Fair Work Ombudsman v Watch Trader Pty Ltd

Link copied
Case Copied 41 min read

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Fair Work Ombudsman v Watch Trader Pty Ltd [2024] FedCFamC2G 162

File number: MLG 2511 of 2021
Judgment of: JUDGE FORBES
Date of judgment: 27 February 2024
Catchwords: FAIR WORK – failure to comply with compliance notice – application for civil penalties – where admissions made by way of statement of agreed facts – where filed statement of agreed facts incomprehensible – where steps taken by Ombudsman to correct errors – whether the respondents cooperated or frustrated proceedings – significance of statement of agreed facts under Evidence Act - where proceedings stayed against employer after it entered administration – accessorial liability of director admitted – penalty imposed
Legislation:

Corporations Act 2001 (Cth) s 417B

Crimes Act 2009 (Cth) s 4AA

Evidence Act 1995 (Cth) s 191

Fair Work Act 2009 (Cth) ss 3, 12, 14, 90, 539, 546, 550, 716

Federal Circuit and Family Court of Australia Act 2021 (Cth) s 141
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith  [2008] FCAFC 8
Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
Della-Vedova v R [2009] NSWCCA 107
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown  [2017] 275 IR 148
Fair Work Ombudsman v Rika Foods North Melbourne Pty Ltd [2022] FedCFamC2G 768
Kelly v Fitzpatrick [2007] FCA 1080
R v Crowley [2004] NSWCCA 256
Trade Practices Commission v CSR Ltd (1991) ATPR 41-076
Division: Division 2 General Federal Law
Number of paragraphs: 134
Date of hearing: 28 April 2023
Place: Melbourne
Solicitor for the Applicant: HWL Ebsworth Lawyers
Respondents: In person

ORDERS

MLG 2511 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

FAIR WORK OMBUDSMAN

Applicant
AND:

WATCH TRADER PTY LTD

First Respondent

DARRYL JOHN MIDDLETON

Second Respondent

ORDER MADE BY:

JUDGE FORBES

DATE OF ORDER:

27 FEBRUARY 2024

THE COURT ORDERS THAT:

1.The proceedings against the First Respondent be permanently stayed.

THE COURT DECLARES BY CONSENT THAT:

2.The Second Respondent was involved, within the meaning of section 550(2) of the Fair Work Act 2009 (Cth) (FW Act), in the contravention by the First Respondent of the Compliance Notice issued on 7 May 2021 (the Compliance Notice), and is taken by s 550(1) to have contravened s 716(5) of the FW Act.

AND THE COURT ORDERS THAT: 

3.Pursuant to section 546(1) of the FW Act the Second Respondent pay a pecuniary penalty in the amount of $2,664.00 for his involvement in the contravention by the First Respondent of section 716(5) of the FW Act.

4.Pursuant to section 546(3)(a) of the FW Act any pecuniary penalties ordered to be paid by the Second Respondent be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days.

5.The Applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.

Note: The form of…

CaseChat AU logo

Keep reading for free

Create a free CaseChat account to read Fair Work Ombudsman v Watch Trader Pty Ltd and more:

  • Read every judgment in full
  • Ask AI and get answers linked to paragraphs
  • See how each paragraph was cited in later cases
  • Download judgments as PDF or Word
Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details
Case
[2024] FedCFamC2G 162
Decision Date

CaseChat Overview and Summary

The Fair Work Ombudsman sought a penalty against Watch Trader Pty Ltd and its director, Mr Middleton, for contraventions of minimum wage and annual leave provisions under the Fair Work Act 2009 (Cth). The dispute arose from an investigation into the employment of Ms Stella Gultom, a part-time employee of Watch Trader, who alleged she was underpaid and did not receive her entitled annual leave. Following an investigation, a Fair Work Inspector issued a compliance notice to Watch Trader, which it failed to comply with. The case proceeded with a statement of agreed facts (SOAF) that was found to be incomprehensible due to an administrative error by the Ombudsman. The court had to determine the appropriate penalty against Mr Middleton, considering the delay in providing a comprehensible SOAF and the circumstances of the contraventions.

The primary legal issue was determining the appropriate penalty for Mr Middleton’s contraventions of the Fair Work Act. Factors considered included the complexity and significance of the statement of agreed facts, Mr Middleton's cooperation with the proceedings, and the proportionality of the penalty. The court also had to assess the impact of Watch Trader entering administration on the proceedings and the implications for accessorial liability. The court found that while Mr Middleton could have acted more swiftly to correct the errors in the SOAF, the administrative error was not his fault, and he had otherwise demonstrated a willingness to cooperate with the Ombudsman.

The court concluded that a penalty of 50% of the maximum should be imposed on Mr Middleton, with a 20% discount, amounting to $2,664. The court considered the first offence nature of the contravention, Mr Middleton’s self-representation, and his demonstrated cooperation in the proceedings. Given the administrative error by the Ombudsman, the court found that Mr Middleton should not be penalised for it. The court also noted that the proceedings against Watch Trader were stayed due to its entry into administration, and thus no further orders were made against the company.

The court made an order imposing a penalty of $2,664 on Mr Middleton, reflecting the considerations of proportionality and the mitigating factors present in the case.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

On 6 September 2023 correspondence was received by my chambers from the Ombudsman’s legal representative. The Ombudsman’s representative stated that as a result of administration and pursuant to 417B of the Corporations Act, the proceedings against the first respondent should now be stayed. The Ombudsman stated that it did not seek leave to continue the proceedings against Watch Trader but confirmed that it intended to pursue its claim for a penalty against Mr Middleton, for his involvement in the company’s contravention.BACKGROUNDThe business and employee entitlements At all relevant times, Watch Trader, operated a retail business selling second-hand watches in the Melbourne CBD. Watch Trader was incorporated under the Corporations Act and was first registered on 16 October 2009. The second respondent, Mr Middleton, was the sole director and secretary of Watch Trader and was responsible for its operation, management and control. The company was covered by the FW Act in respect of its employees as it was a “constitutional corporation” within the meaning of section 12 of the FW Act and a “national system employer” pursuant to s 14 of the FW Act. Employees of Watch Trader performing sales and retail work were entitled to be paid pursuant to the General Retail Industrial Award 2010 (2010 Award) for work performed prior to 1 October 2020 and under the General Retail Industrial Award 2020 (2020 Award) for work performed after that date. These modern awards prescribe various employee entitlements including the minimum rates of pay as well as entitlements to paid annual leave. On 9 June 2020, Ms Stella Gultom commenced part-time employment with Watch Trader. During her employment, Ms Gultom held a student visa. She was an Indonesian citizen, in her late 20s and had a good command of English. On 29 January 2021, Ms Gultom’s employment with the company was terminated. Compliance Notice under s 716 FW Act In or around April 2021, Ms Gultom sought the assistance of the Ombudsman in relation to her employment with Watch Trader. At this time, a Fair Work Inspector Victor Josue Acevedo (FWI Acevedo) commenced an investigation into the company’s compliance with various fair work instruments in respect Ms Gultom’s employment. As a result of the investigation, FWI Acevedo formed a belief that Ms Gultom had not been paid the applicable minimum wage for part of the period of her employment or accrued annual leave on termination of her employment. Specifically, FWI Acevedo formed a reasonable belief within the meaning of section 716(1)(b) of the FW Act that between 9 June 2020 and 29 January 2021, Watch Trader contravened the following provisions of the 2010 Award, 2020 Award and the National Employment Standards in respect of Ms Gultom (Contraventions):(1)clause 12.7 of the 2010 Award and clause 17.1 of the 2020 Award - minimum rates; and(2)section 90(2) of the FW Act - annual leave on termination. On 7 May 2021, FWI Acevedo issued Watch Trader with a compliance notice pursuant to s 716(2) of the FW Act in respect of the alleged contraventions of the modern Awards and FW Act.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I am prepared to accept that the second respondent could have done more and acted more quickly to help put the matter back on track. But I do not accept that the respondent should be seen as having put the Ombudsman in the situation of having to make the extremely unusual application seeking leave to unilaterally file a substitute SOAF – an application which in my view was likely to fail. The situation in which the Ombudsman found itself was not in my view a “simple problem”, nor was it “occasioned by the respondent’s failure”.CONCLUSION The Court must exercise the discretion conferred by section 546 of the FW Act judicially, that being fairly and reasonably and with regard for the subject matter, scope and purpose of the statute. A penalty must not be crushing, but rather, it must be fixed at an amount that is proportionate to the contravening conduct. As discussed above, the lack of evidence to quantifying Ms Gultom’s outstanding entitlements troubles me, as does the Ombudsman’s unparticularised and unexplained estimate, which I find does not carry significant weight when determining the loss incurred by the employee as a result of the contravention. This is Mr Middleton’s first offence. The respondent is self-represented and has not engaged in proceedings of this kind previously. As mentioned, I regard his admissions made within the March and Amended SOAF demonstrate a preparedness to cooperate with the regulator. I do not find that the respondent’s delay in consenting to an amended SOAF should detract from his willingness to cooperate with the Ombudsman or reduce his entitlement to an appropriate discount. He should not be penalised for the Ombudsman’s administrative error. Having regard to all of the circumstances, I do not accept the Ombudsman’s submission that the penalty should be 60-70% of the maximum with a discount of 20%. I have decided that a penalty of 50% of the maximum should be imposed with a discount of 20%, which in dollar terms is $2,664. I will make orders in those terms. By reason of the proceedings having now been stayed against the first respondent, I do not propose to make further orders or declarations.

Ratio Decidendi

Legal Principle Established

Some months following the penalty hearing and after my decision had been reserved for judgment, the first respondent Watch Trader was placed into external administration under the Corporations Act 2001 (Cth) (the Corporations Act) pursuant to a winding up order made by the Supreme Court of Victoria, on 23 August 2023. On 6 September 2023 correspondence was received by my chambers from the Ombudsman’s legal representative. The Ombudsman’s representative stated that as a result of administration and pursuant to 417B of the Corporations Act, the proceedings against the first respondent should now be stayed. The Ombudsman stated that it did not seek leave to continue the proceedings against Watch Trader but confirmed that it intended to pursue its claim for a penalty against Mr Middleton, for his involvement in the company’s contravention.BACKGROUNDThe business and employee entitlements At all relevant times, Watch Trader, operated a retail business selling second-hand watches in the Melbourne CBD. Watch Trader was incorporated under the Corporations Act and was first registered on 16 October 2009. The second respondent, Mr Middleton, was the sole director and secretary of Watch Trader and was responsible for its operation, management and control. The company was covered by the FW Act in respect of its employees as it was a “constitutional corporation” within the meaning of section 12 of the FW Act and a “national system employer” pursuant to s 14 of the FW Act. Employees of Watch Trader performing sales and retail work were entitled to be paid pursuant to the General Retail Industrial Award 2010 (2010 Award) for work performed prior to 1 October 2020 and under the General Retail Industrial Award 2020 (2020 Award) for work performed after that date. These modern awards prescribe various employee entitlements including the minimum rates of pay as well as entitlements to paid annual leave. On 9 June 2020, Ms Stella Gultom commenced part-time employment with Watch Trader. During her employment, Ms Gultom held a student visa. She was an Indonesian citizen, in her late 20s and had a good command of English. On 29 January 2021, Ms Gultom’s employment with the company was terminated. Compliance Notice under s 716 FW Act In or around April 2021, Ms Gultom sought the assistance of the Ombudsman in relation to her employment with Watch Trader. At this time, a Fair Work Inspector Victor Josue Acevedo (FWI Acevedo) commenced an investigation into the company’s compliance with various fair work instruments in respect Ms Gultom’s employment. As a result of the investigation, FWI Acevedo formed a belief that Ms Gultom had not been paid the applicable minimum wage for part of the period of her employment or accrued annual leave on termination of her employment. Specifically, FWI Acevedo formed a reasonable belief within the meaning of section 716(1)(b) of the FW Act that between 9 June 2020 and 29 January 2021, Watch Trader contravened the following provisions of the 2010 Award, 2020 Award and the National Employment Standards in respect of Ms Gultom (Contraventions):(1)clause 12.7 of the 2010 Award and clause 17.1 of the 2020 Award - minimum rates; and(2)section 90(2) of the FW Act - annual leave on termination.