Fair Work Ombudsman v The Emperor's Court Pty Ltd (No 2)
[2023] FedCFamC2G 136
•24 February 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v The Emperor’s Court Pty Ltd (No 2) [2023] FedCFamC2G 136
File number(s): PEG 42 of 2022 Judgment of: JUDGE LADHAMS Date of judgment: 24 February 2023 Catchwords: INDUSTRIAL LAW – contraventions of s 716 of the Fair Work Act 2009 (Cth) – appropriate penalty to be imposed Legislation: Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) ss 12, 539, 546, 550, 716
Cases cited: Australian Building and Construction Commissioner v Pattinson & Anor (2022) 175 ALD 383; [2022] HCA 13
Fair Work Ombudsman v Blue Hornsby Pty Ltd [2016] FCCA 1150
Fair Work Ombudsman v Deborah Ruth Souris [2016] FCCA 345
Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557
Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No 2) [2019] FCCA 2144
Fair Work Ombudsman v The Emperor’s Court Pty Ltd [2022] FedCFamC2G 736
Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492
Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65
Trade Practices Commission v CSR Ltd (1991) ATPR 41-076; [1990] FCA 521
Division: Division 2 General Federal Law Number of paragraphs: 39 Date of hearing: 6 February 2023 Place: Perth Counsel for the Applicant: Mr S Witton Solicitor for the Applicant: Australian Government Solicitor Respondents: No appearance by or for the respondents ORDERS
PEG 42 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: THE EMPEROR’S COURT PTY LTD
First Respondent
GIA GIAN WONG
Second Respondent
order made by:
JUDGE LADHAMS
DATE OF ORDER:
24 February 2023
THE COURT ORDERS THAT:
1.Pursuant to s 546(1) of the Fair Work Act 2009 (Cth) (Fair Work Act), the first respondent pay to the Commonwealth within 28 days of this Order a pecuniary penalty of $23,310 for the contravention declared at paragraph A of the Order made on 1 September 2022.
2.Pursuant to s 546(1) of the Fair Work Act, the second respondent pay to the Commonwealth within 28 days of this Order a pecuniary penalty of $4,620 for the contravention declared at paragraph B of the Order made on 1 September 2022.
3.The applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
THE COURT NOTES THAT:
A.Pursuant to r 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 LADHAMS:
INTRODUCTION
This matter comes before the Court in relation to the penalty to be imposed on:
(a)the first respondent, The Emperor’s Court Pty Ltd (Emperor’s Court), for contravening s 716(5) of the Fair Work Act 2009 (Cth) (Fair Work Act) by failing to comply with a compliance notice dated 30 July 2021 (Compliance Notice); and
(b)the second respondent, Mr Wong, for being involved in Emperor Court’s failure to comply with the compliance notice.
The failure of Emperor’s Court to comply with the Compliance Notice and Mr Wong’s involvement in that contravention were the subject of declarations that I made on 1 September 2022. On that occasion, I entered default judgment in favour of the applicant, the Fair Work Ombudsman (Ombudsman) and made the declarations and various orders. I made an order requiring Emperor’s Court to take the steps that were required by the Compliance Notice within 28 days of the Order, namely, calculating and paying to a former employee outstanding amounts that she was owed and preparing and providing to the Ombudsman a schedule outlining the outstanding amounts and proof that those amounts had been paid. I also ordered Emperor’s Court to pay pre-judgment interest on the outstanding amounts, and made directions for the filing of further evidence and submissions in relation to penalty. My reasons for making those orders are explained in Fair Work Ombudsman v The Emperor’s Court Pty Ltd [2022] FedCFamC2G 736. The conduct that led to the making of the orders and declarations is summarised at [22] of that judgment, and is not repeated here.
Neither respondent has taken any part in the proceeding before the Court. The respondents did not file any evidence or submissions in relation to penalty and they did not appear at the hearing in relation to penalty. At the hearing on penalty, I formed the view that the respondents had been properly served with all relevant documents and properly notified of the hearing date and I was satisfied that it was appropriate to proceed with the hearing in the absence of the respondents.
The Ombudsman continues to rely on the evidence and submissions that were filed prior to default judgment being entered and also filed one further affidavit in relation to penalty, in compliance with an order that I made on 1 September 2022. That affidavit is an affidavit of the Ombudsman’s solicitor, Samuel Tristan Witton, affirmed on 31 October 2022. Amongst other things, Mr Witton’s affidavit provides evidence that, at the time of making the affidavit, Emperor’s Court had not complied with the Compliance Notice. There is no more recent evidence before the Court to suggest that Emperor’s Court has now complied with the Compliance Notice or the Order that I made on 1 September 2022.
CONSIDERATION OF APPROPRIATE PENALTY
Relevant principles
Section 546(1) of the Fair Work Act allows the Court to order that a person pay a pecuniary penalty that the Court considers to be appropriate if the Court is satisfied that the person has contravened a civil remedy provision.
The approach that a court should take when imposing penalties was recently considered by the High Court in Australian Building and Construction Commissioner v Pattinson & Anor (2022) 175 ALD 383; [2022] HCA 13 (Pattinson). In that case, the High Court held that the power conferred by s 546 of the Fair Work Act is not constrained by the criminal law notion of proportionality and there is nothing in the text, context or purpose of s 546 which requires that the maximum penalty be reserved for the most serious cases: Pattinson at [10], [49], [50]. The task of the Court remains to determine the ‘appropriate’ penalty in the circumstances of the case: Pattinson at [19]. An ‘appropriate’ penalty is one that ‘strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case’: Pattinson at [46].
The types of factors which can inform an assessment of what amounts to an appropriate penalty were summarised by French J in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076; [1990] FCA 521 at [42].[1] The factors are:
[1] See also Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14], where a similar, albeit not identical, list of relevant factors is set out.
1.The nature and extent of the contravening conduct.
2.The amount of loss or damage caused.
3.The circumstances in which the conduct took place.
4.The size of the contravening company.
5.The degree of power it has, as evidenced by its market share and the ease of entry into the market.
6.The deliberateness of the contravention and the period over which it extended.
7.Whether the contravention arose out of the conduct of senior management or at a lower level.
8.Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.
9.Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.
These factors are not to be treated as any sort of checklist and the Court’s task remains to determine the appropriate penalty: Pattinson at [19]. I have addressed these factors below to the extent that they are the subject of evidence or relevant to the present application.
Identification of contravention
As mentioned above, the contravention in the present matter is a breach of s 716(5) of the Fair Work Act.
Section 716 relevantly provides:
(1)This section applies if an inspector reasonably believes that a person has contravened one or more of the following:
(a) a provision of the National Employment Standards;
(b) a term of a modern award;
(c) a term of an enterprise agreement;
…
Giving a notice
(2)The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a)take specified action to remedy the direct effects of the contravention referred to in subsection (1);
(b)produce reasonable evidence of the person's compliance with the notice.
…
(5) A person must not fail to comply with a notice given under this section.
Note: This subsection is a civil remedy provision (see Part 4-1).
In the present matter, a Fair Work Inspector, after conducting an investigation, formed a belief that Emperor’s Court had contravened the terms of the Restaurant Industry Award 2020 and the Fair Work Act by failing to pay certain entitlements to an employee. On 30 July 2021 the Inspector gave Emperor’s Court the Compliance Notice requiring it to calculate and rectify underpayments to the employee. Emperor’s Court failed to comply with the Compliance Notice by the due date or at all. Mr Wong is the sole director of Emperor’s Court and was responsible for the overall operation and control of the business operated by Emperor’s Court and, as mentioned above, I previously declared that he was involved, within the meaning of s 550(2) of the Fair Work Act, with the contravention of s 716(5).
Maximum penalty
Pursuant to ss 539(2) and 546(2) of the Fair Work Act, the maximum penalty that can be imposed for a contravention of s 716(5) is 30 penalty units for Mr Wong and 150 penalty units for Emperor’s Court. ‘Penalty unit’ has the meaning given by s 4AA of the Crimes Act 1914 (Cth) (see s 12 of the Fair Work Act). At the time of the contravention, a penalty unit was $222. This means that the maximum penalty the Court may impose is:
(a)$33,300 on Emperor’s Court; and
(b)$6,600 on Mr Wong.
The maximum penalty is one of a number of relevant factors to consider in determining the appropriate penalty: Pattinson at [54]. However, as the High Court explained in Pattinson, ‘the maximum penalty does not constrain the exercise of the discretion under s 546… beyond requiring “some reasonable relationship between the theoretical maximum and the final penalty imposed” ’: Pattinson at [55].
Deterrence
In considering the appropriate penalty, it is appropriate to consider both general and specific deterrence.
As summarised in the Ombudsman’s submissions, general deterrence must serve a purpose that the penalty is not seen by others as ‘the cost of doing business’: Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 at [27]. A penalty should be sufficiently high to be ‘likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations’: Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65 at [93].
Justice Marshall emphasised the importance of general deterrence in Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29] when he said:
… It is important to ensure that the protections provided 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 they are respected…
I accept that the need for general deterrence is high in the present matter and I place significant weight on this factor. In considering general deterrence, I am also mindful that Emperor’s Court operated in the café and restaurant industry, which, according to the evidence in the affidavit of Ms Isabel Pires affirmed on 28 July 2022, is an industry with a high dispute rate.
Specific deterrence is also relevant. As acknowledged by the Ombudsman in the written submissions, specific deterrence is directed at ensuring that a contravenor is not prepared to embark upon the risk of engaging in the same contravening conduct in the future.
The evidence before the Court suggests that while Emperor’s Court is still registered, it has ceased operating the restaurant business and Mr Wong has a registered Australian Business Number. While specific deterrence is still relevant in the present case, I do not place as much weight on specific deterrence as I might otherwise, given that the relevant conduct is a single contravention and Emperor’s Court is no longer operating as a business.
Nature, extent and circumstances of conduct
The conduct involved a single failure to comply with the Compliance Notice. The Compliance Notice was issued in circumstances where an employee, who was a visa holder and who did not speak English as a first language, alleged that she was paid a flat rate for her work which fell below the minimum rate in the relevant award and was not paid penalty rates, personal leave and accrued annual leave entitlements on the termination of her employment. The Compliance Notice, amongst other things, required Emperor’s Court to calculate the amounts owed to the employee. In circumstances where Emperor’s Court has failed to comply with the Compliance Notice, the Court does not know the quantum that is owed to the employee.
As identified by the Ombudsman in written submissions, compliance notices provide a mechanism for the efficient and cost-effective rectification of identified contraventions of the Fair Work Act, including underpayments to employees: Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No 2) [2019] FCCA 2144 at [19]; Fair Work Ombudsman v Blue Hornsby Pty Ltd [2016] FCCA 1150 at [29].
Failure to comply with a compliance notice is serious. In Fair Work Ombudsman v Deborah Ruth Souris [2016] FCCA 345, Judge O’Sullivan said at [48]:
The failure to comply with the notices properly issued by the applicant in the course of its investigations and the discharge of its statutory functions is serious. Recipients of such notices should be left under no misapprehension about their obligations to comply with those notices.
I also note the following observations of Judge Emmett in Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492 at [7] regarding the effect of failure to comply with a compliance notice and I take these considerations into account when considering the seriousness of the breach of s 716(5) (footnotes omitted):
…intentional failure to comply with a mandatory notice issued by the workplace regulator is “conduct … [which] undermines the utility and effectiveness of a fundamental object” of the FW Act. The failure to comply undermines and frustrates the powers conferred on Fair Work Inspectors, which are conferred for the purposes of providing an effective means of enforcing compliance with lawful minimum entitlements. There is a significant cost to the public by reason of the need to bring this matter before the court to enforce compliance.
I accept the Ombudsman’s submissions that if Emperor’s Court had complied with the Compliance Notice:
(a)pursuant to s 716(4A) of the Fair Work Act, the Ombudsman would have been prevented from bringing civil remedy proceedings against it in respect of the underlying contraventions; and
(b)pursuant to s 716(4B) of the Fair Work Act, Emperor’s Court would not be taken to have admitted or contravened the civil remedy provisions in respect of the underlying contraventions.
I am satisfied that the respondents were both aware of the Compliance Notice. The affidavit of Ms Pires shows that the Compliance Notice was served on Mr Wong, as the proper officer of Emperor’s Court, by hand, and a copy was also emailed to Emperor’s Court. Ms Pires’ affidavit also shows that she, in her capacity as Inspector, held a telephone conversation with Mr Wong about the Compliance Notice and how to comply with it.
Emperor’s Court was required to comply with the Compliance Notice by 24 August 2021. Ms Pires deposed that Emperor’s Court failed to comply with the Compliance Notice by that date and on 1 September 2021, Ms Pires sent a letter to Mr Wong about the failure to comply with the Compliance Notice. Notwithstanding this reminder, Emperor’s Court still has not complied with the Compliance Notice.
I accept the Ombudsman’s submissions that the conduct of the respondents in failing to comply with the Compliance Notices demonstrates a deliberate disregard for their obligations under the Fair Work Act and the authority of the Ombudsman as a regulator of Commonwealth workplace laws.
Nature and extent of loss
I accept the Ombudsman’s submission that as a result of the failure to comply with the Compliance Notice, the relevant employee still has not received the amounts owed to her, notwithstanding that approximately 18 months have now past since Emperor’s Court was required to comply with the Compliance Notice.
As mentioned above, the precise amounts owed to the employee are unknown to the Court because Emperor’s Court did not comply with the Compliance Notice which, amongst other things, required it to calculate amounts owed to the employee and produce to the Ombudsman evidence of compliance, including by providing a schedule setting out relevant information about the calculations.
Contrition, cooperation and corrective action
I accept the Ombudsman’s submissions that it is not appropriate to apply any discount on the penalty for contrition, cooperation and corrective action in the present case.
Emperor’s Court did not comply with the Compliance Notice within the specified time frame, namely, by 24 August 2021, and there is no evidence that it has taken any steps to comply with the requirements set out in the Compliance Notice in the period of approximately 18 months that has passed since then. I am therefore not satisfied that the respondents have taken any corrective action.
Further, neither respondent has provided any reasonable excuse for the failure to comply with the Compliance Notice. The respondents have not taken part in this proceeding and there is no evidence before the Court of any cooperation with the regulator since the Compliance Notice was issued.
Compliance with minimum standards
I accept the Ombudsman’s submission that Emperor’s Court’s failure to comply with the Compliance Notice undermines the enforcement framework under the Fair Work Act and the safety net of entitlements that it is designed to protect, and reflects a prioritisation of its own interests at the expense of the employee’s minimum entitlements. I agree with the Ombudsman that given the importance of the power of an Inspector to issue compliance notices, and that compliance with compliance notices avoids the need for litigation and the imposition of penalties, the penalty for failing to comply with the Compliance Notice should be set at a level that demonstrates that there are serious consequences for failing to comply with a compliance notice.
Deliberateness of contravening conduct
In circumstances where the evidence before the Court establishes that the respondents were aware of the Compliance Notice and the actions required to respond to the Compliance Notice, and no explanation for the failure to comply has been provided to the Court, I infer that the conduct of the respondents in not complying with the Compliance Notice was deliberate.
Penalty recommended by Ombudsman
The Ombudsman submitted that the Court should impose a penalty that is 80% of the maximum penalty, being a penalty of $26,640 against Emperor’s Court and a penalty of $5,328 against Mr Wong.
CONCLUSION REGARDING THE APPROPRIATE PENALTY
In the circumstances of the present case, I consider that the appropriate penalty to be imposed should be high. This is appropriate taking into account all of the factors discussed above, in particular the need for deterrence, the seriousness and deliberateness of the conduct and the complete lack of cooperation with the regulator since the Compliance Notice was issued. It is also relevant that the employee, who is still waiting to be paid the entitlements she is owed, is a visa holder who does not speak English as her first language and might on that basis be considered to be vulnerable.
However, despite the need for a high penalty, I do not consider that the appropriate penalty is quite as high as that recommended by the Ombudsman. The penalty is to be imposed in relation to a single contravention where there is no evidence before the Court of past non-compliance by either respondent. Ms Pires deposed in her affidavit that Mr Wong told her in a telephone conversation in January 2021 that the restaurant had closed. While the evidence before the Court shows that Emperor’s Court remains registered, it appears that it ceased operating the restaurant business at least two years ago, and I have taken this into account in considering the appropriate penalty.
There is no reliable evidence before the Court of the financial position of either respondent, and there is therefore no basis to conclude that the penalty I consider to be appropriate would be oppressive for either respondent. While I acknowledge that there is before the Court a file note of a conversation between Ms Pires and Mr Wong that took place in January 2021, in which Mr Wong indicated that ‘he doesn’t have any money’, it is unclear from the context whether Mr Wong was referring to himself or Emperor’s Court and there are no records or details before the Court to form any view of the accuracy of Mr Wong’s assertion. I place no weight on Mr Wong’s assertion that he does not have any money, as recorded in the file note, for the purposes of considering whether the penalty would be oppressive.
Taking into account all of the circumstances, I consider it appropriate to impose a penalty of $23,310 on Emperor’s Court and a penalty of $4,620 on Mr Wong. These amounts are 70% of the maximum penalty.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Ladhams. Associate:
Dated: 24 February 2023
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