Fair Work Ombudsman v Rika Foods North Melbourne Pty Ltd

[2023] FedCFamC2G 379

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

Fair Work Ombudsman v Rika Foods North Melbourne Pty Ltd [2023] FedCFamC2G 379

File number:

MLG 1567 of 2022

Judgment of:

JUDGE RILEY

Date of judgment:

11 May 2023

Catchwords:

INDUSTRIAL LAW - failure to comply with a compliance notice – failure to pay JobKeeper payments to employee – penalty.

Legislation:

Fair Work Act 2009 ss.536(2), 546, 716, 550(2)
Taxation Administration Act 1953
Coronavirus Economic Response Package (Payment and Benefits) Rules 2020

Cases cited:

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3

Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13

Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 326 ALR 476; (2015) 90 ALJR 113; (2015) 255 IR 87; [2015] HCA 46

Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at 230-231; [2001] FCA 1364

Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301

Fair Work Ombudsman v Rika Foods North Melbourne Pty Ltd [2022] FedCFamC2G 768

Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492

Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080

Mason v Harrington Corporation Pty Ltd [2007] FMCA 7

Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70

Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170

Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65

Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412

Division:

Division 2 General Federal Law

Number of paragraphs:

64

Date of hearing:

8 March 2023

Place:

Melbourne

Advocate for the Applicant:

Barney Adams

Solicitor for the Applicant:

HWL Ebsworth Lawyers

Advocate for the Respondents:

Radomir Pantovic (in person)

Solicitor for the Respondents:

None

ORDERS

MLG 1567 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:

FAIR WORK OMBUDSMAN
Applicant

AND:

RIKA FOODS NORTH MELBOURNE PTY LTD
(ACN 634 257 248)
First Respondent

RADOMIR PANTOVIC
Second Respondent

order made by:	JUDGe riley
DATE OF ORDER:	11 May 2023

THE COURT ORDERS THAT:

1.Within 28 days, pursuant to s.546 of the Fair Work Act 2009 (“the Act”), the first respondent pay pecuniary penalties, fixed in the sum of $26,640, to the Commonwealth for the first respondent’s contravention set out in declaration 1 made on 21 November 2022.

2.Within 28 days, pursuant to s.546 of the Act, the second respondent pay pecuniary penalties, fixed in the sum of $5,328, to the Commonwealth for the second respondent’s contravention set out in declaration 2 made on 21 November 2022.

3.The applicant have liberty to apply on seven days’ notice in the event that orders 1 and 2 are not complied with.

THE COURT DIRECTS THAT:

4.The national registrar refer this matter to the Commissioner of Taxation (“the Commissioner”) for investigation into whether the respondents have breached any laws administered by the Commissioner in circumstances where the respondents have admitted to failing to remit JobKeeper payments to Ms Hilary Aitken.

5.The national registrar provide a copy of these orders and the reasons for this judgment to the Commissioner, and such other documents from the court file as the Commissioner may request.

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 RILEY:

INTRODUCTION

1. This matter concerns the penalty, if any, to be imposed for the respondents’ contraventions of the Fair Work Act 2009 (“the Act”). The contraventions consisted of the first respondent failing to comply with a compliance notice issued by the applicant under s.716(5) of the Act, and the second respondent being involved in that contravention.

2. The applicant is the Fair Work Ombudsman. The first respondent, Rika Foods North Melbourne Pty Ltd (“Rika”), is a company that operated a juice and coffee bar inside the Sonsa Markets in Collingwood. The second respondent, Mr Pantovic, is and was at all relevant times the sole director of Rika.

3. Rika employed Hilary Aitken on a casual basis. Pursuant to the Coronavirus Economic Response Package (Payment and Benefits) Rules 2020, Rika received JobKeeper payments in in respect of Ms Aitken of:

   (a)$1,200 per fortnight in the period 28 September 2020 to 3 January 2021; and

   (b)$1,000 per fortnight in the period 4 January 2021 to 28 March 2021.

4. On 8 July 2021, Ms Aitken requested assistance from the Ombudsman. The Ombudsman conducted an investigation and formed the view that Rika had not paid Ms Aitken the sum of $14,400 that Rika had received under the JobKeeper scheme for Ms Aitken for the period 28 September 2020 to 28 March 2021.

5. On 16 November 2021, the Ombudsman sent a compliance notice to Rika under s.716(2) of the Act. The compliance notice required Rika to, essentially:

   (a)by 14 December 2021:

   (i)ascertain whether Ms Aitken had not been paid the full amount of any payments Rika had received for her under the JobKeeper scheme; and, if so

   (ii)calculate the amount she had been underpaid and pay it to her; and

   (b)provide proof to the Ombudsman of its compliance with the compliance notice by 21 December 2021.

6. Rika failed to comply with any aspect of the compliance notice by the specified dates or at all.

7. The Ombudsman commenced these proceedings on 1 July 2022. The matter was listed for first return on 27 September 2022. On that date, Mr Pantovic appeared in person and was granted leave to appear for Rika. The matter was adjourned to 21 November 2022 for further directions, as Mr Pantovic said that he wished to obtain legal assistance.

8. At the directions hearing on 21 November 2022, Rika and Mr Pantovic were not legally represented. Mr Pantovic was given leave to appear on Rika’s behalf. The respondents consented to final orders being made on liability, and to orders for Rika to pay the outstanding amounts to Ms Aitken. The orders and declaration made on 21 November 2022 included the following:

   THE COURT DECLARES THAT:

   1. The first respondent contravened s.716(5) of the Fair Work Act 2009 (“the Act”) by failing to comply with the compliance notice issued to the first respondent by the applicant on 16 November 2021.

   2. Pursuant to s.550(2) of the Act, the second respondent was involved in the first respondent’s contravention identified in declaration 1.

   …

   THE COURT ORDER BY CONSENT THAT:

   4. Pursuant to s.545(1) of the Act, by 4pm on 16 January 2023, the first respondent pay the amount of $14,400 to its former employee, Ms Hilary Aitken, and provide proof of payment to the applicant.

   5. Pursuant to s.547(2) of the Act, by 4pm on 16 January 2023, the first respondent pay to Ms Aitken interest on the amount of $14,400.

   …

9. The matter was otherwise adjourned for penalty hearing on 8 March 2023.

10. Rika Foods did not comply with orders 4 and 5 made on 21 November 2022. The amount of $14,400 plus interest payable to Ms Aitken remains outstanding.

11. Pursuant to s.539(2) and s.546(2) of the Act, the maximum penalty that the court may impose for a contravention of s.716(5) of the Act is 30 penalty units for an individual and 150 penalty units for a company. At the time of the contraventions, in December 2021, the value of a penalty unit was $222. Consequently, the maximum penalties are $33,300 for Rika and $6,660 for Mr Pantovic.

12. The Ombudsman proposed penalties that allowed a 10% discount from the maximum penalty for admissions, and then 80% to 90% of the balance remaining. That works out to be in the range of $23,976 to $26,973 for Rika and $4,795 to $5,395 for Mr Pantovic.

13. Mr Pantovic said that he would leave it up to the court to determine the scale of the penalty.

    MATERIAL RELIED UPON

14. The Ombudsman relied on the following documents:

    (a)the initiating application filed on 1 July 2022;

    (b)the statement of claim filed on 1 July 2022;

    (c)the affidavit sworn by Victor Josue Acevedo Alfaro on 19 December 2022;

    (d)the Ombudsman’s written submissions on penalty filed on 20 December 2022;

    (e)the court book filed on 3 March 2023; and

    (f)the list of authorities filed on 3 March 2023.

15. Rika and Mr Pantovic did not rely on any written material but made brief oral submissions at the hearing on 8 March 2023.

    THE PURPOSE OF CIVIL PENALTIES

16. In Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13, all the members of the High Court, except Edelman J, said that:

    [9]… Under the civil penalty regime provided by the Act, the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act. In that context, the penalties fixed by the primary judge were appropriate because they were no more than might be considered to be reasonably necessary to deter further contraventions of a like kind by Mr Pattinson, the CFMMEU or others. They represented a reasonable assessment of what was necessary to make the continuation of the CFMMEU’s non-compliance with the law, amply demonstrated by the history of its contraventions, too expensive to maintain.

    [10]The Full Court’s critical error was that it was distracted by a concern, drawn from the criminal law, that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a “notion of proportionality”, in the sense in which the Full Court used that term, in a civil penalty regime. Further, and relatedly, their Honours were misled by the view that the Act required that the maximum penalty be reserved for only the most serious examples of the offending comprehended by s 349(1), and that this principle could prevent the court from imposing the maximum penalty even though a penalty in that amount might reasonably be considered to be necessary to deter future contraventions of a like kind. Nothing in the text, context or purpose of s 546 requires that the maximum penalty be reserved for the most serious examples of misconduct within s 349(1). What is required is that there be “some reasonable relationship between the theoretical maximum and the final penalty imposed”. That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others.

    …

    [15]Most importantly, it has long been recognised that, unlike criminal sentences, civil penalties are imposed primarily, if not solely, for the purpose of deterrence. The plurality in the Agreed Penalties Case said:

    [W]hereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd , is primarily if not wholly protective in promoting the public interest in compliance:

    “Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”

    (citations omitted)

    PROPORTIONALITY

17. In Pattinson, the High Court addressed the question of proportionality as follows:

    [40]Nothing in the text, context or purpose of s 546 of the Act suggests that the Full Court’s “notion of proportionality” inheres in the court’s task, pursuant to s 546, to fix a penalty which it considers to be an “appropriate” penalty. The discretion conferred by s 546 is, like any discretionary power conferred by statute on a court, to be exercised judicially, that is, fairly and reasonably having regard to the subject matter, scope and purpose of the legislation. In a civil penalty context, Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission said:

    “[I]nsistence upon the deterrent quality of a penalty should be balanced by insistence that it ‘not be so high as to be oppressive’. Plainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression.”

    [41]It may therefore be accepted that s 546 requires the court to ensure that the penalty it imposes is “proportionate”, where that term is understood to refer to a penalty that strikes a reasonable balance between deterrence and oppressive severity. It is in this sense that the Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd used the term “proportionality”, when their Honours said:

    “If it costs more to obey the law than to breach it, a failure to sanction contraventions adequately de facto punishes all who do the right thing. It is therefore important that those who do comply see that those who do not are dealt with appropriately. This is, in a sense, the other side of deterrence, being a dimension of the general deterrence equation. This is not to give licence to impose a disproportionate or oppressive penalty, which cannot be done, but rather to recognise that proportionality of penalty is measured in the wider context of the demands of effective deterrence and encouraging the corresponding virtue of voluntary compliance.” (emphasis added)

    [42]However, the Full Court’s “notion of proportionality” derived from Veen (No 2) is something quite different. That notion cannot be reconciled with the decisive statements in the Agreed Penalties Case that civil penalties are not retributive, but rather are protective of the public interest in that they aim to secure compliance by deterring repeat contraventions. To introduce considerations drawn from theories of retributive justice into the application of s 546 of the Act undermines the primary significance of deterrence.

    …

    [46]It does not follow, as the Full Court suggested and as the CFMMEU argued in this Court, from the rejection of the Full Court’s “notion of proportionality” that s 546 must be taken to require the imposition of a penalty approaching the maximum in relation to any and every contravention by a recidivist offender. It is important to recall that an “appropriate” penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a “one-off” result of inadvertence by the contravenor rather than the latest instance of the contravenor’s pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law on the part of a union official, or where the official responsible for a deliberate breach has been disciplined by the union. In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.

    [47]The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors of the kind adverted to by French J in CSR. For example, where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.

    …

    [50]This Court’s reasoning in the Agreed Penalties Case is distinctly inconsistent with the notion that the maximum penalty may only be imposed in respect of contravening conduct of the most serious kind. Considerations of deterrence, and the protection of the public interest, justify the imposition of the maximum penalty where it is apparent that no lesser penalty will be an effective deterrent against further contraventions of a like kind. Where a contravention is an example of adherence to a strategy of choosing to pay a penalty in preference to obeying the law, the court may reasonably fix a penalty at the maximum set by statute with a view to making continued adherence to that strategy in the ongoing conduct of the contravenor’s affairs as unattractive as it is open to the court reasonably to do.

    (citations omitted)

    APPROACH TO DETERMINING PENALTY

18. Bromwich J summarised the proper approach to determining penalty in cases such as this in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 at [36] as follows:

    (1)Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.

    (2)Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.

    (3)Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.

    (4)Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.

    (5)Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].

1. A convenient checklist of the factors that the court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is as follows, (with paragraph letters inserted):

   (a)The nature and extent of the conduct which led to the breaches.

   (b)The circumstances in which that conduct took place.

   (c)The nature and extent of any loss or damage sustained as a result of the breaches.

   (d)Whether there had been similar previous conduct by the respondent.

   (e)Whether the breaches were properly distinct or arose out of the one course of conduct.

   (f)The size of the business enterprise involved.

   (g)Whether or not the breaches were deliberate.

   (h)Whether senior management was involved in the breaches.

   (i)Whether the party committing the breach had exhibited contrition.

   (j)Whether the party committing the breach had taken corrective action.

   (k)Whether the party committing the breach had cooperated with the enforcement authorities.

   (l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.

   (m)The need for specific and general deterrence.

2. The court must, of course, be mindful of the caution expressed by the High Court at [19] of Pattinson as follows:

   It may readily be seen that this list of factors includes matters pertaining both to the character of the contravening conduct (such as factors 1 to 3) and to the character of the contravenor (such as factors 4, 5, 8 and 9). It is important, however, not to regard the list of possible relevant considerations as a "rigid catalogue of matters for attention" as if it were a legal checklist. The court's task remains to determine what is an "appropriate" penalty in the circumstances of the particular case.

   (citations omitted)

3. The court will consider the circumstances of the case under the various headings suggested by Mowbray FM, and then consider whether any other matters are relevant.

   STEP 1: IDENTIFYING THE BREACHES

4. As stated above, Rika Foods contravened s.716(5) of the Act by failing to comply with a compliance notice issued on 16 November 2021. Pursuant to s.550(2) of the Act, Mr Pantovic was involved in that contravention.

   STEP 2: SINGLE COURSE OF CONDUCT

5. The breach in the present case was a single breach, so the course of conduct provisions do not apply.

   STEP 3: GROUPED BREACHES

6. This step does not apply in the present case as there was only one breach.

   STEP 4: THE APPROPRIATE PENALTY FOR THE BREACHES

   a.        the nature and extent of the conduct which led to the breach

7. There was one breach, being the failure to comply with a compliance notice. There is no doubt that Rika, through Mr Pantovic, was aware of the compliance notice and its requirements, and that these proceedings would be brought in the event of non-compliance. Notwithstanding that, Rika, through Mr Pantovic, failed to comply with the compliance notice by the specified dates or at all. This can only be regarded as a deliberate breach.

8. The underlying defaults were that Rika failed to pass on to Ms Aitken JobKeeper payments that the government had given to Rika for Ms Aitken for the period 28 September 2020 to 28 March 2021. The defaults represented an underpayment of $14,400.

   b.        the circumstances in which that conduct took place

9. The circumstances of the breach were that the COVID-19 pandemic was underway. Mr Pantovic did not provide any evidence or submissions to the effect that his business was more affected by the COVID-19 pandemic than other similar businesses. Of course, the whole point of JobKeeper payments to employers was to enable them to pay their staff when business was slow or non-existent. The point of JobKeeper payments was not for employers to retain the money for their own benefit, as has happened in this case.

   c.        the nature and extent of any loss or damage sustained

10. Judge Emmett said in Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492 at [42]:

    … intentional failure to comply with a mandatory notice issued by the workplace regulator is “conduct … [which] undermines the utility and effectiveness of a fundamental object” the FW Act. The failure to comply undermines and frustrates the powers conferred on Fair Work Inspectors, which are conferred for the purposes of providing an effective means of enforcing compliance with lawful minimum entitlements. There is a significant cost to the public by reason of the need to bring this matter before the court to enforce compliance.

    (footnotes omitted) 

11. I adopt that passage. Moreover, the failure to comply with the compliance notice meant that Ms Aitken did not receive the $14,400 in a timely way. That is a substantial amount of money in anyone’s terms, but particularly for a casual worker in the hospitality industry.

    d.        whether there had been similar previous conduct

12. The Ombudsman submitted at the hearing that this was not the first time Rika and Mr Pantovic had been brought before the court for failure to comply with a compliance notice. In Fair Work Ombudsman v Rika Foods North Melbourne Pty Ltd [2022] FedCFamC2G 768, Judge Forbes found that Rika, with Mr Pantovic’s involvement, had failed to pay Ms Seok anything at all for 40 hours of work over an eight day period.

13. The Ombudsman commenced proceedings against Rika and Mr Pantovic for failing to comply with a compliance notice issued on 13 April 2021 in respect of Ms Soek. Judge Forbes made relevant declarations on 27 May 2022. 

14. The present compliance notice was issued on 16 November 2021 and required compliance by 14 and 21 December 2021. As a result, the breach in the present case occurred before a court had made a finding of a breach in Ms Soek’s case. In these circumstances, the Ombudsman accepted that Ms Soek’s case was not, strictly speaking, a “prior conviction”. However, it remains relevant conduct.

    e.        whether the breaches arose out of the one course of conduct

15. There was only a single breach, so this factor has no application.

    f.         the size of the business enterprise involved

16. The respondents did not place any evidence before the court about the size of their business.  However, it can readily be inferred that it was a small business.

17. Having said that, Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [28]:

    No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level”

    (footnote omitted)

18. Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at [27]:

    Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size.  Such a factor should be of limited relevance to the Court’s consideration of penalty.

    g.        whether or not the breaches were deliberate

19. The breach was deliberate. Rika was given multiple opportunities to comply with the compliance notice. Despite his awareness of the compliance notice, Mr Pantovic did not take any steps, on behalf of Rika, to ensure compliance.

    h.        whether senior management was involved in the breach

20. Mr Pantovic was, to all intents and purposes, the senior management of his business. He was involved in the breach.

    i.         contrition, corrective action and co-operation with the authorities

21. By conceding liability at the directions hearing on 21 November 2022, the respondents spared the Ombudsman and the court the time and effort of dealing with a contested matter. That can be regarded as co-operation with the authorities.

22. However, in Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70, the Full Federal Court said at [76] that:

    … a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.

23. There is no evidence in the present case that the respondents have made any expression of regret, to the Ombudsman, the court or Ms Aitken. Mr Pantovic told the court on 21 November 2022 that he wanted to “put this matter to a closure”. On 8 March 2023, he told the court that, “All I want to do is relieve this debt and move on with everybody’s lives.” He did not actually apologise, or say he was sorry for what he had done.

24. Moreover, most tellingly, Mr Pantovic has still not caused Rika to pay the $14,400 plus interest that is owing to Ms Aitken. This is not the action of a person who is willing to facilitate the course of justice, or who is genuinely contrite. 

25. Mr Pantovic said at the penalty hearing that he had agreed with the Ombudsman to repay $500 every week in reduction of the debt. However, a moment later, he said that he would pay $500 every seven to 10 days. The immediate diminution of his offer does not inspire confidence that it will be honoured. Moreover, Mr Pantovic has had ample time to start reducing the debt to Ms Aitken but did absolutely nothing up until the date of the hearing. 

26. The Ombudsman recommended a 10% discount for admissions. That strikes me as generous, in the absence of any corrective action or genuine contrition. The absence of corrective action has occurred in the circumstances of court orders for payment to Ms Aitken by January 2023, as well as the compliance notice requiring the payment to Ms Aitken by December 2021 and the law itself having required payment to Ms Aitken between about September 2020 and March 2021 when Rika received the JobKeeper payments from the government.

    j.         the need to ensure compliance with minimum standards

27. In her outline of submissions on penalty filed on 20 December 2022, the Ombudsman said that:

    48.One of the principal purposes of the FW Act is to provide a guaranteed safety net of fair, relevant, and enforceable minimum terms and conditions for all employees.⁵⁰ To be able to enforce these terms, FWIs must be able to exercise their compliance powers effectively. The purpose of the powers conferred on FWIs is to provide the FWO with an effective means of investigating and enforcing compliance with minimum standards and industrial instruments.

    49. Rika Foods’ failure to comply with the Compliance Notice undermines the FW Act’s enforcement framework and the safety net of entitlements it is designed to protect,⁵¹ and reflects a prioritisation of the Respondents’ own interests at the expense of Ms Aitken’s minimum entitlements.

    50. The failure to comply with a statutory notice properly issued by the FWO is serious.⁵² The efficacy of statutory notices such as compliance notices will be hindered or made redundant if recipients perceive that a failure to comply carries no meaningful consequences.⁵³

    FN 50:Section 3(b), FW Act.

    FN 51:Fair Work Ombudsman v Trek North Tours (No 2) [2015] FCCA 1801, [21]–[22].

    FN 52:Fair Work Ombudsman v VS Investment Group Pty Ltd [2013] FCCA 208, [51].

    FN 53:Nobrace, [40].

28. I accept those submissions.

    k.        the need for specific and general deterrence

29. As the High Court recently confirmed in Pattinson, general and specific deterrence is the primary, if not sole, objective of the civil penalty regime under the Act.

30. In Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 326 ALR 476; (2015) 90 ALJR 113; (2015) 255 IR 87; [2015] HCA 46, French CJ, Kiefel, Bell, Nettle and Gordon JJ said at [55]:

    No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:

    Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. ... The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.

    (footnotes omitted)

31. Similarly, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3, Keane, Nettle and Gordon JJ said at [116]:

    As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty’s general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition.

    (footnotes omitted)

32. In relation to specific deterrence, Gray J observed in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170 at [37] that:

    … Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur. …

33. In relation to general deterrence, Lander J noted in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 at [93]:

    … In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations.  If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section.  However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat.  In some cases, general deterrence will be the paramount factor in fixing the penalty…

    (footnotes omitted)

34. Similarly, in Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at 230-231; [2001] FCA 1364, Finkelstein J said at [9]:

    … even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law’s disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ….

35. In the present case, the respondents did not file and serve any affidavit evidence regarding their present circumstances. However, Mr Pantovic said from the bar table that Rika was no longer operating. The Ombudsman did not dispute that, but said that Rika was still registered. Mr Pantovic also said that he was working for himself as a cleaner and did not expect to employ any people in the future. He said that he is 65 years old. There was no objection to these statements being made to the court.

36. In the circumstances, I accept that the need for specific deterrence is in the moderate range. I consider that there is still some prospect of Mr Pantovic employing people in the future, perhaps in his cleaning business. Mr Pantovic, and through him, Rika, have not shown any contrition, which is an indicator for future breaches. In addition, Mr Pantovic, and through him, Rika, have been involved in another, separate breach of the Act, as found by Judge Forbes. That is another indicator for future breaches.

37. In relation to general deterrence, in her outline of submissions on penalty filed on 20 December 2022, the Ombudsman said that:

    22. General deterrence must serve a purpose such that the penalty is not seen by others as just ‘the cost of doing business’.¹⁸ In order to be useful as a general deterrent, a penalty ‘should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations’.¹⁹

    23. The efficacy of statutory notices such as compliance notices will be hindered if recipients perceive that a failure to comply carries no meaningful consequences. Given the importance of the power to issue a compliance notice as a tool of Fair Work Inspectors, and that compliance with such notices avoids the need for litigation or the imposition of any penalties,²⁰ penalties for non-compliance should be set at a level which demonstrates there are serious consequences for failing to comply with a compliance notice. In doing so, the Court will deter other parties from failing to comply with compliance notices.

    24. Rika Foods operated in the café and restaurant industry). Relevant in assessing the need for general deterrence is evidence as to practices or compliance levels in the particular industry.²¹ As set out in the FWO’s industry profile for the restaurant industry for the period between July 2018 and June 2022, the Café and Restaurant Industry is a rated by the Applicant as a high dispute industry, accounting for 9.7% of the total disputes completed by FWO across the financial years ending 2019 to 2022.²²

    FN 18:Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290, [27].

    FN 19:Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65, [93] (Lander J).

    FN 20:Fair Work Ombudsman v Syndicate Group Pty Ltd [2015] FCCA 2847, [27]; cited in Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150, [29].

    FN 21:Fair Work Ombudsman v NSH North Pty Ltd t/a New Shanghai Charlestown [2017] FCA 1301 (NSH North) at [133]-[134].

    FN 22:FWI Acevedo Affidavit, Annexure VA-9.

38. I accept those submissions, the effect of which is that there is a need for very substantial general deterrence in this matter.

    Other issues

1. I raised with the Ombudsman at the hearing whether Rika and Mr Pantovic faced an additional penalty, perhaps under the Taxation Administration Act 1953, for their failure to pay the JobKeeper payments to Ms Aitken. The Ombudsman was unable to assist on that point, but did emphasise that the penalty in the present case was for failure to comply with a compliance notice and not for failure to remit JobKeeper payments to the relevant employee. 

2. I accept those submissions. It follows that there is not a risk of Rika and Mr Pantovic being penalised twice for the same conduct, as the compliance notice breach is separate and distinct from the JobKeeper breach. Moreover, as the penalty to be imposed in the present case will be first in time, it would be for any court considering the JobKeeper aspect of the matter to take into account the penalty in the present matter, if that court sees fit. 

3. Having said all that, it seems to me to be proper to refer this matter to the Commissioner of Taxation to investigate whether there has been any breach of laws administered by the Commissioner.

   STEP 4: THE APPROPRIATE PENALTY

4. Mr Pantovic said from the bar table that he was self-employed in the cleaning industry. He provided no evidence to the court about the amount of his earnings or his assets. Accordingly, I am unable to assess whether any particular level of penalty would be crushing or otherwise excessive.

5. In my view, there should be no discount for the early admissions because they were not reflective of any genuine contrition. The admissions were reflective of the overwhelming case against the respondents.

6. In my view, a penalty of 80% of the maximum is appropriate for each respondent. It seems to me that this will satisfy the need for both general and specific deterrence in this case. That works out to be $26,640 for Rika and $5,328 for Mr Pantovic.

   STEP 5: THE TOTALITY PRINCIPLE

7. There is no need to undertake the check that is required by the totality principle, as there was only a single contravention by each respondent.

   CONCLUSION

8. There will be orders accordingly.

I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley.

Associate:

Dated:       11 May 2023