Workplace Ombudsman v SRS Investments (WA) Pty Ltd

[2009] FMCA 1132

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WORKPLACE OMBUDSMAN v SRS INVESTMENTS (WA) PTY LTD & ANOR [2009] FMCA 1132

INDUSTRIAL LAW – Civil penalty proceedings – records relating to employees – alleged contravention of requirement to produce records for inspection – whether request made of correct entity – nature of a trust – trustee’s obligations – effect of withdrawal of penalty infringement notice – whether first time contravener – penalty – factors for consideration.

PRACTICE AND PROCEDURE – Admission – whether admission can be withdrawn – factors for consideration.

TRUSTS – Nature of a trust – trustee’s obligations.

Crimes Act 1914 (Cth), s.4AA
Federal Court Rules (Cth), O.22 r.4(2)
Federal Magistrates Act 1999 (Cth), ss.3 and 42
Federal Magistrates Court Rules 2001 (Cth), r.1.03
Workplace Relations Act 1996, ss.3(c) & (f)(i), 4(1), 169(1), 719(2), 728(1) and 846(2)(g)
Workplace Relations Regulations 2006 (Cth), Chapter 2, regs.14.3, 14.4, 14. 5(1), 19.1, 19.18, Part 19B,19.53, 19.54

Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8
Buckingham v KSN Engineering Pty Ltd (2008) 177 IR 427; [2008] FMCA 546
Carr v CEPU & Anor [2007] FMCA 1526
Celestino v Celestino (unreported, Full Court of the Federal Court of Australia, 16 August 1990)
CFMEU v Austral Bricks (Qld) Pty Ltd (2009) 178 IR 470; [2009] FMCA 143
Deangrove Pty Ltd (Receivers and Managers appointed) v Commonwealth Bank of Australia [2003] FCA 268
Goodall v Nationwide News Pty Ltd [2007] FMCA 218
Hanssen Pty Ltd v Jones (2009) 179 IR 57; [2009] FCA 192
Jones v Hanssen [2008] FMCA 291
Kelly v Fitzpatrick (2007) 166 IR 14, [2007] FCA 1080
Klousia v TKM Investments Pty Ltd & Anor [2009] FMCA 208
Leighton Contractors & Anor v CFMEU & Ors (2006) 164 IR 375; [2006] WASC 317
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Murran Investments Pty Ltd v Aromatic Beauty Products Pty Ltd (2000) 191 ALR 579; [2000] FCA 1732
Olsen v Sterling Crown Pty Ltd (2008) 177 IR 337; [2008] FMCA 1392
Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545
Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550
Swevenings Pty Ltd v Ferguson Consolidated Holdings Pty Ltd & Anor(No. 4) [2009] FMCA 291
Workplace Ombudsman v Golden Maple Pty Ltd [2009] FMCA 664
Workplace Ombudsman v Saya Cleaning [2009] FMCA 38
Workplace Ombudsman v Securit-E Holdings Pty Ltd [2009] FMCA 700

JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (7^th Edn), (Chatswood: Lexis Nexis Butterworths, 2006)
PW Young, C Croft and ML Smith, On Equity (Sydney: Thomson Reuters (Professional) Australia Ltd, 2009)

Applicant: WORKPLACE OMBUDSMAN

First Respondent: SRS INVESTMENTS (WA) PTY LTD (ACN 122 069 916)

Second Respondent: SARA RHIAIN SANDFORD

File Number: PEG 51 of 2009

Judgment of: Lucev FM

Hearing date: 7 July 2009

Date of Last Submission: 7 July 2009

Delivered at: Perth

Delivered on: 20 November 2009

REPRESENTATION

Counsel for the Applicant: Mr M. Crowley and Ms L. D'Ascanio

Solicitors for the Applicant: Australian Government Solicitor

For the First Respondent: Ms S R Sandford (as an officer of the First Respondent, pursuant to s.854(10)(a) of the Workplace Relations Act 1996 (Cth)

For the Second Respondent: Ms S R Sandford in person.

DECLARATIONS AND ORDERS

THE COURT DECLARES THAT:

1. The first respondent has contravened regulation 19.18 of Part 19 of Chapter 2 of the Workplace Relations Regulations 2006 (Cth) by failing to make available the records the subject of a written request by the applicant on 22 October 2008.

2. The second respondent has contravened regulation 19.18 of Part 19 of Chapter 2 of the Workplace Relations Regulations 2006 (Cth), by reason of s.728(1) of the Workplace Relations Act 1996 (Cth), by failing to make available the records the subject of a written request by the applicant on 22 October 2008.

THE COURT ORDERS THAT:

1. The first respondent pay a pecuniary penalty of $3850 for breach of regulation 19.18 of Part 19 of Chapter 2 of the Workplace Relations Regulations 2006 (Cth).

2. The second respondent pay a pecuniary penalty of $770 for breach of regulation 19.18 of Part 19 of Chapter 2 of the Workplace Relations Regulations 2006 (Cth), by reason of s.728(1) of the Workplace Relations Act 1996 (Cth).

3. Payment of the penalties imposed in Orders (3) and (4) above be made by 4.00pm on 20 December 2009 to the Commonwealth Consolidated Revenue Fund.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 51 of 2009

WORKPLACE OMBUDSMAN

Applicant

And

SRS INVESTMENTS (WA) PTY LTD (ACN 122 069 916)

First Respondent

SARA RHIAIN SANDFORD

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application by the Workplace Ombudsman, pursuant to reg.14.3 of the Workplace Relations Regulations 2006 (Cth),[1] against SRS Investments (WA) Pty Ltd[2] and its sole director, secretary and shareholder, Sara Sandford,[3] for declarations that SRS Investments and Ms Sandford have breached reg.19.18(1) of Part 19 of Chapter 2 of the WR Regulations, and for orders that SRS Investments and Ms Sandford each pay a pecuniary penalty for failure to make available records the subject of a written request.

   [1] “WR Regulations”.

   [2] “SRS Investments”.

   [3] See the affidavit of Stephanie Narelle Fletcher, affirmed 20 April 2009 (“Fletcher’s Affidavit”), Annexure SNF 2, being a company search for SRS Investments.

Basis for application

1. In its grounds of application, the Workplace Ombudsman states that a written request was made to SRS Investments for records pursuant to reg.19.18(1) of Part 19 of Chapter 2 of the WR Regulations on 22 October 2008.[4]

   [4] “October 2008 Request”. A copy of the October 2008 Request appears in Fletcher’s Affidavit, Annexure SNF 13.

2. Regulation 19.18 relevantly provides as follows:

   (1)An employer must make a copy of a record available, in accordance with subregulations (2) and (3), on request by: …

   (b)     a workplace inspector. …

   (3)    The employer must make the copy available: …

   (b) if the request is from a workplace inspector – within 3 business days at the employer’s business premises or by posting or faxing a copy of the record to the workplace inspector within 14 days of receiving the request.

   (4) Strict liability applies to the physical elements in subregulations (1), (2) and (3).

   (5)    Subregulation (1) is a civil remedy provision.

3. The Workplace Ombudsman made the October 2008 Request to SRS Investments to make available all wage and time records of three employees of a business named “Cavill Business Solutions”.[5] The employees were Jodie Mainwaring, Kimbra Turton and Maxine Scales.[6]

   [5] “Cavill”.

   [6] “the Employees”.

4. The Workplace Ombudsman alleges that SRS Investments has failed to make the records available at any time.

Response – an admission made

1. A Response was filed on 17 June 2009. It:

   a)says that it is filed on behalf of “RESPONDENTS”, after which Ms Sandford’s name is handwritten;

   b)says that it is prepared by “RESPONDENTS”, after which Ms Sandford’s name is handwritten; and

   c)gives the address for service as 26 Prindiville Drive, Wangara (which is the address of SRS Investments’ registered office and principal place of business);[7]

   [7] Fletcher’s Affidavit, Annexure SNF 2.

2. The Response is signed by Ms Sandford, and the box indicating that the Response has been “Signed by … the respondent/s” has been ticked.

3. In the Response SRS Investments and Ms Sandford:

   a)“accept that they did not provide documents to the Workplace Ombudsman”;

   b)“request that the court consider the mitigating circumstances detailed in [the] attached statutory declaration”; and

   c)indicate that they “are and have always been willing to provide documents requested.”

4. The Response’s acceptance that documents were not provided to the Workplace Ombudsman appears, in its full context as follows:

   “The respondents consent to the making of the following orders sought in the application:

   1.The respondents accept that they did not provide documents to the Workplace Ombudsman.”

5. It is this acceptance that documents were not provided which the Workplace Ombudsman says constitutes an admission, a contention with which the Court agrees.[8] The nature of the acceptance as an Admission, and the lack of opposition to the Workplace Ombudsman’s application, is confirmed by the fact that SRS Investments and Ms Sandford did not, in the Response:

   a)indicate any opposition to the making of any of the orders sought by the Workplace Ombudsman; and

   b)seek that any further orders be made.

   [8] “Admission”.

Contentions – the admission disappears

1. In an outline of Contentions of Law and Fact[9] filed on behalf of SRS Investments and Ms Sandford, and signed by the latter, on 3 July 2009, SRS Investments and Ms Sandford appear to withdraw the Admission.

   [9] “Contentions”.

2. The following assertions are made in the Contentions under the heading “NATURE OF DEFENCE”:

   First Respondent

   1. The first respondent does not operate, and has never operated, the business known as ‘Cavill Business Solutions’ or ‘SRS Business Solutions’.

   2.The First Respondent does not, and has never, provided financial services or engaged employees.

   3.The First Respondent did not employ Julie Bond, Kimbra Turton, Maxine Scales or Jodie Mainwaring.

   4.The First Respondent was issued an infringement notice by Stephanie Narelle Fletcher on 19 July 2008.

   4.1The First Respondent does not trade, has no assets, and had no capacity to pay the infringement notice.

   4.2The infringement notice requested records that the First Respondent had no legal or lawful right over, and therefore was unable to provide.

   5.The First Respondent has not contravened Regulation 19.18(1) of Part 19 of Chapter 2 of the Workplace Relations Regulations 2006 (Cth). (the Regulations)

   Second Respondent

   6.The Second Respondent:

   6.1Does not conduct any day-to-day business and management for the First Respondent as the First Respondent is not a trading entity;

   6.2Did not sign all correspondence between the Applicant and the First Respondent.

   7.The First Respondent is not the alter ego of the Second Respondent. SRS Investments (WA) Pty Ltd is a separate legal entity to its Director and Shareholder, Sara Rhiain Sandford.

   8.The Second Respondent has not contravened Regulation 19.18 of the Regulations as contravention is contingent on the First Respondent contravening Regulation 19.18 of the Regulations, which it has not.

   The Request for Records

   9.All correspondence from the Applicant was made to the First Respondent and Second Respondent.

   10.No responses were made to the Applicant by the First Respondent or Second Respondent in their capacities as First Respondent and Second Respondent.

   11.All Responses were incorrectly made by Sara Rhiain Sandford in her capacity as Director of SRS Investments (WA) Pty Ltd in its capacity as trustee of the Arens Trust (The Employer) which trades as ‘SRS Business Solutions’ and formerly as ‘Cavill Business Solutions’.

   12.The employer of Julie Bond, Kimbra Turton, Maxine Scales and Jodie Mainwaring has never received a request for documents from the applicant.

   13.Documents were provided to the applicant for Julie Bond in error and were received by the applicant on 27 June 2008. Requests were never made to The Employer of Julie Bond.

3. Similar assertions were made by Ms Sandford in cross-examination.[10]

   [10] See para.22 below.

Issues

1. The following issues arise in this matter:

   a)if the admission can be withdrawn, was the October 2008 Request for records made to the wrong entity, thereby negating the need for SRS Investments and Ms Sandford to comply with the October 2008 Request?

   b)can SRS Investments and Ms Sandford withdraw the Admission?

   c)whether any relevant entity is a trading corporation;

   d)if:

   i)the Admission cannot be withdrawn; or

   ii)in the event that the Admission can be withdrawn and the October 2008 Request was made to the correct entity,

   did SRS Investments and Ms Sandford breach regulation 19.18(1) of the WR Regulations?; and

   e)if SRS Investments and Ms Sandford did breach reg.19.18(1) of the WR Regulations, what are the appropriate penalties?

Request for records – the wrong entity issue

Respondents change of position

1. SRS Investments and Ms Sandford attempted to change their position by arguing that the October 2008 Request was made to the wrong entity, thereby negating the need to provide the documents at all. This argument was first raised in the Contentions filed on Friday 3 July 2009. The hearing was to commence on Tuesday 7 July 2009. This gave the Workplace Ombudsman no real chance to plead in reply to the allegations, and limited time to consider the allegations, prior to hearing.

2. There was no formal application for leave made by SRS Investments or Ms Sandford to withdraw the Admission, and the Workplace Ombudsman did not consent to the Admission being withdrawn.

Applicant’s evidence

1. The Workplace Ombudsman provided a copy of a business name extract for Cavill as at 6 July 2009. The related corporation listed as carrying on business was SRS Investments (WA) Pty Ltd.[11]

   [11] Exhibit A1, Cavill Business Solutions Business Name Extract.

2. Ms Fletcher confirmed in examination-in-chief that at no point prior to filing the Contentions did Ms Sandford allege that the Employees were not employed by SRS Investments.[12]

   [12] Transcript p.4.

Respondents’ evidence

1. SRS Investments and Ms Sandford claim that the October 2008 Request was made to the wrong entity, and therefore they were not required to comply with the request. However, at the same time, they claimed they were willing to hand over the documents, and always had been.

2. SRS Investments and Ms Sandford rely on Ms Sandford’s Statutory Declaration declared on 17 June 2009[13] as evidence of the circumstances of the conduct leading up to and subsequent to the October 2008 Request being made. Much of the information provided in Ms Sandford’s Statutory Declaration is irrelevant to the present case. However, the following statement, made in relation to an earlier request for records in relation to the Employees and another employee named Julie Bond in May 2008,[14] goes to the heart of the matter:

   Miss Fletcher’s requests for documents were not ignored and as I had been reconstructing documentation that had not been prepared by the sacked payroll officer it was difficult to prepare four files at once.[15]

   [13] “Ms Sandford’s Statutory Declaration”.

   [14] “May 2008 Request”.

   [15] Ms Sandford’s Statutory Declaration, p.11.

3. The following was offered as reasons why the documents for both the May and October 2008 Requests were not provided:

   During July, August, September and October 2008 we were under extreme pressure. Not only as I mentioned previously regarding the messages and meetings, but due to the changes in the procedures, we had many disgruntled clients. They were exhibiting obvious resistance in providing substantiation and source documents when preparing returns…

   During August and September [2008] I had clients coming in saying that they had been told that I was going bankrupt. I had clients telling other clients that I had sacked staff and not paid them…

   During November and December 2008 I had many matters to deal with, with the Taxation Board of Western Australia. Complaints had been made by a number of clients and this culminated with a meeting with the Board in mid December 2008 where it was agreed that due to the unusual amount and type of complaints that there was most likely an outside force directing most of them. Sadly my focus on the documents for Ms Fletcher from the workplace ombudsman was placed on the backburner while I dealt with this.[16]

   [16] Ms Sandford’s Statutory Declaration, p.11-12.

4. Ms Sandford’s evidence was contradictory at times:

   MS SANDFORD:    …what is stated in there (the statutory declaration) does explain why it did take so long for me to get the information together. But also – and together with that it has been requested of the wrong entity… I have the documents here, I’m quite happy to provide them to them, so there are no problems.[17]

   MR CROWLEY:     …the [May 2008] [R]equest for records itself, did you understand the purpose of that request?

   MS SANDFORD:       Yes, I do and as I said I have all the records there to provide to the ombudsman.

   …

   MS SANDFORD:       I understood what was wanted. I also understood that these four employees were trying to create problems for me and they had done so in the past.

   …

   [17] Transcript p.8.

   HIS HONOUR:           Is that a reason why you didn’t produce the records then?

   MS SANDFORD:       No, not at all…The reason that it took me so long was because I was under a great deal of pressure and stress at that point in time…[18]

   [18] Transcript pp.19-20.

5. It was revealed that at the time of the May 2008 Request that the records requested did not exist. Ms Sandford said that she went back and re-created the records, including those the subject of the October 2008 Request.[19]

   [19] Transcript p.21.

6. There is evidence that Ms Sandford wrote to Ms Fletcher, the workplace inspector investigating the claims of Julie Bond and the Employees, on 26 June 2008, on Cavill letterhead.[20] The 26 June 2008 Letter was in relation to the May 2008 Request. The 26 June 2008 Letter is signed by Ms Sandford as “PRINCIPAL”, and says as follows:

   [20] “26 June 2008 Letter”.

   I enclose the documents relating to the employment of Julie Bond.

   Further documents relating to Jodie Mainwaring, Kimbra Turton and Maxine Scales, will be forwarded early next week.[21]

   [21] Transcript p.16; Fletcher’s Affidavit, Annexure SNF 7.

7. At the foot of the 26 June 2008 Letter the following appears as part of the printed letterhead:

   SRS Investments (WA) Pty Ltd ATF Arens Trust

   ABN 66 459 567 122

8. Ms Sandford admitted in cross-examination that Julie Bond and the Employees were employed by the same employer.[22]

   [22] Transcript p.19.

9. It was put to Ms Sandford in cross-examination that she did not actually mean that SRS Investments had no legal or lawful right over the documents and therefore was unable to provide them; but, rather that it was too difficult to provide them because they did not exist. To this proposition Ms Sandford replied that it was a mixture of both.[23]

   [23] Transcript p.22.

10. Ms Sandford also claimed that she did not take in the full situation at the time of the May 2008 Request because she had other pressures on her.[24] She said that:

    I was very stressed at the point in time and I was trying to prepare them and, as I said, I have them here ready to give to the ombudsman.[25]

    [24] Transcript p.24.

    [25] Transcript p.24.

11. Ms Sandford entered into evidence certificates of currency for insurance purposes showing that, at relevant times, in relation to the “Professional Business” of “Public Accounting Services” the insured was ‘SRS Investments (WA) Pty Ltd ATF Arens Trust T/as Cavill Business Solutions’. The limit of liability under the policies is $1,000,000, or $3,000,000 in the aggregate.[26]

    [26] Exhibit R4.

Consideration – wrong entity issue

1. It was SRS Investments, acting on a day-to-day basis through Ms Sandford, which:

   a)provided the records for Ms Bond to the Workplace Ombudsman;

   b)said at the same time as providing the records for Ms Bond to the Workplace Ombudsman that it would provide records relating to the Employees;

   c)made the Admission; and

   d)was preparing to provide records for the Employees to the Workplace Ombudsman until raising the wrong entity issue, which it did very shortly before the hearing.

2. Further, Ms Sandford admitted that Ms Bond’s employer was the same as that of the Employees. The employer who provided the records in relation to Ms Bond was SRS Investments.

1. SRS Investments and Ms Sandford argued that SRS Investments was not the correct entity to produce the records because the business, Cavill, was operated under or through a trust, the Arens Trust. That argument is misconceived. A trust imposes upon or accords to an existing legal person, the trustee, whether a natural or corporate person, duties, disabilities, rights and powers in relation to specific property. A trust is not a separate entity from the trustee or beneficiaries, and is therefore not a juristic person. The trust imposes an obligation upon the trustee to deal with the trust property, over which the trustee has control, for the benefit of the beneficiaries of the trust. As a matter of law, it is SRS Investments which has control over the trust property (which in this case must include the records of the Arens Trust and Cavill) and in carrying out its duties for the benefit of the beneficiaries, which duties would ordinarily include acting according to law so as to not dilute the trust property by reason of having to make payments of penalties for having contravened the law, it was SRS Investments that was obliged to produce the records in response to the October 2008 Request.[27]

   [27] JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (7^th Edn), (Chatswood: Lexis Nexis Butterworths, 2006) para.101; PW Young, C Croft and ML Smith, On Equity (Sydney: Thomson Reuters (Professional) Australia Ltd, 2009), 388.

Withdrawal of an admission

1. A party cannot withdraw an admission operating for the benefit of another party without the consent of the other party or the leave of the Court.[28]

   [28] Federal Court Rules (Cth) O.22 r.4(2).

2. There was no consent to the withdrawal of the Admission by the Workplace Ombudsman.

3. This Court has previously observed that before an admission can be withdrawn, the Court must be satisfied that:

   a)an error or mistake by or on behalf of the party seeking to withdraw the admission had been demonstrated;

   b)there is a sensible explanation for the making of the admission, and that explanation has been provided, based on evidence of a solid and substantial character; and

   c)no injustice will be occasioned to the other party by the withdrawal of an admission, other than hardship by delay or costs which can be accommodated by an appropriate order for costs.[29]

   [29] Swevenings Pty Ltd v Ferguson Consolidated Holdings Pty Ltd & Anor(No. 4) [2009] FMCA 291 at para.25 (and also paras.28-30) per Lucev FM citing Murran Investments Pty Ltd v Aromatic Beauty Products Pty Ltd (2000) 191 ALR 579 at 589 per Mansfield J; [2000] FCA 1732 at para.44 per Mansfield J, referring to Celestino v Celestino (unreported, Full Court of the Federal Court of Australia, 16 August 1990) at pp.8-10.

4. Similar criteria were laid out by the Federal Court in Deangrove Pty Ltd (Receivers and Managers appointed) v Commonwealth Bank of Australia, as follows:

   35.    … a party who makes a clear and distinct admission on a factual question, which is accepted and acted upon by the opponent, should not be permitted freely to withdraw that admission. Whether or not it is appropriate to grant leave will depend upon the particular circumstances of the case and an assessment of the interests of justice. The relevant circumstances include the nature of the admission, how it came to be made (for example, whether it was made deliberately or inadvertently), when and why the party seeks to withdraw the admission and the impact of any withdrawal on the other parties to the litigation.[30]

   [30] [2003] FCA 268 at para.35 per Sackville J.

5. The above factors must also be applied in the context of the objects of the Federal Magistrates Act 1999 (Cth)[31] and the Federal Magistrates Court Rules 2001 (Cth),[32] in which it is apparent that the Court is intended to operate in a manner:

   a)as informal as possible in the exercise of judicial power;

   b)which is not protracted in its proceedings;

   c)which resolves proceedings justly, efficiently and economically;

   d)uses streamlined procedures; and

   e)avoids undue delay, expense and technicality.[33]

   [31] “FM Act”.

   [32] “FMC Rules”.

   [33] See ss.3 and 42 of the FM Act; r.1.03 of the FMC Rules; see also discussion in Goodall v Nationwide News Pty Ltd [2007] FMCA 218 at para.21 per Lucev FM.

Consideration – withdrawal of Admission

1. In the Court’s view Ms Sandford has not sufficiently demonstrated that an error or mistake was made in making the Admission. The evidence provided in support of the claim to withdraw the Admission is neither solid nor substantial. It is at best contradictory. The Court does not accept that the documents were not provided because SRS Investments and Ms Sandford considered there was no legal obligation to provide them. It is clear to the Court, in reviewing the conduct of Ms Sandford leading up to the attempted withdrawal of the Admission, that she was preparing the documents to provide to the Workplace Ombudsman and she admitted prior to and at the hearing that she and SRS Investments were willing to provide the documents to the Workplace Ombudsman.

2. In the circumstances, the Court concludes that:

   a)no error or mistake by SRS Investments or Ms Sandford has been demonstrated in support of the withdrawal of the Admission;

   b)the only sensible explanation for the making of the Admission is that SRS Investments recognised (at least until the late change of position) that it was required to produce the records in response to the October 2008 Request; and

   c)there would be an injustice if the Admission was withdrawn in circumstances where, as a matter of fact and law, it is SRS Investments which was required to produce the records, and, in any event, where the Admission was withdrawn so late.

3. The Court will therefore not grant leave to withdraw the Admission. Even if leave to withdraw the Admission had been granted, the Court would have still reached the same conclusion: that is, that as a matter of fact and law it is SRS Investments which was required to respond to the October 2008 Request by producing the Employees’ records.

The trading corporation issue

1. There was a submission that SRS Investments was not a trading corporation or entity, and that it did not employ anyone.[34]

   [34] Contentions, paras.1-4.

2. The evidence belies this submission, and establishes that:

   a)SRS Investments was a body corporate;[35]

   b)SRS Investments employed Bond and the Employees;[36]

   c)SRS Investments was insured as a professional business providing public accounting services;[37]

   d)SRS Investments operated out of commercial premises;[38] and

   e)SRS Investments provided public accounting services, especially in relation to taxation, and in September 2007 had work in progress of approximately $300,000.[39]

   [35] Fletcher’s Affidavit, Annexure SNF 2.

   [36] See paras.26 and 31 above.

   [37] Exhibit R 4.

   [38] Ms Sandford’s Statutory Declaration generally; 26 June 2008 Letter.

   [39] Ms Sandford’s Statutory Declaration p.5.

3. By any measure SRS Investments is a trading corporation. The submission that it is not emanates from the misconception that because Cavill trades under the auspices of the Arens Trust it is not trading, or not a corporation. For reasons set out above,[40] where the trustee is a corporation, here SRS Investments, it is through that corporation, as trustee, that the trust actually operates and is liable to produce the records requested in the October 2008 Request.

WR Regulations contravened

[40] See para.32 above.

Contravention by SRS Investments

1. Having regard to the conclusions reached above,[41] SRS Investments is in breach of reg.19.18 of Part 19 of Chapter 2 of the WR Regulations and a declaration will be made to that effect.

   [41] See paras.32, 40 and 43 above.

Contravention by Ms Sandford

1. Ms Sandford is liable for the same contraventions as SRS Investments by virtue of her being a “person involved in a contravention of a civil remedy provision”.[42] In her capacity as a sole director, shareholder and secretary of SRS Investments she:

   a)knew the essential facts of the contraventions;

   b)was knowingly concerned in the contraventions; and

   c)was an intentional participant in the contraventions,

   even though she need not have known that the matters in question constituted a contravention.[43]

   [42] WR Act, s.728(1).

   [43] Buckingham v KSN Engineering Pty Ltd (2008) 177 IR 427 at 438-439 per Lucev FM; [2008] FMCA 546 at paras.39-40 per Lucev FM.

2. Ms Sandford is therefore in breach of reg.19.18 of Part 19 of Chapter 2 of the WR Regulations, and a declaration will be made to that effect.

Assessment of penalty

General considerations

1. The considerations to be taken into account in assessment of penalty are well established,[44] as follows:

   [44] Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 (“Kelly”); Olsen v Sterling Crown Pty Ltd (2008) 177 IR 337; [2008] FMCA 1392 (“Sterling Crown”); CFMEU v Austral Bricks (Qld) Pty Ltd (2009) 178 IR 470; [2009] FMCA 143; Jones v Hanssen [2008] FMCA 291 (“Hanssen”); Workplace Ombudsman v Golden Maple Pty Ltd [2009] FMCA 664 (“Golden Maple”). An appeal against Hanssen was successful, and the penalty imposed by the Court was reduced, but the Federal Court’s appeal judgment did not vitiate these factors: Hanssen Pty Ltd v Jones (2009) 179 IR 57; [2009] FCA 192.

   a)the nature and extent of the conduct which led to the contraventions;

   b)the circumstances of the conduct (including deliberate defiance or disregard of the WR Act);

   c)relevant record of civil penalty contraventions;

   d)whether the contraventions are distinct or arise from a single course of conduct;

   e)the consequences of the contravening conduct;

   f)deterrence, both general and specific;

   g)the objects of the WR Act;

   h)the size and financial resources of the contravener;

   i)co-operation with regulatory authorities;

   j)the contravener’s contrition;

   k)the size of the prescribed penalty, and any recent increases to that prescription; and

   l)the totality principle.

2. This is not an exhaustive list of considerations that the Court may take into account.[45]

   [45] Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at para.11 per Gyles J; Australian Ophthalmic Supplies v McAlary-Smith (2008) 165 FCR 560 at 580 per Buchanan J; [2008] FCAFC 8 at para.91 per Buchanan J (“Australian Ophthalmic Supplies”); Golden Maple at para.11 per Lucev FM.

Nature and extent of the conduct which led to the contraventions

1. The nature of the conduct was the failure to produce records the subject of the October 2008 Request.

2. The October 2008 Request clearly set out the requested documents and the methods of compliance with the request, along with the consequences of non-compliance.

3. The failure to produce these records must be considered in the context of the reason for the requirement to produce records, as set out below.[46]

   [46] See paras.69-72 below.

4. SRS Investments and Ms Sandford had not provided any of the requested records as at the date of the hearing, more than eight months after the October 2008 Request was made. The failure to produce is both serious and the extent in time considerable.

5. The failure to provide the records has involved a deliberate course of subterfuge by SRS Investments and Ms Sandford, concealing from the Workplace Ombudsman that the records did not exist at the time of the request. This fact only emerged in Ms Sandford’s Statutory Declaration filed on 17 June 2009. Ms Sandford’s Statutory Declaration deposed that, in response to the May 2008 Request, she began the task of reconstructing the records for the Employees and Julie Bond.[47] This was then confirmed in her cross-examination at the hearing.[48]

   [47] See para.20 above.

   [48] See paras.22-23 above.

6. Ms Sandford admitted that the payslips the subject of the May 2008 Request had not been prepared by the payroll officer and that she had “created them to match the payments that they had had”.[49] Ms Sandford further admitted in cross-examination that at the time of both the May 2008 Request and the October 2008 Request the documents were not provided because “I didn’t have the files completed to give to them [the Workplace Ombudsman].”[50]

   [49] Transcript p.22 and Ms Sandford’s Statutory Declaration, p.11.

   [50] Transcript p.24.

7. The contravention was significant in scope, prolonged in time, and involved a complete failure to produce the records in relation to the Employees the subject of the October 2008 Request, in circumstances where the purpose of the October 2008 Request was to enable the Workplace Ombudsman to check to see if those employees had received their correct entitlements.[51]

The circumstances of the conduct (including deliberate defiance or disregard of the WR Act)

[51] See the October 2008 Request: Fletcher’s Affidavit, Annexure SNF 13.

1. From August 2007 when the payroll officer’s employment was terminated by Ms Sandford, no payroll officer was employed. The non-employment of a payroll officer from August 2007 obviously affected the ability of SRS Investments to maintain the relevant records. Furthermore, together with the subsequent conduct of SRS Investments, it is indicative of a failure to put in place a system to facilitate compliance with requests for records under the WR Act.

2. Following the October 2008 Request:

   a)follow-up telephone calls were made by Ms Fletcher to SRS Investments on 27 October and 7 November 2008;[52] and

   b)a fax was sent on 7 November 2008, advising Ms Sandford that none of the records the subject of the October 2008 Request had been received,[53]

   and the Court therefore considers it must have been clear to SRS Investments and Ms Sandford that they were not meeting their obligations with respect to the October 2008 Request.

   [52] Fletcher’s Affidavit, Annexures SNF 14 and SNF 15.

   [53] Fletcher’s Affidavit, Annexures SNF 16.

3. In the circumstances, SRS Investments has acted in deliberate disregard of its obligations under the WR Act and WR Regulations to both keep and to produce records. Likewise, Ms Sandford, for it was through her that SRS Investments acted.

Relevant record of civil penalty contraventions

1. SRS Investments and Ms Sandford failed to comply with the May 2008 Request.

2. SRS Investments and Ms Sandford were issued with a penalty infringement notice on 20 June 2008.[54] They failed to satisfy the penalty infringement notice by 19 July 2008 (the due date for the payment of the penalty).

   [54] Fletcher’s Affidavit, para.19 and Annexure SNF 15.

3. The penalty infringement notice was withdrawn by the Workplace Ombudsman on 13 August 2008, after SRS Investments and Ms Sandford had furnished some of the documents requested in the May 2008 Request.[55]

   [55] Fletcher’s Affidavit, para.33 and Annexure SNF 12.

4. In Sterling Crown this Court said:

   To have regard to the previous conduct of the respondent where an infringement notice was paid seems to contradict the stated purpose of the infringement notice section of the WR Regulations, and particularly the provisions in ch.2. reg.19.51(d) of the WR Regulations. If an infringement notice is paid, the recipient who paid the fine is not to be taken as having been convicted of a contravention. To treat the infringement penalty issued and paid in respect of the 14 January 2008 Request for Records as a prior contravention would be to treat the respondent as if they had been convicted of a contravention, contrary to ch.2 reg.19.51(2)(d) of the WR Regulations.[56]

   [56] Sterling Crown IR at 349 per Lucev FM; FMCA at para.44 per Lucev FM.

5. Where a penalty infringement notice is withdrawn[57] the penalty must be refunded by the Commonwealth.[58] Thus, no penalty has been imposed where there is a withdrawal of the penalty infringement notice and subsequent refund. Even more so than in the circumstances referred to in Sterling Crown set out above, these circumstances do not constitute a prior contravention.

   [57] WR Regulations, Ch.2, reg.19.53.

   [58] WR Regulations, Ch.2, reg.19.54.

6. In the circumstances of the withdrawal of the penalty infringement notice, SRS Investments and Ms Sandford will be treated as first time contraveners.[59]

   [59] See Part 19B of the WR Regulations.

Whether the contraventions are distinct or arise from a single course of conduct

1. Neither party contends that the contraventions arise out of anything other than a single course of conduct.[60]

   [60] WR Act, s.719(2); WR Regulations, Ch.2, reg.14.5(1); Transcript p.32.

2. The Court finds that the contraventions arise out of a single course of conduct as the October 2008 Request in relation to the Employees was made at the same time, and in respect of all time and wage records for the entire employment periods of each of the Employees. Therefore, the failure to provide the documents arose out of a single course of conduct, namely the failure to provide documents the subject of the October 2008 Request.[61]

   [61] Contrast Sterling Crown IR at 350 per Lucev FM; FMCA at para.49 per Lucev FM where two requests “related to different requests at different times for different records for different periods for different people”, were held (IR at 350 per Lucev FM; FMCA at para.50) to be two separate contraventions. Likewise, Golden Maple at paras.40-43 per Lucev FM. See also Workplace Ombudsman v Saya Cleaning [2009] FMCA 38 at para.24 per Simpson FM.

3. Each of SRS Investments and Ms Sandford is therefore taken to have committed one contravention of reg.19.18 of Part 19 of Chapter 2 of the WR Regulations pursuant to the failure to make documents available as required by the October 2008 Request.

The consequences of the contravening conduct

1. The consequences of the contravention do not immediately impact upon the parties themselves in terms of loss or damage, but they do have the effect of undermining the relevant statutory objectives. In context, this effect must be considered as being of similar importance as would be the case if loss and damage were suffered.[62]

   [62] Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at para.56 per Flick J. See also Hanssen at para.29 per Lucev FM: “conduct … unchecked … might undermine some of the statutory objects and purposes of the WR Act.” See generally Sterling Crown IR at 350-351 per Lucev FM; FMCA at para.51 per Lucev FM.

2. The powers of workplace inspectors can be exercised for the purposes of determining whether various industrial instruments and minimum standards and entitlements, and the requirements of the WR Act and WR Regulations themselves, are being observed.[63]

   [63] WR Act, s.169(1).

3. One of the purposes of Part 19 of Chapter 2 of the WR Regulations is to provide for the inspection of records by workplace inspectors.[64]

   [64] WR Regulations, Ch.2, reg.19.1.

4. The provisions of reg.19.18 of Part 19 of Chapter 2 of the WR Regulations go to the observance of entitlements of matters such as:

   a)the provision of economically sustainable safety net minimum wages and conditions for persons whose employment is regulated by the WR Act;[65] and

   b)ensuring compliance with minimum standards and industrial instruments through the provision of effective means for investigation and enforcement of employee entitlements.[66]

   [65] WR Act, s.3(c).

   [66] WR Act, s.3(f)(i).

5. By failing to provide requested records to a workplace inspector, in breach of reg.19.18 of Part 19 of Chapter 2 of the WR Regulations, SRS Investments and Ms Sandford have engaged in conduct that undermines the utility and effectiveness of principal objects of the WR Act, and the WR Regulations.[67]

   [67] Sterling Crown IR at 351 per Lucev FM; FMCA at para.52 per Lucev FM.

Deterrence, both general and specific

1. General and specific deterrence are primary objectives of imposing penalties.[68]

   [68] Leighton Contractors & Anor v CFMEU & Ors (2006) 164 IR 375 at 391 per Le Miere J; [2006] WASC 317 at para.74 per Le Miere J; Carr v CEPU & Anor [2007] FMCA 1526 at para.29 per Lucev FM.

1. Specific deterrence is required in this case for the following reasons:

   a)the deliberateness of the contraventions;

   b)the duration of the contraventions, the October 2008 Request still not having been complied with;

   c)the lack of contrition and remorse shown;

   d)the risk of re-offending in circumstances where SRS Investments continues to run Cavill; and

   e)the fact that there is no evidence that systems are in place to ensure records are kept or able to be produced on request, as opposed to having to be created each time a request is made.

2. General deterrence is an important and relevant consideration in assessing penalty, in order to mark disapproval of the conduct in question and act as a warning to others not to engage in similar conduct.[69] As noted in Kelly:

   No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “Must be imposed at a meaningful level”: see ACCC v ABB Transmission and Distribution Ltd [2001] ATPR 41-815 at [13].[70]

   [69] Klousia v TKM Investments Pty Ltd & Anor [2009] FMCA 208 at para.55 per FM O’Sullivan.

   [70] Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J.

3. This is a case in which both specific and general deterrence must be taken into account when setting penalty.

The objects of the WR Act and WR Regulations

1. The objects of the WR Act and WR Regulations are discussed above in relation to the consequences of the contravening conduct.[71]

   [71] See paras.69-72 above.

The size and financial resources of the contravener

1. There is limited evidence about the size and financial resources of each of SRS Investments and Ms Sandford.

2. In relation to SRS Investments:

   a)it does not appear to be a large employer but it is not possible to determine on the evidence, how large;

   b)during the period of November 2006 to October 2007 there was a significant blow out in work in progress from approximately $30,000 to over $300,000;[72] and

   c)a major client was lost in June 2007, and by August 2008 there had been significant client losses.[73]

   [72] Ms Sandford’s Statutory Declaration, pp.2 and 5.

   [73] Ms Sandford’s Statutory Declaration, pp.4 and 12.

3. In relation to Ms Sandford, she is a single parent with a significant mortgage.[74]

   [74] Ms Sandford’s Statutory Declaration, p.1.

4. The evidence shows that, because of a range of circumstances, but including perhaps the fact that it is not a large employer, SRS Investments failed to keep and maintain appropriate records and then had difficulty in complying with the Workplace Ombudsman’s October 2008 Request.

5. Although the Contentions assert that SRS investments has no capacity to pay a penalty infringement notice issued in July 2008,[75] there is no evidence as to the present capacity of SRS Investments, or Ms Sandford, to pay a penalty.

   [75] Contentions, para.4.1.

Co-operation with regulatory authorities

1. At the time of the hearing neither SRS Investments nor Ms Sandford had complied with the October 2008 Request. This lack of co-operation will be taken into account in assessing penalty.

2. Ms Sandford made the following statement in closing submissions at the hearing;

   I have the documents here to provide to the ombudsman. … I’m quite happy to give them to the ombudsman on direction to the correct entity. I request also that the consideration be taken to the difficulties that I did have last year and putting everything together I do apologise to the ombudsman for that time wasting. But also I would, yes, quite happy to provide them with the documents, I’m not going to withhold them.[76]

   [76] Transcript pp.29-30.

3. This “co-operation” is however conditional on the applicant making a new request to what Ms Sandford says is the “correct entity”.[77] Given the Court’s finding that the October 2008 Request was made to the correct entity there is no, and never was a, necessity for a new request. In those circumstances, the suggestion that there should now be a new request is an aggravating circumstance in the assessment of penalty. The Court also notes that the “co-operation” has come at the latest possible time in the hearing, as well as being more than eight months after the October 2008 Request. This belated display of qualified co-operation will not have any positive effect on mitigating penalty.

   [77] Transcript p.30.

The contravener’s contrition

1. In Ms Sandford’s Statutory Declaration, she says:

   The only thing I have done wrong is not sacking all of the employees and I should have done so as soon as my gut feeling started to indicate that there was a problem in June 2007. I have suffered greatly from this situation and as a consequence I have become reluctant to employ staff.[78]

   [78] Ms Sandford’s Statutory Declaration, p.13.

2. Ms Sandford also asserts that she is the “victim”, and that the Employees:

   a)have colluded to “financially murder” her; and

   b)used the Workplace Ombudsman to instigate a “vexatious action” against her.[79]

   [79] Ms Sandford’s Statutory Declaration, p.13.

3. In cross-examination Ms Sandford said:

   And I have said from the outset, I have the documents there. I went through absolute hell last year from these people and others, and it made it extremely difficult to get the documents prepared and going through the rubbish that this lot – and you all are adding to it – only because of these four – I’m sorry, it just – my blood boils, because I have gone through hell. I have been financially murdered by the person I purchased the business from. I have had these – their employees are working against me and it only just go[es] to show the fact that the pay slips hadn’t been issued. The first pay slips were issued, none were issued after that, and I know for a fact that these people were working with her, they were still seeing her. You might think I’m being over – you know, ridiculous, but I am not.[80]

   [80] Transcript p.21.

4. Ms Sandford was also trenchantly critical of the Workplace Ombudsman’s role in the matter,[81] and unfairly so, criticising it for the performance of statutorily mandated tasks.

   [81] Ms Sandford’s Statutory Declaration, p.3.

5. The actions of SRS Investments and Ms Sandford have resulted in the waste of public resources: expenses have been incurred by both the Workplace Ombudsman and the Court in relation to the hearing to deal with a matter in respect of which the records requested were, according to Ms Sandford, available by the time of the hearing, but never provided.

6. The above statements and actions show no real contrition on the part of SRS Investments and Ms Sandford. No discount will be given in assessment of penalty in respect of this consideration.

The size of the prescribed penalty, and any recent increases to that prescription

1. The maximum allowable penalty that a Federal Magistrate may impose for a breach of reg.19.18 of Part 19 of Chapter 2 of the WR Regulations is:

   a)for a body corporate $5,500; and

   b)for an individual $1,100.[82]

   [82] See ss.4(1) (definition of “penalty unit”) and 846(2)(g) of the WR Act, sub-reg.14.4 of the WR Regulations and s.4AA of the Crimes Act 1914 (Cth).

2. As discussed by this Court in Sterling Crown, the maximum penalty increased more than five-fold in 2006 and against that background the Federal Court has “suggested … that the imposition of civil penalties in industrial law proceedings is no longer to be approached with a light hand, and that it might be appropriate for penalties … to rise appreciably.”[83] These are matters to be considered in imposing a penalty on SRS Investments and Ms Sandford.

   [83] Sterling Crown IR at 346 per Lucev FM, and case there cited; FMCA at para.32, and case there cited. See also IR at 346 and 358 per Lucev FMCA at paras.31 and 83 per Lucev FM.

The totality principle

1. The totality principle does not apply to a single contravention by a single respondent.[84]

   [84] Golden Maple at para.96 per Lucev FM citing Workplace Ombudsman v Securit-E Holdings Pty Ltd [2009] FMCA 700 at para.24 per Raphael FM.

Assessment of penalty

1. Each of SRS Investments and Ms Sandford will be treated as a first time offender, and in that respect it is appropriate to reduce penalty by an amount of 20% to 30%.

2. No discount will be given for co-operation with the regulatory authority or expression of contrition, because there was none.

3. The contraventions were contrary to the objects of the WR Act and the purposes of the WR Regulations. The contraventions were serious, deliberate and for this type of contravention, border on the most serious category of cases. The seriousness of the contraventions warrants either no, or at most a very minor, reduction in penalty. The Court notes that there is no useful evidence as to the financial resources of either SRS Investments or Ms Sandford, but the available evidence would tend to indicate that any penalty ought not be unduly onerous. In all the circumstances a further penalty reduction in the order of 10% to 15% is appropriate having regard to the seriousness of the contraventions and what evidence there is of the size of SRS Investments and the financial resources of SRS Investments and Ms Sandford.

4. In determining the final amount of penalty the Court takes account of the need for specific and general deterrence. In terms of specific deterrence the Court considers that in this case there is a requirement for significantly greater than normal specific deterrence, noting with concern the failure to express contrition, the lack of co-operation over a significant period of time and the seriousness of the contraventions. In terms of general deterrence the Court considers there to be a need for greater than normal general deterrence of contraventions of this kind so as to deter other people from completely disregarding their obligations under the WR Act and WR Regulations as SRS investments and Ms Sandford have done in this matter.

5. In circumstances where the Court considers that a penalty reduction within the range of 30% to 45% is within contemplation, taking into account all of the factors above, the Court considers that a reduction of 30% is appropriate. The minimum of the range has been imposed because, in all the circumstances set out above in relation to assessment of penalty, the conduct of SRS Investments and Ms Sandford warrants no more leniency by the Court. On that basis the penalty for:

   a)SRS Investments will be $3850; and

   b)Ms Sandford will be $770.

Declarations and orders

1. For the reasons set out above there will be declarations that each of SRS Investments and Ms Sandford has contravened Ch 2, reg.19.18 of the WR Regulations in respect of the October 2008 Request. In respect of:

   a)SRS Investments a penalty of $3850 will be imposed; and

   b)Ms Sandford a penalty of $770 will be imposed,

   with four weeks to pay and payable to the Commonwealth Consolidated Revenue Fund.

2. The Court will hear the parties as to costs, if any.

I certify that the preceding one-hundred and one (101) paragraphs are a true copy of the reasons for judgment of Lucev FM

Associate:  S. Gough

Date:  20 November 2009