Hampton v Brown Cow Café Sunbury Pty Ltd (No 2)
[2024] FedCFamC2G 331
•17 April 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Hampton v Brown Cow Café Sunbury Pty Ltd (No 2) [2024] FedCFamC2G 331
File number(s): MLG 2048 of 2022 Judgment of: DEPUTY CHIEF JUDGE MERCURI Date of judgment: 17 April 2024 Catchwords: INDUSTRIAL LAW – FAIR WORK – application for penalties – consideration of appropriate penalty amount – where respondents have not participated in proceedings – need for general and specific deterrence – further consideration of whether it is appropriate for any penalty to be paid to applicant’s representative – where applicant seeks penalties be made payable to representative – penalty orders made.
INDUSTRIAL LAW – FAIR WORK – application for costs – whether order for costs ought be made – s 570 of the Fair Work Act 2009 (Cth) – where applicant entered into conditional costs agreement with JobWatch – consideration of indemnity principle which requires legal liability to pay costs – costs orders made.
Legislation: Fair Work Act 2009 (Cth), ss 45, 323, 351, 352, 470, 539, 540, 544, 546, 557A, 570 Cases cited: Australian Building and Construction Commissioner v Pattinson and Anor [2022] HCA 13
Drummond v Canberra Institute of Technology (No 2) [2023] FCA 422
Hampton v Brown Cow Café Sunbury Pty Ltd [2023] FedCFamC2G 808
Trade Practices Commission v CSR Ltd [1990] FCA 762
Trustee for the MTGI Trust v Johnston (No 2) [2016] FCAFC 190
Zreika v Royal [2019] FCAFC 82
Division: Division 2 General Federal Law Number of paragraphs: 54 Date of last submission/s: 18 January 2024 Place: Melbourne – in chambers on the papers Solicitor for the Applicant: Jobwatch Inc Solicitor for the Respondents: The First and Second Respondents did not participate ORDERS
MLG 2048 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: WADE HAMPTON
Applicant
AND: BROWN COW CAFE SUNBURY PTY LTD
First Respondent
HAO 'NICK' TRUONG
Second Respondent
ORDER MADE BY:
DEPUTY CHIEF JUDGE MERCURI
DATE OF ORDER:
17 APRIL 2024
THE COURT ORDERS THAT:
1.Pursuant to section 546(1) of the Fair Work Act 2009 (Cth), within 28 days of this order:
(a)the first respondent pay a pecuniary penalty in the sum of $13,320 to the applicant’s representative JobWatch Inc in respect of the underpayment contraventions; and
(b)the second respondent pay a pecuniary penalty in the sum of $2,640 to the applicant’s representative JobWatch Inc in respect of the underpayment contraventions; and
(c)the first respondent pay a pecuniary penalty in the sum of $33,300 to the applicant’s representative JobWatch Inc in respect of the dismissal contraventions; and
(d)the second respondent pay a pecuniary penalty in the sum of $6,660 to the applicant’s representative JobWatch Inc in respect of the dismissal contraventions.
2.Within 28 days of this order, the respondents pay to the applicant the fixed sum of $9,595.10 in respect of the applicant’s costs.
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
DEPUTY CHIEF JUDGE MERCURI:
INTRODUCTION
Before the court is an application for penalties and costs. This application follows orders made on 31 October 2023, in which the court entered default judgment in favour of the applicant in this matter, and amongst other things, ordered the first respondent to pay the applicant $7,320.08 in compensation plus pre-judgment interest (‘October 2023 judgment’).[1]
[1] Hampton v Brown Cow Café Sunbury Pty Ltd [2023] FedCFamC2G 808.
BACKGROUND
The orders of 31 October 2023 also provided for the applicant to serve a copy of the orders made on that date on the respondents by registered post to the first respondent’s registered office. The matter was otherwise listed for further directions hearing on 1 December 2023 on the issue of penalty and costs.
On 1 December 2023, there was no appearance by either respondent.
Orders were made for the parties to file and serve written submissions in relation to the question of penalty and costs and for the court to be able to determine those matters on the papers.[2]
[2] Orders of Deputy Chief Judge Mercuri dated 1 December 2023.
The respondents did not comply with those orders and, consistent with their lack of engagement with these proceedings, filed no submissions.
The applicant filed written submissions in accordance with the 1 December 2023 orders and also filed an affidavit of Mr Paul Goddard who, among other things attested to the fact that the orders made on 31 October 2023 were served on the respondents by post and email on 2 November 2023.[3]
[3] Affidavit of Mr Paul Goddard affirmed on 17 January 2024 and filed on 18 January 2024 at paragraph [5].
Mr Goddard also attests to the fact that as at the date of affirming his affidavit, the respondents had not complied with the 31 October 2023 orders and that it appeared from a Google search of the first respondent that the first respondent continues trading.[4]
[4] Affidavit of Mr Paul Goddard affirmed on 17 January 2024 and filed on 18 January 2024 at paragraph [9].
Mr Goddard also deposes to the applicant having entered into a conditional costs agreement with JobWatch and JobWatch having incurred costs estimated to be $9,595.10.[5]
[5] Affidavit of Mr Paul Goddard affirmed on 17 January 2024 and filed on 18 January 2024 at paragraphs [4] and [8].
PENALTY APPLICATION
It is submitted for the applicant that by virtue of the findings made in the substantive proceedings, both the first and second respondents have contravened section 351 and section 352 of the Fair Work Act 2009 (Cth) (‘FW Act’). Both of those provisions are civil remedy provisions and the applicant seeks the imposition of a penalty in respect of each respondent.[6] It is further submitted that any pecuniary penalty ordered in this instance ought to be made payable to JobWatch pursuant to section 546(3)(b) of the FW Act.[7]
[6] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraphs [1] and [2].
[7] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [4].
For the reasons given in the October 2023 judgment, declarations were made that the first respondent contravened sections 45, 323, 351 and 352 of the FW Act. In addition, for the reasons given in the October 2023 judgment, a declaration was also made that the second respondent was involved in those contraventions pursuant to section 550 of the FW Act.
Each of the provisions which have been found to have been contravened by the respondents is a civil remedy provision. In each case, the applicant is entitled to bring apply to the court for orders in relation to said contravention.[8]
[8] Fair Work Act 2009 (Cth), ss 539(2), 540 and 544.
Section 546(1) of the FW Act relevantly provides that this court ‘may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision’.
Section 546(3) further provides that:
(3)The court may order that the pecuniary penalty, or a part of the penalty, be paid to:
(a) the Commonwealth; or
(b) a particular organisation; or
(c) a particular person.
The factual background to this matter is set out in the October 2023 judgment. The circumstances in which the applicant’s employment came to an end are also detailed in the October 2023 reasons. The applicant was employed as a casual from December 2021 until 8 May 2022.
The contraventions which the respondents have engaged in essentially relate to the circumstances in which the applicant’s employment was terminated, on the one hand, and the failure by the first respondent to pay the applicant his correct wage after he turned 17 years of age, on the other. I therefore agree that in fixing any penalty, the court should effectively group the contraventions into these two categories, namely, the dismissal contravention the underpayment contravention.[9]
[9] See Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [6].
I now turn to address the following issues:
(a)what penalty is appropriate in respect of the dismissal and the underpayment contraventions respectively; and
(b)whether it is appropriate for any penalty awarded to be paid to the applicant’s representative.
The applicant also seeks an order that the respondents pay his costs to JobWatch pursuant to section 470(2) of the FW Act, which I will return to later in these reasons.
Amount of penalty
The court has a broad discretion when determining an appropriate penalty, although that discretion must be exercised reasonably. Section 546(2) of the FW Act relevantly provides:
(2) Subject to this section, the pecuniary penalty must not be more than:
(a)if the person is an individual--the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2); or
(b)if the person is a body corporate--5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2).
In the context of the underpayment contravention, section 539(2) provides for two different penalty maxima depending on whether the contravention is a ‘serious contravention’ or not.
A ‘serious contravention’ attracts a tenfold increase to the maximum applicable contravention. Section 557A of the Act provides that a contravention is a ‘serious contravention’ if certain criteria is met. The applicant submits that the circumstances of this matter would not bring the respondents’ conduct within that definition.[10] I agree with this submission.
[10] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [11].
Therefore, the maximum penalty which could be ordered in this case for both the underpayment contravention and the dismissal contravention would be $66,600 for the first respondent and $13,200 for the second respondent.
The principles which apply to the imposition of a penalty are well-settled. These principles have recently been the subject of consideration by the High Court in Australian Building and Construction Commissioner v Pattinson and Anor [2022] HCA 13 (‘Pattinson’).
Relevantly, at paragraph [9], the plurality (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ) said:
9.… Under the civil penalty regime provided by the Act, the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act.
After listing various factors identified by Justice French in Trade Practices Commission v CSR Ltd [1990] FCA 762,[11] which informed the court in that case in assessing an appropriate penalty under the Trade Practices Act 1974 (Cth), the plurality in Pattinson went on to say:
19.It may readily be seen that this list of factors includes matters pertaining both the character of the contravening conduct … and to the character of the contravenor … It is important, however, not to regard the list of possible relevant considerations as a ‘rigid catalogue of matters for attention’ as if it were a legal checklist. The court’s task remains to determine what is an ‘appropriate’ penalty in the circumstances of the particular case. (emphasis added)
[11] See Australian Building and Construction Commissioner v Pattinson and Anor [2022] HCA 13 at [18].
The plurality also noted that whilst deterrence remains the primary motivator in fixing and imposing a civil penalty, consideration also needs to be given to other relevant factors on a case-by-case basis.[12]
[12] See Australian Building and Construction Commissioner v Pattinson and Anor [2022] HCA 13 at [47].
The applicant submits that in the case of the dismissal contravention, a penalty of 50% of the maximum (for each respondent) is appropriate, and in the case of the underpayment contravention, a penalty of 20% of the maximum (for each respondent) is appropriate,[13] for the following reasons:
(a)at the time of the dismissal contravention, the applicant was only 17 years old and at the commencement of his working life;[14]
(b)the applicant took appropriate steps to advise the respondents that he was unwell and unable to work due to illness and this unreasonably resulted in his immediate dismissal;[15]
(c)the manner in which the applicant was dismissed was humiliating and degrading;[16]
(d)the respondents’ conduct which resulted in the dismissal of the applicant was deliberate in nature;[17]
(e)the need to impose a penalty which is at a level to discourage both the respondents themselves and other employers from failing to comply with their obligations under the FW Act is a significant factor in determining an appropriate penalty;[18]
(f)a penalty must be set at a level to have a deterrent effect and not to be seen simply as ‘the cost of doing business’;[19]
(g)in this case, the evidence suggests that the first respondent is continuing to trade and therefore specific deterrence is a relevant factor;[20] and
(h)importantly, in circumstances where the respondents have not only failed and/or refused to participate in these proceedings, but in circumstances where they have continued to fail to comply with orders made in October 2023, the need for specific deterrence is clear.[21]
[13] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [12].
[14] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [21].
[15] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [22].
[16] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [24].
[17] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [27].
[18] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraphs [34] to [43].
[19] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [34].
[20] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [38] and following.
[21] Applicant’s Outline of Submissions on Penalties and Costs filed on 18 January 2024 at paragraph [43].
In this case, as stated, the respondents have not participated in the proceedings. As such, there is no evidence about the size of the business or its capacity to pay. However, it is well-settled that the ability of a respondent to satisfy a penalty is of less relevance than the need to deter further contraventions of workplace laws. This is particularly so in cases where minimum entitlements for vulnerable workers is concerned.
Similarly, there is no evidence of contrition, corrective action or co-operation on the part of the respondents. To the contrary, they have not participated in these proceedings, remedied the underpayments or complied with orders made in October 2023.
Having regard to each of these matters, I agree that penalties in amount sought by the applicant are appropriate.
Payment of penalty to applicant’s representative
In circumstances where the applicant’s representative is a community legal service providing services to employees who would otherwise not be able to seek redress for claims of this size, and where the applicant seeks an order to this effect, I am satisfied that it is appropriate in the circumstances of this case that the penalty be paid to JobWatch.
COSTS APPLICATION
As stated, the applicant also seeks that his costs be paid by the respondents.
Two issues arise for consideration in determining whether the applicant’s application for costs ought to be granted:
(a)the first is whether the circumstances of this case justify an order for costs at all given the limited power to award costs in proceedings initiated under the FW Act by virtue of section 570; and
(b)if the circumstances warrant an order for costs, the second issue is whether such an order can be made in circumstances where the applicant entered into a conditional costs agreement with JobWatch.
I will address each of these matters in turn.
Whether an order for costs ought be made
Section 570(1) of the FW Act relevantly provides that a party to a proceeding in a court arising under the FW Act may only be ordered to pay costs incurred by another party to the proceedings in limited specified circumstances.
Relevantly, section 570(2) provides:
(2) The party may be ordered to pay the costs only if:
(a) …
(b)the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c) the court is satisfied of both of the following:
(i)the party unreasonably refused to participate in a matter before the FWC;
(ii) the matter arose from the same facts as the proceedings.
As stated by the Full Court of the Federal Court in Trustee for the MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at paragraph [8]:
8.Section 570 of the FW Act confers discretion on the Court to order costs in Fair Work matters where proceedings were instituted vexatiously or without reasonable cause. Not only must this discretion be exercised judicially according to the terms defining it, it must be exercised with caution because of the exceptional nature of the power in an otherwise no-costs jurisdiction. The case for its exercise should be clearly demonstrated: … As Mortimer J observed (correctly, in our opinion) in Ryan v Primesafe [2015] FCA 8 at [64]:
“The reason for caution is the potential for discouraging parties' pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them.”
In this case, had the respondents participated in the proceedings, opposed the orders made and ultimately been unsuccessful, it is highly unlikely that section 570(2)(b) or (c) could be said to have applied, absent any particularly egregious conduct on their part.
The fact is, however, that the respondent’s abject failure to participate at all in these proceedings, and their failure to participate in a conciliation conference in the Fair Work Commission, has had the consequence that the applicant has been put to the time and expense of having to press his claims in this court.
As noted by Justice Wigney in Drummond v Canberra Institute of Technology (No 2) [2023] FCA 422 at paragraph [15]:
15.… the threshold of being an “unreasonable act or omission” for the purposes of s 570(2)(b) is generally not crossed “[s]imply because a party does not conduct its litigation in the most efficient way”, or because the party “pursues arguments which are ultimately abandoned or rejected by the Court” … Nor does a “lack of precision” in the way a case was presented necessarily amount to an unreasonable act or omission …
As stated, in this case, the respondents did not participate at all in the proceedings.
Moreover, the second respondent sought to evade service of the initiating proceedings, thereby necessitating a further application, which was ultimately granted, for substituted service. In those circumstances, and given the ultimate findings and orders made, which the respondents have not sought to disturb, I am satisfied that the respondent’s failure to either concede the applicant’s claim or to defend it has caused the applicant to incur costs in pursuing this claim.
For that reason, I am satisfied that section 570(2)(b) of the FW Act would provide a basis for this court to make an order for costs in the applicant’s favour.
Having come to this view, it is not necessary for me to consider whether section 570(2)(c) would also provide an alternative basis for a costs order.
Impact of conditional costs agreement
This then brings me to the second issue, namely, whether an order should be made in circumstances where the applicant’s liability to pay costs to JobWatch is conditional.
The applicant engaged JobWatch on a conditional costs arrangement whereby it was only required to pay JobWatch if a ‘successful outcome’ was reached. A ‘successful outcome’ is defined in the conditional costs agreement annexed to the affidavit of Mr Goddard at Annexure PG-01 as follows:
“Successful outcome” means any of the following:
(a)a court or other tribunal or statutory scheme finds in your favour and orders another party to pay your legal costs; or
(b)the case is settled, and part of the settlement includes payment of your legal costs; or
(c)a court finds in your favour and orders another party to pay pecuniary penalties to you; or
(d) the case is settled and the settlement includes a pecuniary penalty.
The conditional costs agreement goes on to provide:
1. The basis on which our charges will be calculated
Our charges (excluding disbursements/out of pocket expenses) will be calculated in accordance with the relevant Federal Circuit of Australia Court scale of costs. We estimate our costs to be between $7,000 and $12,000.
2. Your liability for our charges
You will be liable to pay our charges in this matter ONLY if there is a ‘successful outcome’ in this matter. This is provided that you retain us to the conclusion of the matter.
Despite anything else to the contrary in this Agreement, we will not require you to pay any amount under the bill until you have received payment of that amount from another party in accordance with the definition of ‘successful outcome’ above.
We will not require you to initiate proceedings against another party to enforce a court order or settlement agreement as described in the definition of ‘successful outcome’. (emphasis in original)
I accept that the conditional costs agreement is drafted in such a way that the applicant is not required to actually pay costs to the representative unless:
(a)there is a ‘successful outcome’ as defined; and
(b)the respondents actually comply with any orders made to pay the applicant’s costs.
This arrangement would not, in my view, offend against the indemnity principle which requires that there be a legal liability to pay costs.
A similar issue arose in Zreika v Royal [2019] FCAFC 82 in which issue was taken with the trial judge’s decision to make an order for costs in circumstances where the party in whose favour the costs order was made only had a contingent liability to pay their legal fees at the time the costs order was made. On appeal to the Full Court of the Federal Court, the trial judge’s decision and reasoning was upheld. Relevantly, the Full Court said:
314.Her Honour's reasons for rejecting the respondents' submission that the applicants were not legally obliged to pay any legal costs to their solicitors are at CD[37]-[52]. Those reasons set out the relevant factual matters upon which the respondents below relied and upon which they rely as appellants in these appeals, including counsels' fee agreements, together with a detailed consideration of the relevant cases. The reasons are as follows:
37. …
38. …
44.Mainieri v Cirollo is authority that the application of the indemnity principle does not depend on whether the contingency is expressed as a condition precedent or condition subsequent provided the client is contingently liable to pay legal fees ‘at the instant the costs order is to be made’. In the present case, the Royals are contingently liable under their costs agreement with Watson Magioni to pay legal fees and disbursements to Watson Magioni for the legal services provided in relation to this litigation. The mere fact that the liability is contingent on sufficient recovery of moneys out of which to meet those costs does not mean that the indemnity rule would be contravened by an order for costs because at the time when that order is sought the contingency triggering the liability has not been satisfied. There is a contingent liability to pay fees and thus an obligation to be indemnified when a costs order is made.
…
321.In summary, we consider that the primary judge made no error of principle and that the costs orders were appropriate in light of the findings her Honour made. …
In this instance, similar reasoning applies.
At the point at which an order for costs is made in the applicant’s favour, the applicant becomes liable to pay the costs incurred by JobWatch. The fact that JobWatch may ultimately not enforce the obligation to pay those costs, in the event that the party ordered to pay them does not comply with that order, does not detract from the fact that there is a liability. The decision by a creditor to waive a debt does not alter the character of the debt in the first place.
For these reasons, I am satisfied that there is a legal liability to pay costs in circumstances where the applicant has had a ‘successful outcome’ as defined. In the circumstances of this matter, the applicant has had a ‘successful outcome’.
The applicant seeks that his costs be paid in the sum of $9,595.10, pursuant to Schedule 2 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth). In circumstances where the costs sought are on scale, I am satisfied that it is appropriate to make costs in the amount sought by the applicant.
CONCLUSION
For each of these reasons, I make the orders set out at the commencement of these reasons.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of Deputy Chief Judge Mercuri. Associate:
Dated: 17 April 2024
0
6
1