FEDERAL COURT OF AUSTRALIA

Australian Building and Construction Commissioner v Professional Gyprock Solution Pty Ltd [2011] FCA 1393

THE COURT DECLARES THAT:

1.     The first respondent, by keeping false and misleading employee records (including in respect of rate of remuneration, gross and net amounts paid, leave accrual and superannuation contributions) during each of the two periods March 2010 to mid-April 2010, and mid-April 2010 to May 2010 (the two relevant periods), committed two contraventions of sub regulation 3.44(1) of the Fair Work Regulations 2009 (Cth) (FW Regulations).

2.    The first respondent, by failing to keep pay records of the kind required to be kept by the FW Regulations during each of the two relevant periods, committed two contraventions of subsection 535(1) of the Fair Work Act 2009 (Cth) (FW Act).

3.    The first respondent, by failing to give a payslip to employees within one working day of paying an amount to those employees in the performance of work during the period 12 April 2010 to 21 May 2010, contravened subsection 536(1) of the FW Act.

4.    The second respondent, by being involved in the contravention of sub regulation 3.44(1) of the FW Regulations by the first respondent during the period mid April 2010 to May 2010, breached sub regulation 3.44(1) of the FW Regulations.

5.    The second respondent, by being involved in the contravention of subjection 535(1) of the FW Act by the first respondent during the period mid April 2010 to May 2010, breached subsection 535(1) of the FW Act.

6.    The second respondent, by being involved in the contravention of subsection 536(1) of the FW Act by the first respondent during the period 12 April 2010 to 21 May 2010, breached subsection 536(1) of the FW Act.

THE COURT ORDERS THAT:

7.    A total penalty of $16,000 be imposed on the first respondent for:

(a)    two contraventions of Reg 3.44 of the FW Regulations;

(b)    two contraventions of s 535(1) of the FW Act; and

(c)    one contravention of s 536(1) of the FW Act.

8.    A total penalty of $3,000 be imposed on the second respondent for:

(a)    one contravention of Reg 3.44 of the FW Regulations;

(b)    one contravention of s 535(1) of the FW Act; and

(c)    one contravention of s 536(1) of the FW Act.

9.    The penalties imposed on the first and second respondents be paid into the Consolidated Revenue Fund within 60 days of this order.

10.    The parties bear their own costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

REASONS FOR JUDGMENT

A QUESTION OF PENALTY

1    The applicant sought orders imposing pecuniary penalties on the first and second respondents for contraventions of the employer record keeping provisions of the Fair Work Act 2009 (Cth) (FW Act) and the Fair Work Regulations 2009 (Cth) (FW Regulations).

2    The first respondent employed workers to perform work on building sites for the construction projects known as the Equus Project at 580 Hay Street and the Performing Arts Centre Project at the corner of William and Roe Streets, Northbridge, Perth Western Australia. The work was in the nature of erecting gyprock ceilings and walls. The second respondent was at all material times the sole director, shareholder, secretary and manager of the first respondent. The second respondent commenced as a worker in the construction industry in Australia as early as 2005, but did not become a principal in that industry until four years ago.

3    In joint submissions filed 18 August 2011, the applicant submitted that the first respondent committed two contraventions of Reg 3.44 of the FW Regulations, two contraventions of s 535(1) of the FW Act and one contravention of s 536(1) of the FW Act. The applicant further submitted that the second respondent committed one contravention of Reg 3.44(1) of the FW Regulations, one contravention of s 535(1) of the FW Act and one contravention of s 536(1) of the FW Act. The respondents admit these contraventions in a statement of agreed facts filed 18 August 2011.

4    In their joint submission the parties agreed that the total penalties for the above contraventions should be:

    $16,000 in the case of the first respondent; and

    $3,000 in the case of the second respondent.

but recognise that this agreement in this regard was subject to the Court’s consideration.

5    On 19 August 2011 this matter was listed for hearing and I made orders in terms of what the parties sought, having considered the proposed pecuniary penalties to be appropriate in all of the circumstances. These are my formal written reasons for so doing.

PENALTY – GENERAL PRINCIPLES

6    In their joint submission the parties agreed by reference to well established authority, and I accept, that the proper approach for the Court to adopt in respect of an agreed position as to the quantum of the penalty is as follows:

    it is the responsibility of the Court to determine the appropriate penalty;

    determining the amount of penalty is not an exact science;

    within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another;

    there is public interest in promoting settlement of litigation, particularly where it is likely to be lengthy;

    the view of the regulator, as a specialist body, is a relevant, but not determinative, consideration;

    in determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case; and

    where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure, in the Court’s view, is appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if it is within the permissible range.

7    The parties in their joint submissions also made reference to the approach described by Jessup J in Wotherspoon v Construction, Forestry, Mining and Energy Union [2010] FCA 11 at [8] and [27], which I acknowledge, as follows:

[8] The authorities make it clear that, notwithstanding the agreement of the parties to a particular proceeding, the determination of the correct penalty is a matter for the court. The court is not obliged to accept the parties’ agreement; nor is it entitled to take the easy course of doing so without deliberation. However, the authorities also show that, where the parties have agreed on a penalty, the court should give weight to that agreement, and should generally give effect to it so long as the agreed penalty falls within the appropriate range, that is, so long as it may be described as neither manifestly inadequate nor manifestly excessive…

…

[27] The touchstone by reference to which to approach the question whether the penalties agreed in the present case are either manifestly inadequate or manifestly excessive is that the penalties should pay ‘appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations.’: Australian Ophthalmic Supplies Pty Ltd v McAlary Smith (2008) 165 FCR 560, 580 [91]: Construction, Forestry, Mining and Energy Union v Williams (2009) 262 ALR 417, 428. Although it is not the function of the court to substitute its own preferred penalties for those agreed by the parties, it is necessary for the court to come at least to a general view about the seriousness of the conduct involved in the admitted contraventions of s 38 of the BCII Act.

8    As I have observed in other cases, the task which a sentencing judge is faced with is one of ‘instinctive synthesis’: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560 (Australian Ophthalmic Supplies), Gray J at [27] and Graham J [55]. Such a process requires that a court take into account all relevant factors and to arrive at a single result which takes due account of them all: see Wong v The Queen [2001] HCA 64; (2001) 207 CLR 584 at [74]-[76]; Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 (Markarian), Gleeson CJ, Gummow, Hayne and Callinan JJ at [37]-[39]. The penalty must not be so great as to crush the person upon whom the penalty is imposed or reveal the person as a scapegoat: Ponzio v BP Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 at [93] (Lander J); McDonald v R (1994) 48 FCR 555 at 563. The maximum penalty is reserved for only the most serious of contraventions: Markarian at [31]. Proportionality and consistency commonly operate as a final check on the penalty assessed: Australian Ophthalmic Supplies at [53].

Maximum penalties

9    The maximum penalties for contraventions of the FW Act and FW Regulations provisions are as follows:

    Regulation 3.44 of the FW Regulations: $11,000 in the case of a corporation (100 penalty units) and $2,000 in the case of an individual (20 penalty units);

    Section 535(1) of the FW Act: $16,000 in the case of a corporation (150 penalty units) and $3,300 in the case of an individual (30 penalty units); and

    Section 536(1) of the FW Act: $16,500 in the case of a corporation (150 penalty units) and $3,300 in the case of an individual (30 penalty units).

10    Section 12 of the FW Act provides that a “penalty unit” has the same meaning as in the Crimes Act 1914 (Cth). Section 4AA of the Crimes Act defines a “penalty unit” to be $110.

11    Therefore, the maximum penalty that the Court can impose on the first respondent in relation to the admitted contraventions is $71,500, constituted as follows:

    two breaches of regulation 3.44 ($22,000);

    two breaches of section 535(1) ($33,000); and

    one breach of section 536(1) ($16,000).

12    The maximum penalty that the Court can impose on the second respondent in relation to the admitted contraventions is $8,800, constituted as follows:

    one breach of regulation 3.44 ($2,200);

    one breach of section 535(1) ($3,300); and

    one breach of section 536(1) ($3,300).

factors relevant to penalty

13    In their joint submissions and by reference to authority the parties correctly identified the following range of factors that may be relevant in assessing the appropriate penalty in the circumstances of a particular case:

    the nature and extent of the contravening conduct;

    the circumstances in which the conduct took place;

    the period of the conduct;

    the nature and extent of any loss or damage sustained as a result of the conduct;

    whether the contraventions were distinct or arose out of the one course of conduct;

    whether or not the breaches were deliberate;

    whether senior management was involved in the conduct;

    whether there had been any contrition exhibited;

    whether the party committing the breach had taken any corrective action;

    whether the party committing the breach had cooperated with the prosecutor;

    whether there has been similar previous conduct by the respondent;

    the size of the business enterprise involved; and

    the need for general and specific deterrence.

14    It is understood checklists of this kind can be useful provided they are not transformed into a rigid catalogue of matters for attention: Australian Ophthalmic Supplies Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560 at [91] per Buchanan J.

15    I note also that a contravention of industrial laws is now generally regarded more seriously than has been the case in the past: see Finance Sector Union of Australia v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 224 ALR 467 at [72] per Merkel J; McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29.

NATURE of the contravening conduct and circumstances in which it took place

16    During the course of an investigation officers of the applicant sought and obtained copies of employee records, timesheets, pay records and related documents from the first respondent. The material obtained related to work performed by the employees of the first respondent on the buildings sites of the Equus Project and Performing Arts Centre Project. When interviewed about the material by officers of the applicant on 16 August 2010 and 29 August 2010, the second respondent provided information which included admissions of the contraventions as pleaded in the minute of proposed further amended statement of claim and admitted in the statement of agreed facts.

17    The nature of the contravening conduct related to the keeping of false or misleading records to the respondents’ knowledge, a failure to keep pay records and a failure to give payslips to employees.

18    As to the total numbers of employees affected, the first respondent’s two contraventions of Reg 3.44 related to four employees in total and the second respondent’s one contravention of Reg 3.44 related to three employees in total. The first respondent’s two contraventions of s 535(1) of the FW Act related to eight employees and the second respondent’s one contravention of that section related to four employees. Finally, each of the first and second respondents’ contraventions of s 536(1) related to two employees in total.

19    In the statement of agreed facts, the applicant accepted the first and second respondents’ contention that they did not intend to contravene the law. However, both parties agreed that the conduct was negligent.

20    The contraventions were committed in circumstances where a number of the employees concerned are from non-English speaking backgrounds. The applicant submitted this was relevant because those employees may be more vulnerable than employees whose native language is English. If records of an employee’s employment and pay are not maintained, and not maintained accurately, the risk of confusion being generated about terms and conditions of employment may be more acute in the case of employees of heightened vulnerability.

21    The parties also referred to the fact that the second respondent comes from China and from a non-English speaking background. The parties contend this was relevant because a sole director and manager of a small company who does not speak English as a first language may not have the same level of understanding of employee record keeping requirements than an employer which is operated by persons who were born in Australia and whose native language is English.

22    If the general proposition were to be advanced that a lack of familiarity with a language is a mitigating factor, I would be inclined to reject it. Each case rather must be assessed on its merits. Poor language, comprehension and reading skills may or may not serve to explain a contravention.

23    In the circumstances before the Court I accept the second respondent did not have an adequate record keeping system and it is likely that unfamiliarity with the English language had a detrimental effect on the second respondent’s ability to fully understand and comply with the statutory requirements. However, it is also clear that the second respondent displayed carelessness in his approach to keeping employee records. In my view, unfamiliarity with the English language is not a strong mitigating factor in this case.

NATURE AND EXTENT OF ANY LOSS OR DAMAGE SUFFERED

24    The parties did not submit that the admitted contraventions caused or gave rise to any loss or damage to any person. During the course of the hearing, Counsel for the applicant emphasised that while there was no actual harm, the risk of detriment was significant and warrants recognition through financial penalties of the quantum proposed, particularly where that risk is enhanced through the greater vulnerability of the employees. I accept that this is a factor which should be taken into account in this case.

PERIOD OF THE CONDUCT

25    The period the contraventions occurred was from March 2010 to May 2010. Specific dates relevant to each employee are referred to at [18], [22], [26], [30], [33]-[48] and [49]-[52] of the statement of agreed facts.

SEPARATE CONTRAVENTIONS OR FORMING ONE COURSE OF CONDUCT

26    Section 557(1) of the FW Act relevantly provides:

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.

27    The parties agreed and I accept that the various employees affected in relation to each identified contravention were affected by the same course of conduct.

28    The parties also agreed and I accept that for penalty fixing purposes the respondents’ conduct constitutes five contraventions of the FW Act and FW Regulations in respect of the first respondent and three contraventions of the FW Act and FW Regulations in respect of the second respondent.

29    The applicant submitted that two separate and distinct decision-making points occurred in the circumstances of this matter affecting the first respondent’s contraventions of Reg 3.44 of the FW Regulations and s 535(1) of the FW Act, arising from the distinctly separate periods where first Mr Zhu (an employee of the first respondent) and, secondly, the second respondent, had responsibility for the production of employer records during the relevant period.

30    The second respondent had engaged Mr Zhu as a supervisor on behalf of the first respondent, and delegated to him the responsibility for the creation, keeping and management of relevant statutory employee records, including payslips. On or about mid-April 2010, Mr Zhu left the employment of the first respondent. From this point onwards, the second respondent assumed the administrative responsibilities previously undertaken by Mr Zhu.

31    I accept that this is an appropriate distinction to make and that this is the proper way to group the contraventions.

DELIBERATE CONDUCT

32    In the joint submissions the applicant accepted the respondents’ contention that they did not intend to contravene the record keeping provisions of the FW Act and FW Regulations. The parties nevertheless agreed that the respondents’ conduct involved willed acts and omissions that were negligent.

INVOLVEMENT OF SENIOR MANAGEMENT

33    The parties did not dispute that at material times the second respondent was the sole director, shareholder, secretary and manager of the first respondent, and that the pay records produced by the first respondent were completed by the second respondent during part of the relevant period. At all relevant times, the second respondent knew the content of the pay records and the accuracy or otherwise of the contents relating to the employees. The second respondent was personally responsible for issuing payslips to the employees following payments to them as employees of the first respondent during the period 12 April to 21 May 2010.

Contrition and cooperation post contravention

34    The parties submitted that the respondents’ cooperation was a mitigating factor in the assessment of penalty for the following reasons:

    After the applicant pointed out to the respondents their errors, the respondents started using the MYOB payment system and the respondents consulted with appropriate persons regarding the relevant requirements with a view to rectifying the situation.

    The first and second respondents admitted liability at a relatively early stage.

    The second respondent agreed to complete compliance training and provide a personal undertaking to the applicant in relation to the first respondents’ record-keeping obligations.

    The first and second respondents agreed to participate in random audits by the applicant of the first respondent’s employee records.

    The respondents also agreed facts and penalties, resulting in a considerable saving in resources and court time.

35    I consider the respondents’ co-operation is a significant mitigating factor in the assessment of penalty, particularly because it obviates the need for a lengthy trial and reduces the costs involved.

RELEVANT PRIOR CONDUCT

36    There are no prior penalties or contraventions under the FW Act or FW Regulations committed by the first and second respondents.

SIZE OF THE CONTRAVENER

37     In the joint submissions it is noted that the first respondent is a small company directed and managed by one person, the second respondent, and which does not have any dedicated human resource management expertise.

SPECIFIC AND GENERAL DETERRENCE

38    The need for general as well as specific deterrence requires consideration in every case: see Construction, Forestry, Mining and Energy Union v Safety Glass Pty Ltd [2010] FCA 989 at [15] per Tracey J.

39    The applicant submitted that the penalties in this case should be imposed at a meaningful level so as to deter other small to medium business operators from committing similar contraventions. The applicant considered the agreed penalties to be at that level. The parties agreed that the proposed penalties will reasonably act as a deterrent to the respondents engaging in further conduct in non-compliance with the relevant industrial legislation.

40    I consider that the proposed penalties adequately give effect to the need for both general and specific deterrence.

Consideration

41    It is important in a proceeding such as this, where the parties come together and put an agreed position to the Court as to the admission of an offence and the penalties that might be imposed, for the Court to be satisfied that that which is proposed is appropriate in all the circumstances. As noted above a court should not merely rubber stamp a proposal put forward by the parties.

42    The joint written submissions appropriately set out all the relevant factors that bear upon penalty. It is well understood that as useful as it is for a court to look down a list to make sure something relevant is not forgotten in the process of imposing penalty, the assessment of penalty involves more than a mere mathematical or mechanical calculation.

43    Rather, the process of assessment is one that is described by the suggestive compound expression, “instinctive synthesis”. Ultimately, it is important, when assessing penalty, to understand the importance of the contravened regulatory provisions. The penalty needs to be designed to ensure that an appropriate punishment is meted out and it is not seen as a nominal penalty or merely as a cost of doing business. The penalty also needs to send a message to people who work in a particular industry or in industry more generally, about the importance of the regulatory system. Finally, the penalty needs to be proportionate to the wrongdoing.

44    I accept the approach taken by the parties as to the two courses of conduct here. One does not simply conclude how many documents were incorrectly filled out overall and impose a penalty in respect of each. This would produce a result disproportionate to the gravity of the contravening conduct.

45    Taking into account all of the factors discussed above, I am satisfied here that there was at least carelessness in this case. Nonetheless, the evidence of contravention suggests it is conduct that did not happen by accident. It is conduct that should not be permitted, and the penalties imposed should send a message, both to the contraveners and other employers more generally, that such conduct will not be condoned.

46    Needless to say, if there were further instances of contravening conduct in the future by the respondents, the Court would be taking quite a different view from the position the parties have arrived at by agreement here. That being said, I do take note of the fact that there are no prior contraventions.

47    I also take note of the fact that at an appropriately early time the respondents admitted their contraventions. The process of the parties coming to the court in the way they have illustrates that the contraveners are conscious of the contraventions, and in that way have shown a degree of contrition. By adopting this course they have also saved the applicant expense and, generally speaking, have reduced the costs of the process of judicial administration in the public interest. I take all of those factors into account.

48    Accordingly, taking into account the nature of the contravening conduct and all the factors noted above, I consider it appropriate to make the orders as sought by the parties. The pecuniary penalties are not insignificant. They involve pecuniary penalties of $16,000 for five contraventions against the company, the first respondent, and $3,000 for three contraventions in respect of the second respondent in his personal capacity. Taken as a whole the penalties are proportionate to the offending conduct.

THE COURT DECLARES THAT:

1.    The first respondent, by keeping false and misleading employee records (including in respect of rate of remuneration, gross and net amounts paid, leave accrual and superannuation contributions) during each of the two periods March 2010 to mid-April 2010, and mid-April 2010 to May 2010 (the two relevant periods), committed two contraventions of sub reg 3.44(1) of the Fair Work Regulations 2009 (Cth) (FW Regulations).

2.    The first respondent, by failing to keep pay records of the kind required to be kept by the FW Regulations during each of the two relevant periods, committed two contraventions of subs 535(1) of the Fair Work Act 2009 (Cth) (FW Act).

3.    The first respondent, by failing to give a payslip to employees within one working day of paying an amount to those employees in the performance of work during the period 12 April 2010 to 21 May 2010, contravened subs 536(1) of the FW Act.

4.    The second respondent, by being involved in the contravention of sub reg 3.44(1) of the FW Regulations by the first respondent during the period mid April 2010 to May 2010, breached sub reg 3.44(1) of the FW Regulations.

5.    The second respondent, by being involved in the contravention of subs 535(1) of the FW Act by the first respondent during the period mid April 2010 to May 2010, breached subs 535(1) of the FW Act.

6.    The second respondent, by being involved in the contravention of subs 536(1) of the FW Act by the first respondent during the period 12 April 2010 to 21 May 2010, breached subs 536(1) of the FW Act.

THE COURT ORDERS THAT:

7.    A total penalty of $16,000 be imposed on the first respondent for:

(a)    two contraventions of Reg 3.44 of the FW Regulations;

(b)    two contraventions of s 535(1) of the FW Act; and

(c)    one contravention of s 536(1) of the FW Act.

8.    A total penalty of $3,000 be imposed on the second respondent for:

(a)    one contravention of Reg 3.44 of the FW Regulations;

(b)    one contravention of s 535(1) of the FW Act; and

(c)    one contravention of s 536(1) of the FW Act.

9.    The penalties imposed on the first and second respondents be paid into the Consolidated Revenue Fund within 60 days of this order.

10.    The parties bear their own costs.

Associate:

Dated:    9 December 2011