Fair Work Ombudsman v Teds Crane Hire Pty Ltd
[2022] FedCFamC2G 1043
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Teds Crane Hire Pty Ltd [2022] FedCFamC2G 1043
File number(s): MLG 2665 of 2021 Judgment of: JUDGE SYMONS Date of judgment: 14 December 2022 Catchwords: INDUSTRIAL LAW – Fair Work – default judgment entered previously for failure to comply with compliance notice - whether penalty should be imposed and level of penalty to be imposed – primacy of deterrence – where respondent failed to engage in proceeding – where steps required under compliance notice still unperformed at time of penalty hearing – where penalty directed at general deterrence in circumstances were respondent unlikely to trade in future – penalty imposed to send message to like employers and businesses that failure to comply with compliance notice objectively serious Legislation: Fair Work Act 2009 (Cth) ss. 3, 90, 117, 546, 700, 716
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr. 4.03, 4.04, 9.04, 13.05
Building and Construction General On-site Award 2010 cl 32.2
Cases cited: Australia Building and Construction Commissioner v Pattinson (2022) 399 ALR 599; [2022] HCA 13.
Fair Work Ombudsman v Avant-Garde Logistics Solutions Pty Ltd [2022] FedCFamC2G 879
Fair Work Ombudsman v Chia Tung Development Corp. Ltd & Anor [2016] FCCA 3457
Fair Work Ombudsman v Theill Pipelines Pty Ltd & Anor [2021] FCCA 492
Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550
Trade Practices Commission v CSR Ltd [1990] FCA 5211
Division: Division 2 General Federal Law Number of paragraphs: 35 Date of last submission/s: 9 December 2022 Date of hearing: 9 December 2022 Place: Melbourne Solicitor for the Applicant: HWL Ebsworth Respondent: No appearance ORDERS
MLG 2665 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: TEDS CRANE HIRE PTY LTD (ACN 631 848 514)
Respondent
order made by:
JUDGE SYMONS
DATE OF ORDER:
14 DECEMBER 2022
THE COURT ORDERS THAT:
1.Pursuant to s 546(1) of the Fair Work Act 2009 (Cth) (FW Act) the respondent pay a pecuniary penalty in the sum of $18,700 for its contravention of s 716(5) of the FW Act as declared in the orders made on 14 October 2022.
2.The respondent pay the pecuniary penalty referred to in order 1 to the Commonwealth by 11 January 2023.
3.The applicant serve a sealed copy of this order via email on the respondent at the email address of [email protected] by 4 pm on 16 December 2022.
AND THE COURT NOTES:
A.Pursuant to rule 17.05(2)(a) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) the Court may vary or set aside a judgment or order after it has been entered if it was made in the absence of a party.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE SYMONS:
INTRODUCTION
On 14 October 2022, responsive to an application made by the applicant (the FWO), the Court entered default judgment under rule 13.05(2)(c) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (the Rules) against the respondent (Teds Crane Hire).
The decision was made in circumstances where the Court was satisfied that Teds Crane Hire had committed acts of default through its failure to:
(a)file and serve a response within 28 days of service as required by rules 4.03 and 4.04(3) of the Rules;
(b)file and serve a notice of address for service by 8 December 2021 in accordance with order 2 of orders made on 1 December 2021(December orders);
(c)file and serve a response and any defence by 22 December 2021 in accordance with order 3 of the December orders; and
(d)defend the proceedings with due diligence.
The Court made a declaration that Teds Crane Hire had contravened s 716(5) of the Fair Work Act 2009 (Cth) (the FW Act) and made orders which required Teds Crane Hire to take the steps that it was required to take under a compliance notice that had been given to it pursuant to s 716(2) of the FW Act on 5 March 2021 and to pay interest on any amounts outstanding to the affected employee, Mr Brooks. Teds Crane Hire was required to take each of these steps within 28 days, that is, by no later than 10 November 2022.
On this same date, the FWO, who was represented by lawyer advocate, Mr Adams, invited the Court to go on to consider its submissions and affidavit material directed at the imposition of a pecuniary penalty against Teds Crane Hire. This was because, as is evident from the matters set out at [2] above, the respondent had, to date, largely been absent from the proceeding. Indeed, the extent of the respondent’s involvement in the proceeding and/or communication with the FWO can be described as follows.
On 26 May 2022, the sole director of Teds Crane Hire, Mr Tyson Dalton, contacted the legal representative for the FWO to inform her that he had only just seen emails that had been sent to his email address as they had been going through to his junk folder. The FWO’s legal representative informed Mr Dalton that she would arrange for all material filed in the proceeding to be sent to him via email and this occurred on 2 June 2022. The FWO also attempted to contact Mr Dalton on this same date on the mobile number he had provided, however, the number rang out without any facility to leave a voice mail. The material provided to Mr Dalton included all documents filed in this proceeding as at that date, as well as a copy of the December orders and orders made on 26 May 2022 (May orders). The May orders had, amongst other things, required the respondent to file and serve any affidavit evidence and written submissions in respect of the FWO’s application for default judgment by 30 June 2022 and to file and serve any affidavit evidence and written submissions on the question of penalty by 19 August 2022.
On 4 October 2022, a legal representative for the FWO had a phone conversation with Mr Dalton during which Mr Dalton indicated that he was aware that the matter was set down for a hearing on 14 October 2022 and that he would appear on this date.
At the commencement of the hearing on 14 October 2022, Mr Dalton was not in attendance. I stood the matter down whilst my staff contacted Mr Dalton via his mobile phone. Mr Dalton indicated he was aware of the hearing but would not be joining the Microsoft Teams link. Mr Dalton was afforded a final opportunity to participate in the hearing by telephone, which he accepted, and was subsequently dialled into the hearing.
As at the date of the hearing on 14 October 2022, Teds Crane Hire had not produced any material directed at the default judgment application or the question of penalty. In these circumstances and where Mr Dalton accepted that Teds Crane Hire had engaged in the acts of default identified at [2] above and there was no suggestion from Mr Dalton that the respondent had a defence to the matters alleged in the FWO’s statement of claim, I granted the application for default judgment.
I did not however accede to the FWO’s request to deal contemporaneously with its application for the imposition of a pecuniary penalty. This was because Mr Dalton told the Court that he had obtained an appointment with a lawyer next Thursday and that it was his intention to engage the services of the lawyer to assist Teds Crane Hire in dealing with matters that included a response to the FWO’s application for a penalty order. In circumstances where the FWO seeks a substantial pecuniary penalty against Teds Crane Hire I considered it appropriate to allow the respondent further time to obtain legal advice and to prepare materials on this issue. Accordingly, the Court made orders setting the matter down for a penalty hearing on 9 December 2022 and requiring Teds Crane Hire to file written submissions and affidavit material on or before 11 November 2022 (October orders). The balance of this judgment is concerned with the question of penalty.
Materials relied upon by the parties
In addition to its application and statement of claim filed on 20 October 2021, the FWO relied upon the following further documents:
·Outline of submissions filed 21 July 2022;
·Affidavit of Senior Fair Work Inspector Natalie May affirmed 21 July 2022; and
·Affidavit of Barney Adams affirmed 6 December 2022.
Regrettably, despite the opportunity afforded to Teds Crane Hire to produce material directed at the question of penalty, it did not file any material with the Court. Neither did the respondent engage a lawyer and when the matter returned before me on 9 December 2022 there was no appearance from or on its behalf, including from Mr Dalton who, had he appeared would most likely have been granted leave pursuant to rule 9.04 of the Rules to represent the respondent at the hearing.
The FWO invited the Court to proceed to hear and determine its application for a civil penalty against the respondent. The FWO submitted that it was appropriate for the Court to do so in the respondent’s absence having regard to the steps taken by it to communicate with the respondent and to remind it of its obligation to file materials pursuant to the October orders. In this regard, the affidavit of Mr Adams deposed to the FWO (through its lawyers) having contacted Mr Dalton on eight occasions between 19 October and 5 December 2022 to provide information and reminders about the forthcoming penalty hearing. I considered, having regard to the failure of the respondent to appear at the hearing or to explain its absence, and the exhaustive steps taken by the FWO to communicate with the respondent and impress upon it the need for it to file responsive material, that it was appropriate to hear the FWO’s application for a pecuniary penalty.
The circumstances of the contravention
Default judgment was entered as a result of the Court being satisfied that the statement of claim relied upon by the FWO disclosed, on its face, a claim for the relief sought and that it made the following allegations:
(a)the respondent was at all relevant times:
(i)a company incorporated under the Corporations Act 2001 (Cth);
(ii)a “constitutional corporation” and a “national system employer”, and covered by the FW Act in respect of its employees;
(iii)the operator of a crane hire business with a principal place of business at 42 Barry Road, New Gisborne, Victoria (the Business).
(b)In or around September 2020, Mr Ma (FWI Ma), a Fair Work Inspector appointed under s 700 of the FW Act, conducted an investigation into Teds Crane Hire after which FWI Ma formed a reasonable belief that:
(i)Teds Crane Hire employed Mr Kenneth Brooks (Mr Brooks) to work at the Business;
(ii)the Building and Construction General On-site Award 2010 (Award), covered and applied to Mr Brooks’ employment with Teds Crane Hire;
(iii)Mr Brooks’ employment with Teds Crane Hire was terminated on 28 August 2020; and
(iv)on termination of Mr Brooks’ employment, Teds Crane Hire failed to pay Mr Brooks for accrued but untaken annual leave that would have been payable to Mr Brooks had he taken that period of leave, and make payment in lieu of notice of termination.
(v)because of the matters in (i)-(iv), during the Contravention period (being 1 April 2018 to 28 August 2020), Teds Crane Hire contravened s 90(2) of the FW Act (payment for annual leave on termination) and s 117(2)(b) (payment in lieu of notice of termination) (Contraventions).
(c)On 5 March 2021, FWI Ma gave Teds Crane Hire a compliance notice pursuant to s 716(2) of the FW Act in relation to the Contraventions (Compliance Notice) in which Teds Crane Hire was required to do the following (Specified Action) by 9 April 2021:
(i)identify the amount that Teds Crane Hire had paid to Mr Brooks in respect of the payment of annual leave on termination, and the payment in lieu of notice of termination (Entitlements)
(ii)calculate the amounts that should have been paid to Mr Brooks in respect of the Entitlements;
(iii)make payment to Mr Brooks of the difference between the amounts referred to in paragraph 13(c)(i) and the amount of the payment referred to in paragraph 13(c)(ii);
(iv)calculate and pay any additional superannuation contributions required by clause 32.2 of the Award in respect of the amounts owed to Mr Brooks; and
(v)produce reasonable evidence of compliance with the requirements of the Compliance Notice by 16 April 2021.
(d)Teds Crane Hire failed to take the Specified Action set out in the Compliance Notice by 9 April 2021 and failed to produce evidence of compliance with the Compliance Notice by 16 April 2021, and therefore contravened s 716(5) of the FW Act.
Submissions as to penalty
The FWO submits that a penalty in the range of $26,640 – $29,970 is appropriate, in circumstances where the maximum penalty that the Court may impose for a contravention of s 716(5) of the FW Act by a corporation is $33,300.
The FWO invites the Court to fix a penalty that “it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions”: Australia Building and Construction Commissioner v Pattinson [2022] HCA 13 (“Pattinson”), at [71]. In doing so, the FWO invites me to have regard to the non-exhaustive list of the factors that were identified by Justice French in Trade Practices Commission v CSR Ltd [1990] FCA 521 (“TPC v CSR”). Those factors include:
(a)the nature and extent of the conduct which led to the breaches;
(b)the circumstances in which that conduct took place;
(c)the nature and extent of any loss or damage sustained as a result of the breaches;
(d)whether there had been similar previous conduct by the respondent/s;
(e)whether the breaches were properly distinct or arose out of the one course of conduct;
(f)the size of the business enterprise involved;
(g)whether or not the breaches were deliberate;
(h)whether senior management was involved in the breaches;
(i)whether the party committing the breach had exhibited contrition, taken corrective action and co-operated with the enforcement authorities;
(j)he need to ensure compliance with minimum standards by provision of an effective means for an investigation and enforcement of employee entitlements; and
(k)the need for specific and general deterrence.
While this summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion.[1] The discretion remains at large.
[1] Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550.
Although the FWO’s written submissions traversed a number of these factors, the emphasis in written and oral submissions was on the following five considerations which it said operated with particular force in this case.
Deterrence
The FWO submitted under this heading that for any penalty to be useful as a general deterrent it would need to reflect both the character of the contravention and the profile of the industry or organisation to which the deterrent effect was directed.
In respect of the compliance notice regime, the FWO highlighted the importance of the power to issue a compliance notice as a tool of Fair Work Inspectors and which, when compliance with the notice occurred, dispensed with the need for litigation.
As far as the profile of the target audience, the FWO noted that Teds Crane Hire operated in both the machine hire industry and the building and construction industry and that the FWO’s industry profile for the machine hire industry and the construction industry indicated that a not insignificant proportion of disputes in both sectors related to termination of employment and annual leave entitlements.[2]
[2] See annexure “NM-8” and “NM-9” to the affidavit of Natalie May affirmed 21 July 2022.
Mr Adams, who appeared for the FWO again at the penalty hearing, made the overriding submission that in the circumstances of this case, the need for general deterrence was greater than the need for specific deterrence. This submission involved an acknowledgement that the respondent was not presently trading and was not likely to trade in the future including because, subject to steps taken by the FWO to defer its occurrence to allow this proceeding to run its course, the respondent would be deregistered in the foreseeable future.
Mr Adams made the further submission that as far as general deterrence was concerned, Mr Dalton should be treated as a member of the broader audience to whom this consideration was directed. In this regard, it was submitted that the Court should take account of the representations made by Mr Dalton at the hearing on 14 October 2022 which resulted in a bifurcation of the proceeding (default judgment followed by penalty hearing) and the expenditure of further resources and use of the Court’s time. The FWO submitted that the approach adopted by Mr Dalton (and imputed to the respondent) demonstrated a contempt for the Court process and was further evidence of a lack of cooperation. This was said to aggravate the necessity for a penalty at the higher end of the available amount.
Nature, circumstances and deliberateness of the contravening conduct
The FWO submitted that Teds Crane Hire had been given ample opportunities to engage with the FWO or to rectify its non-compliance with the Compliance Notice and that as at the date of hearing, Teds Crane Hire had still not taken any of the steps required by the Compliance Notice and had not complied with the October orders which had required it to, in effect, take those same steps again, this time by 10 November 2022.
The FWO made the submission that Teds Crane Hire’s failure to comply with the Compliance Notice and the October orders demonstrated a serious disregard for its obligations under the FW Act and the authority of the FWO as a regulator.
Nature and extent of loss
The FWO referred in this context to the direct financial impact on Mr Brooks flowing from the failure of Teds Crane Hire to calculate the precise amounts owing to him under the Compliance Notice and to rectify the amounts outstanding, including any superannuation contributions. There was also a more public loss reflecting the need for the FWO to commence proceedings and to divert judicial resources and the time and public funds of the regulator.
Compliance with minimum standards
The FWO submitted under this consideration that one of the principal purposes of the FW Act is to provide a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions for all employees: s 3(b). The failure of Teds Crane Hire to comply with the Compliance Notice undermined the FW Act’s enforcement framework and the safety net of entitlements it was designed to protect. It was said that Teds Crane Hire had effectively prioritised its own interests at the expense of Mr Brooks’.
Corrective action, cooperation with the FWO and contrition
The FWO submitted that the Court should not discount penalty on account of contrition or corrective action as there was no evidence of cooperation or corrective action on the part of Teds Crane Hire or Mr Dalton. This was said to be evident from, or a consequence of, the failure of Teds Crane Hire and/or Mr Dalton to:
(a)comply with the Compliance Notice;
(b)make rectification of the Entitlements to Mr Brooks;
(c)make meaningful contact with the FWO regarding the Compliance Notice and the investigation which preceded it; and
(d)to engage in this proceeding.
CONSIDERATION
As the FWO noted in its submissions, the approach to determining penalty was revisited this year by the High Court in Pattinson. In that decision, the majority upheld the Commissioner’s appeal and confirmed that the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with provisions of the FW Act by those responsible and by (like) others. The Court rejected the approach implicit in the decision of the Full Court (the subject of the appeal) that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The majority held instead that “[t]he power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a ‘notion of proportionality’ in a civil penalty regime”.[3] However the High Court did accept that s 546 requires the Court to ensure that any penalty “strikes a reasonable balance between deterrence and oppressive severity”.[4] It was only in this more qualified sense that the term “proportionality” had any role to play.
[3] See Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13 at [10].
[4] Ibid at [41].
The High Court also referred to the several factors identified by French J in TPC v CSR which informed the assessment of a penalty of an appropriate deterrent value. This list revealed that both the circumstances of the contravenor and the circumstances of the contravention may be relevant to the assessment of whether the maximum level of deterrence is called for.[5] However, the Court repeated the caution that the list of possible relevant considerations should not be approached as a “rigid catalogue of matters for attention” and instead the task of the court remains to determine what is an “appropriate” penalty in the circumstances of the particular case.[6]
[5] Ibid at [57].
[6] Ibid at [18] and [19]].
As noted earlier, the FWO asks the Court to fix a penalty in an amount that would represent between 80 and 90 per cent of the maximum penalty available for a contravention of s 716(5) of the FW Act. In circumstances where the imperative for specific deterrence does not loom large this necessarily means that the primary objective of promoting compliance with the compliance notice regime will be largely achieved through the signalling to the broader (yet like) community that inaction and non-responsiveness to efforts made by the workplace regulator to secure compliance with minimum conditions of employment is a matter that warrants censure.
In this respect I accept that the broader community includes the separate industries in which the respondent operated – namely the machine hire industry and the construction industry. I also accept the submission of the FWO that Mr Dalton, although not a respondent to the application for a civil penalty, is through his proximity to the respondent as director and because he is a person who, at least historically (his future plans are not known) has operated a business within these two industries, is a member of that community or audience. The need for general deterrence is therefore capable of recognising his own particular contribution to the course of this proceeding which self-evidently led to a protraction of the proceeding as a result of what it has transpired, were empty representations that the respondent would participate in a penalty hearing and furnish information directed at the imposition of a penalty.
As I have noted previously, the circumstances in which a breach of s 716(5) will arise are often relevantly indistinguishable from one another, in the sense that at their core they involve a failure to take the steps specified in the compliance notice in the time specified in such notice[7]. However, in this case, the evidence from the FWO is that the respondent did not engage with it at all in response to the giving of the Compliance Notice. Neither did the respondent provide any response when the FWO issued it with a Failure to Comply Notice.[8] The respondent’s lack of engagement in this proceeding also means that it has never placed before the Court any evidence that might explain or mitigate its failure to do so. I consider that the silence and inaction maintained by the respondent in its interactions with the FWO and in the context of this proceeding aggravates the seriousness of the contravention. I also accept that to the extent that the financial circumstances of the respondent might have been a factor that inhibited its ability to comply with the financial aspect of the Compliance Notice that as Deputy Chief Judge Mercuri recognised in Fair Work Ombudsman v Theill Pipelines Pty Ltd & Anor [2021] FCCA 492, the Compliance Notice did not simply require the payment of outstanding entitlements but it also required the calculation of entitlements and the identification of what payments had been made in satisfaction of those entitlements. The respondent did not attend to these steps and has never provided an explanation for its failure to do so.
[7] See Fair Work Ombudsman v Avant-Garde Logistics Solutions Pty Ltd [2022] FedCFamC2G 879 at [49].
[8] See affidavit of Natalie May filed on 21 July 2022 at paragraphs [13], [14], [15], [16], [17] & [18].
I consider therefore that the level of the penalty levied in this case must be imposed at a level which has the capacity to deter employers (current and prospective) from simply ignoring a compliance notice, as the respondent did in this case. However, I do not consider that it would be appropriate that the penalty be set quite at the level sought by the FWO. Whilst the respondent should not gain an advantage from its failure to put before the Court any evidence concerning its financial status and capacity to pay any penalty, a matter about which I am entitled to take judicial notice is that it, like many businesses, was impacted adversely by the economic downturn created by the COVID-19 pandemic and this has likely had a sobering impact on its ability to pay a pecuniary penalty.
I also note that this case does not have the same litany of aggravating features as did one of the cases that the FWO invited the Court to consider as an example of a similar case involving a lack of engagement and cooperation with the regulator. In that case, Fair Work Ombudsman v Chia Tung Development Corp. Ltd & Anor [2016] FCCA 3457 a penalty representing 90% of the maximum was set in recognition of factors that included the quantum of the underlying entitlements, the vulnerability of the affected employees and the history of non-compliance by the employer.
Here, while the contravention of s 716(5) is objectively serious, I consider that a penalty in the amount of $18,700 is an appropriate and proportionate response in circumstances.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons. Associate:
Dated: 14 December 2022
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