Moteki v Legnor Pty Ltd
[2018] FCCA 1988
•23 July 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MOTEKI v LEGNOR PTY LTD & ANOR | [2018] FCCA 1988 |
| Catchwords: COMPANY LAW – Applicant’s employer was first respondent – first respondent was aligned to group of companies based in Japan – entire business was funded by the group – second respondent was sole director and shareholder of first respondent – first respondent was a separate legal entity – second respondent did not challenge he was controlling mind of first respondent – second respondent an accessory to contraventions committed by the first respondent. |
| Legislation: Fair Work Act 2009, ss.44, 45, 340(1)(a)(iii), 550, 535(3) Fair Work Regulations 2009, reg.3.42 Restaurant Industry Award 2010 |
| Other materials: Davies & Worthington, Gower & Davies’ Principles of Modern Company Law (Sweet & Maxwell, 7th ed, 2003) |
| Cases cited: Adams v Cape Industries plc [1990] Ch 433 |
| Applicant: | IKUMI MOTEKI |
| First Respondent: | LEGNOR PTY LTD T/A HA-LU (ACN 120 622 344) |
| Second Respondent: | YUTAKA YAMAUCHI |
| File Number: | PEG 130 of 2017 |
| Judgment of: | His Honour Judge Wilson |
| Hearing date: | 9 February 2018 |
| Date of Last Submission: | 23 April 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 23 July 2018 |
REPRESENTATION
| Solicitors for the Applicant: | MKI Legal |
| Counsel for the First Respondent: | No appearance |
| Solicitors for the First Respondent: | None |
| Solicitors for the Second Respondent: | DFG Legal WA |
DECLARATION
The first respondent contravened –
(a)s 340(1)(a)(iii) of the Fair Work Act 2009;
(b)s 535(3) of the Fair Work Act 2009;
(c)s 45 of the Fair Work Act 2009; and
(d)s 44 of the Fair Work Act2009.
ORDERS
The second respondent pay to the Commonwealth of Australia a penalty fixed in the sum of $35 000, comprising –
(a)$11 000 for contravening s 340(1)(a)(iii) of the Fair Work Act 2009;
(b)$2 000 for contravening s 535(3) of the Fair Work Act2009 and reg 3.42 of the Fair Work Regulations 2009;
(c)
(d)$11 000 for contravening s 45 of the Fair Work Act2009; and
(e)$11 000 for contravening s 44 of the Fair Work Act 2009.
The second respondent pay to the applicant damages fixed in the amount of $13 443.43.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 130 of 2017
| IKUMI MOTEKI |
Applicant
And
| LEGNOR PTY LTD T/A HA-LU (ACN 120 622 344) |
First Respondent
| YUTAKA YAMAUCHI |
Second Respondent
REASONS FOR JUDGMENT
Introduction
At all relevant times the applicant was a waitress at a Japanese restaurant, who sought payment of $13 375.24 plus general damages following her dismissal from the first respondent’s business, then trading as Ha-Lu. The second respondent was the owner and controller of the applicant’s employer, the first respondent. The amount in issue in this case was modest but the matters raised in this case were involved.
This case passed through an unusually high number of interlocutory appearances after its commencement in March 2017 in Perth. While sitting in Perth in February 2018 I made orders that culminated in the entry of default judgment against both respondents. No application was made thereafter to set aside the orders of 20 February 2018. Instead, the case proceeded to a determination on the papers of the applicant’s claims for penalties, declaratory relief and damages, interest and costs arising from the entry of default judgment.
Synopsis
For the reasons that follow –
a)I declare that the first respondent contravened s 340(1)(a)(iii) of the Fair Work Act2009 (“the Act”) by reason of adverse action being taken against the applicant after she sought to exercise a workplace right by emailing the second respondent concerning underpayment;
b)I declare that the first respondent contravened s 535(3) of the Act by reason of its failure to provide copies of all pay records to the applicant;
c)I declare that the first respondent contravened s 45 of the Act by contravening the provisions of the Restaurant Industry Award 2010 by underpaying the applicant sum of $10 111.93 for the period 23 January 2014 to 4 September 2016; and
d)I declare the first respondent contravened s 44 of the Act by contravening the national employment standards by reason of the first respondent’s failure to provide the applicant with notice of termination or with payment in lieu of notice of termination.
For the reasons that follow, I order the second respondent to pay the applicant the amount unpaid in respect of wages, namely $10 111.93.
I impose the following penalties –
a)$11 000 for a contravention of s 340(1)(a)(iii), the sum of $12 600 being the maximum penalty applicable;
b)$2 000 for the contravention of s 535(3) of the Act and reg 3.42 of the Fair Work Regulations 2009 (“regulations”), the sum of $2 400 being the maximum penalty applicable;
c)$11 000 for a contravention of s 44 of the Act, the sum of $12 600 being the maximum penalty payable; and
d)$11 000 for a contravention of s 44 of the Act, the sum of $12 600 being the maximum penalty payable.
Procedural matters
In these reasons I have made various determinations on the papers, not having heard viva voce evidence. Having undertaken an extensive examination of the statutory basis for the making of declaratory orders in default in Fair Work Ombudsman v Greenan (No.2),[1] I applied the reasoning in the authorities referred to in that case and ordered the entry of default judgment in this case on 20 February 2018. That default judgment was not appealed nor did the respondents seek to be heard about the orders made on 20 February 2018. On 23 April 2018 the second respondent affirmed an affidavit (78 paragraphs in length) in which the second respondent deposed to the applicant’s role with the first respondent, the applicant’s suspension from employment and aspects of the applicant’s claim including that the first respondent was in liquidation and that the applicant is entitled to seek payment of unpaid amounts from the liquidators of the first respondent.
[1] [2017] FCCA 2059
Importantly, at no stage has the second respondent applied to me or to an appeal court to argue that the default orders made on 20 February 2018 should be set aside.
The applicant and her representatives proceeded on the basis that the first respondent was in liquidation when I ordered the case proceed as a penalties hearing. Documents filed with the Australian Securities and Investments Commission revealed that the first respondent was placed in liquidation by its creditors and that on 5 October 2017 joint and several liquidators were appointed to it. As result of the first respondent being in liquidation, in the absence of an order of a superior court authorising the commencement or continuation of this proceeding, it was not competent for this proceeding to go forward against the company in liquidation. No evidence was adduced that any such leave had been sought or obtained. Having regard to the concession made by the applicant that she did not seek relief against the first respondent, two consequences followed. First, it was not possible to make orders against the first respondent in the absence of an order permitting this proceeding to go forward against it. Second, the second respondent’s liability in this litigation was not contingent upon the solvency of the first respondent. He was sued as an accessory to contraventions committed by the first respondent. The applicant sought relief only as against the second respondent.
A factual recital
The factual matters recorded below have been taken from the applicant’s affidavit sworn 21 August 2017 and her affidavit sworn 23 March 2018 as well as from the second respondent’s affidavit affirmed 23 April 2018. Neither deponent gave viva voce evidence so the version of events as given by each was untested. That said, neither party sought a hearing in relation penalties nor has either party served a notice to attend for cross examination. At all relevant times, both the applicant and the respondent were represented by legal practitioners.
As was customary for litigation in the fair work division of this court, this proceeding did not proceed by way of pleadings. Instead, the applicant relied on information in 17 separately numbered paragraphs in part G of her claim alleging dismissal in contravention of a general protection.[2] As is also customary for this type of litigation, the detail in the paragraphs in part G of her claim was discursive and at points imprecise, characterised by narrative rather than fact. Be that as it may, the more important allegations that emerge from it were as follows –
[2] Claim under the Fair Work Act 2009 alleging dismissal in contravention of a general protection, filed 9 March 2017
a)the applicant commenced employment with the first respondent on 8 July 2011 after which, on 23 January 2014, she was promoted to restaurant manager, although in reality she was a full-time permanent employee despite being called a casual employee;
b)her employment was covered by the Restaurant Industry Award 2010 (“the award”) as a level 5 food and beverage supervisor;
c)between 7 July 2006 until the date on which the applicant’s employment was terminated on 8 September 2016 the second respondent was a director and the chief executive officer of the first respondent;
d)for work between 23 January 2014 and 5 September 2016 the first respondent underpaid the applicant by $10 111.93;
e)on 5 September 2016 the applicant complained to the second respondent about the first respondent underpaying the applicant by $10 111.93;
f)on 5 September 2016 the applicant complained to the second respondent that the first respondent had not provided her with a signed version of her employment contract and employee records despite her making a request for those documents;
g)on 5 September 2016 the applicant complained to the second respondent that the first respondent did not pay her superannuation entitlements between April and June 2013, between July and September 2014 and between January 2015 and August 2016;
h)on 5 September 2016 the applicant complained to the second respondent that accrued entitlements (not being limited to superannuation entitlements) aggregating $3 263.31 was owing to her by the first respondent;
i)the complaints recorded above were in the nature of the exercise of one or more workplace rights;
j)on 7 September 2016, by telephone, the second respondent informed the applicant that her employment with the first respondent was terminated forthwith; and
k)on 8 September 2016 the second respondent sent an email to the applicant with reasons for the termination of the applicant’s employment.
The applicant asserted that the second respondent was the relevant decision maker and was therefore involved under s 550 of the Act. She asserted that the second respondent decided to terminate the employment because of, in whole or in part, the exercise by the applicant of the workplace rights referred to above.
So far as monetary compensation for underpayment was concerned, the applicant sought $10 111.93 as underpayments and $3 263.31 for accrued entitlements.
The total, ($13 375.24) correspond with the sum claimed on page eight of her form two.
The applicant’s affidavit sworn on 21 August 2017 set out in affidavit form the details that were condensed in her form two documents. To that she exhibited –
a)a spreadsheet recording the calculations of outstanding entitlements;
b)unpaid superannuation sums and the periods over which they were payable;
c)various SMS messages (in Japanese and English) on 6 September 2016;
d)a certified translated letter from the second respondent to the applicant that began “Honestly, ordinarily, I should not make contact without going through a solicitor…”;
e)A two-page salary payments history the payer being Willecia Pty Ltd as trustee for the RMM family trust; and
f)a copy contract of the employment contract between the applicant and the first respondent.
Other documents, some relevant some not, were exhibited to the applicant’s affidavit sworn 23 March 2018. In that affidavit the applicant more fully addressed certain factual matters. The following is an encapsulation of those factual matters –
a)in July 2011 the applicant commenced working with the first respondent as a casual floor staff member at the first respondent’s Mount Hawthorn premises;
b)she was promoted to restaurant manager in January 2014; and
c)she was paid at the rate of $769.23 per week whereas under the award a food and beverage supervisor should have been paid at the rate of $832.30 per week.
The applicant said the second respondent admitted on several occasions during meetings with her in May 2016 that the first respondent should have but failed to pay her the correct sum under the award. She stated in her affidavit sworn on 23 March 2018 that following the complaints she made in early September 2016, the second respondent suspended her on 7 September 2016.
The applicant said she was unpaid approximately $8 700 in salary and approximately $3 200 in personal leave and annual leave entitlements.
Following the termination of employment with the first respondent, the applicant obtained alternative employment at Classroom Restaurant in North Perth for one year between September 2016 and September 2017. The salary was less. She received $1 713.22 less per month as compared to her salary at the second respondent’s restaurant. She said that from January 2018 she has worked as a waitress at a karaoke bar in Perth in a casual capacity for which she was paid something in the order of $300 per week.
So far as the matters canvassed in Kelly v Fitzpatrick[3] were concerned, the applicant recorded some of them in her 23 March 2018 affidavit. They included the following –
a)the first respondent’s restaurant employed two full-time workers, namely the head chef and the applicant;
b)the first respondent had 13 casual employees, five of whom worked on weekday evenings and eight of whom worked on weekends;
c)the second respondent was the key decision maker of the restaurant business;
d)all employees were Japanese; and
e)according to Japanese culture, employees rarely complained and most workers worked very hard.
[3] [2007] FCA 1080
Not all those matters aligned with the second respondent’s evidence on the same issue, especially in relation of the corporate details of the first respondent. In his affidavit affirmed 23 April 2018 the second respondent gave details of the first respondent and of the role the applicant in the restaurant operations conducted by the first respondent. Some of the more salient matters were as follows –
a)the first respondent was incorporated in July 2006;
b)Ha-Lu restaurant opened in early 2007, the first respondent being its owner;
c)the first respondent was aligned to Aizawa Real Estate (“ARE”), a group of companies based in Japan;
d)the second respondent at all relevant times was the sole director and shareholder of the first respondent the entire business of which was funded by ARE;
e)in February 2016 the controlling management of ARE changed and its new management decided that the Australian operations should close so the second respondent was instructed to sell the Ha-Lu restaurant;
f)the restaurant business was sold in September 2017; and
g)in October 2017 liquidators were appointed to the first respondent
The second respondent said he did not personally hire the applicant so he was unable to say positively when her employment commenced. However, he affirmed that the applicant worked as a casual staff member between July 2011 and October 2013 and that on 10 October 2013 the applicant was promoted to restaurant manager, initially as a casual employee then later as a full-time employee.
The second respondent affirmed that the applicant was suspended by reason of her unauthorised disclosure of confidential data as well as by reason of the nature of her performance. He addressed those issues between paragraphs 24 and 61 of his affidavit. It was apparent the second respondent wanted to agitate threshold issues in this litigation, including issues that went to liability. It scarcely needed to be pointed out that liability had been determined, as it happened adversely to the respondents, by my orders made on 20 February 2018. Matters of liability and issues that went to liability evaporated. Accordingly, it was not to the point for the second respondent to debate why the applicant was suspended. In default, declaratory orders had been made that the first respondent contravened the provisions of the Act. The issue remaining concerned the consequences of that declaratory relief.
In paragraph 62 of his affidavit the second respondent stated he recognised that the applicant had been paid at the wrong rate. However, he said the first respondent and not him personally decided her salary and therefore the first respondent and not him underpaid her.
Several things must be said of that assertion. First, the second respondent did not challenge the fact that he was the controlling mind of the first respondent. Nor could he. He was the director and shareholder of it. He said that the Japanese management of the parent entity ARE issued directives with which he complied. As a matter of Australian company law the directors of a company are responsible for the decision of the company as they are the controlling minds of the relevant corporate entity. Further, for the purposes of adverse action litigation where the identity of the decision maker is important, the human being behind the corporate entity is important. I disagree that the first respondent and not the second respondent decided the applicant’s salary. The second respondent did.
In paragraph 64 of his affidavit the second respondent made a remarkable assertion. It was as follows –
I do not see why I should be required to personally compensate the Applicant when, to the best of my knowledge, the Applicant is in a position to claim recovery of any unpaid wages and accrued annual leave from the liquidators of the First Respondent.[4]
[4] Second respondent’s affidavit, affirmed on 23 April 2018, 9 [64]
His affidavit was prepared by a legal practitioner, one Damian Francis Gordon of the firm DFG Legal WA. I assume the creator of that affidavit proofread that paragraph before the deponent swore to its truth. I found it inexplicable that a legal practitioner, irrespective of his instructions, would permit a sentence in that form to remain in an affidavit. I say that for several reasons. First, the sentence was a submission and not a matter of fact whereas affidavits are limited to matters of fact. Second, it was a matter of subjective belief, wholly inappropriate to an affidavit which, as mentioned, should record factual matters only. Third, it was wrong in law. Fourth, whether or not a witness saw why he was liable to another was entirely beside the point. If he was liable as a matter of law then his liability prevailed, irrespective of whether he agreed with it or took a different view. Fifth, in this case his liability was accessorial about which my brother Kelly has written in scholarly terms in Fair work Ombudsman v Nobrace Centre Pty Ltd.[5]
[5] [2018] FCCA 378
In other paragraphs of his affidavit the second respondent purported to explain why he failed to file material by way of defence of this case. His explanation bordered on ridiculous. I reject it. He then asserted that he will fall into bankruptcy if he is required to pay any amount to the applicant. That statement was meaningless without some understanding of his net asset position. For all I know, his personal solvency may well be considerable. He chose to file no personal financial information. In those circumstances I reject his assertions that the levy of any penalty will inflict severe financial impact upon him.
With that rather lengthy recital of the factual history of this case, it is now necessary to move to the issue of penalties.
Penalties
In very helpful written submissions for the applicant, her solicitors pointed out that a four step process is involved when a court imposes penalties for contraventions of the Act. Two lead authorities bear on point, one being the decision in Fair Work Ombudsman v Kentwood industries Pty Ltd (No.3)[6] and the other being Fair Work Ombudsman v Lifestyle SA Pty Ltd.[7] The four steps involve –
a)identifying each separate contravention in determining whether any arise in a single course of conduct;
b)determining the appropriate penalty;
c)ascertaining whether any of the contraventions contain common elements and determining the appropriate penalty for each contravention; and
d)applying the totality principle.
[6] [2011] FCA 579
[7] [2014] FCA 1151
Identifying the contraventions
One of the important issues in this case, that is to say, subsequent to the first respondent being placed in liquidation, was the nature of the second respondent’s liability. It was accessorial. The first respondent was the primary actor in the events, at least at a level consonant with proper legal personality. In other words, the applicant’s employer in law was the first respondent. While true, the second respondent was the guiding mind and a controlling influence of the first respondent. Nevertheless, according to basic principles of the company law, the first respondent was the separate legal entity the existence of which was independent of its corporator. That proposition is so entrenched in Anglo Australian jurisprudence that authority for it need not be cited. Lest authority is required, I have applied the reasoning in Salomon v Salomon & Co Ltd,[8] Gas Lighting Improvement Co Ltd v Inland Revenue Commissioners, [9] Australasian Temperance and General Mutual Life Assurance Society Limited v Howe ,[10] Hobart Bridge Co Ltd v Federal Commissioner of Taxation,[11] Multinational Gas & Petrochemical Co v Multinational Gas and Petrochemical,[12] Adams v Cape Industries Plc,[13] Meridian Global Funds Management Asia Ltd v Securities Commission,[14] Sons of Gwalia (subject to deed of company arrangement v Margaretic[15] and New South Wales v The Commonwealth.[16]
[8] [1897] AC 22, 57
[9] [1923] AC 723,
[10] (1922) 31 CLR 290
[11] (1951) 82 CLR 372
[12] [1983] Ch 258
[13] [1990] Ch 433
[14] [1995] 2 AC 500
[15] (2007) 231 CLR 160
[16] (2006) 229 CLR 1
One of the most useful explanations of the separate entity doctrine in company law was given by Isaacs J in Howe.[17] There, his Honour held as follows –
A corporation once created is by common law a "person" (see Royal Mail Steam Packet Co. v. Braham (1); Pharmaceutical Society’s Case (2); Grant on Corporations, p. 4 (n.), and Foote on Private International Jurisprudence, 4th ed., p. 125). This is one of the most deeply rooted doctrines of our law (Coke’s Institutes, 2 Inst., 722) and it is the starting-point from which the Courts in England, basing themselves purely on the common law, have by its beneficial flexibility kept abreast in the case of corporations of the general advance of a progressive society.
[17] (1922) 31 CLR 290, 301
A helpful analysis of the principle is given in the most recent addition of Davies & Worthington, Gower & Davies’ Principles of Modern Company Law[18] at page 193 and following.
[18] Sweet & Maxwell, 7th ed, 2003
Returning to the analysis in this case, the primary contravenor in this case was the first respondent as the applicant’s employer. The person whose liability was accessorial was the second respondent. But by reason of such accessorial liability, the second respondent is taken to have been a participant in the contraventions in which the first respondent engaged. So, while the first respondent actually contravened the particular provisions of the Act, the mind that controlled the first respondent was equally responsible for the commission of the contravention. As mentioned earlier, I have enjoyed the very considerable advantage of the meticulously detailed analysis given to the subject of accessorial liability by his Honour Judge Anthony Kelly QC in Nobrace. In the passages that follow I have distilled some of the more important points of principle that emerged from that decision.
Thus, the party taken to be one committing the contraventions in a claim in respect of accessorial liability is the accessory, relevantly here, the second respondent.
The next issue was the number and identity of the contraventions. I agree with the analysis given by the applicant’s solicitors when contending that four contraventions were involved, namely –
a)s 340(1)(a)(iii) of the Act;
b)s 533(3) of the Act and reg 3.42(1) of the regulations;
c)s 45 of the Act; and
d)s 44 of the Act.
Judgment was entered in respect of those contraventions. It fell to me to impose an appropriate penalty.
In Kelly v Fitzpatrick, Tracey J identified an array of considerations that bear upon the determination of the appropriate penalty. His Honour’s distillation of those matters is not exhaustive and, to an extent, involves a degree of overlapping of considerations, but the list provides something of a guideline. By no means does that list remove the discretion reposed in a trial judge when imposing an appropriate penalty to consider all the circumstances of the case, as was pointed out in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith.[19]
[19] (2008) 165 FCR 560
The formulation of relevant issues that Tracey J conceived has been approved and applied time and again. It stands as an unimpeachable beacon of industrial law. If I may say so with the greatest respect, the list makes good sense. The Full Court adopted it in Australian Ophthalmic Supplies as did Gray J in John Holland Pty Ltd v Maritime union of Australia (No.2).[20] I have held similarly in such cases as Fair Work Ombudsman v Monochromatic Engineering Pty Ltd[21] and in Fair Work Ombudsman v Raimondi Investments Pty Ltd.[22] A survey of other decisions of other judges of this court reveals a comparable approach.
[20] [2010] FCA 110
[21] [2007] FCCA 533
[22] [2016] FCCA 1398
Before going to the list of issues that Tracey J held should be considered, it is relevant to point up in general terms certain observations about the imposition of penalties. They are –
a)any penalty to be imposed should be an appropriate response to the relevant contravention. So much having been held in Australian Ophthalmic Supplies;
b)it is necessary to have regard to the maximum penalties that apply and to balance them against all other relevant factors, as was held in Markarian v R;[23]
c)the list in Kelly v Fitzpatrick does not restrict the court about the matters that may be taken into account, as was held in Sharpe v Dogma Enterprises Pty Ltd;[24] and
d)to the extent that two or more contraventions have common elements, that is a matter to be taken into account in considering the appropriateness of the penalty in all circumstances because a respondent should not be penalised twice for the same conduct.
[23] (2005) 228 CLR 357
[24] [2007] FCA 1550
Let me now turned to the Kelly v Fitzpatrick considerations.
Nature and extent and circumstances of the offending conduct
At its core, the relevant conduct was the first respondent’s failure to pay the applicant at the correct rate for a considerable period of time. The precise dates over which the applicant was incorrectly paid called for investigation. In written submissions filed on behalf of the applicant, the applicant’s solicitor contended that the applicant worked for the first respondent for over five and a half years. That much seemed correct. The period over which the applicant was paid at the incorrect rate commenced when the applicant started full-time employment in January 2014. The applicant recorded that claim in her email to the second respondent dated 5 September 2016. In the same email she complained that –
a)pay records had not been provided to her since July 2011; and
b)the first respondent had not paid superannuation between April and June 2013, between July and September 2014 and between January 2015 and August 2016.
The applicant’s solicitors also relied on the telephone call made to the applicant by the second respondent telling her on 7 September 2016 to stop coming to work, for which she was given no reason or notice.
The second respondent adopted a most peculiar position respect of this litigation. The solicitors for the second respondent did not address the elements outlined in Kelly v Fitzpatrick. As a result it was not possible for me to discern what the second respondent’s attitude was to this component of the matters to which I must give consideration. Instead, the second respondent’s solicitors wrote the following –
However, given that any monies owed to the Applicant as a former employee are owed to her by the employer, the First Respondent, and not the Second Respondent personally, who merely acted for and on behalf of the First Respondent, the Applicant should withdraw her claim against the Second Respondent in this respect.[25]
[25] Second respondent’s outline of submissions, p.4 pg. 16
That submission was unhelpful at best and wrong in law at worst. The second respondent should have but failed to provide some sensible explanation for the contraventions alleged beyond denying any wrongdoing.
It must not be overlooked that the second respondent’s liability in this case was accessorial. He was pursued in reliance upon s 550 the Act on the basis that he aided, abetted, counselled or procured the contravention or that he had been, by act or omission, in any way, directly or indirectly knowingly concerned in or party to the contravention. In my view there could have been no doubt whatsoever that the second respondent was knowingly concerned in all acts done by the first respondent, especially the breaches of the Act that were alleged in this case. The second respondent was the controlling mind of the first respondent. Anything the first respondent did had, by definition, to have been done by the second respondent.
A number of legal propositions have been established by the decided cases on the subject of accessorial liability. Those have been meticulously recorded by my brother Kelly in Nobrace. Let me endeavour to distil the more important of them, yet by so doing, in no way do I detract from the excellence of legal learning and jurisprudence in which his Honour examined the subject, especially from paragraph 280 and following of his Honour’s reasoning. The more important matters, that for the purposes of s 550 of the Act, are, it seemed to me –
a)accessorial liability under the Act has as its genesis the common law doctrine of secondary participation derived from the criminal law;
b)accessorial liability is grounded in the principal that the secondary wrongdoer had sufficient practical connection to the wrongdoing that he or she should share the responsibility for the wrongdoing of the primary wrongdoer;
c)once the principal offence has been committed, the secondary participant is liable, as was held in Yorke v Lucas;[26]
d)where accessorial liability is found in a statute (as here) such liability is declaratory of the common law and is procedural in nature, as was held in Giorgianni v The Queen;[27]
e)the purpose of accessorial liability is to make it possible to impose liability on a secondary wrongdoer who, with knowledge of all relevant facts, engaged in the conduct that constituted the primary wrongdoing, as was held in Mallan v Lee;[28]
f)as a corporation can only act through the agency of natural persons, the law of accessorial liability aims to protect the corporation against the consequence of wrongful conduct by a person whose conduct caused the corporation to incur the primary liability, as was held in R v Australian Industrial Court; Ex parte CLM Holdings Pty Ltd;[29]
g)accessorial liability aims to strengthen a statutory prescription against the contravention of a provision by the primary wrongdoer by subjecting the accessory to liability for the same wrongdoing, as was held in Fencott v Muller;[30]
h)for the purposes of the imposition of accessorial liability, it is not necessary that the accessory should have appreciated that conduct was unlawful, as was held in Johnson v Youden,[31] Giorgianni v R, Yorke v Lucas, Australian Competition & Consumer Commission v Giraffe World Australia Pty Ltd (No.2),[32] Rural Press Ltd v Australian Competition and Consumer Commission (ACCC),[33] Qantas Airways Ltd v Transport Workers' Union of Australia (No.2);[34]
i)if the primary wrongdoer’s liability cannot be established neither can the accessories, as was held in Mallan v Lee, Giorgianni v R, Rural Press,Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union;[35] and
j)the liability of the primary wrongdoer must be established and it may be so established by proof or admission, as was held Gore v Australian Securities and Investments Commission (ASIC).[36]
[26] (1985) 158 CLR 661
[27] (1985) 156 CLR 473
[28] (1949) 80 CLR 198
[29] (1977) 136 CLR 235
[30] (1983) 152 CLR 570
[31] [1950] 1 KB 544
[32] (1999) 95 FCR 302
[33](2002) 118 FCR 236
[34] [2011] FCA 816
[35] (2016) 248 FCR 18
[36] [2017] FCAFC 13
On the facts of this case, it seemed to me that the second respondent -
a)was knowingly concerned in the first respondent’s contraventions of the Act;
b)aided and abetted, counselled and procured those contraventions;
c)was a party to those contraventions; and
d)was not wilfully blind to the contraventions concerned but in any event, nothing less than actual knowledge will suffice as was held in Australian Securities & Investments Commission v Adler.[37]
[37] [2002] NSWSC 171
In this case, the day-to-day management of the first respondent fell to the second respondent. He performed all acts associated with paying staff. There was no evidence that paying staff was undertaken by any other employee. Similarly, he was required to complete pay records. No other employee of the first respondent did that. The same observations apply to making superannuation contributions. Acts of the first respondent, at a managerial level, were the acts of the second respondent.
Having essayed the learning on accessorial liability, I am persuaded to the requisite degree that the second respondent possessed actual knowledge of the relevant contraventions. It was only through him that the first respondent could, and did, act.
Nature and extent of the loss or damage
The underpayment was said to have been $8 771.17 over the period 23 January 2014 to 4 September 2016. In corporate parlance that may have not been a large sum. It was the applicant’s only source of income and to her the sum was significant. In addition, over certain periods, superannuation entitlements that she legitimately expected to be paid were not in fact paid. Further, the sum of $3 263.31 in accrued annual leave and personal leave went unpaid.
To my mind, it is not to the point to say that those unpaid sums were small. To the person entitled to receive them they were considerable. The amounts should have been in the applicant’s pocket rather than in her employer’s. In fact, they should have been in the applicant’s pocket many years ago. She has been denied the benefit of those payments for over four years. That translates to a penalty for non-payment. Had she received payslips, as she should have done, she may have been able to assess her claims earlier and brought proper corrective action.
Any similar previous conduct
No evidence was led to the effect that the first or second respondent had previously engaged in similar conduct.
Size of business
The evidence on this point was equivocal. Next to no information was adduced about issues that conventionally are examined when assessing the size of the business. They include –
a)the size of the business’s assets and undertaking;
b)its turnover;
c)its payroll;
d)the number of its employees;
e)all locations at which it operates; and
f)its client base.
In this case, the evidence on point, such as it was, revealed the answers to only some of those matters. There was no information about the first respondent’s assets and undertaking. It seemed the first respondent was somehow a member of the Japanese group of companies. That said, the second respondent was the shareholder and director of the first respondent so precisely how the Japanese interests exercised control over the Australian company was not explored at an evidentiary level. The location of the restaurant was given and some (but little) information was given about there being more than one employee on the payroll. No information was given about the first respondent’s payroll or turnover.
That said, one decisions of the Federal Court of Australia has held that an employer’s financial position at the time of the contravention is not relevant to the question of penalty. It is Kelly v Fitzpatrick. As I said in Monochromatic Engineering Pty Ltd that reflects the good sense that all employers, irrespective of their size and financial position, are bound by the same workplace laws.
Involvement of senior management
This point has been addressed above. The second respondent was intimately involved throughout. He perpetrated the breaches. He had been the director of the first respondent for 12 years. It would undermine the protection that the Act gives to the public if the second respondent were not personally answerable having regard to his personal involvement and experience in the business. To that extent, I respectfully adopt the observations in that regard of the High Court in Hamilton v Whitehead[38] and of the Federal Court in Fair Work Ombudsman v Kentwood Industries Pty Ltd (No.2).[39]
[38] (1988) 166 CLR 121
[39] [2010] FCA 1156
Contrition
No contrition whatsoever has been exhibited by the second respondent. To the contrary. In written submissions[40] he advanced a collection of propositions that pointed to the fact that he continued to debate his liability. Among them were the following –
a)the assertion in paragraph 16 that the applicants claim was in truth maintainable against the first respondent so the applicant should withdraw her claim against him;
b)the assertion in paragraph 17 that the applicant was not entitled at law to recover the amounts pressed in this case;
c)the contention that the applicant should pursue recovery of all claims in this case but not against him and instead she should claim against the liquidators;
d)the erroneous contention that the applicant disclosed confidential information and was quite properly dismissed without warning for doing so;
e)the unsupported contention that the applicant’s performance was poor;
f)the unmaintainable contention that the applicant simply failed to return to work but she was “never terminated… merely suspended on disciplinary grounds resulting from her own actions…”;[41] and
g)the general contention that the second respondent put the applicant to her proofs in relation to all sections of the legislation said to have been contravened.
[40] Second respondent’s outline of submissions filed 23 April 2018
[41] Second respondent’s outline of submissions filed 23 August 2018, 7 [36]
Then, with breathtaking brashness, the second respondent’s written submissions at paragraph 62 advanced the contentions that –
a)the default judgment should be set aside; and
b)the whole of the applicant’s claims should be dismissed.
Suffice to say I reject both contentions. Those contentions go to the issue of contrition. I find no contrition at all was exhibited by the second respondent. That in turn goes to penalty. In addition to other matters, it tends to place the penalties to be imposed by the court at the higher end of the range.
Corrective measures
No corrective measures were taken. To the contrary, the first respondent was in liquidation, the second respondent denied any wrongdoing at all and maintained that the applicant should pursue the liquidators for payment.
Deliberateness
The applicant contended that the breaches on which she relied were deliberately committed. In support, she relied on the second respondent’s own email to her, the translation date of which was 22 September 2016. In it the second respondent wrote a number of things about his philosophical approach towards company management. It was a fair distillation of the long narrative that he placed the interests of his company’s profitability ahead of the welfare of his employees. He used a curious collection of phrases. Taken in isolation they were largely meaningless. But when red as a whole, as I read his long email, it offered some considerable insight into the second respondent’s motivation for acting as he did in this case. Let me record a segment from his email –
Employees are, after all, promiscuous. They are not devoted to Ha‑Lu, and if such a thing happened they might think that they could just simply go off and find another job, if the business is in trouble, it’s no skin off their noses. Such thoughts on the side of the business operator are probably not understood. However, the ultimate mission of being president of a company is survival. That is the reason we cannot return to the employees anything over and above the profit that the business generates.[42]
[42] Second respondent’s affidavit affirmed 23 March 2018, 56
Even allowing for imperfections in translations, employees being promiscuous was a peculiar comment, illustrative of a most peculiar attitude held by the second respondent. If it indicated his views on employee loyalty, then the comment was too broad and generic to be in any way useful. If it conveyed his unreserved view in respect of all employees, then his view was warped and distorted. His final sentence of the quoted passage missed the point. The applicant was not seeking payment over and above his company’s profit – she was merely seeking payment of amounts to which she was lawfully entitled. Those amounts had to be paid before ascertaining whether the relevant company made any profit.
The applicant invited me to conclude that the second respondent deliberately paid the applicant incorrect amounts. It was no accident that he paid incorrect amounts to the applicant. I am persuaded on the balance of probabilities that his actions in paying incorrect amounts were deliberate.
Ensuring compliance with minimum standards
No legitimate reason existed for the second respondent’s failure over a sustained period to pay incorrect amounts to the applicant. He was driven by profitability for his company. He was not permitted by law to do that at the expense of his employees. The Act prescribes minimum standards. Those include paying correct pay entitlements, making correct payments for superannuation and keeping proper records. The respondents wholly failed in their compliance with their lawful obligations.
Deterrence
The need for general and specific deterrence is a factor of importance in the imposition of a penalty, as was observed in Meadley v Sort Worx Pty Ltd,[43] Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union,[44] Community and Public Sector Union (CPSU) v Telstra Corp Ltd[45] and Ponzio v B & P Caelli Constructions Pty Ltd.[46]
[43] [2013] FCA 1012
[44] (2008) 171 FCR 357
[45] [2001] FCA 1364
[46] (2007) 158 FCR 543
I have taken into account the observations in those cases in arriving at an appropriate penalty.
Common elements
The contraventions in this case are separate. The only common thread to them is the activity of the second respondent who failed to pay the applicant the correct amounts lawfully due to her.
Monetary sum is urged by the applicant
The applicant asked me to impose certain sums by way of penalties. I have taken into account the maximum amounts in issue and considered whether the nature of the contraventions are near the maximum sums or the amounts urged by the applicant. In all instances, the applicant invited me to impose a penalty that equated to half of the maximum sum due.
To my mind, that was generous. I do not propose to acceed to that request. The second respondent’s approach was argumentative, defiant and confrontational. It was the antithesis of contrite. He should be penalised for that approach. But more importantly, he should be penalised for his deliberateness in refusing to pay the applicant amounts to which she is legitimately entitled.
For the contravention of s 340(1)(a)(iii) of the Act the maximum amount of penalty was $12 600. The applicant urged me to impose a penalty of $6 000. I impose a penalty of $11 000.
For a contravention of reg 3.42(1) of the regulations, the maximum amount of penalty was $2 400. The applicant urged me to impose a penalty of $2 200. I impose a penalty of $2 000.
For the contravention of s 45 of the Act, the maximum penalty was $12 600. The applicant urged me to impose a penalty of $6000. I impose a penalty of $11 000.
For the contravention of s 44 of the Act, the maximum penalty was 12 600. The applicant urged me to impose a penalty of $6 000. I impose a penalty of $11 000.
The applicant pointed out that I should take care to ensure that that the sum ordered by way of penalty is not crushing. That much is true. Equally, the maximum sum that might be imposed is reserved for contraventions that are egregious. In my view this case falls within that category. I take the view that the second respondent has been argumentative, defiant and confrontational. He disputed his liability to the end. He failed to exhibit the slightest remorse or contrition. He said he will be driven into bankruptcy if he is visited with any sanction for his actions. I reject that submission. Even if true (on which no evidence was led) he may be able to procure support from the Japanese parent to contribute to his loss. That also is a matter over which no evidence was led.
Conclusion
I make a declaration that the second respondent has contravened the Act. The penalties imposed are as follows –
a)$11 000;
b)$2 000;
c)$11 000; and
d)$11 000.
In total, a penalty of $35 000 is imposed.
Damages of $13 443.43 are also ordered.
I certify that the preceding seventy-seven (77) paragraphs are a true copy of the reasons for judgment of his Honour Judge Wilson
Associate:
Date: 23 July 2018
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