Federal Court of Australia

Enkel v We R Finance Pty Ltd [2020] FCA 1668

ORDERS

THE COURT ORDERS THAT:

1.    The orders of the Western Australian Industrial Magistrates Court made 22 August 2019 are set aside.

2.    The parties must, within seven days of the date of this order, file a minute of consent orders specifying the amounts to be paid under s 545(3) and s 547(2) of the Fair Work Act 2009 (Cth) or, if agreement cannot be reached, separate minutes.

3.    The matter is listed on 2 December 2020 at 10.15 am for any further hearing necessary to settle the orders referred to in the preceding paragraph.

4.    Liberty to apply in relation to paragraphs 2 and 3.

5.    The question of penalties for each of the cross-respondents is remitted to the Western Australian Industrial Magistrates Court for further hearing and determination.

6.    Any party wishing to apply for an order in relation to the costs of the appeal or the cross-appeal must make an application within seven days of the date of these orders by way of written submissions of no more than three pages in length directed to the chambers of Justice Jackson.

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

REASONS FOR JUDGMENT

JACKSON J:

1    This is an appeal - strictly speaking, a cross-appeal - from two decisions of the Western Australian Industrial Magistrates Court (WAIMC). In the first decision (Enkel v We R Finance Pty Ltd [2019] WAIRC 284, the Liability Judgment), the industrial magistrate found that the first cross-respondent, We R Finance Pty Ltd (WRF), had not complied with the Banking, Finance and Insurance Award 2010 (Award), in contravention of the Fair Work Act 2009 (Cth) (FWA), by underpaying a former employee, the cross-appellant Mr Alastair Enkel. The industrial magistrate also found that WRF contravened obligations found in a term of the Award and in provisions of the Fair Work Regulations 2009 (Cth) (FWR), by failing to provide Mr Enkel with a copy of the relevant award and a copy of the National Employment Standards, and failing to keep certain records. At the same time her Honour found that Mr Enkel had not established that the second cross-respondent, Mr Harry Ross, a director of WRF was involved in the contraventions. In the second decision (Enkel v We R Finance Pty Ltd [2019] WAIRC 651, the Penalty Judgment) the industrial magistrate imposed a civil penalty of $20,500 on WRF. Her Honour also ordered WRF to pay Mr Enkel the amount of the underpayment. She dismissed an application by Mr Enkel for his costs of the proceeding.

2    An appeal was commenced by WRF and Mr Enkel filed a cross-appeal. This court has jurisdiction to determine such appeals by reason of s 565 of the FWA and s 24(1)(c) of the Federal Court of Australia Act 1976 (Cth). WRF has since discontinued its appeal, so only Mr Enkel's cross-appeal remains. In broad terms, it raises four issues, namely:

(1)    whether the industrial magistrate erred in finding that Mr Enkel had not established that Mr Ross was involved in the contraventions;

(2)    whether the industrial magistrate erred in finding that 'locum payments' which WRF made to Mr Enkel could be set off against WRF's liability to pay the amount of the underpayment to Mr Enkel;

(3)    whether the penalties were inadequate, including because the underpayment contraventions should not have been treated as a single contravention; and

(4)    whether the industrial magistrate should have ordered costs against WRF.

3    For the following reasons, I respectfully consider that the Industrial Magistrate erred in relation to the first three issues, but not the fourth. The amounts to be paid by WRF must be increased so as not to set off the locum payments. The matter must be remitted to her Honour to consider the question of penalty for Mr Ross and to reconsider the question of penalty for WRF.

Background

4    The business of WRF involves the provision of personnel to car dealerships. The personnel process applications for finance and for insurance which are commonly made by customers who buy a vehicle. The finance and insurance can be provided by various different banks, finance companies and insurers.

5    Mr Enkel became an employee of WRF after a job interview with Mr Ross and Andrew Thornton, who was Finance Manager with a car dealership called Westside Auto, which is located in Bentley, Western Australia. The interview was in February 2017. Mr Enkel was 20 years old at the time (he turned 21 some three months into his employment with WRF). His previous employment experience comprised approximately three years as a salesman at a furniture showroom.

6    At the interview, Mr Ross introduced himself as the director and owner of WRF. The signature block on his emails gave his job title as 'Director'. There was no other evidence about his role in the company or who else, if anyone, was a director or otherwise involved in senior management. There was no evidence about WRF's size, profitability or financial position or any evidence about its activities, other than the evidence Mr Enkel could give about his direct observations from his job position as an employee.

7    Following the interview in February 2017, Mr Ross offered Mr Enkel the position of 'Finance and Insurance Consultant' with WRF and Mr Enkel accepted the offer. Mr Enkel, and Mr Ross on behalf of WRF, signed an employment contract on 7 and 10 March 2017 respectively. The contract did not specify Mr Enkel's duties, providing only that '[y]our duties will be explained to you prior to your commencement date' (cl 3.1). It provided that the terms and conditions of employment, except as otherwise provided for or modified in the contract, were in accordance with the National Employment Standards found in Part 2-2 of the FWA (NES), the Award, and WRF's policies and procedures as varied from time to time.

8    The remuneration under the contract was set out in a schedule. The schedule specified the 'Employee Award Classification' for Mr Enkel as 'Level 3'. It provided for a 'retainer' of $25,000 per annum paid fortnightly inclusive of superannuation. It also provided, under a heading 'Remuneration Conditions':

You and We R Finance agree that, your base remuneration (and any commission if applicable), averaged over four consecutive fortnightly pay cycles, will set off any payment owed to you under the strict terms of the Award with respect to such terms, include but not limited to:

o    annual leave loading;

o    allowances;

o    weekend or other penalties; and

o    payment for overtime;

over those four consecutive fortnightly pay cycles.

9    Mr Enkel commenced work on 15 March 2017 at Westside Auto. He received training for the position over a period of 10 weeks. The training was mostly from Mr Thornton, although Mr Ross did carry out a role playing scenario with Mr Enkel at the end of the training, after which Mr Ross said 'I think you're ready' and gave him updated schedules to the employment contract which provided for Mr Enkel to earn a commission in addition to the retainer payment (although these updated schedules were not in evidence).

10    During his employment with WRF, when he was not at Westside Auto Mr Enkel worked regularly at a dealership in Rockingham and also occasionally filled in for people who had rostered days off at dealerships in Mandurah and Cannington. His duties involved meeting with customers who were purchasing a vehicle to discuss their needs for finance and insurance and, depending on the outcome of that discussion, he would help arrange the finance and insurance. This typically included making an initial assessment of the customers' eligibility for finance and completing an online application with the chosen financier.

11    Towards the end of his period of employment with WRF, Mr Enkel began to ask Mr Ross questions about whether he was receiving the pay to which he was entitled under the Award. The questions were contained in emails which Mr Enkel sent on 4 August 2017 and 7 September 2017. Mr Ross's email replies did not give clear answers.

12    On 11 September 2017, Mr Ross and Mr Enkel signed an updated contract of employment, which provided for base remuneration of $30,000 per annum plus superannuation, certain commissions and, against the item 'Locum Days', for a payment of $150 (inclusive of superannuation) 'for relief cover'. Although the updated contract was signed on 11 September 2017, it appears from the payslips that are in evidence that Mr Enkel was in fact receiving the locum payments and a commission from at least 16 August 2017. Mr Enkel's evidence (given during cross-examination in the WAIMC) was that the locum payment was an extra payment for doing the same work at a different location, and he accepted that it was part of his normal remuneration. He said that it was a payment for the inconvenience of having to travel to do the job somewhere other than his usual workplace. The Level 3 'Employee Award Classification' and the 'Remuneration Conditions' set off provision quoted above appeared in the updated contract, unchanged.

13    On 25 October 2017 Mr Enkel gave two weeks' notice of resignation to Mr Ross, but Mr Ross said that he should finish on 31 October 2017 because commission was payable at the end of the month. So that was his last day of work for WRF.

14    The proceedings in the WAIMC were commenced in June 2018. Both WRF and Mr Ross were named as respondents.

The reasons of the industrial magistrate

15    In the WAIMC, Mr Enkel claimed that WRF contravened the NES and the Award by failing to pay him wages, payment for overtime hours worked, accrued annual leave and superannuation, to which he was entitled under the Award. Mr Enkel alleged that he was only paid $29,325.18, despite being entitled to $49,115.67 under the Award. Mr Enkel claimed a pecuniary penalty (which, under s 546(3)(c) of the FWA could be ordered to be paid to him) and interest. Mr Enkel claimed that Mr Ross aided, abetted, counselled or procured the contraventions, and so was involved in the contraventions for the purposes of s 550.

16    The industrial magistrate's reasoning in the Liability Judgment commenced by considering a 'no case to answer' submission that WRF and Mr Ross had made. The submission was put on the basis that Mr Enkel had not established that the Award covered and applied to WRF and Mr Enkel as employer and employee, because there was no evidence before the court as to the industries that are covered by the Award. Consistently with the approach usually taken in no case to answer submissions in civil cases, WRF and Mr Ross did not adduce any evidence in their case.

17    The industrial magistrate held that it was not necessary to lead evidence to establish the proper construction of the description of the industries that are referred to in the Award as being covered by it. Her Honour went on to consider the coverage of the Award. Under cl 4.4 it covered any employer who supplies labour on an on-hire business in the industries set out in cl 4.2, among which were 'the industries of banking, lending, loaning, providing credit … finance'. Her Honour was persuaded that WRF participated in industries of that kind. Her Honour relied on Mr Enkel's evidence about what he did while employed at WRF. She also found that the Award covered Mr Enkel as the employee. As a result, the no case to answer submission was rejected. There is no challenge to those conclusions on appeal, but it has been necessary to describe them because they form the basis in part of Mr Enkel's submission that her Honour should have awarded costs in his favour, which is in issue on appeal.

18    The industrial magistrate then proceeded to make findings as to Mr Enkel's classification under the Award (Level 2 for the first 10 weeks of his employment, while he was receiving training, and thereafter Level 3) and what his entitlements were under the Award. It is not necessary to describe these findings in detail, as they are not challenged; in summary, her Honour found that Mr Enkel was entitled to ordinary pay, overtime and penalty payments totalling $42,201.56 and accrued annual leave and leave loading of $2,530.53 leading to total entitlements of $44,732.09. Her Honour calculated that the total amount paid by the Company was $30,064.13. That was comprised of an amount attributable to the 'retainer' of $25,000 per annum that was later increased to $30,000 per annum, commissions, the locum payments and a final payment made in respect of accrued annual leave.

19    The industrial magistrate found that this underpayment meant that WRF had engaged in five contraventions of the FWA. The first was a breach of s 44, which prohibits breach of the NES. The particular provision breached was s 90(2) of the FWA, which requires an employer to pay the amount that would have been payable as annual leave if the leave is untaken when the employment ends. While WRF did pay untaken annual leave when Mr Enkel left its employ, the payment was not calculated on the basis required by the Award and so did not comply with s 90(2). The other four contraventions were breaches of the prohibition in s 45 on contravening a term of a modern award. Each contravention was comprised of a breach of a different term of the Award as it appeared at the time, specifically: cl 13, which provided for a minimum weekly wage; cl 23.1, which provided for overtime; cl 24.3, which provided for annual leave loading; and cl 21.2, which required payment of superannuation contributions so as to avoid having to pay the superannuation guarantee charge under superannuation legislation. Under s 545(3) her Honour ordered WRF to pay to Mr Enkel $13,826.89 in ordinary pay, overtime and penalty rates and $499.22 in accrued untaken annual leave and annual leave loading, as well as a payment to a superannuation fund for Mr Enkel's benefit in an amount that was to be determined.

20    The industrial magistrate found that WRF engaged in two other contraventions. One was a further contravention of s 45, comprised of a breach of the obligation in former cl 5 of the Award to ensure that copies of the Award and the NES were available to employees either on a conveniently located noticeboard or through electronic means. The other was a breach of s 535(2) of the FWA, which requires employers to keep employee records in a form, and including information, as prescribed by the FWR. In fact the provisions of the FWR to which her Honour referred, r 3.32 and r 3.34, required WRF to keep records of a certain kind for the purposes of s 535(1), rather than records in a particular form for the purposes of s 535(2). So it appears that her Honour may have had s 535(1) in mind, but nothing turns on that. In substance, her Honour inferred that WRF had not kept records of a kind prescribed in r 3.32, because Mr Enkel's contract of employment and payslips did not specify his employment as permanent, temporary or casual (see r 3.32(d)). And she inferred from WRF's failure to pay overtime, or to detail it in payslips, that WRF failed to keep a record of overtime hours worked as required by r 3.34(b).

21    The industrial magistrate found, however, that Mr Enkel had not established that Mr Ross was involved in any of WRF's contraventions within the meaning of s 550 of the FWA. This conclusion is challenged on the cross-appeal and it will be necessary to describe her Honour's reasoning in the course of determining the relevant appeal grounds below.

22    In the Penalty Judgment, the industrial magistrate made rulings on the outstanding issues of penalty and costs. Her Honour referred to s 557(1) of the FWA, which relevantly provides that two or more contraventions of a civil remedy provision referred to in s 557(2) are taken to constitute a single contravention if the contraventions are committed by the same person and arose out of a course of conduct by the person. Each of s 44, s 45, s 535(1) and s 535(2) are provisions referred to in s 557(2). Her Honour found that the failures to pay ordinary pay, overtime and penalty rates, annual leave and annual leave loading were part of a single course of conduct which was to be treated as a single contravention. That is challenged in the cross-appeal.

23    Having regard to a number of matters specified in her reasons, the industrial magistrate found that WRF's conduct was 'properly categorised in the low range'. For those reasons and with regard to the principle of totality, her Honour awarded a total penalty of $15,000 for the underpayment contraventions. This is challenged in the cross-appeal.

24    Her Honour also treated the failure to keep the records of Mr Enkel's employment status (full time, part time or casual) and the failure to keep overtime records as a separate single contravention. That grouping and the quantum of penalties for these - $3,000 for failing to provide the relevant instruments and $2,000 for failing to keep the records - are also challenged.

Grounds 1 to 3 - Mr Ross's involvement in WRF's contraventions

25    Grounds 1 to 3 of the notice of cross-appeal challenge the industrial magistrate's conclusion that Mr Ross was not involved in WRF's contraventions within the meaning of s 550 of the FWA, and so not taken to have contravened the relevant provisions. Ground 1 challenges the conclusion on the basis that her Honour found it significant that Mr Ross was ignorant of the law. This is criticised on the basis that it was not a finding that was available on the evidence and if it was, her Honour misapplied s 550(1) by taking it into consideration. Ground 2 asserts that her Honour should have drawn an adverse inference against Mr Ross because of his decision not to give evidence. By ground 3, Mr Enkel claims that her Honour applied the incorrect test to determining whether Mr Ross was liable pursuant to s 550(1), because her Honour considered that Mr Ross needed to have engaged in conduct that was 'intentional and aimed at the commission of a contravention', when she should have assessed his state of mind regardless of whether he knew that WRF's conduct constituted a contravention.

26    Counsel for the cross-respondents complained that the inference which ground 2 says should have been drawn is not specified in the notice of cross-appeal. I do not think there is anything in that point. Given that the inference is said to have arisen out of a failure to give evidence, it must have been obvious that it was an inference of the kind referred to in Jones v Dunkel (1959) 101 CLR 298, that the evidence of Mr Ross would not have assisted his case. That is confirmed in Mr Enkel's written submissions and there was no suggestion of any prejudice because that was not spelled out in the notice of appeal.

27    It is convenient to consider these grounds together, and to start by determining how her Honour reasoned in relation to Mr Ross's involvement in the contraventions. That is necessary because her Honour's course of reasoning is, with respect, not entirely clear.

28    Her Honour commenced by setting out s 550, which 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.

(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.

29    At [117] of the Liability Judgment her Honour observed that '[t]he intent of an accessory is found in their knowledge or belief that they are assisting or encouraging a primary offender to do something, which goes to make up the facts which constitute the relevant contravention'. After discussing the position of sole directors (despite not making a finding that Mr Ross was a sole director of WRF), her Honour then turned to Potter v Fair Work Ombudsman [2014] FCA 187. That case concerned whether a director alleged to be liable for involvement in a company's underpayment of award entitlements needed to be aware that the award applied to the employees. The industrial magistrate described the effect of the decision of Cowdroy J in Potter as follows (at [124], emphasis added):

… the Federal Court noted that to be 'knowingly concerned' in the company's contraventions of the FWA, the alleged accessory must have actual knowledge of the essential facts that constituted the contravention. Mere ignorance of the law may not be sufficient to attract personal liability. The Court held that Mrs Potter could only be personally liable for the company's underpayment if she had known the correct award that applied to the employees. As that was not the case throughout the employment, Mrs Potter's appeal against the contraventions was partially successful. However, she was still held liable for underpayments made after she received professional advice that the award did apply.

Her Honour noted that this departed from previous authorities. While this summary of Potter is mostly correct, the italicised sentence is her Honour's gloss on the decision. Nowhere does Cowdroy J refer to 'ignorance of the law'. His Honour's conclusion, in reliance on Yorke v Lucas (1985) 158 CLR 661, was that actual knowledge that an award applies to employees is necessary in order to establish that a director is liable for the company's underpayment, because the applicability of the award is an element of that contravention by the company: see Potter at [79], [81].

30    The industrial magistrate then reviewed the evidence about Mr Ross's involvement in Mr Enkel's employment. Her Honour's description of the evidence was similar to the one I have given above, but she did not examine the content of any of the emails between Mr Enkel and Mr Ross, and did not, in this regard, note the references to the Award found in the employment contracts.

31    Her Honour said it was not clear from Mr Enkel's submissions the basis upon which he said Mr Ross was liable under s 550 of the FWA. But the statement of claim filed in the WAIMC relies on s 550(2)(a) ('aided, abetted, counselled or procured the contravention') and s 550(2)(c) ('knowingly concerned in or party to the contravention'). Her Honour appeared to consider both those limbs of s 550(2).

32    The industrial magistrate noted that Mr Enkel relied on admissions in the respondent's response (defence) filed in the WAIMC, but her Honour refused to accept those admissions as establishing the truth of facts as asserted by Mr Enkel.

33    The industrial magistrate then said (at [130]):

On Mr Enkel's contention the only reasonable inference to be drawn on the found facts is that Mr Ross had actual knowledge of the essential facts that constituted the contravention, rather than being merely ignorant of the law. In my view, the founds [sic] facts taken from Mr Enkel's evidence falls [sic] short of drawing the only reasonable inference sought to be drawn by him. That is, I am satisfied that the evidence is also, arguably, capable of drawing an alternative inference, that being Mr Ross was ignorant of the law. Mr Enkel's evidence goes no further than demonstrating the personal interaction he had with Mr Ross in an interview, in signing employment contracts where Mr Ross is a director of the Company, and during a role play. In my view, this does not establish to the requisite standard, even by inference, Mr Ross was knowingly concerned in the contraventions in the manner provided for in s 550(1) and (2) of the FWA.

34    With respect, this is a difficult paragraph to understand. Taking it as a whole, and tracing the line of reasoning through as best one can, it appears to be saying that there is an arguable inference that Mr Ross was 'ignorant of the law', and that the evidence of Mr Enkel falls short of establishing that Mr Ross 'had actual knowledge of the essential facts that constituted the contravention'. So the industrial magistrate seems to be saying that Mr Enkel failed to establish that Mr Ross was knowingly concerned in the contraventions because Mr Enkel had failed to establish that Mr Ross was not merely 'ignorant of the law'. Putting that together with her Honour's discussion of Potter, in which she seems to equate ignorance of the law with a lack of knowledge of the Award, it appears that her Honour found that Mr Enkel had failed to discharge an onus of proving that Mr Ross knew of the applicability of the Award.

35    After [130], the industrial magistrate then seems to turn from considering whether Mr Ross was knowingly concerned in the contraventions, to the other potentially applicable limb of s 550(2), that he had 'has aided, abetted, counselled or procured the contravention' (s 550(2)(a)). Her Honour refers to three authorities on the meaning of aiding, abetting, counselling or procuring (Yorke v Lucas, Abigroup Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2012] FMCA 820; (2012) 226 IR 60 and Guirguis v Ten Twelve Pty Ltd [2012] FMCA 307). At [134] her Honour concludes that Mr Ross's conduct 'in merely organising the claimant's pay cannot be said to provide support to the contraventions. He in no way urged, incited, instigated or encouraged the contraventions'. Her Honour thus appears to have rejected the possibility that Mr Ross aided, abetted, counselled or procured the contraventions because the evidence of his conduct did not rise to that level.

36    Her Honour then said (at [135]):

Having regard to what was said in Potter, I conclude that the necessary intent of an accessory is found in their knowledge or belief that they are assisting, encouraging or causing a primary offender to do something which goes to make up the relevant contraventions. Such participation must be intentional and aimed at the commission of a contravention, albeit not the specific contravention.

37    Counsel for WRF and Mr Ross on the appeal conceded, properly, that the last part of the last sentence is incorrect. That is because it is not necessary, in order to establish liability for involvement under s 550(2)(a) and similar provisions, to prove that the alleged 'accessory' intended or knew that what was being done would be a breach of the law: Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [176]. That aside, this paragraph can be construed to be saying that the alleged accessory needs to have done something intentionally, that is, not inadvertently or by accident, which they know assists, encourages or causes the 'primary offender' to do the relevant act, that is the act that constitutes a contravention. To that extent, the paragraph is perhaps unobjectionable.

38    However, the section of the industrial magistrate's reasons on Mr Ross's involvement then concludes as follows:

[136]    As indicated earlier, the alternate inference capable of being drawn on the found facts is that Mr Ross was ignorant of the law, which arguably gives rise to a lack of intent on his part that the Company pay Mr Enkel anything but his correct entitlements. Support for this view can be found in Mr Enkel's payslips and employment contracts where the Company, to that extent, was transparent about what it did pay Mr Enkel, albeit I have found it paid him erroneously. I am not satisfied Mr Ross has aided, abetted or procured the contraventions committed by the Company.

[137]    Accordingly, I am not satisfied the claim against Mr Ross pursuant to s 550(1) of the FWA is proven to the standard required.

39    Paragraph 136 shows that the reference at the end of [135] to the need to aim at the commission of a contravention was not an aside. In my view [136] confirms that her Honour did consider that it was necessary, at least for aiding, abetting, counselling or procuring under s 550(2)(a), to establish that Mr Ross intended or knew that WRF would contravene the FWA. Here, 'ignorance of the law', and what her Honour appears to have viewed as the transparency of WRF's or Mr Ross's conduct in issuing payslips and signing contracts, is enlisted to support the conclusion that there was no intent that WRF contravene the FWA. This leads to a conclusion that Mr Ross did not aid, abet, counsel or procure the contraventions. In light of counsel's concession, it is clear that this reasoning is incorrect.

40    In summary, the industrial magistrate's description of the legal criteria to be applied is incorrect in respect of s 550(2)(a), although if Potter is good law, her Honour's reasoning is probably correct in respect of s 550(2)(c). In order to determine whether her Honour's conclusions are wrong it is also necessary to consider the evidence that is relevant to Mr Ross's involvement.

41    I have already described that evidence in the 'Background' section above. To summarise and comment on it:

(1)    Mr Ross described himself as the director and owner of WRF. His emails were signed as 'Director'. Those matters suggest that he had the capacity to obtain knowledge of and exercise control over all aspects of the company's activities, although by themselves they do not indicate whether he had knowledge of or control over matters concerning Mr Enkel's employment.

(2)    There was, however, no other evidence about WRF's management structure, or Mr Ross's role at the company.

(3)    WRF's business involved hiring out the services of its personnel, making it open to infer that the capabilities of the personnel and the incidents of their employment were important enough for the director and owner to pay attention to and to give direction on. It must, however, be acknowledged that it appears that Mr Enkel was not under Mr Ross's day-to-day supervision, either when Mr Enkel was at Westside Auto (where Mr Thornton probably supervised him) or when he was at other dealerships.

(4)    Mr Ross participated in Mr Enkel's job interview and the role play at the end of his training period, he made the offer of employment on behalf of WRF to Mr Enkel, he signed his employment contract as director of WRF, and he was the person Mr Enkel went to when he had questions about the Award. This strengthens the inference that Mr Ross knew about and gave direction on Mr Enkel's terms of employment.

(5)    Since Mr Ross did sign the employment contracts with Mr Enkel, the content of those contracts is relevant. They said expressly that the terms and conditions of employment were in accordance with the NES and the Award. They gave an Award classification for the employee. They provided for certain payments to be set off against Award entitlements. Signing a document does not always mean that as a matter of fact that the signatory knows what the document says, but it can found an inference that they do.

(6)    When Mr Enkel raised the question of his award entitlements with Mr Ross by email in August 2017 and September 2017, Mr Ross did not disclaim knowledge of the Award or disclaim any knowledge of or involvement in Mr Enkel's employment arrangements.

(7)    In relation to that last point, there is relevant detail which should be added the description of the evidence thus far. Rather than disclaim knowledge or involvement, in his first email reply (on 6 August 2017), Mr Ross said, 'You have a base of $25k and top up of doing deal at westsides as well as locum work … Happy to reimburse for fuel going to mandurah and Rockingham - just give me fuel receipts' (all grammar and errors in the original). This displays knowledge of Mr Enkel's terms of employment and a close enough involvement to be willing to receive fuel receipts for reimbursement. In his second email reply (on 8 September 2017) Mr Ross said:

the award states u have earn at least that amount in any calendar year. it can be broken up with any retainer or comms structure

az and i have gone back over the last 6 months at cjd to roughly work out a percentage on what u need to do to achive this income on top of your retainer

42    This last email displays a detailed awareness of the interaction between Mr Enkel's terms of employment and the requirements of the Award and a consciousness that the latter were mandatory. It is not to the point whether Mr Ross's understanding of these matters was correct. While the emails date from the latter part of Mr Enkel's employment, taking them together with the fact that Mr Ross signed the employment contracts dated from the beginning of the employment relationship, and the other matters I have just summarised, provides ample basis to infer, as I do, that throughout the employment relationship, Mr Ross was aware of the terms of Mr Enkel's remuneration, how much he was in fact being paid, the applicability of the Award and the remuneration it required, and the fact that Mr Enkel had not been paid an amount at least equal to the Award remuneration.

43    That leads to the conclusion that Mr Ross knew that all the elements of the contraventions were present in this case. That includes knowledge of the applicability of the Award, so that it is unnecessary to determine whether the approach in Potter is correct (it has been doubted in Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034; (2016) 152 ALD 209 at [1018]-[1019] (Katzmann J) and not followed in Australian Building and Construction Commissioner v Parker [2017] FCA 564; (2017) 266 IR 340 at [127]-[128] (Flick J) and Fair Work Ombudsman v Hu (No 2) [2018] FCA 1034; (2018) 279 IR 162 at [166] (Rangiah J)).

44    The matters I have set out above concerning Mr Ross's position in WRF's business and his level of involvement in Mr Enkel's employment also support an inference, which I also make, that Mr Ross gave direction about the terms of Mr Ross's employment, so that his conduct had sufficient practical connection with the contraventions to mean that he not only knew of the contraventions, but was concerned in and a party to them.

45    There is another matter agitated in the appeal which is not necessary to determine in order to reach the above conclusions, but does strengthen them. As I have already touched on, Mr Ross did not give evidence in the WAIMC. Mr Enkel submitted to the industrial magistrate that she should draw an inference of the kind described in Jones v Dunkel as a result of this. Her Honour did not refer to that submission or draw the inference in her reasons. It is well established that the inference which can be drawn in such circumstances is that the evidence which the relevant witness would have given would not have assisted the party who has failed to call the witness. A Jones v Dunkel inference cannot fill gaps in the evidence that has been adduced. But in appropriate circumstances, it can justify the court in accepting evidence more confidently or strengthen other inferences which it may be open to the court to draw. See Jones v Dunkel at 308 (Kitto J), 312 (Menzies J). It is unlikely that the existence of the privilege against exposure to a civil penalty precludes the drawing of such an inference (see Chong & Neale v CC Containers Pty Ltd [2015] VSCA 137; (2015) 49 VR 402 at [229]) and no submission was made here that it did.

46    In my view, a Jones v Dunkel inference strengthens the case for Mr Ross's involvement here. The inferences that Mr Ross knew of and contributed to the contravening conduct are open. If he did not know of the conduct (and did not know of the Award), or had no role in its occurrence, it would have been a simple matter for him to go into evidence and say so. Putting it another way, Mr Ross would have been able to give probative evidence about whether he knew of the existence of the state of affairs which made up the contraventions and whether he took any steps to bring about that state of affairs. It could not be supposed that he would give evidence that he did not know whether he knew those things, and did not know whether he took such steps. So an inference that his evidence on those matters would not have assisted him logically provides further support for the inferences that he did know, and that he did take those steps. It is a situation where 'a party to litigation fails to accept an opportunity to place before the court evidence of facts within his or her knowledge which, if they exist at all, would explain or contradict the evidence against that party', so that 'the court may more readily accept that evidence': Weissensteiner v The Queen (1993) 178 CLR 217 at 227. That is especially so where the witness who was not called was a party: Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 at [63].

47    As a result of these conclusions it is not necessary to determine another issue raised in submissions, but not expressly in the grounds of appeal, as to whether the industrial magistrate erred in refusing to take the admission by Mr Ross of allegations made concerning his involvement as proof of the matters alleged and admitted. Determining that would require examination of the status of pleadings in the WAIMC as a court of summary jurisdiction, and may engage considerations such as whether, regardless of that, to refuse to accept as correct a matter that is alleged and admitted was to deny Mr Enkel the opportunity to put evidence of that matter on and thus to deny procedural fairness. None of these matters were raised in the notice of appeal or written submissions and it is not necessary to consider them.

48    For those reasons, I uphold grounds 1, 2 and 3 of the cross-appeal and find that under s 550 of the FWA, Mr Ross was involved in, and thus liable for, WRF's contraventions of the FWA which were comprised of failures to pay Mr Enkel his entitlements under the Award and the NES. To the extent that it is necessary to specify which limb of s 550(2) is applicable, I am satisfied that Mr Ross was knowingly concerned in or party to those contraventions for the purposes of s 550(2)(c).

49    The same cannot be said of Mr Ross's involvement in WRF's failures to provide a copy of the Award and the NES and failure to keep employment records of the prescribed kind. There is nothing to suggest that Mr Ross was involved in administrative matters such as record keeping or the provision of standard information to employees.

Ground 4 - set off

50    If an employer pays amounts to an employee which are not expressly said to be in satisfaction of award entitlements, a question arises as to whether those amounts should nevertheless be appropriated to those entitlements so that they are taken to satisfy them, in whole or in part. This is often loosely referred to as an issue of 'set off'. Ground of cross-appeal 4 asserts error in the industrial magistrate's application of the principle to the locum payments mentioned above.

51    The relevant terms of Schedule 2 to Mr Enkel's contract of employment with WRF and other evidence concerning the locum payments are described at [8] and [12] above. After considering relevant authorities, at [94]-[95] of the Liability Judgment the industrial magistrate concluded as follows:

Applied to the facts of this case, Schedule 2 of the Updated Employment Contract included reference to base remuneration and commission payments by the Company to Mr Enkel being in discharge of payments required by an award. The locum payment was in reality a payment made to do the exact same job at a different car dealership and I do not accept that it was a separate payment in the manner suggested by Mr Enkel. It was subject to superannuation and taxation, as indicated in the payslips. This documentation is strongly suggestive that the locum payment was paid and received in discharge of any obligation to pay a wage, overtime or penalty rates.

Accordingly, I do not accept Mr Enkel's submission with respect to the locum payment and I find that it is capable of setting off any award entitlements.

52    The principles to be applied to cases of 'set off' are summarised in Poletti v Ecob (No 2) (1989) 91 ALR 381 at 393 (Keely, Gray and Ryan JJ):

It is to be noted that there are two separate situations dealt with in the passage from the judgment of Sheldon J [in Ray v Radano [1967] AR (NSW) 471] which has been quoted and in the reasoning of the Commission in Pacific Publications [v Cantlon (1983) 4 IR 415]. The first situation is that in which the parties to a contract of employment have agreed that a sum or sums of money will be paid and received for specific purposes, over and above or extraneous to award entitlements. In that situation, the contract between the parties prevents the employer afterwards claiming that payments made pursuant to the contractual obligation can be relied on in satisfaction of award entitlements arising outside the agreed purpose of the payments. The second situation is that in which there are outstanding award entitlements, and a sum of money is paid by the employer to the employee. If that sum is designated by the employer as being for a purpose other than the satisfaction of the award entitlements, the employer cannot afterwards claim to have satisfied the award entitlements by means of the payment. The former situation is a question of contract. The latter situation is an application of the common law rules governing payments by a debtor to a creditor. In the absence of a contractual obligation to pay and apply moneys to a particular obligation, where a debtor has more than one obligation to a creditor, it is open to the debtor, either before or at the time of making a payment, to appropriate it to a particular obligation. If no such appropriation is made, then the creditor may apply the payment to whichever obligation or obligations he or she wishes: see Halsbury's Laws of England 4th ed, vol 9, paras 505 and 506.

53    Mr Enkel relied on his contract with WRF as giving rise to the first kind of situation, so that the parties agreed that the locum payments were for specific purposes, over and above or extraneous to award entitlements, as they were for the inconvenience of having to attend a dealership other than Westside Auto in order to fill in for other personnel.

54    I have described Mr Enkel's evidence about what the locum payments were for at [12] above. However as Poletti makes clear, ascertaining the purpose of the payment is a question of contract, that is, the ascertainment from an objective point of view of the parties' mutual intention: see Workpac Pty Ltd v Rossato [2020] FCAFC 84; (2020) 378 ALR 585 at [234] (Bromberg J). So Mr Enkel's subjective view about what the payment was for is not relevant, except to the extent that it may provide support for a finding of fact that the parties' words and conduct objectively manifested that intention.

55    There is no need to rely Mr Enkel's subjective view in that way here. The purpose of the locum payments is clear enough from the terms of the updated written contract which the parties executed in September 2017 and the manner in which the parties conducted themselves prior to signing. The relevant item (in 'Schedule 2 - Remuneration') says 'Locum Days $150 INC Superannuation for relief cover'. It is specified in item 5, separately to item 4, the base remuneration, and item 6, the commission. So it is paid expressly for 'relief cover', and it is implied from its context that it is over and above the base remuneration and commission which is paid for the work that Mr Enkel was doing when he was at the workplace, whether that was Westside Auto or the other locations where he provided relief cover. It can be inferred from the term that it was to be a lump sum paid for each day where Mr Enkel had to work at different premises (and the evidence shows that is the basis on which it was in fact paid).

56    However, some locum payments were made prior to the signing of the updated contract in September 2017. These payments were not required under the version of the contract that was signed in March 2017. It is therefore arguable that those payments do not fall under the first situation referred to in Poletti. Neither party took this point on appeal, and the ground of appeal concerns the purpose of the payments and the contract of employment without being specific about when and how the contractual obligation arose. In my view the earlier payments were made on the same contractual terms as the later payments. Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,118 affirms that in a commercial relationship new terms will often be added or will supersede older terms without being immediately committed to a formal contract. Accordingly, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. The same can be said of an employment relationship. A contract may be inferred from the acts and conduct of the parties as well as or in the absence of their words: Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 528.

57    The payslips in evidence show that from 16 August 2017 Mr Enkel was receiving a payment designated 'Locum $150 per day plus super'. The designation 'locum' indicates that it was a payment for filling in for someone else when they cannot perform their duties. In other words it was 'for relief', as the varied written contract subsequently confirmed. In this case, I infer that Mr Enkel had already begun working at different premises 'for relief' prior to signing the version of the contract that was signed in September 2017 and became contractually entitled to those locum payments pursuant to an informal agreement between himself and WRF, which was subsequently formalised in the written contract. Therefore, the earlier locum payments were for the same contractual purpose as those made after the contract was signed. Accordingly, they all fall to be considered under the first situation referred to in Poletti.

58    All this means that, viewed objectively, the parties intended that the locum payments were to be paid and received for a specific purpose, over and above award entitlements. The purpose was 'for relief'. Given that, and given that it was specified in addition to base remuneration and commission, it can be inferred that it was indeed paid as compensation for having to work other than at Mr Enkel's usual workplace. Subject to one point which WRF raised, there is no entitlement for payments for that purpose in the Award. The fact that it is extraneous to the Award finds further support in the express clause I have set out at [8] above, which only applies base remuneration and commission to award entitlements, not the locum payments found in a separate item in the contract.

59    The point which WRF raised is that a term of the Award (at the time of the contraventions, cl 18.4(b)) provided for payment of reasonable expenses actually incurred when the employee is required in the course of their duty to go to any place away from their usual place of employment. But even assuming that there is a close correlation between the purpose of that entitlement and the objective purpose of the locum payments, Mr Enkel made no claim for payment of those expenses and no entitlement to them was included in the industrial magistrate's calculations. His claim, and the amounts which the industrial magistrate found WRF was obliged to pay under the Award, were for ordinary pay, overtime and penalty payments and annual leave. The locum payments cannot be set off against them. For the point WRF makes to have any effect on the judgment, WRF would have to acknowledge an additional entitlement to travelling expenses beyond the Award entitlements which Mr Enkel claimed, that additional entitlement would have to be quantified, and then the locum payments would have to be set off against that additional entitlement. Assuming, as is likely, that the travelling expenses were less than $150 per day, this would increase Mr Enkel's total entitlements before set off by a certain amount. Applying the set off would then reduce those entitlements by the same amount. So the net effect would be nil. This argument does not avail WRF.

60    The conclusions I have reached mean, with respect, that the industrial magistrate erred in her treatment of the locum payments. They were not payments for doing 'the exact same job at a different car dealership'; the base remuneration and commission were for doing the job, and the locum payments were additional, to reflect the fact that Mr Enkel had to work at a different location. That it was a payment separate to those amounts appears on the face of the contract. And her Honour's emphasis on the fact that the locum payments were subject to superannuation and taxation was misplaced; that the legislative regimes for taxation and superannuation were engaged by the payments says nothing about the mutual intention of the parties as to what the payments were for.

61    Ground 4 is upheld. The industrial magistrate's order that WRF pay Mr Enkel $14,326.11 plus pre-judgment interest of $1,537.80 will be set aside. I will direct the parties to confer as to the amounts which will be the subject of the orders to be made in place of her Honour's orders.

Grounds 5-7 - penalties

62    By ground 5, Mr Enkel criticises the industrial magistrate's finding that WRF's failure to pay ordinary pay, overtime and penalty rates, annual leave loading and associated superannuation arose from a single course of conduct which were treated as a single contravention for the purpose of assessing penalty. By ground 6 he says that her Honour erred in treating WRF's contraventions in respect of the FWRs as a single contravention. By ground 7 he says that the penalty imposed on WRF was manifestly inadequate in all the circumstances. It is convenient to deal with these grounds together.

63    In relation to grouping of contraventions, the industrial magistrate held (at [11] of the Penalty Judgment):

I am satisfied having regard to the findings made in the substantive decision with respect to the contraventions that no relevant distinction can be made in the First Respondent's conduct with respect to some of the contraventions. It follows from this that I find a single course of conduct by the First Respondent in failing to pay ordinary pay, overtime and penalty rates, annual leave and annual leave loading and associated superannuation, and these failures will be treated as one single contravention.

64    In making that statement her Honour sought to apply s 557(1) of the FWA: see Penalty Judgment at [10]. That section relevantly provides:

(1)    For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are … taken to constitute a single contravention if:

(a)    the contraventions are committed by the same person; and

(b)    the contraventions arose out of a course of conduct by the person.

(2)    The civil remedy provisions are the following:

(a)    subsection 44(1) (which deals with contraventions of the National Employment Standards);

(b)    section 45 (which deals with contraventions of modern awards);

…

(n)    subsections 535(1), (2) and (4) (which deal with employer obligations in relation to employee records); …

65    In the WAIMC, WRF was found to have contravened s 45 in four relevant respects: it failed to pay Mr Enkel the minimum weekly wage required by cl 13 of the Award; it failed to pay him overtime as required by cl 23.1 of the Award; it failed to pay him annual leave loading as required by cl 24.3 of the Award, consequent on the above underpayments; and it failed to pay superannuation contributions at the amount required by cl 21.2 of the Award. Also consequent on underpayment of award entitlements, WRF breached s 44 in one respect, in failing to pay the amount of annual leave required by s 90(2) of the FWA when Mr Enkel left his employment with WRF.

66    Mr Enkel submits that her Honour misapplied s 557 by grouping all the underpayment contraventions into one. This is, he submits, contrary to the construction of s 557 which the Full Court described in Rocky Holdings Pty Limited v Fair Work Ombudsman [2014] FCAFC 62; (2014) 221 FCR 153, because her Honour grouped contraventions of four different provisions of the Award and one provision of the NES into a single contravention.

67    That submission must be accepted. The construction of s 557 at which the Full Court arrived in Rocky Holdings is clear: the 'contraventions of a civil remedy provision referred to in subsection (2)', which s 557(1) requires to be taken as a single contravention, do not refer to multiple contraventions of s 44 or s 45 (for example). They refer to multiple contraventions of each provision of the NES or of each term of the modern award, each being a contravention prohibited by s 44 or by s 45 as the case may be. So, for example, if WRF had failed to pay base remuneration in breach of cl 13 of the Award on multiple occasions, and those multiple failures arose out of a single course of conduct, then those occasions would be treated as a single contravention. But s 557(1) would not require that contravention to be taken as a single contravention together with, say, one or more failures to pay overtime in breach of cl 23.1 of the Award. And on no view could it require contraventions of terms of the Award in breach of s 45 to be treated as a single contravention along with contraventions of a provision of the NES in breach of s 44.

68    The cross-respondents' sole submission against this was to say that if the court were to impose the maximum penalty for each contravention found, the penalty would be 'crushing'. This hypothetical possibility does not engage with the argument based on Rocky Holdings; of course the court will not impose the maximum penalties in a case like the present, and it must not impose a total penalty which is excessive in all the circumstances.

69    Ground 5 must be upheld. Mr Enkel did not, however, suggest that each contravention of each term of the Award (for example each contravention of cl 13 which might have occurred each time Mr Enkel received his fortnightly pay) should be treated as other than a single course of conduct. So the question of penalty must be approached on the basis that there were five relevant underpayment contraventions, being a contravention of each of four different terms of the Award and a contravention of s 90(2) being a provision of the NES. Absent a statutory provision that provides otherwise (like s 557(1)), a separate penalty must be applied in respect of each contravention: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113, (2017) 254 FCR 68 at [114]-[115] (Agreed Penalties) (Dowsett, Greenwood and Wigney JJ).

70    My conclusion that s 557(1) does not provide otherwise in this case does not necessarily mean, however, that the course of conduct principle and the related totality principle have no role to play. The court must fix a penalty for each contravention and then review the aggregate to ensure that it is just and appropriate. If the result of the aggregation of multiple penalties is that the penalty is excessive, that may lead to the moderation of the fine imposed in respect of each offence: Agreed Penalties at [118]. In considering this, the course of conduct principle is a tool of analysis which the court may (not must) use: Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; (2010) 269 ALR 1 at [41]-[42] (Middleton and Gordon JJ). As explained in Agreed Penalties at [148]:

The important point to emphasise is that, contrary to the Commissioner's submissions, neither the course of conduct principle nor the totality principle, properly considered and applied, permit, let alone require, the Court to impose a single penalty in respect of multiple contraventions of a pecuniary penalty provision. There is no doubt that, in an appropriate case involving multiple contraventions, the Court should consider whether the multiple contraventions arose from a course or separate courses of conduct. If the contraventions arose out of a course of conduct, the penalties imposed in relation to the contraventions should generally reflect that fact, otherwise there is a risk that the respondent will be doubly punished in respect of the relevant acts or omissions that make up the multiple contraventions. That is not to say that the Court can impose a single penalty in respect of each course of conduct. Likewise, there is no doubt that in an appropriate case involving multiple contraventions, the Court should, after fixing separate penalties for the contraventions, consider whether the aggregate penalty is excessive. If the aggregate is found to be excessive, the penalties should be adjusted so as to avoid that outcome. That is not to say that the Court can fix a single penalty for the multiple contraventions.

71    Ground 6 challenges the grouping of the record keeping contraventions. It will be recalled that those contraventions concern two respects in which employee records which WRF was obliged to keep by s 535(1) were not records of the kind prescribed by the regulations in relation to Mr Enkel, because they did not specify whether Mr Enkel's employment was permanent, temporary or casual (content prescribed in r 3.32(d)) and they did not specify the number of overtime hours worked by Mr Enkel (r 3.34). Her Honour grouped the failure to specify whether the employment was full time, part time or casual, together with the failure to specify overtime worked, as a single contravention.

72    Mr Enkel challenges this on the basis that it is inconsistent with Rocky Holdings. It is not abundantly clear whether Rocky Holdings applies in the same way to contraventions of s 535 as it does to contraventions of s 44 and s 45. That is because the structure of s 535(1) together with the relevant provisions of the FWR is different to the structure of s 44 and the provisions of the NES, and to s 45 and the terms of an award. Section 535(1) provides:

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

Regulation 3.32 relevantly provides:

For subsection 535(1) of the Act, a kind of employee record that an employer must make and keep is a record that specifies:

…

(d)    whether the employee's employment is permanent, temporary or casual; …

Regulation 3.34 provides:

For subsection 535(1) of the Act, if a penalty rate or loading (however described) must be paid for overtime hours actually worked by an employee, a kind of employee record that the employer must make and keep is a record that specifies:

(a)    the number of overtime hours worked by the employee during each day; or

(b)    when the employee started and ceased working overtime hours.

Unlike the NES or an award, the relevant regulations do not contain obligations or prohibitions which can be breached. The regulations state the content that complying records need, but they do not in terms place an obligation on the employer to keep the records. That obligation is found in s 535(1). So it is arguable that, even in light of Rocky Holdings, the contraventions are of s 535(1) alone and so can be grouped.

73    Nevertheless, I do not consider that argument is correct. Section 535(1) requires the employer to keep employee records (plural) of a certain kind. Then s 535(1) read together with r 3.32 require the employer to keep an employee record, singular, of a certain kind. The same goes for s 535(1) and r 3.34. So a contravention relevantly occurs if no record specifying whether the employee's employment is permanent, temporary or casual is kept. A contravention of a different kind relevantly occurs when no record specifying overtime hours is kept. On the proper construction of s 557(1), the contravention of a civil remedy provision referred to in the subsection is a failure to keep a record of a kind prescribed by a particular regulation in the FWRs. As with contraventions of one term of an award and contraventions of another term of the same award, s 557 does not require contraventions concerning different regulations to be treated as a single contravention. Ground 6 will be upheld.

74    Once again, there was no suggestion that each of the breaches (in respect of each of r 3.32 and r 3.34) amounted to more than one course of conduct. So it is necessary to proceed on the basis that there was one contravention of s 535(1) in respect of r 3.32 and another in respect of r 3.34.

75    These conclusions make it unnecessary to give separate consideration to ground 7, which alleges manifest inadequacy in the penalty. In other circumstances, it would be appropriate for this court to proceed to re-exercise the sentencing discretion for itself. But the upholding of grounds 1 to 3 as to Mr Ross's involvement makes that undesirable in this case. Counsel for the cross-respondents submitted that if Mr Ross were found on appeal to be liable then he should be given the opportunity to be heard on the subject of penalty, because he was not the subject of any penalty at first instance. I accept that submission. The position might have been different had there been a single hearing in the court below on liability and penalty, as then Mr Ross could have been expected to adduce any evidence and make any submissions on penalty on which he wished to rely. But since there were separate hearings, Mr Ross must be taken not to have had that opportunity, since by the time evidence and submissions were received on penalty the industrial magistrate had held that he was not liable. So the question of any penalty to be imposed on Mr Ross should be remitted to the industrial magistrate to determine. That being so, it would not be appropriate for this court to impose revised penalties on WRF. Mr Ross could conceivably adduce evidence and make submissions that could bear upon the penalty to be imposed on the company, and since Mr Ross is liable for involvement in WRF's contraventions, the penalties to be imposed on each should be considered together.

Ground 8 - costs

76    Section 570(1) of the FWA provides that a party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under the FWA may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with s 570(2) (or other provisions which are not relevant here). Section 570(2)(b) gives the court a discretion to order costs against a party if the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs.

77    Mr Enkel sought his costs of the proceeding before the industrial magistrate on the basis that WRF's defence was wholly without merit and so to maintain it was an unreasonable act within the meaning of s 570(2)(b) which caused Mr Enkel to incur costs. He submitted that the matter was defended solely on the basis of a misconceived submission that WRF was not an employer to whom the Award applied as it was not in the 'banking, finance and insurance industry' as defined in the Award. He submitted that WRF relied on irrelevant decisions about the construction of awards, maintained that the Award needed to be tendered into evidence, failed to lead evidence about WRF's business activities and failed to challenge business records which Mr Enkel put into evidence.

78    In dismissing Mr Enkel's claim for costs, the industrial magistrate did not exercise the discretion against Mr Enkel; she found that it did not arise, because the requirement of an unreasonable act or omission causing the costs was not satisfied here. Her Honour took three things into account in reaching that finding: (1) the onus of proving the claim was on Mr Enkel and WRF was not required to help him do that, but it was entitled to put him to proof; (2) Mr Enkel had failed to prove his claim against Mr Ross; and (3) WRF's forensic decisions were a matter for it, and the question for the court was whether there was an unreasonable act or omission causing Mr Enkel to incur costs.

79    Her Honour also had regard to what she considered to be the fact that the parties conducted the litigation efficiently, without protracted or irrelevant cross-examination or prolix submissions. Her Honour considered that while some of WRF's legal arguments may have been misguided, there were sufficient prospects of its defence being successful that it was not an unreasonable act or omission causing legal costs for WRF to maintain that defence.

80    The ground of appeal attacks these findings on the basis that it was irrelevant to take into account the manner in which the parties conducted the proceeding, and to take into account the fact that Mr Enkel had not succeeded against Mr Ross. The ground also alleges that, having concluded that some of the legal arguments were misguided, it followed that the precondition in s 570(2)(b) was satisfied and the industrial magistrate should then have considered whether to exercise the discretion thus arising.

81    In submissions in this court Mr Enkel made it clear that the alleged unreasonable act was to defend the matter on the basis that it was not covered by the Award when that defence was doomed to fail. Counsel for Mr Enkel submitted that WRF defended the matter wholly on the basis that it was not an employer in the banking, finance and insurance industry and so was not covered by the Award. He said that this defence was 'hopeless', 'incompetent' and 'unsupportable', particularly in light of admissions that WRF had made in its defence to the effect that Mr Enkel's duties included meeting with customers to discuss options and products for vehicle finance and insurance and processing applications for vehicle, finance and insurance, and that the title of his role was ' finance and insurance consultant'.

82    Gilmour J conveniently summarised the principles applicable to s 570(2)(b) in Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd (No 2) [2015] FCA 1509 as follows (most citations removed):

[8]    The purpose of s 570 is to ensure that litigants, including respondents, are not deterred from 'complete[ly] and robust[ly]' defending claims for contravention.

[9]    In light of this purpose, 'costs will rarely be awarded under [s 570] and exceptional circumstances are required to justify the making of such an order'. Courts should be particularly cautious before finding that a party has an [sic] engaged in an unreasonable act or omission, lest that discourages parties from pursuing litigation in the manner which they deem best.

[10]    That a party has a 'self-evidently weak case' is not enough to warrant a costs order. There must be 'a higher level of criticism or disapprobation. Indeed, costs were not awarded against the FWO in Fair Work Ombudsman v Valuair Ltd (No 3) [2014] FCA 1182 even though elements of the FWO's case were 'artificial and unsatisfactory' and 'potentially bizarre'.

[11]    Where a party relies on s 570(2)(b), the Court must be satisfied of two matters: there must be an unreasonable act or omission; and that act or omission must have 'caused' costs to be incurred.

[12]    The pursuit of a case by a party in circumstances where, on the materials before the party at the time, there was no substantial prospect of success may constitute an unreasonable act or omission. However, that an argument is ultimately not accepted does not mean it is unreasonable to put it.

83    To this it may be added that whether a party has conducted itself or its litigation in such a way as to cross the threshold will depend on the particular circumstances of the case: Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143; (2008) 170 FCR 574 at [28].

84    In my view, Mr Enkel has not established that the manner in which WRF defended the claim amounted to an unreasonable act which caused Mr Enkel to incur costs. In the Liability Judgment, the industrial magistrate recorded the basis on which WRF and Mr Ross defended the case as follows:

[4]    The Company and Mr Ross (the Respondents) dispute the claim. First, the Respondents deny the Banking Modern Award (or any award) applied in circumstances where the Company is not an employer within banking [sic], finance and insurance industry, but provides labour on an on-hire basis to car dealerships to process the finance and insurance contracts made between car dealerships, vehicle purchasers and finance providers. To that end, the Respondents say Mr Enkel's role was to complete documents on behalf of the car dealerships and vehicle purchasers and submit the documents to a finance or insurance provider.

[5]    Secondly, the Respondents dispute the span of hours Mr Enkel says he worked and the Respondents claim that Mr Enkel was paid all entitlements owed under the relevant employment contracts.

[6]    Thirdly, at the end of Mr Enkel's evidence, the Respondents made a 'no case to answer' submission on the basis that there was no evidence of the industries to which the Banking Modern Award applied and no evidence of the Company's business within any relevant industry.

85    The following observations can be made about those matters:

(1)    The basis of the defence described in [4] was self-evidently weak. But it was not so unarguable that to put it made the act of defending the proceeding an unreasonable act. The nub of the argument was that WRF hired people out to the car industry, not to the finance industry. That was an arguable point, albeit one that was unlikely to succeed.

(2)    The defence described at [5] was a factual one, of which no criticism has been made.

(3)    The basis of the no case to answer submission was at least partly misconceived, in that evidence of the industries to which the Award applied was not necessary - it was a matter of the proper construction of the Award. But the submission was also partly based on putting Mr Enkel to proof. WRF led no evidence and it is clear from the industrial magistrate's reasons as a whole that it sought to rely on the fact that Mr Enkel had limited visibility of what its operations were, and could only really speak of what his own role involved. That was a forensic approach which it was open to WRF to take, especially in a case where civil penalty proceedings were pursued against it.

(4)    The admissions cannot have been as conclusive as Mr Enkel submitted on appeal, because he still made the forensic decision to adduce evidence to prove his case including that WRF and he were covered by the Award. Mr Enkel conceded before the industrial magistrate that in order to determine the coverage of the Award it was still necessary to consider the evidence and make findings concerning the business of the company and the role Mr Enkel performed in that business (see Liability Judgment at [12]). Her Honour only reached conclusions in his favour after a detailed review and consideration of that evidence (Liability Judgment at [29]-[51]).

86    Taking those matters into account, and taking into account the caution with which the court should approach any finding that a party has acted unreasonably, I do not consider that it was unreasonable within the meaning of s 570(2)(b) for WRF to defend the matter on these bases.

87    Even if that is wrong, there is no reason to suppose that doing so caused Mr Enkel to incur costs. He was still required to adduce the evidence necessary to establish the contraventions and Mr Ross's knowing involvement in them. Further, establishing precisely what the entitlements were in the circumstances and establishing Mr Ross's involvement and knowledge would still have been necessary.

88    In his written submissions before the industrial magistrate, Mr Enkel attached a schedule of costs incurred which shows that the costs were largely required for drawing up the statement of claim (which would have been necessary regardless of what defences were subsequently raised), preparing for and attending a half day trial on liability, and preparation of the case on penalty (and there is and can be no complaint about WRF's opposition as to that). A half-day hearing would have been necessary in any event; I am not persuaded that the costs would have been any lower if WRF had not made the largely legal arguments which Mr Enkel now characterises as unsupportable or misconceived.

89    I do not uphold ground 8.

Conclusion

90    The industrial magistrate's orders as to payment of ordinary pay, overtime and penalty rates and accrued untaken annual leave must be set aside and replaced with orders requiring WRF to pay the relevant amounts, and annual leave loading calculated without setting off the locum payments and with the amounts of pre-judgment interest and, possibly, superannuation, adjusted.

91    Within seven days the parties should bring in a minute of consent orders or, if necessary, competing minutes reflecting the necessary calculations.

92    In relation to penalty, the order providing for a total penalty of $20,500 will be set aside and the matter remitted to the WAIMC to determine the penalties against each of WRF and Mr Ross according to law.

93    It appeared from the notice of cross-appeal and from oral submissions that, despite s 570, Mr Enkel reserved the right to seek the costs of the appeal. The parties must make any application for such costs within seven days, which they may do by directing an outline of written submissions of no more than three pages in length to my chambers. If such a submission is received within that time, further directions will be made and no order adverse to the other parties will be made without giving them an opportunity to be heard.

Associate:

Dated:    18 November 2020