FEDERAL COURT OF AUSTRALIA

Australian Rail, Tram and Bus Industry Union v Railtrain Pty Ltd [2019] FCA 1740

ORDERS

THE COURT ORDERS THAT:

1.    The parties are to bring in Short Minutes of Order to give effect to these reasons within 14 days.

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

REASONS FOR JUDGMENT

FLICK J:

1    In the present proceeding, the Australian Rail, Tram and Bus Industry Union (the “Union”) filed an Originating Application and a Statement of Claim in October 2018. The Respondents to that proceeding were Railtrain Pty Ltd (“Railtrain”) as First Respondent and three individual Respondents. That Originating Application and Statement of Claim were amended in January 2019 and then further amended in April 2019.

2    As pleaded in the Further Amended Statement of Claim, Railtrain (inter alia) “operates a labour hire business supplying train crew and infrastructure operators to rail transport operators”. The Second Respondent (Mr Christopher Elston) is said to have been “from at least 2017 employed by Railtrain as its General Manager – People, Safety and Strategy”. The Third Respondent (Mr Graham Butler) is said to have been “at all material times an authorised representative of Railtrain”. The Fourth Respondent (Mr Jae Druce) is said to have been “at all material times employed by Railtrain as its Registered Training Organisation Manager”.

3    In very summary form, the April 2019 Further Amended Statement of Claim pleads that Railtrain contravened ss 323 and 325 of the Fair Work Act 2009 (Cth) (“Fair Work Act”). Messrs Elston, Butler and Druce, it is further pleaded, were “involved” in those contraventions by reason of s 550 of the Fair Work Act.

4    In January 2019, the Respondents filed an Interlocutory Application seeking (inter alia) to have parts of the then Amended Originating Application and Amended Statement of Claim dismissed pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) (the “Federal Court of Australia Act”) and r 26.01(1) of the Federal Court Rules 2011 (Cth) (“Federal Court Rules”). In the alternative, orders were sought seeking that certain paragraphs of the pleadings be struck out pursuant to r 16.21(1) of the Federal Court Rules. The April 2019 amendments did not address the concerns of the Respondents and the Interlocutory Application was pressed as against the current pleadings. No further amendments were intended to be made by the Union.

5    The Interlocutory Application did not seek any order that the case as against Railtrain should be dismissed.

6    It is concluded that the criticisms of the pleadings advanced on behalf of the Respondent have largely been successful and that parts of the pleadings should thus be struck out. It is only the case against Railtrain which should thus proceed to hearing.

The Fair Work Act

7    Section 323 of the Fair Work Act provides as follows:

323    Method and frequency of payment

(1)    An employer must pay an employee amounts payable to the employee in relation to the performance of work:

    (a)    in full (except as provided by section 324); and

(b)    in money by one, or a combination, of the methods referred to in subsection (2); and

    (c)    at least monthly.

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

Note 2:     Amounts referred to in this subsection include the following if they become payable during a relevant period:

(a)    incentive‑based payments and bonuses;

(b)    loadings;

(c)    monetary allowances;

(d)    overtime or penalty rates;

(e)    leave payments.

(2)    The methods are as follows:

   (a)    cash;

   (b)    cheque, money order, postal order or similar order, payable to the employee;

(c)    the use of an electronic funds transfer system to credit an account held by the employee;

   (d)    a method authorised under a modern award or an enterprise agreement.

(3)    Despite paragraph (1)(b), if a modern award or an enterprise agreement specifies a particular method by which the money must be paid, then the employer must pay the money by that method.

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

The “mischief” sought to be addressed by s 323(1) was identified as follows by Crennan, Kiefel, Bell, Gageler and Keane JJ in Construction, Forestry, Mining and Energy Union v Mammoet Australia Pty Ltd [2013] HCA 36, (2013) 248 CLR 619 at 633-634:

“Payment to an employee”

[45]    ... It is tolerably clear from the terms of s 323(3), and is confirmed by the Explanatory Memorandum which accompanied the Bill for the Fair Work Act 2009, that s 323(1) addresses the same mischief addressed by “Truck Acts” as they had by then come to exist in each State, that is, that an employee’s entitlement to payment for work might be compromised by an employer requiring the employee to accept some form of payment in kind of less value than the payment of money forgone. Section 323(3) expressly acknowledges that this mischief is not a concern where the provision is contained in an enterprise agreement.

(footnotes omitted)

See also: Australian Education Union v Victoria (Department of Education and Early Childhood Development) [2015] FCA 1196 at [150], (2015) 239 FCR 461 at 502 per Bromberg J (“Australian Education Union”).

8    Section 325 of the Fair Work Act provides as follows:

325    Unreasonable requirements to spend or pay amount

(1)    An employer must not directly or indirectly require an employee to spend, or pay to the employer or another person, an amount of the employee’s money or the whole or any part of an amount payable to the employee in relation to the performance of work, if:

(a)    the requirement is unreasonable in the circumstances; and

(b)    for a payment—the payment is directly or indirectly for the benefit of the employer or a party related to the employer.

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

(1A)    An employer (the prospective employer) must not directly or indirectly require another person (the prospective employee) to spend, or pay to the prospective employer or any other person, an amount of the prospective employee’s money if:

  (a)    the requirement is in connection with employment or potential employment of the prospective employee by the prospective employer; and

     (b)    the requirement is unreasonable in the circumstances; and

 (c)    the payment is directly or indirectly for the benefit of the prospective employer or a party related to the prospective employer.

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

(2)    The regulations may prescribe circumstances in which a requirement referred to in subsection (1) or (1A) is or is not reasonable.

The reference in s 325(1)(a) to a “requirement [that] is unreasonable in the circumstances” is one which “calls for an evaluative judgment in which competing considerations need to be assessed”: Australian Education Union [2015] FCA 1196 at [148], (2015) 239 FCR 461 at 501. Drawing upon the experience derived from the “Truck Act[s]”, Bromberg J observed that the “primary rule imposed by the Truck Act was the prohibition of the payment to an employee of remuneration otherwise than in money”. His Honour continued on to state that that rule “was moderated by a limited number of permissible exceptions which effectively permitted deductions to be made in relation to some matters, but with constraints designed to guard against an employer unfairly profiting from the making of a deduction”: [2015] FCA 1196 at [152], (2015) 239 FCR 461 at 502.

9    Sections 323 and 325 are each “civil remedy” provisions and, as such, are “quasi-criminal”: cf. Australian Building and Construction Commissioner v Ravbar [2018] FCA 1196 at [57] per Reeves J (“Ravbar”).

10    Section 550 of the Fair Work Act provides as follows:

550    Involvement in contravention treated in same way as actual contravention

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

Note:    If a person (the involved person) is taken under this subsection to have contravened a civil remedy provision, the involved person’s contravention may be a serious contravention (see subsection 557A(5A)). Serious contraventions attract higher maximum penalties (see subsection 539(2)).

(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 effect the contravention.

Section 550(2)(a) and (c) have a “different emphasis”: Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 (“Devine Marine Group”). In summarising the relevant principles, White J there observed:

Relevant principles

[176]    Although the general principles relating to accessorial liability are settled, their application in a case such as the present is not without difficulty. In order to aid, abet, counsel or procure the relevant contravention, the person must intentionally participate in the contravention with the requisite intention: Yorke v Lucas (1984) 158 CLR 661 at 667. In order to have the requisite intention, the person must have knowledge of “the essential matters” which go to make up the events, whether or not the person knows that those matters amount to a crime: Yorke v Lucas at 667. Although it is necessary for the person to be an intentional participant and to have knowledge of the matters or things constituting the contravention, it is not necessary for the person to know those matters or things do constitute a contravention: Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213; (2002) 118 FCR 236 at [159]-[160]. That is to say, it is not necessary that the accessory should appreciate that the conduct in question is unlawful. The Full Court in Rafferty v Madgwicks [2012] FCAFC 37; (2012) 287 ALR 437 summarised the position in this respect at [254]:

[W]hile the identification of the elements of a contravention requires careful legal analysis, “[i]n order to know the essential facts, and thus satisfy s 75B(1) … and like provisions, it is not necessary to know those facts are capable of characterisation in the language of the statute” … This is another aspect of the longstanding principle that it is not necessary for a person to “recognise” the contravention as such, or explicitly to think about the relevant legislation that their actions may contravene …

[177]    Actual, rather than imputed, knowledge is required. So much was made clear in Giorgianni v The Queen (1985) 156 CLR 473 at 506-7 by Wilson, Deane and Dawson JJ:

… [Offences of aiding and abetting and counselling and procuring] 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. …

[178]    The notion of being “knowingly concerned” in a contravention has a different emphasis from that of aiding, abetting, counselling or procuring” a contravention. To be knowingly concerned in a contravention, the person must have engaged in some act or conduct which “implicates or involves him or her” in the contravention so that there be a “practical connection between” the person and the contravention: Construction, Forestry, Mining and Energy Union v Clarke [2007] FCAFC 87; (2007) 164 IR 299 at [26]; Qantas Airways Ltd v Transport Workers’ Union of Australia [2011] FCA 470; (2011) 280 ALR 503 at [324]-[325].

[179]    As indicated, these principles are not in doubt. The more difficult question arises from their application to the circumstances of this case and, in the identification of the essential facts about which an accessory must have actual knowledge.

These principles were endorsed by the Full Court in EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134 at [11], (2018) 360 ALR 261 at 263-264 per Flick, Bromberg and O’Callaghan JJ.

11    As White J made clear in Devine Marine Group, it has long been settled that an allegation that a person has “aided, abetted, counselled or procured” a contravention requires a party to prove that a person has “knowledge of the essential matters which go to make up the offence”: e.g. Tytel Pty Ltd v Australian Telecommunications Commission (1988) 11 IPR 223 at 231. When considering the comparable provision formerly found in s 75B(a) of the Trade Practices Act 1974 (Cth), Sheppard J relevantly concluded in that case (at 231 to 232):

…Section 82 thereof provides that a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Pt IV (relevantly s 46) or Pt V (relevantly ss 52 and 53) may recover the amount of the loss or damage by action against that other person “or against any person involved in the contravention”. Section 75B provides that a reference to a person involved in the contravention of a provision of Pt IV or Pt V shall be read as a reference, inter alia, to a person who has aided, abetted, counselled or procured the contravention, or has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention. These provisions were in part the subject of consideration by the High Court in Yorke v Lucas (1985) 158 CLR 661; 61 ALR 307 where the High Court held that the provisions of para (a) — the aiding and abetting provisions — imported the requirements of the criminal law. Amongst other things, Mason ACJ and Wilson, Deane and Dawson JJ said (at 669) that notwithstanding that s 75B operated as an adjunct to the imposition of civil liability, its derivation was to be found in the criminal law and there was nothing to support the view that the concepts which it introduced should be given a new or a special meaning. Earlier they had said (at 667) that under the criminal law a person, in order to form the requisite intent, must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime. The High Court was not concerned with para 75B(c) of the Act (being knowingly concerned in or party to a contravention), but the word “knowingly” imports into the provision similar considerations to those which apply to an allegation of aiding and abetting a contravention.

It follows that, for the applicants to succeed against STC on the grounds that it aided and abetted Telecom or was knowingly concerned in or party to Telecom’s contravention, it must plead and prove facts and circumstances which will enable the court to conclude that STC had the requisite knowledge and intent. That matter is at the heart of the submissions made by counsel for STC in the present case.

Similar language to that formerly found in s 75B is now found in (for example) ss 213, 224 and 232 of The Australian Consumer Law (being sch 2 to the Competition and Consumer Act 2010 (Cth)).

12    An allegation that a person is “knowingly concerned” in a contravention, such as for the purposes of s 550(2)(c) of the Fair Work Act, has been said to be a serious one, akin to a pleading of dishonesty: cf. Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31, (2018) 368 ALR 607 at 627 (“Stefanovski”). McKerracher, Robertson and Derrington JJ there observed:

[70]    In this case, where much of the liability of the appellants is founded upon them being “knowingly concerned” in TK Signs’ statutory contraventions, there are no pleaded allegations of the knowledge which is a necessary prerequisite to such a claim. It is well established that accessorial liability rests upon the intentional participation by a party in the contravention and such knowledge must be expressly pleaded against the party from whom relief is sought. The allegation that a person was “knowingly involved” in a contravention is a serious one and is akin to dishonesty. A party against whom such a claim is made is entitled to have the allegation clearly pleaded such that they might defend it. In Wyzenbeek v Australasian Marine Imports Pty Ltd [2017] FCA 1460 Derrington J referred to the relevant principles in the following discussion:

[96]    In relation to the second matter, there is substantial weight in the submissions of the respondents that the pleading in paragraph 56 does not plead a reasonable cause of action against Mr Gay based on him being “knowingly concerned” in the alleged breaches of the TPA and ACL. An essential requirement of any plea of this nature is that the person against whom the claim is made knew of the matters which make up the essential elements constituting the contravention in question. Such allegations are necessary to establish that the person intentionally participated in that contravention. Where accessorial liability is alleged in relation to misleading or deceptive conduct, the party alleging the same must assert that at least the respondent knew of the making of the representation, that it was made in trade or commerce and that it was misleading or deceptive (see Yorke v Lucas (1985) 158 CLR 661 at 667). In Australian Competition and Consumer Commission v Online Dealz Pty Ltd [2016] FCA 732 Markovic J identified the now well accepted positon which flows from Yorke v Lucas. Her Honour said:

[163]    It is necessary to show an intentional participation in and actual knowledge of the essential elements of the contravention. However, it is not necessary to show that the person appreciated that the conduct constituted a contravention. In Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [48] a majority of the High Court confirmed that the trial judge had rightly held that it was necessary to find that the relevant individuals participated in, or assented to, the companies’ contraventions with “actual knowledge of the essential elements constituting the contraventions” and that in order to “know the essential facts, and thus satisfy s 75B(1) of the Act and like provisions, it is not necessary to know that those facts are capable of characterisation in the language of the statute”.

[164]    In Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17 a Full Court of this Court held at [133] that for a person to be involved in a contravention pursuant to s 75B(1)(c) of the Trade Practices Act, the person must be an “intentional participant in the contravention, the necessary intent being based upon knowledge of the essential elements of the contravention” relying on Yorke v Lucas. The Court went on to say that while it was not necessary to establish that the individual respondents had “knowledge that there was such a contravention … of the Act, it is necessary to demonstrate that each individual respondent had knowledge of each of the essential elements of the contravention”. …

In Stefanovski, their Honours went on to conclude that the pleading as against Mr Stefanovski was deficient, there being “no pleading that Mr Stefanovski …[was] knowingly concerned in the conduct of TK Signs which amounted to a breach of its obligation of good faith towards DCA”: [2018] FCAFC 31 at [72], (2018) 368 ALR at 628.

13    Similarly, in Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 (“South Jin”) White J has also concluded that in order for a person to be “knowingly concerned in a statutory contravention, that person must have been an intentional participant, with knowledge of the essential elements constituting the contravention”. In this context, his Honour summarised the general principles in relevant part as follows:

Accessory liability – principles

[227]    In order to be knowingly concerned in, or party to, a contravention, a person must have engaged in some conduct which “implicates or involves” him or her in the contravention, so that there is a “practical connection” between the person and the contravention: …

…

[229]    In order for a person to have been knowingly concerned in a statutory contravention, that person must have been an intentional participant, with knowledge of the essential elements constituting the contravention: Yorke v Lucas (1985) 158 CLR 661 at 670. However, it is not necessary that a person with knowledge of the essential elements making up the contravention also know that those elements do amount to a contravention: … An accessory does not have to appreciate that the conduct involved is unlawful: …

[230]    Actual knowledge of the essential elements constituting the contravention is required. Imputed or constructive knowledge is insufficient: …

[231]    Proof that a person had actual knowledge of each of the essential elements making up a contravention may be derived from direct evidence but more commonly will be a matter of inference from all the circumstances found to be proved. In some cases, actual knowledge can be inferred from the combination of a respondent’s knowledge of suspicious circumstances and the decision by the respondent not to make enquiries to remove those suspicions. Nevertheless it is actual knowledge which is required. In this respect, Wilson, Deane and Dawson JJ in Giorgianni v The Queen (1985) 156 CLR 473 at 505 said:

[A]lthough it may be a proper inference from the fact that a person has deliberately abstained from making an inquiry about some matter that he knew of it and, perhaps, that he refrained from inquiry so that he could deny knowledge, it is nevertheless actual knowledge which must be proved and not knowledge which is imputed or presumed.

And later (at 507-8):

The fact of exposure to the obvious may warrant the inference of knowledge. The shutting of one’s eyes to the obvious is not, however, an alternative to the actual knowledge which is required as the basis of intent to aid, abet, counsel or procure.

[232]    The conclusion that a person has actual knowledge of the elements of a contravention by reason of that person’s knowledge of suspicious circumstances coupled with a deliberate failure to make enquiries which may have confirmed those suspicions requires consideration of the person’s knowledge of the matters giving rise to the suspicion, the circumstances in which the person did not make the obvious enquiry and the person’s reasons, to the extent that they are known, for not having made the enquiry. It is not every deliberate failure to make enquiry which will support the inference of actual knowledge. …

…

[234]    The requisite actual knowledge must be present at the time of the contravention. A later acquisition of knowledge of the essential matters is not sufficient.

(citations omitted)

See also: Ravbar [2018] FCA 1196 at [94] per Reeves J; BlueScope Steel Limited v Australian Workers’ Union [2018] FCA 1574 at [21] per Wigney J; Patrick Stevedores Holdings Pty Limited v Construction, Forestry, Maritime, Mining and Energy Union [2019] FCA 451 at [100] per Lee J.

14    Citing Stefanovski, and in concluding a pleading as to a person being “knowingly involved” in a contravention of the Fair Work Act was deficient, Thawley J in Whitby v ZG Operations Australia Pty Ltd (No 2) [2019] FCA 201 (“Whitby”) observed:

[28]    Knowledge that the applicants performed their work in a particular way and were not paid as employees, whilst clearly relevant to the question, does not equate to knowledge that the applicants were, in truth, employees. Mr Dixon may have thought that the applicants were independent contractors, being what the applicants were ultimately determined to be.

[29]    A pleading that a person is “knowingly concerned” in a contravention is a serious one, akin to a pleading of dishonesty – see: Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31 at [70]. A pleading that a person was knowingly concerned in a contravention, exposing them to personal liability and seeking the imposition of civil penalties, should be drafted with some considerable care. It should plead the material facts said to establish that the person was knowingly concerned in the contravention. This includes an express identification of the elements of the contravention and an express pleading that the person had knowledge of each of the essential elements constituting the contravention. It should identify the material facts said to establish knowledge or from which such knowledge is to be inferred. The pleading should generally also identify the material facts said to constitute the relevant acts or omissions of the person which are relied upon as establishing any practical connection with or link to the contraventions (Whitby at [234], [235]) which are contended to establish the person was “knowingly concerned” within the meaning of s 550(2)(c).

[30]    In its application to the present circumstances, if the applicants’ case when instituted was based on the notion that Mr Dixon knew that the applicants were employees, that allegation should have been made expressly in the pleading together with the material facts relied upon as establishing that Mr Dixon had that knowledge or from which such knowledge should have been inferred. If that had occurred, attention would necessarily have been directed to whether the claim was a reasonable one to make and whether the material or evidence available or likely to be available (assessed in accordance with s 140 of the Evidence Act 1995 (Cth) and Briginshaw v Briginshaw (1938) 60 CLR 336) permitted the pleading of the relevant material facts and provided reasonable cause to institute the proceedings.

[31]    If the claim of knowledge that the applicants were in truth employees rested largely or entirely on the fact that Mr Dixon knew what the applicants did in the course of their work, the question would naturally have arisen whether that provided reasonable cause, in the circumstances of the case, to plead that he was “knowingly concerned” in contraventions of the FW Act.

[32]    It is one thing to assert a person had actual knowledge that an arrangement constituted an employment arrangement if, for example, armed with knowledge of the relevant facts, the person had sought and received advice from another person with expertise in the field, or if they themselves had sufficient experience in the field. It is another to assert that a person knew that arrangements constituted employment arrangements simply because they knew what the parties did in the performance of their work. Clearly there are cases where the circumstances of the parties of themselves so obviously give rise to the conclusion that the relationship is one of employment that it could be inferred that a person familiar with the arrangements knew an employment relationship existed. The present case is not an example of that situation. Even if it were such a case, it would have been desirable, if not necessary, for the applicants to plead that Mr Dixon’s knowledge that the applicants were, in truth, employees was to be inferred on the basis that such a conclusion was obvious from identified facts known to Mr Dixon and in light of his experience. Such a pleading would have directed attention to whether there was reasonable cause to institute proceedings on that basis.

15    Although these cases repeat much of that which has long been-established and repeat principles established in Yorke v Lucas (1985) 158 CLR 661, the repetition of these principles serve as a continuing requirement of that which must be pleaded and that which must be proved if a person is to be found to have “aided, abetted, counselled or procured” a contravention by another. Both Stefanovski and South Jin serve as useful examples of the degree of care with which pleadings must be drafted.

The pleadings as to the involvement of Elston, Butler & Druce

16    The pleaded contravention as against Railtrain, which is not the subject of the present Interlocutory Application, is that Railtrain contravened ss 323(1) and 325(1) of the Fair Work Act. There is no pleading as to a contravention of s 325(1A), namely that provision directed to “prospective employer[s]” and “prospective employee[s]”.

17    So confined, the deficiency relied upon in support of the argument that the claims against Messrs Elston, Butler and Druce can be adequately exposed by reference to the pleadings against Mr Elston. Each of the pleadings against Messrs Butler and Druce follow a similar format.

18    The Further Amended Statement of Claim thus provides as follows (without alteration):

Elston’s contraventions

31C.    As the General Manager – People, Safety and Strategy, and otherwise a senior manager and active participant within Railtrain, Mr Elston engaged, and had a decision making role in:

a.    the manner in which Railtrain engaged and paid its employees other than the Trainees;

b.    the design of the system for engaging Trainees as pleaded at [8]-[22] (the System); and

c.    the day-to-day and ongoing implementation of each aspect of the System.

31D.    Mr Elston knew, or ought be taken to have known:

a.    that the Trainees were engaged, during their respective Training Periods, in accordance with the System;

b.    of the representations being made in accordance with the System to Trainees during the advertisement, recruitment, interview and offer process, and thereafter;

c.    that the Trainees were from commencement required to be available to perform, and to perform, work for Railtrain;

d.    of the amounts, if any, being paid to Trainees during their relevant Training Period;

e.    otherwise ofo the manner in which the Trainees were engaged;

f.    the attempts to charge Trainees fees;

g.    the deduction of moneys from amounts owing to former Trainees on termination;

f.    of the existence of the Award, and its terms; and

g.    of the existence of the Agreement, and its terms.

31E.    In the premises pleaded above, Mr Elston:

a.    aided, abetted, counselled, procured;

b.    induced; and/or

c.    was otherwise knowingly concerned in, the:

d.    Non-payment Contravention;

e.    Training Fees Contravention; and

f.    Non-Permitted Deductions contraventions,

and as such was involved in each such contravention within the meaning of s.550 of the FW Act (together, the Elston Contraventions)

19    The reference in para [31C(b)] to “the System” and paras [8] to [22] was a reference which included pleadings that:

    “In or around 2014, Railtrain … caused advertisements to be placed on job advertisement sites …” (at para [8]);

    “From around 2018, the Traineeships were advertised by Railtrain …” (at para [9]);

    “Between around 2014 to 2015, on being offered a position, each Trainee was provided with a document …” (at para [13]);

    “From 2016 to around 2017, on being offered a position, each Trainee was provided with a document …” (at para [14]);

    “From around 2018, on being offered a position, each Trainee was provided with a document…” (at para [15])’

    “Between 2014 to 2017, Railtrain” (for example) “paid Trainees for time spent on ‘on-the-job training’” (at para [19]);

    “From 2018, Railtrain did not pay any amount to Trainees at any time during the Training Period” (at para [20]);

    “Trainees who completed training in the period 2016 to 2017 were, at the conclusion of the training program, provided with a document from Railtrain …” (at para [21]); and

    “Trainees who completed training in or after 2018 were, at the conclusion of the training program, provided with a document from Railtrain …” (at para [22]).

Of present relevance is the identification in the pleadings of the various periods of time specified. The comparable pleadings to those made against Mr Elston are made against Mr Butler (at paras [31F], [31G] and [31H]) and against Mr Druce (at paras [31I], [31J] and [31K]).

20    The Further Amended Statement of Claim, prior to turning its attention to the “involvement” of Messrs Elston, Butler and Druce, turns its attention to the question as to whether those participating in the training scheme were “employees” and pleads, in part, as follows (without alteration):

24.    In the premises pleaded above, including at [17]-[18], the Trainees, including the Claimant Workers were:

a.    as a result of the job advertisements pleaded at [8] and [9] above, led to believe they were applying for employment with Railtrain;

   b.    did so apply;

c.    in response to such application, were offered a position correctly characterized as employment with Railtrain;

   d.    accepted such employment with Railtrain, and

and were employees of Railtrain within the meaning of s.12 and s.42 of the FW Act from the commencement of their relevant Training Period and thereafter.

Section 31A & the Federal Court Rules

21    The Interlocutory Application filed by the Respondents seeks an order that the proceeding be dismissed (in part) pursuant to s 31A(2) of the Federal Court of Australia Act and r 26.01(1) of the Federal Court Rules or an order that the Further Amended Statement of Claim be struck out (in part) pursuant to r 16.21(1) of the Federal Court Rules. An order for costs pursuant to s 570(2) of the Fair Work Act and/or s 43(1) of the Federal Court of Australia Act is also sought.

22    Section 31A(2) provides as follows:

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.

It is sufficient for present purposes to note that s 31A “lowers the bar” for the purposes of securing summary judgment: Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 at [5] per Gilmour J. The effect of that section, as stated by the Full Court, is to “soften the test for a successful application for summary judgment”: Kowalski v MMAL Staff Superannuation Fund Pty Ltd [2009] FCAFC 117 at [25], (2009) 178 FCR 401 at 408 per Spender, Graham and Gilmour JJ. But the exercise of the power to summarily terminate a proceeding is to be exercised with “caution”: Spencer v Commonwealth of Australia [2010] HCA 28 at [24], (2010) 241 CLR 118 at 131-132 per French CJ and Gummow J.

23    Rules 26.01 of the Federal Court Rules provides in relevant part as follows:

Summary judgment

(1)    A party may apply to the Court for an order that judgment be given against another party because:

(a)    the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or

(b)    the proceeding is frivolous or vexatious; or

(c)    no reasonable cause of action is disclosed; or

(d)    the proceeding is an abuse of the process of the Court; or

(e)    the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding.

The counterpart provision to r 26.01 was formerly found in Order 20 of the now-repealed Federal Court Rules 1979 (Cth).

24    Rule 16.21(1) of the Federal Court Rules provides as follows:

Application to strike out pleadings

(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:

(a)    contains scandalous material; or

(b)    contains frivolous or vexatious material; or

(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; or

(f)    is otherwise an abuse of the process of the Court.

The counterpart provision to r 16.21 was formerly found in Order 11 r 16 of the now-repealed Federal Court Rules 1979 (Cth).

25    There remains a fundamental difference in the manner in which a Court approaches an application to strike out a form of pleadings and an application for summary judgment under s 31A. This difference was explained as follows by Finkelstein J in Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920, (2008) 252 ALR 41 at 43 and 44:

[4]    The fundamental thing to understand about the strike-out rule, which the language of O 11 r 16 itself makes clear, is that the rule is concerned only with the adequacy of the pleading (or to be more precise, the allegations and the causes of action asserted therein) as a matter of law. The rule does not permit or allow consideration of facts or evidence outside the pleadings: Dey v Victorian Railway Cmrs (1949) 78 CLR 62 at 91 and 109; [1949] ALR 333 at 347-8; see also General Steel Industries Inc v Cmr for Railways (NSW) (1964) 112 CLR 125 at 129; [1965] ALR 636 at 638 (General Steel). Indeed, as counsel for ANZ… correctly noted in his submissions, the court must, for purposes of deciding the strike-out motion and deciding whether a pleading discloses a reasonable cause of action, assume the truth of the allegations in the statement of claim and draw all inferences in favour of the non-moving party because the question is whether those allegations, even if proved, cannot succeed as a matter of law: General Steel at CLR at 129; ALR 638.

….

[6]    In contrast, a s 31A application not only permits, but requires, a consideration of matters outside the pleadings: …The application is, after all, a trial albeit a summary trial. In White Industries Aust Ltd v Federal Cmnr of Taxation (2007) 160 FCR 298; 240 ALR 792; 95 ALD 30; [2007] FCA 511 at [50], Lindgren J said that s 31A “is concerned with the bringing and defending of proceedings, not just with pleadings; with substance, not just with form”. That is to say, the “no reasonable prospect of success” standard is designed to test the adequacy of the evidence in support of the allegations, not just the allegations themselves. At the same time, it is important to understand that the court in deciding a motion for summary judgment does not, in testing that evidence, find any facts; rather, the court determines, as a matter of law, whether there are any facts that need to be found such that a trial is required: …

(citations omitted)

The adequacy of the pleadings against Elston, Butler & Druce

26    Irrespective of whether reliance is placed upon s 550(2)(a) or (c) of the Fair Work Act, the Respondents contend what is missing from the pleadings is any pleading that Messrs Elston, Butler and Druce each had any knowledge that the persons who participated in the training scheme were “employees”. Knowledge that those persons were “employees”, it was submitted, was an essential element of the contravention of both ss 323 and 325.

27    By way of stark contrast, Counsel on behalf of the Union contended that it was unnecessary to expressly plead that Messrs Elston, Butler or Druce had actual knowledge that the persons participating in the training scheme were “employees”. On her account:

    for the purposes of s 550(2)(a) and to make good an allegation that each Messrs Elston, Butler and Druce “aided, abetter, counselled or procured the contravention” in any contravention of ss 323 and/or 325, it was not necessary to plead other than those matters set forth (for example) in para [31D]; and (similarly)

    for the purposes of s 550(2)(c) and to make good an allegation that Messrs Elston, Butler or Druce were “knowingly concerned in” any contravention of ss 323 and/or 325 by Railtrain it was not necessary to allege actual knowledge that the persons participating in the training scheme were “employees” but that it was sufficient to make the allegations set forth (for example) in para [31D].

28    Common to both ss 323 and 325 is the focus upon a person being “an employee”. In there is an obligation to “pay an employee” and, in s 325, there is a prohibition upon a requirement being placed upon an “employee” to pay money.

29    The “essential matters” or the “essential elements” which go to make out a contravention of s 323(1) (for example) are relevantly:

    that there be an “employer”;

    who fails to “pay … amounts payable”; and

    a failure to pay the amount to an “employee”.

30    A contravention of s 323 is made out, relevantly, if an employer fails to “pay an employee”. Even if the employer may be mistaken as to the proper characterisation of a person as an “employee”, and mistakenly believes (for example) that a person is merely one who seeks to become employed, the contravention is made out if there has been no payment and the person is properly characterised as an “employee”. In such circumstances, it is no defence for an employer to say: “I didn’t think he was an employee”. Although an employer’s Defence may simply deny a pleading that it was the “employer”, the issue would need to be joined on the pleadings. An employer’s denial that he knew the person (not being paid) was an “employee” would not be a sufficient answer.

31    And, and at least for the purposes of s 550(2)(a), namely the “involvement” of a person by reason of that person having “aided, abetted, counselled or procured the contravention”, it is necessary to expressly plead that an the alleged accessory had actual knowledge of each of the elements of the contravention – including an express pleading that the alleged accessory had knowledge that the person not being paid was an “employee” (cf. Stefanovski [2018] FCAFC 31 at [70], (2018) 368 ALR at 627; South Jin [2015] FCA 1456 at [229]; Whitby [2019] FCA 201 at [28]-[32]). To this extent, to make out a case against an accessory, it is necessary to plead not only that the person not being paid was an “employee” but also knowledge that that person was an “employee”.

32    And for the purposes of s 550(2)(c), namely that a person be “knowingly concerned” in a contravention by another, it was the very absence of a pleading that the person knew that those involved were “employees” which led to the conclusion of Thawley J in Whitby.

33    Even though s 550(2)(a) may have a “different emphasis” than s 550(2)(c) (cf. Devine Marine Group [2014] FCA 1365 at [178]), there remains the necessity with both provisions to expressly plead that the alleged accessory knew of the “essential elements” of the specific contravention. In the present circumstances, it is an “essential element” of both contraventions that the person was an “employee”. In the absence of express pleadings in the Further Amended Statement of Claim, the pleadings against Messrs Elston, Butler and Druce should be struck out.

34    Left to one side for present purposes is the manner in which an allegation that an accessory to a contravention had knowledge that a person was an “employee” is to be established. The question for present purposes is the form of the pleadings.

An additional argument – Elston

35    In addition to the submissions made generally with respect to Messrs Elston, Butler and Druce, it was further urged on behalf of Mr Elston that the pleading (at para [5(b)]) that Mr Elston “from at least 2017” was employed by Railtrain could not sit consistently with the pleading (at para [31C(b)]), that being the pleading that Mr Elston was “engaged, and had a decision making role in” that which incorporated in the pleadings from paras [8] to [22], namely “the System”.

36    There is, at the very least, a tension between a pleading which seeks to ascribe to Mr Elston responsibility “from at least 2017” and a pleading as to events pleaded to have taken place:

    “[i]n or around 2014” (at para [8]);

    “[b]etween around 2014 to 2015” (at para [13]);

    “[f]rom around 2016 to around 2017” (at para [14]); and

    “[b]etween 2014 to 2017” (at para [19]).

37    That tension, it is respectfully concluded, gives rise to the potential for such uncertainty or confusion that the pleading should be struck out.

38    That uncertainty or confusion could, however, potentially be remedied by granting leave to re-file further amended pleadings which confine the exposure of Mr Elston – should any pleading as to accessorial liability survive – to his involvement during the period of time for which he assumed responsibility, namely “from at least 2017”.

39    If this was the source of difficulty, Counsel on behalf of the Union intimated that there may be a need for amendment.

40    Nevertheless, this additional argument advanced by counsel for the Respondents, on behalf of Mr Elston, should prevail.

CONCLUSIONS

41    The relief sought in the Interlocutory Application prevails to the extent that it seeks the striking out of the pleadings against Messrs Elston, Butler and Druce. The pleadings are deficient by reason of not expressly pleading that those persons knew that payments were not being made to “employees”.

42    In respect to Mr Elston, there is a further reason for striking out the pleading as against him, namely the uncertainty, and potential for “embarrassment”, arising by reason of his involvement only as from “at least 2017”.

43    These pleadings should be struck out rather than there being summary judgment entered in favour of Messrs Elston, Butler and Druce.

44    No consideration has been given to whether some of the relief sought in the Further Amended Statement of Claim falls within “excluded subject matter” within the meaning of s 30K(1)(p) of the Fair Work Act: cf. Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833 at [71] per Flick J.

45    There should be no order as to costs. Such deficiencies as there have been found in the Further Amended Statement of Claim are not sufficient to invoke s 570 of the Fair Work Act. And that is so notwithstanding the series of amendments which preceded the hearing of the present Interlocutory Application.

THE ORDERS OF THE COURT ARE:

   1.    The parties are to bring in Short Minutes of Order to give effect to these reasons within 14 days.

Associate:    

Dated:    25 October 2019