FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v United Petroleum Pty Ltd [2020] FCA 590

ORDERS

THE COURT ORDERS THAT:

1.    Within 7 days of the date of this Order, the parties are to file orders by agreement giving effect to the reasons for judgment or, if no agreement is reached, written submissions (of no more than five pages) as to the form of final relief to be ordered (including in respect of costs).

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

ORDERS

THE COURT ORDERS THAT:

1.    The application of 20 September 2019 be dismissed, with no order as to costs.

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

REASONS FOR JUDGMENT

ANDERSON J:

Introduction

1    An inspector appointed under the Fair Work Act 2009 (Cth) (Act) has the power to require a person, by notice, to produce records or documents to the inspector. This decision examines whether such a notice issued by an inspector under the Act, Melvin Paul (Inspector Paul), to the respondent, United Petroleum Pty Ltd (United), is valid or not.

2    In February 2018, Inspector Paul commenced an investigation into an entity named Parashar’s Pty Ltd (Parashar’s), which operated a “United Petroleum” branded petrol and convenience store. As a result of that investigation, Inspector Paul found that Parashar’s had contravened aspects of the Vehicle, Manufacturing, Repair, Services and Retail Award 2010 (Vehicle Award), the Act and the Fair Work Regulations 2009 (Cth) (Regulations).

3    In May 2018, Inspector Paul commenced a consequent investigation into whether United had breached s 558B(1) of the Act as a “responsible franchisor entity” of Parashar’s. Later, on 9 November 2018, Inspector Paul issued a notice to United under s 712(1) of the Act (Notice). The Notice required United to produce specified records and documents to Inspector Paul by 7 December 2018. United did not comply.

4    The applicant in this proceeding, the Fair Work Ombudsman (Ombudsman), seeks certain declarations and orders in respect of United’s failure to comply with the Notice. This decision relates solely to the question as to whether or not United contravened s 712(3) of the Act, which provides that a person served with a notice under s 712(1) must not fail to comply with that notice. In response to the Ombudsman’s application, United contends it did not breach s 712(3) as the Notice was invalid.

5    I agree with United. As explained in detail below, for a notice under s 712(1) to be valid, it must, amongst other things, adequately specify its statutory purpose to enable the notice recipient (and the Court) to determine whether the notice validly requires the specified records or documents to be produced. Given Inspector Paul was investigating potential secondary liability by United, it was necessary for the Notice, on its face, to particularise the primary statutory contraventions by Parashar’s. The Notice failed to do so, which is fatal to its validity.

6    The Ombudsman’s application is accordingly dismissed.

Legislative framework

Inspector’s power to require production of records or documents

7    The Ombudsman is empowered by the Act to appoint inspectors. These appointees are referred to by the Act as “Fair Work Inspectors” (s 700 of the Act), but are referred to in these reasons as simply inspectors. Subject to certain exceptions, an inspector, once appointed, may exercise “compliance powers” conferred on the inspector for the purposes of, amongst other things, “determining whether the Act … is being, or has been, complied with”: ss 703(1) and 706(1)(a).

8    One of the powers conferred on an inspector is the power to require the production of records or documents under s 712 of the Act. That statutory provision provides as follows:

Power to require persons to produce records or documents

(1)     An inspector may require a person, by notice, to produce a record or document to the inspector.

 (2)     The notice must:

   (a)     be in writing; and

   (b)     be served on the person; and

(c)     require the person to produce the record or document at a specified place within a specified period of at least 14 days.

The notice may be served by sending the notice to the person’s fax number.

(3)     A person who is served with a notice to produce must not fail to comply with the notice.

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

 (4)     Subsection (3) does not apply if the person has a reasonable excuse.

9    As can be seen, subsection 712(3) is a civil remedy provision. Thus, a person who fails to comply with a notice issued under s 712(1), without reasonable excuse, is liable to the imposition of a pecuniary penalty: s 539(2), item 32.

10    An inspector can require the production of both “a record” or “document” under s 712. For simplicity, these reasons refer to these forms of material collectively as documents.

Responsibility of “responsible franchisor entities”

11    The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth) (Amending Act) made various amendments to the Act in 2017. According to the Explanatory Memorandum to the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (Cth) (Explanatory Memorandum) (at pg 2), the Bill was designed to address “increasing community concern about the exploitation of vulnerable workers (including migrant workers) by unscrupulous employers, and responds to a growing body of evidence that the laws need to be strengthened”.

12    In particular, and relevantly for present purposes, the Explanatory Memorandum explained at pp 2–3 that the Bill would “introduce new provisions to hold franchisors and holding companies responsible for contraventions of the Fair Work Act, if they knew or could reasonably have been expected to have known the contraventions would occur in their business networks and failed to take reasonable steps to manage the risk”. These new provisions were set out in Pt 2 of Sch 1 to the Amending Act, which inserted into the Act a new Div 4A of Pt 4-1 (entitled “Responsibility of responsible franchisor entities and holding companies for certain contraventions”). That new division included new ss 558A and 558B of the Act.

13    Section 558A of the Act is a definitions provision, and provides as follows:

Meaning of franchisee entity and responsible franchisor entity

(1)     A person is a franchisee entity of a franchise if:

(a)     the person is a franchisee (including a subfranchisee) in relation to the franchise; and

(b)     the business conducted by the person under the franchise is substantially or materially associated with intellectual property relating to the franchise.

(2)     A person is a responsible franchisor entity for a franchisee entity of a franchise if:

(a)     the person is a franchisor (including a subfranchisor) in relation to the franchise; and

(b)     the person has a significant degree of influence or control over the franchisee entity’s affairs.

14    Section 558B of the Act is the operative provision, and relevantly provides as follows:

Responsibility of responsible franchisor entities and holding companies for certain contraventions

Responsible franchisor entities

(1)     A person contravenes this subsection if:

(a)     an employer who is a franchisee entity of a franchise contravenes a civil remedy provision referred to in subsection (7); and

(b)     the person is a responsible franchisor entity for the franchisee entity; and

(c)     the contravention by the franchisee entity occurs in the franchisee entity’s capacity as a franchisee entity; and

  (d)     either:

(i)     the responsible franchisor entity or an officer (within the meaning of the Corporations Act 2001) of the responsible franchisor entity knew or could reasonably be expected to have known that the contravention by the franchisee entity would occur; or

(ii)     at the time of the contravention by the franchisee entity, the responsible franchisor entity or an officer (within the meaning of the Corporations Act 2001) of the responsible franchisor entity knew or could reasonably be expected to have known that a contravention by the franchisee entity of the same or a similar character was likely to occur.

Note: This subsection is a civil remedy provision (see this Part).

…

Reasonable steps to prevent a contravention of the same or a similar character

(3)     A person does not contravene subsection (1) or (2) if, as at the time of the contravention referred to in paragraph (1)(a) or (2)(b), the person had taken reasonable steps to prevent a contravention by the franchisee entity or subsidiary of the same or a similar character.

…

15    As noted in s 558B(1)(a), subsection 558B(7) sets out a range of civil penalty provisions that a “franchisee entity” may commit from which secondary liability under s 558B(1) may derive. The prescribed contraventions in s 558B(7) predominately relate to underpayment of wages and failures of record keeping.

Background to this proceeding

16    The key facts to this proceeding were set out in the introduction to these reasons. Those facts were derived primarily from a Statement of Agreed Facts (Agreed Facts) filed in the proceeding by the Ombudsman, on behalf of the parties. The Agreed Facts relevantly provided as follows:

PART A    PARTIES AND BACKGROUND

Applicant

1.     The Applicant (FWO) is and was at all material times:

1.1.     a statutory appointee of the Commonwealth pursuant to subsection 687(1) of the Fair Work Act 2009 (Cth) (FW Act);

1.2.     a Fair Work Inspector pursuant to section 701 of the FW Act; and

1.3.     a person with standing to bring these proceedings under subsection 539(2) of the FW Act.

Respondent

2.     The Respondent (United Petroleum) is and was at all material times:

2.1.    a company incorporated under the Corporations Act 2001 (Cth) since 7 January 1999;

2.2.     capable of being sued in and by its corporate name;

2.3.     a “constitutional corporation” within the meaning of section 12 of the FW Act.

Inspector

3.     Melvin Joel Paul is and was at all material times a Fair Work Inspector within the meaning of section 700 of the FW Act (Inspector Paul).

Parashar’s

4.     Parashar’s Pty Ltd (Parashar’s) is and was at all material times:

4.1.     party to an agreement with United Petroleum which permitted it to operate a United branded petrol and convenience store at 1006 - 1014 Beaudesert Road, Coopers Plains Queensland (the United Outlet); and

4.2.     a “national system employer” within the meaning of section 14 of the FW Act.

PART B     THE NOTICE

5.     On 9 November 2018 Inspector Paul issued a notice in writing to United Petroleum, which was served on United Petroleum, requiring United Petroleum to produce specified records or documents to Inspector Paul at the Applicant's office on 7 December 2018 (the Notice). A copy of the Notice is at Annexure A to this statement.

6.     The Notice was personally served on David Szymczak, the Chief Operating Officer of United Petroleum, at 600 Glenferrie Road in Hawthorn by Fair Work Inspectors Kathleen Hill and John Richards on 9 November 2018.

7.     United Petroleum did not produce any records or documents to Inspector Paul on or before 7 December 2018.

…

17    As noted in paragraph 5 of the Agreed Facts, a copy of the Notice was extracted at Annexure A to that document. The relevant terms of the Notice are likewise extracted in the Annexure to these reasons (which starts below at page 20).

Application to this Court

18    The Ombudsman commenced this proceeding on 20 September 2019. She claimed the following relief in her originating application dated 20 September 2019:

1.     A declaration that the Respondent contravened subsection 712(3) of the Fair Work Act 2009 (Cth) (FW Act) by failing to produce documents or records required to be produced by the notice in writing issued by Fair Work Inspector Melvin Joel Paul to the Respondent on 9 November 2018 (Notice).

2.     An order pursuant to subsection 545(1) of the FW Act that the Respondent produce the records or documents called for in the Notice to the Applicant within 14 days of this order.

3.     An order pursuant to subsections 546(1) and 546(3) of the FW Act that the Respondent pay a penalty for its contravention of subsection 712(3) of the FW Act to the Commonwealth within 28 days of this order.

4.     An order that the Applicant have liberty to apply on three days’ notice in the event that any of the preceding orders are not complied with.

19    On 7 November 2019, Mortimer J made procedural orders in the proceeding, including listing a hearing on the question of United’s liability under s 712(3) of the Act.

20    That hearing was held by telephone before me on 9 April 2020. Ms Dowsett appeared on behalf of the Ombudsman and Mr Dalton QC, with Mr Ternovski of counsel, appeared on behalf of United.

Relevant test

21    In Construction, Forestry, Maritime, Mining and Energy Union v Fair Work Inspector Lam [2018] FCA 1379 (Lam), Bromberg J considered an earlier authority on s 712 of the Act, being Construction, Forestry, Mining and Energy Union v Alfred [2016] FCA 591; 242 FCR 35 (Alfred) per Logan J, and various authorities considering analogous statutory provisions, namely Bannerman v Mildura Fruit Juices Pty Ltd (1984) 2 FCR 581 per Bowen, Davies and Neaves JJ (Bannerman); SA Brewing Holdings Ltd v Baxt (1989) 23 FCR 357 (Baxt) per Fisher and French JJ, with Wilcox J partially in dissent, Thorson v Pine [2004] FCA 805 (Thorson v Pine (No 1)) per Heerey J, Thorson v Pine [2004] FCA 1316; 139 FCR 527 (Thorson v Pine (No 2)) per Marshall J and Aurora Construction Materials Pty Ltd v Victorian WorkCover Authority [2018] VSCA 16 (Aurora) per Tate and Kaye JJA, with Maxwell P dissenting.

22    Having considered those authorities, Bromberg J expressed in Lam at [27] that, for a notice issued under s 712 of the Act to be valid, it must, on a non-technical and fair reading of its terms:

(a)    disclose that it is an exercise of the power which is conferred on an inspector by s 712 of the Act; and

(b)    both:

(i)    specify with reasonable clarity the records or documents that the recipient is required to provide; and

(ii)    disclose the relationship between the records or documents being required and the matter (the particular inquiry as to non-compliance) which is the subject of the exercise of the power,

so as to enable its recipient to determine whether the inspector is exercising the power for a “compliance purpose” for the purposes of s 706(1) of the Act.

23    Particular aspects of this test are discussed below in considering the validity of the Notice in the present case.

Submissions

Ombudsman’s submissions

24    The Ombudsman contends, in summary, that the Notice is valid, and that United infringed s 712(3) of the Act by, without reasonable excuse, failing to comply with a valid notice under s 712(1). The Ombudsman accordingly seeks a declaration that United has contravened s 712(3) of the Act by failing to produce documents required to be produced by the Notice, and also an order under s 545(1) of the Act requiring United to, within 14 days, produce the documents called for in the Notice.

25    The Ombudsman argues that the Notice complies with the test for validity articulated by Bromberg J in Lam. In particular, the Ombudsman submits that the Notice sufficiently specified the “purpose” of the Notice, and that there was sufficient particularity to permit United to appreciate the relationship between the suspected contravention or contraventions and the documents sought in the Notice. In this regard, the Ombudsman submits that it is unnecessary for a notice under s 712(1) to refer to the particular legislative provisions.

26    The Ombudsman contends that the Notice, to disclose its purpose, expressly stated that it was issued pursuant to s 712 of the Act and:

(a)    referred to the separate investigation that had been conducted into Parashar’s following a complaint made by Siddhartha Pathak, a former employee of Parashar’s, who had performed work during the period from 22 October 2017 to 14 January 2018;

(b)    noted that Inspector Paul had assessed Parashar’s compliance with five civil penalty provisions of the Act (four of which appear in s 558B(7) of the Act);

(c)    stated Inspector Paul’s findings that Parashar’s had contravened provisions of the Vehicle Award, the Act and the Regulations;

(d)    stated that Inspector Paul had formed a belief that Parashar’s was a “franchisee entity” and that United was a “responsible franchisor entity” of Parashar’s for the purposes of the Act; and

(e)    under a heading “Rationale for the records or documents sought”, stated that the records and documents sought were required to determine whether United had contravened s 558B of the Act and, more specifically, whether United, or one of its officers, had, or could have reasonably been expected to have had, the type of knowledge referred to in ss 558B(1)(d)(i) or (ii) of the Act.

27    The Ombudsman argued that documents sought, and the relationship of those documents to the compliance purpose, were expressed with reasonable clarity in the Notice. In this regard, the Ombudsman explains that the Notice sought production of documents that related to, broadly, the business relationship between United and Parashar’s, the reporting arrangements and lines of authority within United as it relates to Parashar’s, the operation and financial performance of Parashar’s, and United and Parashar’s compliance with “Commonwealth Workplace Laws” (as defined in the Notice). According to the Ombudsman, such documents may contain direct or circumstantial evidence by reference to which Inspector Paul could determine whether:

(a)    United, or an officer of United, knew, or could reasonably be expected to have known, that Parashar’s would contravene provisions of the Vehicle Award, the Act or the Regulations; or

(b)    as at the time of Parashar’s contravention, United, or an officer of United knew or could reasonably be expected to have known, that a contravention by Parashar’s of the same or a similar character was likely to occur.

28    The Ombudsman finally submits that, if the Court accepts that the purpose of the Notice is sufficiently disclosed but, contrary to the Ombudsman’s submission, one or more of the categories in the Notice is invalid, such a finding would not invalidate the Notice as a whole. In the Ombudsman’s submission, any categories determined by the Court to be invalid could be severed from the Notice.

United’s submissions

29    United contends, in summary, that the Notice is wholly invalid and the Ombudsman’s application should be dismissed. To this end, United raises that the power conferred by s 712(1) of the Act is highly invasive, and the failure to comply with a notice issued under that provision renders the recipient liable to a civil penalty. United accordingly submits that, due to the nature of this power, provisions such as s 712 must be strictly complied with, and such a notice must satisfy the requirements for validity on its face.

30    United argues that the Notice failed to sufficiently identify a “matter”—the particular inquiry as to non-compliance—for the purposes of s 712(1) of the Act. In this regard, United highlights that the Notice expressly states that it is issued for the purpose of investigating secondary liability of United in relation to primary contraventions by Parashar’s. As the suspected liability of United is secondary, United submits that the Notice must also disclose the underlying primary contraventions by Parashar’s with sufficient particularity to provide a point of reference by which to judge whether the notice validly requires the specified documents to be produced.

31    Moreover, where the purpose of the notice is to investigate a possible breach of a modern award, it cannot be enough, in United’s submission, for the notice to identify the suspected contravention merely as being a breach of s 45 of the Act; it is also necessary to disclose the particular term of the award in issue (whether expressly or by stating the substance of the suspected contravention). As the Notice fails to do so, United submits that the Notice leaves the recipient having to guess what those underlying contraventions are. The Notice discloses neither the provisions that Parashar’s is said to have contravened, nor any facts said to constitute these contraventions.

32    United further contends that, even if the Notice sufficiently identifies a “matter”, each of the categories of documents specified in the Notice are defective. From a broad level, the Notice, according to United, fails to disclose the relationship between the categories of documents sought and the “matter” that is the subject of the exercise of the power. In this regard, United submits that the categories of documents specified in the Notice are vague and incomprehensible, and otherwise extend far beyond any compliance purpose relating to United’s suspected secondary liability. Here, according to United, the Notice’s description of Parashar’s contraventions is so lacking in particularity such that it is not apparent how the specified categories of documents could assist Inspector Paul to determine whether United is liable under s 558B(1) of the Act.

Consideration

33    As indicated above, the relevant terms of the Notice are set out below in the annexure to these reasons (starting at page 20). My view as to the validity of the Notice is now set out.

Identification of source of power

34    For a notice issued under s 712 of the Act to be valid, it must firstly specify that it has been issued pursuant to that provision: Bannerman at 584 per Bowen CJ and Neaves J; Aurora at [79]; Lam at [27(a)]. The hearing of the Notice issued by Inspector Paul in the present case specifies that the Notice was “Pursuant to Section 712 of the Far Work Act 2009”, and accordingly satisfies this requirement.

Disclosure of purpose

35    A valid notice under s 712 of the Act must also specify the purpose for which that notice has been issued. The statutory “purpose” of a notice was considered in Thorson v Pine (No 1), Thorson v Pine (No 2), Aurora, Alfred and Lam. (Marshall J in Thorson v Pine (No 2) also referred to the “sub-purposes” of the notice in that case.) Similarly, in Bannerman and Baxt, the Full Court, borrowing from the terms of s 155(1) of the Trade Practices Act 1974 (Cth) (which was in question in those cases), referred to the “matter” that is said to constitute, or may constitute, a contravention of that Act. Bromberg J referred to a “matter” in the relevant test in Lam at [27(b)(ii)] (as paraphrased above at [22]), and also equated this to “the particular inquiry as to non-compliance”. Although Bromberg J’s test did not designate the identification of the statutory purpose as a separate limb of the test, to do so is necessary in order to determine whether the notice has adequately disclosed the relationship between the documents required and the statutory purpose of the notice: see Thorson v Pine (No 2) at [36].

36    The reason why the “purpose” of a statutory notice to produce documents must be adequately disclosed to the notice recipient was explained by Bowen CJ and Neaves J in Bannerman at 584 (in the context of a notice given by the Chairman of the Trade Practices Commission under the Trade Practices Act 1974 (Cth)):

The requirement that a notice under sub-section 155(1) identify the matter that constitutes, or may constitute, a contravention of the Act has a twofold purpose. First it is necessary that the notice disclose on its face that it is an exercise of the power which the subsection confers. That power depends upon the existence, objectively determined, of a “matter”, in the sense in which that expression has been explained in earlier decisions of the court, that constitutes, or may constitute, a contravention of the Act and a belief in the person issuing the notice that the recipient is capable of furnishing information or producing documents relating to the matter so identified. Secondly, the identification of the matter that constitutes, or may constitute, a contravention of the Act provides for the recipient the point of reference by which to judge whether the notice validly requires the specified information to be furnished or the specified documents to be produced. It will only validly do so if the information and the documents specified in the notice can be seen, from the face of the notice itself, to be information or documents that relate to a matter of the kind described in the subsection and identified in the notice.

See, relatedly, Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd [1979] HCA 67; 143 CLR 499 at 525 per Gibbs ACJ and Aurora at [87] per Kaye JA. In a different context (the specification of a criminal offence in a warrant to search), see Smethurst v Commissioner of Police [2020] HCA 14 at [30] per Kiefel CJ, Bell and Keane JJ.

37    The Notice in the present case states in its opening paragraph that the request for documents is “in respect of United’s compliance with its responsibility as a franchisor entity pursuant to section 558B of the Act”. (And, in this regard, the Notice continues to explain Inspector Paul’s belief that United is a “responsible franchisor entity”.) The invocation of s 558B is repeated throughout the Notice. In particular, the Notice expresses the following:

RATIONALE FOR THE RECORDS OR DOCUMENTS SOUGHT

The records and/or documents below are required to determine whether United has contravened section 558B of the Act; specifically, whether United, as a responsible franchisor entity, or an officer of United (within the meaning of section 9 of the Corporations Act 2001 (Cth)):

(a)     knew, or could reasonably be expected to have known, that the contraventions by Parashar’s would occur; or

(b)     at the time of the contraventions by Parashar’s, knew or could reasonably be expected to have known that a contravention by Parashar’s of the same or similar character was likely to occur.

38    Thus, the overarching purpose of Inspector Paul issuing the Notice is to investigate whether United has contravened its obligations under s 558B of the Act. That much is certain.

39    As s 558B of the Act is a mode of secondary liability (which is contingent on there being a primary contravention by a “franchisee entity”), the Notice explains that the primary contravention is said to have been committed by one of United’s franchisees—Parashar’s. The Notice provides some background to the primary contraventions of Parashar’s found by Inspector Paul:

NON-COMPLIANCE WITH COMMONWEAL TH WORKPLACE LAWS BY PARASHAR'S

I am investigating United's compliance with its responsibility as a responsible franchisor entity pursuant to section 558B of the Act, following my separate investigation into a complaint made by Siddhartha Pathak (Mr Pathak), a former employee of Parashar’s who performed work for Parashar's during the period from 22 October 2017 to 14 January 2018.

During my separate investigation into the complaint made by Mr Pathak, I have assessed Parashar’s compliance with the following provisions of the Act:

(a)     section 44: compliance with the National Employment Standards;

(b)     section 45: compliance with a Modern Award, specifically the Vehicle, Manufacturing, Repair, Services and Retail Award 2010 (Vehicle Award):

(c)     section 535: compliance with employer obligations in relation to employee records;

(d)     section 536: compliance with employer obligations in relation to pay slips; and

(e)     section 550: determining if any individuals were involved in the above contraventions of Parashar’s.

As a result of the above investigation, I have made findings that Parashar’s has contravened some provisions of the Vehicle Award, the Act and the Fair Work Regulations 2009 (Cth) (Regulations).

40    Each of the first four statutory provisions listed in this section of the Notice—ss 44, 45, 535 and 536 of the Act—are civil remedy provisions that are eligible primary contraventions for the purposes of secondary liability under s 558B: see s 558B(7).

41    Based on the analysis thus far, the Notice is, from a high-level view, addressing the topics necessary to identify the matter underlying the request under the Notice. However, the problem for the validity of the Notice is that it fails to provide the necessary detail as to the nature of the primary contraventions by Parashar’s. To explain this, let us step into the shoes of United.

42    At the time of receiving the Notice, United was evidently aware of Parashar’s; there is a “Commission Agency Agreement” (amongst other arrangements) between those two parties: see para 4.1 of the Agreed Facts (as extracted above at [16]). The extent of United’s knowledge (prior to receiving the Notice) about the nature of Inspector Paul’s investigation into Parashar’s (and when United first learned that information) is not precisely clear from the Agreed Facts. However, in any event, United’s subjective knowledge about the content of that investigation is not relevant to assessing the validity of the Notice. This is because the Notice must sufficiently describe its statutory purpose in its own terms; it is insufficient for the Notice to obliquely rely on the existence of extraneous information to establish its own validity. As Heerey J explained in Thorson v Pine (No 1) at [8] (in the context of a notice issued under s 86(1A)(c) of the Workplace Relations Act 1996 (Cth) (Workplace Relations Act)):

It is not to the point that the recipient may suspect that the inspector has in mind some particular award or agreement or requirement of the Act. Nor is it any answer that subsequent to the issue of the notice the inspector has provided information as to what she has in mind. This is a question of validity. The notice when issued is either valid or it is not. This is a matter of legal power.

43    As a starting point, the terms of s 558B of the Act are clear. By reading the Notice, United can understand, at least from a high level, what Inspector Paul is seeking to do: investigate United’s compliance with that statutory provision. United can moreover discern from the Notice that Inspector Paul conducted an investigation into Parashar’s compliance with, relevantly, ss 44, 45, 535 and 536 of the Act. United can also infer that these matters are somehow connected to the complaint made by Mr Pathak in relation to his employment at Parashar’s between 22 October 2017 and 14 January 2018. However, without more, these disclosures are insufficient for two reasons.

44    First, the list of relevant statutory provisions in the Notice—ss 44, 45, 535 and 536—are only the statutory provisions in respect of which Inspector Paul investigated Parashar’s compliance. The Notice does not state that Inspector Paul, having conducted the investigation, found Parashar’s to have contravened those particular provisions. Rather, the Notice states that “[a]s a result of the above investigation, I have made findings that Parashar’s has contravened some provisions of the Vehicle Award, the Act and the Fair Work Regulations 2009 (Cth)” (emphasis added). There is no particularisation of the particular provisions which Parashar’s contravened. (And, as a sidenote, a breach of the Regulations by a franchisee is not a form of contravention for which a franchisor may be held liable under s 558B: s 558B(7)). Thus, to paraphrase Logan J in Alfred at [24], the description of Parashar’s contraventions is set at such a level of generality as to make it impossible, reasonably, to ascertain the matter to which production of the specified documents relates.

45    This analysis is consistent with that undertaken by Bromberg J in relation to the statutory notice in Lam. In that case, the notice issued by the inspector—Mr Lam—under s 712(1) of the Act specified that the purpose of production of the specified documents was to determine “whether the [Act] is being or has been complied with, specifically Part 3-3 (compliance with industrial action provisions). His Honour noted at [32]–[33] that Pt 3-3 of the Act contained 11 provisions and that, although each of the provisions had some connection with the taking of industrial action, their nature was disparate.

46    Bromberg J concluded as follows (at [34]) in relation to the specificity of the notice’s purpose:

The failure of Mr Lam to expressly identify the particular provisions that founded his compliance inquiry may have been overcome if the notice had made the nature of the suspected contraventions discernible. However, the notice’s reference to Pt 3-3 in the context of the disparity of the subjects addressed by the civil penalty provisions in that Part, makes it difficult to discern from the face of the notice, the nature of the suspected contravention or contraventions and thus the particular provision or provisions in Pt 3-3 that provide the foundation for the notice’s requirement that particular documents be produced.

47    Second, and relatedly, even if the list of relevant statutory provisions did form the primary contraventions determined by Inspector Paul, the references to ss 44 and 45 of the Act are, by themselves, unhelpful. For reference, those provisions relevantly provide as follows:

44 Contravening the National Employment Standards

(1)     An employer must not contravene a provision of the National Employment Standards.

…

45 Contravening a modern award

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

48    It can be seen that these statutory provisions simply declare that the relevant person (in this case, Parashar’s) must not breach the terms of another source: see Rocky Holdings Pty Limited v Fair Work Ombudsman [2014] FCAFC 62; 221 FCR 153 at [13] per North, Flick and Jagot JJ. And, relevantly for current purposes, the National Employment Standards and the relevant modern award in the present case are not brief.

49    The National Employment Standards, as referred to in s 44(1), are set out in Divs 3–12 of Pt 2-2 of the Act: s 61(3) of the Act. As identified in s 61(2), the National Employment Standards relate to the following matters:

(a)     maximum weekly hours (Division 3);

(b)     requests for flexible working arrangements (Division 4);

(c)     parental leave and related entitlements (Division 5);

(d)     annual leave (Division 6);

(e)     personal/carer’s leave, compassionate leave and unpaid family and domestic violence leave (Division 7);

(f)     community service leave (Division 8);

(g)     long service leave (Division 9);

(h)     public holidays (Division 10);

(i)     notice of termination and redundancy pay (Division 11);

(j)     Fair Work Information Statement (Division 12).

50    Accordingly, a contravention of the National Employment Standards could include, for example (amongst many others), requiring an employee to work beyond the maximum weekly hours (s 62), failing to provide an employee with the appropriate parental leave (s 70), failing to return an employee to an appropriate position upon return from unpaid parental leave (s 84), failing to provide the long service leave to which an employee is entitled (s 113) or failing to pay redundancy pay to an employee where entitled (s 119). The point is that there are many different forms of an employer’s conduct that could constitute a contravention of the National Employment Standards.

51    The same analysis applies in relation to a contravention of a modern award for the purposes of s 45 of the Act. In the present case, the relevant modern award is the Vehicle Award. Without descending into detail, that award contains 62 clauses and nine schedules. It specifies a range of obligations broadly relating to salary rates and employee entitlements. By way of example, the obligations under the Vehicle Award relate to matters as diverse as paying an employee’s superannuation contributions (cl 25.4) and ensuring that an unpaid tea break does not exceed 15 minutes (cl 26.7). This should demonstrate that, like the National Employment Standards, there are many different forms of conduct by an employer that may constitute the contravention of the Vehicle Award.

52    Given that ss 44(1) and 45 of the Act are, for current purposes, simply conduits to the underlying provisions of the National Employment Standards and the Vehicle Award and that, as demonstrated above, a wide range of conduct may constitute breaches of those underlying provisions, United is not reasonably able to identify the conduct of Parashar’s which underpins United’s alleged secondary liability under s 558B. Instead, United is, from the face of the Notice, left guessing as to the conduct of Parashar’s that is said to breach ss 44(1) and 45 of the Act.

53    The analysis of the Notice above does not gainsay the principle that it will not always be necessary for a valid notice under s 712(1) of the Act to expressly specify the particular provision or provisions to which the inquiry as to non-compliance relates (for which, see Aurora at [92] per Kaye JA and Lam at [30] and [34]). However, an exemption from the notice doing so is only available where there is an alternative manner in which the notice informs the recipient of the nature of the suspected contravention: ibid.

54    In this regard, the Ombudsman relied on the decision of Marshall J in Donnelly v O’Donnell [2005] FCA 1412; 146 IR 434 (Donnelly) in support of the proposition that it was unnecessary for Inspector Paul to identify the particular provisions of the Act, Regulations and Vehicle Award that were the subject of the findings against Parashar’s. In that case, a notice was issued under s 86(1A)(c) of the Workplace Relations Act by an inspector in the Commonwealth Department of Employment and Workplace Relations to the National Secretary of the National Union of Workers. The notice specified four purposes (Donnelly at [5]), one of which (referred to in Marshall J’s reasons as the “second purpose”) was

whether section 170MN of the Act has been observed by; organisations bound by the provision of any certified agreement or s 170MX(3) Award to which the NUW or their related bodies corporate is party, officers or employees of such an organisation acting in that capacity, or employees whose employment is subject to the certified agreement or s 170MX(3) Award … .

55    For context, s 170MN of the Workplace Relations Act, when in operation, relevantly (and broadly) provided that, in respect of certain employment relationships, an organisation of employees was prohibited in certain circumstances from engaging in industrial action for the purpose of supporting or advancing claims against an employer. The application of this prohibition hinged on, amongst other things, the time at which a “certified agreement” or a particular award came into operation. However, the operation of s 170MN was not contingent on there being a breach of those instruments.

56    The notice recipient in Donnelly relevantly argued that the “second purpose” lacked particularity by failing to specify any particular agreements in relation to which the inspector sought to ascertain compliance. To this, Marshall J responded as follows at [16]:

The sub-purpose in mind for Ms O’Donnell to ascertain under this sub-heading is whether a provision of the Act has been breached. The relevant provision, s 170MN, is disclosed in the identification of the purpose. The fact that the particular awards or agreements are not set out does not mean that a relevant purpose is not stated. Had the relevant purpose been to ascertain whether an award or certified agreement had been breached, it would have been expected that the award or agreement be identified for the purpose to be properly stated and conveyed to the recipient of the notice. …

57    Donnelly does not assist the Ombudsman in the present case. The “second purpose” in Donnelly was to investigate whether s 170MN of the Workplace Relations Act was complied with. The notice in Donnelly expressly stated so. And it was not necessary for the notice to also specify a particular breach of the award or certified agreement because the operation of s 170MN was not contingent on such a breach.

58    In the present case, the Notice only states (in broad terms) that Parashar’s has contravened the Act, Regulations or the Vehicle Award. The Notice, unlike the notice considered in Donnelly, does not specify that a particular provision has been contravened. And, in respect of ss 44(1) and 45 of the Act, the operation of those provisions, unlike s 170MN of the Workplace Relations Act, is reliant on subsidiary breaches. Moreover, the Notice in the present case does not provide an alternative means (that is, a means other than specifying the particular statutory provisions) by which the purpose of the Notice may be discerned. In particular, the descriptions of the documents requested, although generally centring on the 2018 financial year, are particularly broad. They do not greatly assist United to identify the purpose of the Notice. Ultimately, United is left to speculate.

59    Where a statutory notice is issued to compel the production of documents for the purpose of investigating whether the notice recipient is accessorily or secondarily liable in connection with an actual or suspected primary contravention committed by a third party, it will ordinarily be insufficient, for the purpose of specifying the matter underlying the production of documents, for the notice to simply detail the source of the accessorial or secondary liability, but fail to specify the nature of the primary contravention to which the accessorial or secondary liability is connected. This is because, for the notice to be valid, the notice recipient needs to be informed of the nature of the primary contravention to enable the recipient (and the Court) to assess whether the notice validly required the specified documents to be produced.

60    The Notice in the present case, on a non-technical and fair reading of its terms, failed to adhere to this requirement. United was able to recognise from the face of the Notice that Inspector Paul was investigating United’s compliance with s 558B of the Act. A reasonable person in the position of United would have turned to that statutory provision, and seen that liability under that provision depended on, amongst other things, whether:

(a)    United (or its officers) knew or could reasonably be expected to have known that the contravention by Parashar’s would occur; or

(b)    at the time of Parashar’s contravention, United (or is officers) knew or could reasonably be expected to have known that a contravention by Parashar’s of the same or a similar character was likely to occur.

61    However, without the Notice adequately particularising the nature of Parashar’s primary contraventions, a reasonable person in the position of United would be left to speculate as to what Parashar’s contravening conduct was, or what a contravention of a “similar conduct” would look like. This means, to paraphrase Bowen CJ and Neaves J in Bannerman, that United was not provided a sufficiently precise point of reference by which to assess whether the Notice validly required the production of the specified documents.

Specification of documents

62    A valid notice under s 712 of the Act must specify with reasonable clarity the documents that the recipient is required to provide: Aurora at [79] per Kaye JA; Lam at [27(b)(i)].

63    In the present case, United took issue with various aspects of the description of documents set out in the Notice. In summary, United argued that:

(a)    the Notice’s description of Parashar’s contraventions was so lacking in particularity that it was not apparent on the face of the Notice how any of the categories of documents could assist Inspector Paul to determine whether United was liable under s 558B(1) in respect of those primary contraventions;

(b)    the descriptions of the documents in categories 1, 2, 3 and 4(a) were vague and incomprehensible; and

(c)    the other categories of documents sought by Inspector Paul extended far beyond that warranted by any compliance purpose of the Notice.

64    As the Notice in the present case failed to adequately set out the purpose of the request under the Notice, it is unnecessary to further consider these complaints regarding the description of the documents.

Disclosure of interrelationship between specified documents and notice’s purpose

65    Finally, assuming that the purpose of a notice under s 712(1) of the Act, and the documents required by that notice, were adequately specified, the notice was also required to adequately disclose the necessary relationship between the documents sought and the purposes of which they are sought: Baxt at 370 per Fisher and French JJ; Aurora at [79] per Kaye JA. As the Notice in the present case failed to adequately set out the purpose of the request under the Notice, it is not possible for the Court to undertake that inquiry.

Severance

66    In certain circumstances, it will be possible to sever invalid aspects of a notice issued under s 712(1) of the Act from its valid aspects: see, for example, in relation to analogous statutory provisions, Donnelly at [11] per Marshall J and Laing v Carroll [2005] FCAFC 202; 146 FCR 511 at [38] per Spender J and [215] per Lander J, with Kenny J agreeing.

67    In the present case, however, the failure of the Notice to adequately specify the purpose of the requests for production goes to the heart of the validity of the Notice, and does not permit any opportunity for severance.

Conclusion

68    For the reasons expressed above, the Notice is wholly invalid. I direct that the parties confer and provide minutes of proposed orders to give effect to these reasons within seven days.

Associate:

Dated:        7 May 2020

ANNEXURE

NOTICE ISSUED BY MELVIN PAUL, FAIR WORK INSPECTOR, TO UNITED PETROLEUM PTY LTD ON 9 NOVEMBER 2018

GPO Box 9887, ADELAIDE SA 5001

Reference:    [File reference specified]

Date Notice Issued: 9 November 2018

NOTICE TO PRODUCE RECORDS OR DOCUMENTS

Pursuant to Section 712 of the Fair Work Act 2009

To:    The Proper Officer

    United Petroleum Pty Ltd (ACN: 085779255)

Of:    200 Hoddle Street

    ABBOTSFORD VIC 3067

I, Melvin Paul, a Fair Work Inspector appointed under section 700 of the Fair Work Act 2009 (the Act), require you, the Proper Officer of United Petroleum Pty Ltd (ACN: 085 779 255) (United), to produce to me records or documents for the period from 1 July 2017 to 1 July 2018, unless otherwise expressly stated, in respect of United’s compliance with its responsibility as a franchisor entity pursuant to section 558B of the Act, relating to one of United’s former commission agents, Parashar’s Pty Ltd (ACN: 604 755 044) (Parashar’s).

UNITED AS A RESPONSIBLE FRANCHISOR ENTITY

I have formed the belief that United is a ‘responsible franchisor entity’, within the meaning of section 558A of the Act, for the following reasons:

A.    a ‘franchise’, within the meaning of section 9 of the Corporations Act 2001 (Cth), exists because:

(i)    Parashar’s business made use of United’s trademarks, designs and/or intellectual property including by, but not limited to;

(a)     branding the exterior of the premises with United’s logos and trademarks, including designs relating to the Quickstop and Pie Face brands;

(b)     promoting products in the outlet’s convenience store by using marketing and promotional displays developed by United, including displays relating to the Pie Face brand; and

(c)    positioning, displaying and promoting products for sale in the outlet’s convenience store according to United’s policies, provided to Parashar’s through publications developed by United;

(ii)    Parashar’s derived profit and/or income from using United’s trademark, design and/or intellectual property in connection with the supply of goods or services, including petroleum products and other products sold in the outlet’s convenience store; and

(iii)     Parashar’s did not engage United, or an associate of United, to use United’s trademark, design and/or intellectual property on Parashar’s behalf;

B.    Parashar’s was a ‘franchisee entity’ within the meaning of section 558A of the Act because:

(i)    Parashar’s was a franchisee in relation to United, the franchise; and

(ii)    Parashar’s business was substantially and/or materially associated with United’s intellectual property in the ways set out in the above paragraphs A(i)(a) – (c);

C.    United was a franchisor of Parashar’s; and

D.    United had a significant degree of influence or control over Parashar’s financial, operational or corporate affairs, including by, but not limited to:

(i)    setting the opening and closing hours of the outlet;

(ii)    setting the prices at which petroleum products may be sold and the commission Parashar’s would receive for selling petroleum products; and

(iii)    having control over stock for Parashar’s convenience store, including;

(a)    the specific brands and items that could be stocked;

(b)    the specific suppliers that products could be purchased from;

(c)    the maximum prices at which products could be sold; and

(d)    the way that stock was to be positioned and promoted in the convenience store.

NON-COMPLIANCE WITH COMMONWEALTH WORKPLACE LAWS BY PARASHAR’S

I am investigating United’s compliance with its responsibility as a responsible franchisor entity pursuant to section 558B of the Act, following my separate investigation into a complaint made by Siddhartha Pathak (Mr Pathak), a former employee of Parashar’s who performed work for Parashar’s during the period from 22 October 2017 to 14 January 2018.

During my separate investigation into the complaint made by Mr Pathak, I have assessed Parashar’s compliance with the following provisions of the Act:

(a)     section 44: compliance with the National Employment Standards;

(b)     section 45: compliance with a Modern Award, specifically the Vehicle, Manufacturing, Repair, Services and Retail Award 2010 (Vehicle Award);

(c)     section 535: compliance with employer obligations in relation to employee records;

(d)     section 536: compliance with employer obligations in relation to pay slips; and

(e)     section 550: determining if any individuals were involved in the above contraventions of Parashar’s.

As a result of the above investigation, I have made findings that Parashar’s has contravened some provisions of the Vehicle Award, the Act and the Fair Work Regulations 2009 (Cth) (Regulations).

RATIONALE FOR THE RECORDS OR DOCUMENTS SOUGHT

The records and/or documents below are required to determine whether United has contravened section 558B of the Act; specifically, whether United, as a responsible franchisor entity, or an officer of United (within the meaning of section 9 of the Corporations Act 2001 (Cth)):

(a)     knew, or could reasonably be expected to have known, that the contraventions by Parashar’s would occur; or

(b)     at the time of the contraventions by Parashar’s, knew or could reasonably be expected to have known that a contravention by Parashar’s of the same or similar character was likely to occur.

RECORDS OR DOCUMENTS REQUIRED FOR PRODUCTION

For the purposes of investigating United’s compliance with its obligations as a responsible franchisor entity pursuant to section 558B of the Act in respect of Parashar’s compliance with Commonwealth workplace laws, I require you, the Proper Officer of United, to produce to me the following in respect of Parashar’s:

1.     All records or documents detailing the franchise, commission agent and reseller business models applicable to the business relationships between Parashar’s and United for the period from 1 July 2017 to 1 July 2018.

2.     All records or documents detailing the business structures and lines of responsibility within United, including organisational charts, as it relates to United’s dealings with Parashar’s, from 1 July 2017 to 1 July 2018.

3.     All records or documents relating to United’s internal review of the profitability of Parashar’s business model, including reports, briefs and written correspondence, from 1 July 2017 to 1 July 2018.

4.     All written advice received by United during the period from 1 July 2017 to 1 July 2018, including advice provided by an accountant, industry association and/or government agency, that relates to:

a.     profitability of Parashar’s under each of United’s business models;

b.     United’s compliance with any Enterprise/Collective Agreement, any Modern Award, the Act and/or the Regulations (Commonwealth Workplace Laws); and

c.     United’s commission agents’ (inclusive of Parashar’s) compliance with Commonwealth Workplace Laws.

5.     All records or documents recording the terms, contractual arrangements and/or agreements (however described) on which Parashar’s operates or operated a United retail fuel outlet, including:

a.     the sale of fuel and products for retail, however described,

b.     licensing arrangements;

c.     the use or lease of the business premises;

d.     royalties, rent and fees payable by Parashar’s in respect of fuel sales, retail sales, equipment support, insurance and software support;

e.     the method and calculation by which fuel commission amounts and daily licence fees were determined in respect of Parashar’s;

f.     the terms of re-sale or termination of the franchise, commission agent and/or reseller agreements in respect of Parashar’s; and

g.     all documents and records (including correspondence and emails) between United and Parashar’s in relation to the negotiation of the agreements referred to in this paragraph 5.

6.     All records or documents relating to United’s recommendations, instructions, policies, protocols and standards (however described) to Parashar’s in relation to:

a.     the engagement of workers including staffing levels, rostering, duties, hours of work, employment entitlements, type of employment, terms of engagement, rates of pay, record keeping and the creation and issuing of pay slips;

b.     inspection of the business premises by United, or representatives of United;

c.     the purchase pricing and sales pricing of fuel and products for retail;

d.     the type and volume of inventory required to be maintained by Parashar’s, preferred supplier or vendor arrangements, and the display of products in respect of fuel and products for retail;

e.     sales targets and quotas required to be maintained by Parashar’s in respect of fuel and products for retail;

f.     the record keeping and reporting requirements of Parashar’s to United in relation to Parashar’s compliance with the recommendations, instructions, policies, protocols and standards referred to in this paragraph 6.

7.     All records or documents (including all correspondence) detailing information, advice and/or assistance provided by United, or representatives of United, to Parashar’s in relation to Parashar’s compliance with Commonwealth Workplace Laws, including in relation to:

a.     any Modern Award (including the Vehicle Award) applicable to Parashar’s employees;

b.     minimum employment entitlements under any Modern Award (including the Vehicle Award) and the Act relating to terms of engagement, minimum rates of pay and wage increases, penalty rates, overtime, allowances, breaks, leave including personal and annual leave, deductions made from wages and the provision of the Fair Work Information Statement;

c.     the records required to be made and kept under the Act and the Regulations;

d.     the issuing to employees of pay slips; and

e.     tax file number declaration forms (please note the obligation to redact tax file numbers, as detailed below);

8.    All records or documents (including correspondence and emails) between United, or representatives of United, and Parashar’s, in relation to:

a.     complaints or concerns raised by Parashar’s, or workers of Parashar’s, regarding Parashar’s obligations in relation to wages, employee entitlements and workplace conditions, under any Modern Award (including the Vehicle Award), contractual agreement, the Act or the Regulations;

b.     requests made by United to Parashar’s to confirm their compliance with Commonwealth Workplace Laws, including by way of statutory declaration or affidavit;

c.     audits conducted, training undertaken (including certificates of completion, correspondence in relation to attendance and the names of the persons who attended on behalf of United and Parashar’s), enquiries made, assistance provided, or other action taken by United, regarding Parashar’s compliance with Commonwealth Workplace Laws; and

d.     financial penalties or breach orders issued by United to Parashar’s for failing to comply with Commonwealth Workplace Laws.

9.     All records or documents that record the operations and financial performance of Parashar’s for the period from 1 October 2017 to 31 January 2018, including:

a.     sales records and sales reports (however described);

b.     fees and amounts incurred or paid by Parashar’s under the franchise agreement(s), commission agent agreement(s) and/or reseller agreement(s);

c.     royalties, rent, commissions and fees paid by Parashar’s in respect of fuel sales, retail sales, equipment support, insurance and software support including copies of invoices and records of payment;

d.     records that identify all workers (including independent contractors) who performed work for Parashar’s including names, contact details, duty statements, position descriptions, visa information, reports or print-outs from cash registers or points of sale systems, fuel dip records and fuel and stock delivery records and receipts and occupational health and safety or other workplace incident reports;

e.     records detailing the hours worked by all workers for Parashar’s including timesheets, rosters, clock cards, diary entries, cash register or computer system logins and logouts, and electronic time entries;

f.     records detailing the payments made (including gross and net amounts), entitlements accrued and deductions made in respect of Parashar’s workers, including pay slips, payroll summaries, spreadsheets, store logs and EFT receipts; and

g.     financial statements, including income statements (including that show revenues, expenses and profit and loss), balance sheets (including that show assets, liabilities and equity), statements of cash flows and statements of changes in equity.

This Notice seeks the production of original records or documents, or if the original is not available, a copy or duplicate of the record or document will be sufficient.

You are required to produce the above records and/or documents either in person at Level 12, 414 La Trobe Street, Melbourne 3000, by post to GPO Box 9887, Adelaide SA 5001, or by email to [email address specified] by 5:00pm on 7 December 2018.

…

Failure to comply with this Notice, without reasonable excuse, is a contravention of subsection 712(3) of the Act and may attract a maximum penalty of $63,000 in respect of a body corporate or $12,600 in respect of an individual.

Should you require further information or wish to discuss this Notice, please contact me on [telephone number specified], or by email at [email address specified]. Please quote the reference number [file reference specified]

Melvin Paul

Fair Work Inspector

Fair Work Ombudsman