Fair Work Ombudsman v Saga Source Pty Ltd
[2023] FedCFamC2G 954
•26 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Saga Source Pty Ltd [2023] FedCFamC2G 954
File number(s): PEG 243 of 2022 Judgment of: JUDGE VASTA Date of judgment: 26 October 2023 Catchwords: INDUSTRIAL LAW – Contraventions of Fair Work Act 2009 (Cth) – pecuniary penalty – deterrence Legislation: Fair Work Act2009 (Cth) ss 545(1), 546(1), 547(2), 550(2)(c), 716(5) Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Mason v Harrington Corporation Proprietary Limited t/as Pangaea Restaurant & Bar [2007] FMCA 7
Division: Division 2 General Federal Law Number of paragraphs: 32 Date of last submission/s: 25 August 2023 Date of hearing: In Chambers on the papers Place: Brisbane Solicitor for the Applicant: Office of the Fair Work Ombudsman Counsel for the Respondents: The Second Respondent on behalf of the Respondents ORDERS
PEG 243 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: SAGA SOURCE PTY LTD ACN 645 410 206
First Respondent
AYDEN LEE HERNAN-SAYERS
Second Respondent
ORDER MADE BY:
JUDGE VASTA
DATE OF ORDER:
26 OCTOBER 2023
BY CONSENT, THE COURT DECLARES THAT:
A.The First Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (“FW Act”) by failing to comply with the Compliance Notice; and
B.The Second Respondent was involved, within the meaning of section 550(2)(c) of the FW Act, in the First Respondent’s contravention of section 716(5) of the FW Act.
BY CONSENT, THE COURT ORDERS THAT:
1.Pursuant to section 545(1) of the FW Act, within 60 days of this order, the First Respondent paid to the employee, Mr Braedan Dowellon, the amount of $6,956.75.
2.Pursuant to section 547(2) of the FW Act, within 60 days of this order, the First Respondent pay interest to the employee, Mr Braedan Dowellon, the amount in Order 1 herein at the applicable pre-judgment interest rate prescribed by the Federal Circuit and Family Court of Australia.
3.The Applicant have liberty to apply on seven days’ notice in the event that any of the Orders herein are not complied with.
THE COURT ORDERS THAT:
4.Pursuant to section 546(1) of the FW Act, the First Respondent pay a pecuniary penalty in the sum of $12,000 to the Commonwealth for the contraventions in Declaration A above, within 60 days of this order.
5.Pursuant to section 546(1) of the FW Act, the Second Respondent pay a pecuniary penalty in the sum of $2,500 to the Commonwealth for the contraventions in Declaration B above, within 60 days 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 VASTA
INTRODUCTION
On 19 December 2022, the applicant, Fair Work Ombudsman (“FWO”), asked this Court to make declarations against the first respondent, Saga Source Pty Ltd, and the second respondent, Ayden Hernan-Sayers, in that the first respondent and second respondent had contravened the Fair Work Act2009 (Cth) (“FW Act”). The applicant also sought the imposition of pecuniary penalties for the contravention.
The matter was to come before the Court for the first time in March 2023, however the parties entered into an agreement and sent that to the Court. On 13 March 2023, His Honour Judge Kendall ordered that the respondents file and serve a notice of address and that they file and serve responses and defences by 11 April 2023. His Honour adjourned the matter for directions hearing on 2 May 2023.
Before that date came about, the parties again agreed on a set of orders and sent those to His Honour’s Chambers. On 2 May 2023, His Honour ordered that the matter be listed for a penalty hearing and gave a timetable for the filing of an agreed statement of facts, any evidence and submissions.
The matter was transferred into my docket in early July 2023, in anticipation of my sitting in Perth in the week of 28 August 2023. The parties sent consent amendments extending the time within which they were to file that material and I made orders in those terms on 5 July 2023.
I had listed the penalty hearing to be heard on 31 August 2023, however the parties contacted my Chambers, on 25 August, informing me that they were content for me to consider the question of penalty (and other orders) in Chambers “on the papers”.
I have now considered the matters and will give my reasons as to the orders I have considered as being appropriate.
Background
The first respondent is a company that was incorporated and registered on 26 October 2020. It was the operator of an information technology business. The second respondent was the sole director of the first respondent and was also responsible for the overall operation, management and control of the first respondent. This means that he was responsible for ensuring that the first respondent complied with its legal obligations under the FW Act.
In January 2022, the applicant was contacted by Braedan Dowell (the employee) who asked for assistance because he felt he had been underpaid. The applicant then commenced an investigation.
The investigation
What was revealed was that the employee had been employed as a Junior Backend Developer. He commenced employment on 8 November 2020 and concluded his employment on 31 December 2021. The employee was employed on a part-time basis and was employed as a Level I Graduate Professional under the Professional Employees Award 2020 (“Award”).
The investigation showed that the employee took personal leave from 5 July 2021 to 25 August 2021. In this period, the first respondent did not pay the employee for the hours of personal leave taken and the wages that were paid were below the minimum rates in the Award. The investigation also showed that the first respondent did not pay the employee for his accrued, but untaken, annual leave at the end of his employment.
Consequences of the investigation
The applicant, having formed the belief that those facts illustrated contraventions of the FW Act, gave the first respondent a compliance notice on 11 March 2022. That notice required the first respondent to remedy the contraventions by 18 April 2022 and to produce reasonable evidence of compliance with the notice by 25 April 2022.
The compliance notice
The first respondent (and the second respondent) did not comply with the compliance notice. There was some belated compliance with the notice by the second respondent who, on 3 August 2022, sent an email to the applicant calculating what the employee was owed under the compliance notice. That amount is $6,956.75.
The employee still had not been paid any of that money.
Pecuniary penalties
The law in relation to assessment of pecuniary penalties has really been laid down quite comprehensively. The High Court, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3, said, at paragraph 116 of that judgment:
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.
The High Court reaffirmed that principle very recently in the matter of Australian Building and Construction Commissioner v Pattinson [2022] HCA 13. The High Court said, at paragraph 46:
[46]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. …
[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 … 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.
[48]It is not necessary to multiply examples further. It is sufficient to say that a court empowered by section 546 to impose an “appropriate” penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.
In Mason v Harrington Corporation Proprietary Limited t/as Pangaea Restaurant & Bar [2007] FMCA 7, which is known as the Pangaea case, the Court went through, in effect, a number of factors the Court should be mindful of when imposing pecuniary penalties. One must be careful, though, in looking at the Pangaea case (Supra), that one does not simply look at those matters as some form of checklist to see whether or not the facts of the case with the particular factors either aggravate or mitigate the penalty. As such, the list compiled in Pangaea (Supra) is extremely useful, but it should not be a formula used by the Court to slavishly come up with some sort of almost mathematical guide for the imposition of penalties.
Notwithstanding what has been said in Pattinson (supra), the principles in Pangea are still apposite when looking at the circumstances of the contravention as well as the circumstances of the contravenor.
Nature of the Compliance Notice regime
In accordance with the authorities, it is trite to say that deterrence is the primary objective of the imposition of pecuniary penalties. However, it is important to strike a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case.
The act of the first respondent (and the second respondent), which needs to be deterred, is the act of failing to comply with the compliance notice. In many ways, the size of the amount underpaid by an employer is not a particularly relevant factor. Whether the underpayment is $500 or $50,000, is a secondary consideration to the Court needing to deter the actual non-compliance with the compliance notice.
In this case, the amount of just under $7,000 is not a particularly large amount (though the Court recognises that such a sum of money would be a very large amount for the employee). On the facts before the Court, the first respondent had always paid the proper amount to the employee throughout his employment, with the exception of this particular period of personal leave. It is instructive that the first respondent resumed paying the proper amount upon the employee’s return to work from his leave.
If the Court were simply dealing with the first respondent and second respondent for contravening those sections of the FW Act, those facts would weigh very much in favour of the respondents.
However, the Court is not dealing with the first respondent (and second respondent) for contravening the payment provisions of the FW Act. It is dealing with the first respondent (and second respondent) for the failure to comply with the compliance notice.
The Court has said, on numerous occasions, that the compliance notice regime is one of the true benefits of the FW Act. It allows for identification to be made of the contravention but allows an employer the opportunity to rectify that contravention without any penalty - either monetary or otherwise. It is for this reason that failing to comply with a compliance notice is seen by the Court as a very serious contravention.
Mitigation?
The second respondent has said to the Court that the entitlements were not withheld because of any disrespect to the employee or any disregard to the relevant obligations. The second respondent said that, at the time he received the compliance notice, the first respondent had been “stagnant” because of other persons involved in the business using information gained to further the interests of other entities to the detriment of the first respondent.
The second respondent said that this significantly impacted the financial strength of the company and eventually crippled the company, and the second respondent himself. The second respondent said that the first respondent is currently in “strike-off” status with ASIC and, as such, will no longer be trading in any capacity once these proceedings have been finalised.
The second respondent submitted that he had been extremely cooperative with the Court and with the applicant. He said that he would be solely responsible for settling the outstanding entitlements owed to the applicant as well as his superannuation contributions.
The second respondent said that he would have to consider bankruptcy if the Court made a “crushing” pecuniary penalty.
The applicant has correctly submitted that the financial circumstances of respondents do not exculpate breaches of workplace laws. It is a question for the Court to look at what level the pecuniary penalty should be set so that it is “appropriate”.
Conclusion
I have had regard to the maximum penalties available. I have had regard to the partial compliance of the first respondent and second respondent, albeit that such compliance was over three months late.
I do not see this case as one where the first respondent and second respondent have “thumbed their noses” at the authority of the applicant or the Court. I acknowledge what the second respondent has said about the dire financial straits in which the first respondent finds itself, however, once a compliance notice is given to an employer, the priority for the employer must be compliance with the notice.
In all the circumstances, I am of the view that the appropriate penalty for the first respondent is one of $12,000. I am of the view that the appropriate penalty for the second respondent is one of $2,500.
Order
I will make the orders as proposed by the parties with the amount of pecuniary penalties inserted.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Vasta. Associate:
Dated: 26 October 2023
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