Fair Work Ombudsman v Red Lion Brewery
[2022] FedCFamC2G 353
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Red Lion Brewery [2022] FedCFamC2G 353
File number(s): MLG 1839 of 2021 Judgment of: JUDGE MANSINI Date of judgment: 12 May 2022 Catchwords: INDUSTRIAL LAW – FAIR WORK – pecuniary penalty – where second respondent contravened the Fair Work Act 2009 (Cth) by being involved in the first respondent’s contravention of s.716(5) – non-appearance of second respondent – assessment of relevant considerations – penalty order made under s.546(1) to be paid by the second respondent – where s546(3) provides that the court may order payment to the Commonwealth, a particular organisation or a particular person. Legislation: Corporations Act 2001 (Cth) s 471B.
Fair Work Act 2009 (Cth) ss 539(2), 546(1), 546(2) 550(2), 716(3), 716(5).
Hospitality Industry (General) Award 2010.
Cases cited: Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654.
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13.
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25.
CFMMEU v ABCC [2018] FCAFC 97.
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46.
Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801.
Fair Work Ombudsman v T & Sons Pty Ltd [2020] FCCA 3519
Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53.
Markarian v The Queen [2005] HCA 25.
Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076.
Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 61.
Division: Division 2 General Federal Law Number of paragraphs: 42 Date of last submission/s: 5 May 2022 Date of hearing: 6 May 2022 Place: Melbourne Solicitor for the Applicant: Maddocks’ Lawyers The Respondents: No appearance by or on behalf of the Respondents
Table of Corrections 13 May 2022 At paragraph 18, the words “in relation the penalty proceedings” have been removed as a duplicate. ORDERS
MLG 1839 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: RED LION BREWERY (ACN 622 720 094)
First Respondent
MR PAUL KENNETH HENDRIE
Second Respondent
ORDER MADE BY:
JUDGE MANSINI
DATE OF ORDER:
12 MAY 2022
THE COURT ORDERS THAT:
1.Pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (Act), the Second Respondent pay a pecuniary penalty of $2,640 in respect of the contravention of section 716(5) of the Act.
2.Pursuant to section 546(3), the penalty in Order 1 be paid to Mr Daniel Walker within 28 days of the date of this order.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Judge Mansini
INTRODUCTION
In this matter, the Fair Work Ombudsman (FWO) seeks the imposition of a pecuniary penalty against Mr Paul Hendrie (Second Respondent) for his involvement in the Red Lion Brewery (First Respondent)’s failure to comply with a “compliance notice” issued by the FWO.
The matters alleged against the First and Second Respondents were subject of hearing before this Court, as constituted by his honour Judge Davis, on 4 February 2022. The First Respondent was by then in liquidation and represented by the appointed liquidator, who did not object to findings being made against the First Respondent for the purposes of granting a declaration and making orders against the Second Respondent. The Second Respondent did not appear and had not engaged in the proceedings at all.
By reasons delivered ex-tempore and orders of 4 February 2022, the Court entered default judgment, made a declaration and orders (the Default Judgment). The FWO accepted that the proceeding could not continue as against the First Respondent pursuant to s.471B of the Corporations Act 2001 (Cth).[1] The Second Respondent was taken to have contravened s.716(5) of the Fair Work Act 2009 (Cth) (Act) by being involved in the contravention of the First Respondent within the meaning of s.550(2) and orders were made for hearing of the FWO’s application for pecuniary penalty.
[1] Transcript of 4 February 2022, [12].
These reasons address the remaining question of the appropriate pecuniary penalty (if any) to be imposed on the Second Respondent for its contravention.
CONTEXT
The Court’s findings are on transcript and recorded in the orders earlier defined as the Default Judgment. For present purposes the following are most pertinent:
(a)The First Respondent operated a bistro within the hospitality industry. The Second Respondent was the sole director and responsible for overall control, direction, management and supervision of those operations.
(b)In or around January 2021, the FWO commenced an investigation into the First Respondent following a request from a former employee of the First Respondent (a Mr Daniel Walker (the Employee)).
(c)Following the investigation, the FWO formed a reasonable belief that the First Respondent had contravened various provisions of the Hospitality Industry (General) Award 2010 (as in force at that time) (Award) and the National Employment Standards in the Act (NES) over the period 30 October 2019 to 27 March 2020 - amounting to an estimated total of $5,476.34 (gross) in unpaid wages and 149.7687 hours in accrued but untaken annual leave entitlements.
(d)On 19 March 2021, the FWO gave the First Respondent a “compliance notice” which required various actions and evidence of compliance with which was to be produced by 28 April 2021 (the Notice). The Notice was sent to the registered office of the First Respondent and the email address of the Second Respondent. The Notice met the requirements of s.716(3) of the Act.
(e)The First Respondent failed to comply with the Notice and had contravened s.716(5) of the Act.
(f)The Second Respondent was responsible for ensuring that the First Respondent complied with the Notice, had actual knowledge of the Notice that was given to the First Respondent, had actual knowledge that the First Respondent failed to comply with the Notice and was an intentional participant in the First Respondent’s failure to comply with the Notice.
On 4 February 2022, the Court declared that:
The Second Respondent was involved, within the meaning of s.550(2) of the Fair Work Act 2009 (Cth), in the contravention of section 716(5) of the Fair Work Act found in Section B paragraph 14 of this order.
Also on 4 February 2022, the Court ordered that:
1.The Respondents be served with a copy of this order by, as soon as reasonably practicable:
a. emailing a copy of this Order to [email protected];
b. attaching screenshots of this Order and sending them via text message to 04** *** *** and 04** *** ***; and
c. sending a further text message to 04** *** *** and 04** *** *** stating: On Friday 4 February 2022, Judge Davis delivered judgment in the Applicant’s Application filed 24 January 2021, for Default Judgment
2.The Applicant file and serve any affidavits upon which it seeks to rely and an outline of submissions in relation to the penalties which it seeks against the Second Respondent, no later than 18 March 2022.
3.The Second Respondent file and serve any affidavits upon which he seeks to rely and an outline of submissions in relation to the penalties sought against him by the Applicant, no later than 15 April 2022.
4.The matter is adjourned to 6 May 2022 at 10:00am for the hearing of the Applicant’s claim for penalties to be imposed on the Second Respondent for the contraventions declared in section C above.
(actual telephone numbers omitted).
PENALTY PROCEEDINGS
The FWO filed 5 affidavits and written submissions in relation to the penalty proceedings. Nothing was filed by or on behalf of the Second Respondent.
At the penalty hearing on 6 May 2022, appearance was entered for the FWO. The Second Respondent did not appear.
The FWO provided the Court with evidence that the Second Respondent was served with materials filed in support of the penalty application and on notice of the penalty hearing.[2] In all of the circumstances, I determined it was appropriate to proceed with the penalty hearing absent the attendance of the Second Respondent.
[2] Affidavit of Lyndel Gwen David of 21 March 2022.
The FWO sought the imposition of a “high range” pecuniary penalty on the Second Respondent pursuant to s.546(1) of the Act, in the amount of $5,328 to $5,994.
For the reasons that follow the Court will impose a penalty totalling $2,640 as against the Second Respondent.
APPROACH TO THE DETERMINATION OF PENALITIES
The Court’s power to impose pecuniary penalties in respect of the established contravention resides in s.546(1) of the Act.
Section 546(1) permits the Court to impose a pecuniary penalty “that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision”. By the Default Judgment, that state of satisfaction exists.
It falls to determine what level of penalty (if any) is appropriate as against the Second Respondent in light of that established contravention. The present case involves a single contravention by the Second Respondent being an individual, the maximum penalty for which is $6,600 (s.546(2) and s.539(2)).
Factors relevant to the Court’s discretion
As recently affirmed by the High Court of Australia, the purpose of a civil penalty under the regime provided by the Act is primarily, if not wholly, protective in the promotion of the public interest in compliance with the provisions of the Act and in (general and specific) deterrence of further contraventions.[3] An “appropriate” penalty being one that “strikes a reasonable balance between oppressive severity and the need for deterrence in a particular case”.[4]
[3] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [15]-[16] (Pattinson )citing the plurality in (the Agreed Penalties Case) and French J in Trade Practices Commission v CSR Ltd [1990] FCA 762.
[4] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [41].
The principles that inform the determination of appropriate penalties in a particular case are well established. The task of assessing what amount to impose involves the selection of a figure taking into account all factors relevant to the particular case.[5] The oft cited decision of French J in Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076 at [42], listed those factors relevant to an overall assessment of penalty, restated by the Full Court in CFMMEU v ABCC [2018] FCAFC 97 at [20]:
..the nature, character and seriousness of the conduct; the loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and, any co-operation with the regulator and contrition.
[5] Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 611, [75] (Gaudron, Gummow and Hayne JJ); Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357, 373-375, [37] (Gleeson CJ, Gummow, Hayne and Callinan JJ); Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68, 84, [55] (Allsop CJ, Davies and Wigney JJ); Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25, 36 [44] (Jagot, Yates and Bromwicgh JJ) as cited by Snaden J at [26] in Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654.
I consider the present matter in light of those well-established principles.
Nature and deliberateness
The relevant conduct in the present case is the involvement of the Second Respondent in the First Respondent’s failure to comply with the Notice. The Notice was issued following investigation and on the basis of a Fair Work Inspector’s reasonable belief that the First Respondent had contravened provisions of the relevant Award and the NES in respect of entitlements owed to the Employee, in particular:
(a)the minimum adult apprentice wage for ordinary hours worked and loadings for hours worked on Saturdays and Sundays (estimated at $5,476.34 gross in unpaid wages); and
(b)for accrued but unused annual leave owed upon termination (a total of 149.7687 hours according to the most recent payslip).[6]
[6] Affidavit of Christine Maree Cox dated 18 March 2022, [8].
The Notice required the First Respondent to take certain remedial actions by 21 April 2021 including to: identify the appropriate classification of the Employee under the Award, make full payment to the Employee of the amounts owed and prepare a schedule of calculations and amounts paid to the Employee to remedy any underpayment identified. Evidence of compliance was required by 28 April 2021. The matter was not referred for litigation until 5 May 2021.[7]
[7] Affidavit of Nicholas Whitfield dated 18 March 2022, NW-2.
The materials before the Court establish that the Notice was given to the Second Respondent (sole director of the First Respondent) on 19 March 2021 (by express post and email).[8]
[8] Affidavit of Nicholas Whitfield dated 18 March 2022, [7]- [8].
During the period 19 March to 5 May 2021, numerous attempts were made by the FWO (including by telephone, post and email) to communicate with the Second Respondent about the need for compliance with Notice and the consequences of non-compliance.[9] On 21 April 2021, the date by which the remedial action was required, the Second Respondent emailed the FWO in which he sought help but did not comply with the Notice or engage in any substantive way.[10]
[9] Affidavit of Nicholas Whitfield dated 18 March 2022 at [7]-[8], [10]-[11], [15]-[17].
[10] Affidavit of Nicholas Whitfield dated 18 March 2022, [12] and NW-6.
Notwithstanding the Second Respondent’s awareness of the Notice, reasonable evidence of compliance was not forthcoming by 28 April 2021 as required, as at the commencement of these proceedings on 28 July 2021 or at the time of the penalty hearing on 6 May 2022.
As to the issues subject of the Notice, the Second Respondent sent email correspondence to the FWO in which he acknowledged and accepted that outstanding entitlements were owed to the Employee (and, also, “a few others”).[11] The underlying contraventions subject of the Notice were taken to be admitted in the Default Judgment and remain undefended in this Court.
[11] Affidavit of Nicholas Whitfield dated 18 March 2022, NW-1 and NW-6.
In light of the above, the Second Respondent was aware of the Notice and the consequences of failure to comply. The decision of the Second Respondent not to comply or ensure the First Respondents’ compliance with the Notice was deliberate. The circumstances which gave rise to the Notice and the Second Respondent’s express admissions in this regard should also be taken into account in determining penalty in this case.
Loss and damage
The Second Respondent’s involvement in the failure to comply with the Notice or attempt resolution has resulted in public resources expended in pursuit of such compliance and the present litigation.
The outstanding entitlements owed to the Employee (by the Default Judgment, taken to be admitted in these proceedings) remain unresolved as a consequence of the non-compliance with the Notice.[12] The quantum of those underlying contraventions is not able to be assessed with any precision on account of the non-compliance but is estimated by the FWO as amounting to in excess of $9,000.[13] It has now been over one year since the Notice issued in an attempt to resolve the underlying contraventions. That is not an insignificant period of time and ought properly be regarded as too long.
[12] Affidavit of Inspector Whitfield, [19].
[13] Affidavit of Christine Maree Cox dated 18 March 2022, [9].
Cooperation and contrition
The Second Respondent did not ensure the First Respondent’s compliance with the Notice and, although by one email of 21 April 2021 he sought help, did not actively cooperate or engage with the FWO in an effort to comply or partially comply with the Notice or rectify the underlying underpayments.
Since the commencement of these proceedings, the Second Respondent has been properly served with the relevant applications and orders but failed to: file a defence among other documents ordered by the Court, attend 3 directions hearings and appear at the hearings for default judgment and penalty. As recently as 3 February 2022, the Second Respondent emailed the Court and the FWO in which he reconfirmed his email address as correct.[14]
[14] Affidavit of Lyndel Gwen David dated 17 March 2022.
It follows that the Second Respondent has not cooperated with the regulator, demonstrated any contrition or attempted to correct the wrongdoing subject of these proceedings. In the circumstances, I am not able to apply a discount on account of these factors.
Size and financial resources
It is not controversial that the business of which the Second Respondent was sole director experienced financial hardship and is no longer operational, having gone into voluntary liquidation by February 2022. The materials on the Court’s file reflect that the Second Respondent had claimed financial and personal hardship in his emails to the FWO of January and April 2021.[15] However, the Second Respondent’s failure to defend or engage with these proceedings means the exact financial circumstances and resources of the Second Respondent are not before the Court and there is no other explanation in the Second Respondent’s defence as may have been relevant to the assessment of penalty.
[15] Affidavit of Nicholas Whitfield dated 18 March 2022, NW-1 and NW-6.
Compliance with minimum standards
A further and an important consideration in this case is the need for compliance with the statutory framework. The statutory framework concerning compliance notices is an important mechanism for a Fair Work Inspector to deal with non-compliance with minimum entitlements in the Act as an alternative to commencing litigation. It also provides a means of early resolution and rectification without penalty.
I accept the FWO’s contention that the Second Respondent’s involvement in the First Respondent’s failure to comply with the Notice undermines the enforcement framework in the Act and the safety net of entitlements it is designed to protect; and is at least indicative of a prioritisation of his own interests at the expense of the Employee’s entitlements under the Award and the NES.[16]
[16] Citing Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801, [21]-[22] and Fair Work Ombudsman v T & Sons Pty Ltd [2020] FCCA 3519, [28].
Deterrence
The FWO contended that the Court should order a penalty:
(a)in specific deterrence given the Second Respondent’s demonstrated disregard for the obligations on an employer under the Commonwealth workplace laws; and
(b)of sufficient severity to send a message of general deterrence to the café and restaurant industry.
It emphasised the need for general deterrence, given the number of disputes that stem from the café and restaurant industry, where businesses employ a high number of young individuals who vulnerable or in low-income roles. The FWO filed an affidavit of a Fair Work Inspector which included the FWO’s report titled “Fair Work Ombudsman Industry Profile and FWO Interactions – Cafes and Restaurants”, analysing disputes over the period July 2018 to December 2021, in support. The Inspector summarised the Report as indicating, among other things:
i.The cafes and restaurants industry accounted for 9.7% of completed disputes across all industries;
ii.10% of all disputes in the cafes and restaurants industry involved contraventions relating to termination of employment; and
iii.13% of all disputes in the cafes and restaurants industry involved contraventions relating to underpayment of wages and a further 13% related to non-payment of wages. [17]
[17] Affidavit of Nicholas Whitfield dated 18 March 2022, [20] and NW-10.
This is a case where there is a need for specific deterrence, particularly in circumstances where the Second Respondent has failed to participate in the proceeding. It is also necessary given the complete lack of contrition and failure to make any attempt to rectify the underpayments to the Employee which remain outstanding.
There is also a need for general deterrence, to emphasise the importance of the maintenance of effective minimum terms and conditions of employment and adherence to the provisions of industrial instruments. It is vital that the penalty be imposed at a level which is sufficient as not to simply constitute a cost of doing business in the event that a disgruntled employee or a regulator may investigate.
CONCLUSION
The Second Respondent contravened s.716(5) by his involvement in the First Respondent’s failure to comply with the Notice.
When all of the factors above are considered, I am satisfied that it is appropriate to impose a pecuniary penalty on the Second Respondent pursuant to s.546(1).
The FWO’s recommended penalty range in respect of the single contravention by the Second Respondent is $5,328 to $5,994. In the particular circumstances of this case, a penalty in the range of 80-90% of the maximum is excessive. Weighing the various competing factors, I consider it appropriate to fix the penalty at $2,640 for the Second Respondent’s contravention by involvement in the First Respondent’s contravention. In my view, this is a proportionate response to the contravention of s.716(5) and strikes a reasonable balance between oppressive severity and the need for both general and specific deterrence in this particular case.
The FWO pursued this proceeding as regulator but did not oppose an order that the pecuniary penalty be paid to the Employee. I am satisfied it is appropriate that the penalty be payable to the Employee pursuant to s.546(3)(c) rather than part or all be payable to the Commonwealth. This is a case where the Employee has been left financially disadvantaged for a considerable period of time and had sought the assistance of the FWO in rectifying this position - as yet to no avail.
No order as to interest was sought and I make no order in this respect.
I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 12 May 2022