Minister for Immigration v Sahan Enterprises Pty Ltd
[2012] FMCA 619
•28 June 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MINISTER FOR IMMIGRATION v SAHAN ENTERPRISES PTY LTD | [2012] FMCA 619 |
| MIGRATION – s.140Q of the Migration Act 1958 – first application since changes to the Act – breach of reg.2.79 and reg.2.82 of the Migration Regulations 1994 – principles to be applied to determining penalty. |
| Fair Work Act 2009 Migration Act 1958, ss.140Q, 140M, 486R(3) Migration Regulations 1994, regs.2.79, 2.82 Workplace Relations Act 1996 |
| CPSU v Telstra Corporation Limited (2001) 108 IR 228 Fair Work Ombudsman v Tiger Telco Pty Ltd (In Liquidation) and Anor [2012] FCA 479 Johnson v The Queen (2004) 205ALR 346 Mason v Harrington Corporation [2007] FMCA 7 |
| Applicant: | MINISTER FOR IMMIGRATION & CITIZENSHIP |
| Respondent: | SAHAN ENTERPRISES PTY LTD |
| File Number: | MLG 1774 of 2011 |
| Judgment of: | Whelan FM |
| Hearing date: | 28 June 2012 |
| Date of Last Submission: | 28 June 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 28 June 2012 |
REPRESENTATION
| Counsel for the Applicant: | Ms Whittemore |
| Solicitors for the Applicant: | Sparke Helmore |
| Counsel for the Respondent: | Mr Sahan in person |
ORDERS
THE COURT DECLARES THAT:
The Respondent has contravened s.140Q of the Migration Act 1958 by failing to comply with its sponsorship obligation under reg.2.79 of the Migration Regulations 1994 to ensure equivalent terms of employment were provided to Mr Azahim by:
(a)failing to pay him a weekly wage in accordance with reg.2.79 between the weeks ending 18 September 2009 and 2 July 2010; and
(b)failing to pay him any wage at for five of the weeks during the period of weeks ending 18 September 2009 and 2 July 2010.
The Respondent has contravened s.140Q of the Migration Act 1958 by failing to comply with its sponsorship obligation under reg.2.79 of the Migration Regulations 1994 to ensure equivalent terms of employment were provided to Mr Azahim by failing to pay him a weekly wage in accordance with reg.2.79 between the weeks ending 9 July 2010 and 29 October 2010.
The Respondent has contravened s.140Q of the Migration Act 1958 by failing to keep records of the wages paid to Mr Azahim in breach of its sponsorship obligation under reg.2.82 of the Migration Regulations 1994 between the weeks ending 18 September 2009 and 2 July 2010.
THE COURT ORDERS THAT:
The Respondent pay a pecuniary penalty pursuant to s.140Q of the Migration Act 1958 in the sum of $35,000.00. This payment is to be made in accordance with the following schedule:
(a)$5,000.00 to be paid on or before 2 July 2012;
(b)$5,000.00 to be paid on or before 2 August 2012;
(c)$5,000.00 to be paid on or before 2 September 2012;
(d)$5,000.00 to be paid on or before 2 October 2012;
(e)$5,000.00 to be paid on or before 2 November 2012; and
(f)$10,000.00 to be paid on or before 2 December 2012.
The Respondent pay the Applicant’s costs of these proceedings, fixed in the amount of $10,889.00.
All payments of the penalties imposed on the Respondent be paid into the Consolidated Revenue Fund of the Commonwealth.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1774 of 2011
| MINISTER FOR IMMIGRATION & CITIZENSHIP |
Applicant
And
| SAHAN ENTERPRISES PTY LTD |
Respondent
REASONS FOR JUDGMENT
(Revised from Transcript)
This is an application by the Minister for Immigration and Citizenship for declarations by the Court that the Respondent contravened s.140Q of the Migration Act 1958 (“the Act”) by failing to comply with its sponsorship obligations under regs.2.79 and 2.82 of the Migration Regulations 1994 (“the Regulations”).
The Respondent has conceded breaching these obligations by failing to pay Mr Azahim the weekly wage required by reg.2.79 between 18 September 2009 and 29 October 2010 and by failing to keep records of the wages paid to Mr Azahim as required by reg.2.82, between 18 September 2009 and 2 July 2010.
This is evidenced by both the affidavit of Mr Sahan, the sole director and shareholder of the Respondent and the failure of the Respondent to dispute the Notice to Admit Facts issued by the Applicant on 9 February 2012 and further by the affidavit of Bernadette Raymond dated 25 June 2012.
The background to the application is set out in paragraphs 5 to 14 of the Applicant’s written submission and that summary is consistent with the affidavit material before the Court:
On 25 May 2009 the Respondent became a standard business sponsor of an employee Mr Mohammed Roomie Mohammed Azahim pursuant to section 140E of the Act and regulation 2.58(a) of the Migration Regulations. On 27 May 2009 Mr Azahim was granted a sub-class 457 Temporary Business (Long-Stay) visa under section 65 of the Migration Act in relation to the Respondent’s sponsorship. Mr Azahim worked as head chef of the Respondent’s business, Roks Café/Restaurant. Mr Sahan is the sole director and shareholder in the Respondent.[1]
On 8 July 2010 monitoring officers from the Department of Immigration and Citizenship commenced monitoring the Respondent in relation to its compliance with sponsorship obligations. On that date a site visit was conducted at the Respondent’s business premises in St Kilda and Mr Sahan was interviewed.[2]
During the interview Mr Sahan admitted that the Respondent did not keep independently verifiable records of the wages that were paid to Mr Azahim. Mr Sahan was informed that the Respondent was required to pay a base rate of pay of $45,220 per annum or at least $731 per week in order to comply with its obligations under regulation 2.79.[3]
[1] Applicant’s Outline of Submissions, dated 26 June 2012 at paragraph 5.
[2] Applicant’s Outline of Submissions, dated 26 June 2012 at paragraph 7.
[3] Applicant’s Outline of Submissions, dated 26 June 2012 at paragraph 8.
On 10 September 2010 the Respondent provided a PAYG summary to the Department of Immigration and Citizenship (“DIAC”) which indicated that Mr Azahim had been paid a gross salary of $45,760.00 during the 2009/2010 financial year.
On 4 November at an interview with Mr Sahan it became clear that the PAYG summary that had been presented on 10 September 2009 was false and that it had been amended to reflect the Respondent’s requirements under the Regulations. On 18 November 2010 the Applicant sent the Respondent a notice of intention to take action in respect of a number of contraventions of the Regulations.
Mr Sahan responded to that on 6 December 2010 and gave as his reason for his failure to comply with the Regulations his lack of knowledge in relation to those matters.
On 7 April 2011 the Applicant sent the Respondent an infringement notice which requested that he pay a pecuniary penalty of $6,600.00 for contraventions of regs.2.79 and 2.82 in respect of Mr Azahim and the Respondent did not comply with that notice.
On 3 June 2011 the Applicant sent the Respondent a Notice of Decision-Sanction which informed the Respondent that a decision had been made under s.140M of the Act to bar it from making further applications for approval as a standard business sponsor for a period of four years.
Applicable principles
The application that is before the Court today was lodged on 16 December 2011 and seeks declarations and orders in relation to pecuniary penalties against the Respondent as set out in s.140Q of the Act. Section 140Q of the Act provides that a person who is subject to sponsorship obligations under the Regulations and who fails to satisfy those obligations is liable to a civil penalty. The penalty for a body corporate is up to $33,000.00. Section 140Q is a civil penalty provision and therefore if it is contravened the civil penalty provisions contained within the Act are invoked.
In particular s.486R(3) of the Act states that:
In determining the pecuniary penalty the court must have regard to all relevant matters including but not limited to:
(a) The nature and extent of the contravention;
(b) The nature and extent of any loss or damage suffered as a result of the contravention;
(c) The circumstances in which the contravention took place; and
(d) Whether the person has previously been shown by a court in proceedings under the Act to have engaged in the same or similar conduct.
It is clear from the Explanatory Memorandum that the Court is not limited to consideration of only those matters. The Applicant in these proceedings points out that this is the first penalty hearing in respect of a contravention of s.140Q of the Act and submits that guidance should be drawn from the sentencing principles applied in cases dealing with the imposition of a pecuniary penalty in an industrial law context and in particular, those dealing with the imposition of a pecuniary penalty under the civil penalty provisions of the Fair Work Act 2009 and its predecessor the Workplace Relations Act 1996.
Both the civil penalty provisions in the Act and those in the Fair Work Act 2009 and Workplace Relations Act 1996 deal with ensuring the appropriate working conditions of employees and in the case of the Migration Act1958 the working conditions of employees who are sponsored visa holders. The maximum penalties under the civil penalty provisions in both the Act and the Fair Work Act 2009 are the same.
The Applicant submits that it is appropriate to adopt the non‑exhaustive list of sentencing considerations regarded by Mowbray FM in Mason v Harrington Corporation[4] as being appropriate in dealing with penalty provisions under that Act. This list was also referred to by Tracey J in Kelly v Fitzpatrick[5] and is regularly cited in civil penalty proceedings in both the Federal Magistrates Court and the Federal Court under the Fair Work Act 2009.
[4] Mason v Harrington Corporation [2007] FMCA 7.
[5] Kelly v Fitzpatrick [2007] FCA 1080.
The Court in Mason v Harrington Corporation[6] set out a list of matters which the Court should take into account in determining penalties:
[6] Mason v Harrington Corporation [2007] FMCA 7.
·The nature and the extent of the conduct which led to the contravention;
·The circumstances in which the conduct took place;
·The nature and extent of any loss or damage sustained as a result of the contraventions;
·Whether there has been similar previous conduct by the respondent;
·Whether the contraventions were properly distinct or arose out of the one course of conduct;
·The size of the business enterprise involved;
·Whether or not the contraventions were deliberate;
·Whether the party committing the contraventions has exhibited contrition;
·Whether the party committing the contraventions has taken corrective action;
·Whether the party committing the contraventions has cooperated with enforcement authorities; and
·The need for specific and general deterrence.
It is noted that the first four of those matters are also matters contained in s.486R(3) of the Act. I accept that they provide appropriate guidance for penalty considerations under s.140Q of the Act. I will deal with each of those considerations both by reference to the submissions made by the Applicant and also by reference to any comments made by Mr Sahan for the Respondent which in my view are relevant.
The nature and extent of the contraventions and the nature and extent of the loss suffered
The first consideration is the nature and extent of the contraventions. The Applicant also dealt with the nature and extent of any loss or damage sustained as a result of those contraventions.
The Applicant submits that the contravention of reg.2.79 involved systematic underpayments to one employee, Mr Azahim, and that those contraventions occurred between the weeks ending 18 September 2009 and 29 October 2010 covering a significant period of time being more than 15 months. Moreover, it was conceded by the Applicant that it failed to pay Mr Azahim anything at all for a period of five weeks during that period.
The Applicant has estimated the underpayments during this period to be a total of $14,796.00 gross which represents almost a third of the total salary Mr Azahim was entitled to be paid over that period. The Applicant therefore submits that Mr Azahim would clearly have been disadvantaged by those underpayments. Further, the underpayments continued to occur for a period of some three months even after the Respondent had been specifically informed by monitoring officers from DIAC that it had underpaid Mr Azahim and that he should be paid at least $731.00 per week to ensure compliance with the Regulations.
The contraventions of reg.2.82 involved the sponsor failing to keep records of the wages paid to Mr Azahim between the weeks ending 18 September 2009 and 2 July 2010 − a period over nine months. The contraventions occurring during a time that Mr Azahim was paid cash in hand.
I am satisfied that Mr Azahim would have been clearly disadvantaged by the underpayment. The failure to keep records of his wages would also have impacted on the employee and also on the capacity of the Australian Taxation Office to ascertain whether the appropriate tax had been paid. I also accept that it made it more difficult for the Applicant in conducting the investigation of the Respondent in establishing what exactly Mr Azahim had or had not been paid. The Applicant also submits that it would be reasonable to draw an inference that if the contraventions had not been brought to the attention of the Respondent they would have been ongoing and again I accept that that is the case.
The circumstances in which the conduct took place
The Respondent made certain allegations about Mr Azahim’s work performance during the course of his discussions with DIAC and also in the affidavit which Mr Sahan presented before the Court. The issue of the employer’s obligation to pay the employee in accordance with reg.2.79 is not contingent on the employer being satisfied with the employee’s performance. If the employer was not satisfied with the employee’s performance then the appropriate course of action was to approach DIAC about cancelling the sponsorship and not simply to elect to pay the employee what the Respondent did or did not think the employee might have been worth.
The second issue raised by the Respondent was that the contraventions occurred in circumstances where Mr Sahan was trying to assist Mr Azahim who could only stay in Australia if he was sponsored. Mr Sahan also claimed that he was ignorant of the requirements of the sponsorship and the requirement in particular to keep records of the payments to staff.
Mr Sahan signed the necessary documents to enable the Respondent to sponsor Mr Azahim. It was incumbent on him to be aware of what the responsibilities of the sponsorship entailed.
In relation to the issue of recording wages paid, that requirement exists not only under the Migration Act 1958 but under the Fair Work Act 2009 and existed previously under the Workplace Relations Act 1996 outside of any obligations that might have been imposed on the Respondent as a sponsor. As an employer the Respondent should have been aware of those obligations.
Similar previous conduct
The next consideration is whether there has been similar previous conduct by the sponsor. The Applicant submits that the Respondent has not previously been found by a Court in proceedings under the Act to have engaged in the same or similar conduct.
The Respondent was, however, sanctioned by the Applicant for similar conduct in respect of Mr Azahim between 1 July 2009 and 13 September 2009 when it failed to pay him the minimum gazetted salary for his nominated position and failed to make any superannuation contribution payments to him in accordance with what was then the obligation under the Regulations. The Applicant also points out that on 3 June 2011 the Respondent was barred from making further application for approval as a standard business sponsor for a period of four years in accordance with s.140M(2) of the Act.
Whether the contraventions were properly distinct or arose out of the one course of action
The Applicant has submitted that the Respondent engaged in four courses of conduct:
(1)The multiple contraventions between September 2009 and July 2010 whereby Mr Azahim was underpaid;
(2)The five weeks during which Mr Azahim was not paid at all;
(3)The multiple contraventions between July and October 2010 when Mr Azahim was underpaid after intervention by DIAC; and
(4)The multiple contraventions of reg.2.82 involving the failure to record wages paid between September 2009 and July 2010.
I am satisfied that it is appropriate to consider the underpayments pre- and post- the intervention of DIAC as separate courses of conduct, and the failure to record wages during the first period as a separate course of conduct to the failure to pay wages.
It is not clear how the Respondent came to owe Mr Azahim five weeks wages as at July 2010. He was paying him cash in hand during that time, and it appears that some weeks he did not pay him at all.
In my view, the failure to pay wages or to pay the amount required by the Act and Regulations prior to July 2010 should be regarded as part of a single course of conduct, and I will not separate those two.
I have therefore grouped the multiple contraventions as three separate courses of conduct:
(1)The failure to comply with reg.2.79 prior to July 2010;
(2)The failure to comply with reg.2.79 after notification by DIAC between July and October 2010; and
(3)The failure to comply with reg.2.82.
Size of the business
The Respondent is an Australian proprietary company with a sole shareholder, Mr Sahan. The business operated by the company at the relevant time was a restaurant.
The Applicant points out that there is no other evidence before the Court about the size of the Respondent’s operations. It is reasonable to assume, however, that there were other employees, apart from Mr Azahim. There is a reference in the Affidavit of Mr Sahan to him undertaking certain things with ‘staff’.[7] I therefore assume there were other staff. I am also prepared to assume, however, that, given the nature of the operation, it could be classified as a small business.
[7] Affidavit of Mustafa Sahan, sworn 5 January 2012, at paragraph 3.
Whether the contraventions were deliberate
The Applicant submits that the contraventions were deliberate. The Applicant submits that the failure to pay Mr Azahim any wages at all for five weeks during the first period – the period leading up to October 2010 – should be classified as a deliberate contravention of reg.2.79. On the basis that even if the Respondent was unaware of the exact amount of wage that was required to be paid in accordance with the obligation, it must have been aware that it had to pay him something, and could not pay him nothing at all.
The Applicant further submits that the contravention of reg.2.79 between 8 July and 29 October should also be classified as a deliberate contravention because these contraventions occurred after the Respondent had been specifically informed by the DIAC monitoring office about the underpayment, and what was necessary to be paid in order to comply with the Regulations.
The Respondent claims ignorance of the requirements of reg.2.79.
There are, in my view, two aspects of the contraventions which cannot be described as due to ignorance – the failure to pay any wages over a period of five weeks, and the failure to pay the correct wage between July and October 2010. These cannot be ascribed to ignorance, and can only be considered to be a deliberate failure to meet the requirements of the Act and the Regulations.
The Applicant also submits that the failure to record wages was a deliberate attempt to cover up the underpayments.
I find it hard to accept that, as an employer, the Respondent was unable, or was unaware of any requirement to keep records of the wages paid to employees. The business engaged an accountant, who would surely have been aware of such a legal requirement. A failure to keep such records leaves it open to the inference that the failure was a deliberate attempt to obscure the actual amounts being paid.
Mr Sahan, in oral submissions, blamed his accountant for the failure to pay the correct wages between July 2010 and October 2010. It was, however, the Respondent’s responsibility to ensure the correct payments were made. If not deliberate, then that failure to do so was at least negligent.
Whether the party committing the contraventions has exhibited contrition
I accept that the Respondent has now paid all monies owed to the employee. In his affidavit and oral submissions, Mr Sahan said that action to make up the losses was taken in the month following the notification by DIAC.[8]
[8] Affidavit of Mustafa Sahan, sworn 5 January 2012, at paragraph 6.
I further accept that the admissions made by Mr Sahan, and the failure to dispute the Notice to Admit Facts are evidence of contrition, and I cite the case of Fair Work Ombudsman v Offshore Marine Services Pty Ltd[9] as support for that finding.
[9] Fair Work Ombudsman v Offshore Marine Services Pty Ltd [2012] FCA 498
On the other hand, the Respondent provided a false PAYG summary to DIAC, indicating that Mr Azahim had been paid the correct salary during the 2009/2010 financial year, and it also failed to pay the infringement notice issued on 7 April 2011.
Whether the party has taken corrective action, and whether they have cooperated with the enforcement authorities
As indicated, the Respondent did take corrective action in relation to the contravention of reg.2.82 following intervention by DIAC when it started to pay the employee by electronic funds transfer. Mr Sahan also indicated that some immediate action was taken to repay the employee for the amounts that had been unpaid with respect to the five weeks wages owing to him.
The Applicant submits, however, that the Respondent delayed taking corrective action in respect to the contravention of reg.2.79, and even after being specifically informed of the amount it was required to pay Mr Azahim, failed to do so.
One of the issues in this matter that I must note is that Mr Sahan has consistently blamed the employee for his difficulties, and appears to consider that his good-hearted action in sponsoring Mr Azahim is the source of his problems.
To me, this indicated an ongoing failure to understand his obligations as a sponsor, and despite corrective action taken, provides at least some basis, in my view, for some of his failure to cooperate with the enforcement authorities.
While he attended interviews and made admissions, he also provided misleading information, and I refer again to the PAYG statement, and did not implement the required payments in relation to the wages until after the second intervention by DIAC.
The need for specific and general deterrence
As the Applicant has submitted, both specific and general deterrents are relevant and significant considerations in setting pecuniary penalties for breaches of civil penalty provisions, and the Applicant, in its submissions, refers, in this regard, to the frequently quoted statements by Mr Justice Finkelstein in CPSU v Telstra Corporation[10], and by Mr Justice Tracey in Kelly v Fitzpatrick.[11]
[10] CPSU v Telstra Corporation Limited (2001) 108 IR 228 at 331.
[11] Kelly v Fitzpatrick [2007] FCA 1080 at [28]
The barring of the Respondent from making further applications for approval of a standard business sponsorship for a period of four years, and apparent loss of the restaurant since the contraventions, suggests that specific deterrence in this matter is not an issue. However, sponsored workers are especially vulnerable to exploitation, and such exploitation where the employer is a small business is less likely to come to the attention of DIAC.
As previously noted, if these matters had not been uncovered by DIAC, it is reasonable to assume that the contraventions would have continued. General deterrence is therefore a matter to which I must give weight.
Conclusions
I come now to the issue of the appropriateness of the penalty, and what is referred to as the totality principle.
On the basis of my finding of three contraventions, the available maximum penalty would involve payment of $33,000.00 for each of those contraventions, a total of $99,000.00.
In imposing a civil penalty, the general approach is to determine the appropriate level of penalty for each contravention, and then to look at that as an aggregate. The Applicant in this case submitted that the penalty imposed should fall somewhere in the mid-range of the spectrum of what the Court could impose in such matters, and submitted that a penalty of between $12,000.00 and $15,000.00 for each contravention would be appropriate.
Where there are several contraventions found, the totality principle of sentencing requires the Court to review the aggregate sentence to determine if the sentence is ‘just and appropriate’, and the Applicant, in submission, refers to the principle as outlined by Gummow, Callinan and Heydon JJ in Johnson v The Queen.[12]
[12] Johnson v The Queen (2004) 205ALR 346 at [18]
In considering the appropriateness of the penalty in this matter, I would also refer to the principles set out by Bromberg J in the recent matter of Fair Work Ombudsman v Tiger Telco Pty Ltd (In Liquidation) and Anor.[13] His Honour referred to three principles as ones which should inform the exercise of the Court’s discretion in these matters.
[13] Fair Work Ombudsman v Tiger Telco Pty Ltd (In Liquidation) and Anor [2012] FCA 479
The first of these is proportionality; that is, that any penalty imposed should not exceed that which is appropriate or proportionate to the gravity of the contraventions found proven in the light of its subjective circumstances.
The second is parsimony. The Court must ensure that it imposes the minimum term consistent with the attainment of the relevant purposes of sentences, taking care that the punishment is only for the crime before the Court.
And the third of these is penalty maximum; that is, that the maximum penalty should be reserved for the worst type of contravention.
In my view, the nature of the contraventions in this matter are not what would be described as the worst type, but I do give weight to the following features:
·First, the length of time over which the contraventions occurred;
·Second, the failure to pay any wages at all for a period totalling five weeks;
·Third, the failure to rectify the situation completely after being advised by the DIAC of the legal obligation;
·Fourth, the vulnerability of an employee dependent on the ongoing sponsorship of the respondent, and being paid cash in hand;
·Fifth, the likelihood that without detection by the DIAC, the contraventions would have continued indefinitely; and
·Sixth, the failure of the respondent to adequately inform itself of its obligations as an employer in a sponsorship arrangement under the Act.
In my view, the appropriate penalty is within the mid-range of penalties which might be imposed, and I am therefore of a view that an amount of $15,000.00 for each group of contraventions, or a total of $45,000.00, would be appropriate.
Having fixed an appropriate penalty for each group of contraventions, the Court needs to look at the aggregate penalty to determine if it is an appropriate response to the conduct, and is not oppressive or crushing, to use the words of Tracey J in Kelly v Fitzpatrick.[14]
[14] Kelly v Fitzpatrick [2007] FCA 1080 at [30]
The Court has little information about the Respondent company, although it would appear that the restaurant was sold, with little, if anything, left after payment of the debtors.
Under those circumstances, I am prepared to reduce the total penalty to an amount of $35,000.00. That amount may be paid in instalments of $5,000.00 each, with the first payment to be made on 2 July 2010, and then on the second of each month thereafter, with a final payment of $10,000.00 on 2 December 2012. The Respondent can, of course, discharge the debt at any time prior to that date by payment in full.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Whelan FM
Date: 13 July 2012
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