SDAEA v Arora; SDAEA v Arora Markets Pty Ltd
[2018] FCCA 85
•16 February 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SDAEA v ARORA; SDAEA v ARORA MARKETS PTY LTD & ORS | [2018] FCCA 85 |
| Catchwords: INDUSTRIAL LAW – Fair Work Act contraventions – non payment of employee entitlements – Easter Sunday day in lieu payment and superannuation – failure to remit union dues deducted from wages – facts admitted – declarations made – consideration of claims for compensation, interest and penalties. |
| Legislation: Corporations Act 2001 (Cth), s.471B Fair Work Act 2009 (Cth), ss.50, 52, 53, 323, 345, 539, 546, 547, 550, 556, 557 Federal Circuit Court of Australia Act 1999 (Cth), s.76 |
| Cases cited: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 Australian Energy Regulator v Snowy Hydro Limited (No.2) [2015] FCA 58 Australian Licenced Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd (2011) 193 FCR 526; 205 IR 392; [2011] FCA 333 Cahill v Construction, Forestry, Mining and Energy Union(No.4) [2009] FCA 1040; (2009) 189 IR 304 Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 255 IR 87 Construction, Forestry, Mining and Energy Union v Cahill (2010) 194 IR 461 Dafallah v Fair Work Commission (2014) 225 FCR 559; 242 IR 273; [2014] FCA 328 Deputy Commissioner of Taxation v Arora [2017] NSWSC 1016 Director of Consumer Affairs (Vic) v Alpha Flight Services Pty Ltd [2015] FCAFC 118 Registrar of Aboriginal and Torres Strait Islander Corporations v Matcham (No.2) (2014) 97 ACSR 412 Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 |
| Applicant: | SHOP, DISTRIBUTIVE AND ALLIED EMPLOYEES ASSOCIATION |
| Respondent: | AJAY ARORA |
| File Number: | SYG 299 of 2015 |
| Applicant: | SHOP, DISTRIBUTIVE AND ALLIED EMPLOYEES ASSOCIATION |
| First Respondent: | ARORA MARKETS PTY LTD |
| Second Respondent: | ARORA SUPERMARKETS PTY LTD |
| Third Respondent: | AJAY ARORA |
| Fourth Respondent: | POOJA ARORA |
| File Number: | SYG 177 of 2015 |
| Judgment of: | Judge Driver |
| Hearing dates: | 16 March 2017, 25 October 2017 |
| Date of Last Submission: | 25 October 2017 |
| Delivered at: | Sydney |
| Delivered on: | 16 February 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr D O’Sullivan |
| Solicitors for the Applicant: | Taylor & Scott Lawyers |
| Solicitors for the Respondents: | Mr G Potkonyak of Capellia Legal |
ORDERS
The applicant shall, within 14 days, bring in short minutes reflecting the Court’s judgment on the issues of compensation, interest and penalty.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 299 of 2015
| SHOP, DISTRIBUTIVE AND ALLIED EMPLOYEES ASSOCIATION |
Applicant
And
| AJAY ARORA |
Respondent
SYG 177 of 2015
SHOP, DISTRIBUTIVE AND ALLIED EMPLOYEES ASSOCIATION
Applicant
And
ARORA MARKETS PTY LTD
First Respondent
ARORA SUPERMARKETS PTY LTD
Second Respondent
AJAY ARORA
Third Respondent
POOJA ARORA
Fourth Respondent
REASONS FOR JUDGMENT
Introduction and background
These proceedings concern a dispute over non payment of certain employee entitlements and failure to remit union dues deducted from employee wages to their union, the Shop, Distributive and Allied Employees Association (SDAEA), the applicant in both proceedings. The proceedings focus on the provisions of two supermarket industrial agreements.
Mr Ajay Arora, the third respondent in SYG177/2015 and the sole respondent in SYG299/2015, was a director of Arora Markets Pty Ltd (Arora Markets) and Arora Supermarkets Pty Ltd (Arora Supermarkets), respectively the first and second respondents in SYG177/2015, and the director of a third company, Arora International Markets Pty Ltd (Arora International Markets) (collectively, the companies). Ms Pooja Arora, the fourth respondent in SYG177/2015, was also a director of Arora Markets and Arora Supermarkets.
As at the time of the directions hearing on 23 September 2016, Arora Markets and Arora Supermarkets were in liquidation, and accordingly I formally noted that the proceedings in SYG177/2015 against the first and second respondents were stayed pursuant to s.471B of the Corporations Act 2001 (Cth) (Corporations Act). On 16 March 2017 at the outset of the trial, SDAEA indicated through its counsel that it no longer wished to pursue Ms Arora.
These proceedings have been characterised by protracted and ultimately unsuccessful negotiations between the parties, leading to numerous interlocutory hearings. On 17 November 2016 I ordered, with the consent of the parties, that the matters be heard together. By that time, SYG177/2015 had been before me for some twelve mentions or directions hearings and the parties had additionally requested by email and been granted some seven adjournments to pursue an elusive settlement which, like the torment of Tantalus, was forever dangling out of reach.
The following background is derived from the statement of agreed facts filed by SDAEA on 25 October 2017 and the submissions of the parties.
By Amended Form 4 Claims filed on 24 August 2016, SDAEA seeks various orders in respect of Mr Arora’s involvement in contraventions of ss.50, 323 and 345 of the Fair Work Act 2009 (Cth) (Fair Work Act) by Arora Markets, Arora Supermarkets and Arora International Markets. Mr Arora admits that he was involved, within the meaning of s.550(2) of the Fair Work Act, in contraventions by the companies.
The contraventions by the companies can be briefly characterised as being of three basic types:
a)the misleading of employees of the companies as to where their payroll deductions purportedly for union dues were going, in contravention of s.345 of the Fair Work Act, as the deductions were never paid to the authorised entity;
b)the failure to pay workers engaged under the Franklins National Retail Agreement 2008 (Franklins agreement) for one day’s pay in both 2013 and 2014 when they were not provided a day in lieu for the Easter Sunday public holiday; and
c)the failure to pay superannuation obligations under the Franklins agreement and the Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited Retail Agreement 2008 (Coles agreement).
SDAEA is and was at all material times:
a)an “employee organisation” and an “industrial” organisation within the meaning of the Fair Work Act;
b)an employee organisation covered by the Franklins agreement within the meaning of s.53 of the Fair Work Act;
c)an employee organisation covered by the Coles agreement within the meaning of s.53 of the Fair Work Act;
d)entitled to represent the industrial interests of persons employed by the companies;
e)an “employee organisation” and an “industrial association” with standing under s.539(2) of the Fair Work Act to apply for orders in respect of contraventions of civil remedy provisions under the Fair Work Act; and
f)affected by the contraventions in [6] above.
The companies were at all material times:
a)companies incorporated under the Corporations Act;
b)national system employers within the meaning of the Fair Work Act; and
c)the employer of persons who are national system employees within the meaning of the Fair Work Act.
Arora Markets and Arora International Markets were at all material times:
a)an employer to which the Franklins agreement applies, within the meaning of s.52 of the Fair Work Act;
b)an employer covered by the Franklins agreement within the meaning of s.53 of the Fair Work Act; and
c)the employer of persons who are covered by the Franklins agreement and are members of SDAEA.
Arora Supermarkets was at all material times:
a)an employer to which the Coles agreement applies, within the meaning of s.52 of the Fair Work Act;
b)an employer covered by the Coles agreement within the meaning of s.53 of the Fair Work Act; and
c)the employer of persons who are covered by the Coles agreement and are members of SDAEA.
Mr Arora was at all material times, as specified below:
a)a person capable of being sued;
b)a director of the companies at the following times:
i)Arora Markets: 25 February 2010 to 17 November 2014;
ii)Arora Supermarkets: 24 June 2010 to 17 November 2014 and 23 December 2015 to 30 May 2016;
iii)Arora International Markets: 26 September 2012 to 22 December 2014;
c)general manager and shareholder of the companies; and
d)aware of the day to day activities of the companies and the effective controller of the companies.
Payroll deduction contraventions
Arora Markets made deductions from the wages payable to employees who were members of SDAEA, for the purpose represented to the employees, namely that the money deducted was being transferred to SDAEA pursuant to authorisations made by those employees. SDAEA asserts that this occurred between September 2013 and December 2014, whereas Mr Arora asserts that it occurred between September 2013 and November 2014.
Between September 2013 and March 2014, Arora Markets did not forward the amounts to SDAEA in the month following the deductions.
SDAEA asserts that between April 2014 and December 2014, Arora Markets did not forward these amounts to SDAEA at all. Mr Arora concedes that this is correct between April 2014 and November 2014.
Between September 2013 and December 2014, Arora Supermarkets made deductions from the wages payable to employees who were members of SDAEA, for the purpose represented to the employees, that the money deducted was being transferred to SDAEA, pursuant to authorisations made by those employees.
Between September 2013 and March 2014, Arora Supermarkets did not forward the amounts to SDAEA in the following month.
Between April 2014 and December 2014, Arora Supermarkets did not forward these amounts to SDAEA at all.
Between September 2013 and December 2014, Arora International Markets made deductions from the wages payable to employees who were members of SDAEA, for the purpose represented to the employees, that the money deducted was being transferred to SDAEA, pursuant to authorisations made by those employees.
Between September 2013 and March 2014, Arora International Markets did not forward the amounts to SDAEA in the following month.
Between April 2014 and December 2014, Arora International Markets did not forward these amounts to SDAEA at all.
Easter Sunday contraventions
Arora Markets and Arora International Markets were required by clause 5.3(b) of the Franklins agreement to pay permanent team members whose non-working day fell on Easter Sunday 2013 and Easter Sunday 2014 an amount equal to their ordinary rate of pay.
Arora Markets have failed to pay the amounts required to be paid to permanent team members whose non-working day fell on Easter Sunday 2013.
Arora Markets have failed to pay the amounts required to be paid to permanent team members whose non-working day fell on Easter Sunday 2014.
Arora International Markets have failed to pay the amounts required to be paid to permanent team members whose non-working day fell on Easter Sunday 2013.
Arora International Markets have failed to pay the amounts required to be paid to permanent team members whose non-working day fell on Easter Sunday 2014.
Superannuation contraventions
Arora Markets and Arora International Markets were required by clause 3.10(c) of the Franklins agreement to make superannuation contributions for eligible employees of 9 per cent or any higher amount legislated, to the Retail Employees Superannuation Trust (REST).
Arora Markets failed to make superannuation contributions as required on 31 August 2014, 30 September 2014, 31 October 2014 and 30 November 2014. SDAEA asserts that Arora Markets further failed to make superannuation contributions as required on 31 December 2014, 31 January 2015, 28 February 2015 and 31 March 2015.
In Deputy Commissioner of Taxation v Arora[1] (Arora), the Deputy Commissioner of Taxation obtained judgment against Mr Arora under the Superannuation Guarantee (Administration) Act 1992 (Cth) (Superannuation Guarantee Act) in respect of unpaid superannuation contributions by Arora Markets for the period 1 June 2013 to 31 October 2014.
[1] [2017] NSWSC 1016
Arora International Markets failed to make superannuation contributions as required on 31 August 2014, 30 September 2014, 31 October 2014, 30 November 2014 and 31 December 2014. SDAEA asserts that Arora International Markets further failed to make superannuation contributions as required on 31 January 2015, 28 February 2015 and 31 March 2015.
In Arora, the Deputy Commissioner of Taxation obtained judgment against Mr Arora under the Superannuation Guarantee Act in respect of unpaid superannuation contributions by Arora International Markets for the period 1 June 2013 to 31 October 2014.
Arora Supermarkets was required by clause 1.1.2 of Appendix G of the Coles agreement to make monthly superannuation contributions for eligible employees in accordance with Superannuation Guarantee Legislation to REST.
Arora Supermarkets failed to make superannuation contributions as required on 31 August 2014, 30 September 2014, 31 October 2014, 30 November 2014, 31 December 2014, 31 January 2015, 28 February 2015 and 31 March 2015.
Admissions
Mr Arora admits that he was involved (within the meaning of s.550(1) of the Fair Work Act) in the companies’ contraventions of the Fair Work Act as follows:
a)between September 2013 and November 2014 Arora Markets knowingly or recklessly made false or misleading representations about the effect of the exercise of a workplace right by other persons in contravention of s.345 of the Fair Work Act. SDAEA asserts that this occurred between September 2013 and December 2014;
b)between September 2013 and November 2014 Arora Markets did not pay employees in full amounts payable in relation to the performance of work, in contravention of s.323(1) of the Fair Work Act. SDAEA asserts that this occurred between September 2013 and December 2014;
c)between September 2013 and December 2014 Arora Supermarkets knowingly or recklessly made false or misleading representations about the effect of the exercise of a workplace right by other persons in contravention of s.345 of the Fair Work Act;
d)between September 2013 and December 2014 Arora Supermarkets did not pay employees in full amounts payable in relation to the performance of work, in contravention of s.323(1) of the Fair Work Act;
e)between September 2013 and December 2014 Arora International Markets knowingly or recklessly made false or misleading representations about the effect of the exercise of a workplace right by other persons in contravention of s.345 of the Fair Work Act;
f)between September 2013 and December 2014 Arora International Markets did not pay employees in full amounts payable in relation to the performance of work, in contravention of s.323(1) of the Fair Work Act;
g)on and from 29 April 2013, Arora Markets contravened clause 5.3(b) of the Franklins agreement, in contravention of s.50 of the Fair Work Act;
h)on and from 19 May 2014, Arora Markets contravened clause 5.3(b) of the Franklins agreement, in contravention of s.50 of the Fair Work Act;
i)on and from 29 April 2013, Arora International Markets contravened clause 5.3(b) of the Franklins agreement, in contravention of s.50 of the Fair Work Act;
j)on and from 19 May 2014, Arora International Markets contravened clause 5.3(b) of the Franklins agreement, in contravention of s.50 of the Fair Work Act;
k)on 31 August 2014, 30 September 2014, 31 October 2014 and 30 November 2014, Arora Markets contravened clause 3.10(c) of the Franklins agreement, in contravention of s.50 of the Fair Work Act. SDAEA asserts that this further occurred on 31 December 2014, 31 January 2015, 28 February 2015 and 31 March 2015;
l)on 31 August 2014, 30 September 2014, 31 October 2014, 30 November 2014 and 31 December 2014, Arora International Markets contravened clause 3.10(c) of the Franklins agreement, in contravention of s.50 of the Fair Work Act; and
m)on 31 August 2014, 30 September 2014, 31 October 2014, 30 November 2014, 31 December 2014, 31 January 2015, 28 February 2015, and 31 March 2015, Arora Supermarkets contravened clause 1.1.2 of Appendix D of the Coles agreement, in contravention of s.50 of the Fair Work Act.
Relevant documents
In addition to its Amended Form 4 Claims filed on 24 August 2016, SDAEA relies upon the affidavits of Mitchell Worsley made on 20 December 2016 and 15 March 2017 and the affidavit of Timothy John McCauley made on 6 April 2017.
Mr Arora relies upon his affidavits made on 10 February 2017 and 15 March 2017.
SDAEA tendered the affidavits of Mr Arora made on 11 October 2016[2] and 23 October 2016[3], in the event that they would be necessary to prove admissions of Mr Arora, and an email[4] to SDAEA from the People & Culture Manager of the subsequent owner of Arora Markets and Arora International Markets, which relevantly stated that it had not made any payments in relation to the 2013 and 2014 Easter Sunday payments and to superannuation entitlements between 1 July 2014 and 22 December 2014 (Arora International Markets) and 1 July 2014 and 31 March 2015 (Arora Markets).
[2] Exhibit A1
[3] Exhibit A2
[4] Exhibit A3
I also have before me the statement of agreed facts filed on 25 October 2017.
Trial
The trial of the matter commenced on 16 March 2017. I granted an adjournment in order to prevent unreasonable prejudice to SDAEA arising from the very late filing and service of Mr Arora’s affidavit made on 15 March 2017.
The trial resumed on 25 October 2017.
On 25 October 2017 I made the following orders in SYG299/2015:
THE COURT DECLARES, BY CONSENT (EXCEPT IN RELATION TO DECLARATIONS 1(a) AND 1(b)):
(1) That the respondent by reason of his involvement for the purposes of s.550 of the Fair Work Act 2009 (Cth) in the conduct of Arora International Markets Pty Limited, contravened:
(a)s.345 of the Fair Work Act 2009 (Cth) between September 2014 and December 2014 by knowingly or recklessly making false or misleading representations about the effect of the exercise of a workplace right by other persons;
(b)s.323(1) of the Fair Work Act 2009 (Cth) between September 2013 and December 2014 by not paying in full employees amounts payable in relation to the performance of work;
(c)s.50 of the Fair Work Act 2009 (Cth) on and from 29 April 2013, by contravening 5.3(b) of the Franklins National Retail Agreement 2008;
(d)s.50 of the Fair Work Act 2009 (Cth) on and from 19 May 2014, by contravening paragraph 5.3(b) of the Franklins National Retail Agreement 2008; and
(e)s.50 of the Fair Work Act 2009 (Cth) on 31 August 2014, 31 September 2014, 31 October 2014 and 31 November 2014 by contravening clause 3.10(c) of the Franklins National Retail Agreement 2008.
I also made the following orders in SYG177/2015:
THE COURT DECLARES, BY CONSENT (EXCEPT IN RELATION TO DECLARATIONS 1(a) AND 1(b)):
(1)That the third respondent by reason of his involvement for the purposes of s.550 of the Fair Work Act 2009 (Cth) in the conduct of Arora Markets Pty Limited, contravened:
(a)s.345 of the Fair Work Act 2009 (Cth), between September 2013 and December 2014, by knowingly or recklessly making false or misleading representations about the effect of the exercise of a workplace right by other persons;
(b)s.323(1) of the Fair Work Act 2009 (Cth), between September 2013 and December 2014, by not paying employees in full amounts payable in relation to the performance of work;
(c)s.50 of the Fair Work Act 2009 (Cth) on and from 29 April 2013 until 19 September 2014, by contravening paragraph 5.3(b) of the Franklins National Retail Agreement 2008;
(d)s.50 of the Fair Work Act 2009 (Cth), on and from 19 May 2014 until 19 September 2014, by contravening paragraph 5.3(b) of the Franklins National Retail Agreement 2008;
(e)s.50 of the Fair Work Act 2009 (Cth) on 31 August 2014, 30 September 2014, 31 October 2014, 30 November 2014, 31 December 2014, 31 January 2014, 28 February 2015, and 31 March 2015 by contravening clause 3.10(c) of the Franklins National Retail Agreement 2008;
(2)That the third respondent by reason of his involvement for the purposes of s.550 of the Fair Work Act 2009 (Cth) in the conduct of Arora Supermarkets Pty Limited, contravened:
(a)s.345 of the Fair Work Act 2009 (Cth) between September 2013 and December 2014, by knowingly or recklessly making false or misleading representations about the effect of the exercise of a workplace right by other persons;
(b)s.323(1) of the Fair Work Act 2009 (Cth) between September 2013 and December 2014, not paying employees in full amounts payable in relation to the performance of work; and
(c)s.50 of the Fair Work Act 2009 (Cth) on 31 August 2014, 30 September 2014, 31 October 2014, 30 November 2014, 31 December 2014, 31 January 2014, 28 February 2015, and 31 March 2015 by contravening clause 4.5.2 of the Coles Supermarkets Australia and Bi-Lo Limited Retail Agreement 2008.
Consideration
Notwithstanding the substantial factual agreement between the parties by the time of the trial of this matter, and the declarations made almost entirely by consent at that time, the parties remain in dispute on the question of compensation, penalties, interest and costs. SDAEA seeks compensation with interest and penalties on the basis that, in relation to the payroll deduction of union dues, employees of the companies were misled as to where their payroll deductions for union dues were going. This is said to have been a contravention of s.345 of the Fair Work Act. Further, because of the same false dealing with those payroll deductions, employees were not paid in full for the time they worked, by reference to the relevant industrial agreements that applied to their work.
In relation to the failure to pay workers for Easter Sunday, it is established that the employees engaged under the Franklins agreement missed out on a day’s pay in 2013 and 2014 when they were not provided with a day in lieu for Easter Sunday. The second contravention in 2014 was made notwithstanding knowledge of the first contravention in 2013.
In relation to superannuation, SDAEA points out that obligations to pay superannuation under the Franklins agreement and the Coles agreement were ignored for many months.
SDAEA points out that the factual admissions made by Mr Arora extend to his involvement in the contraventions by the companies and are sufficient to support both compensation and penalties.
Mr Arora opposes orders for compensation, interest and penalties on several bases. He suggests that he acted in good faith and sought finance in order to meet the companies’ liabilities but could not secure that finance. He suggests that SDAEA and the former employees should have claimed in the company liquidations rather than bringing these proceedings. In relation to the unremitted union dues, Mr Arora denies that employees were misled. He asserts that the relevant agreement was to deduct the dues from payroll, which was done. Further, in relation to the Easter Sunday payment, Mr Arora submits that he was willing to provide a day in lieu (rather than make a monetary payment) but he was unable to do so within the 28 days specified in the industrial agreement.
Mr Arora refers more generally to the financial losses he has suffered personally and the liability he has separately incurred to the Deputy Commissioner of Taxation in Arora.
Whether orders to pay compensation should be made
I accept the submissions of SDAEA that compensation orders should be made.
In these proceedings, there is a direct correlation between the compensation sought and the consequences of the pleaded contraventions of the Fair Work Act and the applicable industrial instruments in the Amended Form 4 Claims in each matter. Further, the affidavit of Mr Worsley sets out how the extensive schedules were arrived at for affected persons (particularly employees who are members of SDAEA). I accept that the formula adopted by Barker J in the Federal Court is appropriate to determine compensation in these matters:[5]
In accordance with usual principle, an order awarding compensation must be assessed on the basis that an applicant establishes loss that a person has suffered because of the contravention and that this requires an appropriate causal connection between the contravention and the loss claimed.
[5] Australian Licenced Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd (2011) 193 FCR 526; 205 IR 392; [2011] FCA 333 at [423]
Appropriateness is still a touchstone, as with s.23 of the Federal Court of Australia Act 1976 (Cth), about which Deane J stated:[6]
Wide though that power is, it is subject to both jurisdictional and other limits. It exists only “in relation to matters” in respect of which jurisdiction has been conferred upon the Federal Court. Even in relation to such matters, the power is restricted to the making of the “kinds” of order, whether final or interlocutory, which are capable of properly being seen as “appropriate” to be made by the Federal Court in the exercise of its jurisdiction.
[6] Jackson v Sterling Industries Ltd (1987) 162 CLR 612; 71 ALR 457; 61 ALJR 332; at 622
In respect of the legislation being considered here, Mortimer J in the Federal Court similarly held: [7]
… In s 545(1), the governing consideration is what the Court considers “appropriate”, and this in my opinion leaves room for a Court to find in a given case that less than full compensation might be appropriate.
[7] Dafallah v Fair Work Commission (2014) 225 FCR 559; 242 IR 273; [2014] FCA 328 at [157]
I do not consider that it is appropriate in these matters for less than full compensation to be ordered (putting to one side the issue of superannuation). The loss suffered by Mr Arora’s knowing concern in the breaches by each of the companies is plain and essentially unexplained.
Mr Arora points to some possible future satisfaction of part of the compensation sought by some of the corporate entities in liquidation. He has had three years to make good that suggestion. The loss of the affected employees and SDAEA by his contraventions of the Fair Work Act are plain on the face of the Amended Form 4 Claims in these proceedings and in Mr Worsley’s affidavit of 20 December 2016. These applications were commenced well before any other proceedings by other regulators against any of the three companies. Mr Arora could have taken steps to satisfy these claims well before those proceedings were brought. He did not. It is appropriate that the contraventions in which he was knowingly concerned are compensated as fully as possible.
In relation to the union dues, I accept that the employees were misled. Their understanding was not simply that the union dues would be deducted from their wages. Their expectation was that the money so deducted would be remitted to SDAEA so as to discharge their liability to SDAEA. There was some oral argument at the trial about whether the non remittal of the dues to SDAEA had an impact on the membership entitlements of the union members. Be that as it may, there can be no doubt that the non remittal left the employees indebted to SDAEA. The position would be the same if, for example, the arrangement had been for deductions from salary for mortgage payments. In the absence of remittal to the financial institution holding the mortgage, there would remain a mortgage debt.
SDAEA should receive compensation to it for the monies deducted from the employees’ wages and not remitted to it.
As for the Easter Sunday payment, there is a plain liability to compensate the employees for their Easter Sunday salary entitlement in the absence of a day off in lieu. No day off in lieu was provided within the time specified in the industrial agreement and the employees are entitled to receive what is due to them.
The position in relation to superannuation payments is complicated by the decision of the NSW Supreme Court in Arora. By that judgment on 4 August 2017, Mr Arora is required to pay the sum of $1,894,929.53 to the Deputy Commissioner of Taxation. That amount includes components for withholding tax, the superannuation guarantee charge, interest and penalties. For the purpose of these proceedings, it was not disputed in argument at the trial that, while the amounts due were payable to the Deputy Commissioner of Taxation, it could be assumed that the amounts paid in respect of the superannuation guarantee charge would in due course be credited to the employees entitled to those superannuation payments.
It would not, in my opinion, be appropriate for the employees to be paid twice in respect of the same superannuation entitlements, by reason of competing orders of two courts. It follows that any compensation order in respect of unpaid superannuation entitlements should be limited to payments not already dealt with by the NSW Supreme Court. I accept that the orders of the NSW Supreme Court were for a more limited period than the period of the amended claim in this matter. At the trial, I was informed in argument of the possibility of further proceedings being instituted by the Deputy Commissioner of Taxation in respect of the additional period. To date, however, I am unaware of any such further proceedings. It follows that an order for compensation in relation to the period not already dealt with by the NSW Supreme Court should be made.
Interest up to judgment should be paid on the compensation amount in accordance with s.547 of the Fair Work Act and s.76 of the Federal Circuit Court of Australia Act 1999 (Cth) at the rate specified in Federal Court Practice Note GPN-INT.[8]
[8] issued 18 September 2017
Whether penalties be imposed
I also accept SDAEA’s submissions in relation to the general principles to be applied to the question of penalties.
The following broad steps are to be addressed in setting a pecuniary penalty under s.546(1) of the Fair Work Act:
a)identifying the central object of the imposition of a pecuniary penalty, being to establish deterrence against further contraventions of the Fair Work Act both to Mr Arora and to the community at large;
b)considering the application of pecuniary penalties to multiple contraventions of the Fair Work Act;
c)assessing the penalties as separate contraventions prior to engaging in the instinctive synthesis of determining the total penalty for Mr Arora; and
d)assessing the penalties as against each course of conduct engaged in by Mr Arora.
The primary purpose of any civil penalty regime is to ensure compliance with the legislation by deterring future contraventions. Deterrence applies at two levels:
a)to other potential contravenors in the community at large – general deterrence; and
b)the specific respondent found to have contravened the legislation in this instance – specific deterrence.
Sentencing in civil penalty matters do not involve notions of retribution or rehabilitation. They are “primarily if not wholly protective in promoting the public interest in compliance”.[9]
[9] Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 255 IR 87 at [55]
The decision cited immediately above endorsed the following earlier comments by French J (as he then was) in Trade Practices Commission v CSR Ltd[10] (TPC v CSR) at 52,152:
Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.
[10] (1991) ATPR 41-076
In these applications, the respondent was the controlling mind of a number of supermarkets which engaged large numbers of employees on the basis of meeting their legal entitlements. There is an important need to achieve deterrence to establish that such respondents should not decide to breach industrial law in order to simply redistribute money due to its employees (or to other persons to which employees have authorised their wages be paid) for other corporate or personal purposes of the three Arora companies or Mr Arora himself. The penalties must be set at such a level to achieve this deterrent effect.
In this case, the contraventions alleged are flagrant in that they were of a large scale, affecting a large number of employees, and repeated. There can be no argument that the companies and Mr Arora knew what they were doing when they and he were not meeting obligations under the enterprise bargaining agreements and under the Fair Work Act.
Further, while Mr Arora had ample opportunity to demonstrate remorse and measures to address compliance, none has been demonstrated. His pleadings and evidence were advanced to avoid the financial consequences of his admitted contraventions.
Multiple contraventions
Apart from the distinct statutory contraventions established, the conduct can internally be split into distinct repeated contraventions of the one section.
Although each of the contraventions are distinct on the face of the legislation, there is a very close factual correlation in the circumstances that gives rise to the contraventions. The following three principles apply to considering multiple contraventions in these circumstances:
a)avoiding duplication of penalties for conduct which is truly identical;
b)grouping together separate but overlapping contraventions into one “course of conduct”; and
c)after the first two steps, a separate reassessment of the penalty as reflection of the totality of the conduct.[11]
[11] Registrar of Aboriginal and Torres Strait Islander Corporations v Matcham (No.2) (Matcham) (2014) 97 ACSR 412 at [197]-[198]
In seeking to avoid duplication, “course of conduct” and “totality” are distinct steps.[12]
[12] Matcham at [292]-[293]; Pearce v R (1998) 194 CLR 610 at [45]-[48]
If contraventions of multiple provisions arise from the same wrongful conduct it should attract one penalty only, not separate penalties for each technical contravention.
In this case, that principle would ensure that Mr Arora is not separately penalised for each individual act of underpayment to an employee, or each individual misleading of an employee in contravention of s.345. It is the conduct that is penalised, not the fact that it had the effect on dozens or hundreds of particular employees. Each individual act might establish a contravention, but each affected employee would not.
This principle of avoiding duplication is distinct from the course of conduct principle, in that each individual act still is still considered a separate contravention. Under the “course of conduct”, similar acts may be grouped together to potentially reduce the number of technical contraventions further.
Course of conduct
Separate contraventions arising from separate acts should ordinarily attract separate penalties. However, a different principle may apply where separate acts, giving rise to separate contraventions, are nonetheless so inextricably interrelated that they should be viewed as one multi-faceted “course of conduct” or “one transaction”. This provides one way of avoiding double punishment for those parts of the legally distinct contraventions which involve overlap in wrongdoing.
The Federal Court in Fair Work Ombudsman v Devine Marine Group Pty Ltd[13] (Devine Marine) considered the application of s.557, which deals with the course of conduct in two or more contraventions of the same civil remedy provision: [14]
…Section 557 provides (relevantly):
Course of conduct
(1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
[13] [2015] FCA 370
[14] at [11]-[12] per White J
(2) The civil remedy provisions are the following:
…
(b) section 45 (which deals with contraventions of modern awards);
...
The proper application of s 557 was considered by the Full Court in Rocky Holdings Pty Ltd v Fair Work Ombudsman [2014] FCAFC 62; (2014) 221 FCR 153. The Court held that the term “two or more contraventions of a single penalty provision” in subs (1) is a reference to the contraventions which occur when a term of a modern award or, as the case may be, a provision of a national employment standard, is contravened, and that that is so even when the contraventions relate to two or more persons.
The same principles would apply to contraventions of an industrial instrument under s.50 (which is at s.557(2)(c)), as to failure to pay in full at s.323(1) (at s.557(2)(g)) but not to the s.345 contravention (misleading employees as to their workplace rights).
When considering the maximum penalty for a course of conduct it is important to bear in mind that the statutory maximum for one contravention is not converted into a maximum for the entire course of conduct: the maximum continues to apply to each contravention which forms part of the course of conduct. Accordingly, if appropriate, penalties can be imposed for the course of conduct which exceed, perhaps greatly, the statutory maximum for a single contravention.[15]
[15] Construction, Forestry, Mining and Energy Union v Cahill (2010) 194 IR 461 at [39]-[42]. Those passages were cited as a correct explanation of the course of conduct principles by the Full Federal Court in Director of Consumer Affairs (Vic) v Alpha Flight Services Pty Ltd [2015] FCAFC 118 at [46], and as “authoritative statements of principle” by the Full Court in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [53]
The question whether certain contraventions should be treated as being truly a single course of conduct is a factual enquiry to be made, having regard to all of the circumstances of the case. The course of conduct or “one transaction” principle is a “tool of analysis” which can, but need not, be used in any given case.[16]
[16] see Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 at [75]-[77] and the cases there referred to
The “totality” principle
Where multiple penalties are to be imposed upon a particular wrongdoer, the totality principle requires the Court to make a “final check” of the penalties to be imposed on a wrongdoer, considered as a whole. It will not necessarily result in a reduction. However, in cases where the Court believes that the cumulative total of the penalties to be imposed would be too low or too high, it should alter the final penalties to ensure that they are “just and appropriate.”[17]. As noted, the totality principle is quite separate from the course of conduct principle and is applied at a different stage of the analysis.
[17] See Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [5]-[7] per Gyles J and [41]-[43] and [90]-[92] per Stone and Buchanan JJ; Clean Energy Regulator v MT Solar Pty Ltd at [81]-[82]
The Court should assess the penalty that would be properly appropriate for each separate contravention, total those amounts and reconsider whether that total is appropriate as per Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd.[18]
[18] (1997) 145 ALR 36 at 53
The maximum penalty applicable for each of the present contraventions for Mr Arora is $10,200 (at the date of the pleaded contraventions). To repeat, grouping multiple contraventions into a course of conduct does not result in the maximum for a single contravention operating as “cap” on the penalty for that course of conduct. However, in practice it is still likely to operate as a useful guide.[19]
[19] Australian Energy Regulator v Snowy Hydro Limited (No.2) [2015] FCA 58 at [119]
Instinctive synthesis
A number of factors are considered relevant in considering a penalty of appropriate deterrent value in cases such as the present.[20] They include:
a)the nature and extent of the contravention;
b)the circumstances in which the contravention took place;
c)the nature and extent of loss and damage suffered as a result of the contravention;
d)whether the contravenor has engaged in any similar conduct in the past;
e)the size of the contravenor;
f)whether the contraventions involve senior management;
g)any contrition or corrective action taken; and
h)any co-operation with authorities which has been shown.
[20] The factors identified by French J in TPC v CSR, as applied, for example in Stuart-Mahoney v Construction, Forestry, Mining and Energy Union [2008] FCA 1426; (2008) 177 IR 61 at [40]; Temple v Powell [2008] FCA 714; (2008) 169 FCR 169 at [56], [78]; Cahill v Construction, Forestry, Mining and Energy Union(No.4) [2009] FCA 1040; (2009) 189 IR 304 at [9], [10]
It is important to remember that such factors are not to be treated as a “rigid catalogue” of matters for attention.[21] However, addressing each of these matters will assist the Court to carefully and transparently consider the overall circumstances of the contraventions.
[21] See Matcham at [173] and [233]
Ultimately, “[t]he Court is to determine an appropriate penalty in each case by a process of instinctive synthesis after taking into account all relevant factors…The need for deterrence, both personal and general, is usually a prominent consideration in the determination of penalty.”[22]
[22] Devine Marine [2015] FCA 370 at [15]. See also Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560 at [27], [55]; Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 at [37]-[39]
I accept that there are four distinct courses of conduct which should be addressed in relation to penalty:
a)the failure to make the Easter Sunday 2013 payment to employees covered by the Franklins agreement – despite there being multiple contraventions for the number of affected employees across two employer companies at a number of Arora stores, the failure to meet this contravention was one course of conduct in 2013;
b)the failure to pay the Easter Sunday 2014 payment to employees covered by the Franklins agreement – again there are multiple contraventions for the number of affected employees across two employer companies at a number of Arora stores. However, this is a separate course of conduct to the 2013 failure to pay. The 2014 contravention followed findings of the Fair Work Commission relating to the 2013 Easter Sunday contravention.[23] The 2014 contravention was therefore more serious and more flagrant, which should be reflected in the penalty ordered by the Court;
c)the failure to remit the union dues deducted from employees’ payslips. There are two separate courses of conduct here. First, the deductions were remitted late, for several months. Then, a decision was made not to remit the deductions at all. This is a contravention of two separate sections of the Fair Work Act (ss.323 and 345), but involves the same conduct. The conduct is repeated, however, every fortnight that employees fail to receive full pay for their work payment and receive a misleading payslip. The conduct is more serious when it is clear that the respondent knows about the contravention but repeatedly fails to address the contravention; and
d)the failure to pay superannuation. There are 21 distinct occasions when Mr Arora was knowingly concerned in the failure to pay superannuation according to the Franklins agreement or the Coles agreement for multiple employees. SDAEA submits that there are 21 distinct courses of conduct which should be reflected in the penalty awarded by the Court.
[23] See Shop, Distributive and Allied Employees Association v Arora Markets Pty Ltd [2014] FWC 2603
While I accept SDAEA’s submissions on the courses of conduct, I do not accept that any penalties should be imposed in relation to the failure to pay superannuation. I take into account that penalties have already been imposed by the NSW Supreme Court in Arora. It would not, in my opinion, be appropriate to impose multiple penalties in different proceedings for the same conduct.
As to the amount of penalties to be imposed in respect of the other courses of conduct, I agree generally with SDAEA’s submissions.
The nature and extent of the contraventions are demonstrated to some extent by the quantum of the compensation sought in respect of each type of contravention. These are described in Mr Worsley’s affidavit of 20 December 2016. The nature of the contravention is more egregious when the respondent is aware of previous contraventions of the same nature but simply repeats the behaviour and does nothing to address the contravention. This is starkly illustrated in the 2014 repetition of the 2013 failure to pay employees for Easter Sunday when the Fair Work Commission had expressly found that the payment was required during 2013.[24]
[24] See footnote [21] above
The circumstances of the contraventions do not excuse Mr Arora. In each case, the contravention does not arise from any misunderstanding of obligations, just a disinclination to meet those obligations. In respect of each contravention, the contravention was brought to his attention and he did not make good the underpayment, failure to remit or misleading conduct. Instead, he repeated it.
There is no evidence of contrition by Mr Arora prior to the trial but there were protracted negotiations between the parties and Mr Arora admitted the contraventions. This does avoid the necessity of formally proving some conduct on his part, but does not outweigh the flagrancy of his contraventions in the first place.
Appropriate penalties before the application of the totality principle are in the table as follows:
Easter Sunday 2013 Contraventions (s.50) in respect of 148 employees, same course of conduct $3,300 Easter Sunday 2014 Contraventions (s.50) in respect of 161 employees, same course of conduct $6,600 Failure to pay in full/misleading conduct re permitted deductions September 2013 to April 2014
Fortnightly contraventions of s.345 and s.323 through late payments in respect of 224 employeesSection 556 provides for order under only one provision where pecuniary penalty ordered in respect of that conduct
16 x $3,300 = $52,800
Failure to pay in full/misleading conduct re permitted deductions May 2014 to December 2014
Fortnightly contraventions of s.345 and s.323 through failure to pay in respect of 224 employeesSection 556 provides for order under only one provision where pecuniary penalty ordered in respect of that conduct
16 x $5,000 = $80,000 Total $142,700
In the application of the totality principle, SDAEA sought an overall penalty of $100,000 against Mr Arora. This reflected his central involvement in four distinct types of underpayment reflecting an underpayment to affected employees in the order of $450,000. This is, in my opinion, a reasonable and fair submission, but the amount requires adjustment having regard to my decision not to impose penalties in relation to the failure to pay superannuation. I will order that Mr Arora pay an overall penalty of $75,000.
Conclusion
Apart from the issue of penalty, the issue of compensation and interest requires further calculation, based on my findings and conclusions. During the course of oral argument at the trial, I raised with counsel for SDAEA the quantum of compensation, having regard to Order 3 I made on 19 August 2015 in SYG177/2015, anticipating a default judgment at that time. The liquidated amount of compensation calculated at that time was $26,231.10. Counsel submitted that the calculation upon which that figure was based was incomplete.
I will order that SDAEA bring in short minutes within 14 days to specify the amount of compensation and interest to be paid by Mr Arora, and to formalise the imposition of the penalty.
I certify that the preceding ninety-five (95) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 16 February 2018
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