Lang v Xidis Pty Ltd - [2008] FMCA 1009

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LANG v XIDIS PTY LTD & ANOR

[2008] FMCA 1009

INDUSTRIAL LAW – Determination of penalty for admitted multiple contraventions of Workplace Relations Act New South Wales Award – application s.719 – totality principle

Workplace Relations Act 1996, ss.253(2), 719(2)

Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70
Kelly v Fitzpatrick [2007] FCA 1080

Applicant:

INSPECTOR DARREN JOHN LANG

First Respondent:

XIDIS PTY LTD TRADING AS EFFECTIVE SUPERMARKET SERVICES ACN 097 227 659

Second Respondent:

NICK IKSIDIS

File number:

SYG 2960 of 2007

Judgment of:

Burchardt FM

Hearing date:

17 June 2008

Date of last submission:

17 June 2008

Delivered at:

Melbourne

Delivered on:

31 July 2008

REPRESENTATION

Counsel for the Applicant:

Mr M.J. Follett

Solicitor for the Applicant:

Corrs Chambers Westgarth

Counsel for the Respondents:

Mr J.L. Snaden

Solicitor for the Respondents:

Tisher Liner & Co

ORDERS

The First Respondent shall pay a penalty of $120,000.00 payable to the Consolidated Revenue Fund.
The said $120,000.00 be paid as follows:
(a)First payment of $10,000.00 on or before 30 September 2008.
(b)Thereafter $10,000.00 per month paid on or before the 30th day of each succeeding month for 11 months.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

SYG 2960 of 2007

INSPECTOR DARREN JOHN LANG

Applicant

And

XIDIS PTY LTD TRADING AS EFFECTIVE SUPERMARKET SERVICES ACN 097 227 659

First Respondent

NICK IKSIDIS

Second Respondent

REASONS FOR JUDGMENT

The issue before the Court is the level of penalty that should be imposed upon the First Respondent for 12 admitted contraventions of the Workplace Relations Act 1996 (“the Act”).
On 4 March 2008 by consent I made orders that set out the 12 contraventions. The parties have filed copious materials, but more importantly have filed an agreed statement of facts on 11 April 2008. From the agreed statement of facts it is apparent that there is no issue as to the appointment of the Applicant, Inspector Lang, or his capacity to bring the proceedings.
Xidis Pty Ltd is a company limited by shares. The Second Respondent, Nick Iksidis, is the sole director, company director and sole shareholder of the First Respondent. Xidis Pty Ltd trades as Effective Supermarket Services and provides trolley collection services to supermarkets in Victoria and New South Wales.
The Second Respondent has at all times had complete control over the affairs of the First Respondent. No penalty is sought against the Second Respondent in this proceeding because he has undertaken to pay any penalty imposed upon the First Respondent personally.
At all times up until May 2007, the First Respondent employed about 80 to 100 people. In the period leading up to 29 May 2007, the First Respondent outsourced its trolley collection services at three sites in the Albury region to another company, and thereafter has employed about 85 people.
The First Respondent employed over 40 employees who were simply not paid entitlements to which they were entitled by the Shop (Employees) State Award, which was a New South Wales award which became subject to the Act and became a notional agreement preserving a state award (“NAPSA”) under the transitional arrangements in the Workplace Relations Act 1996. As is set out in the agreed statement of facts at paragraphs 12-20, and reflected in the consent orders earlier made by this Court, 42 employees were not paid entitlements in respect of no less than 12 categories of such payments to which they were entitled either pursuant to the Act or more generally to the NAPSA.
The total amount of moneys underpaid to the employees is agreed to have been $102,724.71, and the amounts underpaid were in a number of instances substantial for employees paid on the admitted payment rate of either $12.50 or at its highest $12.75 in New South Wales.
Although this was not the subject of agreement, I am satisfied on the evidence, most particularly that of Mr Smith and Mr McPhee, that a not insubstantial number of the employees who did the trolley collection work that the Respondents organised were the subject of disability. I accept, as counsel for the Applicant submitted, that they were not chosen unwittingly by the Respondents for this work.
I also accept that the employees were given contracts of employment of considerable complexity. The complexity of these contracts, governing as they did matters totally irrelevant such as ownership of inventions and the like, were given to them not inadvertently but as I find as part of a general tactic by the employer to intimidate the employees.
I further accept that the responses of the First and Second Respondents to such queries as were made by the employees as to their rates of pay were met by aggressive, legally oriented and threatening correspondence.
Mr Iksidis chose a workforce that he knew or suspected would be pliable, and bullied them if they complained. Nonetheless, in time complaints burbled to the surface and in due course the Applicant became involved.
Much of the proceeding before me involved questions as to the extent to which the Respondents had cooperated with Inspector Lang's inquiries. Contrary to the submissions for the Respondents, I do not accept that the conduct of the Respondents has been “exemplary”

(see Respondents’ submission paragraph 11). An examination of the affidavit material shows that Inspector Lang had to sort out a large number of matters before all employees were paid the moneys they were owed. The tenor of the correspondence from Messrs Tisher Liner on behalf of the Respondents was in my view at best only as cooperative as it needed to be, and at worst querulous and argumentative.
The affidavit material filed on behalf of the Respondents, being the affidavit of Mr Iksidis himself, is largely self-serving and shows but little insight into the nature of his conduct. Nonetheless, I accept that in the ultimate an agreed statement of facts has been produced, all underpayments have in the ultimate been rectified (albeit with a grudging assertion by Mr Iksidis that he is only doing so because he is unable himself to check the relevant figures).
I have considered all the affidavit material in forming my conclusion. Matters that I regard as being of particular significance are the following:
a)
The letter sent by Mr Iksidis to Tim Lansdown was one

Mr Iksidis said in evidence he did not regard as a threat. This was a letter to an employee who raised his entitlements, and it plainly threatened defamation proceedings in an aggressive and offensive way. It was clearly a threat.
b)Mr Iksidis conceded that he had written to Mr Popov threatening him with defamation action. Likewise, this was totally inappropriate. I find that both responses by Mr Iksidis were designed to stifle complaints, contrary to Mr Iksidis' express evidence otherwise.
c)Mr Iksidis said he had no means of verifying hours worked, other than by checking rosters. This ignored the fact that any deficiency in the accurate recording of time worked was wholly a matter for his own organisation, bearing in mind that it was his job under the legislation through his company to ensure that time sheets were provided and properly maintained.
d)I do not accept the evidence given by Mr Iksidis that hours of work were not tampered with to ensure that they fell within budgetary constraints imposed by him. I find as Mr Smith has deposed (and he was not required for cross-examination) that employees were paid as much as the budget was prepared to provide.
e)I accept, as is indeed in the ultimate unarguable, that the Respondents took no steps to discovering what their compliance obligations were in New South Wales. Much was made of the fact that a large proportion of the underpayments and contraventions arose because the Respondents had applied in New South Wales the terms of an award that was plainly, according to its face, only applicable in Victoria.
f)Even if the Respondents had reasonably failed to see what to my mind is fairly obvious, namely that the Victorian award was applicable to Victoria only, it is certainly clear that they were at the best negligent and at the worst totally uncaring about finding out whether they had any different obligations in New South Wales.
g)Furthermore, I accept that the failure to pay annual leave as required was deliberate.
h)I accept, as the Applicant submitted, that the Respondents exploited vulnerable employees.
i)I further find that the attempts by the Respondents, as it were, to show that others had made the same mistake as they, particularly in relation to the assertion that Mr McPhee had not understood the award, do them no credit. Mr McPhee is not an industrial officer or lawyer. He is an employee of an organisation designed to assist disabled people. There is nothing to suggest that he has or ought to have expertise in industrial instruments. This desire to pass the buck likewise does the Respondents no credit.
j)Furthermore, I reject the criticism of the conduct of the Applicant, Inspector Lang, which was expressly raised by counsel for the Respondents. I do not think there was anything unreasonable in the Applicant issuing proceedings when he did. He had been through a number of investigations in an endeavour to isolate accurately the true position. He had scarcely been met with fulsome cooperation. The Respondents had on a number of occasions indicated that all relevant payments had been made when, as it transpired, they had not.
k)Further, the Respondents’ submissions fail totally to give credit to Inspector Lang’s obligation as delegate of the Workplace Ombudsman to pursue matters such as this in the courts to ensure general deterrence.
l)Finally, the Respondents have committed other contraventions of industrial law as shown by Exhibit A1.

The size of penalty

It needs to be borne well in mind that the conduct of the Respondents was to an extent a course of conduct. The things that they did wrong to one employee, they did to a number of others. The Respondents already have the benefit of s.719(2) of the Act in limiting the contraventions to 12.
There is, as counsel for the Applicant conceded, a measure of overlap in the various offences. Nonetheless, 12 discrete contraventions of the legislation have been established. I accept the concession of Inspector Lang that the contraventions of s.253(2) of the Act and of clause 23 of the NAPSA overlap. I accept the Respondents should not be penalised twice for the same conduct (See Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 (“Ophthalmic Supplies”) per Graham J at [46]). This is a separate matter from the application of the totality principle (see Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 (“Mornington Inn”) at [41]-[46] per Stone and Buchanan JJ). I have decided in view of the concessions by counsel for the Applicant to treat the four contraventions of s.253(2) of the Act and clause 23 of the NAPSA as two contraventions only.
The contraventions involved substantial amounts of money, which would have been enormous amounts to employees earning the low wages the employees concerned were being paid.
Against this, I accept that there is little risk of further contravention in New South Wales by the Respondents. They have outsourced most of their work in that state and are not likely to make the same mistake again. I also note the steps taken to ensure compliance with awards more generally, including joining the Australian Industry Group (“AIG”) (see Iksidis affidavit paragraphs 66-68). Specific deterrence, therefore, has little work to do.
Nonetheless, and based on the affidavit material of Mr Price, it is apparent that this is an industry with what might be described as widespread problems. General deterrence has a significant role to play.
I bear in mind however, the fact that this is in the ultimate a relatively new business with a small level of profitability. It is more probable than otherwise that Mr Iksidis will have to bear personally through borrowing the cost of any fines that I impose.
Nonetheless, likewise I bear in mind the remarks of Tracy J in Kelly v Fitzpatrick [2007] FCA 1080 at [28] that:
“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”: see Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd [2001] ATPR 41-815 at [13].”
I bear in mind all those matters standing to the credit of the Respondents, which are expressly agreed by the Applicant. To the extent that there is any argument, I accept the position of the Applicant as to the Respondents’ conduct and motives. This is not a case that calls for a very substantial discount.
This was a case involving a number of disabled people. All the employees involved in this sort of work were likely to be vulnerable to a greater or lesser extent. Supermarket trolley return is, after all, scarcely at the top of the employment pecking order. It is reasonable to suppose that those doing this work were desperate for the employment. They were given deliberately confusing contracts of employment and bullied if they stood up for their rights.
The maximum penalty for each contravention is $33,000.00. In my view the appropriate penalty is, in all the circumstances, in the lower to middle part of the range.
In all the circumstances I think I should impose a penalty of $12,000.00, somewhat less than half the maximum for each contravention. That produces a total of $12,000.00 times 10, a sum of $120,000.00.
Finally, I must consider the penalty in the light of the totality principle, as explained in Ophthalmic Supplies and in Mornington Inn.
In my opinion, in all the circumstances of this case, the total of $120,000.00 is “just and appropriate” (Mornington Inn per Gyles J at [33] quoting Mill v R (1988) 166 CLR 59). The orders made by consent expressly confirm 12 classes of contravention all involving numerous employees.
The Respondents already have both the benefit of s.719 of the Act and of my grouping four contraventions into two contraventions.
While the penalties I impose produce a substantial figure they are not in all the circumstances excessive (Ophthalmic Supplies at [102] per Buchanan J). While the evidence shows that Mr Iksidis will pay this sum personally, given his age and undoubted energy there is no reason (and indeed there is no evidence) that it will impose a crushing burden.
Even if I am wrong on this last point, I still think the level of overall penalty is appropriate in the light of the facts of this case as I have found them above.
I will hear the parties as to time for payment. By consent, the $120,000.00 will be payable to the consolidated revenue fund.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate: Brooke Evans

Date: 31 July 2008