Fair Work Ombudsman v World Gym Sunshine Pty Ltd
[2014] FCCA 2201
•19 September 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v WORLD GYM SUNSHINE PTY LTD & ANOR | [2014] FCCA 2201 |
| Catchwords: INDUSTRIAL LAW – Application seeking orders for compliance with an order of the Fair Work Commission – breach of a civil remedy provision – consideration of factors relevant to penalty. |
| Legislation: Crimes Act 1914 (Cth), s.4AA |
| Cases Cited: Mayberry v Kijani Investments Pty Ltd. as Trustee for The Dawe Investments Trust Subway Wallsend trading as Subway [2011] FCA 1238 Meadley v Sort Worx Pty Ltd [2013] FCA 1012 Kelly v Fitzpatrick (2007) 166 IR 14 Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 Fair Work Ombudsman v Kentwood Industries Pty Ltd (No.2) (2010) 201 IR 234 Australian Competition and Consumer Commission v Energy Australia Pty Ltd [2014] FCA 336 Alogaidi v Agad Property Consulting Pty Ltd [2014] FCCA 1883 Vickery v The Trustee for Roderick Trust t/as Encompass Books & Anor [2014] FCCA 546 Fair Work Ombudsman v Maclean Bay Pty Ltd (No.2) [2012] FCA 557 |
| Applicant: | Fair Work Ombudsman |
| First Respondent: | World Gym Sunshine Pty Ltd (ACN 126 599 077) |
| Second Respondent: | WAYNE GEORGE MAILING |
| File Number: | MLG 1196 of 2014 |
| Judgment of: | Judge O’Sullivan |
| Hearing date: | 19 September 2014 |
| Date of Last Submission: | 19 September 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 19 September 2014 |
REPRESENTATION
| Counsel for the Applicant: | Ms Knowles |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| The First Respondent | Mr Mailing |
| The Second Respondent: | In person |
THE COURT DECLARES
The first respondent contravened section 405 of the Fair Work Act 2009 (Cth) (“FW Act”), by failing to comply with the terms of an order of the Fair Work Commission; and
The second respondent was involved in the first respondent’s contravention of section 405 of the FW Act, pursuant to subsection 550(1) of the FW Act.
THE COURT ORDERS
Pursuant to subsection 546(1) of the FW Act the first respondent pay a pecuniary penalty in the amount of $41,182.50 for the contravention declared in paragraph 1 above.
Pursuant to subsection 546(1) of the FW Act the second respondent pay a pecuniary penalty in the amount of $6,426 for his involvement (within the meaning of subsection 550(2) of the FW Act) in the contravention declared in paragraph 1 above.
Pursuant to subsection 546(3)(a) of the FW Act the pecuniary penalties imposed by order (3) and (4) be paid to the Commonwealth within three months of the date of this order.
The Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1196 of 2014
| Fair Work ombudsman |
Applicant
And
| world gym sunshine pty ltd (ACN 126 599 077) |
First Respondent
| wayne george mailing |
Second Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
Introduction
The Fair Work Ombudsman (“the applicant”) commenced these proceedings, by an application and statement of claim filed on 18 June 2014, against the World Gym Sunshine Pty Ltd (“the first respondent”) and Wayne George Mailing (“the second respondent”). The applicant alleged the first respondent failed to comply with orders made in the Fair Work Commission (“the FWC”) on 17 January 2014 and the second respondent was involved in that contravention.
Background
The applicant is able to bring these proceedings by virtue of s.539(2) of the Fair Work Act 2009 (Cth) (“the FW Act”). Earlier this year the applicant was contacted by Ms Samaka Sophie Ndege (“Ms Ndege”) who is 24 years of age and was employed by the first respondent, on a casual basis, as a receptionist at the gymnasium operated by the first respondent from 29 August 2011 to 8 October 2012.
On or around 8 October 2012 the first respondent terminated Ms Ndege’s employment. On 25 October 2012 Ms Ndege filed an application for unfair dismissal in the FWC against the first respondent.[1]
[1] see exhibit A2
There were proceedings in the FWC in May 2013 where the second respondent represented the first respondent. On 14 June 2013 the FWC dismissed a jurisdictional objection to Ms Ndege’s application.[2]
[2] [2013] FWC 3633
There was then a hearing in the FWC (where again the second respondent represented the first respondent) in relation to Ms Ndege’s unfair dismissal application. On 12 November 2013 Commissioner Lee of the FWC held there was not a valid reason for the termination of Ms Ndege’s employment by the first respondent and that her dismissal was harsh, unjust and unreasonable.[3]
[3] [2013] FWC 8434
Finally, on 17 January 2014 Commissioner Lee made orders for the first respondent to pay Ms Ndege compensation in the amount of $2,200.00 (gross), plus 9 percent in superannuation, less taxation within 14 days. After Ms Ndege contacted the applicant, requests were made for the first respondent to comply with the FWC orders.[4]
[4] see exhibit A7
The applicant alleged that notwithstanding the order of the FWC and those requests the respondents had not complied with the order of the FWC. The applicant alleged that as a result the first respondent has contravened s.405 of the FW Act and the second respondent was involved in that contravention.
The application filed 18 June 2014, was given a first Court date of 21 July 2014. The orders sought by the applicant were set out in the statement of claim as follows:
“Relief sought
The Applicant seeks:
23.A declaration that the First Respondent contravened section 405 of the FW Act by failing to comply with the Order.
24.A declaration that the Second Respondent was involved in the First Respondent’s contravention of section 405 of the Fair Work Act set out in paragraph 23 above, pursuant to subsection 550(1) of the FW Act.
25.An order pursuant to section 545(2) of the FW Act that the First Respondent compensate Ms Ndege by paying her an amount of $2,200.00 plus 9% in superannuation, less taxation as required by law.
26.An order pursuant to subsection 547(2) of the FW Act that interest be paid to Ms Ndege by the First Respondent on the amount referred to in the order sought in paragraph 25 above.
27.An order that all amounts due to Ms Ndege pursuant to these orders be paid within 14 days.
28.An order pursuant to subsection 546(1) of the FW Act imposing a pecuniary penalty on the First Respondent in respect of the contravention set out in paragraph 23 above.
29.An order pursuant to subsection 546(1) of the FW Act imposing a pecuniary penalty on the Second Respondent for his involvement (within the meaning of subsection 550(2) of the FW Act) in respect of the contravention of section 405 of the FW Act set out in paragraph 23 above.
30.An order pursuant to subsection 546(3)(a) of the FW Act that all pecuniary penalties imposed be paid to the Commonwealth within 28 days.
31.An order that the Applicant have liberty to apply on seven days notice in the event that any of the preceding orders are not complied with.
32.Such further or other orders as the Court considers appropriate.”
On the first Court date Mr Crick appeared on behalf of the applicant and the second respondent (a director of the first respondent) appeared in person and on behalf of the first respondent. After hearing submissions from both parties the Court made the following orders:
“THE COURT ORDERS THAT:
1.The First Respondent and Second Respondent each file and serve a response and any defence by not later than 4.00 pm on 22 August 2014.
2.The Applicant file and serve any reply by not later than 4.00pm on 12 September 2014.
3.The proceedings be adjourned for hearing on Friday
19 September 2014 at the Federal Circuit Court of Australia at Melbourne commencing at 10.00 am.”
On 26 August 2014 the second respondent filed a ‘statement of defence’ although not in the prescribed format. In the ‘statement of defence’ it was said:
“1.The Second Respondent was not the controlling mind of the First Respondent as he only owned 15% of the Controlling entity and he was unable to force the other 85% unit holders to put in the money to pay the Order.
2.The Second Respondent was unable to control or force the First Respondent to pay the order as the First Respondent has no funds to pay.
3.The Second Respondent was unaware he would be responsible for the order made against the First Respondent and when he became aware of this he immediately put the funds in from his own pocket to pay the order.”
No further material had been filed by either party since that date.
The hearing
The matter returned to Court for hearing today, Friday, 19 September 2014. Ms Knowles appeared on behalf of the applicant and the second respondent who is still a director of the first respondent appeared in that capacity and in person.
Today the parties sought leave, which was granted, to file in Court a Statement of Agreed Facts (“S.O.A.F”) which is Annexure A to these reasons.[5] The S.O.A.F was prepared following discussions between the parties and the opportunity for the respondents to obtain legal advice.
[5] S.O.A.F marked as exhibit A1, see s.191 Evidence Act 1995 (Cth)
It is not controversial the orders[6] made on 17 January 2014 by the FWC were:
“1.Within 14 days of the date of this Order, World Gym Sunshine Pty Ltd is to pay compensation to Samaka Sophia Ndege in the amount of $2,200.00 gross, plus 9 per cent in superannuation, less taxation as required by law.”
[6] see PR546939
In the S.O.A.F the respondents now admit:
“3.The First Respondent admits to contravening section 405 of the Fair Work Act 2009 (Cth) (FW Act), by contravening the terms of an order of the Commission made on 17 January 2014 (Admitted Contravention).
4.The Second Respondent admits to his involvement in the Admitted Contravention described in paragraph 3 above.”
At today’s hearing the applicant relied on the application, statement of claim, and the S.O.A.F. By consent the applicant also relied on the viva voce evidence from Ms Ndege and Inspector Saunders. Save for the S.O.A.F the respondent did not seek to lead any evidence and was content to tender only two exhibits.[7] Aside from the evidence upon which they relied both parties made submissions on the appropriate penalty.
[7] see exhibits R1 & R2
As a result of the above and the admissions made by the respondents in the S.O.A.F the proceedings before the Court now only concern the question of what penalties should be imposed for the admitted contraventions by the respondents of the FW Act.
Consideration
The orders of the FWC were made under Part 3-2 of the FW Act which deals with unfair dismissal. Section 405 of the FW Act, falling within Part 3-2 of the FW Act provides that a person to whom an order under that part applies must not contravene a term of that order. Section 539 of the FW Act provides that a contravention (amongst other things) of s.405 is a civil remedy provision.
The Court has the power to make any order it considers appropriate if it is satisfied that the first respondent has contravened a civil remedy provision (see s.545(1) FW Act). By s.545(2)(h) of the FW Act the Court has the power to order a payment of compensation for loss that a person has suffered “because of” a contravention. However no such order was sought by the applicant.
The applicant has standing to apply for the orders it seeks (see s.539(2) FW Act). The approach to what is effectively an application seeking an order for compliance with orders of the FWC has been the subject of at least 2 decisions of the Federal Court (see Mayberry v Kijani Investments Pty Ltd. as Trustee for The Dawe Investments Trust Subway Wallsend trading as Subway [2011] FCA 1238 per Katzmann J and Meadley v Sort Worx Pty Ltd [2013] FCA 1012 per Tracey J).
Section 545 of the FW Act confers on the Court broad powers to grant relief to persons who have suffered as a result of a contravention of a civil remedy provision. Had the orders of the FWC been complied with Ms Ndege would have been entitled to the compensation referred to in the order. Ms Ndege has been deprived of this up and until 20 August 2014 (when after the commencement of these proceedings she received the payment) because of the first respondent’s failure to comply with the order of the FWC. There is no reason Ms Ndege should not have been entitled to the monies due pursuant to the orders of the FWC within 14 days and as a result the evidence is she has sustained a loss.
The position of the first respondent (at least to the extent it had been articulated by the second respondent) did not take issue with the FWC orders. In any event there had been no appeal from the FWC orders.
I am satisfied the first and second respondents would have been well aware they were expected to comply with the FWC orders. Despite claims to the contrary, there is no real evidence the first respondent was or is insolvent or unable to comply with the FWC order.
Penalty
The applicant has sought the imposition of a pecuniary penalty on the first and second respondents because of the first respondent’s failure to comply with the FWC orders and the second respondent’s involvement with that contravention. Counsel for the applicant referred to a number of decisions that have considered the appropriate penalty for the same sort of contravention as is now admitted by the respondents.[8]
[8] see Alogaidi v Agad Property Consulting Pty Ltd [2014] FCCA 1883 and Vickery v The Trustee for Roderick Trust t/as Encompass Books & Anor [2014] FCCA 546
As Katzmann J said in Mayberry v Kijani Investments Pty Ltd. as Trustee for the Dawe Investments Trust Subway Wallsend trading as Subway [2011] FCA 1238 at [20]:
“The Court may make a pecuniary penalty order in addition to any other order. This is a proper case to make such an order. Employers, no less than employees, are expected to comply with the orders of Fair Work Australia. Failure to do so is liable to bring the system of regulation of industrial disputes into disrepute. Kijani’s conduct signifies a refusal to accept the umpire’s decision. It should not go unpunished.”
In terms of the approach to fixing an appropriate penalty, in Meadley v Sort Worx Pty Ltd [2013] FCA 1012 Tracey J said:
“41.In exercising this power the Court is required “to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations”: see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 580 (per Buchanan J).
42.In Kelly v Fitzpatrick (2007) 166 IR 14 at [14] I identified a number of factors which were potentially relevant and applicable in determining an appropriate penalty. These factors were:
•The nature and extent of the conduct which led to the breaches.
•The circumstances in which that conduct took place.
•The nature and extent of any loss or damage sustained as a result of the breaches.
•Whether there had 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 breach had exhibited contrition.
•Whether the party committing the breach had taken corrective action.
•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.
Each of these considerations, to varying degrees, bear on the determination of a penalty in the present case.”
Section 550 of the FW Act provides that a person (in this case that includes the second respondent) who is involved in a contravention of a civil remedy provision is treated as having contravened the civil remedy provision. Section 546 of the FW Act enables a Court to impose a penalty upon a person who has contravened a civil remedy provision.
Under the FW Act the maximum penalty that can be imposed on the first respondent is 300 penalty units and on the second respondent is 60 penalty units.
Section 12 of the FW Act provides that “penalty unit” has the same meaning as the Crimes Act 1914 (Cth). At the time the contravention took place, section 4AA of that Act defined “penalty unit” to be $170[9]. Accordingly, the maximum penalty the Court can impose on the first respondent is $51,000 and on second respondent is $10,200.
[9] Crimes Legislation Amendment (Serious Drugs Identity Crime and Other Measures) Act 2012
The nature and extent of the conduct, the circumstances in which it took place and the loss or damage sustained have already been referred to. The Court should take into account that whilst there is no evidence that the first and second respondents have previously offended this is a very serious matter. Ms Ndege, with the assistance of the applicant, has had to go to the cost, expense and time of seeking compliance with the FWC orders through these proceedings. Ms Ndege and the applicant ought to have been entitled to expect that the first respondent would abide by the umpire’s decision (i.e. the FWC order). There is no evidence of any appeal or other action taken by the respondents in relation to this. The conduct in question (failure to comply with the FWC Order) involved senior management including in the form of the second respondent who, on the evidence, was involved at every stage of the proceedings in the FWC and did not answer requests to comply.
This was a small business however that is no excuse.[10] There is, nothing to suggest that first respondent has shown any insight into, let alone remorse for, its behaviour, nor is there anything to demonstrate cooperation with the applicant save only at the door of the Court and after the commencement of these proceedings. There is no evidence that the failure to comply with the FWC orders is not deliberate. Everything points to the likelihood that the first respondent until the commencement of these proceedings has wilfully ignored them.
[10] see Kelly v Fitzpatrick (supra) at [30]
The applicant’s submissions emphasised the importance of enforcing the system of industrial regulation and that the respondents’ conduct threatened to bring orders of the FWC into disrepute. There is no evidence to mitigate the seriousness of the conduct. Any penalty should be imposed at sufficient level to deter the first respondent from similar conduct along with a significant measure of general deterrence so that others understand the need to accept the umpire’s decision and comply with orders of the FWC.[11]
[11] see Fair Work Ombudsman v Maclean Bay Pty Ltd (No.2) [2012] FCA 557 at [27]
The same considerations should apply in determining penalty in respect of the conduct of the second respondent who is involved in several other businesses. The material before the Court makes clear the second respondent who represented the first respondent during the proceedings before the FWC was involved in the contravention. The material before the Court makes clear the second respondent was directly involved in what can only be described as the deliberate conduct by the first respondent in not complying with the FWC order. However there should be some further discount to any penalty imposed on the second respondent for his co-operation (albeit at the door of the Court).
The approach to accessorial liability is set out in decisions such as Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 and Fair Work Ombudsman v Kentwood Industries Pty Ltd (No.2) (2010) 201 IR 234 at [198]. It is important to note that liability under this provision does not require proof of the legal consequence of those facts, or proof of intent. In any event the second respondent has now made admissions he was involved in the contravention.
Given the decision in Australian Competition and Consumer Commission v Energy Australia Pty Ltd [2014] FCA 336 I have taken into account and accept the submissions made on behalf of the applicant as to the appropriate penalty.
Given the maximum penalty that may be imposed, I find that the proper penalties given all of the above are for the first respondent to pay $41,182.50 and for the second respondent to pay $6,426.00.
The applicant sought an order for payment of the penalty to consolidated revenue. In accordance with s.546(3) of the FW Act that is an appropriate order but it should be paid in full within 3 months. Therefore there will be a declaration to mark the unlawful conduct of the first and second respondents and orders as set out at the beginning of these reasons for decision for the reasons set out above.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge O’Sullivan
Associate:
Date: 19 September 2014
“Annexure A”
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