FWO v James Nelson Pty Ltd

FEDERAL CIRCUIT COURT OF AUSTRALIA

FWO v JAMES NELSON PTY LTD & ANOR

[2016] FCCA 531

Catchwords:
INDUSTRIAL LAW – Application for imposition of civil penalties – statement of agreed facts – numerous contraventions of award and otherwise
– consideration of matters relevant to level of penalties to be imposed – misconduct of respondents in disposing of assets serious – penalty imposed
at 80 per cent of the applicable maximum.

Legislation:

Fair Work Act 2009

Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Kelly v Fitzpatrick (2007) 166 IR 14
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union (CFMEU) [2008] FCA 466
Jordan v Mornington Inn Pty Ltd (2007) 166 IR 33
Printing & Kindred Industries Union v Vista Paper Products Pty Ltd (1994) 127 ALR 673
Trade Practices Commission v CSR Limited [1990] FCA 521

Applicant:

FAIR WORK OMBUDSMAN

First Respondent:

JAMES NELSON PTY LTD
(A.C.N. 127 410 780)

Second Respondent:

WENDY LANGRIDGE

File Number:

LNG 31 of 2014

Judgment of:

Judge Burchardt

Hearing date:

30 November 2015 & 21 December 2015

Date of Last Submission:

16 February 2016

Delivered at:

Melbourne (via video link to Hobart)

Delivered on:

17 March 2016

REPRESENTATION

Counsel for the Applicant:

Ms Dowsett

Solicitors for the Applicant:

Office of the Fair Work Ombudsman

Counsel for the Respondents:

Ms Wells

Solicitors for the Respondents:

Butler McIntyre & Butler

ORDERS

Pursuant to s.546(1) of the Fair Work Act 2009 (Cth) (“the FW Act”) the Second Respondent a pecuniary penalty:
(i)for her contravention of s.50 of the FW Act by contravening clause 19.1 of the James Nelson Pty Ltd Employee Collective Agreement 2010 (“the 2010 Agreement”) in respect of Nathan Clark, Joseph Dalton, Jenine Esticoe, Donald Massey, Paul Smith and Leanne Whyte (“the Stand Down Employees) of $8,160.
(ii)for her contravention of s.50 of the FW Act by contravention clause 11.1 of the 2010 Agreement in respect of the Stand Down Employees of $8,160.
(iii)for her contravention of s.44(1) of the FW Act by contravening s.117 of the FW Act in respect of the Stand Down Employees of $8,160.
(iv)for her contraventions of s.50 of the FW Act by contravening clauses 15.1 and 17.1 of the 2010 Agreement and s.323(1) of the FW Act in respect of Greg Alder, Vladislav Beran, Krystyna Beran, Anthony Clark, Dale Cleaver, Patricia Eadie and Kirstine Jensen (“the Further Employees) of $8,160.
(v)for her contravention of s.50 of the FW Act by contravening clause 19.1 of the 2010 Agreement in respect of Greg Alder, Vladislav Beran, Krystyna Beran, Anthony Clark, Dale Cleaver and Patricia Eadie of $8,160.
(vi)for her contravention of s.50 of the FW Act by contravening clause 11.1 of the 2010 Agreement in respect of Greg Alder, Vladislav Beran, Krystyna Beran, Anthony Clark, Dale Cleaver and Patricia Eadie of $8,160.
(vii)for her contravention of s.44(1) of the FW Act by contravening s.90(1) of the FW Act in respect of Anthony Clark and Kirstine Jensen of $8,160.
(viii)for her contravention of s.44(1) of the FW Act by contravention s.90(2) of the FW Act in respect of the Further Employees of $8,160.
(ix)for her contravention of s.44(1) of the FW Act by contravening s.99 of the FW Act in respect of Vladislav Beran and Krystyna Beran of $8,160.
(x)for her contravention of s.44(1) of the FW Act by contravening s.117 of the FW Act in respect of the Further Employees of $8,160.
(xi)for her contravention of s.44(1) of the FW Act by contravening s.119 of the FW Act in respect of Kirstine Jensen of $8,160.
(xii)for her contravention of s.712(3) of the FW Act by failing to comply with the Notice to Produce issued by the Applicant on 11 February 2015 of $8,160.
(b)Pursuant to s.546(3)(a), all of the pecuniary penalties imposed upon the Second Respondent in Order (a) above be paid to the Commonwealth within 28 days of the order for payment.
(c)
Pursuant to s.545(1) of the FW Act and/or s.545(2)(a) of the

FW Act that the Second Respondent is restrained from:
(i) aiding, abetting, counselling or procuring; or
(ii)being in any way directly or indirectly knowingly concerned in conduct in respect of employees employed in the textile industry that contravenes the FW Act.
(d)The Applicant be permitted to disclose the contents of and/or provide copies of the subpoenaed records produced by the Commonwealth Bank of Australia and the Australia and New Zealand Banking Group in this proceeding to:
(i)other Commonwealth agencies including but not limited to the Australian Securities and Investments Commission and the Australian Taxation Office for the purpose of performing their statutory functions;
(ii)Giuseppe Michele Rambaldi and Andrew Reginald Yeo of Pitcher Partners, Level 19, 15 William Street, Melbourne, Victoria, the appointed liquidators of the First Respondent; and
(iii) any subsequent body appointed as liquidators of the First Respondent.
(e)The Applicant has 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 HOBART

LNG 31 of 2014

FAIR WORK OMBUDSMAN

Applicant

And

JAMES NELSON PTY LTD (A.C.N. 127 410 780)

First Respondent

WENDY LANGRIDGE

Second Respondent

REASONS FOR JUDGMENT

Introductory

Although the parties have expended substantial time and resources

on this proceeding, the only matter now in dispute are the quantum

of the penalties that it is agreed should be imposed on the second respondent. (The first respondent has not actively opposed

the proceeding. I have been told that it is being wound up but the position is not entirely clear). The difference between the parties is the view to be taken of the conduct of the second respondent.
For the reasons that follow, I think penalties should be imposed on the second respondent in the quantum of 80 per cent of the applicable maximum.

Agreed Facts

The parties have filed a Statement of Agreed Facts (“SOAF”)

on 17 July 2015. It is comprehensive. It is too lengthy for it to be necessary or appropriate to set it all out, but I refer to the entirety

of it by reference.
It should be noted that in her affidavit material the second respondent appears in part to have sought to resile from matters conceded in the SOAF and in her oral evidence she appeared to suggest that she had agreed to the SOAF out of a weary desire to see the end of the controversy as a whole.
Nonetheless the SOAF was agreed between the parties, was signed by Second Respondent and tendered to the Court. The Court is therefore required to treat it as what it says it is, namely, a series of agreed facts involving significant concessions on the Second Respondent’s part.
It should be noted that there is no question as to the authority of the applicant to bring the proceedings. There is equally no question that the first respondent since 2007 was incorporated and operated

a weaving mill in the principal place of business at:

a) Mowbray Heights in Tasmania until 21 October 2014; and

b) Waverly in Tasmania from 22 October 2014 to 23 December 2014.

The case arises out of what happened to two groups of employees.

The first, a group of six employees, are referred to as the Stand Down Employees in the SOAF. The second, who are referred to as the Further Employees, involves a group of seven employees who, putting matters shortly, continued in their employment longer than the Stand Down Employees.
Of the total of 13 employees a substantial number (particularly of the Further Employees) are of relatively advanced stage and had been,

at the material times with which we are concerned, employed for very lengthy periods of time either by the first respondent or antecedent companies who operated the same weaving mill.
On 4 June 2013 the Stand Down Employees were present at a staff meeting at which they were notified that they were to be stood down without pay. Subject to minor and immaterial exceptions they remained stood down without pay until December 2013.
On or about 11 December 2013 the applicant received a written complaint lodged by one of the Stand Down employees, Mr Dalton, regarding his stand-down. The stand-down continued thereafter.

The matter only arrived at any conclusion when the Applicant notified the First Respondent in March 2014 that it had determined that the First Respondent had contravened the Fair Work Act 2009 (“the FW Act”) by failing to pay redundancy and notice entitlement to the Stand Down Employees.
The Further Employees worked for varying lengths of time following the staff meeting at which the Stand Down Employees were first notified in June 2013. They were either not paid or underpaid certain amounts of pay as a result. They were all ultimately subject

to termination of employment.
In the ultimate it is sufficient to set out the admitted contraventions and agreed declarations and orders set out at paragraphs 175-180 of the SOAF which read as follows:
“175.    The First Respondent expressly admits to contravening the provisions set out in paragraph 180(a)(i) to 180(a)(xi) below (the Admitted Contraventions).
176. The Second Respondent admits that she was involved in each of the Admitted Contraventions, pursuant to subsection 550(1)(a) and (b) of the Fair Work Act 2009 (Cth) (FW Act), and is therefore to be treated as having herself contravened the Admitted Contraventions.
177.    The First Respondent and Second Respondent

(the Respondents) admit that the Admitted Contraventions resulted in an underpayment of $43,346.45 to the Stand Down Employees comprising of the following amounts:
(a)     $7,823.78 to Mr N. Clark;
(b)     $6,563.63 to Ms Esticoe;
(c) $6,003.45 to Mr Smith;
(d)     $6,055.82 to Mr Dalton;
(e) $11,101.91 to Mr Massey; and
(f)$5,797.86 to Ms Whyte.
178.    The Respondents admit that the Admitted Contraventions resulted in an underpayment of $115,629.26 to the Further Employees comprising of the following amounts:
(a)     $21,721.35 to Mr Alder;
(b)     $13,096.35 to Mr Beran;
(c) $13,191.69 to Mrs Beran;
(d)     $19,008.67 to Mr A. Clark;
(e) $21,991.82 to Mr Cleaver;
(f)$12,367.13 to Ms Eadie; and
(g)     $14,252.25 to Ms Jensen.
179.    The Respondents in conjunction with the Applicant, agree to the making of declarations and orders in the terms set out in paragraph 180 below.
180.    The Applicant and Respondents seek:
(a)     declarations that the First Respondent contravened:
(i) section 50 of the FW Act by contravening clause 15.1 of the 2010 Agreement by failing to pay the minimum agreement rate for work performed by the Further Employees;
(ii) section 50 of the FW Act by contravening clause 17.1 of the 2010 Agreement by failing to pay wages on a fortnightly basis to the Further Employees;
(iii) section 50 of the FW Act by contravening clause 19.1 of the 2010 Agreement by failing to pay redundancy pay to the Stand Down Employees and

Mr Alder, Mr Beran, Mrs Beran, Mr A. Clark,

Mr Cleaver and Ms Eadie;
(iv) section 50 of the FW Act by contravening clause 11.1 of the 2010 Agreement by failing to pay out to the Stand Down Employees and Mr Alder, Mr Beran,

Mrs Beran, Mr A. Clark, Mr Cleaver and Ms Eadie their accrued personal leave entitlements at 60%

of the agreed rate upon being made redundant;
(v) section 44(1) of the FW Act by contravening section 90(1) of the FW Act by failing to pay

Mr A. Clark and Ms Jensen in respect of a period

of annual leave taken by each;
(vi) section 44(1) of the FW Act by contravening section 90(2) of the FW Act by failing to pay to the Further Employees when their employment ended, any untaken accrued annual leave that would have been payable to the Further Employees had they taken that period of annual leave;
(vii) section 44(1) of the FW Act by contravening section 99 of the FW Act by failing to pay Mr and

Mrs Beran in respect of a period of paid personal leave taken, at their base rate of pay for their ordinary hours of work in that period;
(viii) section 44(1) of the FW Act by contravening section 117 of the FW Act by failing to give the Employees notice or paying them in lieu of notice

of the termination of their employment;
(ix) section 44(1) of the FW Act by contravening section 119 of the FW Act by failing to pay redundancy pay to Ms Jensen;
(x) section 323(1) of the FW Act by failing to pay the Further Employees amounts payable in relation to the performance of work in full, in the specified methods, and at least monthly; and
(xi) section 712(3) of the FW Act by failing to comply with the NTP issued by Inspector Desmond on

11 February 2015;
(b)declarations that, by reason of the Second Respondent’s involvement in the First Respondent’s failure to comply with the provisions set in paragraph 180(a)(i) to 180(a)(xi) above, the Second Respondent herself contravened these provisions, for the purposes of section 550 of the FW Act.
(c)An order pursuant to section 545(2)(b) and 541(2)

of the FW Act that the First Respondent pay the underpayment amounts to the Employees including amounts arising from SNCEs in the amounts set out in paragraphs 177 and 178 within 28 days of the date

of the order.
(d)An order pursuant to section 547(2) of the FW Act that the First Respondent pay the Employees interest at the applicable pre-judgment rate on the amounts payable under paragraph 180(c) above.
(e)An order pursuant to section 546(1) of the FW Act that the First Respondent pay pecuniary penalties

in respect of the contraventions set out at paragraph 180(a)(i) to 180(a)(xi) above.
(f)An order pursuant to section 546(1) of the FW Act that the Second Respondent pay pecuniary penalties in respect of the contraventions set out at paragraph 180(a)(i) to 180(a)(xi) above.
(g)Orders pursuant to section 546(3)(a) of the FW Act that any pecuniary penalties ordered to be paid by:
(i)     the First Respondent; and/or
(ii)     the Second Respondent
be paid to the Commonwealth within 28 days

of the Court’s order.
(h)An order pursuant to section 545(1) of the FW Act and/or section 545(2)(a) of the FW Act, that the Second Respondent is restrained from:
(i)     aiding, abetting, counselling or procuring; or
(ii)     being in any way directly or indirectly knowingly concerned,
in common conduct in respect of employees employed in the textile industry that contravenes the FW Act.
(i)An order that the applicant have liberty to apply

on seven days’ notice in the event that any of the proceeding orders are not complied with.”
The Applicant’s written submissions set out principles relevant

to determining penalty and factors relevant to the imposition

of a penalty. These matters are all expressly agreed with in paragraph 5 of the Second Respondent’s written submissions. It is appropriate, therefore, to traverse and paraphrase the Applicant’s submissions

in this regard concisely.
The methodology to be adopted is set out at paragraph 22 and I accept that the matters there asserted (and the authorities footnoted thereto) represent an appropriate way in which to proceed. The Court must:
a)Identify the separate contraventions involved;
b)Consider whether the breaches constitute a single course of conduct;
c)Consider whether two or more contraventions have common elements and take this into proper account;
d)
Consider the appropriate penalty for single breaches and,

if relevant, each group of contraventions taking into account all relevant circumstances; and
e)Finally, apply the totality principle.
The Applicant submits that there are 14 courses of conduct attracting penalty as set out in Annexure A (see paragraph 32 Applicant’s written submissions), and while I note that the Second Respondent accepts this grouping I should make it clear that I have turned my mind to the matter myself and I also agree.
The Applicant’s written submissions go on to deal with the question

of common elements of the various contributions and suggest a set

of groupings in paragraph 35. The tables in Annexure A adopt that grouping and result in a total of 12 separate contraventions for the purpose of determining penalties. Once again I note that the Second Respondent agrees with this grouping and I also agree.
Paragraphs 37-41 indicate the maximum penalties that may be imposed upon the Respondents and there is no question that the relevant maximum penalties are:
a)First Respondent, $612,000; and
b)Second Respondent, $122,400.
The Applicant’s written submissions then set out at paragraphs 40-43

a number of factors relevant to determining penalty, which have their origin in the decision of Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7, adopted subsequently by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14 at [14] (“Kelly”). It should be noted however that Buchanan J pointed out in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [91] (“Ophthalmic Supplies”) that these checklists, while convenient, should not “become transformed into a rigid catalogue of matters for attention”. I bear that qualification well in mind.
I further note the observations of Gyles J in A & L Silvestri Pty Ltd
v Construction, Forestry, Mining and Energy Union (CFMEU) [2008] FCA 466 at [6] which, in my respectful opinion, ought to guide the Court’s approach to the matter. His Honour said:
“However, the discretion is at large. There are no mandatory statutory criteria and it is wrong to regard factors seen
as relevant by one court as statutory criteria. Indeed, lists
of factors can confuse an essentially straightforward task and lead to over-elaborate reasoning.”

Matters not agreed

Against this entirely agreed position it is now appropriate to come

to the areas in which the parties differ. Essentially, where they differ

is as to the nature of the Second Respondent’s conduct and what should be made of it.
The Applicant filed a number of affidavits from the former employees of the First Respondent. In part, the Second respondent replied

to those affidavits. I do not propose, obviously, to set out all the matters to which the Second Respondent deposed in her affidavit affirmed 16 November 2015. I have of course had regard to all of it. The matters that are particularly relevant are as follows.
The First Respondent was incorporated on 5 September 2007. At all times the Second Respondent has been the sole director and secretary of it. The shareholders of the First Respondent are the Second Respondent and Mr Graham Prisk. Ms Langridge is 65 years old and is married to Peter Langridge who is 67 years old. Ms Langridge completed fourth form at High School in Brooks High School and has completed a number of TAFE commercial courses but has no formal tertiary qualification. She first started working at the Mowbray Mill

at the Mowbray site in 1967. Subject to gaps where she was looking after very young children Ms Langridge has worked there thereafter.
By the time the Second Respondent returned to work following

a period of maternity leave in 1983 the business had been purchased

by the Pila family who were based in Melbourne. According

to Ms Langridge the Pila family ran the Mowbray Mill business from Melbourne and from 1983 Ms Langridge worked in accounts payable then in accounts receivable. Over the period 1983 to 2007

Ms Langridge worked closely with members of the Pila family and would spend a week each month on the Pila family’s mainland sites training staff.
In about June 2007 the Pila family asked Ms Langridge to become General Manager for the Mowbray Mill which she did.
An endeavour by the Pilas to sell the Mowbray Mill business in 2006 or 2007 was unsuccessful and in early 2007 Mr and Mrs Langridge approached the Pilas through their accountant Mr Steven Hernyk about purchasing the business. At the time the business employed about 35 workers and Ms Langridge deposed that she was keen, “to do all we could to stop everyone losing their jobs”. Ms Langridge further deposed “to the extent I knew about the inner workings of the Mowbray Mill business in my role as General Manager, the business seemed
to be doing well” (paragraph 18 of her affidavit).

The business was sold to Mr and Mrs Langridge along with a number of other investors (not identified) for a purchase price of $2 million comprising $1.5 million for the land and buildings and $500,000

for the machinery. It does not appear that there was any payment

for goodwill. The land and buildings were bought by JN Properties

Pty Ltd, a company in which Ms Langridge asserts an (unquantified) interest.
The State Government provided, ultimately, $235,000 towards the purchase.
Prior to the purchase Ms Langridge had never run a business nor employed anyone, nor had purchased a business and had never been

a company director or secretary.
Mr Hernyk, by agreement between the Pilas and Mr and

Mrs Langridge, made all arrangements for the sale/purchase of the Mowbray Mill business. According to Ms Langridge’s affidavit

Mr Hernyk performed the calculations to determine whether

the Langridges could afford to buy the business. Nonetheless they received no written advice from him although Mr Hernyk demonstrated the calculations to Ms Langridge on a whiteboard in his office.
A group of 14 employees contributed $135,000 towards the purchase price of the business including some of those in the Stand Down Employees and the Further Employees.
The business was brought by the Langridges with a line of credit secured by a second mortgage on their home but Ms Langridge did not conduct due diligence on the Mowbray Mill business or seek or obtain independent legal or accountancy advice in relation to the purchase.
Although the affidavit goes into some detail about the course of events it is not necessary to paraphrase this in any detail. Mr and Mrs Langridge borrowed more moneys to enable the business to continue but it did not go well. From February 2008 to February 2013 the First Respondent engaged a Mr David Bartholomew as its accountant.

On occasion he commented to the Second Respondent that the First Respondent’s business was “not going well” (paragraph 45 of the affidavit).
The affidavit goes on to depose to what Ms Langridge would describe as a beneficent attitude on her part towards the ongoing employees

of the First Respondent (paragraph 50 of the affidavit). It goes on

to depose difficulties that arose towards the end of 2012 with a loss of

a particular contract. Perhaps the kernel of Ms Langridge’s position

is at paragraph 63 where she deposes:
“I did not give real consideration to terminating the employment of any of the First Respondent’s employees, by way

of redundancy or otherwise. To my mind the preffered course – the right thing to do – was to do everything I could to ensure

no one lost their job. Reducing working hours seemed to me

to be the only way I could prevent anyone losing their job.”
Things continued to go poorly with the business thereafter and in due course the Stand Down Employees were stood down, and the Further Employees were not paid the funds that are now accepted they should have been.
Other loans were obtained from a Mr Bart Barnes and from

a Mr Roderick Lanham, the Second Respondent’s brother, the latter

of which enabled the payment out of a receiver appointed by a creditor in September 2014. The precise date is not clear but it appears that the creditor was paid out and the receivership ended in October 2014.
At paragraph 95 Ms Langridge deposes:
“As at 4 September 2014 the First Respondent had customer orders to fulfil but no premises from which to operate.
An industry stakeholder offered and I accepted use of their facilities at 45 Waverley Road at Waverley in Tasmania (the Waverley Site). I made arrangements for some of the Plant and Equipment to be moved to the Waverley site and that move commenced on or about 4 September 2014. A combination of Waverley site staff and the First Respondent’s staff started preparing machinery for removal and when basic machinery was setup at the new site both Waverley staff and the First Respondent’s staff helped with the manufacturing. I am involved in production at the Waverley as a director of Southern Textiles Pty Ltd. Neither Southern Textiles nor I are employing anyone at the Waverley site.”
The affidavit then goes on to depose to the alleged sale on

23 December 2014 of the plant and equipment of the first respondent

to Mr Lanham as trustee for the Inspection Trust for a price

of $200,000. It then deposes to the sale on 23 December 2014 of the First Respondent’s business to Southern Textiles Pty (“Southern Textiles”) for $95,000. The First Respondent ceased trading on that same day, 23 December 2014.
Otherwise the affidavit consists of assertions about the Second Respondent’s home, a number of detailed responses to the affidavits sworn by former employees (to an extent critical of those employees’ assertions) and the ill health of Mr Langridge between March and August 2013 and associated difficulties. Ms Langridge deposed that her husband continues to be very unwell.
At paragraphs 130-138 the affidavit deposes to the lack of business experience of Ms Langridge and her husband and the understandable difficulties that the failure of the business has produced both

in emotional and financial terms for them.
It is sufficient to note that the affidavits of the former employees that have been filed, none of whom were required for cross-examination, speak in what to me at least are heart wrenching terms about the effects of the stand-down and/or non-payment of wages and entitlements have had on the former employees of the First Respondent. It is not necessary to say more than that the financial and emotional circumstances of these employees have been very severely affected,

as must have been indeed obvious at all material times to all concerned, including the Second Respondent herself.

The evidence given at Court

No doubt because of the striking difference and emphasis of the parties’ view of the matter Ms Langridge was required for cross-examination. In evidence-in-chief she adopted her affidavit. She gave evidence that the Industrial Relations Advisor referred to in her affidavit was Mr Andrew Cameron and that she thought he would

do everything the right way. So far as her current income is concerned she receives aged Centrelink benefits in the sum of $1,284 per fortnight and has no other income. The only bank account is that of the company.
Under cross-examination by counsel for the Applicant Ms Langridge asserted that she only had a basic understanding of the operation of the business before she bought it. Notwithstanding that she was General Manager everything was done under instructions from the owners.
When taken to an email from Mr Hernyk to the Tasmanian Government dated 30 December 2007 (Further Documents page 41-42) Ms Langridge confirmed that the persons who had reviewed cash flows referred to therein were Mr Hernyk and a young assistant who did the budgets. When taken to the reference to cost cuttings by her since she had taken control of management in July 2007 she said this was poetic licence. She said the only thing she did was multi-skilling

for employees. She did confirm she had prepared an analysis

for Mr Hernyk of what she thought the costs of business would be. That email was tendered as exhibit A1.
Ms Langridge asserted that she had not been a company director until the business was bought. She was challenged however with materials at Court Book (“CB”) 422 which show that she was a director of

a number of companies on and from 5 September 2007. She said all these companies were set up at the same time and, in effect, they were all part of the same series of transactions. When challenged with having been a director of Woodridge (Tas) Pty Ltd from August 2006 onwards she said she had forgotten that this existed and that the initiative had never developed.
It should be noted that Ms Langridge’s recollection as to her experience as a director is plainly wrong. I have to record that her answers given on this issue struck me as being somewhat insouciant with the truth.
I note that on 20 January 2015 the Fair Work Ombudsman, who was responding to an email from Mr Cameron (Ms Langridge’s Industrial Relations Advisor) dated 26 November 2014, sought an undertaking that the First Respondent not disperse any assets or proceeds from sales of assets. Ms Langridge signed such an undertaking on 24 February 2015 (CB 449). When challenged with the fact that she had already sold the plant and machinery and the business by that time

Ms Langridge had to concede that this was the case.
Furthermore, when cross-examined about the various promises she had made to employees to pay them sums from time to time

Ms Langridge’s denials were, I regret to say, unconvincing.
I note that Ms Langridge conceded that on occasions she had received moneys properly payable to the first respondent into her own private account to make sure that then appointed receiver did not obtain the funds.
Ms Langridge confirmed in respect of the sale of the business that her brother Mr Lanham is the sole shareholder of Southern Textiles. When challenged with the proposition that there was no evidence that the purchase price of $95,000 had been paid by Southern Textiles

Ms Langridge responded, “You will need to speak to Ken Davies.
It has been checked out and the liquidator is confident it’s okay”.

Mr Davies is as I understand it an accountant. What role he plays

is unclear.
Ms Langridge was taken to CB 365 which is an email dated 30 January 2015 to somebody called Raj. The email confirms that the First Respondent stopped trading on 23 December 2014 and that the “new” company’s name is Southern Textiles Pty Ltd. Under cross-examination Ms Langridge confirmed that Raj is a continuing customer who has moved over and traded with the new company. Notwithstanding this Ms Langridge said she was not familiar with the phrase Phoenixing in relation to businesses.
When challenged with the fact that for the plant and equipment which was sold for $200,000, there did not appear to be any evidence to prove payment, Ms Langridge said moneys were received 18 months before. There was a tax bill which was paid by Bart and Gail Barnes. When pressed about the contract Ms Langridge said you would have to ask Mr Davies.
Ms Langridge denied moving the plant and the company’s assets

to avoid this proceeding.
The picture that emerges to me from the evidence as a whole, I should interpolate at this stage and say, is that the sale documents were not

a truthful representation of what was occurring. The $200,000 for the plant and equipment was not a purchase by Mr and Mrs Barnes of that plant and equipment for that sum. Rather it was at best a payment

in kind, so to speak, to offset an earlier loan made some years earlier.
The picture in relation to the sale of the business to Southern Textiles

is even less clear. It may have been, in effect, set off against the sums that Mr Lanham had earlier advanced which, as I understand it, were used at least in part to pay out the former creditor who had appointed the receiver. The picture remains far from clear but it is clear that no $95,000 was paid as the contract purported to show.

My findings as to Ms Langridge’s conduct

I accept that the Second Respondent is a woman with no tertiary qualifications. I further accept that she did not receive independent accounting or legal advice prior to the purchase of the business.

Mr Hernyk clearly acted for both vendor and purchaser with their consent.
Notwithstanding this lack of formal academic qualification, it is not possible to accept Ms Langridge’s asserted near total ignorance of the operation of the business. She had been working in it on and off

for almost a quarter of a century at the time she became its General Manager and, subsequently, its purchaser. She worked in accounts payable and then accounts receivable. The assertion that she was

a mere cipher in the hands of the Pila family simply does not make sense.
I note from exhibit A1 and indeed from her own evidence that

Ms Langridge was actively involved in the purchase process and produced cash flow documentation for it.
Although her written submissions have sought to emphasise the almost philanthropic nature of her purchase of the business I do not accept that this was by any means her main motivation. It is entirely reasonable

to suppose that she and her husband bought this business because they thought it was profitable and they would do well. They would never have taken out the sort of loans they did had they thought otherwise.
It is important to note that of the $1,765,000 actually provided by the parties other than the State Government, no less than $135,000 was provided by some 14 employees. This was, on any view of the matter, a not by any means completely insubstantial contribution by those employees to the totality of the purchase price. It is quite clear from the affidavits of the former employees filed in this proceeding that the individual amounts that they put up were large amounts in the scheme of their financial affairs, and I have no difficulty in inferring that the Second Respondent would have been well aware of this.
The conduct of Ms Langridge in standing down the stood down employees, said by her both in her affidavit and oral evidence

to be designed to ensure that no one lost their job, and the similar conduct in relation to the Further Employees in taking their labour and not paying them for the same alleged reason, is likewise not a construct I can accept. Ms Langridge well knew the business could not afford

to pay redundancy or other payments from an early date as her own material makes clear. She must have known that having the employees stood-down without any form of payment and/or working and not being paid was extremely detrimental to them.
I note that Ms Langridge was not above dealing falsely with the receiver by, on her own admission, extracting funds due to the company directly into her own account.
It is perhaps sufficient to say that having seen her give her evidence, that while Ms Langridge was undoubtedly, to an extent, simply overwhelmed by events (including the ongoing ill health

of her husband during the relevant periods) she was at best very significantly deficient in her responsibilities as an employer

and wittingly so. She knew the company could not afford to pay

its debts as and when they were falling due and, in a fashion that could at the lowest be described as thoughtless but at the highest could

be described as heartless, effectively took advantage of the employees, a number of whom she well knew were both aged and with a deep commitment to the company for which they had worked for so long.
Having referred to these matters, all of which redound very poorly

to Ms Langridge’s credit, it should be noted that her affect while giving evidence was dull and despondent. She has clearly been overwhelmed to an extent by the misfortunes that have come upon her. There

is no reason to doubt that her affairs have gone badly and there was

an easily discernible weariness with the entire process.
Perhaps however the most troubling aspect of the matter is the phoenix operation that has been put in place to spirit to third parties’ the plant and equipment and business of the First Respondent. Ms Langridge’s conduct in signing the undertaking not to distribute assets when

she knew at the time they had already been distributed is telling.

She has deposed that she is the secretary and company director of what is clearly a new and operating company at the Waverley site.

Her affidavit describes her occupation as company director, not retired. Someone is continuing to operate what in effect is the former

First Respondent’s business at Waverley. The evidence does not go far enough to enable me to say exactly who it is, but on any view of the matter, even if I were to accept that Ms Langridge herself has no direct benefit from it, her conduct in facilitating this phoenix operation (even though she expressed a believable lack of familiarity with the term) stands significantly against her.
It should finally be noted that the corporate status of the

First Respondent remains unclear. Various references to liquidation have been made in the various materials and evidence before the Court but it seems, as best one can say, that the company remains registered. I note that I have not been asked to make any further orders against the First Respondent additional to the declarations and orders made

on 2 November 2015.
This brings us to the amount of penalties to be imposed. I will adopt the various matters set out at paragraph 42 of the Applicant’s written submissions (I repeat again agreed to the by the Second Respondent) for convenience, while noting that all relevant circumstances must

be taken into account.

The nature and extent of the conduct which led to the breaches

The Stand Down Employees were stood-down at a time when the Respondents knew that it was not possible to pay the redundancy pay

if their employment was terminated and knew they could not be paid their wages on an ongoing basis (Ms Langridge’s affidavit paragraph 69). The Stand-down continued even after the Respondents knew that a complaint had been made by Mr Clark to the Applicant. The same considerations apply in respect of the Further Employees through until the termination of their employment between August and December 2014. From time to time Ms Langridge made misleading assertions

to several of these employees that they would in fact be paid.
Put shortly, it was a witting process whereby both the Stand Down Employees and the Further Employees’ interests were subordinated

to the interests of the Respondents in circumstances where the Second Respondent well knew that this was the case.

The nature and extent of the loss occasioned as a result of the contraventions

The total amount of money not paid is almost $159,000. All the employees are still owed their components of this amount. Furthermore, not being paid this money has unquestionably had

an effect on all of the former employees and in some case, as the affidavit materials reveal, significant and very understandable ones. These effects are detailed in my view correctly at paragraphs 71-85

of the Applicant’s written submissions. It is not necessary to set them out in full, but I pay proper regard to them.

Similar previous conduct

There is no assertion that either Respondent has previously contravened Workplace Relations laws. I accept however as the Applicant submits that the conduct in relation to the Further Employees occurred after the Respondents had been advised of contraventions

in respect of the Stand Down Employees.

Whether the breaches arose out of one course of conduct

This has already been addressed.

Size and financial circumstances of the business

This is a medium-sized company although perhaps in the context

of northern Tasmania reasonably large. It is apparent that the

First Respondent will not be able to pay any penalty imposed against it. The Second Respondent’s financial circumstances are not wholly clear but it is more probable than otherwise that at the very least the imposition of penalties would create significant financial difficulty

for her.
This question however is to be addressed in the light of the relevant authorities. In Kelly at [28] Tracey J stated:
“No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such

a sanction “must be imposed at a meaningful level” (authorities omitted).
In Jordan v Mornington Inn Pty Ltd (2007) 166 IR 33 at [99] Heerey J said:
“As to the respondent’s own financial position, however,
in considering the size of a penalty, capacity to pay is of less relevance than the objective of general deterrence.”
The only other authority I would refer to from those referred

to is Printing & Kindred Industries Union v Vista Paper Products
Pty Ltd (1994) 127 ALR 673 where Wilcox CJ said, in even starker circumstances, at p.688:
“While this evidence suggests that both Vista and Mr McNamee may have difficulty in paying penalties, I do not think I should allow it to deflect me from imposing whatever penalties are otherwise appropriate.”

That was a case in which Mr McNamee’s financial circumstances were, at best, very uncertain.
The reality is that Ms Langridge’s present position is, as I have already indicated, not wholly clear, although her affidavit suggests that her only remaining asset is the family home valued at in excess

of $275,000 (Annexure WL7). However bad her financial circumstances may be (and she has not in my view been wholly informative about the precise state of the phoenix company that

is clearly operating) I accept that the Court should impose penalties that reflect both the objective seriousness and deliberateness of the contravening conduct and the need to impose a sufficiently meaningful and deterrent penalty (Applicant’s written submissions paragraph 104).

The deliberateness of the breaches

It is sufficient to say that the Second Respondent well knew at all relevant times that the First Respondent could not either pay its bills

as and when they fell due and was unable to pay the redundancy payments that, as I am satisfied, Ms Langridge well knew were truly payable to the workers it could no longer afford to retain. Although

the way Ms Langridge put it was always that she was concerned only to make sure no one lost their jobs, even if I were to accept that this was her state of mind it reflects a wilful blindness to the circumstances. There is no point in having a nominal job for months on end if there

is no real prospect that you are ever in fact going to be paid and/or actually given further employment. The course of conduct upon which the Respondents embarked was done as a witting choice in which the possible benefits to the company were held to be far more significant than any obligations to the employees.

Involvement of Senior Management

It is conceded that Senior Management was involved with the contraventions.

Contrition

Although Ms Langridge has, in her affidavit filed as recently

as November 2015, expressed regret as to the consequences of the Respondents conduct upon the former employees, this must be seen

in context. First, Ms Langridge’s affidavit makes a small number

of carping submissions about the employees’ affidavits, which criticisms were not advanced by cross-examination of the employees themselves. Second, this affidavit comes very late in the piece.
At all points Ms Langridge has effectively sought to place the blame for the outcome on others. She blames Mr Hernyk. She has blamed the various accountants employed from time to time. The picture

she has sought to present is one of her being unwittingly placed in an impossible position. I do not accept that this is the case. She has never apologised directly to the employees concerned. While I have no doubt that she is very sorry that things have come out as they have,

the picture that emerges for me is that her primary regrets are more concerned with herself and her husband than with the employees.
It should be noted however that while contrition in these circumstances cannot be a strong point of the respondents’ position, this does not in any way operate as an aggravating factor. Rather it means only that any penalty otherwise to be imposed is not reduced to take into account contrition as such.
Furthermore, while the Respondents have made full admissions

in relation to the contraventions, the conduct of the Respondents (signing an undertaking when the business has already been sold)

is open to criticism.
Nonetheless, by agreeing to the SOAF and not conducting a contested hearing there is no question that a certain amount of time has been saved although I note also the authorities set out at paragraphs 140-141 of the Applicant’s written submissions. In this case the Respondents deserve a measure of credit for not contesting the proceeding

and providing the SOAF (and the other matters set out in paragraph 13

of the closing submissions), and I will take these matters into consideration when fixing the level of penalties to be applied.

Corrective action

No corrective action has been taken. As the applicant’s written submissions correctly point out, the sale of the business to third parties can only be understood as an endeavour, at least in part, to defeat the claims in this proceeding.

Cooperation with the authorities

This matter has already been dealt with.

Insurance of compliance with minimum standards and general deterrence

It is not necessary to say overly much about these aspects of the matter. As I understand it the parties agree that it is necessary that there

be compliance with minimum standards and that general deterrence

is an important matter in cases such as this. The Applicant’s written submissions at paragraphs 143-155 are not put in issue in any way

by the Respondents. I note that the First Respondent is no longer operating and in all probability will not operate in the future. Nonetheless, it is important that penalties be imposed at a sufficient level to ensure that employers have a clear understanding of the severe consequences that will attend a failure to apply minimum standards and/or to contravene the legislative requirements in any event. I will be setting a level of penalties that will give expression to this necessity. In Trade Practices Commission v CSR Limited [1990] FCA 521 at [40] French J (as his Honour then was) said:
“The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price
on contravention that is sufficiently high to deter repetition
by the contravener and by others who might be tempted
to contravene the Act.”
I respectfully adopt and agree with his Honour’s observation and will give it proper application.

Specific deterrence

Although as indicated already the First Respondent is not really likely to require further individual deterrence given that it no longer operates, the same is by no means necessarily true of the Second Respondent.

It is not clear to what extent as a company director and secretary

Ms Langridge continues to engage in the employment of any employees. If she presently employs no one it is not clear that she will not do so in the future. It is necessary therefore to take into consideration specific deterrence as a relevant consideration. I note that even at this stage, the entirety of the materials filed by the Second Respondent has been self-exculpatory and not in truth really accepting the contravening nature of her conduct.

The totality principle

It is accepted that the totality principle is a matter of instinctive synthesis and applies at the final stage of the Court’s deliberations. The Court is required to take a final look at the aggregate penalty and determine whether it is an appropriate response to the conduct concerned and to ensure that it is not oppressive, but that while it is not oppressive or crushing it bears relativity to the seriousness of the conduct engaged in by the Respondents. See Ophthalmic Supplies

at [23] per Gray J, [71] per Graham J and [102] per Buchanan J.

Conclusion

Having regard to all of these relevant considerations in my view the penalty that should be imposed should be 80 per cent of the applicable maximum. These were serious and continuing contraventions.

In relation to the Further Employees they continued long after the Respondents knew that their conduct was the subject not only

of complaint but a definite view on the part of the Applicant that the conduct was unlawful. They have had significant and serious consequences for the employees concerned, not only in terms of the actual non-receipt of the benefits to which the employees were entitled, but the very unfortunate sequelae that this had for some and, indeed, most of those employees.
In circumstances where a company’s assets are stripped and given

to a third party the Court should take a particularly severe view.

The way in which the company’s assets were sold to third parties,

(in effect for nothing beyond possible forgiveness of debts which may or may not have been secured), is a course of conduct which the Court should regard with the greatest disfavour.
I would regard the Respondents’ course of conduct, and I expressly

of course include the Second Respondent for the reasons given,

as being towards the highest end of culpability save for the following factors to which I give weight.
It is ultimately true that the Second Respondent is not tertiary qualified and failed to obtain any independent advice, as she clearly should have, prior to purchasing the business. To an extent however the emphasis on this failure on the Second Respondent’s part rather misses the point. To say merely that she was naïve is not a sufficient or adequate explanation. Persons who conduct business ineptly could bring great damage to third parties including, no doubt, the creditors of the First Respondent and its former employees. In one sense the more

Ms Langridge points to her own inadequacies the stronger she makes the case against herself.
Nonetheless, the Second Respondent is 65 years old and her husband

is in poor health. Her financial circumstances are most likely very straightened, and as I have indicated, her demeanour in Court suggests that the entirety of this experience has taken a significant toll on her.
Bearing all these matters in mind, and the need for any penalty not

to be crushing but to reflect the seriousness of the offences, I think

a percentage of 80 per cent of the maximum is appropriate. It is not

in all the circumstances, excessive. (See Buchanan J in Ophthalmic Supplies at [102]). There will otherwise be orders and declarations

as agreed and as sought by the Applicant.

I certify that the preceding ninety-six (96) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.

Associate:

Date: 17 March 2016

[2016] FCCA 531

17 March 2016

Key Legal Topics

Areas of Law

Employment Law

Legal Concepts

Breach

Penalty

Remedies