FEDERAL COURT OF AUSTRALIA

Quincolli Pty Ltd v Fair Work Ombudsman [2013] FCA 321

THE COURT ORDERS THAT:

1.    Orders 1 to 39 inclusive (in respect of the first appellant) and orders 40 to 45 inclusive (in respect of the second appellant) made by the Federal Magistrates Court of Australia in proceeding no SYG1898 of 2010 on 18 February 2013 be stayed pending the final determination of the appellants’ appeal, on condition that the first appellant pays into Court the sum of $20,762 on or before 19 April 2013.

2.    Within 3 days of the sum being paid into Court, the Registrar notify each party in writing that the sum has been received.

3.    The stay take effect on and from the date that the said sum is paid into Court.

4.    Subject to further or other order, the said sum be paid into the Litigants’ Fund pursuant to r 2.42(1)(b) of the Federal Court Rules 2011.

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

REASONS FOR JUDGMENT

1    On 18 February 2013, the Federal Magistrates Court of Australia (the Federal Magistrates Court) made orders that the first appellant, Quincolli Pty Limited, pay certain identified persons various sums which, in aggregate, total $193,419.36, representing underpayments of wages and other entitlements under an industrial instrument known as the Clerical NAPSA. The effect of the orders is that these payments are to be made by 19 April 2013. The Federal Magistrates Court also found that the first appellant and the second appellant, Judith Madge Potter, had contravened the Workplace Relations Act 1996 (Cth) and the Fair Work Act 2009 (Cth) and ordered the first appellant to pay penalties totalling $81,000 and the second appellant to pay penalties totalling $26,500.

2    At relevant times, the first appellant operated call centres at Nowra and at other places. The underpayments and contraventions found by the Federal Magistrates Court were all in relation to persons employed by the first appellant at the Nowra Call Centre.

3    On 19 February 2013, the appellants filed a notice of appeal in this Court. On 28 February 2013, the appellants filed an interlocutory application seeking a stay of the orders made by the Federal Magistrates Court. The interlocutory application is before me for determination.

4    The appellants relied on an affidavit made by the second appellant on 2 April 2013 in support of their application. The respondent relied on an affidavit made by Darren John Lang on 19 March 2013 and an affidavit made by Lucy Madden on 3 April 2013.

5    The parties proceeded on the basis that, in determining the application, I should consider whether the appellants have an arguable case on appeal and whether the balance of convenience favours the granting of a stay.

the appeal

6    The appellants’ primary ground of appeal is that, contrary to the finding of the Federal Magistrates Court, the Clerical NAPSA does not apply to the first appellant’s employees at the Nowra Call Centre. The appellants contend that the employees were either in “an award free zone” or covered by the Contract Centre Industry Award 2003 (CCCA). The respondent submits that this contention was not properly raised before the Federal Magistrates Court and is not properly raised by a ground in the notice of appeal. There is, however, evidence before me of a submission made to that effect to the Federal Magistrates Court. The respondent points out that this submission was made after the hearing concluded, whilst judgment was reserved. There is no material before me, however, that would permit me to conclude that the submission was not considered and taken into account by the Federal Magistrates Court before judgment was given. Furthermore, perhaps somewhat generously to the appellants, grounds 2, 3 and 4 of the notice of appeal appear to cover the point.

7    More importantly, the respondent submits that the CCCA cannot apply to the first appellant’s employees at the Nowra Call Centre because it is a respondency based award and the first appellant was not at any relevant time a respondent to that award. The respondent submits, therefore, that any resemblance between the indicative tasks contained in the CCCA and the work performed by the Nowra Call Centre employees is entirely irrelevant, such that any reliance by the appellants on the CCCA in their appeal is bound to fail.

8    The notice of appeal raises a number of other related grounds. Without seeking to canvass all of these grounds, they include a ground challenging, in any event, the Federal Magistrates Court’s application of the Clerical NAPSA in light of the evidence that had been adduced. The respondent submits that, in advancing this ground of appeal, the appellants do not pay sufficient regard to the coverage provision of cl 34.1 of the Clerical NAPSA, which has been construed broadly in the relevant authorities and which, on the respondent’s submission, was applied correctly by the Federal Magistrates Court. The respondent also submits that, in advancing this ground, the appellants place too much emphasis on indicative tasks which are but an aid to classification within the broad framework provided by cl 34.1 in the Clerical NAPSA. The respondent also submits that if, which he does not accept, there was error in the judgment appealed from in relation to the grading of employees, this will be reflected in, at most, some modification to the quantum of the sums that the first appellant has been ordered to pay.

9    The appellants also contend that the Federal Magistrates Court erred in admitting evidence outside the ambit of the pleadings as particularised. The respondent disputes this and submits that, in any event, the impugned evidence was admitted without objection at the hearing. The respondent submits that it was only at a later time, in the course of submissions, that the appellants sought to challenge (apparently without any particularity) the reception of the evidence that had already been adduced concerning the nature of the work performed by the employees at the Nowra Call Centre.

10    The appellants also contend that the Federal Magistrates Court erred in refusing to permit the appellants to reopen their case and to adduce evidence in the form of an affidavit by John Michael Parnell going to the issue of the lodgement of contracts.

11    The respondent has made an overarching contention that the appellants have not shown, on this application, that they have arguable grounds of appeal. Although that overarching contention has been supported by a number of cogent submissions which tend to show that the appellants’ prospects of success on particular grounds are not strong, I am not persuaded that the appellants’ appeal on all grounds is unarguable or could not lead to some variation in the judgment under appeal.

12    The appellants also appeal against the severity of the penalties that have been imposed. They did not seek to identify where the Federal Magistrates Court erred in this regard. If, however, they are successful in their appeal, it would follow that this would lead to success on this ground.

balance of convenience

13    The appellants say that they are unable to pay the penalties and, in the case of the first appellant, the sums ordered to be paid to employees at the Nowra Call Centre. The appellants say that, if no stay is granted, and the first appellant is required to pay the sums as ordered, as well as the penalties imposed on it, liquidation will be its only course.

14    Some evidence has been adduced of the respective financial positions of the appellants. As I will come to explain, the evidence of the second appellant’s financial position is, to say the least, scant. I will deal, firstly, with the first appellant’s financial position, as revealed by the evidence, and then turn to consider the second appellant’s financial position.

15    It emerged in the course of the second appellant’s evidence in the proceeding before the Federal Magistrates Court that, on 5 March 2011, the employment of the employees at the Nowra Call Centre was transferred to a company called Browns Road Pty Limited. Both the first appellant and Browns Road Pty Limited are companies controlled by the second appellant and her husband, Norman Charles Potter. In her affidavit read in this application, the second appellant said that the first appellant’s “physical assets” – being some call centre stations, desks, chairs, telephones and headsets – were purchased by “Well Done Contact Centres” which, I infer, is the name of a business which now conducts the Nowra Call Centre.

16    The second appellant’s affidavit includes a copy of the first appellant’s 2012 tax return and an accountant’s declaration made on 28 March 2013 showing the first appellant’s current financial position. This material records that the first appellant has total current assets of $20,762 and total debts of $69,810, said to be derived wholly from shareholders’ loans. I note that the second appellant and Mr Potter are recorded as the first appellant’s only shareholders. The first appellant’s current year loss is $7,064. The first appellant’s 2012 tax return reports that it had total income for the relevant year of $2,829 and total expenses of $8,286. It thus reports a loss of $5,457. The second appellant’s affidavit makes clear that the first appellant’s only present asset is the sum of $20,762 comprising funds in a bank account. There is no evidence that the first appellant is currently trading and, from the available evidence, I infer that it is not trading, has not traded for some time, has no intention of trading and has no capacity to trade absent some support from the second appellant and Mr Potter.

17    It is plain that the first appellant is a creature of the second appellant and her husband. Its financial fate rests in their hands. They are its only apparent creditors. The available evidence indicates that the first appellant is insolvent, and has been insolvent for some time.

18    The second appellant has given evidence that she and her husband have modest incomes and that she has no income or savings with which to pay the fines imposed on her. She has provided copies of her income tax returns for the 2008 to 2012 tax years, showing net taxable income in the range of $22,593 to $52,532.

19    In her affidavit, she says:

If the fines and orders are to be paid as a priority I will not be able to continue in business. Having no personal resources to pay, I may have to declare myself bankrupt, and thus would be unable to continue to run the business (as a director).

[Emphasis added]

20    I note the equivocal nature of this assertion. The second appellant has not given, by evidence, a fuller account of her financial position, including her assets.

21    The appellants also point to the time over which the proceeding before the Federal Magistrates Court was heard and finally determined, to support a submission that there will be no significant additional prejudice caused by the effluxion of time if a stay is granted or, alternatively, that any such prejudice to either the first appellant’s former employees or the respondent would not outweigh the prejudice to them if no stay is granted. In this connection, apart from their stated impecuniosity, the appellants submit that, absent a stay, the business conducted by the Nowra Call Centre will be adversely affected if no stay is granted. Why this would be so is not at all clear on the evidence.

22    The respondent submits that it faces the prospect of having to conduct an appeal and incur substantial costs, in circumstances where there is, on the appellant’s evidence, little prospect of the orders of the Federal Magistrates Court being complied with. The respondent also submits that employees at the Nowra Call Centre, who have been long out of pocket, would face still further delays in receiving any of the money they are owed, if a stay is granted. The respondent also submits that neither the first appellant’s nor the second appellant’s impecuniosity is a reason to grant a stay.

consideration

23    Taking all these matters into account, I am persuaded that a stay of orders 1 to 33 inclusive made by the Federal Magistrates Court concerning payments to the employees at the Nowra Call Centre should be granted, but only on condition that the first appellant pays into Court the sum of $20,762 on or before 19 April 2013. The funds are to be held pending the determination of the appeal and then disbursed as the Court shall order.

24    In coming to this determination, I have endeavoured to balance the interests of all those affected by the bringing of the appeal. I appreciate that a stay in respect of the orders concerning the employees at the Nowra Call Centre will delay the payment of their entitlements (or some part of them), as presently determined. However, it would be unrealistic for me not to take into account the parlous financial position of the first appellant and the practical likelihood that those employees will not receive a timely payment in any event. On the other hand, should the first appellant make the payments, or some part of them, and subsequently succeed in its appeal, it may be difficult for it to obtain repayment of the sums in question. Although the appellants offered an undertaking to the Court not to dispose of any assets of the first appellant pending the determination of their appeal, in my view, the better course is to order that the funds be paid into Court as a condition of granting a stay. This reflects my view that the first appellant’s prospects of success in the appeal are not strong insofar as they concern these orders.

25    Given that, on the material before me, the outcome of the appellants’ severity appeals appears to be dependent on their appeal in relation to the first appellant’s liability to pay its former employees, it seems to me to be appropriate that the penalty orders made by the Federal Magistrates Court also be stayed on the same condition.

Associate:

Dated:    11 April 2013