Sutton v Edyvane's Transports Pty Ltd (No 2)

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Federal Circuit AND FAMILY Court of Australia

(DIVISION 2)

Sutton v Edyvane’s Transports Pty Ltd (No 2) [2022] FedCFamC2G 1062

File number: MLG 1870 of 2021
Judgment of: JUDGE RILEY
Date of judgment: 21 December 2022
Catchwords: INDUSTRIAL LAW – penalties – 10 contraventions over an extended period by corporation – disregard of awards and legislation – serious contraventions – director involved in six contraventions – costs.      
Legislation:

Fair Work Act 2009 ss.45, 90(2), 323, 535, 536, 546, 557, 557A(5A) 570

Fair Work Regulations 2009 reg.3.32, 3.33, 3.34, 3.36, 3.37(1), 3.42 and 3.46
Other material:

Road Transport and Distribution Award 2010 cl.5, 16.2(b)(vi), 16.4(b)(ii)

Road Transport (Long Distance) Operation Award 2010 cl.5, 14.1(c),(i),(v), 14.2(b)(i)
Cases cited:

AMIEU v Greenmountain Food Processing [2015] FCCA 2655

Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (Nine Brisbane Sites Appeal) (2019) 269 FCR 262; (2019) 366 ALR 698; (2019) 286 IR 336; [2019] FCAFC 59

Australian Building and Construction Commissioner v Pattinson (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13

Fair Work Ombudsman v Bedington [2012] FMCA 1133

Fair Work Ombudsman v Nobrace Centre Pty Ltd (In Liq) (ACN 121 556 447) (No. 2) [2019] FCCA 2970

Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301

Jess v Cooloola Milk Pty Ltd [2021] FCCA 1526

Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080

Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70

Parker v Australian Building and Construction Commissioner (2019) 270 FCR 39; (2019) 365 ALR 402; (2019) 286 IR 116; [2019] FCAFC 56

Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412

Rocky Holdings Pty Limited v Fair Work Ombudsman (2014) 221 FCR 152; (2014) 243 IR 244; [2014] FCAFC 62

Sayed v Construction Forestry Mining and Energy Union (2016) 239 FCR 336; (2016) 259 IR 274; [2016] FCAFC 4

Trade Practices Commission v CSR Ltd (1991) ATPR 41-076; [1990] FCA 52

Division: Division 2 General Federal Law
Number of paragraphs: 136
Date of hearing: 24 October 2022
Place: Melbourne
Counsel for the Applicant: Alan Ford
Solicitor for the Applicant: Peter Hull & Associates
Counsel for the Respondents: Stephen Bunce
Solicitor for the Respondents: Wakefield Vogrig & Boote Lawyers

ORDERS

MLG 1870 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

RONALD SUTTON

Applicant
AND:

EDYVANE'S TRANSPORTS PTY LTD
(ACN 004 749 759)

First Respondent

MARIANNA LYNETTE EDYVANE

Second Respondent

order made by:

JUDGE RILEY

DATE OF ORDER:

21 December 2022

THE COURT ORDERS THAT:

1.Pursuant to s.546(1) of the Fair Work Act 2009 (“the Act”), the first respondent pay to the applicant pecuniary penalties in the following amounts:

(a)$96,000, in respect of its failure to keep employee records in contravention of s.535 of the Act;

(b)$96,000, in respect of…

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Details
Case
[2022] FedCFamC2G 1062
Decision Date

CaseChat Overview and Summary

In Sutton v Edyvane's Transports Pty Ltd (No 2), the primary concern was the enforcement of industrial law provisions against Edyvane's Transports Pty Ltd and its director, Ms Edyvane, for multiple contraventions of employment standards and record-keeping requirements. The applicant, Mr Sutton, sought penalties against the corporation and its director for various breaches under the Fair Work Act 2009, including failures to keep and provide employee records, provide accurate pay slips, and pay entitlements such as long service leave, annual leave, and allowances. The Federal Circuit and Family Court of Australia was tasked with determining the appropriate penalties and assessing the mitigating factors presented by the respondents.

The court was required to address several legal issues, including the calculation of penalties for multiple contraventions, the relevance of the corporation's size and financial difficulties, the deliberateness and duration of the contraventions, the level of involvement of senior management, and the presence of a corporate culture promoting compliance. The court considered the submissions of the respondents, which included arguments about the minor nature of some contraventions and claims of ignorance due to reliance on professional advice. However, the court found that the contraventions were deliberate and widespread, extending over a decade, and directly attributable to the actions of Ms Edyvane, who was a director of the company.

The court concluded that the contraventions were serious and deliberate, involving both the corporation and its director. It held that the size and financial condition of the corporation were not significant mitigating factors. Instead, the primary consideration was the deliberate and sustained nature of the contraventions, which were directly linked to the director’s failure to comply with legal obligations. The court awarded substantial penalties to the applicant, reflecting the seriousness and extent of the breaches. It also ordered that the respondents pay the applicant’s costs of the proceeding.

The final orders of the court mandated that Edyvane's Transports Pty Ltd pay pecuniary penalties totaling $96,000 for each contravention, amounting to $960,000 in total. Ms Edyvane was ordered to pay $8,820 for each contravention she was found to be responsible for, totaling $52,920. Additionally, the respondents were required to pay the applicant’s costs, with liberty granted for the parties to apply for the fixation of the costs. This decision underscores the importance of compliance with industrial laws and the consequences for corporations and their directors who fail to adhere to these obligations.

Orders

Orders of the court

THE COURT ORDERS THAT:

1. Pursuant to s.546(1) of the Fair Work Act 2009 (“the Act”), the first respondent pay to the applicant pecuniary penalties in the following amounts:

(a) $96,000, in respect of its failure to keep employee records in contravention of s.535 of the Act;

(b) $96,000, in respect of its failure to make employee records available on request in contravention of s.535 of the Act;

(c) $96,000, in respect of its failure to provide pay slips with all the required information in contravention of s.536 of the Act;

(d) $96,000, in respect of its failure to ensure that copies of the relevant awards and the National Employment Standards were available to the applicant in contravention of s.45 of the Act;

(e) $96,000, in respect of its failure to pay the applicant his long service leave entitlements in contravention of s.323 of the Act;

(f) $96,000, in respect of its failure to pay the applicant his annual leave entitlements in contravention of s.90(2) of the Act;

(g) $96,000, in respect of its failure to reimburse the applicant for work diaries in contravention of s.45 of the Act;

(h) $96,000, in respect of its failure to reimburse the applicant for protective clothing in contravention of s.45 of the Act;

(i) $96,000, in respect of its failure to pay the applicant a livestock carting allowance in contravention of s.45 of the Act; and

(j) $96,000, in respect of its failure to pay the applicant a long distance operations allowance in contravention of s.45 of the Act.

2. Pursuant to s.546(1) of the Act, the second respondent pay to the applicant pecuniary penalties in the following amounts:

(a) $8,820, in respect of her failure to provide pay slips with all the required information in contravention of s.536 of the Act;

(b) $8,820, in respect of her failure to ensure that copies of the awards and the National Employment Standards were available to the applicant in contravention of s.45 of the Act;

(c) $8,820, in respect of her failure to reimburse the applicant for work diaries in contravention of s.45 of the Act;

(d) $8,820, in respect of her failure to reimburse the applicant for protective clothing in contravention of s.45 of the Act;

(e) $8,820, in respect of her failure to pay the applicant a livestock carting allowance in contravention of s.45 of the Act; and

(f) $8,820, in respect of her failure to pay the applicant a long distance operations allowance in contravention of s.45 of the Act.

3. The respondents pay the applicant his costs of the proceeding on the scale of this court, to be fixed by the court if not agreed.

4. The parties have liberty to apply on the fixing of the amount of costs.

Background

Background to the litigation

The question of costs is dealt with separately below. Jess v Cooloola Milk Pty Ltd [2021] FCCA 1526 is a very different case. For one thing, Judge Vasta in Jess described the applicant’s claim as “quite dishonest”. No such allegation has been, or could be, made in the present case. o.specific mitigating facts In addition, the respondents have put forward a number of specific mitigating facts. Some of them are not facts at all, and were not supported by evidence or were not accepted by the court. In relation to making and keeping records, the respondents submitted that it was a “minor” contravention to not record leave balances from time to time. This was not minor. It led to very substantial underpayments upon Mr Sutton’s retirement. It was also submitted that some of the contraventions came about because Ms Edyvane is not computer literate, and maintained a legacy record keeping system that “worked”. As the principal judgment showed, the legacy record keeping system did not “work”. It really did not matter whether the records were kept on computer or were handwritten. They simply had to be legible, and have all of the detail the legislation required. The respondents maintained that their advisors did not advise them to update their systems. That is beside the point. It was the respondents’ responsibility to comply with their legal obligations, and get such professional advice as they needed for that purpose. In relation to making records available, the respondents submitted that the requests were non-specific. That is simply not supported by the evidence. The respondents also submitted that the first request was made directly to the respondents, even though they were legally represented. That did not alter the basic obligation under the legislation. In relation to the admitted payslips contravention, the respondents submitted that they had always done them in the incorrect way and thought it was okay to continue to do so. This submission is simply staggering. In relation to long service leave, the respondents relied on the fact that Mr Sutton requested a certain period as long service leave, so he could have knee operations. However, he only made that request because he did not know he was entitled to sick leave for the knee operations. That was because the respondents did not tell him, and because they did not keep the required records that showed his running balance of sick leave. In relation to annual leave, the respondents submitted that they tried to check the figures. However, as is evidence from the principal judgment, their attempts were inadequate. In relation to the work diaries, the respondents said that they thought they were following industry practice. If there was such an industry practice, this submission just highlights the need for general deterrence. If there was not such an industry practice, this submission just highlights that the respondents were conducting their business as they pleased, with no regard to the law. The respondents also argued in mitigation that Mr Sutton did not ask for reimbursement. However, that was at least partly because the respondents did not comply with their legal obligation to display the awards.

Evidence

Evidence Before The Court

Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at [27]:Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.e. the degree of power it has, as evidenced by its market share and ease of entry into the market This factor applies more to trade practices cases than Fair Work cases. In any event, Edyvane’s did not have a particularly large share of the livestock transportation market.f. the deliberateness of the contravention and the period over which it extended The period over which most of the contraventions extended was from at least July 2009, when the Act and Regulations commenced, until July 2019, when Mr Sutton retired. The contraventions were deliberate, in the sense that Ms Edyvane acknowledged that she had copies of the relevant awards, but did not apply them. She claimed that she paid an hourly rate that was higher than the awards required. However, her hourly rate was only higher than the award rate for ordinary hours, and was not higher than the total amounts that should have been paid under the awards. The contraventions were also deliberate in the sense that Ms Edyvane, on behalf of Edyvane’s, chose not to accurately ascertain her legal obligations under the awards and the Act and the Regulations. Ms Edyvane claimed that she obtained and followed advice from an accountant. However, no such advice was provided to the court. Moreover, if Ms Edyvane had actually followed the advice of an accountant, it appears that the advice would have been professionally negligent. That is especially apparent in relation to the trip allowances. It may have been that Ms Edyvane obtained competent advice from an accountant, but failed to properly understand or apply it. One way or another, Ms Edyvane, on behalf of Edyvane’s, did not act with the rigour required of employers. Ms Edyvane, for many years, followed a process that she established. The contraventions were not the result of an isolated or accidental error in an otherwise adequate system. In that sense also, the contraventions were deliberate. g. whether the contravention arose out of the conduct of senior management or at a lower level The contraventions all arose from the conduct of Ms Edyvane, who was a director of Edyvane’s. h. whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention There was no evidence of Edyvane’s having a corporate culture of compliance with the Act and Regulations, as evidenced by educational programs, or disciplinary or other corrective measures in response to an acknowledged contravention. Having said that, there was no evidence of Edyvane’s or Ms Edyvane having been previously found to have contravened the Act and Regulations.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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