FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Al Hilfi [2012] FCA 1166

THE COURT ORDERS THAT:

1.    In the absence of agreement between the parties as to the appropriate orders, the fourth respondent bring in minutes of order reflecting the conclusions expressed in these reasons.

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

THE COURT ORDERS THAT:

1.     In the absence of agreement between the parties as to the appropriate orders, the fourth respondent bring in minutes of order reflecting the conclusions expressed in these reasons.

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

REASONS FOR JUDGMENT

Introduction

1    The Fair Work Ombudsman (“the Ombudsman”) was established by s 681 of the Fair Work Act 2009 (Cth) (“FW Act”). One of the functions of the Ombudsman is to commence proceedings in a court to enforce the FW Act (s 682(1)(d)).

2    The Ombudsman has commenced two proceedings in this Court. The first proceeding is SAD 27 of 2012 and is brought against four respondents, being Messrs Al Hilfi, Albarouki, Ferriere and Coles Supermarkets Australia Pty Ltd (ABN 45 004 189 708) (“Coles”). I will refer to this proceeding as the Al Hilfi proceeding. The second proceeding is SAD 109 of 2012 and is brought against four respondents, being Messrs Al Basry, Albarouki, Ferriere and Coles. I will refer to this proceeding as the Al Basry proceeding.

3    In each proceeding, Coles has issued an interlocutory application seeking an order that the application against it be dismissed, or in the alternative, an order in the Al Hilfi proceeding that paragraphs 54-60 of the Ombudsman’s Statement of Claim be struck out and an order in the Al Basry proceeding that paragraphs 57-63 of the Ombudsman’s Statement of Claim be struck out.

4    In SAD 27 of 2012 the Ombudsman’s Statement of Claim is a Further Amended Statement of Claim dated 8 August 2012 (“FASOC”) and in SAD 109 of 2012 the Ombudsman’s Statement of Claim is an Amended Statement of Claim dated 9 August 2012.

5    The matters raised by Coles are the same in each proceeding. Coles’ application was argued by reference to the Al Hilfi proceeding. Coles and the Ombudsman accept that my decision in the Al Hilfi proceeding will also apply to the Al Basry proceeding. None of the other respondents in either proceeding took part in the submissions on Coles’ application.

Coles’ application In the Al Hilfi Proceeding

6    Coles relies on s 31A of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”) which provides relevantly:

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

7    Coles also relies on Rule 26.01(1)(a), (c) of the Federal Court Rules 2011 (Cth) (“Federal Court Rules”) in seeking an order that the proceeding against it be dismissed.

8    In relation to its application that the pleadings against it be struck out, Coles relies on Rule 16.21(1) (c), (d), (e) of the Federal Court Rules which are in the following terms:

(1)     A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:

…

(c)    is evasive or ambiguous; or

(d)    is likely to cause prejudice, embarrassment or delay in the proceeding; or

(e)    fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading;

9    In support of its application, Coles relies on an affidavit of Mr Craig Higginbotham sworn on 24 August 2012. Mr Higginbotham is a solicitor and partner with Lander and Rogers, which is the firm of solicitors acting for Coles. Mr Higginbotham deposes to the fact that after the proceeding was issued and on 8 March 2012 he wrote to the Ombudsman giving him notice of “serious” defects in the Statement of Claim and requesting the provision of further and better particulars of various allegations made in the Statement of Claim. On 27 March 2012, this Court ordered that the Ombudsman file and serve an amended application and amended statement of claim on or before 8 May 2012. Mr Higginbotham deposes to the fact that he was served with an Amended Application and Amended Statement of Claim on 8 May 2012.

10    Mr Higginbotham deposes to the fact that on 5 June 2012 he wrote to the Ombudsman advising him that the amendments contained in the Amended Statement of Claim had failed to properly address the issues he had identified in his letter to the Ombudsman dated 8 March 2012.

11    Mr Higginbotham deposes to the fact that on 15 June 2012 he received a letter from the Ombudsman advising him that the Ombudsman wished to give further consideration to the matters before determining its response to the assertions made by Mr Higginbotham.

12    On 20 June 2012, this Court ordered that the Ombudsman file and serve a further amended application and further amended statement of claim by 30 July 2012. Mr Higginbotham deposes to the fact that he was served with a Further Amended Application and the FASOC by the Ombudsman’s solicitors on 8 August 2012. Mr Higginbotham reviewed the Further Amended Application and the FASOC, and he wrote to the Ombudsman by letter dated 24 August 2012 setting out reasons in support of Coles’ contention that the FASOC did not disclose a reasonable cause of action against Coles and that it was ambiguous and was likely to cause prejudice, embarrassment or delay in the proceeding.

13    The significance of Mr Higginbotham’s affidavit is that Coles’ application is to be determined by reference to the pleadings and that that is to be done in a context in which the Ombudsman has already had three opportunities to address the appropriate pleading of his case.

The Case against Coles

14    The Ombudsman seeks the following orders against Coles:

12.    A declaration that Coles contravened section 45 of the FW Act in relation to each of the employees as referred to in paragraphs:

(a)    paragraphs 21, 25 and 46 of the Statement of Claim; or in the alternative

(b)    paragraphs 35, 39, 43 and 46 of the Statement of Claim.

13.    Orders under section 546 of the FW Act that Coles pay penalties in respect of the contraventions of section 45 of the FW Act referred to in:

(a)    paragraphs 21, 25 and 46 of the Statement of Claim; or in the alternative

(b)    paragraphs 35, 39, 43 and 46 of the Statement of Claim.

14.    An order under section 546(3) of the FW Act that Coles pay the penalties into the Consolidated Revenue Fund of the Commonwealth.

15    The Ombudsman does not allege that Coles was the primary contravener of the various sections in the FW Act. He alleges that it was involved in contraventions by Mr Al Hilfi. He relies on s 550 of the FW Act, which is in the following terms:

(1)    A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.

(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 or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

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

16    The primary contraventions alleged against Mr Al Hilfi are contraventions of ss 45, 536(1) and 535(1) of the FW Act. Those sections are in the following terms:

45 Contravening a modern award

A person must not contravene a term of a modern award.

Note 1:    This section is a civil remedy provision (see Part 4-1).

Note 2:    A person does not contravene a term of a modern award unless the award applies to the person: see subsection 46(1).

535 Employer obligations in relation to employee records

(1)    An employer must make, and keep for 7 years, employee records of the kind prescribed by the regulations in relation to each of its employees.

Note:    This subsection is a civil remedy provision (see Part 4-1).

(2)    The records must:

(a)    if a form is prescribed by the regulations—be in that form; and

(b)    include any information prescribed by the regulations.

Note:    This subsection is a civil remedy provision (see Part 4-1).

(3)    The regulations may provide for the inspection of those records.

536 Employer obligations in relation to pay slips

(1)    An employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work.

Note 1:    This subsection is a civil remedy provision (see Part 4-1).

Note 2:    Section 80 of the Paid Parental Leave Act 2010 requires an employer to give information to an employee to whom the employer pays an instalment under that Act.

(2)    The pay slip must:

(a)    if a form is prescribed by the regulations—be in that form; and

(b)    include any information prescribed by the regulations.

Note:    This subsection is a civil remedy provision (see Part 4-1).

17    For the purposes of considering s 45 of the FW Act, the terms of s 46 and s 47 should also be noted.

46 The significance of a modern award applying to a person

(1)    A modern award does not impose obligations on a person, and a person does not contravene a term of a modern award, unless the award applies to the person.

(2)    A modern award does not give a person an entitlement unless the award applies to the person.

Note:    Subsection (2) does not affect the ability of outworker terms in a modern award to be enforced under Part 4-1 in relation to outworkers who are not employees.

47 When a modern award applies to an employer, employee, organisation or outworker entity

When a modern award applies to an employee, employer, organisation or outworker entity

(1)    A modern award applies to an employee, employer, organisation or outworker entity if:

(a)    the modern award covers the employee, employer, organisation or outworker entity; and

(b)    the modern award is in operation; and

(c)    no other provision of this Act provides, or has the effect, that the modern award does not apply to the employee, employer, organisation or outworker entity.

Note 1:    Section 57 provides that a modern award does not apply to an employee (or to an employer, or an employee organisation, in relation to the employee) in relation to particular employment at a time when an enterprise agreement applies to the employee in relation to that employment.

Note 2:    In a modern award, coverage of an outworker entity must be expressed to relate only to outworker terms: see subsection 143(4).

Modern awards do not apply to high income employees

(2)    However, a modern award does not apply to an employee (or to an employer, or an employee organisation, in relation to the employee) at a time when the employee is a high income employee.

Modern awards apply to employees in relation to particular employment

(3)    A reference in this Act to a modern award applying to an employee is a reference to the award applying to the employee in relation to particular employment.

18    The following allegations are taken from the FASOC.

19    Coles is a corporation carrying on business throughout Australia operating supermarkets and other retail premises including a Coles Supermarket store (store number 455) and a Kmart store (store number 1021) located in West Lakes, South Australia, together referred to as the West Lakes site. Mr Al Hilfi is a person carrying on a trolley collection business at Westfield West Lakes Shopping Centre in South Australia. Starlink International Group Pty Ltd (“Starlink”) was a company carrying on business involving the supply of trolley collection services to Coles in various States and Territories of Australia, including South Australia. On 21 December 2011, Starlink went into liquidation by a creditors’ voluntary winding up under the Corporations Act 2001 (Cth). Starlink Operations Group Pty Ltd (“Starlink Operations”) was a company carrying on business involving the engagement of subcontractors for the purposes of the supply of trolley collection services by Starlink to Coles in various States and Territories of Australia, including South Australia. On 21 December 2011, Starlink Operations went into liquidation by a creditors’ voluntary winding up under the Corporations Act. Mr Albarouki was the sole director and company secretary of Starlink and the beneficial holder of all the issued shares in Starlink. He was also the sole director and company secretary of Starlink Operations and the beneficial holder of all the issued shares in Starlink. Mr Ferriere was the general manager of Starlink and Starlink Operations and the person, together with Mr Albarouki, who had the principal management and control of the business of Starlink and Starlink Operations in relation to those companies’ dealings with Coles, and in relation to the subcontractors engaged by Starlink Operations in relation to the provision of trolley collection services.

20    On 26 March 2009, Coles and Starlink made an agreement pursuant to which Starlink agreed to provide trolley-collecting services to Coles at various Coles and Kmart stores in South Australia and elsewhere, including amongst others, at the West Lakes site, for a term of 36 months commencing on 16 March 2009. The agreement is referred to in the FASOC as the Head Contract, and I will also adopt that description.

21    On 18 September 2009, at the direction or request of Starlink, Starlink Operations made an agreement with Mr Al Hilfi to carry out, for a fee, the trolley-collecting services that Starlink had agreed to provide to Coles at the West Lakes site under the Head Contract. This agreement is referred to in the FASOC as the Sub-Contract and I will also adopt that description.

22    Between 1 January 2010 and 17 March 2011, Mr Al Hilfi employed four persons (“the employees”) as trolley collectors for various periods of time within that period. The period from 1 January 2010 to 17 March 2011 is referred to in the FASOC as the relevant period and I will also adopt that description.

23    On 1 January 2010 the Cleaning Services Award 2010 (“Modern Award”), a modern award made pursuant to the award modernisation process prescribed by the FW Act, commenced operation. The Modern Award covered Mr Al Hilfi and his employment of the employees. They were either full-time employees or part-time employees.

24    Various provisions of the Modern Award applied to Mr Al Hilfi and the employees and the FASOC identifies six clauses. It is alleged that Mr Al Hilfi failed to comply with those clauses.

25    In the alternative, it is alleged that the employees were employed by Mr Al Hilfi as casual employees and that a number of clauses in the Modern Award applied to his employment of the employees as casual employees. Some of the clauses are different from the clauses which are alleged to have applied to them if the employees were permanent employees. Mr Al Hilfi is alleged to have underpaid the employees during the relevant period. The amounts underpaid differ according to whether the employee was a full-time employee or a casual employee.

26    There is an alternative plea to the effect that between 1 January 2010 and 31 December 2010, Mr Al Hilfi was required to observe and comply with an Instrument (referred to in the FASOC as the “Transitional Award”) brought into existence and given legal force and effect by the operation of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) and known under the Act as a “Division 2B State Award”. In respect of the one employee employed between 1 January 2011 and 17 March 2011, it is alleged that Mr Al Hilfi was required to observe and comply with the Modern Award as applicable to an employer which was covered by the Transitional Award immediately prior to 1 January 2011. There are alternative pleas in relation to the Transitional Award depending on whether the employees were employed as full-time employees or casual employees, and then pleas in relation to the second period of 1 January 2011 to 17 March 2011. It is unnecessary to set out the details. Again, it is alleged that Mr Al Hilfi did not pay the employees their due entitlements under the relevant awards.

27    Particulars of Mr Al Hilfi’s alleged contraventions are pleaded in the FASOC and in the Schedules thereto and Coles makes no complaint about the pleading of the primary contraventions (see Fair Work Ombudsman v Eastern Colour Pty Ltd (2011) 209 IR 263).

28    Mr Al Hilfi is also alleged to have failed during the relevant period to give a pay slip to each of the employees within one working day of paying an amount to the employee in relation to the performance of the work and to make and keep for seven years employee records of the kind prescribed by the Fair Work Regulations 2009 (Cth) in relation to each of the employees.

29    There is an allegation that each of Mr Albarouki and Mr Ferriere were involved in Mr Al Hilfi’s contraventions under s 550 of the FW Act.

30    The pleadings against Coles are contained in paragraphs 54 to 60 inclusive of the FASOC. Those pleadings, omitting the detailed particulars provided, are as follows.

54.    At all material times Coles had the capacity to control and direct and/or influence the conduct of Starlink, Starlink Operations and Al Hilfi in relation to:

(a)    the wages and conditions that were paid and accorded to the Employees by Al Hilfi;

(b)    the practices that Al Hilfi adopted with respect to the issuing of pay slips and keeping of employee records in relation to the Employees.

Particulars

…

55.    At the time the Head Contract was made Coles knew that:

(a)    the trolley collection services at the West Lakes site covered by the Head Contract were to be, and once the Head Contract began to run were, performed by persons employed by a sub-contractor;

(b)    the basis upon which Starlink had tendered to provide the trolley collection services covered by the Head Contract was that:

(i)    the weekly cost to Starlink of engaging a sub-contractor to deliver the services at the West Lakes site was estimated to be $2,487.10 per week;

(ii)    the estimated labour cost of providing the services was either $1,940 per week or $1,950 per week based on the employment of a total of 9 employees;

(iii)    there would be no liability to pay penalty rates (for either shiftwork or work on weekends), overtime, or casual loadings to any of the employees.

(c)    the terms of the Head Contract provided that Starlink would receive a weekly Service Fee of $2,462.13 exclusive of GST in relation to the Coles store at the West Lakes Site and a weekly Service Fee of $748.35 exclusive of GST in relation to the Kmart store at the West Lakes Site and that:

(i)    the total weekly Service Fee of $3,210.48 exclusive of GST was made up of the price offered by Starlink of $3,276 per week to provide the “push in” service less the 2% discount on that price offered by Starlink in the Starlink Pricing Sheet; and

(ii)    as a consequence the Head Contract made no provision for meeting the cost of providing the “street run” service which Starlink had quoted in the Starlink Pricing Sheet as being $100 per week.

(d)    the Head Contract did not provide for an entitlement in Starlink to increase the fees it charged under the Head Contract on account of increased expenses incurred as a consequence of an increase in the wage rates and conditions of trolley collectors performing the trolley collection work covered by that contract.

(e)    if during the period that the Head Contract ran, there was a requirement that the wage rates paid to trolley collectors be increased, in the absence of Starlink obtaining award adjustment of the fees Coles paid to it under the Head Contract, the profitability of the Head Contract to Starlink and/or its sub-contractors would be adversely affected in a substantial way.

Particulars

…

56.    Beginning from a date in or about February 2009 and leading up to 1 January 2010, Coles was aware that:

(a)    it was likely that from 1 January 2010 the wages and conditions of the Employees trolley [sic] would be regulated by an award made under the FW Act.

(b)    that the award would be the Modern Award or, alternatively, that the award would be a Division 2B State award the content of which would be made up of the terms of the SA Cleaners Award; and

(c)    trolley collectors performing work for Starlink were being accorded wages and conditions that were significantly less beneficial than those that would be prescribed by the applicable federal award which would begin to operate on 1 January 2010.

Particulars

…

57.    Further, during the whole of the Relevant Period Coles was aware that the wages and conditions accorded to the Employees had not been adjusted to comply with federal award regulation and were not compliant with those prescribed by the Modern Award or alternatively the Transitional Award.

Particulars

…

58.    Despite the matters alleged in paragraphs 53 to 56 Coles:

(a)    neither before or after 1 January 2010 took any action or any action likely to be effective to ensure that Starlink required Al Hilfi after 1 January 2010 complied with the wages and conditions that applied to the Employees under a federal award or to comply with provisions of the FW Act in relation to the issuing of pay slips or the keeping of employee records or from requiring Al Hilfi to do so.

(b)    by refraining and omitting to take such action induced in Starlink the belief that:

(i)    Coles did not require it to ensure that Al Hilfi paid and extended the Employees the wages and conditions prescribed by award; and

(ii)    Coles acquiesced in Al Hilfi not complying with those wages and conditions and that Coles would not take any step adverse to its business by reason of any non-compliance by Al Hilfi with those wages and conditions.

(c)    by refraining and omitting to take such action induced in Al Hilfi the belief that:

(i)    Coles did not require him to ensure that he complied with the wages and conditions prescribed by federal award; and

(ii)    Coles would not take any step adverse to his business by reason of him not complying with those wages and conditions.

59.    By reason of the matters referred to in paragraph 57 Coles:

(a)    encouraged and facilitated Al Hilfi’s conduct in failing to pay the Employees the wages rates and to otherwise grant them the conditions prescribed by the applicable award and in failing to comply with the provisions of the FW Act in relation to the issuing pay slips and the keeping employee records.

(b)    associated itself with Al Hilfi’s conduct in that regard; and/or

(c)    rendered Al Hilfi’s conduct in that regard more likely.

60.    Accordingly, Coles:

(a)    within the meaning of section 550(2)(a), (b) and/or (c) of the FW Act was involved in the contraventions committed by Al Hilfi in relation to the underpayment of wages, making of superannuation contributions, the issuing of pay slips and the keeping of employee records as alleged herein; and

(b)    by operation of section 550(1) is taken to have committed those contraventions.

Coles’ Application for Summary Judgment

31    The High Court considered the scope of s 31A(2) of the Federal Court Act in Spencer v The Commonwealth of Australia (2010) 241 CLR 118. Hayne, Crennan, Kiefel and Bell JJ found that the subsection did not require a certain and concluded determination that the proceeding would necessarily fail, and that this was a radical departure from earlier provisions permitting the entry of summary judgment. Their Honours referred to the difference between a test requiring certain demonstration of the outcome of litigation and a test involving an assessment of its prospects of success. Their Honours said that full weight must be given to the expression “no reasonable prospect of prosecuting a proceeding” as a whole. Their Honours said that the meaning of the phrase should be developed through a succession of decided cases, but that it could be said at this point that the evident purpose of the provision would be defeated if it was confined to cases of a kind which fell within earlier, different procedural regimes.

32    On a different point but one which is relevant in the circumstances of this case, French CJ and Gummow J emphasised, by reference to the reasons of Lindgren J in White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at 309 [47], that the existence of a reasonable cause of action and the pleading of a reasonable cause of action remain distinct concepts.

33    It is clear that a judgment that an applicant has no reasonable prospect of successfully prosecuting a proceeding may be made by reference to the pleadings alone: Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [20] per French J (as his Honour then was).

34    Coles submits that it is entitled to summary judgment for two reasons. First, the Ombudsman must establish that Coles had knowledge of all the essential matters comprising the contraventions for it to be held liable under s 550 of the FW Act. The Ombudsman has pleaded his best case on knowledge and it is not sufficient to establish liability. Secondly, the Ombudsman must establish that Coles intentionally participated in the contraventions for it to be held liable under s 550. The Ombudsman does not plead that Coles intentionally participated in the contraventions.

35    With respect to the requirement of knowledge, Coles submits that in order to be found liable under s 550 of the FW Act, it must have known four matters. First, it must have known that the four named employees were employed by Mr Al Hilfi during the relevant period. Secondly, it must have known that the Modern Award applied to the employment of those four employees. Thirdly, it must have known that the work of each of the employees gave rise to the specific entitlements alleged, for example, that the employees worked on weekends to give rise to an entitlement to the weekend penalty rates, that the employees worked on public holidays, that the employees worked overtime to give rise to that entitlement and that the employees were full-time or part-time employees. Fourthly, it must have known that the employees were not paid those entitlements by Mr Al Hilfi.

36    Coles sought to support its argument as to the level of knowledge required before liability could be established under s 550 by reference to the decision of the Full Court of this Court in Warramunda Village Inc v Pryde (2001) 105 FCR 437. The Court in that case was required to consider whether it was appropriate for the trial judge to make declarations of right of certain conclusions he had reached. The Court referred to a declaration which states the rights of the parties with respect to a particular matter with precision, and in a binding way. The Court said that a declaration should not be used to record in a summary form conclusions reached by the court in reasons for judgment. The Court decided that declarations made by the trial judge should not have been made. The Court said that declarations need to be specific as to the date of breach, the term of any particular award of which the breach had been committed and the nature of the breach. This case is not directly on point, but Coles seeks to gain from the approach adopted by the Court support for the proposition that a breach or contravention needs to be identified precisely, and in terms of the knowledge required for the purpose of liability under s 550, the knowledge needs to be of the specific circumstances constituting the breach. In other words, knowledge of general matters, which Coles contends is the way in which the Ombudsman has pleaded his case against it, is insufficient to establish that Coles was involved in the contravention within s 550 of the FW Act. Another way of putting the submission is that the Ombudsman cannot succeed against Coles unless he can establish that Coles knew of the contraventions as pleaded by the Ombudsman against Mr Al Hilfi in the FASOC including the Schedules thereto. He cannot do that as his pleadings against Coles reveal.

37    As to the first of the four matters identified (see paragraph 35 above), Coles submits that it is not enough for the Ombudsman to allege as he does in paragraph 55(a) of the FASOC that Coles was aware in March 2009 that the trolley collection services at the West Lakes site covered by the Head Contract were to be and were performed by persons employed by a sub-contractor. Coles submits that the contraventions are not at large or in relation to an “unspecified class of employees generally”. Rather, they relate to particular employees.

38    As to the second matter, Coles submits that the Ombudsman must establish that it (Coles) knew that the Awards the Ombudsman relies upon applied. Knowledge by Coles of what might happen, or was even likely to happen, as pleaded in paragraphs 56(a) and (b) of the FASOC, was not sufficient. In that context Coles relied on the following passage in Giorgianni v The Queen (1985) 156 CLR 473 at 506-507 per Wilson, Deane and Dawson JJ:

Those offences require intentional participation in a crime by lending assistance or encouragement. They do not, of course, require knowledge of the law and it is necessary to distinguish between knowledge of or belief in the existence of facts which constitute a criminal offence and knowledge or belief that those facts are made a criminal offence under the law. The necessary intent is absent if the person alleged to be a secondary participant does not know or believe that what he is assisting or encouraging is something which goes to make up the facts which constitute the commission of the relevant criminal offence. He need not recognize the criminal offence as such, but his participation must be intentionally aimed at the commission of the acts which constitute it. It is not sufficient if his knowledge or belief extends only to the possibility or even probability that the acts which he is assisting or encouraging are such, whether he realizes it or not, as to constitute the factual ingredients of a crime. If that were sufficient, a person might be guilty of aiding, abetting, counselling or procuring the commission of an offence which formed no part of his design. Intent is required and it is an intent which must be based upon knowledge or belief of the necessary facts. To the extent that Reg. v. Glennan suggests the contrary, it is not, in our view, in accordance with principle and does not correctly state the law.

39    From these observations Coles asks me to conclude that for the purposes of knowledge under s 550 there must be knowledge of the fact not that a matter or state of affairs is possible or even likely (see Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 at 520 [335]).

40    As to the third matter, Coles submits that there is no plea in the FASOC that it knew that particular employees carried out particular work on particular days so as to give rise to specific entitlements.

41    As to the fourth matter, Coles submits that there is no sufficient plea that it knew that Mr Al Hilfi was not paying the employees their lawful entitlements. The pleas in paragraphs 56(c) and 57 of the FASOC do not meet that description. Paragraph 56(c) is before the relevant period and “impermissibly global and generalised”. Coles submits that paragraph 57 also suffers from the latter defect.

42    In response to these submissions, the Ombudsman pointed to the width of the words in paragraph 550(2)(c) of the FW Act and submits that it was not necessary for Coles to know all the details and particulars of the alleged contraventions. For example, it did not need to know the identity of the employees concerned. The Ombudsman’s response to the four matters identified by Coles was to formulate the matters he said Coles needed to know for the purposes of liability within s 550. He submits that all Coles needed to know was that persons were employed by a sub-contractor to collect trolleys, that the persons were subject to an award and that they were being paid under award payments. He submits that these three matters were pleaded in paragraph 55(a), paragraph 56(a), paragraph 55(b) and paragraphs 56(c) and 57 of the FASOC.

43    The Ombudsman submits that the words “concerned in” in paragraph 550(2)(c) are words of very broad import and he referred me to Kennedy v Sykes (1992) 24 ATR 546 and 548-549 at 551 per Nathan J. The Ombudsman emphasised Coles’ control over the circumstances in which the trolley collectors were working.

44    These then are the competing contentions as to the level of knowledge required for liability under s 550 of the FW Act in relation to the alleged underpayment contraventions by Mr Al Hilfi. There is a good deal of force in Coles’ submissions. However, I am not satisfied at this stage that the Ombudsman has no reasonable prospect of establishing the required knowledge having regard to the broad terms of paragraph 550(2)(c) and the possibility that evidence will throw light on the issue.

45    Coles’ knowledge concerning the contraventions involving payslips and record keeping stands in a different position.

46    With respect to the alleged contraventions of s 536(1) and s 535(1), the Ombudsman relies on events in August 2008 and refers to paragraphs 56(j)(i) and (ii) of the FASOC and the reference therein to an audit report of Deloitte Touche Tohmatsu dated August 2008 and what is said to be a Corrective Action Plan prepared by Coles in August 2008. The Ombudsman contends, as his counsel put it, that the probability was that Coles was aware in August 2009 that Mr Al Hilfi was not complying with s 536(1) and s 535(1) and there was no evidence Coles took any steps to correct that. The Ombudsman concedes that he needed to amend his pleadings to allege that as a material fact rather than, as it is now, a particular. The relevant period for the contraventions involving payslips and record keeping is 1 January 2010 to 17 March 2011. I am not satisfied that the matters identified by the Ombudsman, even if pleaded as material facts, are arguably sufficient to give rise to a finding of knowledge by Coles within the relevant principles (see the passage from Giorgianni v The Queen set out in paragraph 38 above).

47    Coles submits that in addition to knowledge of the constituent elements of the contraventions, the Ombudsman must establish that Coles intentionally participated in the contraventions. I referred to the following passage in Young Investments Group Pty Ltd v Mann [2012] FCAFC 107 at [11]:

There are sound reasons for requiring knowledge to be particularised, at least in relation to the kind of allegations made in the Statement of Claim. Proving a director’s actual knowledge of the essential ingredients of a contractual or tortious breach or statutory contravention is a prerequisite to the director’s personal liability. For statutory breaches, it is well established that, in order to be an accessory or to be knowingly involved in a contravention, a person must have intentionally participated, having knowledge of the essential matters constituting the contravention (see Yorke v Lucas (1985) 158 CLR 661). That is not imputed or constructive knowledge but, rather, actual knowledge. It would not usually be sufficient to establish a statutory breach to show that a person said to be an accessory to such a breach wilfully shut his or her eyes to the obvious (see Giorgianni v The Queen (1985) 156 CLR 473). Actual knowledge of suspicious circumstances and failure to make enquiry may be different (see Pereira v Director of Public Prosecutions (1988) 63 ALJR 1 at 3). However, actual knowledge of suspicious circumstances is not pleaded in the Statement of Claim in the sense required for accessorial liability.

(See also Giorgianni v The Queen at 482 per Gibbs CJ.)

48    The Ombudsman submits that under paragraph 550(2)(c) the necessary intent can be established by knowledge and he referred to the observations of Gilmour J in Australian Building and Construction Commissioner v Abbott (No 4) at 300 [184]. Those observations suggest, he submits, that the necessary intention may be established by knowledge of the constituent elements of the contraventions. The Ombudsman refers to the fact that liability under paragraph 550(2)(c) may arise by omission and he refers to the plea of control by Coles in paragraph 54 of the FASOC.

49    I am not satisfied at this stage that the Ombudsman has no reasonable prospect of succeeding on this aspect of his case. The Ombudsman pleads an element of control by Coles (paragraph 54), certain knowledge by Coles (paragraphs 55, 56 and 57) and non action by Coles (paragraph 58). The evidence with respect to those matters may inform the conclusions to be reached and I do not think it can be said at this stage that the Ombudsman has no reasonable prospect of success with respect to this aspect of his case.

50    In conclusion, I reject Coles’ application for summary judgment except for that part of it that relates to Coles’ alleged involvement in contraventions involving pay slips and record keeping. That part of the application succeeds.

Coles’ Application to Strike out Pleadings

51    Coles makes a number of separate complaints about the pleadings against it.

52    First, Coles submits that paragraphs 55, 56 and 57 are defective because they do not plead the identities of the natural persons whose knowledge the Ombudsman contends should be attributed to Coles. Coles submits that such a pleading is essential at common law: Brambles Holdings Ltd v Carey (1976) 15 SASR 270 at 279 per Bright J; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582-583 per Brennan, Deane, Gaudron and McHugh JJ; The Bell Group Ltd (In Liquidation) & Ors v Westpac Banking Corporation and Ors (No 5) [2004] WASC 273 at [48]-[62] per Owen J. Coles points out that the Ombudsman has not sought to rely on the provisions of subsections 793(2) and (3) of the FW Act which deal with the attribution of a state of mind to a body corporate.

53    In my opinion, the identity of the persons whose knowledge the Ombudsman submits should be attributed to Coles should be identified in the Ombudsman’s pleadings. Some names are referred to in the existing pleadings and it may be said that by implication their knowledge is to be attributed to Coles. However, I think that the attribution point should be expressly and clearly pleaded. There are two further related points. First, paragraph 55 refers to Coles’ knowledge whereas paragraphs 56 and 57 refer to Coles’ awareness. As I understand counsel for the Ombudsman, the pleas are said to mean the same thing. I think it appropriate that the same terminology be used to avoid any ambiguity. Secondly, and more importantly, in paragraphs 56 and 57 the Ombudsman pleads that Coles’ awareness was imputed in the alternative to being actual. As I understand counsel for the Ombudsman, that plea is in effect a plea of attribution. He does not claim that constructive knowledge is sufficient. To my mind the pleas are at the very least ambiguous and in the circumstances should be clarified.

54    Secondly, Coles submits that the Ombudsman’s reliance on paragraphs 550(2)(a) and (b) of the FW Act should be struck out because those paragraphs require a positive act by Coles and yet no positive act by Coles is alleged. The case against Coles in paragraph 58 of the FASOC is one of omission and such a case does not fall within paragraphs 550(2)(a) or (b) (Giorgianni v The Queen at 485-486 per Gibbs CJ at 493 per Mason J; Sent v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201 at 208 per Sweeney J; Yorke and Anor v Lucas (1983) 49 ALR 672 at 681-682; Australian Competition and Consumer Commission v SIP Australia Pty Limited [2002] FCA 824 at [112] per Goldberg J; Australian Building and Construction Commissioner v Abbott (No 4) (2011) 211 IR 267 at 300-302 [185]-[193]). The Ombudsman submits that it is at least arguable that Coles’ acts or omissions fall within paragraph 550(2)(a) and (b) and that, in circumstances where the case is to go forward in relation to paragraph 550(2)(c), these pleas should stand: (Wickstead v Browne (1992) 30 NSWLR 1 at 5-7 per Kirby J; Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 268 [161]-[162] per Kirby J).

55    I reject the Ombudsman’s contention. I do not think that, in the absence of a plea of a positive act by Coles, the Ombudsman’s case in relation to paragraphs 550(2)(a) and (b) discloses a reasonable cause of action and I think the pleading of those paragraphs should be struck out. The fact that the case will proceed in relation to paragraph 550(2)(c) is insufficient reason to allow it to proceed in relation to claims which I think are untenable.

56    Thirdly, Coles submits that the pleadings involve an embarrassing conflation of the primary allegations alleged (J C Decaux Pty Ltd v Adshel Street Furniture Pty Ltd and Anor (2000) 178 ALR 339 at 342-343 [19] per Weinberg J). Paragraph 58(a) is said to be an example of this vice. Each of the alternatives (that is, the provisions of the Modern Award and whether the employee was permanent or casual, the provisions of the Transitional Award and whether the employee was permanent or casual and different periods of time for Mr Bhupinder) needed to be set out and dealt with separately. In a sense this submission is linked to the first point on Coles’ application for summary judgment, that is to say, the level of knowledge required. It stands or falls with that point and as the Ombudsman’s case is to go forward in respect of that matter, I would reject Coles’ submission that the pleadings are defective in this respect.

57    Fourthly, Coles submits that paragraph 54 is embarrassing because it conflates various allegations in the sense that it refers to more than the relationship between two parties; it contains an irrelevant plea concerning the relationship between Coles and Starlink/Starlink Operations in circumstances where it contains no plea of the relationship between Starlink/Starlink Operations and Mr Al Hilfi and it refers to “effective control” without particularising what that means. I reject these complaints. I do not see any difficulty with a reference to more than one relationship between two parties. Perhaps there could have been an express reference to the relationship between Starlink/Starlink Operations and Mr Al Hilfi, but I think it is clear enough that the significance of the Coles and Starlink/Starlink Operations relationship is that the latter was the other contracting party with Mr Al Hilfi. Finally, I think that, read as a whole, paragraphs (c) and (d) make it clear what the Ombudsman means by “effective control”.

58    Fifthly, Coles submits that paragraph 55(a) is embarrassing because, read with the preamble, it refers to two points in time. Strictly, that is correct and should be remedied, although I doubt that it is likely to lead to any misunderstanding. Coles submits that paragraph 55(b) is embarrassing because it is irrelevant. I reject that submission. The matter is one of the matters the Ombudsman relies on to form the basis of a conclusion that Coles knew that the trolley collectors were being underpaid.

59    Finally, Coles complains about various aspects of the pleading in paragraph 57. I think the phrase in paragraph (b) of the Particulars, “Despite its knowledge of federal award regulation on the wages and conditions of trolley collectors” is ambiguous and should be removed or clarified. Counsel for the Ombudsman has offered to provide particulars of the Coles’ requests of Starlink referred to in paragraph (d) of the Particulars. I think that that is an appropriate way in which to proceed. I reject Coles’ other complaints concerning paragraph 57 of the FASOC.

60    There are some errors in the cross referencing of paragraphs in the pleas against Coles and the Ombudsman has agreed to remedy those matters.

Conclusion

61    In the absence of agreement between the parties as to the appropriate orders in light of these reasons, Coles should bring in minutes of order reflecting the conclusions in these reasons and I will hear the parties as to any other orders.

Associate:

Dated:    26 October 2012