Hornyak v Sims Integrated Solutions Pty Ltd
[2022] FedCFamC2G 509
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
Hornyak v SIMS Integrated Solutions Pty Ltd [2022] FedCFamC2G 509
File number: SYG 3733 of 2016 Judgment of: JUDGE CAMERON Date of judgment: 27 June 2022 Catchwords: INDUSTRIAL LAW – Breaches of civil remedy provisions of the Fair Work Act 2009 (Cth) – imposition of pecuniary penalties – relevant considerations.
INDUSTRIAL LAW – Accessorial liability for breaches of civil remedy provisions of Fair Work Act 2009 – imposition of pecuniary penalties.
INDUSTRIAL LAW – Costs – relevant considerations.
Legislation: Fair Work Act 2009 (Cth) ss.45, 323, 535, 539, 546, 550, 557, 570
Crimes Act 1914 (Cth) s.4AA
Fair Work Regulations 2009 (Cth) reg.3.33
Cases cited: Hornyak v SIMS Integrated Solutions Pty Ltd & Ors [2020] FCCA 1764
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216
Kelly v Fitzpatrick (2007) 166 IR 14
McIver v Healey [2008] FCA 425
Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153
Fair Work Ombudsman v Lohr (2018) 356 ALR 424
Johnson v The Queen (2004) 78 ALJR 616
Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151
Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Number of paragraphs: 76 Date of hearing: 18 February 2021 Place: Sydney Counsel for the Applicant: Mr A. Gerard Solicitor for the Applicant: Crawford de Carne Counsel for the Respondents: Ms L. Andelman Solicitor for the Respondents: Turner Freeman ORDERS
SYG 3733 of 2016 BETWEEN: ATTILA HORNYAK
Applicant
AND: SIMS INTEGRATED SOLUTIONS PTY LTD
First Respondent
IMRE HORNYAK
Second Respondent
CATHERINE HORNYAK
Third Respondent
ORDER MADE BY:
JUDGE CAMERON
DATE OF ORDER:
27 JUNE 2022
THE COURT ORDERS THAT:
1.The first respondent pay a penalty of $10,000 for its contraventions of ss.45 and 323 of the Fair Work Act 2009 (Cth).
2.The first respondent pay a penalty of $6,000 for its contravention of s.535 of the Fair Work Act 2009 (Cth).
3.The second respondent pay a penalty of $2,000 for his contraventions as an accessory of ss.45 and 323 of the Fair Work Act 2009 (Cth).
4.The second respondent pay a penalty of $1,200 for his contravention as an accessory of s.535 of the Fair Work Act 2009 (Cth).
5.The penalties be paid to the applicant.
6.The penalties be paid within 28 days.
7.The applicant have liberty to apply in the event that any of orders 1 to 6 is not complied with.
8.The first and second respondents pay 60% of the applicant’s costs as agreed or as assessed in accordance with pt.1 of sch.1 to the Federal Circuit Court Rules 2001 (Cth) as it stood on 1 January 2018, in relation to which the parties have liberty to apply.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE CAMERON
INTRODUCTION
The first respondent (“SIMS Integrated”) operated a business specialising in the installation of electronic security systems. The second respondent (“Imre”) was the director of SIMS Integrated and half-brother of the applicant (“Attila”). The third respondent (“Cathy”) was Imre’s wife and served as director of SIMS Integrated.
Attila alleged that SIMS Integrated had, between 1 May 2013 and 26 June 2015, employed him on a casual basis under the Electrical, Electronic and Communications Contracting Award 2010 (“Award”) as an “Electrical worker grade 5”. The Award was a modern award made under the Fair Work Act 2009 (Cth) (“FW Act”). Attila alleged that SIMS Integrated had contravened the Award by failing to pay him minimum wages, loading, allowances and overtime and by failing to make superannuation contributions on his behalf. He alleged that Imre and Cathy had been involved in SIMS Integrated’s contraventions of the FW Act.
On 3 July 2020 judgment on those allegations was delivered: Hornyak v SIMS Integrated Solutions Pty Ltd & Ors [2020] FCCA 1764 (“First Judgment”). The Court declared that:
(1)The first respondent contravened section 45 of the Fair Work Act 2009 by failing to pay the applicant wages in accordance with the Electrical, Electronic and Communications Contracting Award 2010 or at all.
(2)The first respondent contravened section 45 of the Fair Work Act 2009 by failing to make superannuation contributions on the applicant’s behalf in accordance with the Electrical, Electronic and Communications Contracting Award 2010.
(3)The first respondent contravened section 323 of the Fair Work Act 2009 by failing to pay the applicant wages in full at least monthly for work performed during his employment with it.
(4)The first respondent contravened section 535 of the Fair Work Act 2009 by failing to maintain or keep employee records prescribed by the Fair Work Regulations 2009.
(5)The second respondent was involved in the first respondent's contraventions of sections 45, 323 and 535 of the Fair Work Act 2009 and so is taken to have also contravened those provisions.
The Court also made orders that:
(1)The first respondent pay the applicant compensation in a sum calculated in accordance with the reasons for judgment in this proceeding.
…
(4)Within 28 days the parties bring in a draft minute of order quantifying the compensation and interest the first respondent, or in default the second respondent, is to pay the applicant.
(5)The application be dismissed as against the third respondent.
…
By orders made on 18 September 2020, SIMS Integrated was required to pay Attila $14,932.01 in compensation, being $13,653.33 in respect of wages and $1,278.68 in respect of superannuation, and $4,576.87 in interest.
These reasons concern the penalties to be imposed on SIMS Integrated and Imre for their respective contraventions. It also concerns the parties’ applications for costs pursuant to s.570(2) of the FW Act.
FACTS AND FINDINGS
The facts and findings in this matter are set out in the First Judgment and can relevantly be summarised as follows:
(a)Attila held a licence which qualified him to “sell, install, maintain, repair and service security equipment” and so could provide SIMS Integrated with those services;
(b)in April 2013 Attila and Imre agreed that Attila would work for SIMS Integrated on an ad hoc basis;
(c)Imre told Attila that he would pay him for his work;
(d)the agreement was not void for uncertainty;
(e)Attila attended SIMS Integrated worksites with Imre to perform paying work for SIMS Integrated, not as an observer providing voluntary assistance;
(f)SIMS Integrated charged clients for Attila’s time.
(g)Attila was an Electrical worker grade 5 under the Award;
(h)SIMS Integrated did not pay Attila for his time worked, in contravention of cls.16, 17.2(a), 17.2(b), 22.1 and 26 of the Award and s.45 of the FW Act;
(i)SIMS Integrated did not, at least monthly, pay Attila for his time worked, in contravention of s.323 of the FW Act;
(j)SIMS Integrated did not pay Attila superannuation contributions related to his time worked, in contravention of cl.23.2 of the Award and s.45 of the FW Act;
(k)SIMS Integrated did not make and keep prescribed records in relation to Attila’s employment, in contravention of s.535 of the FW Act; and
(l)Imre was involved in SIMS Integrated’s contravening conduct and liable as an accessory.
The Award relevantly made provision in relation to the following matters:
(a)cl.16.2: the minimum weekly wages for a Grade 5 Electrical Worker;
(b)cl.17.2(a): industry allowance to be paid as a percentage of the standard weekly rate as compensation for difficulties and inconveniences associated with on–site work;
(c)cl.17.2(b): tool allowance to electrical workers at grade 5 and beyond;
(d)cl.22.1: wages to be paid weekly or fortnightly;
(e)cl.23.2 employer to make superannuation contributions; and
(f)cl.26: overtime rates.
LEGISLATION
Penalty
Fair Work Act
Section 45 of the FW Act provides that a person must not contravene a term of a modern award. Section 323(1) relevantly provides that an employer must pay an employee no less frequently than once a month. Section 535(1) of the FW Act provides that an employer must make records of a prescribed kind in relation to each of its employees and keep those records for 7 years. By virtue of s.539 of the FW Act each of those provisions is a civil remedy provision. At the relevant times the combined effect of ss.539(2) and 546(2) of the FW Act was that:
(a)contraventions of s.45 carried a maximum penalty of 300 penalty units ($51,000) for corporations and 60 penalty units ($10,200) for individuals;
(b)contraventions of s.323(1) carried a maximum penalty of 300 penalty units ($51,000) for corporations and 60 penalty units ($10,200) for individuals; and
(a)contraventions of s.535(1) carried a maximum penalty of 150 penalty units for a corporation ($25,500) and 30 penalty units ($5,100) for individuals.
At all relevant times a penalty unit was worth $170: s.4AA Crimes Act 1914 (Cth).
Section 557 of the FW Act relevantly provided:
557Course of conduct
(1)For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
(2)The civil remedy provisions are the following:
…
(b) section 45 (which deals with contraventions of modern awards);
…
(g) subsection 323(1) (which deals with methods and frequency of payment);
…
(n) subsections 535(1) and (2) (which deal with employer obligations in relation to employee records);
…
Section 550 of the FW Act provides:
550 Involvement in contravention treated in same way as actual contravention
(1)A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2)A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.
Fair Work Regulations
Regulation 3.33 of the Fair Work Regulations 2009 (Cth) (”FW Regulations”) prescribes information required to be held in employee records.
Costs
Section 570 of the FW Act relevantly provides:
570Costs only if proceedings instituted vexatiously etc.
(1)A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.
(2)The party may be ordered to pay the costs only if:
…
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; …
…
EVIDENCE
Imre Hornyak
Imre filed one affidavit, affirmed on 2 October 2020, in relation to penalties and costs.
Penalty
Imre deposed that he accepted the judgment of the Court but had genuinely believed that Attila had not been a SIMS Integrated employee because they had helped out one another with their respective businesses.He also deposed that he had not known that Attila held the qualifications required for classification as an Electrical worker grade 5 under the Award and Attila had not set out cl.B2.5(a) of sch.B to the Award in his amended statement of claim or in evidence.
Imre deposed that he and SIMS Integrated had learned from this proceeding and had taken corrective action, particularly with regard to record keeping. He deposed that Ms Angelo, SIMS Integrated’s administration assistant, had helped him put the SIMS Integrated employment records in order and the company had also bought software to enable “better quality invoicing and service orders”. He deposed that he asked Ms Angelo to “check and double check” the wages of casual employees and sub-contractors and that these were paid weekly or fortnightly. His evidence was that these processes would assist with compliance should another investigation arise but, even prior to this proceeding, he had kept employee records for a former technician. He deposed at para.25 of his affidavit:
The mistake I made in regard to the applicant was having him work for me in circumstances where I did not consider him an employee. I understand now that he was an employee and I was required to pay him a wage and entitlements.
Imre deposed that the proceeding had caused problems for SIMS Integrated with two of its clients and with obtaining finance.He deposed that SIMS Integrated had made the following losses and profits over the previous last four years:
•12 month period ending 30 September 2017 ($84,362)
•12 month period ending 30 September 2018 $263,988
•12 month period ending 30 September 2019 ($91,586)
•12 month period ending 30 September 2020 ($58,102)
Imre deposed that he had received a gross salary of $104,156 for the latter two accounting years and that SIMS Integrated’s net profit before tax for the final quarter of the 12 month period ending 30 September 2020 was $26,586. He deposed that COVID-19 had impacted SIMS Integrated and that this proceeding had impacted his health and marriage.
Costs
Imre deposed that Attila’s statement of claim had sought $67,237.18 in unpaid wages and $4,919.05 in superannuation contributions and that the parties had exchanged the following offers:
(a)on 6 June 2017 Attila’s solicitors made a written offer of $40,000 gross with “corresponding statutory superannuation contributions”;
(b)on 7 July 2017 his solicitors made notice of offer to compromise of $5,000;
(c)on 17 January 2018 Attila’s solicitors made a further written offer of $30,000 for unpaid wages and $2,850 for superannuation;
(d)on 25 January 2018 his solicitors made a written offer of $10,000; and
(e)on 15 February 2018 his solicitors made a further written offer of $14,381.20.
Imre’s evidence was that he refused Attila’s 17 January 2018 offer because he believed that it unreasonably claimed payment for travel and for days not worked.
APPLICANT’S SUBMISSIONS
Penalty
Attila submitted that each of the breaches of the Award was a separate contravention of s.45 of the FW Act, that those contraventions were repeated in nature and that they occurred over a period of more than two years.He submitted that in failing to make payments on time and in the form required by s.323(1) of the FW Act, Imre and SIMS Integrated had contravened that subsection on approximately 24 separate occasions.Attila also noted that the failure to keep employee records was a contravention of s.323(1) of the FW Act.
Attila accepted that under s.557 of the FW Act, all of the various contraventions of each particular Award provision were to be treated as a single related contravention of s.45 of the FW Act and that all of the various contraventions of s.323(1) of the FW Act were also to be treated as a single contravention.He posited that those contraventions totalled 7, to which was to be added the contravention of s.535(1) of the Act. He submitted that it would be appropriate to group the superannuation contravention and the wages contraventions together and to treat the record-keeping contravention as a separate breach.
Attila’s submission was that SIMS Integrated and Imre had committed “deliberate” and “moderately serious” contraventions of the FW Act over an extended period of time. He submitted that the failure to pay him wages was a “deliberate act” by SIMS Integrated and Imre and that, although SIMS Integrated had employed other family members such as Imre, Cathy and Imre’s sister, Imre and it had deliberately decided not to pay him or keep records of his work.
Attila submitted that the dates and times he was positively able to establish were on the lower end of the spectrum of losses but it had been SIMS Integrated’s responsibility to maintain appropriate records and as a result of it and Imre’s “troubling approach and conduct” with respect to the available records:
… there is a tension and circularity in relying too heavily, on the question of penalties, on the amount of lost wages the Applicant was left to be able to prove in the absence of the records that the First Respondent was required to keep in relation to the Applicant’s employment but did not keep.
Attila submitted that senior management was involved because Imre was SIMS Integrated’s controlling mind, chief operative and decision-maker; made all employee-related decisions; directed employees of the business; knew of the April 2013 conversation making the agreement and knew that wages and superannuation contributions had not been paid to or for him.
Attila submitted that no discount should be applied to the penalties awarded because, based on the way in which SIMS Integrated and Imre defended the proceedings, no objective contrition had been shown.
Attila submitted that even if the Court accepted Imre’s evidence at para.25 of his affidavit that not considering him an employee had been a “mistake”:
… absence of a positive intention to contravene, or any other state of mind such as recklessness or wilful blindness, is not mitigatory, but simply means that the neutral state of mind required for liability has not been disturbed for the purposes of penalty.
Attila submitted that to the extent it was relevant to penalty, Imre had provided “unsatisfactory” evidence of SIMS Integrated’s financial performance because he did not provide any corroborating documents or business records even though his evidence had been found problematical and he had not completely explained his or SIMS Integrated’s financial position and performance. Attila submitted that such evidence was therefore of no material assistance on the subject of penalty, authority in any event making it clear that when considering the question of penalty, courts are concerned with general deterrence and so, regardless of the employer’s size or financial position, a meaningful penalty should be imposed. He submitted that although the Court can consider the respondents’ financial position as a relevant factor, this factor is given limited weight when compared to the need for the penalty to provide effective deterrence. Attila submitted that the respondents’ extended failure to pay him what were fundamental entitlements under the FW Act and the Award was a relevant consideration. He also submitted that Imre’s 2 October 2020 affidavit had not demonstrated remorse.
Attila submitted that pecuniary penalties for SIMS Integrated and Imre for contraventions of:
(a)ss.45 and 323(1) of the FW Act should be between 20 to 25% of the maximum (being, $10,200 to $15,300 and $2,040 to $2,550 respectively);
(b)s.535(1) of the FW Act should be between 25 to 30% of the maximum (being $6,375 to $7,650 and $1,275 to $1,530 respectively).
Costs
Attila submitted that SIMS Integrated and Imre had engaged in “unreasonable acts or omissions” that caused him to incur costs and therefore the Court’s discretion to award costs under s.570(2)(b) of the FW Act was enlivened.He submitted that the respondents’ unreasonable acts or omissions included:
(a)not making him aware that the invoices they produced were not those that had been sent to SIMS Integrated’s clients but were, instead, documents from which references to “2x techs”, “AH” and “ATH” had been removed;
(b)Imre’s sworn evidence in his affidavit of 6 December 2017 deposing to the creation of these invoices and the meaning of “AH” and “ATH” to “conceal the fact that Attila’s time had been charged”; and
(c)denying until cross-examination that he, Attila, had performed work for SIMS Integrated and that SIMS Integrated had charged its clients for his work;
Attila submitted that such acts and omissions caused him to incur substantial costs in:
(a)issuing subpoenas to SIMS Integrated clients;
(b)analysing the invoices against those produced under subpoena and preparing the affidavit of Stephen Crawford sworn, 30 August 2017;
(c)analysing Imre’s 525 paragraph affidavit affirmed 6 December 2017; and
(d)preparing for and undertaking lengthy cross-examinations of Imre and Cathy.
He submitted that these steps would not have been required had SIMS Integrated and Imre produced correct copies of the invoices, not invented untrue meanings for “AH” and “ATH”, not claimed that he had not performed work, or attempted to conceal the fact it had billed clients for his time. Attila submitted that s.570(1) of the FW Act was not supposed to “insulate” a party who “misled”, “misdirected” or “invented” a defence or propositions to the opposing party’s detriment and expense. He submitted that in these circumstances the Court should order SIMS Integrated and Imre to:
… jointly, severally or jointly and severally pay 50% to 60% of [his] costs of the Proceedings as agreed or assessed up to 2 July 2020.
RESPONDENTS’ SUBMISSIONS
Penalty
The respondents submitted that all the contraventions should be grouped together and treated as one contravention:
… because the contraventions are for the same conduct or for overlapping parts of the same conduct as the conduct was a failure to understand that the applicant was to be treated as an employee and as such no employment records were made and no payments of wages or superannuation were made.
The respondents submitted that when compared to other contravention proceedings, this one was unusual in that Attila and Imre’s relationship and conduct was “informal” in nature. They submitted that it was also relevant that Imre had made and kept employment records and complied with the FW Act in relation to a technician whom he had employed before Attila worked with him, whereas Imre had “genuinely believed” that Attila had not been an employee. The respondents submitted that it was not straightforward to determine whether a family member was an employee and so it was not an unreasonable mistake for Imre to have made and was one which he admitted. They submitted that it was not suggested that Imre’s conduct was “intentional”, “wilful” or that he “took advantage of” Attila. The respondents submitted that it was contrary to findings in the First Judgment and not supported by Attila’s evidence to say that their failure to pay, or keep records in relation to, Attila was “deliberate”.
The respondents submitted that they had fully complied with the 11 November 2020 orders and paid Attila $13,653.33 for wages, $1,278.68 in superannuation and $4,576.87 in interest.
The respondents submitted that Attila claimed $67,237.18 in unpaid wages whereas the Court found he had been underpaid $13,653.33. They also submitted that he claimed payments for three months during which he had not performed work and for travel time without legal entitlement.
The respondents submitted that SIMS Integrated was a “micro business” with two employees which made under $30,000 in profit between 2016 and 2020 and, due to the impact of COVID-19, would have to obtain a loan for any future payment.
The respondents submitted that by acknowledging he had made a “mistake” and that he had learned lessons, Imre demonstrated contrition and remorse on behalf of himself and SIMS Integrated. They also submitted that Imre’s health, marriage and work had been impacted by the proceeding.
The respondents submitted that re-offending by Imre or SIMS Integrated was “highly unlikely”. They submitted that the contraventions were in the category of an unintentional an inadvertent breach by a small business operator who lacked experience and misunderstood the common law, Award and legislation.They also submitted that because this case was “peculiar” and other employers were unlikely to follow the respondents’ approach, general deterrence was not a relevant factor.
The respondents submitted the Court should consider that in any practical sense, Imre would bear any penalty imposed upon him and SIMS Integrated.
The respondents submitted that when determining whether or not to award penalties, it was appropriate to consider that Attila had (ultimately) been paid the unpaid wages and entitlements and that they had had to defend a hopeless ambit claim that Attila:
(a)had worked between May, June and July 2013, whereas his first day with SIMS Integrated had been 3 August 2013 and his second day was not until 28 August 2013;
(b)had worked every day from 6:30am to 5:00pm but the updated table showed he usually worked less than half a day on each occasion; and
(c)was entitled to be paid travel time of three hours but had no legal basis for that claim.
The respondents submitted that they had “already suffered substantial punishment” and that this was something that the Court should consider.
Costs
The respondents argued that Attila’s submission that Imre had denied:
… all the way until cross-examination that the applicant even did any ‘work’ for SIMS [Integrated],
was incorrect. They submitted that, rather, Imre had given evidence that he did not believe Attila had performed work as a SIMS Integrated employee but had instead attended worksites to “hang out” and to learn electronic systems by assisting. They submitted that their denial that Attila had been employed by SIMS Integrated was their defence, not an “act or omission” causing costs to be incurred.
The respondents also denied that Attila had incurred additional costs by issuing subpoenas because the invoices they tendered “was an unreasonable act” [sic] as the documents requested of them had been different from the documents subpoenaed. They argued in this regard that Attila had sought from them documents including the following:
a.invoices issued by the first respondent to Sanitarium and Colgate Palmolive, any clients for work performed on the M7 and clients in Kurrajong.
b.MYOB statements showing income received from Sanitarium and Colgate Palmolive from 1 May 2013 to 26 June 2015,
c.Correspondence between SIMS Integrated and or Imre and Sanitarium, Colgate and clients of SIMS from 1 May 2013 to 26 June 2015,
whereas the documents Attila had subpoenaed from Sanitarium, Colgate and Sodexo had been:
a. Documents recording Attila being at the site
b. Sign in books
c. Induction documents
d. Invoices issued by SIMS Integrated from 1 May 2013 to 26 June 2015.
The respondents argued that there was no evidence that the subpoenas had been issued because of the state of the invoices they had produced to Attila.
The respondents also submitted that it was incorrect to submit, as Attila had, that it had been necessary to cross-examine Imre at length:
… because he failed to admit prior to the cross-examination that SIMS Integrated did not charge out for Attila’s time, [sic]
because he had never denied that Attila had attended work sites and assisted him from time to time, although his evidence:
… was that he did not believe that Attila was an employee of SIMS Integrated and performed “work” as an employee.
The respondents further submitted that Attila’s conduct during the proceeding was relevant in that he only provided a copy of the Award after closing submissions; failed to address the Award’s definition of Electrical worker grade 5 in pleadings, evidence or submissions; did not provide evidence of any qualifications required of an Electrical worker grade 5 and did not identify that he relied upon cl.B.2.5(a)(iii) of the Award. They submitted that, as a result, they did not have an opportunity to lead evidence about, or question Attila on, the required qualifications, skills and knowledge. The respondents submitted that they disputed his qualification as an Electrical worker grade 5 but had not had an opportunity to address the Court on this matter.
The respondents submitted that even if they were found to have acted or omitted to act in an unreasonable manner they had not caused Attila to incur costs.
Respondents’ costs from 19 February 2018
The respondents submitted that Attila’s failure to accept their 15 February 2018 settlement offer of $13,163.53 for unpaid wages and $1,217.67 for superannuation was “imprudent”, “without reasonable cause” and an “unreasonable act” which caused them to incur costs. The offer had been open for acceptance for 4 days, two of which fell on a weekend, the trial resuming on the day after the offer closed.
They submitted that this offer reflected calculations based on Attila’s “New Spreadsheet” (see First Judgment at [235], [238]); treated him as a “Level 5 electrical technician”; had not included travel time, to which they contended in the letter making the offer that Attila had no entitlement; and referred to the fact that the one day set aside for cross-examining Cathy, 20 February 2018, would not help Attila to prove that the Award applied.They submitted that there had never been any prospect of success in relation to the claim for travel time and for the number of days worked.
The respondents sought:
(a)a third of their costs up to 19 February 2018 on the indemnity basis or alternatively on the party and party basis; and
(b)their costs thereafter on the indemnity basis or alternatively on the party and party basis; or
(c)a third of their costs of the proceeding on the indemnity basis or alternatively on the party to party basis.
Third Respondent’s costs claim
Cathy submitted that Attila should pay her costs because it was unreasonable that she had been joined as a respondent based on an allegation that she had been an accessory to the contraventions. She submitted the claim against her lacked a legal and factual basis and that it should have been apparent to Attila, properly advised, that the claim against her had no reasonable prospects of success. She argued that Attila’s claim was against Imre and that she was “simply collateral”. Cathy submitted that there was no pleading or evidence that she had any authority to employ Attila on behalf of SIMS Integrated, that she had decided to employ Attila, that she had decided to not pay wages and entitlements to him, that she had been the directing mind and will of SIMS Integrated or that she had been aware of the operation of the Award, the FW Act or the FW Regulations.
Cathy submitted that she:
… was an officer and shareholder of SIMS Integrated and was employed by it to manage invoicing and other administrative matters. [Attila] alleged that Cathy was a witness to a conversation he had with Imre about performing work for SIMS Integrated. The pleadings never went any higher. At the commencement of the proceeding, there was no legal basis to assert that Cathy had the knowledge of the essential matters that made up any of the contraventions alleged.
Cathy submitted that the proceeding against her was “incompetent or hopeless” because the statement of claim failed to particularise material facts supportive of the allegation that she had “aided”, “abetted”, “counselled”, “procured”, “induced” or was “knowingly concerned in or a party to” the contraventions and the situation was not improved by her day-long cross-examination.
CONSIDERATION
Penalty
In Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157, Kiefel CJ, Keane, Nettle and Gordon JJ said:
… the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. (at 195 [116])
In this case, the question of penalty is to be determined as follows:
(a)the Court is to identify the separate contraventions involved. Each contravention of a separate obligation in the Award and the FW Act is a separate contravention: Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223; Kelly v Fitzpatrick (2007) 166 IR 14 at 17 [11]; McIver v Healey [2008] FCA 425 at [16]; Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153 at 159 [13]; Fair Work Ombudsman v Lohr (2018) ALR 424 at 436 [29];
(b)the Court should consider whether contraventions resulting from any particular course of conduct ought to be treated as a single contravention under s.557(1) of the FW Act; (“course of conduct”);
(c)because a contravener should not be penalised twice for what is, in substance, the same conduct, to the extent that two or more contraventions arise out of the same course of conduct or the one transaction, that fact should be taken into account when considering whether a “concurrent” or single penalty should apply to those contraventions: Johnson v The Queen (2004) 78 ALJR 616 at [4]-[5]; Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [61] - [63]. Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243 at 294-296 [226]-[234], (the “course of conduct” or “grouping” principle). These considerations are distinct from the totality principle: Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at 396 – 398 [41]-[46] (per Stone and Buchanan JJ);
(d)the Court should determine an appropriate penalty to impose in respect of each contravention that is to be penalised (whether a single contravention, a course of conduct or group of contraventions) having regard to all of the circumstances of the case; and
(e)having fixed an appropriate penalty for each contravention or group of contraventions, the Court should consider the aggregate penalty to determine whether it is an appropriate response to the contravening conduct: Kelly v Fitzpatrick at 21 - 22 [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560, (the “totality principle”).
As Tracey J said in Kelly v Fitzpatrick at 18-19 [14], in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mowbray FM identified “a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty”. Justice Tracey adopted those considerations, describing them as follows:
•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.
•Whether the party committing the breach had cooperated with the enforcement authorities.
•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.
Considerations relevant to this case are:
(a)the nature and extent of the conduct which led to the breaches and the circumstances in which that conduct took place;
(b)the nature and extent of any loss or damage sustained as a result of the breaches;
(c)whether there had been similar previous conduct by the respondents;
(d)whether the breaches were properly distinct or arose out of the one course of conduct;
(e)whether or not the breaches were deliberate;
(f)whether the party committing the breach has exhibited contrition and taken corrective action;
(g)whether the party committing the breach had co-operated with the complainant;
(h)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
(i)the need for specific and general deterrence.
The nature, extent and circumstances of the contraventions
The detail of the contraventions was set out in the First Judgment and summarised earlier in these reasons at [5]. In brief, SIMS Integrated did not pay Attila the wages to which he was entitled for the work he did for it, failed to make associated superannuation contributions, failed to make and keep prescribed records concerning his casual employment and Imre was involved in those contraventions as an accessory.
The nature and extent of any loss or damage sustained as a result of the breaches
Attila was underpaid $14,932.01 and was awarded that sum together with interest. Attila did not contend that the lack of those payments caused him any particular or general difficulty. It is recorded in the First Judgment at [37] that he was content for Imre to put his wages aside as he was already earning well enough to not need them for quotidian expenses. Nevertheless, I infer that their absence was not inconsequential to him, at least from the point when he sought and was refused payment.
Whether there had been similar previous conduct by the respondents
The evidence did not support a conclusion that the respondents had engaged in similar or indeed any contravening conduct at any earlier time.
Whether the breaches were properly distinct or arose out of the one course of conduct
I reject the respondents’ argument that all the contraventions should be grouped together because they arose out of what they submit was a failure on Imre’s part to understand that Attila “was to be treated as an employee” with the consequence that he was not paid and no records were kept. While I accept the parties’ submissions that the wages and superannuation contributions breaches should be grouped together on the basis that they were different sides of the same coin, namely a failure to pay wages and entitlements, a failure to keep necessary records is quite separate conduct. Even were I to accept that Imre did not believe Attila was a casual employee, which would be inconsistent with the findings of fact made in the First Judgment, his understanding is not the issue. The issue is whether imposing two penalties would see the same conduct penalised twice. That would not be the consequence of imposing separate penalties for payment contraventions and record-keeping contraventions.
Whether or not the breaches were deliberate
The foundational factual questions were whether in April 2013 Imre had asked Attila to work with him on a casual basis and whether Imre had told Attila that he would be paid for his work. From the First Judgment’s affirmative answers to both of those questions flowed the other findings and the ultimate conclusion that Attila had been underpaid, in the sense of not having been paid at all. The findings on those foundational questions also support the conclusion that the breaches were deliberate because the respondents knew that they had agreed to pay Attila for his work and yet had not done so. The respondents submitted that they did not appreciate that the April 2013 conversation had the effect of creating legal relations between SIMS Integrated and Attila but the fact remains that they agreed that he would work for and be paid by the business and he was not paid when he decided to end the arrangement by which his wages were put to one side by SIMS Integrated to be applied to a family holiday. The respondents’ firm position was that they owed Attila nothing in the way of wages and their failure to pay cannot be seen as anything but deliberate.
The failure to keep records reflects a lack of intention to pay wages. In addresses the respondents submitted that this arose out of their belief that there was no employment relationship. Regardless of whether that was true, the respondents nevertheless had agreed to pay Attila for his work and no attempt was made to demonstrate that any attention had been paid to recording how much he was owed from time to time.
Whether the party committing the breach has exhibited contrition and taken corrective action
I accept that Imre has taken steps to ensure that the records of SIMS Integrated are properly maintained. I also accept that the monetary compensation ordered on 18 September 2020 has been paid.
However, in his 2 October 2020 affidavit filed in this part of the proceeding, Imre relevantly deposed:
15.I rely on my evidence in these proceedings. I accept the Judgment of the Court.
16.All of the breaches occurred because I genuinely did not believe that my brother, the applicant was an employee, as we assisted each other with our respective businesses. This is the reason why I did not pay him a salary at least monthly or make superannuation contributions or make or keep employment records.
17.As I did not ever think to ask for a wage or payment in respect of his business as he was a family member I assumed the same was reciprocated.
…
25.The mistake I made in regard to the applicant was having him work for me in circumstances where I did not consider him an employee. I understand now that he was an employee and I was required to pay him a wage and entitlements.
In light of what is said in that quotation, I am not persuaded that Imre did accept the findings in the First Judgment, particularly those at [198], that in April 2013 he and Attila agreed that Attila would work for SIMS Integrated on an ad hoc basis, and at [206], that Attila would be paid for his work. I conclude that Imre has not accepted those findings and still wishes to press the version of events that has been rejected. For instance, in his written submissions it was said:
There is no suggestion that Imre took advantage of Attila or that the conduct was intentional or even wilful.
It is difficult to reconcile that statement with the findings in the First Judgment that SIMS Integrated refused to pay Attila wages he was owed. The fact that there was a dispute as to the amount that ought to have been paid is not exculpatory. Because of the paucity of available records, the amount awarded by the Court reflected only the best approximation of what was owed rather than a precise determination. That lack of precision as to the amount owed was the product of the respondents’ poor record-keeping and is not a matter they can rely on to mitigate the significance of their failure to pay Attila when he sought payment.
Whether the party committing the breach had co-operated with the complainant
Relevant to the question of co-operation are the respondents’ submissions concerning whether any penalty should be imposed. They argued:
In determining whether or not it is appropriate to award any penalties, it is appropriate to consider that the respondents have paid the underpayments of wages and entitlements with interest and have had to defend an ambit claim which was at all times hopeless and doomed to fail.
Although the respondents told Attila that he would be paid for his work for them, that did not occur and this proceeding was brought to enforce that right once a demand for payment was not satisfied. The characterisation of Attila’s claim as ambitious reflects the uncertainties arising out of the respondents’ failure to keep records that could verify or refute Attila’s claims. Relevantly, no evidence was adduced to suggest that the respondents acknowledged any liability prior to the commencement of this proceeding, or subsequently in the form of an open offer. I find there to have been no relevant co-operation.
The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements
The payment of wages and the recording of prescribed information which permits an employee’s wages entitlements to be determined with accuracy and confidence are essential elements of the industrial regime regulated by the FW Act and the FW Regulations. It is of great importance that employers comply with those obligations and that the setting of penalties in this case tend to maintaining compliance by discouraging contrary behaviour.
The need for specific and general deterrence
I accept that the conduct seen in this matter is unlikely to be repeated by the respondents but it is nevertheless important to mark the Court’s disapproval of it by setting penalties which send a message that, regardless of the context, underpayment and record-keeping contraventions will not be tolerated if there is an employment relationship. The penalties to be imposed will reflect that need for general deterrence.
Penalties
I find that SIMS Integrated should pay a penalty of $10,000 for its contraventions of ss.45 and 323 of the FW Act and should also pay a penalty of $6,000 for its contravention of s.535 of that Act. Those penalties total $16,000 which I consider just and appropriate.
I find that Imre should pay a penalty of $2,000 for his contraventions as an accessory of ss.45 and 323 of the FW Act and should also pay a penalty of $1,200 for his contravention as an accessory of s.535 of that Act. Those penalties total $3,200 which I consider just and appropriate.
Costs
First and second respondents
The first, and most important, costs issue between Attila on the one hand and SIMS Integrated and Imre on the other is whether the former incurred costs because of unreasonable conduct on the part of the latter. In the First Judgment it was relevantly recorded:
Copies of SIMS Integrated invoices were introduced into evidence. Invoices that SIMS Integrated’s clients produced on subpoena were different in material respects from the versions of the same invoices produced by SIMS Integrated, most notably and importantly the latter did not contain information regarding Attila and his attendances at client’s premises or, ostensibly, fees invoiced for the time engaged.
… [Imre] deposed that as the invoices transferred from MYOB had already been issued to and paid by the clients, the descriptions in the Xero version of the invoices did not need to include a detailed breakdown of costs, including labour costs. (First Judgment at [79], [80])
Considerable effort was expended in connection with and because of the existence of two sets of invoices which purported to record the same events in different terms and I consider the respondents’ arguments in relation to them, summarised earlier at [39], to verge on the disingenuous. The real issue was not whether subpoenas had to be issued by Attila but that work arose out of the facts that they were issued and that invoices different from the ones already provided by the respondents were produced in response. Further, the argument that there was no evidence that the invoices produced by the respondents led to Attila’s subpoenas being issued distracted from and failed to engage with the fact that the two sets of documents were divergent and that this led to time being devoted to them. The First Judgment at [189] rejected Imre’s evidence concerning how the later Xero version of the invoices on one computer were created from the earlier MYOB version on another computer, it being observed at [187] that:
… Imre says:
(a)over the course of seven months he was personally involved in the manual transfer of the information;
(b)he was not personally involved in the manual transfer of the information; and
(c)the words “printed from MYOB - … ” were automatically transferred from one computer to another in a manual process.
I accept Attila’s submission that:
The policy behind s.570(1) of the Act is not to insulate a party, no matter what, from an adverse costs order where that party seeks to found a claim or defence on propositions that mislead or misdirect and worse are invented (to the financial detriment of the opposing party who incurs substantial costs in then having to establish that the invented claims are untrue).
I find that leading the Xero invoices in evidence was an unreasonable act because they presented an incomplete and misleading picture of who did what work and whose work was invoiced. Those documents tended to be supportive of the respondents’ arguments that Attila did no work of billable value and that his time was not charged to clients, arguments which were disproved. As Attila submitted:
[SIMS Integrated and Imre’s] unreasonable acts and omissions include:
a)the production of the Purported Invoices to the Applicant;
b)the production of the Purported Invoices to the Applicant with no advice, indication or intimation that the Purported Invoices were not copies of invoices sent by the First Respondent to its clients but were in fact another document entirely in the patently material respect that they removed references to matters such as “x2 techs” with separate charges, “AH” and “ATH”;
c)the giving by the Second Respondent of the [rejected] sworn evidence in the 525 Paragraph 6 December 2017 Affidavit regarding the creation of the Purported Invoices …
…
It is to be noted that the generation and content of the various invoices was central to the Court’s findings as to Imre’s credit and that those findings were, in turn, foundational of the ultimate findings in the matter. I find that Attila incurred costs because of unreasonable conduct by SIMS Integrated and Imre.
SIMS Integrated and Imre argued that, regardless of such matters, the exchange of offers demonstrated that Attila’s pursuit of the proceeding and his related failure to settle it was unreasonable and that they were entitled to at least some of their costs. However, as the respondents’ final offer was $14,381.20 and Attila was awarded $19,508.88 inclusive of interest, I conclude that it was not unreasonable of Attila to have not accepted the offer. No costs consequences adverse to him result from the fact that he did not accept it. To the extent that the respondents submitted that Attila’s claims were ambitious and unreasonable and that they were entitled to costs as a consequence, I repeat the earlier observation that that argument reflects the uncertainties arising out of the respondents’ failure to keep records which could verify or refute Attila’s claims. I further observe that that is not a matter the respondents can rely on to demonstrate that it was unreasonable of Attila to claim what he said he was owed according to his own recollection and limited records.
I find that SIMS Integrated and Imre are to pay so much of Attila’s costs as are not attributable to his unsuccessful allegations against the third respondent, Cathy. I assess the proportion payable to be 60%.
Third respondent
Cathy has sought her costs of defending the unsuccessful claim brought against her by Attila, submitting that it had had no reasonable prospects of success. The relevant allegations were:
30.The Second Respondent and Third Respondent were aware that the Applicant was performing work for the First Respondent during the Employment and that the Applicant was not being paid wages or receiving superannuation contributions in relation to this work.
31.The Second Respondent and Third Respondent were aware from at least 26 June 2015 that the Applicant was pursuing the money owed to him for work performed for the First Respondent during the Employment.
32.The Second Respondent and Third Respondent were involved in the contraventions of section 45 and section 323 of the FW Act and section 535 of the FW Act by the Respondent because they:
- Aided, abetted or procured the contraventions;
- Induced the contraventions; and/or
- Were knowingly concerned in the contraventions.
In the First Judgment Attila’s evidence that his April 2013 conversation with Imre, which was the basis of their agreement, had taken place in Cathy’s presence was accepted.It was also found that Cathy knew that Attila was working on SIMS Integrated worksites because she saw the communications documents and learned of it through her interactions with Imre and Attila. However, although she was nominally the director and secretary of SIMS Integrated, the totality of the evidence indicated that her role was a limited one and that she did not exercise any executive control. Also, there was no evidence of her having been involved in decisions concerning payments to Attila, of having been aware of the Award or of having had any responsibility for maintaining employee records.
On their face, the allegations made against Cathy were arguable, in that they disclosed a reasonable cause of action, and would not have supported a finding that they be struck out. They also raised a real or genuine dispute as to material facts that might reasonably have been resolved in Attila’s favour and so would not have been dismissed for want of reasonable prospects of success. As has just been noted, it was contended and proved that Cathy was present during the April 2013 conversation, knew that Attila was working on SIMS Integrated worksites and was director and secretary of SIMS Integrated. Attila deposed in his affidavit affirmed 29 May 2017 at [4], as recorded in the First Judgment at [61], that Cathy was involved in the daily running of the business and performed duties such as bookkeeping, emails, correspondence with clients, inductions, payroll and answering the work phone. In such circumstances it was not unreasonable of Attila to allege that she was involved, in the relevant sense, in the underpayment and record-keeping contraventions. The fact that that case was ultimately not made out does not mean that it was hopeless and bound to fail.
It was also submitted on behalf of Cathy that Attila’s pleading had been inadequate for lack of reference to material facts relevant to her. However, the present issue is not determined by the manner in which Attila’s case against Cathy was pleaded but whether, in substance, he had had nothing worthy of being pleaded. I do not find that to have been the case. The further submission, that the hearing time devoted to the cross-examination of Cathy was wasted time, ignores the fact that her evidence was relevant to more issues than just the allegations against her specifically.
I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 27 June 2022
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