Wang v Liu

[2017] FCCA 437

FEDERAL CIRCUIT COURT OF AUSTRALIA

WANG v LIU [2017] FCCA 437

Catchwords:

INDUSTRIAL LAW – Breach of an order of the Fair Work Commission, Respondents to an order made in the Fair Work Commission wound up – order of the Fair Work Commission a civil penalty provision – whether a director of the companies subject to the orders of the Fair Work Commission is liable as an accessory pursuant to s.550(1) of the Fair Work Act 2009.

Legislation:

Fair Work Act 2009, ss.405, 550, 551
Corporations Act2001, s.556

Cases cited:

Fair Work Ombudsman v Proplas Industries Pty Ltd & Anor [2011] FMCA 506
Fair Work Ombudsman v Step Ahead Security Services Pty Ltd& Anor [2016] FCCA 1482

Applicant: MO HAN WANG

Respondent: LIN QING LIU

File Number: MLG 1204 of 2016

Judgment of: Judge McNab

Hearing date: 16 December 2016

Date of Last Submission: 16 December 2016

Delivered at: Melbourne

Delivered on: 10 March 2017

REPRESENTATION

Solicitors for the Applicant: Maddocks

The Respondent in person

ORDERS

1. The Application filed 8 June 2016 be dismissed.

2. There be no order as to costs.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1204 of 2016

MO HAN WANG

Applicant

And

LIN QING LIU

Respondent

REASONS FOR JUDGMENT

Introduction

1. The Applicant seeks orders against the Respondent on the grounds that she was involved in a contravention of a civil penalty provision of the Fair Work Act 2009 (Cth) (‘the Act’).

2. This matter came before the court for final hearing on 16 December 2016. The Applicant was represented by Mr Grigg, solicitor. The Respondent was not represented. The court was assisted by the oral and written submissions prepared by Mr Grigg.

3. The matters said to give rise to the claim in this proceeding are as follows:

   a)On 5 September 2012, the Fair Work Commission ordered that the Chen Family Trust, trading as Horizon Holdings Pty Ltd (‘Horizon’) and Telpac International Pty Ltd (‘Telpac’) pay the Applicant $6,346, taxed as a genuine redundancy;

   b)At the time the Fair Work Commission order was made, the Respondent was a director of the companies subject to the order;

   c)The Fair Work Commission order required the payment to be made within 21 days of 5 September 2012;

   d)The Fair Work Commission order has not been paid and on 30 January 2013 and 6 February 2013, Telpac and Horizon respectively were placed in liquidation.

4. The Applicant relies on s.550(1) of the Act and alleges that the Respondent is a person involved in the contravention of a civil remedy provision. The civil remedy provision relied upon is s.405 of the Act which provides that a person must not contravene a term of an order made under Part 3-2 of the Act. The Fair Work Commission order was made under that part of the Act. It is said that the Respondent is a person involved in the contravention within the meaning of s.550(2)of the Act. That section provides:

   (2)     a person is involved in a contravention of a civil remedy provision if, and only if, the person:

   (a)has aided, abetted, counselled or procured the contravention; or

   (b)has induced the contravention, whether by threats or promises or otherwise; or

   (c)has been in any way, by act remission, directly or indirectly, knowingly concerned in or party to the contravention; or

   (d)has conspired with others to affect the contravention.

Background

1. On 6 February 2013, Bryan Collis was appointed official liquidator of Horizon by an order of the Supreme Court of Victoria upon the application of Lisa Slavin. The report to creditors prepared by Mr Collis dated 23 September 2013, discloses that the petitioning creditor Ms Slavin had obtained a judgment in her favour in the sum of $17,702.90 relating to an unfair dismissal claim against Horizon.

2. The Collis report discloses that on 30 January 2013, Telpac was placed in liquidation.[1] The report also states that on or about 22 October 2012, Horizon entered into a Sale and Assignment Agreement with Aimei Pty Ltd (‘Aimei’) (Ms Liu, the Respondent, is also the sole director of that company) (‘the Sale Agreement’).

   [1] Report to Creditors prepared by Mr Collison at [5.1].

3. A valuation conducted on about 17 September 2012 of the assets of Horizon value all the plant stock and equipment at $233,805 as a going concern and $43,125 as an estimated auction value. These agreements provided that Aimei would pay Horizon $210,000 by 15 January 2013. Those funds were received and used to extinguish Horizons’ secured debt with the National Australia Bank. The liquidator concluded that the Aimei agreement was not an uncommercial transaction.[2]

   [2] Report to Creditors prepared by Mr Collison at [6.4.2].

4. The report also discloses that between October 2010 and October 2012, Horizon entered into four payment arrangements with the ATO and defaulted on all of them.[3]

   [3] Report to Creditors prepared by Mr Collison at [6.4.1].

5. The liquidator did not identify any transaction which was entered into to defeat creditors on the winding up of the company. In relation to the financial position of the company, the liquidator noted that:[4]

   i)as at February 2013, the company owed $106,738.77 to the ATO and that debt had been accumulating since at least June 2012;

   ii)the company had defaulted in arrangements with the ATO.

   [4] Report to Creditors prepared by Mr Collison at [6.5.3].

6. The liquidator concluded that the company may have been trading whilst insolvent.[5] The liquidator stated that the company Horizon transferred stock to Telpac for nil consideration and that the company was placed in voluntary liquidation on 30 January 2013.[6]

   [5] Report to Creditors prepared by Mr Collison at [ 6.5.4].

   [6] Report to Creditors prepared by Mr Collison at [6.6].

7. On the basis of the report, it would appear likely that the company Horizon was insolvent prior to the order being made in the Fair Work Commission in favour of the Applicant. On that basis, the finding is reasonably open that as at 26 September 2012, the company was unable to pay the judgment debt. There was no evidence before the court regarding the assets held by Telpac prior to its liquidation.

8. I accept the submissions made on behalf of the Applicant that in order for a person to have ‘aided, abetted, counselled or procured the statutory contravention’, the person must have intentionally participated in it and it is also necessary to show that the person’s involvement was a ‘close rather than a remote involvement in the contravention.’[7]

   [7] Yorke v Lucas (1985) 158 CLR 661 at [67]; Fencott v Muller (1983) 152 CLR 570 at 584.

9. I also accept that accessorial liability survives the liquidation of the principal when the principal has been placed or ordered into liquidation.

10. It was submitted that it was clear that the Respondent had actual knowledge that the order was not complied with and it was only under her direction that the payment to the Applicant could be made and therefore the fact that the payment was not made was a matter that she was directly involved in. It was said that an order in favour of the Applicant followed as a result this reasoning.

Consideration

1. This is a somewhat unusual case in that the circumstances where a finding of accessorial liability will generally arise is in relation to the conduct which forms the basis of the making of an order against the corporate employer. This can be seen where an order is made against a company that it is in breach of provisions of the Act or the industrial award and a manager or director of the company is also ordered to pay compensation or a penalty as an accessory to that conduct giving rise to the breach.

2. Such was the case in decisions that the Applicant referred the court to such as Fair Work Ombudsman v Step Ahead Security Services Pty Ltd& Anor [2016] FCCA 1482. In that case, the First Respondent, which was a company, was held to have breached provisions of an award and the Second Respondent, who controlled the corporate employer was held to be liable as an accessory to the conduct that gave rise to the orders against the corporate employer. The corporate employer admitted the contraventions and the manager admitted that he was involved in the contraventions for the purposes of s.550(1) of the Act.[8]

   [8] Fair Work Ombudsman v Step Ahead Security Services Pty Ltd& Anor [2016] FCCA 1482 at [3].

3. Similarly in Fair Work Ombudsman v Proplas Industries Pty Ltd & Anor [2011] FMCA 506, the Second Respondent was, by reason of his position as the sole company officer and sole shareholder, held to have been involved in each of the contraventions which included failing to pay minimum basic hourly rates of pay fixed by statute.

4. In the present case, there is no finding by the Fair Work Commission that the Respondent was involved in the conduct giving rise to the order of the Fair Work Commission. In this proceeding, the Applicant contends that the Respondent is liable as an accessory because the Fair Work Commission order was not paid and the Respondent was the controlling mind of the companies at the time the orders were due to be paid. The Applicant relies upon the following matters to seek to make good its submission that the Respondent had actual knowledge of the essential matters giving rise to the failure to pay the order:

   a)The official liquidator’s report notes that Horizon entered into a Sale and Assignment Agreement on 22 October 2012 to sell its assets to Aimei Pty Ltd (‘Aimei’) for $210,000;

   b)The Respondent is currently the sole director of Aimei;

   c)The sole shareholder of Aimei is Horizons Investment Co Pty Ltd (‘Horizons Investment’);

   d)The Respondent is the sole shareholder of Horizons Investments; and

   e)The principal place of business of both Aimei and Horizons Investments is Shop 44 of the Walk Arcade, Bourke Street Mall, Melbourne.

5. The Applicant also made reference without explanation to the ownership of a number of cars owned by the companies being transferred.

6. In my view it is not axiomatic that a director of companies that are in breach of orders of the Fair Work Commission will be held to be liable because those companies are wound-up as insolvent or are placed in liquidation. The particular circumstances of each case must be examined.

7. In this proceeding, the Respondent gave evidence but was not cross-examined by the solicitor for the Applicant. I questioned the solicitor for the Applicant as to why the Respondent had not been cross-examined and he said that the reason was that the material on the corporate records maintained by the corporate regulator, and the report from the liquidator spoke for themselves.

8. In my view it is not clear that the non-payment of the order was as a result of actions taken by the Respondent to defeat creditors. There was an opinion offered by the liquidator that the company may have been trading whilst insolvent and that he did not identify any transaction entered into to defeat creditors on the winding up of the company.[9] The liquidator found that the sale of assets to the company Aimei was at a value slightly less than the valuation of the assets as a going concern but he did not make any finding that the transaction was entered into at undervalue or for the purposes of defeating creditors.[10] I am not bound by the opinion of the liquidator, but no submissions were made that that opinion was wrong and should be ignored.  The report was relied upon by the Applicant.  Further, the Respondent gave evidence by her affidavit sworn 14 December 2016 of the significant downsizing of the business of Horizon from July 2011 from 18 full time employees to one full time and one part time employee. The liquidation of the companies does not, on the evidence presented, appear to be designed to avoid paying the particular order of the Commission in favour of the Applicant.

   [9] Report to Creditors prepared by Mr Collison at [6.5.4].

   [10] As noted about at [7], the liquidator concluded that the Aimei agreement was not an uncommercial transaction.

9. It would appear that the company Horizon was insolvent prior to the making of the order in the Fair Work Commission and this can be established having regard to its level of indebtedness to the ATO at the time of it being wound-up and its history of failing to pay tax obligations on time. It is also noted that the winding up of Horizon was on the application of a creditor who was not a related party. There is evidence that the order was not paid because the company was insolvent rather than because it devised a scheme to avoid payment of the debt.

10. In order for me to be satisfied that an order should be made pursuant to s.551 of the Act in the circumstance this case, I would have to be satisfied on the balance of probabilities that the Respondent and relevant companies entered into transactions in order to defeat creditors and specifically in order to breach the order of the Fair Work Commission. On the material available, I am not persuaded to the requisite degree to make the orders sought, particularly in light of the contents of the liquidator’s report.

11. The Respondent was not cross examined in relation to the transfer of motor vehicles.

12. Once the orders of the Fair Work Commission were made, the Applicant stood in line with other unsecured creditors of the companies when the companies were wound up. The creditor, Lisa Slavin shared the same priority as a creditor pursuant to s. 556(1) of the Corporations Act2001 (Cth) as the Applicant. I note that on the winding up of Horizon, the liquidator’s fees were in the sum of $39,426.20. The liquidator had priority for payment of his fees and expenses pursuant to s. 556(a)(da) of the Corporations Act.

13. In those circumstances I dismiss the application.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge McNab

Associate: 

Date:  10 March 2017