Fair Work Ombudsman v Sonisolar Pty Ltd & Anor
[2016] FCCA 2027
•29 August 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v SONISOLAR PTY LTD & ANOR | [2016] FCCA 2027 |
| Catchwords: INDUSTRIAL LAW – Breach of terms of modern award and national employment standard – breach of notice requiring production of wage and employment records – failure to provide appropriate wage slips and pay wages either weekly or fortnightly – late acceptance of liability – penalty to be imposed. |
| Legislation: Fair Work Act 2009, ss. 3; 3(b); 3 (c), 44(1), 45, 90(1); 90(2), 116, 118, 134; 134(1) (da), 535(1); 535(2), 536(1), 539(2), 546(2), 550, 557; 557(1); 557(2), 570; 570(2), 701, 712(3), 719(2), 721(1) Crimes Act 1914 (Cth), s. 4AA |
| Cases cited: Rentuza v Westside Auto Wholesale [2009] FMCA 1022 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | SONISOLAR PTY LTD (152 686 792) |
| Second Respondent: | WEI WANG |
| File Number: | ADG 133 of 2015 |
| Judgment of: | Judge Brown |
| Hearing date: | 11 July 2016 |
| Date of Last Submission: | 11 July 2016 |
| Delivered at: | Adelaide |
| Delivered on: | 29 August 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Prain |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Counsel for the First Respondent: | Ms Barnes |
| Solicitors for the First Respondent: | Winters Solicitors |
| Counsel for the Second Respondent: | Ms Barnes |
| Solicitors for the Second Respondent: | Winters Solicitors |
ORDERS
Upon noting that each respondent makes admissions in respect of the matters contained in the Statement of Agreed Facts filed on 2 May 2016 (SOAF) and as subsequently amended, the Court declares that the First Respondent contravened the following provision of the Fair Work Act 2009 (Cth) (FW Act):
(a)section 45 of the FW Act, by contravening the following provision of the Hair and Beauty Industry Award 2010 (Modern Award):
(i)clause A.2.5 of Schedule A to the Modern Award, by failing to pay Mr Jhen and Ms Wang (the Employees) the applicable minimum rate of pay for ordinary hours of work;
(ii)clause 25 of the Modern Award, by failing to pay the Employees weekly or fortnightly;
(iii)clause 31.2(a) of the Modern Award, by failing to pay the Employees the applicable rate of pay for overtime hours;
(iv)clause A.7.3 of Schedule A to the Modern Award, by failing to pay the Employees the applicable Saturday loading for ordinary hours worked on Saturdays;
(v)clause A.7.3 of Schedule A to the Modern Award, by failing to pay the Employees the applicable Sunday loading for hours worked on Sundays that were not overtime or public holiday hours; and
(vi)clause A.7.3 of Schedule A to the Modern Award, by failing to pay the Employees the applicable penalty rate for periods of annual leave taken;
(b)subsection 44(1) of the FW Act; by contravening the following terms of the National Employment Standards:
(i)subsection 90(1) of the FW Act, by failing to pay the Employees for periods of annual leave taken; .
(ii)subsection 90(2) of the FW Act, by failing to pay Mr Jhen for his accrued annual leave on termination of his employment;
(iii)section 116 of the FW Act, by failing to pay the Employees for absences on a public holiday; and
(iv)section 117 of the FW Act, by failing to give the Employees notice of termination of employment or to pay the Employees in lieu of notice
(c)subsection 712(3) of the FW Act, by failing to comply with:
(i)a notice to produce served in respect of Mr Jhen; and
(ii)a notice to produce served in respect of Ms Wang;
(d)subsection 535(1) of the FW Act by failing to make and keep records in respect of the Employees of a prescribed kind, being the kind of records referred to in paragraph 1167 of the Statement of Agreed Facts; and
(e)subsection 536(1) of the FW Act by failing to issue pay slips to the Employees.
The Second Respondent was involved, within the meaning if subsection 550(2)(c) of the FW Act, in the First Respondent's contraventions as set out at (b) to (e) in Declaration 1 above, and therefore is taken to have committed those contraventions pursuant to subsection 550(1) of the FW Act.
Pursuant to subsection 545(1) of the FW Act, that within 28 days the First Respondent and the Second Respondent jointly and severally:
(a)pay to Ms Wang and Mr Jhen the amount of $19,766.88 and $19,377.47 (Outstanding Wages) respectively; and
(b)make contributions on behalf of Ms Wang and Mr Jhen to their respective nominated superannuation funds in respect of the payments made pursuant to the order in subparagraph 1(a) above at the superannuation guarantee charge rate prescribed by applicable superannuation legislation as at the date these orders are made.
Pursuant to subsection 547(2) of the FW Act that, within 28 days, the First Respondent pay interest to Ms Wang and Mr Jhen on the Outstanding Wages, to be calculated from 15 September 2013 in respect of Ms Wang and 11 October 2013 in respect of Mr Jhen at the Federal Court of Australia Pre Judgement Interest Rate applying as at the date these orders are made.
Pursuant to subsection 546(1) of the FW Act the first respondent pay a total pecuniary penalty fixed in the sum of $100,000.00.
Pursuant to subsection 546(1) of the FW Act the second respondent pay a total pecuniary penalty fixed in the sum of $12,000.00.
Pursuant to subsection 546(3)(a) of the FW Act that all penalties imposed on the Respondents be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days of these orders being made.
The Applicant has liberty to apply on seven days' notice on the event that any of the preceding orders are not complied with.
The first and second respondent jointly and severally pay the applicant’s costs of these proceedings fixed in the sum of $13,862.24.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 133 of 2015
| FAIR WORK OMBUDSMAN |
Applicant
And
| SONISOLAR PTY LTD (152 686 792) |
First Respondent
And
| WEI WANG |
Second Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, the Fair Work Ombudsman,[1] commenced these proceedings on 13 April 2014 naming Sonisolar Pty Ltd[2] and Wei Wang[3] as respondents. Mr Wang is the sole director of Sonisolar and has been since August of 2011.
Between September 2013 and May 2014, Sonisolar operated hairdressing salons in Elizabeth and Arndale, in suburban Adelaide, under the business name F10 Quick Cut. It engaged in the business of cutting, washing, dying and styling the hair of its customers for profit. Mr Wang owned half the shares in Sonisolar and operated and managed its business. His wife, Yan Zhao owns the other shares in the company.
Mr Wang is an Australian citizen with a Chinese background. Mandarin is his first language. He has lived in Australia since 2004. He opened the Arndale salon in April 2013; a second salon at Noarlunga in May 2013; and the Elizabeth salon in September 2013.
In mid-2013, Mr Wang approached a hairdressing salon in Taiwan and placed advertisements on a job site website operating in Taiwan seeking qualified hairdressers to work in his salons in Australia. Mr Wang’s overtures were responded to by two Taiwanese hairdressers, Shu-Ting Wang[4] and Wei-Hong Jhen.[5]
It was agreed between Mr Wang on the one hand and Ms Wang and Mr Jhen on the other that Ms Wang and Mr Jhen would travel to Adelaide and work in Sonisolar’s salons as hairdressers.
Both Ms Wang and Mr Jhen are citizens of the Republic of China, as Taiwan is more correctly known. They were able to enter Australia pursuant to working holiday visas. Ms Wang worked in the Elizabeth and Arndale salons between 15 September 2013 and 29 May 2014. Mr Jhen worked only at the Elizabeth salon between 11 October 2013 and 29 May 2014.
In an affidavit filed on his behalf, Mr Wang has deposed that he retained both Ms Wang and Mr Jhen as independent contractors on the understanding that they would manage the business of the hairdressing salons concerned. In exchange, he would pay them each the sum of $580.00 per week, together with a percentage of any profits derived from the business.[6] As such, Mr Wang contended that neither Ms Wang nor Mr Jhen were his employees.
Mr Wang has further deposed that he assisted both Ms Wang and Mr Jhen to obtain Australian business numbers, so that each could fulfil their obligations as independent contractors to Sonisolar. Thereafter the FWO alleges that Sonisolar created monthly invoices, relating to the services purportedly provided by both individuals.
On 29 May 2014 Mr Wang terminated the employment of both Ms Wang and Mr Jhen with immediate effect. It was Mr Wang’s position that he was entitled to break the contract arising between Sonisolar on the one hand and Ms Wang and Mr Jhen on the other because he had discovered them stealing from the business.
On 3 June 2014, Mr Wang and Ms Jhen lodged complaints, with the FWO, alleging that Sonisolar had underpaid them during the periods which they had worked at the Elizabeth and Arndale salons. Underpinning their complaint was their assertion that they were employed by Sonisolar and as such were entitled to minimum conditions of employment arising from any applicable award.
The FWO is a statutory appointment under the Fair Work Act 2009 (Cth).[7] One of the objects of the FWA is to ensure that employees in Australia receive regulated minimum awards of pay and are fairly and transparently treated in their workplace, without exploitation.[8] One of the responsibilities of the FWO is to monitor compliance with the FWA.
In addition, the FWO has responsibility to educate, advise and assist, both employers and employees, in respect of obligations arising under the Act and, if necessary, commence proceedings, in appropriate courts, to enforce the FWA.
Pursuant to section 701 of the Act, the FWO is also a fair work inspector. The Act confers upon such inspectors a number of powers in order to ensure compliance with provisions of the Act. Amongst other things, inspectors can enter work premises and require the production of employee records.[9]
In addition, the FWO, as a consequence of its status as a fair work inspector, has statutory authority to bring proceedings under the Act and seek the imposition of penalties, if breaches of the FWA are established.[10]
Kristopher Dean Pronk was appointed by the FWO to investigate Ms Wang and Mr Jhen’s complaints of underpayment. Mr Pronk is a fair work inspector. As a consequence of his investigations, Mr Pronk concluded that Ms Wang and Mr Jhen were employed by Sonisolar and the terms of their respective employment was covered by the provisions of the Hairdressers and Beauty Salons Award.[11]
It was Mr Pronk’s view that the circumstances surrounding the services provided by both Ms Wang and Mr Jhen to Sonisolar were indicative of them being employees of the company rather than independent contractors. He formed this view because the evidence available to him indicated the following:
·both individuals were subject to the direction of Mr Wang;
·both individuals were required to work the hours and times specified by Mr Wang and were required to obtain his permission in order to take time off;
·neither individual prepared the invoices in respect of the work performed by them;
·neither individual maintained insurance in respect of the work performed;
·neither individual advertised his/her services separately for Mr Wang or Sonisolar;
·both individuals concerned were required to wear a uniform provided by Mr Wang;
·neither individual worked for anyone other than Sonisolar.
Mr Pronk was further of the view that the evidence available to him indicated that neither Ms Wang nor Mr Jhen had personally utilised the Australian business numbers obtained on their behalf or actually created the invoices which had led to them receiving some remuneration from Sonisolar.
Pursuant to the provisions of the Award, Ms Wang and Mr Jhen are entitled to be paid a minimum hourly rate, penalty rates for overtime and working on weekends, an annual leave loading and pay for public holidays, when the salons in question were closed. In addition, each was entitled to payment in lieu of notice and accrued annual leave.
Section 45 of the FWA provides as follows:
“A person must not contravene a term of a modern award.”
In addition, section 44(1) of the Act provides that:
“An employer must not contravene a provision of the National Employment standards.”
Both such provisions are categorised as civil remedy provisions.
It was Mr Pronk’s assessment that Sonisolar had contravened both National Employment standards and the applicable modern award by not paying Ms Wang and Mr Jhen the minimum applicable wage and not paying other allowances in accordance with the award that pertained to employees in the hairdressing industry.
Mr Pronk has deposed that both Ms Wang and Mr Jhen were entitled to be paid a minimum sum of $17.69 per hour, whilst working as a level one hairdresser, for standard hours arising between 9.00am and 5.00pm Monday to Friday. Loadings applied for weekend work and public holidays.
Mr Pronk calculated that Ms Wang had not been paid for thirteen public holidays which had fallen between 7 October 2013 and 25 April 2014. In addition, he calculated that she had not been paid relevant loadings for working on Saturdays, Sundays and overtime.
Over the relevant period, Mr Pronk calculated Ms Wang had been actually paid the sum of $15,520.00. However, he calculated that she was entitled to receive the sum of $35,286.88. Accordingly the underpayment was one of $19,766.88.[12] The shortfalls being calculated as follows:
Summary Quantity Entitlement Mon-Fri 9am-5pm 1,115.25 $19,728.79 Saturday 119.75 $2677.61 Sunday 23.75 $756.20 Overtime – first 3 hours 84.00 $2,228.52 Overtime – after the first 3 hours 21.00 $742.98 Overtime Sunday 139.00 $4,917.82 Public Holiday 12.50 $486.38 Public Holiday not worked 41.50 $734.14 Annual leave 106.77 $1,888.75 Annual leave loading 106.77 $330.99 Personal leave PILN – Mon-Fri 9am -5pm 34.50 $610.31 PILN – Saturday 3.50 $78.26 PILN – OT (1st 3 hours) 3.00 $79.59 PILN – OT (Thereafter/Sunday) 0.75 $26.54
Total Entitlement $35,286.88 Total Amount Paid $15,520.00 Total Under Payments -$19,766.88
Mr Pronk undertook similar calculations in respect of Mr Jhen. He calculated that Mr Jhen had been actually paid the sum of $15,520.00, whilst he had worked for Sonisolar but actually should have been paid the sum of $34,897.47.[13] Accordingly the underpayment was one of $19,377.47. The shortfalls being calculated as follows:
Summary Quantity Entitlement Mon-Fri 9am-5pm 1,072.25 $18,968.10 Saturday 124.00 $2,772.64 Sunday 23.75 $756.20 Overtime – first 3 hours 87.00 $2,308.11 Overtime – after the first 3 hours 33.75 $1,194.08 Overtime Sunday 133.75 $4,732.09 Public Holiday 12.50 $486.38 Public Holiday not worked 49.25 $871.25 Annual leave 22.80 $403.32 Annual leave loading 22.80 $70.68 Annual leave on termination (incl leave) 74.07 $1,539.92 PILN – Mon-Fri 9am -5pm 34.50 $610.31 PILN – Saturday 3.50 $78.26 PILN – OT (1st 3 hours) 3.00 $79.59 PILN – OT (Thereafter) 0.75 $26.54
Total Entitlement $34,897.47 Total Amount Paid $15,520.00 Total Under Payments -$19,377.47
Mr Pronk investigated Ms Wang’s and Mr Jhen’s complaints between 3 June and 15 October 2014. His investigations included visiting Sonisolar’s business premises and interviewing Mr Wang and his accountant.
Throughout the investigation period, Mr Wang maintained his position that both Ms Wang and Mr Jhen were independent contractors. In this context, it was Mr Pronk’s view that records relating to the relationship between the two individuals concerned and Sonisolar were relevant to his investigation. Accordingly, Mr Pronk served Mr Wang with notices to produce employment records in respect of both Ms Wang and Mr Jhen on 18 June and 6 August respectively.
Section 712(3) of the FWA provides as follows:
“A person who is served with a notice to produce must not fail to comply with the notice.”
This provision is also characterised as a civil penalty provision. It is Mr Pronk’s position that Mr Wang did not comply fully with either such notice to produce and what records were produced failed to comply with statutory requirements.
Section 535(2) of the Fair Work Act provides that an employer must keep records relating to its employees in a form prescribed by regulation. In this case regulations 3.32, 3.33 & 3.34 of the Fair Work Regulations 2009, which require records to be kept as to whether an employee was full-time or part-time; permanent, temporary or casual; the rate of remuneration applicable to that employment, including any relevant loading or penalty rate; and details relating to overtime.
In this context, given the manner in which Mr Wang had retained the individuals concerned and Mr Pronk’s view that nonetheless both Ms Wang and Mr Jhen were to be regarded as employees of Sonisolar, it was Mr Pronk’s further view that the records kept by Mr Wang were deficient so far as the regulations were concerned.
In all these circumstances it was also the position that neither Ms Wang nor Mr Jhen had been issued with payslips, in respect of the remuneration they did receive. Section 536(1) of the Fair Work Act provides as follows:
“An employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work.”
As a consequence of his investigations, Mr Pronk concluded that Sonisolar and Mr Wang had contravened a number of provisions of the Fair Work Act in their employment of Ms Wang and Mr Jhen. These contraventions can be summarised as follows:
·Section 45 of the FWA by failing to pay Ms Wang and Mr Jhen the following entitlements under the Hair and Beauty Award:
Øminimum rates of pay;
Øovertime;
Øpenalty rates for working on Saturdays;
Øpenalty rates for working on Sundays;
Øpenalty rates for public holiday work;
Øannual leave loading on leave taken during their employment;
Øfailing to pay the two individuals either weekly or fortnightly.
·Section 44(1) of the FWA failing to pay Ms Wang and Mr Jhen appropriately in contravention of the National Employment Standards in respect of:
Øpayment of annual leave taken during employment;
Øpayment of accrued leave on termination;
Øfailure to pay employees for absence on public holidays;
Øpayment in lieu of notice on termination.
·Section 712(3) of the FWA in respect of the two notices to produce directed to the employment records of Ms Wang and Mr Jhen.
·Section 535(1) of the FWA for failing to keep prescribed records in respect of both Ms Wang and Mr Jhen.
·Section 536(1) of the FWA for failing to issue payslips for Ms Wang and Ms Jhen.
In these circumstances the FWO determined to issue proceedings against the two respondents. The proceedings were commenced in the court on 13 April 2015. In its application, the FWO seeks declarations that both respondents have breached the applicable provisions of the Act and, as a consequence, seeks that pecuniary penalties be imposed on each.
In addition, the FWO seeks an order that Sonisolar and Mr Wang be jointly and severally responsible for paying the wages and superannuation contributions, which remain outstanding to Ms Wang and Mr Jhen, together with interest.[14]
The respondents replied to the allegations made against them on 23 June 2015. In essence it was denied that the provision of the Act relied on by the FWO had any application to the circumstances of either Ms Wang or Mr Jhen, as both were independent contractors. It was also asserted that the immediate termination of both individuals was justified by reason of their larceny from Sonisolar.
Conduct of the proceedings
After the applicant had requested further and better particulars of the allegation of larceny and as to why it was asserted that Ms Wang and Mr Jhen were independent contractors, the case was referred to court based mediation, which failed to resolve the issues between the parties concerned.
Thereafter, on 30 November 2015, at the request of the parties, it was ordered by the court that the issue of any possible liability relating to the conduct of either respondent be tried separately from the issue of any penalty to be imposed. In the applicable legal jargon, the issue of liability was bifurcated from the issue of penalty.
The penalty hearing was allocated three days of court time commencing on 2 May 2016. The applicant was directed to file and serve its affidavit material, in respect of the liability issue by early January of 2016, with the respondents to file its material by early February.
The FWO complied with these directions and filed affidavits from both Ms Wang and Mr Jhen, as well as from Mr Pronk, in January of 2016. Ms Wang and Mr Jhen’s respective affidavits had been deposed by each of them in August of 2015, whilst both had remained in Australia pursuant to their working holiday visas.
In early April of 2016, in response to an inquiry from the FWO, the solicitor for the respondents indicated that he required Ms Wang and Mr Jhen to attend at court for cross-examination during the liability hearing. By this time, both had returned to their respective homes in Taiwan.
As a consequence of this, on 5 April 2016, the solicitor for the FWO applied to the court for leave to serve Ms Wang and Mr Jhen, with the relevant subpoenae, in the Republic of China. An order to this effect was made on 7 April 2016 and the liability hearing scheduled for 2 May 2016 was formally confirmed in the presence of the respondents’ solicitor.
At this stage issues also arose as to the use of an interpreter for both Ms Wang and Mr Jhen in the proceedings. Whilst not making any formal order in respect of the issue, I indicated that given the apparent moment of the proceedings for all concerned, which ostensibly included allegations of impropriety against Ms Wang and Mr Jhen, it was likely to be preferable that a Mandarin interpreter of the highest possible proficiency be retained.
The FWO made arrangements for both Ms Wang and Mr Jhen to travel from Taiwan to Adelaide. Arrangements were also made for an interpreter to be retained for the case, who is based in Sydney. She holds a Level 3 accreditation from the National Accreditation Authority (NAATI) for English/Mandarin translation.
It is the position of the FWO that it incurred considerable expense in bringing Ms Wang and Mr Jhen to Australia and arranging an interpreter for them. It has calculated the costs as follows:
·service costs of subpoenae in Taiwan - $3,005.20;
·travel and accommodation costs of Ms Wang and Mr Jhen - $5,262.00;
·interpreter’s professional fees - $1,364.00;
·interpreter’s accommodation and travel costs - $1,380.96.
Ms Wang and Mr Jhen arrived in Adelaide a few days prior to the liability hearing. Both deposed a further affidavit, which was formally filed with the court on 4 May 2016. These affidavits related to the reaction of both to a television broadcast which was broadcast on Channel Seven’s Today Tonight program on 10 July 2015. Attached to each affidavit was a cd of the broadcast concerned.
On the morning scheduled for the liability hearing to commence I was informed that each respondent intended to admit the allegations contained in the statement of claim filed by the FWO on 13 April 2015. By necessary implication, it was apparent at this stage that the FWO had secured the attendance of Ms Wang and Mr Jhen in Adelaide for the hearing and both were apparently standing by their earlier made denials of any impropriety in their dealings with Mr Wang.
The matter was stood down so that counsel for both the FWO and the two respondents could agree a statement of facts as a basis for what would become only a penalty hearing. Such a statement of agreed facts was filed with the court on 2 May 2016. Pursuant to section 191 of the Evidence Act (1995) (Cth) the matters agreed to in this document are taken not to be in dispute.
On 4 May 2016, counsel for the FWO filed a detailed submission regarding the Ombudsman’s view as to the appropriate penalty to be imposed. In this submission, the FWO contended that the actions of Sonisolar (and of Mr Wang, as its agent and guiding hand) were particularly serious as Ms Wang and Mr Jhen had been deliberately misclassified as independent contractors, when the circumstances prevailing clearly indicated that they were employees of the company.
It was further submitted that both individuals were vulnerable employees because of their limited English skills and the fact that they were each holiday visa holders, visiting Australia temporarily from overseas. As such, both individuals were vulnerable to exploitation by unscrupulous employers, particularly in the hair and beauty industry, which was an industry which exhibited a high rate of complaint to the FWO in respect of allegation of award and similar infringements.
It was also submitted that the failure to provide Ms Wang and Mr Jhen with the legislatively mandated minimum levels of remuneration, as recognised by both the applicable Modern Award and the National Employment Standards, was particularly serious. The reactions of Mr Wang to the FWO’s investigation of his employment practices was characterised as being aggressive and combative, particularly as demonstrated by his public comments on the Today Tonight program.
In these circumstances, the FWO submitted that neither respondent had demonstrated any contrition or acceptance of wrongdoing. As a consequence of these various matters, the FWO contends that the court should impose meaningful penalties, in order to mark its disapproval of each respondent’s conduct.
The penalty hearing scheduled for 4 May 2016 did not proceed on the application of counsel for the respondents. It was her position that she needed further time to provide her submissions in mitigation. In these circumstances, I was persuaded that it would be unfair to the respondents to proceed with the penalty hearing, as scheduled, given the significant level of penalties sought against each of them and the manner in which their conduct had been characterised by the FWO to the court. The penalty hearing was re-fixed for 11 July 2016.
In the meantime, on 4 July 2016, counsel for the FWO has filed further detailed submissions seeking the costs of the proceedings pursuant to section 570 of the FWA. Pursuant to this section, the court has a discretion to order the payment of a party’s costs in respect of proceedings under the Act but only if satisfied of the matters contained in section 570(2) which reads as follows:
“(2) The party may be ordered to pay the costs only if:
(a)the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b)the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c)the court is satisfied of both of the following:
(i) the party unreasonably refused to participate in a matter before the FWC;
(ii) the matter arose from the same facts as the proceedings.”
The respondents each oppose any costs order being made against them. Sonisolar and Mr Wang are represented by the same counsel, who has also filed written submissions in respect of the issue of the quantum of any penalty to be imposed and the issue of costs.
In addition to the respective written submissions of the parties, the following documents are relied upon in respect of the resolution of the issue of the quantum of penalties to be imposed and costs:
i.Statement of claim;
ii.Statement of agreed facts;
iii.Two affidavits of Ms Wang affirmed 17 August 2015 and 3 May 2016 respectively;
iv.Two affidavits of Mr Jhen affirmed 21 August 2015 and 3 May 2016 respectively;
v.Two affidavits of Mr Pronk affirmed 18 January 2016 and 4 May 2016 respectively;
vi.Affidavit of Mr Prain, solicitor for the FWO, sworn 4 July 2016, filed in respect of the issue of costs;
vii.Two affidavits of Mr Wang affirmed 22 February 2016 and 5 July 2016.
As previously indicated, attached to the second affidavit of both Ms Wang and Mr Jhen was attached a DVD of the Today Tonight program featuring Mr Wang and his solicitor. With the acquiescence of both parties I viewed this document in private.
The Today Tonight program
The clear implication of the broadcast, which was titled Backpacker Thieves, is that Mr Wang is an innocent party, who has been unfairly victimised by an unjustifiable FWO prosecution brought against him. The program asserts that Ms Wang and Mr Jhen stole an amount of $40,000.00 from Mr Wang’s business. The evidence of this theft is asserted to be overwhelming, including an alleged confession, by Ms Wang, caught on a video devise.
Ms Wang and Mr Jhen are each identified, in the broadcast, by the display of the identity page from their respective passports. Mr Wang is portrayed as a struggling small business operator, who gave an opportunity to two backpackers, whom it is suggested approached him, rather than vice versa, with his generosity being abused by the two.
When Mr Wang detected the theft, and took appropriate action against the two concerned, it is further suggested, by the reporter of the story, that Ms Wang and Mr Jhen then approached to the FWO “in a clear cut case of revenge of employees caught during the wrong thing. In this context, the program suggests that it is unbelievable that it is Mr Wang, who has been the subject of court action, rather than Ms Wang and Mr Jhen.
The program expresses general dissatisfaction that the SA Police have not proceeded with any action against either Ms Wang or Mr Jhen. It also evinces some incredulity that Mr Wang is being pursued for allegedly under-paying the two individuals, named in the broadcast, in the sum of around $39,000.00. To the reporter, Mr Wang’s solicitor asserts that the two employees concerned were well paid, in excess of the award and received regular bonuses.
Mr Wang expresses himself to be very disappointed at the lack of justice in South Australia, so far as his case is concerned. His solicitor questions the FWO’s action against his client as an abuse of process and suggests that there is no public interest in the FWO case proceeding, given what is suggested to be irrefutable evidence of theft and a case in which Ms Wang and Mr Jhen are described as being well paid, in excess of the award and characterised as being clearly out for revenge.
In his affidavit material, filed in anticipation of the contested liability hearing, Mr Wang reiterated his claim that Ms Wang and Mr Jhen had stolen cash from his business. However, he did not attempt to quantify the amount involved, deposing that the business lost “quite a lot every month.” He deposed that Ms Wang and Mr Jhen confessed to him that they had each “stolen at least $18,000.00.”
Both Ms Wang and Mr Jhen have deposed that they were upset by the broadcast. Both deny having stolen money from Mr Wang or his business. Ms Wang deposed as follows:
“All of the allegations in the Today Tonight segment are untrue and false allegations. I did not steal from my employer. Mr Wang also said that I was paid above award payments and received bonus on the sale of certain products. I was not paid above award payments and did not receive any bonuses. It is upsetting that Today Tonight used my photo and full name in the broadcast.”[15]
The applicable provisions of the legislation and principles to be applied
Issues arise between the parties as to how many actual incidents of contravention have occurred, given the same course of conduct has had implications for both Ms Wang and Mr Jhen and how those contraventions are to be grouped for the purposes of applying penalty. In addition, the parties have very different views as to the overall gravamen of the admitted offending.
Essentially, the respondents contend that there are five incidents of contravention, of which four apply concurrently to Mr Wang. On the other hand, the FWO contends that there are thirteen incidents of contravention, of which seven apply concurrently to Mr Wang.
In broad terms, the FWO characterises the offending behaviour as being in the serious category, requiring penalties of up to 80% of the applicable maximum and no less than 50%. On the other hand, the respondents contend that the offences are less serious and merit a penalty of between 25% and 50%, with a significant discount, when the totality of penalty is considered.
It is implicit in their acceptance of the statement of agreed facts that both Sonisolar and Mr Wang acknowledge that the terms of Ms Wang and Mr Jhen’s employment was covered by the terms of the Hair and Beauty Award 2010. This is a Modern Award and applies to employers in the hair and beauty industry.
This Award specifies minimum rates of pay; allowances for overtime work; penalty rates for work on Saturdays/Sundays/ public holidays; provides a loading for annual leave; and requires payment either weekly or fortnightly.
Both Ms Wang and Mr Jhen worked from Tuesday to Sunday, with Monday off. Their hours were 9.00 am to 5.30 pm on Tuesday, Wednesday and Friday; 9.00 am to 9.00 pm on Thursday; 9.00 am to 5.00 pm on Saturday; and 11.00 am to 5.00 pm on Sunday
Under the Award, the ordinary hourly rate applicable to Ms Wang and Mr Jhen, at relevant times, was $17.69. The hourly rate for overtime was $26.53 per hour for the first three hours and thereafter $35.38 per hour. The loading for Saturdays was $4.67 per hour and for Sundays $14.15 per hour. The penalty rate for public holidays was $38.91.
The FWO calculates that Ms Wang worked 1,258.75 ordinary hours and Mr Jhen 1,220 ordinary hours. Each received around 70% of the basic wage to which they were entitled under the award. Neither Ms Wang nor Mr Jhen received any of their other entitlements for overtime work or any applicable penalties relating to working on weekends or public holidays.
The objects of the Fair Work Act are set out in section 3. Amongst these is the following:
“ensuring a guaranteed safety net of fair, relevant and enforceable minimum wages and conditions through the National Employment Standards, modern awards and national minimum wage orders;” [FWA section 3(b)]
This object contains the gravamen of the FWO’s submissions regarding the overall seriousness of the offending, by the respondents, in this matter. It contends that the respondents comprehensively failed in their obligations to Ms Wang and Mr Jhen to provide to them with the minimum level of remuneration required by the award and so provide each of the individuals concerned with a legislatively mandated safety net, so far as their pay and conditions are concerned.
The above objective is taken up by a specific objective, in respect of the implementation of a system of modern awards, which is contained in section 134 of the Act. It is to ensure a fair and relevant minimum safety net in terms of the provision of conditions relevant to employment. Amongst other things, it is to ensure additional remuneration for overtime; work on weekends; and public holidays [section 134(1) (da)].
As previously indicated, section 45 of the FWA prohibits a person contravening a term of a modern award. In this case, the FWO asserts that Sonisolar has committed seven breaches of section 45 in respect of failing to pay the minimum wage; failing to pay weekly or fortnightly; failing to pay overtime; failing to pay penalties for Saturday work; failing to pay penalties for Sunday work; failing to pay penalties for public holidays; and failing to pay annual leave loading for leave taken.
A note to section 45 indicates that it is a civil remedy provision. Accordingly section 539(2) prescribes the maximum penalty for each of these offences, which is 60 penalty units. Pursuant to the provisions of section 546(2)(b) of the Act, if the person who has committed the offence in question is a body corporate, the maximum penalty is to be multiplied by five. At relevant times, a penalty unit amounted to $170.00.[16]
Accordingly, the maximum penalty, applicable to Sonisolar, for each of the section 45 infringements, as advocated by the FWO, is $51,000.00. From the FWO’s perspective, the most serious matters relate to the failure to pay the minimum wage; overtime; and provide payment in regular increments. It seeks a penalty of between 70 – 80% of the maximum penalty for these matters. In respect of the failure to pay Saturday/Sunday penalties, it seeks between 60 – 70% of the maximum penalty. For the remaining section 45 matters, it seeks between 40 – 50% of the maximum penalty.
Again, as previously indicated, section 44(1) of the FWA prohibits an employer from breaching a provision of the National Employment Standards. They are contained in various provisions of the Act, particularly section 90(1), which requires payment of annual leave at an employees’ base rate; section 90(2) which requires payment of accrued untaken annual leave on termination; section 116, which requires payment for public holidays not worked; and section 118 requires payment in lieu of notice.
The FWO contends that there are four relevant contraventions arising under section 44(1). Pursuant to section 539(2) the maximum penalty for an individual is again $10,200.00 and for a corporation $51,000.00. The FWO seeks penalties against both Sonisolar and Mr Wang.
Mr Wang’s liability in respect of these matters arises by virtue of section 550(1) of the FWA. The section as a whole reads as follows:
“(1)A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2)A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.
Mr Wang acknowledges that he was involved in the first respondent’s contraventions of section 44 of the Act (and indeed in the other record keeping offences, payslip offences and the notice to produce matters). The FWO seeks a penalty of between 60 and 70% of the maximum, against both respondents in respect of the section 44 offences.
The maximum penalty for the failure to comply with the notice to produce [section 712(3)] is also 60 penalty units or $10,200.00 for an individual or 300 penalty units or $51,000.00 for a corporation. The FWO seeks between 60 and 70% of the maximum in the case of both Sonisolar and Mr Wang.
The maximum penalties for the failure to keep prescribed employee records [section 535(1)] and to issue payslips [section 536(1)] in each case is 30 penalty units or $5,100.00 for an individual or $25,000.00 for a corporation. The FWO seeks between 50 and 60% of the maximum in the case of both Sonisolar and Mr Wang.
The approach, which the court is required to take in respect of these contravention proceedings, is not controversial, so far as the parties are concerned. It has been delineated in a number of decisions of the Federal Court[17] and described as a four step process, which I will summarise as follows:
·Firstly, the court should identify each separate contravention arising from a breach of either the applicable award or the FWA and determine whether any of these arise in a single course of conduct within the terms envisaged by section 557(1);
·Secondly, determine what is the appropriate penalty to be imposed (whether in terms of a single episode of contravention or as part of a course of conduct), having regard to all the circumstances of the case;
·Thirdly, give consideration to whether any of these contraventions contain common elements and factor this into considering what is an appropriate penalty, in all the circumstance, for each contravention;
·Fourthly, apply the totality principle. This final step constitutes a review of the aggregate penalty thus far calculated and a consideration of whether such a penalty is an appropriate response to the conduct which led to the various contraventions. This step has been categorised as a process of instinctive synthesis.[18]
The third and fourth steps are to be distinguished from one another. In the context of the former, the following comments, approved by Gleeson CJ in Johnson v R, are apposite, although arising in the context of actual criminal proceedings:
“Where there are truly two or more incursions into criminal conduct, consecutive sentences will generally be appropriate. Where, whatever the number of technically identifiable offences committed, the prisoner was truly engaged upon one multi-faceted course of criminal conduct, the judge is likely to find concurrent sentences just and convenient.” [19]
The totality principle arises when a court is called upon to sentence an individual, as here, in respect of a number of identifiable offences. It is directed to a review of the penalties imposed, in total, in respect of individual offences to determine whether those penalties, in aggregate, constitute a just and appropriate penalty, in all the circumstances arising. As indicated earlier, it has been characterised as a process of intuitive synthesis best summarised in the well-known line from The Mikado “the punishment must fit the crime.”
Gray J in Australian Opthalmic Supplies Pty Ltd said as follows:
“What is required is to determine an appropriate level of penalty for each contravention, as if it were a separate offence, and then look at the aggregate of those penalties in the light of the overall conduct of the [offender], to form a view as to whether that aggregate [is] out of proportion to that overall conduct.”[20]
Regardless of these considerations, the fundamental task, for the court, is to determine, from all the factual circumstances arising, the gravity or seriousness of the offending, which it is called upon to penalise. Again there is general agreement between the parties as to the considerations relevant to this task, which has been delineated in a number of decisions of both this court and the Federal Court.[21]
The considerations are as follows:
·The nature and extent of the conduct which led to the breaches;
·The circumstances in which the conduct took place;
·The nature and extent of any loss or damage sustained as a result of the breaches;
·Whether there has been similar previous conduct by the respondent;
·Whether the breaches were properly distinct or arose out of the one course of conduct;
·The size of the business enterprise involved;
·Whether or not the breaches were deliberate;
·Whether senior management was involved in the breaches;
·Whether the party committing the breaches has exhibited contrition;
·Whether the party committing the breaches has taken corrective action;
·Whether the party committing the breaches has cooperated with the enforcement authorities;
·The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
·The need for specific and general deterrence.
The court needs to be careful not to apply a formulaic approach to the imposition of penalties or attempt to extrapolate the penalties imposed in one case to the circumstances of another. Each case involving the imposition of a civil penalty warrants an idiosyncratic approach and a careful analysis of all relevant circumstances. As was stated in Australian Opthalmic Supplies:
“Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.”[22]
Clearly the check-list, as enumerated above, is useful. It is not to be regarded as an exhaustive list of factors to be considered. The ultimate control on any sentence is that it must be proportionate to the offence committed. A court is not permitted to impose a sentence greater than is warranted by the objective circumstances of the offending.[23]
Helpfully, both Mr Prain, counsel for the FWO and Ms Barnes, counsel for the respondents, followed the Mason & Harrington check-list and I will do the same, when considering penalty, after having first determined how the various matters are to be grouped.
As indicated above, the legislative provisions relating to how contraventions arising under the FWA are to be grouped for the purposes of calculation of penalty are contained in section 557(1) of the FWA, which reads as follows:
“(1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
The FWO accepts that the incidents of contravention, relating to both Ms Wang and Mr Jhen, amount to one course of conduct. Accordingly, it does not seek parallel penalties relating to each individual employee. It does not accept that there is one incident of conduct relating to either section 44 or section 45 of the Act. Rather the FWO asserts that each individual breach of either the Award or the National Employment Standard should be penalised separately, other than the incidents relating to Saturday and Sunday, which it accepts can be grouped together, for the purposes of penalty.
In Blandy v Coverdale NT Pty Ltd[24] Reeves J was dealing with the legislative precursor of the FWA. He made some comments regarding how matters were to be grouped for the purposes of the imposition of civil penalties. He observed that “each separate obligation found in an award is to be regarded as a separate ‘term’.
In this context, whether a separate obligation is to be regarded as a separate obligation is to be determined by reference to whether “it is in substance a different obligation. Further, in my view significantly, His Honour went on to say:
“…where different terms impose cumulative obligations or obligations that substantially overlap, that may be taken into account by imposing a nominal (or no) penalty for some breaches and a substantial penalty for others…”
In FWO v Ramsey Food Processing Pty Ltd (No 2) Buchanan J considered the application of section 719(2) of the Workplace Relations Act, the legislative predecessor of section 557. He said as follows:
“On one view, the failure to make any of the required payments arose from a single course of conduct. They all arose from a determination by the respondents that no payment would be made upon the termination of employment of any of the employees, or the employees as a group. However, this approach gives insufficient attention to the separate legal character of the three forms of obligation earlier identified. I am satisfied that each of those forms of obligation requires separate recognition. I am not, however, satisfied that each individual example of defiance of an obligation is permitted separate recognition. In my view the individual examples, constituted by the failure to make payments to particular individual employees, arise out of a course of conduct in each of the three instances. Any penalty must be assessed taking that into account.”[25]
This is the position advocated by the FWO, who contends that the failure to pay Ms Wang and Mr Jhen the minimum wages due to them; overtime; and other penalties to which they were entitled; are obligations of a distinct legal character and so should be dealt with distinctly. I agree with this approach and propose to adopt it. I must also bear in mind that any penalty to be imposed must be an appropriate response to what the respondents did overall in an aggregate sense.[26]
As Reeves J observed, this can be achieved, in appropriate cases, by imposing nominal sentences in the case of cumulative breaches. This is the approach adopted by the FWO in its submissions on penalty. As indicated above, the Ombudsman proposes reducing penalties for the various section 44 and 45 offences.
The leading case, on the application of section 557 is the Full Court authority of Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman.[27] This was a case broadly analogous to the current one in the sense that the appellant employer concerned had admitted numerous breaches of a modern award in respect of such things as the payment of penalty rates for work on Saturdays and public holidays in contravention of section 45 of the FWA.
In Rocky Holdings the Full Court did not accept that these various incidents of breach were to be regarded as a single course of conduct, referral to a common incident of the employer breaching the applicable modern award per se. The Full Court’s reasoning, in my view, can be summarised as follows:
·The key legislative intent of the FWA is to ensure, through an effective penalty regime, compliance with the minimum terms of relevant modern awards, not to reduce the number of contraventions of civil penalty provisions; see [12].
·It is the provision of the Act, set out in subsection 557 (2), which is relevant to the course of conduct delineated in subsection (1); see [13].
·Subsections (1) and (2) are ambiguous. They are capable of referring to the existence of the identified provision or the substance of the identified provision. As such, it is acceptable to have regard to the relevant Explanatory Memorandum, in resolving the ambiguity;[28] see [14].
·The object and purpose of section 557 is to ensure that an offender is not punished twice for what is essentially the same criminality. What is or is not the same criminality is an exercise requiring close consideration. However bare identity of motive is seldom sufficient to establish the same criminality in separate and distinct acts of offending; see [18].
·It is wrong to characterise the various contraventions of the modern award in question as being merely particulars of an overall breach of section 45; see [24].
·It potentially confusing to apply principles dealing with the punishment and sentencing of criminal offences to the application of civil penalties; see [25].
·Such an analysis has the prospect of leading to arbitrary and capricious outcomes. By way of example an employer who had contravened a wide range of award provisions, leading to widespread underpayment of a number of employees would be subject to the same maximum penalty as an employer who had contravened one award provision, in respect of one employee on one occasion. This is counter-intuitive; see [26].
Of these reasons, in my view, the last one is the one most applicable to the circumstances of the current case. The court must beware of groupings of offences, which lead to capricious or artificial outcomes, bearing in mind that each contravention relates to a separate and distinct breach of a term of the FWA.
In any event, no matter how the various counts are ultimately cut and diced the court’s fundamental obligation is to impose a penalty in keeping with the overall seriousness of the offending in question. In this case, I am satisfied that the respondents have comprehensively failed to supply any of the minimum terms of employment, to which Ms Wang and Mr Jhen were entitled. As such there has been a total failure of the industrial safety net. This is supportive of the grouping proposed by the FWO, which I will adopt.
In these circumstances, I find that the various offences are to be grouped as follows. For ease of dealing with these offences, I will number them and indicate what each party views as the appropriate range of penalty:
Count No Details Maximum penalty FWO range Respondent’s range 1 Section 45 – failure to pay applicable minimum rate of pay $51,000 for a corporation 70%-80% 25%-50% 2 Section 45 – failure to pay weekly or fortnightly $51,000 for a corporation 70%-80% 3 Section 45 – failure to pay overtime $51,000 for a corporation 60%-70% 4 Section 45 – failure to pay Saturday & Sunday loading $51,000 for a corporation 60%-70% 5 Section 45 – failure to pay public holiday penalties $51,000 for a corporation 40%-50% 6 Section 45 – failure to pay applicable leave loading for annual leave $51,000 for a corporation 40%-50% 7 Section 44 – failure to pay annual leave $51,000 for a corporation
$10,200 for an individual60%-70%[29]
25%-50%8 Section 44 – failure to pay accrued annual leave on termination $51,000 for a corporation
$10,200 for an individual60%-70% 9 Section 44 – failure to pay for absences on public holidays $51,000 for a corporation
$10,200 for an individual60%-70% 10 Section 44 – failure to give notice of termination and pay in lieu of notice $51,000 for a corporation
$10,200 for an individual60%-70% 11 Section 712(3) – failure to comply with notice to produce $51,000 for a corporation
$10,200 for an individual60%-70% 25%-50% 12 Section 535(1) – failure to keep employment records $25,500 for a corporation
$5,100 for an individual50%-60% 25%-50% 13 Section 536(1) – failure to issue payslips $25,500 for a corporation
$5,100 for an individual50%-60% 25%-50%
In her submissions to the court, Ms Barnes, counsel for the respondents, conceded that Rocky Holdings was binding on the court and favoured the grouping proposed by the Ombudsman. Her original written submissions did not reflect this concession. Notwithstanding that concession, Ms Barnes and Mr Prain are significantly at odds, in respect of their overall calculations of penalty.
On Mr Prain’s analysis, the maximum penalty for Sonisolar, in respect of the thirteen contraventions is $612,000.00, in respect of which he seeks the imposition of a penalty of between $357,000.00 and $418,200.00. In respect of Mr Wang, the total maximum penalty is $61,200.00. Mr Prain proposes a total penalty of between $35,700.00 and $41,800.00 for Mr Wang. On any view, these are significant sums of money.
On the other hand, Ms Barnes proposes a range of penalties, in the range of between 25% and 50% for both respondents. On my calculations, if the grouping proposed by Mr Prain is adopted, it would represent a range of penalties, for Sonisolar, of between $153,000.00 and $306,000.00 and for Mr Wang of between $15,300.00 and $30,600.00. She proposes that these penalties be discounted by 25% to reflect the totality of the offending, for both respondents. Mr Prain concedes some discount, of up to 25%, but only for Sonisolar. As previously indicated, Ms Barnes opposes any order for costs.
Nature and Extent of the Conduct Leading to the Breaches
The parties have fundamentally different views of the overall gravity of the offending in question. Ms Barnes characterises Mr Wang as a person with an unsophisticated knowledge of his obligations under the FWA, who operated a small business, with a limited number of employees.
By way of background, Mr Wang has deposed that he has been resident in Australia since 2004, originally coming to this country, from China, on a student visa, in order to study accounting. He remained pursuant to a skilled migration visa and was granted permanent residency in 2007.
It is his position that he has had limited professional support in his business enterprises, limited to his accountant and although reasonably fluent in conversational English he does not have a sophisticated or technical grasp of the language or of management of industrial issues.
As such, it is submitted, on his behalf, that he did not, at relevant times, understand his and the company’s legal obligations arising under the FWA and, as such, he has not brazenly ignored his responsibilities. In this context, I accept that Mr Wang has not been in business for a lengthy period of time and his overall level of enterprise is small. I also accept that he did not have a sophisticated knowledge of Australian industrial law. However, at the end of the day he knowingly engaged with Ms Wang and Mr Jhen in a manner which resulted in them being paid a fraction of what they were properly entitled to by way of wages.
Mr Wang lives in Australia and accordingly must be taken to have some understanding of what it costs to live in this country. He also engages in an industry which, by its nature, requires workers to work at times when other members of the public are at leisure – that is at weekends and out of regular business hours. I do not accept that Mr Wang is likely to be entirely ignorant of such matters as penalty loadings for weekend work and the like, in the hairdressing industry.
Mr Wang agreed to both his employees working long hours. On the best construction available to him, he provided them with half of the minimum wage applicable and no other allowances whatsoever. Although the sums of money, due to Ms Wang and Mr Jhen, are not huge sums, this is reflective of the shortish period of time of their employment with Sonisolar, not, in my view, the overall gravity of the offending, which I consider serious.
Ms Wang and Mr Jhen received only about 70% of what they should have been paid. In my view, this represents almost a total failure of the industrial safety net so far as they are each concerned. Mr Wang acknowledges that he offered to pay Ms Wang and Mr Jhen a sum of $100.00 per day. The hourly rate, for ordinary hours, is $17.69, for hairdressers. This equates to a basic weekly wage of $672.00, for a basic 38 hour week/Monday - Friday.
Ms Wang and Mr Jhen worked over a 50 hour week over six days, working long hours, with only, on average, one day off per week. In my view, this situation is indicative of exploitation. Both Ms Wang and Mr Jhen are of Taiwanese extraction and each was on a working holiday visa, when the contraventions against them occurred.
They were recruited whilst oversea, without the protection of any supervisory intermediary. As such, they are each unlikely to have any personal knowledge of their entitlements in Australia under applicable industrial provisions. Neither Ms Wang nor Mr Jhen speaks English to any high degree of proficiency.
Thus, in my view, they are each to be characterised as vulnerable employees, who are thus more susceptible, than English speaking resident employees, within the Australian community, to exploitation within the workplace. In my view, this is a significant feature of the case. The FWO, in my view, must remain vigilant in respect of the potential exploitation of workers, who come temporarily to Australia. Given their status, such workers are more likely to pass under the radar of the industrial arbiter and then return to their country of origin.
By his acceptance of the statement of agreed facts, Mr Wang is taken to have abandoned his claim that either Ms Wang or Mr Jhen is to be taken to be an independent contractor of Sonisolar. In any event, the evidence, in my view, clearly indicates that they did not have any independence in their employment.
Mr Wang directed where Ms Wang and Mr Jhen were to work and when and what each was to do. Neither Ms Wang nor Mr Jhen had any opportunity to offer their services to anyone else. In these circumstances, it suited Mr Wang and Sonisolar to characterise Ms Wang and Mr Jhen as contractors, although this did not equate with the reality of their employment situation.
As Grey J colourfully stated in Re Porter, an employer
“….cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck…” [30]
In my view, the evidence clearly indicates that Mr Wang’s characterisation of Ms Wang and Mr Jhen’s employment relationship with him, which he entirely organised, as being one of independent contractorship, was designed solely to ensure that Mr Wang paid the bare minimum to the two workers concerned.
Given their situation, in Taiwan, when Ms Wang and Mr Jhen were introduced to Mr Wang, neither was in a position to know whether what was being offered to them was either standard within the hairdressing industry in Australia or reasonable in terms of its remuneration. In addition, their judgement is likely to have been influenced by the prospect of being able to come to Australia, on a working holiday. This was likely to be a powerful inducement.
Accordingly, I do not consider that there was any semblance of a level playing field in the negotiations between the parties concerned. This heightened Ms Wang and Mr Jhen’s mutual susceptibility to being exploited. Given their background, both are likely to be ignorant of how they could complain to the Australian authorities, in order to seek redress for the poor employment behaviour, to which they had been subject or fearful they may be characterised as troublemakers, if they did so.
As temporary visa holders, Ms Wang and Mr Jhen are to be regarded as transitory employees, who if subject to the exploitation of an employer, are likely to put it down to a bad employment experience and overlook it, before moving on to another destination or going home.
Mr Wang has consistently claimed that he himself has been subject to exploitation by Ms Wang and Mr Jhen, who stole from him. Regardless of the truth or otherwise of this complaint, the fact remains that long prior to the issue of Ms Wang and Mr Jhen’s honesty being raised, Mr Wang was prepared to inaccurately categorise them as contractors and pay them a fraction of their proper entitlements. His exploitation of Ms Wang and Mr Jhen long pre-dated any alleged dishonesty on their part.
To the Today Tonight program, Mr Wang and his solicitor characterised the evidence of Ms Wang and Mr Jhen’s dishonesty as being irrefutable. For their part, Ms Wang and Mr Jhen deny any such impropriety. I am not in a position to make any concrete findings of fact in this regard, as no oral evidence has been provided in respect of the issue and no cross examination has occurred.
This arose because, on the morning allocated for the liability hearing to commence, Mr Wang indicated that he would accept the statement of claim prepared by the FWO, without any significant changes to it. At this stage, it must have been apparent to him that both Ms Wang and Mr Jhen were in Adelaide for the hearing and accordingly could be subject to cross-examination, at his direction, if the hearing proceeded.
In particular, they could have been questioned regarding the allegation raised by him, in the television program, that they had each received significant other financial benefits during the period of their relationship with Sonisolar and had, in short, been given a fair go so far as their situation was concerned, which they had subsequently abused. Mr Wang despite initially framing his case as his opportunity to obtain vindication chose not to pursue it in this way.
In her oral submissions to the court, Ms Barnes maintained Mr Wang’s position that he continued to believe that Ms Wang and Mr Jhen had stolen from him and therefore he and Sonisolar were entitled to dismiss them. In these circumstances, it is Ms Barnes submission that it is understandable that it would take Mr Wang some time to assimilate the gravamen of the FWO’s case against him and acknowledge his liability. She said as follows:
“Since then, of course, your Honour, he has had legal advice, we’ve had multiple meetings with him, he has participated in mediation where, of course, the details of the case run by the Fair Work Ombudsman were explained to him and he had the opportunity to consider them properly, ultimately, in my submission, his acceptance of the Fair Work Ombudsman’s case demonstrates that he understands now the difference between, on one hand, perhaps, the theft, if you put it that way, he understands about – that this case is about his obligations under the Fair Work Act and he understands that the theft is, if you like, a side issue, it might be an important issue to him but a side issue.”[31]
Mr Wang has formally made a complaint of theft to the South Australian Police in respect of Ms Wang and Mr Jhen. In respect of this Ms Barnes concedes that the police have elected not to pursue the matter, after consulting with the FWO. She does not allege that the Ombudsman has exerted any undue influence in this regard. Rather, Ms Barnes characterise her client as a person who did not have a clear understanding of the role of the Fair Work Ombudsman.
In these circumstances, Ms Barnes characterises Mr Wang’s expressed outrage on the Today Tonight program as being readily explicable. The fact remains Mr Wang’s complaints of theft have not been resolved in his favour and Ms Wang and Mr Jhen have not been subject to direct scrutiny in respect of the issue.
However, in the case before me there is no evidence to indicate that the calculations made by Mr Pronk, regarding the underpayment of Ms Wang and Mr Jhen, are anything other than entirely accurate. There is no evidence of any commissions being paid to Ms Wang or Mr Jhen or that either received any component of the profits of the salons concerned.
Accordingly, in my view, this remains a serious case of wage exploitation of temporary workers from overseas, who notwithstanding serious attacks on their honesty, were prepared to return to Australia to assist the authorities prosecute the persons who had exploited them.
In my view, I must also consider the nature of the industry in which the respondents have breached their employment obligations. Mr Pronk has deposed that complaints to the FWO are prevalent in the hair and beauty industry. The majority of these complaints relate to claims of underpayment.
The only industries which record higher rates of complaint are hospitality; transport; and industrial cleaning. Employees in the hairdressing industry are semi-skilled and very often work in small establishments. In many ways, the descriptor of cottage industry is an apt one. As such, it is an industry not readily amenable to organisational or easy oversight.
I accept that Mr Wang was not immediately cooperative once the FWO became engaged in investigation of his business. It is implicit in his acknowledgement of the accuracy of the statement of agreed facts that he accepts that he and Sonisolar did not fully comply with the relevant notices to produce employment records. It is accepted that only twenty nine days of non-consecutive days employment records were produced out of an applicable period of seven months.[32]
As previously indicated, one of the objects of the FWA is to ensure that employees have the benefit of a safety net, which ensures they receive their minimum entitlements and the terms of any relevant award are followed. The issue of a Notice to Produce, in my view, is an essential weapon in the armoury of a workplace inspector to ascertain whether there have been any breaches of the Fair Work Act and in particular, whether any particular employee has not been provided with the protection of the industrial safety net.
In this context, the respondents also acknowledge that they failed to keep appropriate employment records in respect of Ms Wang and Mr Jhen. Given the circumstances of this matter, in my view, these are serious breaches of the applicable legislation, as it has the potential to retard the capacity of the FWO to investigate matters, pursuant to its statutory obligations and obtain proper redress for the employees who approach its offices.[33]
The provision of appropriate and correct payslips is also an essential component of a fair system of wage regulation. Employees, particularly vulnerable ones, are entitled to know what they have been paid and how specifically their wages are broken down.
Such employees need to know this information promptly so that they can query any areas of uncertainty and sort out any misunderstandings. On a basic level, they need to be able to budget and make properly informed decisions about whether they will elect to continue to work in a particular manner, such as on weekends and at night time.
In this case, the failure to keep proper records and provide payslips to Ms Wang and Mr Jhen is to be regarded as significant, given the nature of their employment and their status as overseas visa holders. For the reasons already provided I regard them each as being particularly vulnerable employees.
In this context, I respectfully adopt what was said by Judge Reithmuller in FWO v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor[34] as follows:
“Without proper payslips, employees are significantly disempowered, creating a structure within which breaches of the industrial laws can easily be perpetrated.”
The nature and extent of the loss
Mr Wang and Sonisolar have formally admitted the amount of wages outstanding to Ms Wang and Mr Jhen. As previously indicated, given the amount to which the two were entitled, the quantum of underpayment must be regarded as significant.
The wages due to each remain outstanding. The period in question is now in excess of two years. In this period both Ms Wang and Mr Jhen returned to their previous lives in Taiwan. At the same time, Mr Wang publically expressed a sense of outrage that the two maintained that they had an entitlement to be compensated for underpayment.
When it became apparent that Ms Wang and Mr Jhen were willing to return to Australia and put in contest the matters raised by Mr Wang and it was also apparent that the authorities were prepared to pay the costs involved, Mr Wang acknowledged the underpayment.
On his application, the penalty hearing was deferred for a period of approximately ten weeks. As a the date of the penalty hearing, neither Sonisolar nor Mr Wang have paid any of the wages outstanding to Ms Wang and Mr Jhen, notwithstanding the respondents’ acknowledgement of liability for them.
Similar previous conduct
Sonisolar has not been previously the subject of any legal proceedings for any breach of industrial regulation. Mr Pronk alleges that he has previously investigated a related entity to Sonisolar, Speed Hair Pty Ltd, of which Mr Wang was a director. This investigation led to notices to produce being served on the registered office of Speed Hair Pty Ltd.
Ms Barnes submits that it would be unfair to the respondents if the court had any regard to this matter, given that it has not been the subject of any exhaustive investigation by the court. I agree. As such, I approach the question of penalty on the basis that both respondents are first time offenders.
Size and financial circumstances of the respondents
I have limited knowledge regarding the size of the enterprise concerned in these proceedings. I accept, however, that Sonisolar falls within the descriptor of small business. Sonisolar commenced running hair salons, in Adelaide, in 2013. At its height it operated from three premises. The Arndale business was sold, for an undisclosed price, in May 2015. The Noarlunga business was closed, when its lease expired. Mr Wang deposes that the Arndale and Noarlunga salons were closed because they were not profitable.
It is Mr Wang’s evidence that he is responsible for most of the hairdressing done at Sonisolar’s remaining salon, in Elizabeth. He has had the assistance of two casual staff, but is now inclined to close this business too, as it is not profitable. He attributes the failure of the business to adverse publicity arising from these proceedings.
In all these circumstances, it is the submission of Ms Barnes that the investigation by the FWO and the subsequent proceedings, have had a devastating impact on Mr Wang and Sonisolar. Mr Wang has had to take much time off work to consult his solicitors. It is his evidence, supported by submissions from Ms Barnes, that it has been a tortuous process for him to understand the legal distinctions, in the workplace context, between which individuals can be properly characterised as independent contractors and those who must be characterised as employees.
I have been provided with Sonisolar’s tax return for the year ending 30 June 2015. This indicates gross receipts of $446,017.00. According to the return, the business incurred a loss of $63,172. Its major expense was rent of $258,862.00. It other expenses were not precisely delineated. I presume Mr Wang drew a wage but I have not been advised that this is the case or, if so, what it was.
The FWO has been concerned that the closure of the two salons may render it less likely that Ms Wang and Mr Jhen will be paid their entitlements. For this reason, it has sought to amend its statement of claim so that both respondents are jointly and severally liable for the sums in question. Mr Wang did not contest the amendment.
It is Mr Wang’s evidence that Speed Hair Pty Ltd has never traded. Mr Wang’s evidence is that he is not a wealthy person. His partner is not engaged in paid work, as she cares for their son, who has special needs. Mr Wang remits money to China, when he is able, to support his elderly parents. He deposes to have experienced significant worry as a consequence of these proceedings, which I accept is the case.
It is trite but true principle of industrial law that employers have an obligation to meet minimum employment standards to their employees and are not entitled to overcome financial challenges by underpaying their employees.
Small business, in Australia, is a significant employer in terms of the number of persons which it employs. In these circumstances, I adopt the comments of Driver FM (as his Honour then was) in Rajagopalan v BM Sydney Building Materials Pty Ltd [35] as follows:
“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.”
Deliberateness of the breaches
This is a contentious issue. The FWO contends that the respondents deliberately classified Ms Wang and Mr Jhen as independent contractors in order to be able to pay them each a portion of their entitlements, which was significantly less than the statutory safety net. As such, the respondents placed their own financial interests above those of Ms Wang and Mr Jhen.
On the other hand, the respondents categorise their conduct as being negligent, on the basis that neither was properly aware of the provisions of the relevant award, although both clearly should have been. I accept the submission that Mr Wang lacked direct knowledge of the industrial law which he breached.
But, as I have already indicated, it is my view that his classification of Ms Wang and Mr Jhen, as independent contractors, was a self-serving piece of subterfuge, on his part. He must have been aware that, to all intents and purposes, the two were Sonisolar’s employees, working in the company’s salons, as directed by the company’s proprietor.
In this sense, Mr Wang was content to arrange his affairs so that the two individuals were paid a fraction of their entitlements. He knew that this was an exercise in artificiality, which suited him not Ms Wang and Mr Jhen. As such, I do not accept that the respondents’ conduct can be characterised as inadvertence.
Involvement of senior management
Mr Wang is the sole director of Sonisolar and the person responsible for its direction, management and control. As such, for obvious reasons, he was integral to every decision made by the company, as he was both its hands and brain. Mr Wang recruited both Ms Wang and Mr Jhen and was responsible for the decision to characterise them as independent contractors. He obtained ABNs for each of them.
Co-operation and contrition
It is only recently that the respondents have acknowledged any culpability in respect of their dealings with Ms Wang and Mr Jhen. I accept that these proceedings have serious implications for both respondents. They are entitled to contest them with the upmost rigour and take every point available. As such, they are not obliged to make any concession prematurely.
One of the significant features of this case is that it concerns two Taiwanese nationals, who had returned home. Without their evidence, the case of the FWO would have been significantly weakened, if not rendered altogether hopeless. In these circumstances, I accept that it is understandable that Mr Wang would have maintained his defence until such time as it was certain that the FWO would be able to proceed against him and Sonisolar with the evidence of both employees concerned.
It is Ms Barnes’ submission that it is these factors which explain the late indication of acceptance of liability by the respondents. I accept that this is the case, but it is hardly evidence of an extreme level of contrition on their part. They admitted liability only when there was no tactical advantage in maintaining denial. Their stance up until this stage has also resulted in the public purse being put to considerable expense in ensuring the attendance of Ms Wang and Mr Jhen, in Adelaide, for the hearing.
Mr Wang continues to maintain that it is he who has been wronged by Ms Wang and Mr Jhen. As I am at pains to point out, I am unable to resolve this issue in the context of the proceedings before me and it is, in any event, essentially a distraction from what is the substantive issue in the case, namely the proper level payment for the two individuals concerned. Mr Prain submits that Mr Wang’s involvement in the Today Tonight program “was an adverse media campaign designed to disparage the applicant, Ms Wang and Mr Jhen.”
Whether this is so is difficult for me to resolve definitely. As I say, the police have chosen not to lay charges; I have not been provided with direct evidence of the alleged wrongdoing by Mr Wang; and he has not elected to challenge their evidence in cross-examination. Rather, when it is apparent that the case against him can proceed he has indicated a willingness to agree the statement of facts collated by the FWO.
In my view, the fact of Ms Wang and Mr Jhen’s arrival in Adelaide, coinciding with the commencement of the liability hearing, is a more logical explanation for the change of stance of Mr Wang, rather than that he had come to a begrudging acceptance that he and Sonisolar were in the wrong in the manner in which they had designated the two individuals as independent contractors.
In these circumstances, in my view, the respondents have not demonstrated a high degree of co-operation with the authorities. It is correct however that the respondents did accept the applicant’s statement of claim without amendment and the cost of a three or four day hearing was avoided. I also accept that the case has had a detrimental financial impact on Mr Wang’s business and has caused stress for him and his family. Mr Wang has also apologised, in his affidavit material, for his conduct.
He deposes as follows:
“I apologise to the complainants and the Court for my error and ask that the Court accept that the error was genuine and has had a significant adverse impact on the business, myself and my family.”
In my view, the most concrete examples of contrition and co-operation, which the respondents could have demonstrated, would have been by paying the monies, which they now concede are due to Ms Wang and Mr Jhen. This has not occurred as at the date of the penalty hearing. Such a payment would have represented a true demonstration of regret, shame and sympathy on the part of the respondents.[36] It would have also been the most obvious way of making amendments for their conduct. As such, there is no evidence of any corrective conduct on the part of the respondents.
General deterrence
One of the central purposes of imposing a civil penalty, in proceedings such as these, is to deter other employers from embarking on a similar course of conduct to that engaged upon by the transgressing employer. In FWO v Maclean Bay Pty Ltd (No 2) Marshall J said as follows:
“It is important to ensure that the protection afforded by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless respected.” [37]
The role of general deterrence in fixing appropriate penalty is demonstrated by what Lander J said in Ponzio v B & P Caelli Constructions Pty Ltd[38] namely:
“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... “(citations removed)
In my view, in this particular case, issues of general deterrence loom large. This is a case concerning compliance with minimum employment standards applicable to two highly vulnerable employees, who were recruited from overseas. It is important to deter other employers from not paying the minimum wage safety net or paying employees the required loadings arising from work performed on weekends or on public holidays to overseas employee visa holders. These are two of the principles objectives of the FWA and the system of modern awards it inaugurated. A warning to others, in this regard, must be issued by the court.
However, I must also observe the idiosyncratic features of this case and not impose a crushing penalty on the respondents. The penalty must be sufficient to convey the message to other employers of the importance of adherence to applicable modern awards in their payment of employees.
In my view, similar considerations relate to the notice to produce offenses. It needs to be underlined to employers that they have an obligation to cooperate with the industrial watchdog and, if they do not do so, such transgressions are liable to penalty. In my view, it is in the general public interest that Fair Work inspectors be able to have confidence that the court will support their investigative role.
In my view, a sufficient penalty needs to be imposed, in this case, in order to reinforce, for prospective errant employers, that any disregard for legal obligation and enforcement processes will be unacceptable. The court needs to encourage employers to engage in more robust cooperation with the regulator, particularly when they have been specifically put on notice of their obligations.
Specific deterrence
Considerations relevant to specific deterrence focus on the individual circumstances of the offender concerned and require some degree of prognostication as to the likelihood of re-offending. The most reliable tool for such prognostication is usually the attitude expressed by the party in question.[39]
It is Mr Wang’s evidence that he is scaling back his operations as a consequence of operational difficulties. In this context, it is Ms Barnes’ submission that as Mr Wang is now well aware of his obligations; does not currently employ any staff; and is soon to cease trading, there is little risk of him or any corporate entity related to him; re-offending.
I take these submissions into account. It cannot be doubted that Mr Wang is aware of his obligations. However, I also accept the FWO’s submission that Mr Wang is to be regarded as a reasonable experienced business person who, in a reasonably short period of time, developed a business operating from three premises. In these circumstances, I accept there is a need for specific deterrence, but I do not regard it as extreme.
Calculation of Penalties and conclusions
It has been said that the task of sentencing is one of the hardest judicial tasks, as it requires the synthesis of competing consideration to arrive at a penalty, which is just and appropriate. Necessarily it is a process of intuitive synthesis. It is useful to think in terms of percentages, but sentencing is not a purely arithmetical process.
I have calculated thirteen offences to which penalties must be applied. I am required to look at the penalties so imposed in aggregate to determine whether it is an appropriate response to the conduct, which led to the breaches. Whilst the penalties, in total must not be oppressive or crushing, they must be proportionate to the conduct engaged in by the respondents.
The inevitable tension between these two considerations encapsulates the particular difficulty of this matter. I regard the conduct of the respondents as being extremely serious and requiring a heavy level of censure. Through a process of artifice, two vulnerable individuals, from overseas, were erroneously characterised as contractors, which led to them each being paid a fraction of their proper entitlements and being excluded from all the protections of the industrial safety net.
On the other hand, the respondents are not sophisticated business people. They operate a modest enterprise. The respondents are also first offenders. The Commonwealth Parliament has inaugurated a broad range of penalties for the offences in question. Clearly, the top of this range must be reserved for the most serious examples of breach, including repeat offenders.
In terms of corporate offenders, I must also bear in mind the wide range of corporate employers – from publically listed corporations, with huge payrolls, deep corporate pockets and ready access to all manner of legal and accounting advice – to small mum & dad business, providing modest services to members of the general public.
In my view, in total, to impose a penalty, in excess of $300,000.00, on Sonisolar, would amount to a crushing penalty, given the circumstances of the company, which has one director and few assets of any significance. I must be careful, I think, not to utilise percentages of the maximum penalty as the sole mechanism for determining the gravamen of the penalty. Rather, I must bear in mind what the penalties add up to, in dollars and cents, for both Sonisolar and Mr Wang.
In my view, the most serious incident, which arises in these proceedings, is the failure, by Sonisolar, to pay the minimum wage to Ms Wang and Mr Jhen. This arose, as did all of the other breaches, arising under both sections 45 and section 44, because of the erroneous characterisation of the two as independent contractors. Accordingly, I will impose the most severe penalty in respect of count one.
For reasons already provided, although each of these incidents represents a separate breach of a term of either the Award or the provisions of the Act, given the common aetiology of each such breach, I am satisfied that there is some level of overlap, which must be taken into account in fixing cumulative penalties.
For this reason, I will impose the most severe penalty for count one and lesser amounts for the remaining counts to reflect this characterisation. A more severe penalty is warranted for the notice to produce count, given the centrality of considerations of general deterrence and its relevance to the administration of the industrial law system.
In these circumstances, I propose imposing the following penalties on Sonisolar:
Section 45
failure to pay minimum rate of pay
$35,000.00
Section 45
failure to pay weekly/fortnightly
$7,500.00
Section 45
failure to pay overtime
$7,500.00
Section 45
failure to pay Saturday/Sunday loading
$7,500.00
Section 45
failure to pay holiday loading
$7,500.00
Section 45
failure to pay public holiday loading
$7,500.00
Section 44
failure to pay annual leave
$7,500.00
Section 44
failure to pay accrued leave
$7,500.00
Section 44
failure to pay for absence on public holidays
$7,500.00
Section 44
failure to give pay in lieu of notice
$7,500.00
Section 712(3)
breach of notice to produce
$21,000.00
Section 535(1)
recording keeping
$7,500.00
Section 536(1)
payslips
$7,500.00
Total
$138,500.00
In respect of Mr Wang, I propose apply the following penalties:
Section 44
failure to pay annual leave
$1,500.00
Section 44
failure to pay accrued leave
$1,500.00
Section 44
failure to pay for absence on public holidays
$1,500.00
Section 44
failure to give pay in lieu of notice
$1,500.00
Section 712(3)
breach of notice to produce
$7,000.00
Section 535(1)
recording keeping
$1,500.00
Section 536(1)
payslips
$1,500.00
Total
$16,000.00
The next step is to look at the aggregate of the penalties in total and consider whether the total penalty is an appropriate one when the circumstances of the offending are considered. As previously indicated this has been described as a process of intuitive synthesis. Does the total penalty appear to be correct in aggregate?
In Kelly v Fitzpatrick Tracey J considered what he termed the orthodox position was for the court to determine the appropriate penalty for each contravention and then consider the aggregate figure to ensure “that it was an appropriate response to the conduct which led to the breaches.” [40]
In my assessment, a penalty of $100,000.00 in aggregate, is an appropriate on for Sonisolar; and one in aggregate of $12,000.00 is appropriate for Mr Wang. These are significant sums, but are, in my assessment proportionate to the serious conduct, which led to the breaches.
Costs
The test to be satisfied under section 570(2) (b) is whether Mr Wang has engaged in an unreasonable act or omission, which has caused the FWO to incur costs.[41] Accordingly two criteria must be satisfied before an order for costs is made.
I accept that a person alleged to have breached a civil liability provision is entitled to put the instrumentality concerned to its proof. As Ms Barnes points out, Mr Wang was not in a position to know that the FWO would definitely proceed against him until it was clear that Ms Wang and Mr Jhen were prepared to come to Australia.
Necessarily such an attitude contains an element of brinkmanship. As such, it is a strategy not without its risks. In pursuing it, Mr Wang has caused the FWO to incur costs in relation to the service of subpoenas; airfares and accommodation for Ms Wang and Mr Jhen; and interpreter’s fees and related expenses.
The issue is whether this was an act, on Mr Wang’s part, which can be characterised as being unreasonable and therefore liable to be penalised by way of a costs order pursuant to the provisions of section 570 (2)(b) of the Act.
Burnett FM (as His Honour then was) in Workplace Ombudsman v Queensland Marine & General Insurance Management Pty Ltd considered that unreasonable conduct did not have to be negligent in nature, rather whether conduct was or was not unreasonable should be measure against what a reasonable person would expect.[42]
In Rentuza v Westside Auto Wholesale[43] Lucev FM (as His Honour then was) said as follows:
“Whether a party has engaged in an unreasonable act or omission depends upon an objective analysis of the particular circumstances of the case.”
In this matter, liability was admitted on the first day of a three day hearing, which had been scheduled for a significant period of time. The FWO was called upon to prepare and file all its evidence. Well in advance of the hearing, the FWO inquired of the solicitor for Mr Wang whether the overseas witnesses were required for cross-examination. As a consequence of being informed in the affirmative, the FWO went through the formal process of applying to serve subpoenas out of the jurisdiction.
When it became apparent that Ms Wang and Mr Jhen had been successfully brought to Australia, Mr Wang indicated his acceptance of the statement of claim, which had been filed against him and Sonisolar since 13 April 2015 without demur. As such, there is significant substance to the FWO’s submission that Mr Wang’s actions were tactically motivated and he had no intention of defending the proceedings on their merits.
In my view, a reasonable person, viewing these circumstances, would readily conclude, as I do, that this was not objectively justifiable conduct on Mr Wang’s part. As such, it is appropriate to make some form of costs order in the case.
The court has a wide discretion as to the calculation of costs. Pursuant to Rule 21.02(2) of the Federal Circuit Court Rules:
In making an order for costs in a proceeding, the Court may:
a) set the amount in costs; or
b) set the method by which the costs are to be calculated; or
c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
d) set a time for payment of costs, which maybe before the proceeding is concluded.
However, pursuant to Rule 21.10:
Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
a) Costs in accordance to Parts 1 and 2 of schedule 1; and
b) Disbursements properly incurred.
Pursuant to Rule 21.15:
The Court or a Registrar may certify that it was reasonable to employ an advocate, or more than 1 advocate, to appear for a party in a proceeding.
Rule 21.10 creates a scale of costs by reference to the occurrence of fixed events. This scale has been described as the primary source used for fixing costs in general federal law proceedings. [44]
Mr Prain, on behalf of the FWO, seeks an order for cost in a total sum of $27,000.34 calculated pursuant to the schedule as follows:
·Item 6: preparation for three day final hearing - $11,185.00;
·Item 13(b): daily hearing fee 2 May 2016 - $1,024.00;
·Item 13(a) : short mention 4 May 2016 - $278.00
·Item 12: Advocacy loading - $651.00;
·Item 14: Disbursements - $13,862.24.
I am not prepared to make an order for costs of this magnitude. However, in all the circumstances of the case, in my view, it is appropriate that an order be made requiring Mr Wang to pay the costs incurred by the FWO in bringing Ms Wang and Mr Jhen to Australia for the hearing. I will make an order that he pay the FWO’s costs fixed in the sum of $13,862.24.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding two hundred and six (206) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 29 August 2016
[1] Hereinafter referred to as the FWO; the Ombudsman; or the applicant
[2] Hereinafter referred to as Sonisolar; the company; or the first respondent
[3] Hereinafter referred to as Mr Wang; or the second respondent
[4] Hereinafter referred to as Ms Wang
[5] Hereinafter referred to as Mr Jen
[6] See affidavit of Mr Wang filed 22 February 2016 at paragraphs 9 - 12
[7] Hereinafter referred to as the FWA or the Act
[8] See FWA at section 3(b) & (c)
[9] See FWA at section 712(1)
[10] See FWA at section 539(2)
[11] Hereinafter referred to as the Award
[12] See Affidavit of Kristopher Pronk filed 18 January 2016 at page 119
[13] Ibid at page 116
[14] See Amended Statement of Claim at paragraph 112 - 113
[15] See affidavit of Ms Wang filed 4 May 2016 at paragraphs 5 - 6
[16] See section 4AA of the Crimes Act 1914 (Cth)
[17] See Fair Work Ombudsman v Kentwood Industries Pty Ltd (No3) [2011] FCA 579 per McKerracher J applied in Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42] per Mansfield J
[18] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [55] per Graham J
[19] See Attorney-General (SA) v Tichy (1982) 30 SASR 84 at 92-93 per Wells J; cited with approval by Gleeson CJ in Johnson v R (2004) 78 ALJR 616; and followed by Stone and Buchan JJ in Mornington Inn v Jordan (2008) 168 FCR 383 at 397
[20] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (supra) at [23]
[21] See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] 166 IR 14 at [14]; Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [23]
[22] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (supra) at [12]
[23] See Veen v R (No 2) (1988) 164 CLR 465 at 472
[24] Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [56]
[25] FWO v Ramsey Food Processing Pty Ltd (No 2) [2012] FCA 408 at [2] The passage was approved by the Full Court in Rocky Holdings [2014] FCAFC 62 at [18]
[26] See Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [46] per Graham J
[27] Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman [2014] FCAFC 62
[28] See Acts Interpretation Act (1901) (Cth) at section 15AB(1)(b)
[29] For both Sonisolar and Mr Wang
[30] Re Porter (1989) 34 IR 179 at 184
[31] See transcript of proceedings 11 July 2016 at page 23
[32] See Statement of Agreed Facts at paragraph 112
[33] See FWO v Orwill Pty Ltd & Ors [2011] FMCA 730 at [21]
[34] FWO v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258 at [67]
[35] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27].
[36] ACE Insurance Limited v Trifunovski (No 2) [2012] FCA 793 at [113] – [114] per Perram J
[37] FWO v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29]
[38] Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [93] approved by Mansfield J in Lifestyle SA (supra) at [154]
[39] See Plancor Pty Ltd v Liquor Hospitality & Miscellaneous Union (2008) 171 FCR 357 at [37] per Gray J
[40] Kelly v Fitzpatrick [2007] FCA 1080 at [30]
[41] See CFMEU v Clarke [2008] FCAFC 143 at [26]
[42] Workplace Ombudsman v Queensland Marine & General Insurance Management Pty Ltd [2011] FMCA 261 at [32]
[43] Rentuza v Westside Auto Wholesale [2009] FMCA 1022
[44] See Piersons Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No 3) [2010] FMCA 250 at [43]
Key Legal Topics
Areas of Law
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Employment Law
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Statutory Interpretation
Legal Concepts
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Penalty
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Statutory Construction
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Remedies
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