gave the first respondent 14 days in which to pay the sum ordered. The first respondent did not pay the sum ordered within the time stipulated. As a result, FWO wrote to the second respondent on
25 August 2014 informing her that failure to comply with the orders of 2 June 2014 was itself a contravention of s.405 of the Fair Work Act2009 (Cth) (“FWA”).[5] That section required a person against whom an order was made not to breach that order.
[5] Affidavit of Prudence Beasley affirmed 18 September 2015 at Annexure “PB-05”.
The letter dated 25 August 2014 called upon the second respondent to pay the sum ordered. In that letter, FWO warned the
second respondent that her non-compliance with the order dated
2 June 2014 may result in a maximum penalty of $10,200.00.[6] Solicitors then retained by the second respondent had earlier written to Ms Hardy’s solicitors offering a payment regime of $20.00 per week.[7] Ms Hardy’s rejection of that offer was duly communicated to FWO on 11 September 2014.[8] The second respondent’s solicitors had stated in August 2014 that the first respondent’s business had been sold in April 2014 and that the first respondent was not operating and had no assets.[9]
[6] Ibid.
[7] Affidavit of Prudence Beasley affirmed 18 September 2015 at Annexure “PB-06”.
[8] Affidavit of Prudence Beasley affirmed 18 September 2015 at Annexure “PB-09”.
[9] Affidavit of Prudence Beasley affirmed 18 September 2015 at Annexure “PB-07”.
According to a search conducted of the records of the
Australian Securities and Investments Commission on
18 September 2015, the first respondent was then still registered and the second respondent was the first respondent’s sole director, secretary and shareholder.[10] By 24 October 2014, the first respondent had not paid Ms Hardy the sum ordered on 2 June 2014. FWO commenced
this proceeding on 24 October 2014. The very next day, on
25 October 2014, the second respondent paid Ms Hardy in full.
Before me, FWO contended that the second respondent took no steps to challenge the orders that were made on 2 June 2014, whether to apply for a rehearing to apply to set aside the orders made or to appeal. FWO contended that the proposed repayment regime by instalments of $20.00 was not sensible.
[10] Affidavit of Prudence Beasley affirmed 18 September 2015 at Annexure “PB-10”.
The course of this litigation
This proceeding concerned the second respondent’s involvement in the first respondent’s failure to comply with the orders made on
2 June 2014. FWO relied upon her accessorial liability in that she, so the FWO said, had actual knowledge of the
first respondent’s contravention of the 2 June 2014 orders and that she, so FWO said, was an intentional participant in the first respondent’s contravention of the 2 June 2014 orders. In her response filed
23 January 2015, the second respondent gave the basis upon which she opposed FWO’s claims in this case. In that response, the
second respondent variously asserted that -
a)
she paid Ms Hardy on what she said were commercial grounds and that it was cheaper for the second respondent to pay
Ms Hardy than to defend the claim;
b)Ms Hardy was a close friend of the second respondent’s estranged husband;
c)Ms Hardy used her position as the second respondent’s employee to pass on confidential information belonging to the first respondent to the second respondent’s estranged husband;
d)Ms Hardy diverted business away from the first respondent in favour of Ms Hardy’s own hairdressing salon; and
e)Ms Hardy had forged payslips.[11]
[11] Response filed on 23 January 2015 at pp.2-4.
Other less well articulated grounds of opposition were also advanced in the response. On 10 July 2015, pursuant to orders made a Registrar of this Court on 7 May 2015, a statement of agreed facts was executed by FWO and second respondent. Pursuant to that statement of agreed facts, the second respondent agreed to not only the facts and contentions recorded therein, but also to this Court making -
a)a declaration that the first respondent contravened s.405 of FWA by failing to comply with the 2 June 2014 orders;
b)an order imposing a pecuniary penalty on the first respondent;
c)a declaration that the second respondent contravened s.405 of FWA by failing to comply with the 2 June 2014 orders;
d)an order imposing a pecuniary penalty on the second respondent; and
e)orders of payment of such penalties as might be imposed within 28 days.[12]
[12] Statement of agreed facts filed 10 July 2015 at p.6.
After agreeing upon the facts set out in the statement of agreed facts, the second respondent filed an affidavit made by her on
31 August 2015. In that affidavit, the second respondent asserted that Ms Hardy lied when giving evidence before FWC. The
second respondent also exhibited various interim intervention orders that she obtained against Ms Hardy in July and August 2015.[13]
Only some portions of that affidavit were of probative value in this case.
[13] Affidavit of Maria Raimondi filed 3 September 2015.
Penalty
In this case, FWO contended that I should order the
second respondent to pay 75%-85% of the maximum penalty payable by the second respondent, the maximum being $10,200.00, for the failure to pay $6,050.60. In making that monetary sum submission, FWO relied on the observations of the High Court of Australia in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Ors.[14] Only one contravention is asserted in this case.
FWO contended that the penalties imposed should be an appropriate response to what the first respondent did. So much was held by the
Full Court of the Federal Court in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith.[15]
[14] [2015] HCA 46.
[15] [2008] FCAFC 8.
It is necessary for me to have regard to the maximum penalties that apply. That is because of the observations of the High Court in Markarian v The Queen[16] where the Court held that maximum penalties are to be taken into account and balanced with all other relevant factors so as to provide a yardstick. In Kelly v Fitzpatrick[17] (“Kelly”), Tracey J embraced an 10-point non-exclusive list of factors relevant to the imposition of a penalty. Those points provide a useful list of factors that assist in weighing up key considerations. That list, while useful, does not restrict the court that is imposing the penalty about the matters the court can take into account. So much was held in Sharpe v Dogma Enterprises Pty Ltd.[18] To some extent the 10 points overlap and can be truncated.
[16] (2005) 228 CLR 357 at [31].
[17] [2007] FCA 1080.
[18] [2007] FCA 1550.
First factor – nature, extent and circumstances of the contravening conduct
The relevant contravening conduct was the failure to pay the sum ordered to be paid within the time so ordered. FWO invited me to conclude that the conduct of the first and second respondents was of the more egregious in character as it revealed, so FWO argued, a deliberate disregard for and flouting of orders made by FWC.
FWO argued that the first respondent’s failure to pay Ms Hardy continued between 2 June 2014 and 25 October 2014 over four months. In order to pay Ms Hardy, the second respondent borrowed from one or more family members.
Of course, it was open to the second respondent to have borrowed from her family earlier than the date she did. Had she done so promptly after the orders were made in June 2014 she may have avoided this litigation. Even if I were to accept that the first respondent’s business had been sold in April 2014 and that it had no assets to meet the sum ordered on 2 June 2014, the inescapable fact remains that the
second respondent paid Ms Hardy the day after this proceeding was issued. It is an inference duly open that the second respondent paid
Ms Hardy after the seriousness of her failure to pay was brought to her attention by the commencement of this proceeding.
Whether that amounts to a deliberate disregard for and flouting of orders of FWC is something I address below. It must also be said that over the four months during which Ms Hardy remain unsatisfied in the sum ordered in her favour she was without the use and benefit of that amount. While on one view the sum of $6,050.60 was a relatively modest amount, over the four months between the date it should have been paid and the date it actually was paid, Ms Hardy was not able to use those funds to her benefit. It must also be said that the sum was paid only after enforcement measures were set in train.
Second factor – nature and extent of the loss or damage sustained
Before FWC, Ms Hardy gave evidence that her net weekly income was $665.00. She said in evidence that after she was terminated she had sought three alternative jobs, all unsuccessfully, and that she ran her own business, deriving $120.00 gross per week and that she was in receipt of paid parental leave. FWC said Ms Hardy would have earned $760.00 per week gross for at least one year had she not been dismissed.
FWC ordered a compensation payment of $6,050.60. Understanding how FWC arrived at the amount of compensation of $6,050.60 is not easy. The arithmetic is problematic. Be that as it may, the
second respondent did not appear at the hearing on 2 June 2014 to challenge the issue, nor subsequently did she appeal against the orders, nor apply to set them aside.
Third factor – any similar previous conduct
FWO adduced no evidence of similar conduct in which the second respondent engaged.
Fourth factor – size of the business
The first respondent was at all relevant times a small business. It was a one-person company: the alter ego of the second respondent and her corporate emanation. The ‘size of the business’ considerations relevant to the facts of this case include the size of the business’s assets and undertaking, its turnover, its payroll, the number its employees, the location at which it operates and its client base. Those are matters that usually go to establish the size of a business. Here, the only evidence about the business came from the second respondent who stated that the business had been sold in April 2014, that the first respondent was not operating and that it had no assets.
FWO led no evidence about the business of the first respondent or of the second respondent. Insofar as “size of the business” incorporates a consideration of the first respondent’s or second respondent’s financial position, two decisions of the Federal Court of Australia are relevant to the imposition of a penalty. They are, namely, Cotis v Macpherson[19] and Kelly.[20] In both of those cases it was held that an employer’s financial position at time of contravention is not relevant to the question of penalty. That reflects the good sense that all employers, irrespective of size and financial position, are bound by the same workplace laws.
[19] (2007) 169 IR 30 at [16].
[20] [2007] FCA 1080.
Put differently, it is no more an answer to a failure to comply with the workplace laws to contend that the business is small and impecunious that it is to contend that the business is large and wealthy. Publicly listed companies that are employers must comply with workplace laws in precisely the same way as must natural persons who are employers.
Fifth factor – deliberateness of breach
FWO stressed to me that the contravention in this case was deliberate, showing disregard for the authority of FWC warranting “the imposition of a meaningful penalty”.[21] By “meaningful”, FWO submitted that the penalty to be imposed on the second respondent was between $7,650.00 and $8,670.00, being respectively 75%-85% of the total maximum of $10,200.00. In my view, FWO’s submissions on deliberateness overstated the position to a very large extent.
[21] Applicant’s submissions on penalty filed 15 October 2015 at [40].
When properly understood, FWO’s submission amounted to a contention that the second respondent actively considered disobeying the orders made on 2 June 2014, and then having actively considered disobeying those orders, chose to disobey them and did in fact disobey them over a period in excess of four months. The evidence never assumed that level of sophistication. It is true the second respondent did not pay the sum ordered on the date ordered. She said she did not pay the sum ordered by the date ordered by reason of her financial circumstances.
FWO argued that the second respondent was able to find the money to pay the sum ordered. FWO said the task was sufficiently simple that she simply borrowed the money from a family member. FWO argued that I should be slow to accept the second respondent’s submissions in that regard. On an objective assessment of the chronological sequence of events in this case, I am unable to find that the second respondent’s failure to pay the sum ordered on 2 June 2014 was accidental.
Whilst she may not have been able to pay the sum ordered by the date ordered and to do so from her own resources, ultimately she did pay the sum ordered once she borrowed funds to do so. I am unable to see why the second respondent could not have borrowed $6,050.60 as soon as the order was made if her personal circumstances and those of the first respondent prevented that payment being made by the date ordered. Put slightly differently, as soon as she knew the precise sum that was ordered against the first respondent, the second respondent must have known, based on her knowledge of hers and the
first respondent’s financial predicament as at 2 June 2014, that she was unable to draw on her own resources or on the first respondent’s resources to pay the sum ordered.
I accept that no evidence was adduced about the first or second respondents’ financial condition as at 14 days after 2 June 2014,
that being the date on which the sum ordered should have been paid.
It was not part of FWO’s case for it to have led that evidence.
The second respondent’s failure to have sought borrowings to meet the sum of $6,050.60 reflected a form of deliberateness on her part to not address the need to pay the sum ordered. I have taken that into account in setting the penalty in this case.
Sixth factor – the involvement of senior management
At all times, the second respondent was the first respondent’s senior and junior management all in one. She was intimately involved in the day-to-day affairs of the first respondent. The first respondent could only do or refrain from doing any act if done by her.
Seventh factor - contrition
FWO was critical of the second respondent for failing to apologise to Ms Hardy or to express genuine remorse. FWO went further by submitting that the acts of the second respondent exhibited a lack of respect for the legal process. I do not agree. The second respondent apologised in Court when this proceeding was before me. She told me her failure to pay the sum ordered by the date ordered related to her personal financial incapacity. I do not accept FWO’s submission that the second respondent exhibited a lack of respect for the legal process. Her failure to pay the sum ordered by the date ordered may reveal some form of deliberateness, but it is altogether a different thing to say that such a failure represented a lack of respect for the legal process in circumstances where the failure to pay was based on financial incapacity.
Eighth factor - corrective measures
FWO submitted that the second respondent paid the sum ordered on 25 October 2014 as, indeed, was an agreed fact.
Ninth factor - cooperation
FWO submitted that the second respondent cooperated with it. That much was obvious. Such cooperation obviated the need to hold a fully contested trial, in turn, relieving FWO of depleting its resources, time and effort. Having acknowledged the second respondent’s cooperation, FWO then advanced a seemingly contradictory submission by contending that the second respondent’s stated reasons for not paying the sum ordered by the date ordered, (financial capacity), was false. It struck me as peculiar that FWO on the one hand acknowledged the second respondent’s cooperation, yet on the other hand submitted that I should be careful not to over-emphasise any such cooperation on account of the falseness of the reason for not complying with the
2 June 2014 orders by the date ordered. The second respondent paid the sum ordered after borrowing funds to enable her to pay. In other words, she failed to pay by the due date from her own funds by reason of personal financial incapacity. That was wholly consistent with her stated reason.
Tenth factor - compliance and minimum standards
Compliance with the orders made by a properly legally constituted court or tribunal is a basic concept of the rule of law. In case it needs judicial pronouncement on point, Katzmann J did just that in
Mayberry & Kijani Investments Pty Ltd (as trustee for the Dawe Investments Trust Subway Wallsend t/as Subway),[22] a reference to FWC.
[22] [2011] FCA 1238 at [20].
The evidence in this case revealed that the second respondent complied with the orders made on 2 June 2014, but only after this proceeding was commenced against her. I have taken into account all the matters that the Court held in Kelly[23] should be taken into account on the hearing of an application in this Court, as is made in this case.
[23] [2007] FCA 1080.
FWO urged me to pay particular regard to issues of general and specific deterrence. I have done that. So far as general deterrence was concerned, there is real force in the proposition expressed by Tracey J in Meadley & Sort Worx Pty Ltd[24] to the effect that an employer is not entitled to unilaterally determine to ignore an order made by FWC. Any penalty to be fixed for failure to comply with the orders made on
2 June 2014 in the time ordered must reflect general deterrence.
[24] (2013) FCA 1012.
So far as specific deterrence is concerned, it has been said in other cases, such as Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union,[25] that specific deterrence focuses on the likelihood of the infringing party being involved in a similar breach in the future. In this case, FWO contended the need for specific deterrence was significant because the second respondent sought to justify her actions in not making payment to Ms Hardy. I do not read the second respondent’s affidavit in that manner. Further, there is no evidence one way or the other that goes to the likelihood of this conduct - not paying the sum ordered to be paid in time - being done in the future.
[25] (2008) 171 FCR 357.
In debate during hearing before me, I canvassed with the legal representative for FWO how the imposition of a crushing sentence was undesirable. I specifically discussed how the sum urged by FWO as its maximum suggested amount, even as discounted, could be construed as being financially crushing in the context of a person who had sworn to suffering financial hardship by reason of a prolonged family law dispute. FWO resisted the concepts I was canvassing. To my mind, when one considers the original order of $6,050.60 against the maximum penalty for non-compliance of $10,200.00 and a discounted penalty of between $7,650.00 and $8,670.00, a degree of disproportion between contravention and penalty is readily apparent.
In my view, the legal representative of FWO took an unduly harsh approach to the circumstances of this case.
While I accept that orders of FWC must be met and on time, nevertheless, in the exercise of any discretion in relation to the imposition of a penalty, the reason for the contravention is important. Put differently, the fact of non-compliance of itself is far from determinative. I have considered particularly the second respondent’s non-compliance, her reasons for that non-compliance, the overall duration of her non-compliance, her cooperation with investigations and in making the statement of agreed facts, the fact that she was required to comply with the 2 June 2014 orders by the date ordered, and also her financial circumstances, including the need to borrow so as to meet the sum ordered on 2 June 2014, as well as issues of general deterrence and specific deterrence. I have also taken into account the 10 factors enumerated above, which Kelly[26] says a court such as this must take into account.
[26] [2007] FCA 1080.
The facts and circumstances of this case are unusual. The non-payment was set against a backdrop of allegations to which the
second respondent swore, not all of which concerned her financial incapacity. They also involved Ms Hardy allegedly providing confidential information owned by the first respondent or the
second respondent to the second respondent’s estranged husband during the course of an extant family law dispute. In no way did that relieve the second respondent of the need to comply with the orders made on 2 June 2014, even assuming those untested assertions by the second respondent were, in fact, true.
The second respondent agreed to relief being ordered in terms of paragraphs 31-36 of the statement of agreed facts filed 10 July 2015. There remained the issue of the amount of the penalty. The maximum amount was $10,200.00. FWO submitted a sum between $7,650.00 and $8,670.00 was appropriate. FWO submitted that a penalty between those sums served as a warning to others and such a penalty was significant. I am not persuaded that the circumstances of this unusual case are sufficiently egregious to warrant the imposition of an amount corresponding to 75%-85% of the maximum amount that could be imposed. In my view, half of the maximum amount is appropriate, being $5,100.00.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Wilson
Date: 8 June 2016
Key Legal Topics
Areas of Law
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Employment Law
Legal Concepts
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Breach
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Penalty
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Remedies
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