Fair Work Ombudsman v Sinpek Pty Ltd

[2019] FCCA 628

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v SINPEK PTY LTD & ORS [2019] FCCA 628

Catchwords:
PRACTICE AND PROCEDURE – Determination of cross-claim alleging coordinate liability – no coordinate liability in equity – the nature and extent of the alleged liability of an employee – no equity arises under the Fair Work Act 2009 to support equitable contribution – no entitlement by direction second respondent to bring cross claim – further amended cross-claim struck out.  

Legislation:

Fair Work Act 2009 (Cth), ss.44, 45, 325, 536, 539, 540, 566, 712

Cases cited:

Friend v Brooker [2009] HCA 21
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125

Applicant: FAIR WORK OMBUDSMAN

First Respondent: SINPECK PTY LTD (ACN 163 426 854)

Second Respondent: KAMALDEEP SINGH

Third Respondent: UMA SINGH

Cross Respondent: SANDEEP SINGH DHARIWAL

File Number: SYG 2187 of 2018

Judgment of: Judge Street

Hearing date: 14 March 2019

Date of Last Submission: 14 March 2019

Delivered at: Sydney

Delivered on: 14 March 2019

REPRESENTATION

Counsel for the Applicant: Mr M Easton

Solicitors for the Applicant: Office of the Fair Work Ombudsman

Counsel for the Respondent: Mr I Latham

Solicitors for the Respondent: Taylor & Scott Lawyers

ORDERS

1. The further amended cross-claim is struck out under r 13.10 of the Federal Circuit Court Rules 2001 (Cth).

2. The costs of the strike out application are reserved.

3. The evidence in chief in this matter is to proceed by way of affidavit. Cross examination will be limited to half an hour without further leave.

4. The Applicant is to file and serve any affidavit material upon which she intends to rely in relation to liability and penalty on or before 6 May 2019.

5. Each of the Respondents are to file and serve on or before 14 June 2019:

   (a)any affidavit material upon which they intend to rely in relation to liability and penalty subject to any claim based on a privilege against exposure to civil penalty;

   (b)any Amended Defence in accordance rule 16.02 of the Federal Court Rules 2011 subject to any claim based on a privilege against exposure to civil penalty;

6. To the extent that order 5a is complied with the Second and Third Respondents are precluded from filing any further affidavit evidence on penalty or contravention without the leave of the Court.

7. The Applicant is to file and serve any affidavit material strictly in reply to the respondents’ affidavits and written submissions on the issues of liability and penalty on or before 5 July 2019.

8. Each of the Respondents are to file and serve any written submissions upon which they intend to rely on the issue of liability and penalty on or before 19 July 2019 subject to any claim based on a privilege against exposure to civil penalty.

9. Each party is to file and serve any objections to affidavits and grounds of objections on or before 26 July 2019.

10. If either party requires a deponent to an affidavit to be made available for cross-examination, that party shall notify the other in writing on or before 1 August 2019.

11. Oral submissions will be limited to half an hour without further leave.

12. The parties have liberty to apply on 2 days’ notice.

DATE OF ORDER: 14 March 2019

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2187 of 2018

FAIR WORK OMBUDSMAN

Applicant

And

SINPEK PTY LTD (ACN 163 426 854)

First Respondent

KAMALDEEP SINGH

Second Respondent

UMA SINGH

Third Respondent

SANDEEP SINGH DHARIWAL

Cross Respondent

REASONS FOR JUDGMENT

1. These are proceedings within the Court’s jurisdiction under s 566 of the Fair Work Act 2009 (Cth) (“the Act”). The applicant is an inspector under the Act for the purpose of bringing these proceedings. The proceedings were commenced by the Fair Work Ombudsman against the first respondent being the corporate employer and the second respondent as a director. The third respondent was joined as an official of the first respondent responsible for payment of wages. The second and third respondents were joined on the basis of being knowingly involved in alleged contraventions under the Act by the first respondent.

2. The second respondent filed in Court a purported cross-claim against an employee alleged to be involved in the contraventions and the cross-claim has been the subject of orders in which the Court permitted the filing of a further amended cross-claim. The Court fixed the matter for hearing today to determine whether or not the further amended cross-claim or any cross-claim should be struck out. The Court has been informed that the further amended cross-claim has been served and that there has been a solicitor engaged on behalf of the cross-respondent. Nonetheless, the Court had made orders that it would determine today the question of whether or not the further amended cross-claim should be struck out.

3. The further amended cross-claim has been brought on the assumption that there is coordinate liability in equity, which is the same in nature and extent, between the director in respect of the alleged knowing involvement in the alleged contravention by the first respondent as that of the employee cross-respondent. The nature of the liability of an employee as alleged in the cross-claim cannot be said to be reasonably arguably the same in nature and extent as that of a director of the company. For that reason alone there cannot be a reasonably arguable cause of action that there is a coordinate liability of a kind to give rise to an equity as alleged in the further amended cross-claim. The second respondent director has no equity to support the alleged further amended cross claim.

4. Directors of a corporation, such as the first respondent, owe particular statutory and fiduciary duties to the corporation. The performance of those duties by directors in the governance of the corporation requires taking into account the interests of shareholders and creditors. Creditors in this regard includes employees. This means that the second respondent owed particular statutory and fiduciary duties in performing the governance of the first respondent to ensure compliance with the statutory duties imposed upon the first respondent under the Act. That governance requires directors to also take into account the interests of creditors including employees.

5. Where involvement by a director in a contravention by the corporation is alleged under the Act, those duties and the said interests mean that liability of the director responsible for the governance of the corporation cannot be the same in nature and extent as that of an employee.  In other words the culpability of the director liable for a contravention would not, in equity, be treated as the same as that of an employee to support a coordinate liability because of the director’s particular duties and the director’s mandatory obligation in performing the same to take into account the interests of creditors including employees.

6. The submission that the second respondent may also have been an employee does not remove the corporate governance distinction between a director and an employee so that if a contravention of the Act is made out the nature and extent of the liability for the contravention cannot be seen in equity to be the same. If it is not the same then there is no equity to support the alleged cause of action for equitable contribution.

7. A common quantification of the loss the subject of an alleged liability arising from a contravention of the Act does not in equity mean the nature and extent of a director’s liability for a contravention could be the same as that of an employee.

8. Proof of common knowledge by an employee with that of a director as to the essential elements of a contravention of the Act to establish the requisite intention for involvement in the contravention does not mean that in equity the nature and extent of the director’s liability for the contravention could be the same as that of an employee. Accordingly the allegations in the further amended cross claim by the cross claimant director against the cross respondent employee cannot give rise to the alleged cause of action for equitable contribution.

9. Further, the nature and the scheme of the Act is such that no equity and no right to equitable contribution could arise in the circumstances of the present case.

10. Section 539(2) of the Act sets out the classes of parties who may make an application for orders in relation to particular civil remedy proceedings. The classes of the persons who may bring proceedings in column two of s 539(2) of the Act for the particular contraventions identified in column 1 of s 539(2) of the Act are subject to s 540 of the Act.

11. The contraventions in the present case involved allegations of contravention of s 44, 45, 325, 535, 536 and 712 of the Act. The only classes of persons in column 1 of s 539(2) of the Act who can bring proceedings in relation to contraventions of s 44 and s 45 of the Act are relevantly:

    a)An employee or an employee organisation or an inspector in relation to contraventions of the national employment standards under s 44 of the Act and;

    b)An employee, an employer, and employer organisation, an employee organisation or an inspector in relation to contraventions under s 45 of the Act.

12. The cross-claimant does not fall within either of those classes of persons in respect of s 44 and s 45 of the Act. For general protections picking up an alleged contravention of s 325 of the Act column 2 of the Act refers to a person affected by the contravention, an industrial associate or an inspector. For the reasons that follow the second respondent is not a person affect by the contravention. For the alleged contraventions of s 535 and s 536 of the Act only an employee or an inspector may bring the proceedings under column 2 in respect of the alleged contravention of s 712 of the Act, only an inspector may bring the proceedings.

13. Further, in order to commence proceedings in respect of a civil remedy provision under s 539 of the Act in relation to a contravention, the applicant must be one of the kinds of persons listed in column 2 and under s 540(1) of the Act must be a person affected by or will be affected by the contravention. The second respondent is not a person within paragraphs (a)-(d) of s 540(1) of the Act.

14. Further, the cross-claimant cannot be characterised as being a person affected or will be affected by the contraventions in respect of the further amended cross-claim. Rather, the cross claimant is a person in respect of whom it is alleged he was aware of and involved in the contraventions. The potential or actual liability flowing from a contravention by the cross claimant does not make the cross claimant a person affected by the contravention or who will be affected by the proposed contravention within the meaning of s 540 of the Act or a person affected within the meaning of column 2 of s 539 of the Act. In other words, the cross-claimant does not fall within the meaning of a person affected by the contravention or a person who will be affected by the proposed contravention because the cross-claimant alleges an actual or potential liability based on involvement in the contravention. The cross-claimant does not meet the statutory criteria under s 540(1) or column 2 of s 539 of the Act to bring the further amended cross claim the subject matter of the present proceedings which is an essential allegation in the alleged cause of action for equitable contribution.

15. As was identified in Friend v Brooker [2009] HCA 21, a statutory regime may be such as to exclude an equitable right of contribution. The Court is satisfied in the circumstances of the present case that the statutory scheme and in particular column 2 of s 539 and s 540 of the Act does exclude any equitable right of contribution of the kind advanced in the further amended cross-claim by a direction against an employee.

16. The Court has taken into account the principles in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 and is satisfied that there is no arguable case to support the further amended cross-claim based on the alleged liability by the cross-respondent on the principles of coordinate liability in equity.

17. Accordingly, the Court is satisfied that this is an appropriate matter in which the further amended cross-claim should be struck out.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Judge Street

Date: 5 April 2019