Mathieson v South End Mixed Business (No.2)

[2014] FCCA 2910

FEDERAL CIRCUIT COURT OF AUSTRALIA

MATHIESON v SOUTH END MIXED BUSINESS (No.2) [2014] FCCA 2910

Catchwords:
INDUSTRIAL LAW – Application for imposition of civil penalties – applicant seeking payment of penalties to herself – consideration of matters relevant to penalty – applicant defrauding Centrelink – order that penalty be paid to the Commonwealth.

Legislation:  

Fair Work Act 2009, ss.539(2), 557
Workplace Relations Act 1996

Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7

Kelly v Fitzpatrick (2007) 166 IR 14

Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560

Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58

National Tertiary Education Industry Union v Central Queensland University [2008] FCA 481
Finance Sector Union v Australia and New Zealand Banking Group [2002] FCA 1035

Applicant: BETH LENNESE MATHIESON

Respondents: MARJORIE NEILD & KEITH GEORGE NEILD TRADING AS SOUTH END MIXED BUSINESS

File Number: MLG 650 of 2012

Judgment of: Judge Burchardt

Hearing date: 31 October 2014

Date of Last Submission: 31 October 2014

Delivered at: Melbourne

Delivered on: 18 December 2014

REPRESENTATION

Counsel for the Applicant: Mr McKenna

Solicitors for the Applicant: Beck Legal Pty Ltd

Counsel for the Respondents: Mr McKenney

Solicitors for the Respondents: Not Applicable

ORDERS

1. A penalty of $5,000 is imposed upon the respondents.

2. The same be paid to the Commonwealth Consolidated Revenue Fund.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT MELBOURNE

MLG 650 of 2012

BETH LENNESE MATHIESON

Applicant

And

MARJORIE NEILD & KEITH GEORGE NEILD TRADING AS SOUTH END MIXED BUSINESS

Respondents

REASONS FOR JUDGMENT

1. On 29 November 2013 I delivered judgment in this matter.  Relevantly, I found that the applicant had been an employee of the respondent for some years and that a number of breaches of award had taken place.  A subsequent appeal against that judgment was unsuccessful and the applicant’s outstanding claim for the imposition of civil penalties remains to be determined.

2. These reasons for judgment should be read in conjunction with the earlier judgment.

3. As things have devolved, there are two essential issues for determination.  The first is the quantum of penalty that should be imposed upon the respondents for their various breaches of the relevant industrial instruments and the second is whether any such penalties should be paid to the applicant.

4. For the reasons that follow, I am going to impose a penalty of $5,000 upon the respondents and I will order that the same be paid to the Commonwealth Consolidated Revenue Fund.

5. The applicant has filed a set of helpful written submissions and counsel for the respondents was content to follow that format in his own oral submissions.  I will therefore myself also follow the template in the applicant’s written submissions.

6. There is no dispute that the underpayments of entitlements set out in paragraph 4(a) to (i) inclusive of the applicant’s written submissions are made out.  Because the applicant was not paid wages at all, it is inevitable that all the applicable minimum hourly rates of pay for both ordinary hours and overtime, public holidays and the like were not paid.  Likewise, the failure to pay superannuation and annual leave and loading are equally inevitably established.  I note that the sums underpaid amount to some $388,688.62.

7. The Court’s approach to penalty, in the sense of methodology, is also not controversial. The court has to identify the separate contraventions, each of which is a contravention of a separate obligation found in the legislation and is a separate contravention of a civil penalty provision for the purposes of s.539(2) of the Fair Work Act 2009 (“Fair Work Act”). Section 557 of the Fair Work Act provides that multiple contraventions may be treated as a single contravention if they involve a course of conduct.

8. To the extent that two or more contraventions have common elements, this should be taken into account in considering what an appropriate penalty for each contravention is because the respondents should not be penalised more than once for the same conduct. 

9. The third step is to consider an appropriate penalty to impose in respect of each contravention whether a single contravention, a course of conduct or group of contraventions having regard to all the circumstances of the case.  Finally, having fixed an appropriate penalty for each contravention, the Court should take a final look at the aggregate penalty to determine whether it is an appropriate response to the contravening conduct.  This involves an instinctive synthesis and is known as the totality principle.

10. In this case, the applicant submitted that the underpayments of overtime and penalty overtime and annual leave and annual leave loading have common elements and should be grouped.  This would give rise on the applicant’s submissions to seven groups of contraventions.

11. The applicants sought that there should be one penalty for each group of contraventions, rather than one each against Mr Neild and Mrs Neild.  The maximum penalty for each contravention of the Workplace Relations Act 1996 (“Workplace Relations Act”) and the Fair Work Act is 60 penalty units or $6,600.

12. The respondent submitted that all of the contraventions arose from a single source and although it may not have been stated in terms, I infer that it was in effect submitted that the Court should conclude that there has been one contravention for the purposes of grouping.

13. It needs to be borne in mind that this was, as I observed in my original judgment, a wholly extraordinary case.  The grouping contended for by the applicant is on one view a reasonable and sensible one.  In ordinary circumstances, it would clearly be acceptable.

14. But these were not ordinary circumstances.  They represent a set of facts and circumstances almost certainly unique.  I am not aware of any reported case in which a similar series of facts has been asserted and I very much doubt that there will be another one in the future.  In reality, every single contravention of a civil penalty provision that has arisen in this case arises not from any disparate origin but rather the deliberate decision of the parties that the applicant would work in exchange for the benefits she received and/or was promised while being in receipt of statutory benefits for almost all of the employment period. The respondents decided not to pay the applicant any wages at all and the applicant acquiesced in that position.

15. It was that single course of conduct that gave rise to all the contraventions.  In my opinion, there was in truth one course of conduct which was to employ the applicant for no wages on a promise of a share in the business and later the Jager Street property and it would be inappropriate to deal with the contraventions in the fashion contended for by the applicant.

16. This then means that there is one contravention and it is common cause that the maximum penalty for that contravention is $6,600.

17. The written submissions of the applicant refer to the well-known decisions in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 and Kelly v Fitzpatrick (2007) 166 IR 14. The matters referred to in those decisions have no achieved wide currency although they must not be approached as a checklist of obligatory considerations (per Buchanan J in Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [91]).

18. The applicant’s written submissions correctly point to the fact that the applicant worked 70 or more hours per week between August 2006 and February 2011 and was paid no wages throughout the entirety of this period (subject to a $25 a day payment that ceased in late 2006).  The amount underpaid in excess of $388,000 is enormous.

19. There is no assertion that the respondents had previously contravened workplace laws and indeed I note they had no experience in retail prior to the start of their business in early 2006.

20. I have already found that the breaches arose out of a single course of conduct.

21. The respondent’s business is a small one.  It is still trading but counsel for the respondent has informed me and I accept that Mr Neild is in his eighties and Ms Neild is in her sixties.  It would seem improbable that this business will continue for any great length of time especially bearing in mind that recovery proceedings will be undertaken, as I am informed by counsel for the applicant.

22. I accept the submission of the applicant that the Court should not refrain from imposing a penalty at an appropriate level only because the respondents may have difficulty paying it and would repeat what I said in Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58 at [57]. Parliament has set significant penalties for the sort of contraventions that the respondents engaged in and I do not think it is appropriate for the totality principle to operate simply to ensure that penalties are imposed in suitably significant amounts to meet the respondents’ capacity to pay.

23. Although the breaches were deliberate in the sense that the respondents plainly decided not to pay the applicant her award wages, it needs to be remembered that this was a wholly extraordinary set of circumstances as I earlier indicated.  While Mr and Mrs Neild were the management of this business, to describe them as senior management in circumstances where they were effectively working proprietors of a milk bar and take away food shop would be somewhat misleading.

24. There is no evidence of contrition on the part of the respondents nor have they taken any action by way of rectifying the substantial underpayments.

25. I accept that cooperation with the enforcement authorities is not a particularly significant issue given the particular facts of this case as the applicant submits.

26. The application lays stress upon compliance with minimum standards and I accept that is a relevant consideration, particularly given the prolonged and fundamental nature of the contraventions.

27. In the particular circumstances of this case, specific and general deterrence have but little role to play.  It is inconceivable that the respondents would be misguided enough to endeavour to continue to underpay employees in circumstances where they face so heavy a price for having done so thus far.  It would beggar commonsense to presuppose that they would wish to repeat their contraventions.  Indeed, I think it is far more probable than otherwise that they will simply cease trading in any event.  I was not provided with any material during the currency of the trial as to the financial circumstances of Mr and Mrs Neild generally and indeed none has been provided in the context of this penalty hearing.  Nonetheless, even if the two properties that Mr and Mrs Neild owned were owned outright, it is reasonable to presuppose that the recoupment of the sums that are found to be underpaid will make a massive impact upon their financial circumstances.  On the figures disclosed to date, it would seem most improbable that they would be able to keep the premises from which the business operated in any event.

28. So far as general deterrence is concerned, as opposed to the enforcement of minimum standards, this case is so extraordinary it is reasonable to presuppose that no one else will ever undertake their affairs in the same way.

29. Taking all these things into consideration, and stressing the need to maintain minimum standards as a general rule, I think penalty towards the higher end of the scale is appropriate.  Bearing in mind the age and other difficulties faced by the respondents, which would be mitigating factors on any view, I would impose a penalty of $5,000.

30. The next issue is to whom the penalty should be paid.

31. I raised with counsel for the applicant the possibility that it might not be appropriate to order payment of any penalty to his client bearing in mind that she was defrauding Centrelink throughout the period of her employment with only one short intermission.  Counsel nonetheless submitted that this would be unjust.  The Department of Social Security has been informed of the orders made and there was a real risk that the applicant would stand behind the state as a creditor in the event that the respondents were to become bankrupt.

32. It is not entirely clear to me on what footing that submission is made.  As I say, nothing is known of the particular financial circumstances of the respondents and there is no immediate reason to presuppose that they will be indebted to the Commonwealth in any particular fashion.

33. The question of payment of penalties to an applicant in such a case was considered by Logan J in National Tertiary Education Industry Union v Central Queensland University [2008] FCA 481 at [50]-[51]. In particular, his Honour said at [50]:

    “I have already highlighted the separate public interest served by a civil penalty proceeding like the present and the recognition by the Parliament of an industrial organisation such as the Union as an appropriate party in the present circumstances to initiate such a proceeding.  Further, there is long standing authority in this Court which draws attention to the role that a provision like s.814(b) has in the encouragement of a common informer.”

34. His Honour went on to quote with approval remarks by Wilcox J in Finance Sector Union v Australia and New Zealand Banking Group [2002] FCA 1035 at [16] to like effect.

35. What sets this case wholly apart from these kind of considerations, however, is the extraordinary set of facts from which it derives.  Whether or not the applicant is required to repay the very substantial statutory benefits she received is not yet known.  One would assume it is certainly probable that they will be.

36. Nonetheless – and bearing in mind that the applicant has a significant history as an offender in relation to social security fraud (see my earlier decision at paragraph 116) it is in my view wholly inappropriate that any civil penalty be paid to her.

37. The court should mark its strong disapprobation of the conduct of the applicant and in these wholly unusual circumstances, it seems to me entirely proper that the penalty be paid to the Consolidated Revenue Fund.

38. Finally, I should make it clear that in consideration of the totality principle, I have had regard to the fact that given the amounts already ordered to be paid by the respondents, any significant additional impost would in my view be likely to come within the description of “crushing” or “oppressive” referred to in the relevant authorities.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate: 

Date:  18 December 2014