FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 4) [2021] FCA 1242

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to the applicant to file and serve a second further amended originating application and a second further amended statement of claim in the form of annexures ST-47 and ST-48 to the affidavit of Sharissa Thirukumar affirmed on 22 December 2020.

2.    Leave also be granted to the applicant to amend the second further amended statement of claim to incorporate in paragraphs 152, 153, 159 and 160 the following additional cross-references: 47HP, 53HP, 59HP and 65HP.

3.    By 21 October 2021, the applicant file and serve the second further amended originating application and statement of claim incorporating the above amendments.

4.    By 28 October 2021 the applicant file and serve further submissions and, if necessary, affidavit evidence, particularising in detail the steps taken by Mr Ronnie Wong that enabled him to reach the conclusion that the base hourly rates at all relevant times were as set out in the table to paragraph 4 of his fourth affidavit affirmed on 22 December 2020.

5.    By 4 November 2021, the second respondent file any amended defence in response to the amendments made in the second further amended statement of claim.

6.    By 25 November 2021, the second respondent file and serve any affidavit evidence in response to Mr Wong’s fourth affidavit and any further affidavit filed as a result of order 4 above.

7.    The parties use their best endeavours to agree on orders giving effect to these reasons, including the amount of the underpayments.

8.    The matter be referred to Senior National Judicial Registrar Priestley to assist the parties to reach agreement.

9.    If the parties are unable to reach agreement by 16 December 2021, pursuant to s 54A of the Federal Court of Australia Act 1976 (Cth) Senior National Judicial Registrar Priestley be appointed as a referee to conduct an inquiry into the following questions in accordance with these reasons and to provide a written report to the Court setting out her opinion on those questions and her reasons:

(a)    With respect to minimum wages, public holidays worked, Monday to Saturday overtime and Sunday overtime worked:

(i)    What amounts should have been paid to each of the Massage Therapists during his or her period of employment with the first respondent?

(ii)    Comparing the agreed amounts paid to each of the Massage Therapists during their employment with the amounts they should have been paid, to what extent was each of them underpaid?

(b)    With respect to accrued untaken annual leave, comparing the agreed amount of untaken annual leave each of the Massage Therapists had at the time their respective periods of employment with the first respondent ended with the amounts they should have been paid in accrued untaken annual leave, to what extent was each of them underpaid?

10.    The parties be provided with an opportunity to make further submissions on these questions to the referee in accordance with any directions she may make.

11.    The matter be listed for further case management within seven (7) days of the provision to the Court of the referee’s report.

12.    Leave be granted to apply on three (3) days’ notice.

THE COURT NOTES THAT:

13.    In these orders:

(a)    the term “Massage Therapists” is a reference to the former employees of the first respondent listed in para 4 of this judgment;

(b)    “the agreed amounts paid to each of the Massage Therapists during their employment” are the amounts recorded in column 5 of tables 2, 3, 4 and 5 of annexure A to the amended statement of claim and reproduced in all subsequent iterations of the applicant’s pleading including in annexure A to the second further amended statement of claim; and

(c)    “the agreed amount of untaken annual leave each of the Massage Therapists had at the time their respective periods of employment with the first respondent ended” is a reference to the amount appearing alongside the names of the Massage Therapists in column 2 of table 7 in annexure A to the amended statement of claim and reproduced in all subsequent iterations of the applicant’s pleading including in annexure A to the second further amended statement of claim.

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

Table of Contents

REASONS FOR JUDGMENT

KATZMANN J

INTRODUCTION

1    In September 2017 the Australian Parliament passed the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (Cth). The amendments included in the Bill were made in response to community concerns about the exploitation of vulnerable workers. Among the most vulnerable are foreign workers on temporary visas. This case is concerned with the wages and conditions of employment of seven such workers before the amendments were introduced.

2    Foot & Thai Massage Pty Ltd (in liquidation) (FTM) was the owner and operator of a therapeutic massage shop which traded as “foot&thai”. In this proceeding the Fair Work Ombudsman alleges that FTM contravened the Fair Work Act 2009 (Cth) (FW Act or Act) in numerous respects and that Colin Kenneth Elvin, the sole director of FTM, and Jun Millard Puerto, an employee of FTM who was responsible for supervising other FTM employees, were involved in most of these contraventions.

3    Numerous contraventions are pleaded in the Ombudsman’s statement of claim. The alleged contraventions include underpayment of wages to employees recruited from the Philippines to work for FTM as massage therapists; breaches of the National Employment Standards and other terms and conditions of employment prescribed by the FW Act; threats of retribution in the event that the employees complained about their situation; and poor and misleading record-keeping.

4    In alphabetical order the employees in question are Irene Amacio; Cristina Bantilan; Ruben Benting; Delo Be Isugan; Mayet Ortega; Janice Castaneda (formerly Mapute); and Cyrene Sarto. For convenience, from now on, when I refer to them collectively, they are the Massage Therapists or Therapists.

5    The Ombudsman seeks various forms of relief, including declarations, orders for compensation, and pecuniary penalties.

6    Liability is disputed.

7    In its defence FTM claimed that it could not be subjected to any order for underpayment of wages because it was a party to a deed of company arrangement executed on 11 April 2016 in respect of which each of the Massage Therapists lodged a formal proof of debt or claim and was paid for unpaid wage and annual leave entitlements and that the deed extinguished any claims or debts of those employees. Otherwise, for various reasons, FTM claimed that it did not know and could not plead to many of the matters alleged against it.

8    Mr Elvin and Mr Puerto also filed defences, initially raising the privilege against self-exposure to a penalty. After the Ombudsman’s witnesses gave evidence, Mr Elvin amended his defence. Mr Puerto did not. Although he was present for the duration of the proceeding, he elected to play no active part in it.

9    The proceeding has had a long and unhappy history.

10    On 13 August 2019, well after the matter had been listed for hearing and the Ombudsman had filed her evidence on liability, FTM appointed external administrators and resolved to wind up the company. On 26 September 2019 I made orders under s 500(2) of the Corporations Act 2001 (Cth) granting the Ombudsman leave to proceed against the company in liquidation: Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) [2019] FCA 1601. That brought to an end FTM’s participation in the proceeding. The liquidator chose not to appear or file submissions.

11    The hearing began in October 2019. At that time, only the Ombudsman’s evidence was presented. All former FTM employees whose affidavits were read were required by Mr Elvin for cross-examination and all except Ms Ortega and Ms Sarto were cross-examined. After the testimony of the last of the Ombudsman’s witnesses was received, orders were made, amongst other things, providing for the respondents to file any amended defences, affidavits, and submissions.

12    The orders afforded the respondents nearly two months to file amended defences and nearly four months for them to put on evidence. The orders were not complied with. The history is summarised in Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 2) [2020] FCA 348.

13    Ultimately, Mr Elvin did file an amended defence in which he waived the privilege. He also filed a number of affidavits. Mr Puerto did not file an amended defence and did not go into evidence. Nor did he cross-examine any of the witnesses or make any submissions.

14    The trial was due to resume in April 2020 but was adjourned until December 2020, largely because of difficulties occasioned by the COVID-19 pandemic. On that occasion, at Mr Elvin’s request, most of the Ombudsman’s witnesses were recalled for further cross-examination and Ms Sarto, who had not previously been required for cross-examination, was now required. Mr Elvin and his witnesses were also cross-examined on their affidavits.

THE STATUTORY FRAMEWORK

15    Section 44(1) of the FW Act prohibits a national system employer from contravening a provision of the National Employment Standards (NES). This subsection is a civil remedy provision: see Pt 4–1. A national system employer is defined in s 14 to include a constitutional corporation. A constitutional corporation is a corporation to which s 51(xx) of the Constitution applies (s 12), that is to say, a foreign corporation or a trading or financial corporation formed within the limits of the Commonwealth.

16    The NES appears in Pt 2–2 of the Act. It sets minimum standards of employment “which cannot be displaced” (s 61). Those minimum standards relate to a number of matters. Relevantly, they include maximum weekly hours of work (Div 3); annual leave entitlements (Div 6); public holiday entitlements (Div 10); and the provision of a Fair Work Information Statement (Div 12).

17    A person is prohibited from contravening a term of a modern award (s 45), provided that the award applies to the person (see s 46). A modern award applies to an employee and an employer if it covers them, is in operation, and no other provision of the Act provides or has the effect that the modern award does not apply to them (s 47). Unless the modern award has ceased to operate (see s 48(4)), a modern award covers an employee and employer if the award is expressed to cover them (s 48(1)) or a provision of the Act, an order of the Fair Work Commission made under the Act, or an order of a court so provides or has that effect (s 48(2)).

18    Sections 62 and 90 set some of the minimum standards under the NES.

19    Section 62 imposes a ceiling on the number of hours an employee may be required to work. It relevantly limits the hours of work an employer may request or require of a full-time employee to 38 hours unless the additional hours are reasonable and gives an employee the right to refuse to work such additional hours as are unreasonable. It also prescribes a list of factors that must be taken into account in determining whether the additional hours are reasonable or unreasonable as the case may be.

20    Section 90(2) requires an employer to pay an employee for any period of paid leave an employee has not taken when the employee’s employment comes to an end.

21    The FW Act also provides for other conditions of employment.

22    Section 323(1)(a) requires a national system employer to “pay an employee amounts payable to an employee in relation to the performance of work… in full, except as provided by s 324”. Amongst other things, the amounts include the following if they become payable during a relevant period: loadings; overtime or penalty rates; and leave payments.

23    Section 324 permits an employer to deduct an amount from an employee’s wages or salary provided they are authorised in writing by the employee or by law or court order to do so and the amount of the deduction is specified.

24    Section 325 prohibits an employer from requiring an employee, directly or indirectly, “to spend any part of an amount payable to the employee in relation to the performance of work if the requirement is unreasonable in the circumstances”.

25    Section 326 provides that terms in an award, enterprise agreement or contract of employment have no effect if they allow an employer to deduct an amount from an employee’s wages or salary or to make a payment to an employer if the deduction or payment is for the benefit of the employer or a related party and is unreasonable in the circumstances.

26    Section 327 relevantly provides that in proceedings for the recovery of an amount payable to an employee in relation to the performance of work:

(b)    any amount that the employee has been required to spend contrary to subsection 325(1), or in accordance with a term to which subsection 326(3) applies, is taken never to have been paid to the employee.

27    Section 340 prohibits an employer from taking adverse action against an employee, including by dismissing or threatening to dismiss the employee, amongst other things, to prevent the exercise by the employee of a workplace right. Section 351 prohibits an employer from taking such action for various reasons including the employee’s race, national extraction or social origin. Section 343 relevantly prohibits an employer from taking or threatening to take action against an employee with intent to coerce the employee from exercising a workplace right. These sections create some of the “general protections” for which the FW Act provides.

28    The FW Act and the Fair Work Regulations 2009 (Cth) (FW Regulations) also impose obligations on employers with regard to the records that must be made and kept and the use to which they may be put and the issuing and content of pay slips.

29    Accessorial liability is covered by Pt 4–1 Div 4.

30    A person who is “involved” in the employer’s contraventions within the meaning of s 550 of the Act is equally liable for those contraventions.

31    Section 793 (in Pt 6–5) deals with the liability of corporations. In substance, it deems certain conduct engaged in by officials of a body corporate or by others at their direction or with their consent or agreement to be action also engaged in by the body corporate. It also provides for a simple method of establishing knowledge, intention, opinion, belief or purpose.

32    All these provisions were in force at all relevant times. Statements in these reasons concerning the content of these and other provisions of the Act and Regulations are intended to apply to the period of the Ombudsman’s claim regardless of the tense of the verb used to introduce them.

THE OMBUDSMAN’S CLAIMS AGAINST FTM

33    The Ombudsman alleged that FTM contravened the FW Act in the following respects.

34    First, the Ombudsman alleged that in around late August 2012 to early September 2012 Mr Elvin and Mr Puerto advised Ms Amacio, Ms Bantilan and Ms Isugan that they would be required to repay FTM $800 in cash each fortnight because FTM’s business located at shop 6, 36 Weedon Close Belconnen (the Belconnen shop) was not earning enough money and not getting enough customers and that, on and from 26 August 2012 until about 2 June 2013, FTM, through Mr Elvin and Mr Puerto, instructed them to do so. Similar allegations were made with respect to Ms Castaneda, Ms Ortega and Ms Sarto. The advice was said to have been given to them on or about 11 April 2013 and the instruction in the period on and from 21 April 2013 to 5 January 2014. Payments purportedly made pursuant to the instructions were described in the Ombudsman’s pleadings as “Fortnightly Cashback Payments”.

35    The Ombudsman alleged that this conduct contravened s 325(1) of the FW Act.

36    Second, the Ombudsman alleged that the deductions from the wages payable to the Massage Therapists for “staff loans” were impermissible deductions and that FTM thereby contravened s 324 of the Act.

37    Third, the Ombudsman alleged that, having regard to s 327 of the Act, as a result of the fortnightly payments and the deductions for loan repayments, the ordinary hourly rates paid to the Massage Therapists were below the award rates. The Ombudsman contended that the Massage Therapists were covered by the Health Professionals and Support Services Award 2010 (Health Award) or, alternatively, by the Hair and Beauty Industry Award 2010 (Hair and Beauty Award).

38    Fourth, the Ombudsman alleged that FTM did not always pay the Massage Therapists overtime when they worked in excess of 76 hours a fortnight in contravention of the relevant award.

39    Fifth, the Ombudsman alleged that FTM failed to pay the Massage Therapists public holiday rates in contravention of the relevant award.

40    Sixth, the Ombudsman alleged that FTM failed to pay the Massage Therapists on termination of their employment their annual leave entitlements in contravention of the relevant award and s 90(2) of the FW Act.

41    Seventh, the Ombudsman alleged that FTM failed to give each of the Massage Therapists a Fair Work Information Statement before, or as soon as practicable after, they commenced employment in contravention of s 125(1) of the FW Act.

42    Eighth, the Ombudsman alleged that FTM required or requested the Massage Therapists to work unreasonable additional hours in contravention of s 62(1) of the Act.

43    The basis of this claim was that the Massage Therapists were required to work more than 38 hours a week without receiving their minimum entitlements to overtime under the relevant award; they were not supervising or managing other employees; and there were risks to their health and safety from working the number of hours they worked on average each week.

44    Ninth, the Ombudsman alleged that there were a number of contraventions relating to the making and keeping of records the provision of pay slips.

45    The Ombudsman claimed that, in contravention of s 535(1) of the FW Act and regs 3.34, 3.36(1), and 3.40 of the FW Regulations, FTM failed to record:

(1)    the number of overtime hours worked by each of the Massage Therapists each day and when they started and ceased working overtime hours;

(2)    the amount of annual leave taken by the Massage Therapists and the balance of their respective entitlements to annual leave from time to time; and

(3)    the manner of termination of their employment and the name of the person who acted to terminate their employment.

46    The Ombudsman claimed that from the fortnightly pay period commencing 31 March 2014 until the end of their respective periods of employment, in contravention of s 536(1) of the FW Act, FTM failed to provide the Massage Therapists with pay slips within one working day of paying them, or at all.

47    The Ombudsman also claimed that, in contravention of s 536(2) of the Act, during the period in which FTM made deductions from their pay it failed to record on the pay slips the name, or the name and number, of the fund or account into which each of the deductions was paid as prescribed by reg 3.46(2) of the FW Regulations.

48    Furthermore, the Ombudsman claimed that, in contravention of reg 3.44(1) of the FW Regulations, FTM failed to ensure that the records were not false or misleading because they did not disclose the fortnightly cashback payments.

49    She also claimed that, by failing to disclose the fortnightly cash refunds when it produced its pay records to the Ombudsman in answer to a notice to produce, FTM made use of entries in the pay records knowing that they were false or misleading, in contravention of reg 3.44(6) of the FW Regulations.

50    Finally, the Ombudsman pleaded contraventions of the general protections provisions of the FW Act.

51    The Ombudsman claimed that FTM contravened ss 340(1)(b) and 343(1)(a) of the Act by threatening to send the Massage Therapists back to the Philippines and to take reprisals against their families if they complained to the authorities about working conditions.

52    She also claimed that FTM took adverse action against the Massage Therapists because of their Filipino race, national extraction and/or “social origin” in contravention of s 351 of the Act.

THE EVIDENCE

53    The evidence was lengthy. It consisted of a large volume of documents and a substantial body of oral evidence. The Court Book alone ran to nearly 5,000 pages.

The Ombudsman’s evidence

54    The Ombudsman read affidavits sworn by eight former FTM employees: the seven Massage Therapists and Bartolome Durado, another employee. As I mentioned earlier, all but Ms Ortega were cross-examined by Mr Elvin. Each witness except for Mr Durado gave evidence with the assistance of an interpreter. The Ombudsman also read affidavits of Luke Thomas, a Fair Work Inspector and Team Leader, and Ronnie Wong, an Assistant Team Leader in the Calculations Team at the Office of the Ombudsman. Mr Wong was required for cross-examination. Mr Thomas was not.

55    Not all the evidence was controversial. Much of it was uncontradicted.

56    Employees recruited from the Philippines commenced employment with FTM in two separate groups. There were about 14 massage therapists in the first group and seven in the second. The first group arrived in Australia on 19 June 2012. Included in that group were Ms Amacio, Ms Bantilan, Mr Benting and Ms Isugan. The evidence indicates that a number of the other members of the group returned to the Philippines before this proceeding was instituted. The second group arrived in Australia on 13 April 2013. It included Ms Castaneda, Ms Ortega and Ms Sarto.

57    Mr Durado immigrated to Australia from the Philippines in 1990 and worked for FTM from 22 August 2014 until 26 October 2015, performing cleaning, maintenance work and some administrative tasks. The Ombudsman makes no claims with respect to him. His evidence corroborated the evidence of the Massage Therapists.

The first group

58    All the Therapists in both groups were born in the Philippines.

59    Ms Isugan was born in Cebu. Her first language is Cebuano. She can speak Tagalog and English but has some difficulty understanding spoken English. She started working as a massage therapist in Cebu in 2005, when she was about 17. When she accepted employment with FTM she was working 12 hours a day, six days a week, earning the equivalent of around $35 per week.

60    Ms Amacio and Ms Bantilan worked for the same business.

61    Ms Amacio was born in Leyte. Her first language is also Cebuano. She can also speak Tagalog and English well but has some difficulty understanding spoken English. She finished high school in the Philippines and started working as a massage therapist in 2006 when she was about 20 years old. Her husband and two young children live in Cebu.

62    Ms Bantilan was born in Daanbantayan. She speaks Cebuano, Tagalog and English but sometimes finds spoken English difficult to understand. She finished high school when she was 17 and also started working as a massage therapist in Cebu when she was about 20. Her husband and two children, aged eight and ten at the time she swore her affidavit, live in Cebu.

63    Mr Benting was born in Cadiz City. He can speak Cebuano, Tagalog, Hiligaynon and English, although he has some difficulty understanding spoken English. He finished high school in the Philippines and completed a Bachelor of Elementary Education at a university in Cebu in 2009. He started working as a massage therapist in Cebu in 2010, when he was about 22. He earned the equivalent of around $40 a week. His parents and siblings live in the Philippines.

Recruitment of the first group

64    In November 2011 Mr Elvin was visiting the Philippines and had a massage at the business where Ms Isugan and Ms Bantilan worked. Later that day, after Ms Isugan and Ms Bantilan had finished work, they were approached by an uncle of Mr Elvin who introduced them to Mr Elvin Mr Elvin asked them if they wanted to work for him in Australia and invited them to a meeting that night at the Marriott Hotel in Cebu to discuss the matter. Mr Benting was separately invited to this meeting but did not attend. Approximately 15 people attended the meeting, including Mr Elvin and his father, Colin Godfrey Elvin (Elvin Snr). Mr Elvin explained that he was advertising for full-time massage therapists in Australia, with free accommodation, a free plane ticket to Australia, and a salary of $52,000 per year including sick leave and holiday pay. Both Ms Isugan and Ms Bantilan were interested as it offered them the chance of earning substantially higher wages than they were earning in the Philippines. Accordingly, they gave Mr Elvin their contact details. In December 2011, Ms Isugan and Ms Bantilan met with Mr Elvin again for an “interview” in which they gave him a massage. He said he would contact them about the role shortly thereafter.

65    In January 2012, Mr Benting attended a meeting at the SM Mall in Cebu where he met Mr Elvin and Mr Puerto. He had been encouraged to go to the meeting by some of his workmates. At the meeting, Mr Elvin offered him a job as a massage therapist in Australia on similar terms. Mr Benting told Mr Elvin he was interested in the job and gave him his contact details. Mr Elvin said that his father had been impressed by a massage Mr Benting had given him, so he would hire Mr Benting.

66    In around January or February 2012, Ms Isugan, Ms Bantilan and Mr Benting attended another meeting with Mr Elvin and Mr Puerto and about 12 other massage therapists at the Radisson Blu Hotel in Cebu. Mr Elvin told the group that they had been hired to work for him in Australia and that Mr Puerto would assist them to obtain Australian visas. At this meeting, Mr Puerto asked them whether they needed to borrow any money to arrange their visa documents. He told them Mr Elvin was willing to lend them some money but they would have to pay it back from their salaries when they started working. Before they emigrated, Ms Bantilan borrowed the equivalent of about $500 to 600, Ms Isugan borrowed the equivalent of around $350, and Mr Benting borrowed the equivalent of $80. Mr Elvin maintained that he loaned them substantially more than this but provided no evidence to support his contention.

67    In February 2012, Mr Puerto contacted Ms Amacio and asked if she would like to work in Australia with Mr Elvin. One of her colleagues had provided Mr Elvin with her telephone number. Ms Amacio met Mr Puerto at the National Statistics Office where she obtained a certified birth certificate. This was to assist Mr Puerto to arrange her Australian visa. He explained that another Filipino massage therapist had had problems obtaining a birth certificate and she was being hired instead. He offered her a job as a massage therapist on similar terms to the offers made by Mr Elvin to the others.

68    In around late February or early March 2012, Ms Isugan, Ms Bantilan and Ms Amacio met Mr Puerto at the SM Mall and signed contracts of employment with FTM that had already been signed by Mr Elvin on FTM’s behalf. At this meeting Ms Amacio borrowed the equivalent of $150 from Mr Puerto for living expenses. Ms Bantilan and Ms Amacio recalled that Mr Puerto told them at this meeting that Mr Elvin had paid for them to attend a Thai massage course at the NKYR Academy in Cebu, which they needed to complete in order to obtain a visa. Ms Amacio, Ms Bantilan and Mr Benting completed this course in 2012.

69    In around June 2012, Mr Puerto met with Ms Bantilan at the SM Mall and asked her to sign her employment contract again. On 13 June 2012, Mr Benting signed a similar employment contract.

70    After their visas had been granted, the first group flew to Sydney with Mr Puerto on 18 June 2012. From 19 June to 23 June 2012, the group stayed at 44A Edwards Street, Higgins, where Mr Elvin’s parents lived, before moving to the house at the rear of the premises (44B Edwards Street) (the Residence), on around 24 June 2012 after a group of Thai workers had moved out.

The second group

71    Ms Castaneda was born in Davao City. Her first language is Visayan. She can speak, read and write in Tagalog and English, although has some difficulty understanding spoken English. After completing a Bachelor of Science and Nursing she began working as a massage therapist in Manila in 2008 at the age of about 25. In her last job in the Philippines, she worked eight hours a day, six days a week and earned the equivalent of $240 a month. Her family lives in the Philippines.

72    Ms Ortega was born in Manila. Her first language is Tagalog. She can also speak, read and write in English but sometimes needs assistance to understand spoken English. Ms Ortega completed a diploma in computer programming and a course in massage therapy and started working as a massage therapist in May 2007 when she was 21. Before coming to Australia, Ms Ortega worked eight hours a day, six days a week and earned the equivalent of around $300 a month. Her son, parents and sister live in the Philippines.

73    Ms Sarto was born in Tupi, South Cotabato. Her first language is Tagalog and she can speak, read and write English well. After finishing high school she completed a course in hotel management. She started working as a massage therapist in 2008 when she was about 21 at the same business as Ms Ortega. Before coming to Australia, she earned the equivalent of around $250 a month. Her parents and siblings live in the Philippines.

Recruitment of the second group

74    The second group were recruited by FTM in a similar way to the first.

75    In June and August 2012 Ms Castaneda, Ms Ortega and Ms Sarto each learned that Mr Elvin was advertising positions for massage therapists in Australia. They understood that there was to be a meeting about the matter at the Ascott Makati Hotel in Manila. They each attended this meeting in about August 2012. There, they met Mr Elvin and Mr Puerto. At the meeting Mr Puerto asked them to give Mr Elvin a trial massage. After they did so, Mr Elvin described the position being advertised. He told them they would be paid a salary of $52,000 a year, they would work eight hours a day for five days a week, and would have paid holidays, free accommodation, free utilities, free food, and transport to and from work. Each of them was interested in the position as it promised a substantial increase in their income. They were asked to provide various documents to Mr Puerto in order to obtain Australian visas.

76    In around September or October 2012, Ms Castaneda, Ms Ortega and Ms Sarto attended another meeting with Mr Elvin and Mr Puerto at the Ascott Makati Hotel. At this meeting, they were each offered the position and they each signed an employment contract, which Mr Elvin had already signed. Mr Elvin spoke about the contract in English, with Mr Puerto interpreting. The terms were substantially the same as had been described at the initial meeting.

77    On around 5 April 2013, Mr Puerto asked Ms Castaneda, Ms Ortega and Ms Sarto to attend an employment agency in Manila where they signed the same employment contracts they had already signed. Ms Castaneda said that this was because the employment agency needed a copy of the contract.

78    On 10 April 2013, Ms Castaneda, Ms Ortega and Ms Sarto met Mr Puerto at a hotel near Robinson Mall in Manila where he told them that the business was “not doing very well” and they would not be paid their full salary. He said they would be paid $1800 every fortnight, but would have to pay back $800. He said that they would be paid their full salary when the business “picked up”.

79    After their visas had been granted, the second group arrived in Australia with Mr Puerto on 13 April 2013. They moved into the Residence shortly thereafter.

Accommodation

80    The Massage Therapists lived at the Residence with Mr Puerto. The house had four bedrooms and three bathrooms. Three rooms could fit four people and one room could fit five or six. After the second group arrived in April 2013, there were approximately 16 or 17 people living in the house, with Mr Puerto sleeping in the living room on a couch.

81    Ms Isugan and Mr Benting said they were compelled to live at the Residence; they were not given a choice of living anywhere else. Ms Amacio and Ms Bantilan said that when they moved into the Residence, Mr Elvin confiscated their passports. Mr Elvin challenged Ms Bantilan (but not Ms Amacio) on this matter, but she maintained that he had.

82    Ms Amacio, Ms Bantilan, Ms Isugan and Mr Benting deposed that they were not allowed to leave the Residence for the first seven or eight months other than to go to work. They said this was because Mr Elvin was concerned about immigration officials discovering that they were living at the house. In cross-examination Ms Isugan and Ms Bantilan said that they were only confined to the Residence for the first three months.

83    From around late 2012 or early 2013, Ms Amacio, Ms Bantilan, Ms Isugan and Mr Benting said they were permitted to leave the house on their days off but they had a curfew of 3 pm. They said this curfew was extended to 5 pm or 6 pm later in 2013, and to 7 pm or 8 pm in 2014. Ms Ortega and Ms Castaneda deposed that when they arrived in April 2013 the curfew was 7 pm. In cross-examination Ms Amacio testified that the curfew was ultimately lifted, as opposed to being further relaxed, but she could not recall when this occurred.

84    There was a gate at the side of 44A Edwards Street that provided access to the Residence. The Massage Therapists deposed that they could not leave the Residence without the gate being opened for them. They said that the gate was locked at around 11 pm each night and opened in the morning before they left for work. They said that “Colin’s mum”, Mrs Elvin, Mr Elvin or Mr Puerto would lock the gate and the therapists did not have access to the key.

85    Mr Elvin put to some of the Therapists (Ms Amacio, Ms Bantilan, Ms Castaneda and Ms Isugan) that the gate was not actually locked but was merely bound by a chain to give the appearance that it was locked. But they were resolute. Each of them maintained that the gate was locked overnight. In addition, Ms Isugan said that if they wanted to do exercises in the morning, or leave the Residence on their days off, they needed to ask Mrs Elvin to open the gate. Ms Castaneda and Ms Bantilan testified that if they left the Residence on their days off and Mrs Elvin was not at home when they returned, they would need to wait for her to return to open the gate, or call Mr Puerto to do the same.

Rules and threats

86    The Massage Therapists deposed that there were a number of rules they were required to observe. The rules prohibited them from having friends, including boyfriends or girlfriends; speaking to anyone about their pay and conditions; leaving the house at night; bringing their mobile phones to work; speaking Filipino at work or letting the customers know they were not Thai; drinking alcohol or soft drinks; eating junk food or white rice; and complaining “about anything”. Mr Elvin told them that if they did not follow the rules, or if they knew someone who was breaking a rule and did not report it, they would be sent back to the Philippines. These rules were regularly repeated during staff meetings between 2012 and 2015, and Mr Puerto would interpret these rules into Cebuano or Tagalog.

87    Some of the therapists (Ms Castaneda, Mr Benting and Ms Bantilan) deposed that Mr Elvin instructed them to tell immigration officials, in the event of an inspection, that they worked eight hours a day for five days a week, with a 30 minute break, and received holiday pay and a salary of $52,000 a year. They said he also them told not to record their actual hours of work. Consistent with the rules and these instructions, when police and immigration officials attended the Belconnen shop in around July 2012, Ms Bantilan told them she was “happy and the work was good”. Ms Amacio and Ms Bantilan said that Mr Elvin returned their passports after he was informed of the inspection.

88    In July 2012, Mr Elvin made threats to the first group that if they told anyone about their pay and conditions at FTM, including their families or immigration officials, he would arrange for their families in the Philippines to be killed. Mr Elvin told the therapists that it would be “easy” for him to pay someone to do this and Ms Amacio and Mr Benting deposed that he said it would only cost him 10,000 pesos. These threats were made during a late night meeting with the first group that lasted until 4 am. Mr Elvin was “very angry” during the meeting, and screamed and swore at the therapists. Mr Puerto translated what Mr Elvin was saying into Cebuano and at one point, according to Ms Amacio, made a gesture to the group with his finger as if he was slicing his throat. Earlier in the night Mr Elvin had driven the group home from the Belconnen shop “very fast” while swerving from one side of the road to the other. He was apparently angry that one of the therapists had spoken to a Filipino customer in Tagalog, and yelled at the group about the rules he expected them to follow.

89    Mr Elvin made similar threats to hurt the Therapists’ families or send them home to the Philippines during subsequent meetings between 2012 and early 2014. Although the Massage Therapists from the second group did not say that Mr Elvin directly threatened to have their families killed, they were each aware that threats of this nature had been made to the first group.

90    Ms Ortega, for example, said that in around 2013 and 2014 some of the therapists in the first group reported that Mr Elvin told them that if they told anyone about their situation he would hire someone to kill their families at a cost of only 10,000 pesos and they were “very scared of him”. Ms Ortega said that she knew that it was not impossible to hire a killer in the Philippines and she believed what she was told. Ms Sarto deposed that in around late April or May 2013 she had a conversation with Ms Amacio in which she told Ms Amacio that Mr Elvin had “such strict rules” and that she was scared to do the wrong thing and be sent home. Ms Sarto went on to say:

Irene then said to me, words to the following effect: “You must not complain about anything. He is scary. He told us if we say anything to Immigration that he will get someone in the Philippines to hurt and kill our families. He said he will really do it. I think he is serious.”

91    Ms Sarto said she was “even more scared” when she heard that. She added:

[Ms Bantilan] and [Ms Amacio] also told me that if they saw me breaking the rules that they had to tell [Mr Elvin] or [Mr Puerto] otherwise they would get in trouble and be sent home.

92    All the Therapists were afraid of breaking the rules and believed they would be sent home if they did so, or that their families would be hurt or killed. This was reinforced when Mr Elvin sent home several therapists to the Philippines between June 2012 and early 2014 for breaking his rules or for alleged underperformance.

93    All the Therapists were frightened of Mr Elvin, particularly when he was angry. Ms Bantilan deposed that Mr Elvin became angry whenever someone complained about their hours or wages, and Mr Benting said he would often scream and swear at the therapists. Mr Benting testified that he was “more angry than calm” when dealing with his employees. Ms Castaneda said that she was “so scared” because Mr Elvin yelled at them “very easily”.

94    The Therapists understood that Mr Elvin was the owner and manager of FTM and had responsibility for their wages and conditions, and for the hiring and firing of the therapists. Mr Elvin attended the Belconnen shop most days and stayed for four to six hours. There were CCTV cameras outside the massage rooms, in the reception area, and in the staff areas at the shop. The cameras also recorded sound, according to Mr Durado.

95    The Therapists said that Mr Elvin would spend most of his time monitoring the CCTV footage on his computer and reviewing the customer booking records. Ms Sarto said he sometimes went to the staff lounge to tell therapists to do work as he could “see in the cameras that [they] are not working”. Mr Elvin also had regular one-on-one meetings with some of the therapists where he would speak about their performance or the performance of others and tell them how to speak to customers and what to say if immigration officials asked them any questions about their employment at FTM. Ms Castaneda said that Mr Elvin regularly spoke to her about her performance and warned her that, if she did not improve, she would be sent back to the Philippines.

96    The Therapists understood that Mr Puerto was a supervisor at the Belconnen shop and an assistant to Mr Elvin. He did not massage any customers. Mr Puerto would frequently remind the therapists of Mr Elvin’s rules and would pass on or translate his directions. Mr Puerto was at the shop most days and lived at the Residence with the therapists. Ms Sarto, Mr Benting and Ms Bantilan deposed that Mr Puerto would watch them and listen to their conversations, both at the shop and at the Residence. Ms Amacio and Mr Benting said he would confiscate their mobile phones at night and Mr Benting said he checked whether they were asleep and would get angry if they were not. Mr Benting said that their phones were mainly confiscated by Mr Puerto in 2012. After FTM opened another shop in Phillip, ACT, Mr Puerto attended the Belconnen shop less frequently and moved out of the Residence in around November 2014.

Hours and breaks

97    On 24 or 25 June 2012, the first group commenced work at the Belconnen shop. The second group commenced on 15 April 2013. The shop was open from 10 am to 10 pm seven days a week and most public holidays. The closing time was extended to 10.30 pm in around September 2013. Every Massage Therapist worked six days a week, including on weekends and public holidays. Those who were rostered to work on the same day would commute to and from work in a van driven by Mr Elvin, Mr Puerto or occasionally Mr Elvin Snr. Mr Benting and Ms Castaneda deposed that the van did not have enough seats for everyone, so some of them sat on the floor. Ms Castaneda testified that initially the only vehicle that transported the therapists was a seven-seater red Tarago, before Mr Elvin purchased a new van in 2014.

98    They arrived at work at around 9.45 am and began massaging customers at 10 am. They did not finish until the shop closed, after which time they would spend an additional 15 to 30 minutes cleaning massage rooms, showers, toilets and saunas before being transported back to the Residence. This was sometimes not until 11 pm, according to Mr Benting and Ms Sarto.

99    Ms Amacio testified that, when they first arrived in Australia, Mr Elvin told the therapists to limit the amount of massage hours to seven per day. Ms Bantilan said they were told to limit massage hours to five or six during the first two months. Each Therapist reported carrying out more hours of massage than this:

(a)    Ms Amacio and Ms Bantilan said they massaged customers between 8.5 and 9.5 hours a day. However, Ms Amacio said this was only on a busy day;

(b)    Ms Isugan said she completed between seven and 9.75 massage hours;

(c)    Mr Benting testified during cross-examination that he performed up to 9.5 massage hours on a busy day, and a minimum of two to three hours if it was not busy;

(d)    Ms Ortega said she spent between eight and nine hours massaging customers on a busy day, and six to seven on a regular day;

(e)    Ms Sarto said she massaged customers between 8 and 10 hours a day; and

(f)    Ms Castaneda merely said she was working “long hours every day”.

100    The Therapists performed various types of massage, including shiatsu, deep tissue, Swedish, foot reflexology, aroma, Thai oil, Thai massage, remedial, oil and dry massage, and head, shoulders and back massage. Each massage would last between 30 minutes and two hours, and appointments were sometimes scheduled without breaks between customers. Mr Durado said that he saw the Massage Therapists take breaks of between 10 and 30 minutes between customers. The Therapists reported feeling tired and sore due to the workload.

101    In between appointments, the Therapists folded towels, mopped floors, refilled bottles of oils and lotions, cleaned and prepared hot towels for the next customer, and practised their massage skills on Mr Elvin or each other. Ms Isugan testified that there were therapist assistants who would assist with these tasks but they did not start work until 4 pm. She said that even with this assistance, “there [were] always tasks to do…we never stop”. Mr Benting stated that the therapist assistants would sometimes attend in the afternoons, but would only attend the shop daily when it was “very busy”. Ms Castaneda said that there were therapist assistants worked in two shifts, one in the morning and one in the afternoon, but she still had to perform cleaning tasks despite their assistance.

102    The Massage Therapists had breaks for lunch and dinner at different times each day depending on their customer bookings. They usually had a lunch break sometime between 12.30 pm and 1.30 pm, and a dinner break between 4.30 pm and 7.30 pm. They said their breaks lasted between 15 and 30 minutes, although if they were busy, their breaks would only be 10 to 15 minutes, or they had no break at all.

103    Ms Bantilan, Ms Isugan and Mr Benting deposed that throughout 2012 they were not permitted to leave the Belconnen shop during their breaks as Mr Elvin told them that they “always need[ed] to be there for the customers”. For the first three months of this period, Ms Isugan said that Mr Puerto would purchase food for the therapists as required.

104    From early 2013, after the second group arrived, Ms Bantilan, Ms Isugan and Mr Benting said they could leave the shop if they had a vacant slot between appointments and there was no other tasks to do. The therapists were required to ask for permission from the receptionists before they left the shop, and notify them when they returned. Ms Amacio said that the receptionists would review the electronic booking system used to record customer appointments — known as Kitomba — and inform her when she could take her break. Ms Bantilan said that they often had to “beg” the receptionist for a break, and they sometimes refused if there was a customer waiting. According to Ms Isugan and Ms Sarto, when they managed to get a break, the break was never more than 30 minutes.

105    Mr Elvin challenged the therapists extensively on this evidence in cross-examination.

106    Ms Isugan testified that they were not permitted to leave the Belconnen shop for the “first few months”. She said that she did not recall having long breaks between customers because “there were other tasks we had to do”. She maintained that she was massaging at least eight to nine customers per day. She also testified that the time of her lunch break varied according to customer bookings and was not always between 12.30 and 1 pm.

107    Ms Bantilan maintained that she massaged up to 9.5 hours a day, and that she never had breaks between massages of one to two hours. She also said that there were never any times that, after massaging customers for two consecutive hours, she received a break of 30 minutes to one hour. In addition, she said that she was not allowed to leave the Belconnen shop during working hours until after the second group arrived.

108    Mr Benting similarly maintained that the therapists were not allowed to leave the Belconnen shop during working hours until the second group arrived. He conceded that he sometimes had breaks between massages that were longer than 30 minutes and up to two hours if it was not busy. In addition he conceded that he did not always have lunch or dinner at the times specified in his affidavit, and that it depended on his customer appointments on the day. He disputed the accuracy of the Kitomba records.

109    Ms Castaneda said there were times when she had breaks between massages of one or two hours, although noted that she was performing other tasks during these breaks.

110    Ms Amacio denied that she ever had meal breaks of one to two hours. However when her attention was drawn to a Kitomba record from 9 December 2012, she said that it was open to her to have a meal break during a two-hour period between customers. She said she never carried out less than four hours of massage a day. Although Mr Elvin put to Ms Amacio that she never massaged for 9.5 hours a day, the Ombudsman referred the Court to several Kitomba records from April 2014 which showed that she did.

111    Ms Sarto maintained that her appointments were usually booked without any breaks in between customers, despite some Kitomba records indicating otherwise.

Wages and cashbacks

112    The Massage Therapists said that their salaries were paid fortnightly by FTM but the amount was not always the same. They said that the amount was usually between $1,700 and $1,900, but they sometimes received payments of $2,100. The Therapists were unsure why this occurred.

113    Upon their commencement at FTM, Mr Puerto told each therapist to create a bank account with the St George Bank into which their salaries would be paid. In around April 2014, Mr Elvin told the therapists to stop using this account and to instead establish an account with the National Australia Bank (NAB). Thereafter their salaries were paid into that account.

114    Each of the Massage Therapists transferred a significant portion of their salary to their families in the Philippines to assist them with education, health care, and other matters.

115    Within three months of their arrival in Australia, Mr Elvin told the therapists in the first group at a meeting in the Residence that they would need to “give back” $800 each fortnight because “the shop [was] not doing well”. For a period of approximately eight months from about September 2012 and June 2013, every fortnight the Therapists from the first group were required to withdraw $800 in cash from an ATM and provide it to Mr Elvin or Mr Puerto. The Therapists would go to an ATM on their breaks or their days off to make the withdrawals. Occasionally Mr Elvin or Mr Puerto would drive a group of them to an ATM at a nearby shopping mall. After the second group arrived, Mr Elvin told the first group that they would no longer need to pay back any amounts as the business had improved.

116    In a supplementary affidavit, Ms Amacio said that there were at least two occasions when she paid back less than $800 but compensated by paying back more than $800 in subsequent fortnights to make up the difference. Ms Bantilan gave similar evidence, also in a supplementary affidavit.

117    Between April 2013 and January 2014, the Therapists in the second group were also required to withdraw $800 in cash each fortnight and provide it to Mr Elvin or Mr Puerto. In a supplementary affidavit, Ms Castaneda deposed there was one occasion when she did not pay back $800 as she wanted to send that money to her family. She said she repaid the outstanding amount in subsequent fortnights. In January 2014, Mr Puerto informed the therapists that the business had improved and that they no longer needed to pay back any amounts.

Pay slips, loans and deductions

118    Each of the Therapists in the first group deposed that they received pay slips from Mr Elvin or Mr Puerto by hand in 2012 and 2013, that they stopped receiving regular pay slips after 2013, and that in 2015 they received between three and four. The Therapists in the second group similarly reported receiving payslips initially by hand, and not receiving pay slips after mid-2014. The pay slips recorded the Massage Therapists as working 38 hours a week or 76 hours a fortnight, which they said was not consistent with their actual hours of work. None of the pay slips recorded the $800 they paid during the so-called cashback periods.

119    A number of pay slips recorded deductions described as “staff loans”. The relevant pay slips were annexed to the Therapists’ affidavits. The Therapists believed these deductions were to cover the amounts they had borrowed from Mr Elvin in the Philippines, although they all remarked that the deducted amounts were greater than the loans they had received:

(a)    a total of $1,500 was deducted from Ms Amacio’s wages despite receiving a loan of around $150;

(b)    a total of $1,739.44 was deducted from Ms Bantilan’s wages despite borrowing approximately $500 to $600;

(c)    a total of $1,684.93 was deducted from Ms Isugan’s wages despite being loaned approximately $350; and

(d)    a total of $1,500 was deducted from Mr Benting’s wages despite being loaned only about $80.

120    Ms Castaneda, Ms Ortega and Ms Sarto deposed that they never received a loan from either Mr Elvin or Mr Puerto. Yet, Ms Castaneda’s first two pay slips disclose that a total of $638.41 was deducted from her wages. She deposed that Mr Elvin and Mr Puerto told her in the Philippines that they would cover flight, visa and medical costs. Ms Ortega’s first two pay slips similarly reveal that a total of $672.91 was deducted from her wages, despite never receiving a loan or signing any document agreeing for a deduction to be made. Similarly, a total of $638.41 was deducted from Ms Sarto’s wages despite never receiving a loan or agreeing for a deduction to be made. In each case the deductions are recorded as “staff loan[s]”.

121    Mr Elvin cross-examined Ms Isugan about other payments he made to her while in the Philippines, such as payments for dental work, and whether she regarded these payments as “loans”. Ms Isugan said that they believed that Mr Elvin had “volunteered to pay for it, that it was … free”. Mr Elvin questioned Mr Benting, Ms Castaneda, Ms Amacio and Ms Bantilan about other payments he had made to them for airfares, training expenses, birth certificates and security clearances. But in no case did he suggest to them that these payments were loans.

Annual leave

122    The Massage Therapists said they had two weeks of annual leave each year. They took this leave over the Christmas/New Year period when the Belconnen shop was closed. During this time, the Therapists would fly to the Philippines together with Mr Puerto, who would also accompany them on the return journey. Ms Isugan and Ms Bantilan said they paid for their own flights in 2012 and 2013, but Mr Elvin paid for some or all of their airfares thereafter. Mr Benting said Mr Elvin paid for his flights in 2013, 2014 and 2015. Ms Castaneda, Ms Ortega and Ms Sarto said they paid for their own flights in 2013 and Mr Elvin paid for part of them in the following years.

123    Ms Isugan stated that she spent only eight days of annual leave in the Philippines in 2012 and 12 days in 2013.

124    Ms Bantilan suggested that she did not receive a total of 14 days annual leave every year. She said that the “first holiday was about 8 days, the second one was about 10 days, the third one was 14 days, and the fourth one in 2015 was 14 or 15 days”.

125    Ms Bantilan was taken to an apparent inconsistency between this evidence and a statement she made to the Australian Federal Police on 18 April 2016. In that statement, she said she had two weeks annual leave in 2013, rather than 10 days. She clarified that her leave that year consisted of 10 days in the Philippines and two days in Australia. She also accepted there was an inconsistency between her affidavit and another statement she made on 18 January 2018 in which she said that Mr Elvin covered the cost of her annual flights to the Philippines. She said she “might have forgotten to mention” that she paid for her own flights in 2012 and 2013 and that Mr Elvin paid for half the cost of the flights in 2014 and 2015.

Fair Work Information statement

126    Each of the Massage Therapists gave evidence that they were not provided with a Fair Work Information Statement.

End of employment

127    Ms Isugan’s employment with FTM ended on 26 October 2015. She deposed that Mr Elvin dismissed her because she was having a relationship with Mr Durado. Mr Durado was also dismissed. Ms Isugan said that she left the Residence at around 11 pm on 26 October 2015 with only her rosary beads, wallet, iPad and phone. She testified that she thought it was “good luck” the gate was unlocked at the time. In late 2015, she applied for a personal protection order against Ms Elvin, which was granted in early 2016.

128    In November 2015 Ms Isugan lodged an application for unfair dismissal against FTM with the Fair Work Commission. She made a statement for the purposes of this application on 18 January 2018. On 8 March 2019, the Commission found that her dismissal was harsh, unjust and unreasonable and ordered FTM to pay her compensation of $29,228.55.

129    Ms Isugan provided a “Request for Assistance” form to the Ombudsman on 10 December 2015. She said she did not mention the cashbacks because her lawyer at the time did not ask about them.

130    Ms Sarto, Ms Ortega and Ms Castaneda resigned from FTM in late 2015 or early 2016 and did not return after taking annual leave in the Philippines.

131    On 8 February 2016 Mr Benting ended his employment with FTM. He left the Belconnen shop during a break and did not return. He feared for his safety after overhearing Mr Elvin yelling about him and the other therapists who had contacted Legal Aid ACT about their employment at FTM. He said Mr Elvin referred to the others as “traitors against the company for making back wage claims” and called him “crazy” and “an idiot” for complaining about his wages while he was still working for FTM. Mr Elvin did not challenge this evidence in cross-examination or adduce evidence to the contrary. Mr Benting gave the following evidence about his state of mind at the time:

I remember I was scared. I was sweating and shaking in fear. I felt that [Mr Elvin] was capable of anything when he was angry and I remembered the threats he made to us. I was in fear of my safety so I decided to leave and not return to the shop. That day I remember saying to the receptionist as I left the shop that I was just going to the mall. I left wearing my uniform and never went back. I did not tell anyone. I was panicking and I was shaking. I did not know what to do or where to go because I had no family in Australia.

132    A few days later, he sent Mr Puerto a text message saying that he no longer wanted to work for FTM.

133    At about 7 am on 12 February 2016 Ms Amacio and Ms Bantilan decided to resign from FTM. They did not tell Mr Elvin or Mr Puerto that they were leaving. They asked Mrs Elvin to unlock the gate to the Residence so that they could attend church. They left most of their belongings behind. Once outside they called Ms Isugan and Mr Durado who came to pick them up. They did not return to the Residence or the Belconnen shop.

134    After leaving FTM, Mr Benting testified that he, Ms Castaneda, Ms Bantilan, Ms Amacio, Ms Ortega and Ms Sarto commenced employment with another massage business, True Balance, which was managed by Ms Sarah Clenci, Mr Durado’s sister. Ms Isugan also confirmed that she now worked there. Ms Amacio and Ms Bantilan said they started working at True Balance shortly after they left FTM.

Mr Elvin’s evidence

135    Mr Elvin read affidavits from himself, his father, his mother, and Ms Palma Yu, a former therapist assistant at FTM. Mr Elvin and each of his witnesses also gave oral evidence, the Ombudsman having required them for cross-examination.

Colin Kenneth Elvin

Background

136    Mr Elvin was born in Canberra. His father is Australian and his mother Filipino. He said he has strong links to the Philippines, a country he estimated having visited more than 30 times. After finishing high school Mr Elvin attended the Australian National University where he studied economics. He conceded in cross-examination that he did not complete his degree, and agreed that his affidavit created a misleading impression that he had.

137    In 2006 Mr Elvin attained a qualification in Thai massage from Watpo Traditional Medical School in Thailand. In 2008 he attained a Certificate IV in Massage from the Australian Institute of Applied Sciences.

138    In February 2008 Mr Elvin established a partnership with Ms Kim Long Liv called Foot & Thai Massage. Mr Elvin testified that he recruited Thai employees from Thai massage parlours in Sydney who held student visas. He said that they were only permitted to work up to 20 hours as a condition of their visas and the business paid for them to catch buses to Canberra on weekends in between their study commitments. He also provided them with accommodation at the Residence and in a rented house in Phillip, ACT. He said that he saw some benefit in employing Thai people to be “authentic”, but noted that they spoke English “extremely poorly”. Mr Elvin described the business as a “massive logistical exercise” given the limited working hours of the employees, the high turnover rate, and the need to transport the employees to and from Canberra. He said that he tried to obtain subclass 457 visas for the employees to allow them to remain in Canberra on a full-time basis but their English was not good enough to qualify for this class of visa.

139    In 2010 Mr Elvin decided to replace the Thai employees with Filipinos. He was aware that Filipinos studied English at school and reasoned that that they would qualify for an exemption to the English language test required for the subclass 457 visa. He also said that the subclass 457 visa did not require a holder to have a formal qualification and that it was sufficient for the holder to have had at least three years of industry experience. Mr Elvin agreed that the product of his decision was to only employ people from one racial group. He denied, however, that he wanted to hire Filipinos because they were vulnerable and would accept inferior terms and conditions, or that they could be controlled and kept in the same location.

140    In 2011 Mr Elvin established FTM as an incorporated company. He was the sole director, secretary and shareholder until early 2016.

Recruitment of the Massage Therapists and Mr Puerto

141    Mr Elvin said that he travelled to Cebu in around December 2011 and Manila in 2012 or 2013 to recruit Filipino therapists. On the first trip he was accompanied by his father and mother. He and his father attended a number of local massage spas and received trial massages from various therapists to identify those with skills of a sufficient quality to work full time at FTM. He also contacted a German national who operated a local massage spa and paid him to recommend any of his own employees to Mr Elvin. Mr Elvin and his father invited a number of the therapists to a meeting at the Marriott Hotel in Cebu to discuss working for him in Australia. Mr Elvin told the attendees of the meeting that he was searching for massage therapists to work at his massage parlour in Canberra. He said that the role was a full-time position with a salary of $52,000 per year working six days a week with an annual two week vacation during which they could travel to the Philippines. Mr Elvin promised to pay for their plane tickets and accommodation and to obtain their working visas in Australia. Despite the terms of the contracts he signed with each of them, he denied telling them that they would work five days per week or that they would receive public holiday penalty rates. He understood that the offers were attractive because the therapists were promised salaries significantly higher than what they were earning in the Philippines. Mr Elvin made similar representations at the Ascott Hotel in Manila during the second visit in 2012 or 2013.

142    In cross-examination Mr Elvin said that he circulated copies of an employment contract to the attendees of the meetings during each of the visits. He testified that he drafted this contract himself by modifying a template he had downloaded from the internet. He testified that he was overwhelmed with paperwork at the time and took “shortcuts” by not getting legal advice. As a result, he said, the contract he drafted was “dodgy”. He claimed to have referred to the Health Award in the contract on the basis of a Google search. He said that he had “skimmed over” that Award and noticed that it referred to “health professionals”. He also read that the Award referred to a remedial masseur as a “common health professional” and considered this was the closest occupation to a massage therapist. He said that massage therapists provided complementary services to health professionals and therefore assumed that they would most likely be covered by the Award as support services employees. He agreed that the contract was to be read in conjunction with the Award and that the employees would be performing duties and responsibilities contemplated by one of the classifications in the Award.

143    Mr Elvin denied that he had identified the Hair and Beauty Award as a relevant award during his searches in 2011. He testified that he only became aware of the Hair and Beauty Award some time after he employed the Massage Therapists and considered that it might apply to them. He contacted the Hair and Beauty Industry Association to seek their advice and was informed that that award would apply to the Massage Therapists but he did not take any steps to ensure that he complied with that award after he received that advice.

144    Mr Elvin conceded that, by giving the Massage Therapists the employment contract, he was conveying to them that they would not have to work more than an average of 38 hours per week. He asserted, for the first time, that he had told the Massage Therapists in the Philippines that the contract was “bodgie” and that it did not reflect what their actual terms and conditions of employment would be at FTM. He said that the contract was merely drafted to fulfil the requirements of the subclass 457 visa. This resulted in the following exchange with the Ombudsman’s counsel, Mr Seck:

[MR SECK:] Do you agree with me that the contract is conveying - - -?

[MR ELVIN:] Yes, the contract is completely wrong and everything is completely wrong in it. I never lied to the staff. I told them exactly the terms of the work. What I did was I just put this bodg[ie] contract in just to get it done, just to get it over the line through immigration. And that’s how this all happened.

[MR SECK:] You said bodg[ie]. Do you mean - - -?

[MR ELVIN:] Well, you know, the contract was just put in as to tick the boxes for immigration.

…

HER HONOUR: So does that mean you were trying to deceive the Department of Immigration?

[MR ELVIN:] Well, yes, your Honour.

…

HER HONOUR: - - - if you – you don’t have to answer the question if you think your answer may incriminate you?

[MR ELVIN:] I wasn’t trying to deceive. I just put in the – I just – as I said, I drafted all of these things really, really quickly because I had so many other things to do. It wasn’t about deceive, it was just, you know, it was just given that way. And I should have checked things, I should have done things properly, I should have went to a lawyer.

MR SECK: You weren’t only deceiving the Department of Immigration, Mr Elvin, you were deceiving the employees. Do you agree?

[MR ELVIN:] No, I told – I told the employees exactly – exactly the arrangements before they came.

[MR SECK:] So when you use the word bodg[ie], you’re – what you’re meaning was that it was a contract that didn’t accurately reflect the true terms of the – true terms of the employment relationship. Is that what you mean by that?

[MR ELVIN:] Yes.

…

[MR SECK:] You don’t say that in any of your evidence. Do you agree?

[MR ELVIN:] Yes.

…

MR SECK: When did you say this to them; before they started employment or after they started employment?

[MR ELVIN:] Before.

[MR SECK:] Was it before or after they signed a contract?

[MR ELVIN:] Before.

[MR SECK:] So you got them to sign a contract which you told them was “bodgie”?

[MR ELVIN:] Yes, and I’ve suffered for that.

[MR SECK:] Did you tell each of the employees that the contract was bodgie?

[MR ELVIN:] Yes. I told everybody, the whole group.

[MR SECK:] When – did you tell them in the Philippines?

[MR ELVIN:] Yes.

…

[MR SECK:] So, from the start, you agree, you had misrepresented to the employees by giving them this contract what terms and conditions of employment they could expect to receive in Australia?

[MR ELVIN:] No, I explained to them that “You guys know that you can’t do the massages just” – “you massage every hour minus a lunchbreak and then go home.” I explained to them that “You guys know that you work here in the Philippines, and it’s the same in here, in Australia, that massages can’t be conducted consecutively unless you’re trying to slave-drive the staff and kill them. And, therefore, to be able to get the six customers required per day – or six hours per day – to afford the 52,000 plus all the benefits that the only way” – like – so I explained it all to them, basically.

[MR SECK]: And I put to you again that that’s a lie?

[MR ELVIN:] No, that’s not a lie

[MR SECK:] You just made that up?

[MR ELVIN:] No, it’s not a lie. That’s not a lie. I was honest. I was open and honest with the staff. I never lied to them about things. I just – I told them honestly and I told them about the contract.

145    Mr Elvin also testified that he told the Massage Therapists that the contract of employment did not reflect their actual terms and conditions because there was no award that afforded them sufficient breaks. This resulted in the following exchange:

[MR SECK:] So when you said earlier on in answer to one of my questions that the reason why this contract didn’t reflect the actual terms and conditions of employment is because there was no award that gave them sufficient breaks. You must have been referring to an award. Which award were you referring to?

[MR ELVIN:] Yes, well, I skim read lots of awards and, yes, didn’t find anything that would assist.

[MR SECK:] Your answer, in terms of the logic you’ve just applied, why wouldn’t you just reduce the number of massages and pay them for the breaks they were taking in between massages?

[MR ELVIN:] Because it would be impossible to do that. We wouldn’t have the money to pay them because there would be no customer – there wouldn’t be enough customers and it would be just impossible to try to meet that $52,000.

[MR SECK:] And what you were being paid for is to, you understood, is for the massage therapists to do work during the hours allowed for under the award, correct?

[MR ELVIN:] Yes.

[MR SECK:] When you say that you, in effect, couldn’t afford it, you were using that as an excuse as to why you didn’t have to apply with the award conditions, correct?

[MR ELVIN:] No, it wasn’t an excuse. We were tied – everything was tight. Like, we were just – yes, it was tight. Things have always been tight. It is never actually – it was never actually really doing well. We always were owing taxes. It was always – we were always, like, struggling. So I just tried to save costs where I could and that made sure that this happens to me.

[MR SECK:] Your evidence earlier on, Mr Elvin, that the contract of employment – sorry, that you told the massage therapists who comprised the group of seven that the contract of employment did not apply because the award didn’t provide for sufficient breaks is completely made – it’s completely made up?

[MR ELVIN:] I explained it in simple terms – I expressed it to them in simple terms. I didn’t explain it complicated like that, but I basically told them that I can’t find – I can’t find, like, basically, it was difficult to draft the contract and meet the terms as for what we needed. And therefore, this contract’s not right. I let them know that up front. I said, “This contract’s not right. It’s impossible,” and the reason being is to get that amount of money, we’ll never be able to afford that going on any of these – the whole thing wouldn’t have ever happened because it’s not affordable based on – so, you know, they would not be able to come to Australia and get their 50,000-odd a year.

146    Mr Elvin claimed that certain awards only permitted lunch breaks, so he would be required to “force the staff to work four hours straight in a massage, then take a lunch break”. That gave rise to the following exchange:

HER HONOUR: Are you telling the court that you did not understand that awards prescribe minimum conditions of work? Minimum standards?

[MR ELVIN:] Yes, I understand that. That it prescribed minimum standards. I just always – I felt that I wasn’t – I wasn’t doing the wrong thing because I – if – if it were in a perfect sense, if a 457 had minimum pay rates. So if they didn’t have that minimum payrate then I could bring them over, for example, on – on a proper – like, I could follow this to the T but I would be paying them much less. I would be paying them $35,000, what the pay scale was. But because the requirement was that – to get a 457 person, you had to pay them over 2000. So yeah. Yeah. So basically, in a perfect sense, if I could have it the perfect way, I would have just given them a $35,000 a year salary and then I wouldn’t have required them to be working so much. I wouldn’t have required – I wouldn’t have had so many requirements. But because of the amount that was described under the 457 and then the nature of the massage and the prices we were charging, it wasn’t – it just simply wasn’t possible. Like, they wouldn’t have been able to come.

[HER HONOUR:] So you made an economic decision not to comply with the award?

[MR ELVIN:] Yes. I made the economic decision and the reasoning behind it was that they’re getting paid well. I’m not – I’m not doing anything bad to these people, it’s just that I can’t find the award that would apply to give them breaks in between their massages.

…

[HER HONOUR:] If the award – if you understood that the awards prescribe minimum standards, there was nothing to prevent you providing rest breaks for the massage therapists, was there?

[MR ELVIN:] Yes, the actual operation of the business prevented me, because if you give breaks in-between each massage, then to do six hours of massage, you would need to be there for, you know, the period before ten and ten. So…

[HER HONOUR:] So you would have to pay overtime. That was the problem, was it?

[MR ELVIN:] I wasn’t trying to avoid the overtime…

[HER HONOUR:] I’m just trying to understand why you say there was a problem providing breaks to people under the award?

[MR ELVIN:] Okay. Because…yep because – all I can do is just explain it basically the way – the simple way I see it is – the salary under a regular award, like just a normal nine to five or something like that for a masseuse therapist – for a massage therapist – is around $35,000, so my thinking was, that “okay, I’m going to give them $52,000 and that would compensate them”, so it was sort of my own remedy to fix this but not do it in a wrong way, because, you know, I wanted the staff to be paid properly. And yes, all of these things like overtime applied, because I didn’t have any Individual Flexibility Arrangement to offer them and extra ...

147    Once the contracts were signed by the Massage Therapists, Mr Elvin provided them to the Philippine Overseas Employment Administration (POEA) for approval, an agency he understood had responsibility for ensuring that the terms and conditions of overseas employment contracts were not unfairly exploitative of Filipino workers. He said that he understood he was deceiving the POEA by providing them with written contracts that did not reflect the actual terms and conditions which would apply to the Therapists.

148    During the first visit to Cebu, Mr Elvin recruited Mr Puerto as a massage therapist but he subsequently assumed the role of “massage supervisor” to assist Mr Elvin in communicating with the other recruits and organising their training. Mr Elvin testified that Mr Puerto also had responsibility for mixing oils, purchasing garments, and responding to minor issues raised by the therapists. Notwithstanding the conditions of Mr Puerto’s visa, Mr Elvin said that he did not notify the Department of Immigration that Mr Puerto was no longer working as a massage therapist.

Accommodation

149    Mr Elvin confirmed the evidence of the Massage Therapists that they stayed at the Residence. Under cross-examination he admitted there were “a lot of occupants” at the Residence and that at one point it accommodated 16 people. He said that Mr Puerto stayed at the Residence but denied he was required to sleep on a sofa, saying he might have done so voluntarily.

150    Mr Elvin agreed that there was a gate beside the Residence that was over 165cm high and claimed that it would be possible for someone with sufficient fitness to jump over it. He denied that the gate was ever locked, saying that a chain was wrapped around it to give it the appearance being locked for security purposes. He testified that the police “checked the gate when no one was there” and confirmed that it was not locked. When his attention was drawn to an Australian Federal Police (AFP) report referring to an inspection of the premises on 24 December 2015 that recorded the gate as being locked, he adhered to his earlier evidence.

Rules and threats

151    Mr Elvin denied being concerned that, if the massage therapists could leave the Residence of their own volition at night or on their days off, they would speak to the Department of Immigration or other authorities about their working conditions at FTM. He maintained that “[e]verybody was extremely happy”. He also denied that Mr Puerto stayed at the Residence to spy on the massage therapists and report back to Mr Elvin about their conversations.

152    Mr Elvin acknowledged that he required the massage therapists to follow rules, but claimed that these rules differed from the rules they described. He said that the notion he had prohibited the therapists from having friends or speaking to anyone other than each other was “ridiculous”.

153    Mr Elvin did admit that he initially prohibited the therapists from speaking in their native language at the shop. He claimed this was a “marketing thing” and that he wanted to avoid complaints regarding the departure of the Thai massage therapists who had developed a loyal client base. He said that “not long after” he openly told customers they were Filipino.

154    Mr Elvin denied telling the massage therapists that they could not speak to anyone regarding their employment conditions or they would be sent back to the Philippines and denied that he told them what to eat. He also denied that he prohibited them from bringing their mobile phones to work, and said that he only prohibited them from having relationships with customers. On the other hand, he agreed that, during an interview with the AFP on 24 December 2015, he said that the massage therapists were not permitted to have their phones at work and that they were not allowed to have boyfriends at the Residence.

155    Mr Elvin denied telling the therapists that they would be sent back to the Philippines if they broke a rule, or knew someone breaking a rule and did not report it. Mr Elvin described as “ridiculous”, “preposterous”, “insane” and a “complete, utter lie” the evidence that he had made threats to arrange to kill the therapists’ families if they did not follow his rules.

Hours and breaks

156    Mr Elvin gave evidence that massage work is physically exhausting and that a therapist should receive a break of 30 minutes after every massage, including a break of at least one hour after completing two hours of continuous massage. On the other hand, he testified that the break pattern at FTM was “fluid” and depended on the receptionist’s management of customer bookings. He said that, if a massage therapist did not receive a break between massages, they would be compensated for this later, so that it “balances out”.

157    Mr Elvin denied that the massage therapists performed tasks other than massaging, although he admitted that they were responsible for making the beds between appointments.

158    In his affidavit Mr Elvin deposed that Ms Isugan “did not do between 7 hours and 9.75 hours of massages each day” and that there were “always breaks between customers”. He also denied more generally the allegations made by the other Massage Therapists regarding their work routine and hours of work. He said that he did not check the Kitomba records and that his statement was based on what he told the receptionists and “how it was supposed to be”.

159    When his attention was drawn to a Kitomba record relating to Ms Amacio which showed that she did not receive a 30 minute break between appointments, Mr Elvin blamed this on an error made by the receptionists. He accepted that he had ultimate responsibility for the receptionists, but said that the onus was on the Therapists to complain about the number of appointments that had been booked.

160    Mr Elvin claimed that he directed the receptionists not to allow the therapists to perform more than six hours of massages a day, but told them that it was “possible to go up to eight hours on a busy day to accommodate customers”. When taken to several Kitomba records indicating that Ms Amacio performed more than eight hours of massages on a number of days, Mr Elvin claimed that the therapists would be afforded some time off work later in the week as compensation. After Mr Seck noted that Ms Amacio did not appear to have been afforded any time off, Mr Elvin gave the following somewhat unintelligible answer:

Well, that’s how it was, Mr Seck. That’s how the procedures work. They – they couldn’t – you have to – also, you have to take into account the total number of hours during the week. That’s the issue. Okay. Now, sometimes on weekends we – you know, some days there were no – no customers on Mondays or Tuesdays or whatever. The weekends – some were – you know, the weekends were allowed to go up to eight and if the receptionist has done this I don’t know. I don’t know what has happened. Okay. Because I haven’t looked at it every single day. But we – we were complained to about it and we worked all – we worked through these. Every week we worked through these things.

161    It was put to Mr Elvin that it was not possible for the Therapists to take the morning or afternoon off work and spend it at the Residence as the van drove the Therapists to the Belconnen shop in the morning and did not return until around 10.30 or 11 pm. Mr Elvin testified that the therapists could ask Mr Puerto to “give them a lift” back to the Residence if they needed. When it was put to Mr Elvin that he made no mention of this in his affidavit, he claimed that he “was only given a few days for [his] affidavit” and that it was “poorly conceived”. When he was reminded of the numerous extensions of time he was given to file his evidence, he agreed that he had an ample opportunity to prepare his case and that he had received assistance in preparing his affidavit.

162    Mr Elvin deposed that “everyone who worked for Foot & Thai was required to take proper breaks” and that a group of employees would “often” take a lunch break of “at least an hour” if they walked to a nearby shopping mall. In cross-examination, Mr Elvin acknowledged that the Therapists’ ability to have their allocated lunch and dinner breaks depended on the receptionists’ management of the customer bookings. He agreed that the Therapists’ meal breaks would be recorded in Kitomba and that the Kitomba records spoke for themselves. He denied that the therapists were required to remain at the shop until it closed at 10 or 10.30 pm even if they had no appointments in the evening, stating that he, Mr Puerto or Mr Elvin Snr could transport them to the Residence at an earlier time if requested, “when it was possible”. But he conceded that this depended on his and Mr Puerto’s availability. He also conceded that the therapists were required to make themselves “ready, willing and able” to perform work during the shop’s opening hours on the days that they were rostered to work.

163    Mr Elvin denied that the therapists were not permitted to leave the Belconnen shop between 2012 to mid-2013 unless they were accompanied by him or Mr Puerto and it was for a specific purpose. He also denied that from May 2013 they were required to obtain permission from the receptionists or Mr Puerto to leave the shop. He said the therapists were only required to let the receptionists know where they were going when they left the shop.

Pay slips, loans and deductions

164    Mr Elvin conceded in his affidavit that there were times when pay slips were not generated. In cross-examination he said that he had a manager and bookkeepers who were responsible for the provision of pay slips, and speculated that “if no one asked for a pay slip, perhaps someone was sloppy and didn’t print one”. He said that he understood that an employer had an obligation to supply a pay slip to employees for each pay period, and claimed that he instructed staff to do this. But he took no responsibility for any failure of FTM to provide pay slips to the Therapists.

165    Mr Elvin acknowledged that there were no written authorisations for the deductions of certain amounts from the salary payments to the Massage Therapists. He said that Mr Puerto wrote down how much he lent to each Therapist when they were in the Philippines, but that none of the Therapists signed this document. He said that the purpose of the loans were to assist the Therapists during the period after they ceased employment in the Philippines and before they commenced at FTM and to cover them for any expenses incurred in travelling to Australia. He instructed his manager to deduct the amounts loaned to the Therapists from their wages, but said that it was a “preposterous lie” that the amounts that were deducted exceeded the amounts of the loans. He said that he “never needed to” ensure these amounts matched as this was the responsibility of the manager. He said that “if there was an issue the staff would always come to [him]”.

166    Mr Elvin admitted that the pay slips were inaccurate but said that this was because they were based on a “sham contract” and the “wrong award”. On the other hand, he denied that the pay slips incorrectly recorded the number of hours worked by the Therapists, stating that he “only considered them to work while they had a massage” and because there was an “unspoken individual flexibility agreement”. He said that he instructed the manager and bookkeepers what to include in the pay slips and suggested that it was “always in agreement” that the massage therapists were only paid for their “massage hours. Later in cross-examination Mr Elvin stated that the payroll system, known as Cashflow, did not accurately record the Therapists’ “working hours” or overtime hours because these were based on a “sham” contract.

Cashbacks

167    Mr Elvin described the evidence about the cashbacks as “ridiculous” and deposed that “no one was ever required to pay back $800 a fortnight”. He denied that Mr Puerto kept a document that recorded the amounts paid back by the Massage Therapists. He also denied that he required the repayments because the Therapists were vulnerable due to their visa status.

Fair Work Information Statement and employee records

168    When asked if he provided the Massage Therapists with a Fair Work Information Statement, he said he thought he did and that “it was in the staff room on the wall in front of them”.

169    Mr Elvin said that there were a number of other employment records maintained by FTM besides Cashflow, including spreadsheets and Google Business. He said that the Therapists’ annual leave was recorded on one of these systems but he could not recall if their overtime hours and the manner of their termination were also recorded. He said that he forwarded these documents to Deloitte Touche Tohmats during the administration process but claimed that “Deloitte lost the files”. He accepted that the Ombudsman issued to FTM a notice to produce time and wage records for the Massage Therapists in June 2016. He claimed not to recall if he was responsible for responding to the notice, although said it was “possible” he was, and denied that he had produced employment records to the Ombudsman that contained false and misleading information.

Discrimination

170    Mr Elvin disagreed with several propositions put to him regarding the race, national extraction and social origin of the massage therapists. In particular, Mr Elvin denied that he did not pay the Therapists in accordance with an award, required them to work unreasonable hours, or directed them to make cash repayments because they were Filipino and could be exploited due to their social isolation and financial dependence on FTM. Mr Elvin described these propositions as “laughable”. Mr Elvin said he “loves Filipinos” and was proud of his Filipino heritage. He said that he treated the Filipino workers the same way he treated the Thai workers (a proposition that raised more questions than it answered) and that there was “was no exploitation in [his] mind”.

Post-employment events

171    In his affidavit Mr Elvin deposed that in around mid-2015, Ms Isugan and Mr Durado commenced a relationship. He said that by late October 2015 two customers had made “serious complaints over two days” regarding Ms Isugan’s performance: that she was “burping in a customer’s ear” and “not providing massages to an acceptable standard”. At around this time, Mr Elvin dismissed Mr Durado. He deposed that Mr Durado then immediately contacted Ms Isugan and “encouraged her to run away from her job”. He said that on 26 October 2015 Ms Isugan did not return to work and did not return his calls.

172    Mr Elvin said that after leaving FTM, Mr Durado and Ms Isugan applied for personal protection orders against him and made complaints to the Fair Work Commission and the Ombudsman. He deposed that they then contacted Ms Clenci and “within a short space of time” Ms Clenci opened True Balance. He said that she did this on the understanding that each of the Massage Therapists would work for her.

173    In April and May 2016 the AFP investigated complaints made by Ms Isugan and Mr Durado. Mr Elvin gave a statement to the AFP as part of that investigation. He told the AFP that he had received two serious complaints about Ms Isugan which were a catalyst for her dismissal. However he then denied that he had dismissed Ms Isugan at all as she had “run away”, and stated that he could not recall what he told the AFP. When taken to a case note of his interview with the AFP which recorded him saying that Mr Isugan had been dismissed due to complaints, he said: “I may have told the police that I dismissed her but I was incorrect”. When taken to an earlier email from FTM to the AFP which stated that Ms Isugan had been terminated for repeated misconduct, he changed his evidence again, saying that he terminated her because she disappeared and that he “made a mistake” by telling the AFP that it was for repeated misconduct.

174    Mr Elvin said that he told the AFP that the massage therapists worked six days per week for 10 hours a day, and that they generally received a break between customers of between 30 minutes to two hours.

175    He said that he told the AFP that the therapists had signed an employment contract but did not tell the police that it was a sham. He denied that he was attempting to give the AFP a misleading impression to the AFP that the therapists were employed under conditions that were “legitimate and lawful”.

176    Mr Elvin said he could not recall a meeting with officials from the Department of Immigration on 15 May 2012 in which he said that the massage therapists would be paid $52,000 a year and weekend penalty rates.

Laura Elvin

177    Laura Elvin, aged 77 at the time of the 2020 hearing, is Mr Elvin’s mother and the wife of Mr Elvin Snr. Mrs Elvin is Filipino by birth and gave evidence at the hearing with the assistance of a Filipino interpreter, although her affidavit was sworn without such assistance. During cross-examination, Mrs Elvin testified that her affidavit was written by her son and that she could not recall its contents. Mrs Elvin said she had not read the affidavits of any of the Massage Therapists or Mr Durado, although later said that she had read them but could not recall their contents. She said her memory was “not very good”.

178    Mrs Elvin testified that in 2008 she and her husband transferred ownership in their property at Edwards Street to Mr Elvin to help him finance the establishment of FTM. Mrs Elvin said she was willing to do this because she would do anything to see her son succeed in business.

179    Mrs Elvin deposed that between February 2008 and early 2016 she and her husband made the Residence available to Mr Elvin to accommodate first the Thai and later the Filipino massage therapists. She deposed that the property was “completely redecorated and furnished to a high standard”, and had a total of four bedrooms with eight bunkbeds. She stated that no more than eight people occupied the Residence. But in cross-examination she testified that she “didn’t go back there” and could not actually recall the number of people residing there. In her affidavit she claimed that in late June 2012 a total of five people were living there, including. Ms Isugan, Ms Bantilan, Ms Amacio and Mr Benting. But when it was put to her in cross-examination that more than five people were living at the Residence in June 2012, she claimed she could not recall. She denied that she had included this statement in her affidavit because Mr Elvin had told her to, although repeated that her “memory [was] not very good”.

180    Mrs Elvin agreed that she did not hear every conversation that Mr Elvin and Mr Puerto had with the Massage Therapists at the Residence.

181    Mrs Elvin deposed that none of the employees living at the Residence ever needed to ask permission to leave and that the gate beside the property was never locked. She said that there was a chain wrapped around the upper part of the gate with a padlock that was “never used”. She said that “[n]o one had a key to enter or exit because [the gate] was not locked”. She said that the gate was about 166 cm high, and that it would be difficult for the massage therapists to jump over.

182    She deposed that Mr Elvin, Mr Puerto or sometimes Mr Elvin Snr drove the massage therapists to work at around 9.30 am each morning. She said that they returned home at 9 pm every night. She deposed that she observed on “many occasions” the therapists coming and going on their days off, although in cross-examination she revealed that she only “sometimes” observed them and maintained that they had “nothing to do” with her. She also said that the boyfriends or girlfriends of some of the therapists visited the Residence on occasion. When it was put to her that she never saw anyone other than the massage therapists entering the Residence, she replied that she once saw a man visiting one of the therapists. She said that she told the therapists the next day: “don’t bring any visitor here during night time”.

Colin Godfrey Elvin

183    Colin Godfrey Elvin, aged 80 at the time of the 2020 hearing, is the father of Mr Elvin and husband of Mrs Elvin. He told the Court that his affidavit was written by Mr Elvin but said that he “must have” read and signed it. He appeared to confuse his affidavit with one he had taken to a police station. The affidavit contained multiple sentences that were identical to Mrs Elvin’s affidavit and largely repeated the same evidence.

184    Like his wife, Mr Elvin Snr testified that he would do anything to help his son succeed in business. He said that he accompanied Mr Elvin on a trip to Cebu in 2011 to help him recruit massage therapists and that he attended one or two meetings during that visit. He said he did not recall whether Mr Elvin told the therapists that the contract of employment was “bodgie” or that it was written to satisfy the requirements of the subclass 457 visa. And he appeared unfazed by the suggestion. He said that it was Mr Elvin’s business and “it wasn’t [his] concern to go into all of the details”.

185    Like Mrs Elvin, Mr Elvin Snr also deposed that a total of eight people lived in the Residence. In cross-examination, however, he said that 15 people “could have been” living there but he “didn’t count any particular number”, explaining that he did not visit the Residence except to carry out repair work. He said that “there would be about six or seven people on the bus” — which I took to be a reference to the van — but “it wasn’t like 15” and it “might have been less than that”. He claimed that his “memory [was] not real good”. When it was put to him that he only included the statement in his affidavit because Mr Elvin told him to, he replied: “no, I don’t know”.

186    Mr Elvin Snr deposed that there was a gate beside the property that was never locked. He said that there was a chain wrapped around the upper part of the gate with a padlock on it but the padlock was “never used”. He said the chain was left on the gate to give the appearance that it was locked to avoid theft. In cross-examination, however, he also said that the chain was there to keep his dogs in the yard. He denied that the gate was locked to stop the dogs escaping.

187    At one point, Mr Elvin Snr acknowledged that the gate was locked when the massage therapists returned at night, but he quickly recanted. That occurred during the following exchange with the Ombudsman’s counsel, Ms Byrnes:

[MS BYRNES:] Well, I’m going to put it to you that, when the van came home at night, your wife, Laura, locked up the gates?

[MR ELVIN SNR:] I don’t recall who locked up the gate, whether they locked it up, the workers locked it up or myself or who.

[MS BYRNES:] And the gates were locked overnight, weren’t they?

[MR ELVIN SNR:] Locked? They weren’t locked; they – they had the chain put on. There was only a chain put on the – there was no lock involved.

188    In his affidavit Mr Elvin Snr also said that Mr Elvin purchased a “large 14 seater van” to transport the therapists to and from the shop, and that sometimes he drove the van. In cross-examination, in contrast, he said that the “bus held about six”. He said that each day the therapists would leave at around 9.30 am and return at around 10.30 pm. He agreed that he only drove the van to transport the therapists to and from work, although noted that there were “seldom” occasions where he transported some therapists to the dentist or post office.

189    In his affidavit Mr Elvin Snr said that he observed the therapists on “many occasions…coming and going on their days off” and that he occasionally saw the therapists’ boyfriends or girlfriends visiting the Residence. He also said that the therapists were never restricted in leaving the Residence. In cross-examination, he could not recall the dates or years when he observed this occurring. And when it was put to him that, because he never visited the Residence, he never saw anyone other than the therapists entering and exiting the property, he conceded that he never had.

190    Like his wife, Mr Elvin Snr agreed that he did not hear every conversation that Mr Elvin and Mr Puerto had with the massage therapists at the Residence. As the Residence was a separate brick building from the house in which Mrs Elvin and her husband lived and the limited circumstances in which they visited the Residence, it is reasonable to conclude that it is highly unlikely that they heard most of those conversations. There was no suggestion in the evidence that they ever listened in on the conversations.

Ms Palma Yu

191    Ms Yu was born in the Philippines and immigrated to Australia 27 years ago. She is the sister of Mr Durado and Ms Clenci. She gave oral evidence with the assistance of a Filipino interpreter.

192    Ms Yu deposed that she was employed by FTM as a therapist assistant “on and off” between mid-2010 and January 2015. Her duties at the Belconnen shop included cleaning, washing towels, and general housekeeping. She said that she had previously assisted the Thai massage therapists before the arrival of the first group. During cross-examination, Ms Yu testified that she worked part-time at FTM from 2010 to mid-2013, working four hours a day for five days a week, before she left for a period of care for her father. She said she resumed “some time” in 2015 and, contrary to her affidavit, worked until 2016. She said that she worked intermittently because she suffered from back and knee problems and was therefore unsure when she worked. She initially gave evidence that her ordinary hours of work were from 6 am to 10 am, but later revised this to 8 am to 12 pm, and said that she occasionally worked to 1 pm.

193    Ms Yu deposed that she spoke to, and associated with, each of the Ombudsman’s witnesses during the course of her employment. She presented FTM as a pleasant place to work. In her affidavit she remarked that:

In my experience no one was ever locked up or had any limits put on their freedom. No one was threatened by [Mr Elvin]. Everyone from the Philippines was extremely happy. They were very well looked after, got paid big money, had free accommodation, got driven around whenever they wanted, could leave if they wanted to, got a free trip home every Christmas, and they got to work and socialise with people from the same Country with similar ideas.

…

From the time I started working for Foot & Thai in 2010 until about late 2015 there were really no problems with the staff including massage therapists, receptionists, therapist assistants and others employed in the business. Everyone followed the rules and worked happily and cooperatively.

194    Ms Yu deposed that in around 2013 she visited Batemans Bay with Mr Benting and Ms Isugan and that she “used to take all the other staff…sightseeing, shopping or meals”. In cross-examination, however, Ms Yu agreed that she never took the therapists sightseeing as a group because they never had time off together. But she denied that she only took the therapists out shopping or for meals on their days off.

195    Ms Yu deposed that she never saw Mr Elvin or Mr Puerto “stop any staff member from taking a break”. She said that everyone was required by Mr Elvin to take “proper breaks” of no less than 30 minutes between customers and that lunch and dinner breaks were often one hour. She also stated that the therapists often had breaks of two to three hours and, if they were not busy, would not begin work until 4pm. She said that staff “always commented on how happy they were”.

196    It was put to Ms Yu’s that her observations regarding the therapists’ breaks were limited to the times when she worked at FTM, noting that she only worked until 12 or 1 pm. Ms Yu then claimed that she often did not leave the shop after she had finished work, and that she sometimes remained until 4 pm. But she agreed that she did not speak to the therapists while they worked, and could not make observations regarding the therapists’ dinner breaks. She also agreed that she was unable to observe the therapists at all times.

197    Between 2012 and 2015 Ms Yu said she went to the Residence several times. She said that the gate beside the property was “never locked” and that there was a chain merely wrapped around it. She said she never heard any FTM employee say that the gate was locked, or that they were not allowed to leave the Residence or that there was a curfew in place.

198    Ms Yu deposed that she could not recall anyone complaining or mentioning an incident in July 2012 where Mr Elvin drove the therapists in a van “very fast” while screaming and swearing. She also said that no one ever told her that they were scared of Mr Elvin or Mr Puerto. Additionally, Ms Yu never heard Mr Elvin or Mr Puerto threaten to kill an employee’s family member in the Philippines. She said that Mr Elvin was not a violent person and she never heard him speaking to any employee in a mean or derogatory way.

199    Ms Yu said that the rules Mr Elvin allegedly required the massage therapists to follow “simply did not exist”. She noted that she never heard Mr Elvin or Mr Puerto tell any employee that they could not have a relationship with another person and that Mr Elvin simply reminded staff to be professional around customers and encouraged them not to cheat on their partners in the Philippines.

200    She confirmed that there was a CCTV camera system operating at the Belconnen shop, including outside the massage rooms and in the staff areas. She said she never saw Mr Elvin, Mr Puerto and Mr Durado watching the CCTV images “for any length of time”.

201    She said that if a therapist assistant was unwell, the massage therapists shared responsibility for “folding towels and keeping the shop clean and tidy”.

202    Ms Yu said that Ms Amacio never told her that she was required to pay Mr Elvin $800 a fortnight.

203    Ms Yu deposed that in 2015 Mr Durado commenced a relationship with Ms Isugan. After Mr Durado was dismissed, she said Ms Isugan “ran away from work to live with him”. She claimed that she then began contacting FTM therapists to offer them jobs. She said that in the months after October 2015, she attended several meetings with Mr Durado, Ms Isugan and “all the other witnesses” where they discussed “how they wanted to take over Foot & Thai or start a new shop”. She said that her sister, Ms Clenci, and her husband, Zoran, led this effort and “everyone else fell into line”. She added that Ms Clenci’s daughter was a receptionist at FTM at the time and had “access to all the information about how the business runs”. Ms Yu deposed that Ms Clenci sought to buy FTM in voluntary administration, and after this was unsuccessful, she and Zoran Clenci “immediately began setting up the True Balance shop”. She said that Ms Isugan, Ms Ortega, Ms Castaneda, Ms Amacio and Ms Bantilan all currently work at True Balance, and that Mr Benting and Ms Sarto previously worked there.

The credibility of the witnesses

204    The evidence of the Massage Therapists was broadly consistent and all the Ombudsman’s witnesses easily withstood cross-examination. While there were some discrepancies, I am satisfied that they were doing their best to give a truthful account of their experiences. I have no doubt that the Therapists were genuinely afraid of Mr Elvin. A number of them broke down in cross-examination when recounting some of their experiences working for FTM and Mr Elvin’s behaviour, in particular. Ms Isugan sobbed as she recounted the threats of harm to her family. Mr Benting wept as he recalled the anger displayed by Mr Elvin the night he threatened to harm family members of staff who reported the “real situation”. Ms Castaneda broke down several times. She sobbed as she gave evidence about Mr Elvin’s criticisms of her performance and his threats to send her home if she did not improve. She was in tears as she told the Court about his angry outbursts and her fear of him. Ms Amacio fought back tears as she recalled Mr Puerto conveying Mr Elvin’s threats of reprisals.

205    That said, the evidence the Massage Therapists did not always correspond with the contemporaneous records. Where it differed from the contemporaneous records, I have preferred the records.

206    For a good deal of time during the hearing Mr Elvin was courteous and cooperative and conducted himself in a way that belied the picture painted by the evidence of the Massage Therapists. Under cross-examination, however, he made an altogether different impression. He laughed inappropriately at some of the questions as if to impress upon the Court that the propositions within them were laughable or, as he put it, “ridiculous”. Under the pressure of cross-examination, he appeared to snap, demonstrating that he had a volatile temper. He became quite belligerent, shouting many of his answers at the cross-examiner. This behaviour made the evidence given by the Massage Therapists concerning his angry outbursts and threatening behaviour all the more credible.

207    It was theoretically possible, of course, that Mr Elvin’s behaviour in cross-examination was merely a reflection of indignation at having to respond to false allegations. But I rejected that theoretical possibility, not only because of the weight of the evidence in support of the Ombudsman’s case but also because of the poor quality of Mr Elvin’s evidence including the content of his answers in cross-examination.

208    Mr Elvin proved to be an unreliable witness, who was given to dissembling. Aspects of his account were contrary to contemporaneous documents he admitted were accurate. Many of his answers were unresponsive to the questions. Parts of his evidence were internally inconsistent. Parts of his evidence defied credibility. At times his evidence made little sense. One vivid example was his testimony concerning how he came to nominate the Health Award in the employment contracts.

209    Mr Elvin is not an honest man. The evidence is replete with examples of his dishonest business practices.

210    He promoted FTM on the company’s website, for instance, as “a registered massage clinic” when there was no requirement for registration of massage clinics, disingenuously claiming to rely on the fact that the business had an Australian Business Number. He overstated the experience of some of his staff. He falsely claimed that the FTM therapists were “licensed overseas” when he knew that none of the Massage Therapists were licensed.

211    Moreover, he admitted to being dishonest. He claimed, for example, to have intentionally deceived both the Australian immigration authorities and the Filipino labour authorities by holding up the employment contracts as genuine when in fact they were bogus or, as he put it to the Court ,“bodgie”.

212    His dishonesty was not confined to his business practices.

213    He gave evidence, for example, that the gates to the 44 Edwards Street properties were never locked and that the police confirmed that when they visited the house and saw they were unlocked. He claimed that an AFP officer told him that when the police visited the premises the gates were not locked. But an AFP case note of an inspection of the premises on 24 December 2015 recorded that “[p]olice observed a gate approximately 1.2 – 1.5 metres in height that was locked” and that the officers scaled the fence in order to obtain access to the Residence. Furthermore, a contemporaneous file note made by Fair Work Inspector Hurrell (FWI Hurrell), annexed to Mr Thomas’s affidavit (LRT-51), of a conversation she had with Mr Puerto at the Belconnen shop on 19 October 2016 during a site visit records that Mr Puerto told her that the gate was locked in the evenings (from 11 pm to 6/7 am) so that the employees could not leave the premises at night. A contemporaneous file note taken by Michelle Reid, another Fair Work Inspector who accompanied FWI Hurrell on the site visit, similarly records that Mr Puerto said that the gate was locked in the evenings (see LRT-52).

214    When asked why certain evidence was being proffered for the first time in cross-examination, Mr Elvin replied that he had only been given a few days to prepare his affidavit, when he was initially afforded four months to file his affidavits and the time was later extended more than once, including in the final instance over the well-founded objection of the Ombudsman. In the result, he had approximately five months to do so.

215    Numerous other examples are provided in the Ombudsman’s written submissions.

216    I formed the view that Mr Elvin was generally prepared to say anything in order to exculpate himself, regardless of whether it was true or accurate.

217    In these circumstances, I consider that his evidence should not be accepted unless it is against his interest or corroborated by reliable independent evidence. The evidence given by his parents was neither reliable nor independent. I have no confidence in Ms Yu’s capacity to give reliable evidence about the conditions of employment of the Massage Therapists, since she did not work after 1 pm until 2016 and was often absent from the workplace, whether because of the nature of her duties or due to injury or illness.

Absent witnesses

218    No evidence was adduced by FTM. Moreover, no evidence was elicited from a number of witnesses from whom Mr Elvin might reasonably have been expected to adduce evidence to rebut the Ombudsman’s case.

219    First, Mr Elvin did not present evidence from a single massage therapist to contradict the evidence of the seven presented by the Ombudsman. Nor did he adduce evidence from any of the receptionists who worked at FTM during the period of the claim. Each of these witnesses could have given evidence about the matters in dispute. As the Ombudsman submitted, the receptionists might have given evidence about the systems in place at FTM, including any system for ensuring that the Massage Therapists did not work unreasonable hours and were given sufficient breaks. But the scope of evidence the receptionists could have given was broader than that. According to Mr Elvin, the receptionists were “trained to carry out a supervisory role” at the FTM shops if he were absent and they supervised or managed the employees whenever he was absent (see email to Lara Hurrell dated 12 September 2016, annexed to Mr Thomas’s affidavit as LRT-36).

220    No explanation was offered for the absence of any of these witnesses.

221    What is more, although Mr Puerto was a key player and the person through whom Mr Elvin’s instructions and alleged threats were conveyed, Mr Elvin did not adduce any evidence from him. And Mr Puerto did not challenge the Ombudsman’s case or present evidence of his own.

222    The unexplained failure of a party to give evidence or call witnesses may lead to an inference that the missing evidence or absent witness would not have assisted that party’s case: Jones v Dunkel (1959) 101 CLR 298 esp. at 308 (Kitto J), 312 (Menzies J) and 321 (Windeyer J). The Court make take that circumstance into account in deciding whether to accept particular evidence that relates to a matter on which the absent witness could have spoken: JD Heydon, Cross on Evidence (12th ed., Lexis Nexis Butterworths, 2019) at [1215], citing O’Donnell v Reichard [1975] VR 916 at 929 (FC). It does not matter that the party who could have called the evidence does not bear the burden of proof. Moreover, evidence the witness might have contradicted can be accepted more readily: Jones v Dunkel at 312 (Menzies J). And any inference favourable to the other party for which there is a foundation in the evidence can more comfortably be drawn: Jones v Dunkel at 308 (Kitto J); at 312 (Windeyer J).

223    As Hodgson JA explained in Ho v Powell (2001) 51 NSWLR 572 at [16], Jones v Dunkel was a particular application of the principle in Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970 that “[a]ll evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted”.

224    While a Jones v Dunkel inference cannot fill gaps in the evidence and cannot convert conjecture or suspicion into inference, if the inference is drawn it can “weigh the scales, however slightly, in favour of the opposing party”: Adler v Australian Securities and Investments Commission [2003] NSWCA 131; 21 ACLC 1810; 46 ACSR 504; 179 FLR 1 at [649] (Giles JA, Mason P and Beazley JA agreeing at [1] and [2] respectively).

225    There are three conditions for the operation of the rule: first, that it might be expected that the evidence from the person would be adduced by the party; second, that the evidence would elucidate a particular matter; and third, that the failure of the person to give evidence is unexplained: Payne v Parker [1976] 1 NSWLR 191 at 201–2 (Glass JA), Musa v Alzreaiawi [2021] NSWCA 12 at [79]–[80] (Gleeson JA, Bell P and Macfarlan JA agreeing at [1] and [2] respectively). A Jones v Dunkel inference will not be drawn if there are facts which disclose that the reason for not adducing evidence from the person was not that the party “fears to do so”: Fabre v Arenales (1992) 27 NSWLR 437 at 445–6 (Mahoney JA, Priestley and Sheller JJA agreeing at 454). As Mahoney JA explained in that case at 449-450:

The significance to be attributed to the fact that a witness did not give evidence will in the end depend upon whether, in the circumstances, it is to be inferred that the reason why the witness was not called was because the party expected to call him feared to do so. But there are circumstances in which it has been recognised that such an inference is not available or, if available, is of little significance. The party may not be in a position to call the witness. He may not be sufficiently aware of what the witness would say to warrant the inference that, in the relevant sense, he feared to call him. The reason why the witness is not called may have no relevant relationship to the fact in issue: it may be related to, for example, the fact that the party simply does not know what the witness will say. A party is not, under pain of a detrimental inference, required to call a witness “blind”.

226    The explanation must be established by evidence; unavailability of witnesses or lack of recollection, for example, is not to be presumed from the passage of time: West v Government Insurance Office (NSW) (1981) 148 CLR 62 at 70 (Murphy J); Cross on Evidence at [1215]. No evidence was adduced in the present case to account for the absence of evidence from any of the other massage therapists, the receptionists or Mr Puerto.

227    These principles, sometimes referred to as the rule in Jones v Dunkel or a Jones v Dunkel inference, do not operate so as to require a party to give “cumulative evidence”. As Heydon put it, if only some people who attended a relevant meeting give evidence about what happened at the meeting, no such inference can normally be drawn as the rule does not require that time be wasted calling unnecessary witnesses: Cross on Evidence at [1215]. In the context of the present case, that means that no adverse inference could be drawn from the fact that the Ombudsman’s did not adduce evidence from other massage therapists. Since Mr Elvin argued that the Ombudsman’s witnesses were lying, however, and that the conditions under which they worked were different, his failure to adduce such evidence is a different matter.

228    Further:

[A] party’s failure to give any satisfactory explanation of a prima facie case against him may suggest that the case is sound, either because silence is assent — an implied admission, or because it shows a consciousness of guilt or liability, or because inferences from the prima facie case, being unchallenged, are thereby strengthened. The presumption is the stronger where the facts are particularly within his knowledge.

Heydon JD, Cases and Materials on Evidence (Butterworths, 1975) at 62.

229    The fact that the proceedings are proceedings for a pecuniary penalty is not a satisfactory explanation: Australian Securities and Investments Commission v Adler [2002] NSWSC 171; 41 ACSR 72; 20 ACLC 576; 168 FLR 253 at [504] (Santow J); appeal dismissed in Adler at [664]–[669]. The proceedings are still civil proceedings. The Court is expressly charged with applying the rules of evidence for civil matters when hearing proceedings relating to a contravention of a civil remedy provision: FW Act, s 551.

230    Reliance on the penalty privilege does not prevent the Court from drawing an adverse inference. And the privilege against self-incrimination can only be claimed by a witness and then only under oath or affirmation: Chong v CC Containers Pty Ltd [2015] 49 VR 402 at [236].

231    A Jones v Dunkel inference may be drawn in both civil and criminal proceedings and regardless of the fact that the witness cannot be compelled to give evidence which is likely to incriminate him or her or expose him or her to a penalty: Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (2001) 115 FCR 442 (ACCC v Universal Music) at [33] (Hill J); Adler at [661] (Giles JA, with whom Mason P and Beazley JA agreed); Council of the NSW Bar Association v Power (2008) 71 NSWLR 451 at [25] (Hodgson JA, with whom Beazley and McColl JA agreed at [1] and [44]). In ACCC v Universal Music at [33] Hill J observed:

Where the proceedings are criminal (and the present proceedings are not; they are proceedings, inter alia, for the recovery of a civil penalty) it might be thought that the failure of the accused to go into evidence should not lead to the drawing of Jones v Dunkel inferences. After all it is clear that a witness can not be compelled to give evidence which is likely to incriminate the witness or expose the witness to a penalty. However, even in criminal cases it has been held that the failure of the accused, who is in a position to deny, explain or answer the evidence adduced by the prosecution, to give evidence will permit the jury to draw inferences adverse to the accused more readily: see Azzopardi v R (2001) 205 CLR 50; 179 ALR 349, affirming Weissensteiner v R (1993) 178 CLR 217. A fortiori, therefore, the failure of a respondent to proceedings for recovery of a pecuniary penalty to give evidence on a matter relevant to an issue in the proceeding and deny, explain or answer the evidence adduced against the respondent will permit the Court more readily to draw the inferences to which the decision in Jones v Dunkel refers.

232    Here the conditions for the operation of the rule are established and the available inferences are not only open, they should be drawn. The absence of evidence from Mr Puerto is of particular significance, not only because he was clearly available and did not testify, but also because he is a party and was personally involved in many of the critical events. In Dilosa v Latec Finance Pty Ltd (1966) 84 WN (Pt 1) (NSW) 557 at 582, in a passage cited by approval in Australian Securities and Investments Commission v Adler [2002] NSWSC 171; 41 ACSR 72; 20 ACLC 576; 168 FLR 253 at [448], Street J observed:

The inference which a Court can properly draw in the absence of a witness, where such absence is not satisfactorily accounted for, is that nothing which this witness could say would assist the case of the party who would normally have been expected to have called that witness. The significance of this inference differs according to the closeness of the relationship of the absent witness with the party against whom the inference is sought to be propounded. Where the absent witness is a party himself then considerable importance may well attach to the inference. Similarly, the inference is significant if the absent witness is, as in the present case, a person who … was personally engaged in the transactions in question and who was in fact present at Court during part of the hearing …

See, too, Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at [63] (Heydon, Crennan and Bell JJ).

THE AGREED AND UNDISPUTED FACTS

233    FTM and Mr Elvin made a number of admissions in their amended defences and Mr Elvin also made admissions in his final submissions. The following facts were either admitted or not denied or disputed. I make findings accordingly.

234    FTM was registered on 1 November 2010. At all relevant times it was a constitutional corporation and a national system employer within the meaning of the FW Act.

235    FTM owned and operated the Belconnen shop and was the employer of each of the Massage Therapists during the period 24 June 2012 to 11 February 2016 (the claim period).

236    Between 1 November 2011 and 11 April 2016 (and therefore throughout the claim period) Mr Elvin was FTM’s sole director and shareholder and also its secretary. He was responsible for the overall direction, management and supervision of the company’s operations. That included setting the operating hours of the Belconnen shop; the recruiting, hiring and firing of employees; determining wages and conditions of employment; setting and adjusting pay rates; paying wages and deciding hours of work; setting times for employees’ meal and rest breaks; writing rosters for employees; supervising employees; and approving annual leave for, and personal leave requests, of employees. He was also responsible for the management and supervision of Mr Puerto.

237    From 15 December 2015 to 17 October 2017 FTM was under the external administration of Ezio Senatore and Neil Cussen of Deloitte. From 4 January 2016 to 4 April 2016 it was subject to an “Operating Licence Deed” to which Mr Elvin and the administrators were also parties. From 11 April 2016 to 17 October 2017 FTM was a party to a deed of company arrangement (DOCA).

238    The Belconnen shop was open to the public seven days a week. In the period from 24 June 2012 to 15 September 2013 its opening hours were from 10 am until 10 pm and thereafter until the end of the claim period from 10 am until 10.30 pm.

239    FTM employed each of the Massage Therapists (as such) at the Belconnen Shop during the claim period:

    Ms Bantilan from 24 June 2012 to 11 February 2016;

    Ms Amacio from 24 June 2012 to 10 February 2016;

    Mr Benting from 24 June 2012 to 8 February 2016;

    Ms Isugan from 24 June 2012 to 26 October 2015;

    Ms Ortega from 15 April 2013 to 13 January 2016;

    Ms Castaneda from 15 April 2013 to 13 January 2016; and

    Ms Sarto from 15 April 2013 to 12 January 2016.

240    The Massage Therapists were recruited from the Philippines and sponsored by FTM under subclass 457 visas to work at the Belconnen shop. A subclass 457 visa was a temporary work visa, which entitled the holder to enter Australia and work for an approved business for a limited period. The visas were valid for four years. Those granted to the therapists in the first group expired on 31 May 2016. Mr Elvin organised the visas and made the travel arrangements. Mr Puerto accompanied the massage therapists on their flights from the Philippines to Australia and took them to their accommodation.

241    For the duration of their employment the Massage Therapists lived together at the Residence. The Residence was a four-bedroom house located at the rear of 44A Edwards Street in which Mr Elvin’s parents lived separately. Mr Elvin owned both houses. They were formerly owned by his parents but ownership was transferred to him when he set up FTM. The massage therapists were driven to and from work each day by Mr Elvin, Mr Puerto or Mr Elvin Snr.

242    Mr Elvin was the person with overall responsibility for recruiting the massage therapists from the Philippines to work for FTM in Australia. He was responsible for the payment of their wages. He knew the hours they worked, the nature of their work, and the duties they performed. He was the person to whom each of them reported during their employment with FTM.

243    Mr Puerto was employed by FTM at all relevant times during the claim period.

244    Each of the Massage Therapists signed a contract of employment before coming to Australia. The contracts were prepared and countersigned by Mr Elvin “for and on behalf of [FTM]”. They were identical in form. The opening paragraphs read:

This letter invites you to become an employee of foot&thai. We hope you will enjoy your position of Massage Therapist and become a significant contribution to the success of the Company. If you accept our offer, this letter will constitute the terms of your employment with us, which will commence when you arrive in Australia (subject to Visa Processing times).

If a word or phrase has a specific meaning in the Fair Work Act 2009 (Cth) (the Act), then it has that meaning in this letter. If no meaning is set out in the Act, then it has its plain English meaning. If it is capable of having a narrow and a wide meaning or construction, then it has the widest possible meaning, unless stated otherwise in this letter. If applicable, this letter should be read in conjunction with the Health Professionals and Support Services Award 2010.

245    The employment of each of the Massage Therapists was described as “full-time permanent employment”. The “day to day duties and responsibilities” were listed in the schedule to the agreement.

246    For present purposes reference need only be made to certain clauses of the contract.

247    The ordinary hours of work were set by clause 2. Clause 2.1 defined them as “an average of 38 hours per week in a fortnight or four week period” and stipulated that no more than 10 ordinary hours of work (exclusive of meal breaks) were to be worked in any one day. Unless otherwise stated, the ordinary hours of work for “a day worker” would be worked between 10 am and 10 pm Monday to Sunday (cl 2.2). The therapists could be asked to work additional hours, which I take to mean hours over and above 38 hours per week, but in that event they would be “remunerated accordingly” (cl 2.3). Each could be required to work “ordinary and/or additional hours with additional remuneration on public holidays” (cl 2.4).

248    Pay rates for weekend work were prescribed by clauses 2.6 and 2.7:

2.6    Where the work location of a practice services patients on a seven day a week basis, the ordinary hours of work for an employee at that location will be between 10.00 am and 10.00 pm Monday to Sunday. Work performed on a Saturday will be paid at the rate of time and a quarter of the employee’s ordinary rate of pay instead of the loading prescribed in clause 2.7 – Saturday and Sunday work. Work performed on a Sunday will be paid at the rate of time and a half of the employee’s ordinary rate of pay instead of the loading prescribed in clause 2.7.

2.7    Saturday and Sunday work

a.    For all ordinary hours worked between midnight Friday and midnight Sunday, a day worker will be paid their ordinary hourly rate and an additional 50% loading.

b.    A casual employee who works on a Saturday or Sunday will be paid a loading of 75% for all time worked instead of the casual loading of 25%.

249    Clause 5 provided for overtime penalty rates. An employee who worked outside their ordinary hours on any day was to be paid at the rate of time and a half for the first two hours and double time thereafter (cl 5.1).

250    The contract term was four years, with the dates to coincide with the “457 Work Permit” (cl 11).

251    Remuneration was governed by clause 12. The annual “base salary” was $52,000 plus 9% superannuation (cl 12.3). Costs of travel (return airfares and travel to work), accommodation, uniforms and visa processing (passports, health and character checks) were to be paid by FTM.

252    Annual leave was covered by clause 20, which supplemented that which was provided for in the NES. Annual leave loading for employees other than shift workers was 17.5% of the ordinary rate of pay (cl 20.2).

253    Employees required to work on a public holiday were to be paid “time and a half for all time worked” (cl 21.2).

254    Clause 27.3 provided:

This agreement will continue to apply to your employment unless varied by mutual agreement in writing.

255    By clause 27.5 FTM agreed to provide a Fair Work Information Statement to all new employees in accordance with the FW Act and noted that the Statement “contains information about the National Employment Standards and the respective roles of [the Fair Work Commission] and the Fair Work Ombudsman”.

256    The “day to day duties and responsibilities” listed in Item 1 to the schedule to the agreements were described as follows (without alteration):

Massage:

-    Thai Foot Reflexology

-    Thai Head, Shoulder and Back

-    Traditional Thai

-    Aromatherapy Oil

-    Deep Tissue

-    Sports

-    Remedial

-    Swedish

•    massaging the soft tissues of the body, such as muscles, tendons and ligaments, to assist healing • utilising a range of massage techniques to enhance sports performance and prevent injury

•    administering treatments to promote relaxation, improve circulation and relieve muscle tension

•    assessing and treating specific soft tissue dysfunction and providing rehabilitation advice

•    employing other techniques such as essential oils to assist recovery

•    assessing client’s physical condition and case history and advising on stretching exercises and relaxation techniques

•    Performs therapeutic massage and administers body treatments for relaxation, health, fitness and remedial purposes. Keep accurate and up-to-date records regarding a client’s condition before and after massage therapy session in cases of a client being treated for a specific condition

•    Obtain and keep an overview or profile of the client’s state of being and health history and discuss any problem areas that may contraindicate massage.

•    Acknowledge their professional limitations and refer the client to an appropriate health professional when necessary, in cases where massage may be or is contraindicated

•    Perform only those services for which they are qualified and which represent their training and education

•    Following different types of sanitary procedures in order to keep the room and the facility clean

257    At all relevant times during their respective employment periods, each of the Massage Therapists arrived at the Belconnen shop at approximately 9.45 am and performed duties until the shop’s closing time. These duties included performing different remedial or therapeutic massages on customers, providing after-care advice to customers, washing and folding towels, undergoing massage training and general cleaning. FTM admitted the Ombudsman’s allegations about the total number of ordinary hours, public holiday hours, and the number of overtime hours the Massage Therapists worked for FTM. FTM also admitted the amounts the Ombudsman alleged it had paid to the Massage Therapists for the hours they worked, though not the cash refunds. While Mr Elvin did not admit these matters, he did not dispute them either.

258    Mr Elvin knew that FTM directly or indirectly requested or required the Therapists to work additional hours in excess of 38 hours per week during their respective employment periods. He also knew that FTM did not give the Therapists a Fair Work Information statement. He had access to, and monitored, FTM employees on CCTV cameras at the Belconnen shop. Each of these matters was admitted in his amended defence.

259    FTM failed to pay each of the Massage Therapists any amounts in relation to their entitlement to accrued, untaken annual leave when their respective employment period ended.

260    From time to time, FTM made deductions from the Massage Therapists’ fortnightly wages, which the Ombudsman contends were unauthorised. They are described in the employees’ pay slips as “staff loans” and amounted to $1,500 each for Ms Amacio and Mr Benting; $1,739.44 for Ms Bantilan; $1,684.93 for Ms Isugan; $638.41 for Ms Castaneda and Ms Sarto; and $672.91 for Ms Ortega — a total of $8,374.10.

261    Each of these matters were admitted in FTM’s further amended defence.

262    Mr Benting, Ms Amacio, Ms Bantilan, Ms Sarto, Ms Castaneda and Ms Ortega each resigned from their employment with FTM without notice.

263    On or around 19 July 2017 the Massage Therapists received total of $144,883.18 from Deloitte, on behalf of FTM, for unpaid entitlements relating to wages and annual leave.

THE BURDEN AND STANDARD OF PROOF

264    With one qualification, the burden of proof rests with the Ombudsman. The qualification relates to the adverse action and coercion claims. In those cases, as I explain later in these reasons, there is a statutory presumption that the action was taken for the alleged reason or with the alleged intent unless the respondents prove otherwise.

265    As this is a civil proceeding, the Ombudsman need only prove the elements of the various causes of action to the civil standard of proof, the balance of probabilities. But whether or not that standard is met is informed by the nature of the cause of action or defence, the nature of the subject-matter of the proceeding and the gravity of the allegations: Evidence Act 1995 (Cth), s 140. Section 140 of the Evidence Act is, in effect, an enactment of the principle explained by Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361–2:

Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect inferences.

266    In considering whether the Ombudsman has made out her case, I have borne these principles firmly in mind.

THE INTERLOCUTORY APPLICATION

267    Before going any further, it is convenient to deal with the Ombudsman’s belated application to further amend the originating application and statement of claim.

Background

268    The Ombudsman’s principal case is that the Massage Therapists were covered by the Health Award which covered:

(a)    employers throughout Australia in the health industry and their employees in the classifications listed in clauses 14 – Minimum weekly wages for Support Services employees and 15 – Minimum weekly wages for Health Professional employees to the exclusion of any other modern award;

(b)    employers engaging a health professional employee falling within the classification listed in clause 15.

269    In the original statement of claim, filed on 22 June 2018, the Ombudsman pleaded that the Health Award covered and applied to FTM in relation to the employment of the Employees and that the Massage Therapists were “properly classified” as “Support Services employee – level 2” (SSE Level 2).

270    An amended originating application and statement of claim were filed on 9 August 2019 making corrections to certain calculations underpinning the underpayments allegations.

271    None of the respondents admitted that the Health Award applied.

272    FTM elected not to plead to the relevant paragraphs, contending that they involved matters of law. In his amended defence Mr Elvin claimed to have “insufficient knowledge” of the allegations concerning the award and asserted he was not required to plead to them and made no assertions, one way or the other, with respect to award coverage.

273    At a case management hearing on 9 August 2019, through its solicitor FTM informed the Court that there was no longer an issue about the award. Shortly thereafter, however, FTM went into liquidation, its lawyers withdrew, and it never amended its defence.

274    In the course of his opening address, I raised with lead counsel for the Ombudsman, Mr Seck, some concerns about whether the Massage Therapists fell within the classification of “Support Services employee”, making the rather obvious point that “support services” suggests that such employees are supporting other employees or other persons and inquired of counsel who those other employees or persons were. He replied:

It does suggest that, your Honour, and we don’t say they’re providing support to any other person, and your Honour does raise directly with me a good point that implicit in the expression “support services” suggests that they’re supporting another person. We say because they’re not professional employees, they’re – can only fall within the definition of “support services”, otherwise no other classification could apply. My learned junior reminds me that the evidence also shows that the massage therapists performed other cleaning and clerical duties as part of their job.

So there is a component of their work which involves support services, but the massage services are not, on their face, supporting any other professional service. And one of the difficulties that often arises in awards, obviously, is trying to find the most appropriate classification for the employees. In this case, the most appropriate classification, on its face, is not clear here because of the issue that your Honour has just identified. We would submit that having regard to the classifications, the best “fit” would be the support services classification.

(Emphasis added.)

275    I was later told that Mr Elvin would contend that the Hair and Beauty Award applied and not the Health Award. Mr Seck informed the Court that, regardless of which Award applied, there were underpayments and foreshadowed a further amendment to plead the Hair and Beauty Award in the alternative. He said that, if Mr Elvin was going to contend that the Hair and Beauty Award applied, then the Ombudsman would “want to cover all bases” and do that sooner rather than later.

276    The next day the Ombudsman was granted leave to amend her pleading and on 21 November 2019 she filed a further amended statement of claim pleading, in the alternative, that the Hair and Beauty Award applied.

277    When he opened his case in December 2020, Mr Elvin submitted that the Hair and Beauty Award was not the correct award and there was doubt as to whether either or any award applied. He denied that massage was “a health care service”.

278    Evidence later emerged which indicated that the Massage Therapists were in all likelihood “health professionals” within the meaning of the Health Award and in her closing submissions the Ombudsman contended that the Massage Therapists fell either within SSE Level 2 or Health Professional – level 1 (HP Level 1). Mr Seck indicated that the Ombudsman would file an application for leave to amend her pleading to reflect this. Mr Elvin foreshadowed that he would oppose any such application.

279    True to her word, on 23 December 2020 the Ombudsman filed an interlocutory application seeking leave to file a second further amended statement of claim to include the further alternative pleading that the Massage Therapists fell within the classification of HP Level 1 and to adduce new evidence. She also applied for leave to file a further amended originating application and she filed submissions in support of the application. The Ombudsman also filed two affidavits. One was affirmed by Sharissa Thirukumar, a senior lawyer in the Office of the Fair Work Ombudsman with the conduct of the proceeding. The affidavit explained the Ombudsman’s application and annexed a draft second further amended statement of claim. The other was affirmed by Mr Wong. It provided revised calculations based on the HP Level 1 classification. The effect of the amendments is to substantially increase the amount of the underpayments claim.

280    True to his word, Mr Elvin opposed the application and filed submissions of his own. Mr Puerto did not oppose the application.

281    The proposed amendments to the pleadings were summarised in the Ombudsman’s submissions as follows:

(1)    additional pleadings relevant to the Massage Therapists’ qualifications and experience and Mr Elvin’s recognition of those qualifications;

(2)    alternative underpayment amounts for the following contraventions under the Health Award as a result of the different rates of pay applicable to the SSE Level 2 and HP Level 1 classifications: minimum hourly rates, public holiday rates, overtime rates, annual leave taken during employment and annual leave on termination amounts; and

(3)    consequential amendments, for example to amend the adverse action pleadings to include the injury constituted by the alternative claims.

282    The proposed amendments to the further amended originating application consisted of the addition of alternative orders in the event that the Court were to find that HP Level 1 was the appropriate classification.

The evidence

283    Ms Thirukumar deposed that the Ombudsman pleaded the SSE Level 2 classification on the basis of the evidence she had in her possession at the time the proceeding was instituted. That evidence indicated that the Massage Therapists did not hold Australian qualifications and included correspondence received from lawyers then acting for Mr Elvin that he did not require the Massage Therapists to hold qualifications (LRT-36). Neither FTM nor Mr Elvin pleaded to the allegations concerning the applicable award. In his opening written submissions, Mr Elvin did not address the question of award coverage or the appropriate classification. At the hearing he contended that no award covered the Massage Therapists.

284    In mid-late November 2020 the Department of Home Affairs produced documents in response to a subpoena issued at Mr Elvin’s request on 29 October 2020. On 1 December 2020 Mr Elvin served on the Ombudsman a bundle of documents which included a letter sent by FTM to the Department dated 1 February 2013, which was admitted into evidence and marked Exhibit 8.

285    During cross-examination on 1 and 2 December 2020 Mr Elvin testified that:

(1)    he was aware that the Massage Therapists had at least three years of experience in the massage industry;

(2)    he read Exhibit 8 before it was sent to the Department, in which he, on behalf of FTM, represented that three years’ relevant experience was equivalent to a formal qualification in massage therapy;

(3)    he required the Massage Therapists to attend the NKYR Academy in the Philippines to obtain qualifications before starting work with FTM and arranged for them to be trained to the standard FTM required; and

(4)    he recognised those qualifications and deemed them to be acceptable.

286    Once she heard this evidence, Ms Thirukumar, together with her supervisor, considered whether there was additional evidence before the Court relevant to the issue of the classification of the Massage Therapists under the Health Award and whether it was necessary to amend the pleading to allege an alternative classification of HP Level 1.

287    On 10 and 11 December 2020 Mr Seck informed the Court that leave would be sought to file a second further amended statement of claim and an order was made that she do so by 23 December 2020. Three days later Ms Thirukumar instructed Mr Wong to update the rates of pay in the Health Award calculations from SSE Level 1 to HP Level 1 and include annual pay point progressions for each of the Massage Therapists as prescribed by cl 15.1 and 15.2. The affidavit from Mr Wong includes that information.

The submissions

288    The Ombudsman submitted that leave should be granted for the following reasons.

(1)    The proposed amendments are important not only to the determination of this case and the resolution of the issues in dispute but also to the Ombudsman’s function in enforcing minimum statutory entitlements under the FW Act.

(2)    Judicial consideration of the issue of award coverage and classification for massage therapists generally is in the public interest.

(3)    The proposed amendments arose out of evidence not previously known to the Ombudsman and “uniquely known” to Mr Elvin, elicited for the first time during his cross-examination, and contrary to earlier representations he made to the Ombudsman.

(4)    Before the evidence was elicited, the Ombudsman lacked “a sufficient evidential basis” to plead that the Massage Therapists fell within the HP Level 1 classification.

(5)    There was no delay and limited prejudice.

289    Mr Elvin bemoaned the series of amendments to the pleadings already made by the Ombudsman. He submitted that it could be inferred that, when the Ombudsman amended her pleading to include the Hair and Beauty Award she effectively abandoned the claim under the Health Award and is now effectively abandoning the claim under the Hair and Beauty Award. He submitted that the application was “extremely late” and the substantial increase in the quantum of the claim was “clearly prejudicial”. He submitted, too, that the facts that he is a litigant in person with no legal training or experience, is the primary carer of two young children, is unemployed and has a diagnosed history of clinical depression compounded the prejudice caused by the delay. He complained that the Ombudsman had not behaved as a model litigant. Finally, he submitted that the application was futile because the claim the Ombudsman wishes to advance through the proposed second further amended statement of claim is unlikely to succeed. Mr Elvin referred to s 37M of the Federal Court of Australia Act 1976 (Cth) (FCA Act), the relevant rules, and a number of authorities, principal among which was the leading case of Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175.

290    While there is cause for lament and Mr Elvin is understandably critical of the Ombudsman’s conduct, the inference he invited is not open. The Ombudsman never abandoned reliance on the Health Award. This was always her principal claim. She pleaded the Health and Beauty Award in the alternative and then only because it was raised by Mr Elvin as a possibility. Mr Elvin well knew that. Not only was it clear from the pleading but he was repeatedly told as much during the hearing.

291    I will deal with the other arguments in due course.

The legal principles

292    The relevant legal principles are uncontroversial.

293    An applicant may apply for leave to amend an originating application or a statement of claim for any reason.

294    Rule 8.21 of the Federal Court Rules 2011 (Cth) (FCR), which deals with amendments to an originating application relevantly provides:

(1)    An applicant may apply to the Court for leave to amend an originating application for any reason, including:

…

(g)    to add or substitute a new claim for relief, or a new foundation in law for a claim for relief, that arises:

(i)     out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the applicant; or

(ii)    in whole or in part, out of facts or matters that have occurred or arisen since the start of the proceeding.

295    The Court has the power to make any order it considers appropriate in the interests of justice (FCR, r 1.32) and at any stage of a proceeding it may exercise a power mentioned in the Rules on its own initiative or on the application of a party or a person with a sufficient interest in the proceeding (FCR, r 1.40).

296    Rule 16.53 requires that a party in the Ombudsman’s position requires the leave of the Court to further amend a statement of claim.

297    A convenient summary of the relevant principles appears in the Full Court’s judgment in Caason Investments Pty Ltd v Cao (2015) 236 FCR 322 at [19]–[21] where Gilmour and Foster JJ observed :

The power of the Court to grant or refuse leave must be exercised in the way that best promotes the Court’s overarching purpose to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: s 37M(3) of the FCA Act and the Federal Court Rules 2011 (Cth) (FCR): Bowen Energy Ltd v 2KD Drilling Pty Ltd [2012] FCA 275 at [8]; Australian Competition and Consumer Commission v Jutsen (No 2) [2010] FCA 982 at [12]-[13]; Suzlon Energy Ltd v Bangad (2011) 196 FCR 259 at [19]; University of Sydney v ResMed Ltd (No 5) [2012] FCA 232 at [14]. ...

The Court’s power to grant leave to amend is broad and has the remedial objective of ensuring that any defect in the pleadings is cured and that the real questions in the controversy are properly agitated and to avoid a multiplicity of proceedings: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [14] ... The object of the Court is not to punish parties for mistakes made in the conduct of their case, but to correct errors with the result that a decision can be made on the real matters in controversy: Clough v Frog (1974) 48 ALJR 481 at 482; 4 ALR 615 at 618, citing Cropper v Smith (1884) 26 Ch D 700 at 710-711.

Leave to amend should be granted unless the proposed amendment is futile, such that the issue sought to be added is unlikely to succeed, the amendment is likely to be struck out or would cause substantial prejudice or injustice to the opposing party in a way that cannot be compensated by costs: Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at [21]-[22]; Ron Medich Properties Pty Ltd v Bentley-Smythe Pty Ltd [2010] FCA 494 at [8]. Rule 16.21 of the FCR identifies the grounds on which pleadings may be struck out.

298    Mr Elvin relied on several passages from the judgments in Aon.

299    First he referred to the remarks of French CJ’s at [4]–[6] in which his Honour outlined the errors made in the courts below:

Save for the dissenting judgment of Lander J in the Court of Appeal, the history of these proceedings reveals an unduly permissive approach at both trial and appellate level to an application which was made late in the day, was inadequately explained, necessitated the vacation or adjournment of the dates set down for trial, and raised new claims not previously agitated apparently because of a deliberate tactical decision not to do so. In such circumstances, the party making the application bears a heavy burden to show why, under a proper reading of the applicable Rules of Court, leave should be granted.

In the proper exercise of the primary judge’s discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system. Given its nature, the circumstances in which it was sought, and the lack of a satisfactory explanation for seeking it, the amendment to ANU’s statement of claim should not have been allowed. The discretion of the primary judge miscarried.

It appears that a factor in the decision of the primary judge and of the Court of Appeal was the decision of this Court in JL Holdings. That case arose out of an entirely different factual setting. However, to the extent that statements about the exercise of the discretion to amend pleadings in that case suggest that case management considerations and questions of proper use of court resources are to be discounted or given little weight, it should not be regarded as authoritative. For the reasons set out more fully below, I would allow the appeal. I agree with the orders proposed in the joint judgment.

300    He then referred to the observation of Gummow, Hayne, Crennan, Kiefel and Bell JJ at [67]:

ANU did not dispute that the substance of its contention was that the “real issues in the proceeding” extended to any issues which a party sought in good faith to advance and which were arguable. For the reasons which follow, that contention cannot be accepted.

301    Finally he relied on the remark in the plurality’s judgment at [101]:

In Ketteman Lord Griffiths recognised, as did the plurality in JL Holdings, that personal litigants are likely to feel the strain more than business corporations or commercial persons. So much may be accepted. But it should not be thought that corporations are not subject to pressures imposed by litigation. A corporation in the position of a defendant may be required to carry a contingent liability in its books of account for some years, with consequent effects upon its ability to plan financially, depending upon the magnitude of the claim. Its resources may be diverted to deal with the litigation. And, whilst corporations have no feelings, their employees and officers who may be crucial witnesses, have to bear the strain of impending litigation and the disappointment when it is not brought to an end. The stated object in the Court Procedures Rules, of minimising delay, may be taken to recognise the ill‑effects of delay upon the parties to proceedings …

Consideration

302    Mr Elvin is understandably aggrieved. The Ombudsman’s application was brought very late. In Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (2015) 230 FCR 298 at [63]–[65] the Full Court (Logan, Bromberg and Katzmann JJ) observed:

[A] civil suit for the recovery of a pecuniary penalty is a proceeding of a penal nature: Naismith v McGovern (1953) 90 CLR 336 at 341. In this class of case, it is especially important that those accused of a contravention know with some precision the case to be made against them. Procedural fairness demands no less. …

Litigation is not a free for all. The overarching purpose of the civil practice and procedure provisions that apply in this Court is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible (Federal Court of Australia Act 1976 (Cth) (“FCA Act”), s 37M). It would not be just to decide a case on a different basis than the way it was conducted. Nor would it be just to permit an applicant to change the nature of its case after the evidence has closed and its weaknesses pointed out, at least not without a formal application and the grant of leave, on terms if necessary.

303    Nevertheless I am persuaded that the Ombudsman’s application should be granted.

304    First, the Ombudsman appears to have been misled by Mr Elvin into thinking that the Massage Therapists had no formal qualifications and that until Mr Elvin’s cross-examination, she believed that she lacked sufficient information to enable her to plead that the HP Level 1 classification applied.

305    In an attachment to an email from Bradley Allen Love Lawyers, dated 12 September 2016, being annexure LRT-36 to Mr Thomas’s affidavit (at p 2346 of the Court Book), which recorded questions asked of Mr Elvin by the Ombudsman and Mr Elvin’s answers, the following exchange is recorded:

9:     What qualifications (if any) are your massage therapists required to have?

•    Mr Elvin did not require his staff to hold any formal qualifications when he was the employer.

306    Exhibit 8 (document 79 in Mr Elvin’s tender bundle) consisted of an email to the Department of Immigration and Citizenship dated 1 February 2013 attaching a letter in response to a request for information made on 11 January 2013. The letter was sent by Lynette Salazar on behalf of Mr Elvin. It referred to a number of primary subclass 457 visa holders who were employees of FTM. They included Mr Puerto, Mr Benting, Ms Isugan, Ms Bantilan, and Ms Amacio. It included a position description for the role of massage therapist.

307    Item 9 of the Department’s request sought evidence of licensing, registration or membership where they are mandatory to work in the nominated occupation under Australian law. This was the response:

In accordance with the Australian Skills Recognition Information (ASRI), listed on the website for the Department of Immigration and Citizenship and by ANZSCO on the Australian Bureau of Statistics for skills needed for a massage therapist in Australia, it states that at least three years relevant experience may substitute for the formal qualification of a AQF Associate Degree, Advanced Diploma or Diploma (ANZSCO Skill Level 2).

308    The evidence adduced from Mr Elvin in cross-examination accords with the summary in Ms Thirukumar’s affidavit. Mr Elvin testified that the Massage Therapists had at least three years’ experience in the massage industry before coming to Australia (T651/24–26) and he understood that, for the purpose of acquiring a subclass 457 visa, at least three years’ relevant experience may substitute for the formal qualification of Australian Qualifications Framework (AQF) associate degree, advanced diploma or diploma (Australian and New Zealand Standard Classification of Occupations (ANZSCO) skill level 2) (T653–4). He also testified that he required the Massage Therapists to attend the NKYR Academy in the Philippines to obtain qualifications before they started work for FTM (T646/5–24); paid for them to obtain those qualifications (T651/11); and recognised the certification of the NKYR Academy as constituting qualifications as a massage therapist (T646/12–14; 698/25–26). He further testified that the Massage Therapists were trained in remedial massage (T640/23).

309    Some of these matters were known to the Ombudsman before the originating application was filed. Internal advice given to the Ombudsman tendered by Mr Elvin (and marked exhibit 2R10) records that the Therapists were “overseas qualified massage therapists with 5+ years of previous experience”. It also shows that she was aware that they were sponsored under the subclass 457 visa as employees at ANZSCO classification 411611 and that the indicative skill level of this classification was an AQF associate degree, advanced diploma, diploma, or alternatively, at least three years of relevant experience.

310    On the basis of this information the advice was that the Therapists were not only covered by the Health Award but that they fell within the classification of HP Level 1. The evidence does not disclose what the Ombudsman did with this advice. It is evident, however, that by the time Mr Wong was instructed to calculate the Therapists’ entitlements the Ombudsman must have decided that the classification was not apt because Mr Wong was told that they were all classified as SSE Level 2.

311    The attachment to the email from Bradley Allen Love dated 12 September 2016, to which the internal advice did not refer, would likely have confused matters and may well have contributed to that decision

312    The new information elicited in cross-examination was that Mr Elvin required the Massage Therapists to attend the NKYR Academy to obtain qualifications before they started work for FTM and that he recognised the certification of the NKYR Academy as constituting qualifications as a massage therapist. A qualification “deemed acceptable by the employer” is sufficient to place a health professional in the classification of HP Level 1. Armed with this information, which was inconsistent with the information provided by Mr Elvin through his solicitors, the Ombudsman could more confidently claim that the Therapists were properly classified as HP Level 1.

313    Second, this case is distinguishable from Aon.

314    In Aon the ANU sued three insurers seeking indemnity for losses it suffered in a fire. Six months later it joined Aon, its insurance broker, as a defendant and claimed damages against it in the alternative based on Aon’s failure to renew insurance over some of the property. On the third day of a four week trial the university settled its case against the insurers and consent judgments were later entered. The ANU then applied for an adjournment of the trial and leave to amend its statement of claim to add a substantial new claim against Aon based on allegations that Aon had been obliged to ascertain and declare the correct value of the property to the insurers and to provide certain advice to the university. No explanation for the amendment was offered. The primary judge granted leave to amend and, by majority, the Court of Appeal dismissed the appeal. Both French CJ and the plurality in the High Court emphasised the importance of case management considerations because they had been overlooked below.

315    As the Full Court (Keane CJ, Gilmour and Logan JJ) observed in Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261 at [51], Aon is “not a one size fits all case”. The weight to be given to the relevant considerations, both individually and in combination, and the outcome of the balancing process involved in the exercise of the discretion may vary according to the facts of the particular case. In contrasting the circumstances of that case with Aon, the Full Court went on to point out at [52] that in Aon the claim introduced by the amendment had not previously been raised because of a deliberate tactical decision on the part of the ANU (Aon at [4] and [24]). Given the delay in proposing the amendment, an explanation was required and none was given (Aon at [106]).

316    This case is very different.

317    Unlike Aon the Ombudsman is not seeking leave to add a substantial new claim. Unlike the decision taken by the ANU in Aon, the Ombudsman’s decision to plead the Support Services classification was not a tactical decision. Further, unlike the ANU in Aon, the Ombudsman provided an explanation to the Court. Until the new evidence emerged, the Ombudsman believed it to be the right classification. When the new information emerged, she believed she might have been mistaken. It is true that she could have obtained the information in exhibit 8 from the Department of Home Affairs herself, if not before the proceeding started, at least by subpoena once it had. That may have been enough to plead the HP Level 1 classification. But her omission to do so is at most an oversight. Any prejudice to Mr Elvin is largely, if not entirely, of his own making.

318    Third, although the timing of the application is unfortunate, and the application for leave to amend was made very late, there was minimal delay in making it once the Ombudsman realised her potential error.

319    Fourth, the interests of the Massage Therapists should also be considered. They were not party to the Ombudsman’s conduct. If the HP Level 1 classification is the correct classification, there is no good reason why they should be penalised for error on the Ombudsman’s part.

320    Fifth, this case should be determined on its merits.

321    In Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 at 446; 50 ALJR 666 at 668, Stephen, Mason and Jacobs JJ said:

If in the cause of action upon which the plaintiff sued there had emerged at the conclusion of the evidence facts which, if accepted, established that cause of action, then it was the duty of the trial judge to leave the issue of negligence to the jury. The pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence which had emerged.

322    In Banque Commerciale SA (in liq) v Akhil Holdings Limited (1990) 169 CLR 279 at 296–7 Dawson J remarked that “modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon [a different basis]… cases are determined on the evidence, not the pleadings”. That remark was approved by five justices of the High Court in Vale v Sutherland (2009) 237 CLR 638 at [41].

323    As the Full Court observed in Cement Australia at [68], there is nothing in Aon or in the FCA Act to suggest that it is irrelevant for the Court to take into account in the exercise of its discretion the desirability that a case be decided on its merits, so as to preserve public confidence in the administration of justice.

324    In Water Board v Moustakas (1988) 180 CLR 491 at 497 Mason CJ, Wilson, Brennan and Dawson JJ said that if issues not apparent from the pleadings are litigated, the pleadings should be amended accordingly. In effect, that is all the Ombudsman seeks to do. The new evidence is necessary only because the classification they want to rely on affects the extent of the underpayments.

325    Sixth, I take into account Mr Elvin’s feelings but any prejudice occasioned to him as a result of a grant of leave is minimal in the scheme of things. He opened his case by saying that the Health Award did not apply. There is no reason to think that Mr Elvin’s position would have been any different if the Ombudsman had pleaded from the outset that the Massage Therapists were properly classified as HP Level 1. The fact that the amounts claimed in the proposed second amended statement of claim are substantially higher than those previously claimed is simply the consequence of the application, if it be the case, of the correct classification in the Award.

326    Seventh, I reject Mr Elvin’s submission that it would be futile to grant the Ombudsman’s application.

327    Contrary to Mr Elvin’s submission, practitioners of complementary medicine are covered by the Health Award. Indeed, remedial masseurs, reflexologists and aromatherapists are listed as “common health professionals” under the Award. Notably, the Therapists’ contract of employment provided that their day-to-day duties involved remedial massage, Thai foot reflexology and massages using aromatherapy oil.

328    There is no evidence one way or the other as to whether the Massage Therapists were registered with a professional organisation. Regardless, registration with a professional organisation does not determine whether they were health professionals within the meaning of the Health Award or came within the HP Level 1 classification.

329    In his submissions on the interlocutory application Mr Elvin referred the Court to the website of the Association of Massage Therapists (AMT), which he described as the oldest association in Australia “to represent massage therapy in its own right and the premier representative body for professional therapists”. He submitted that the AMT website is informative and contradicts the Ombudsman’s claim that the Massage Therapists are covered by the Health Award or, for that matter, the Hair and Beauty Award. He referred to representations made by the AMT to the effect that there is no legislation that “applies solely or specifically to the practice of massage” and “no uniform national system in relation to unregistered health practitioners such as massage therapists”. These representations are not to the point. They are concerned with regulation of registered and unregistered health practitioners. At the same time, they belie Mr Elvin’s argument because they disclose that the AMT considers that massage therapists are health practitioners.

330    Mr Elvin’s submissions also included a link to the AMT’s website.

331    The AMT website is indeed informative, not because it contradicts the Ombudsman’s claim that the Massage Therapists are covered by the Health Award, but because it supports it. Three of the five facts sheets included in the “Practice Resources” of the Members section (accessible by clicking on the “Members” tab at the top of the home page) refer to the Health Award as the award covering massage therapists. One is specifically concerned with award entitlements. That identifies the Health Award and the place where it can be found. It begins with the following statement:

The Health Professionals and Support Services Award 2010 came into effect on 1 January 2010. Along with the National Employment Standards (NES), this Award contains the minimum conditions of employment for Remedial Massage Therapists. Together, the Health Professionals Award and the NES are a safety net that cannot be altered to the disadvantage of the employee/therapist.

332    In any case, the pleading currently relies on the Health Award. The only change the Ombudsman seeks to make is to the classification into which the Massage Therapists fell.

333    Eighth, I do not accept that the Ombudsman has behaved otherwise than as a model litigant.

334    The obligation of the Commonwealth and Commonwealth agencies to behave as model litigants in the conduct of litigation is set out in the Legal Services Directions 2017 (Cth). It applies to the handling of claims and litigation brought by or against the Commonwealth or a Commonwealth agency.

335    The nature of the obligation is to act honestly and fairly by doing or not doing certain things set out in cl 2 of Appendix B of the Directions. Mr Elvin referred to a number of those matters:

(a)    dealing with claims promptly and not causing unnecessary delay in the handling of claims and litigation;

(aa)    making an early assessment of

(i)    the Commonwealth’s prospects of success in legal proceedings that may be brought against the Commonwealth; and

(ii)    the Commonwealth’s potential liability in claims against the Commonwealth;

(e)    where it is not possible to avoid litigation, keeping the costs of litigation to a minimum, including by:

(i)    not requiring the other party to prove a matter which the Commonwealth or the agency knows to be true [.]

…

(f)    not taking advantage of a claimant who lacks the resources to litigate a legitimate claim[.]

336    Most of these matters are irrelevant because they relate to cases brought against the Commonwealth or Commonwealth agency. Mr Elvin is the not a claimant. The Ombudsman has not required Mr Elvin to prove a matter she knew to be true. If anything, the Ombudsman and her lawyers bent over backwards to assist Mr Elvin. There have been a number of delays in this proceeding. The Ombudsman did not cause any of them. To the extent that granting leave to the Ombudsman will cause further delay, Mr Elvin is substantially responsible for it.

337    Mr Elvin complained that he had not been given an opportunity to file a further amended defence. But the complaint is premature. He will be given that opportunity once the Ombudsman files her documents. He will also be given an opportunity to address the new evidence from Mr Wong. As I indicated to the parties at the hearing, I do not propose making final orders in this judgment. Rather, I intend to do as I foreshadowed, namely to direct the parties to try and agree on the orders in the light of my findings and reasons and, if they are unable to do so, to refer to a referee the question concerning the extent of the underpayments. Mr Elvin may file any evidence he wishes in response to Mr Wong’s affidavit and he may make submissions on the matter to the referee in accordance with any directions the referee may make.

338    In the meantime I will proceed on the basis that he denies the new allegations.

THE ISSUES

339    The following issues arise for determination:

(1)    In relation to the applicable award and classification:

(a)    whether FTM was covered by the Health Award or the Hair and Beauty Award;

(b)    if the former, whether the Massage Therapists came within the classifications listed in clauses 14 or 15, that is as Support Services employees in the classification of SSE Level 2 or as Health Professional employees in the classification of HP Level 1; or

(c)    if the latter, whether the Therapists fell within the classification of “Hair and Beauty Employee Level 2”.

(2)    In relation to the alleged requirement to work unreasonable hours:

(a)    whether the Massage Therapists were requested or required to work in excess of 38 hours per week; and

(b)    if so, whether those hours were “unreasonable” in contravention of s 62(1) of the FW Act.

(3)    In relation to the underpayment claims, whether:

(a)    Ms Isugan, Mr Benting, Ms Bantilan and Ms Amacio were required to spend (by paying back from their wages) $800 a fortnight in the period 26 August 2012 to 2 June 2013 in contravention of s 325 of the FW Act;

(b)    Ms Sarto, Ms Ortega and Ms Castaneda were required to spend (by paying back from their wages) $800 a fortnight in the period 21 April 2013 to 5 January 2014 in contravention of s 325 of the FW Act;

(c)    the deductions made from the Massage Therapists’ wages were authorised in writing by the Massage Therapists and principally for their benefit as required by s 324 of the FW Act; and

(d)    whether the Massage Therapists were paid their entitlements to minimum wages, public holiday rates, and overtime rates in accordance with the applicable award.

(4)    In relation to the record-keeping claims, whether:

(a)    FTM’s employee records and the pay slips provided by FTM to the Massage Therapists met the requirements of the FW Act and FW Regulations;

(b)    FTM failed to provide pay slips to the Massage Therapists, as required, from 31 March 2014 to the end of their respective employment periods;

(c)    FTM did not make and keep records in respect of the number of overtime hours, periods of annual leave taken, and the nature of the termination of the Therapists’ employment;

(d)    FTM’s employee pay records were false and misleading in that they did not record the actual wages to the Therapists during the cash back periods, did not accurately record the number of hours worked, and did not accurately record the Therapists’ entitlements to overtime; and

(e)    FTM made use of false or misleading pay records when producing them to the Ombudsman in response to a notice to produce issued on 1 June 2016.

(5)    In relation to the adverse action and coercion claims, whether FTM has rebutted the presumption in s 361 of the FW Act that it:

(a)    engaged in adverse action against the Therapists to prevent them from exercising their workplace rights to make a complaint or inquiry in relation to their employment, in contravention of s 340(1)(b) of the FW Act;

(b)    took adverse action against the Therapists by reason of their race and/or national extraction and/or social origin by injuring them in their employment in contravention of s 351(1) of the FW Act; and

(c)    took actions against the Massage Therapists with the intent to coerce each of the Therapists to not exercise a workplace right, in contravention of s 343(1)(a) of the FW Act.

(6)    Whether Mr Elvin and Mr Puerto were knowingly involved in the claimed contraventions of FTM as alleged.

(7)    Whether the DOCA operates as a bar to the proceedings, which, in turn raises the following issues:

(a)    whether the Ombudsman is a “creditor” for the purposes of the DOCA;

(b)    whether the DOCA extinguished the underlying claims against FTM; and

(c)    whether the DOCA operates to bar all the Ombudsman’s claims.

THE APPLICABLE AWARD

The law

340    Section 47(1) of the FW Act relevantly provides that a modern award applies to an employee and an employer if the award is in operation; covers the employee or employer; and no other provision of the Act provides, or has the effect, that the award does not apply to the employee or employer. A modern award does not apply to an employee (or an employer in relation to the employee) at any time the employee is “a high income employee” (s 47(2)). A reference in the Act to a modern award applying to an employee is a reference to the award applying to the employee in relation to particular employment (s 47(3)).

341    A modern award “covers” an employee or employer if it is expressed to do so (s 48(2)) unless the award has ceased to operate (s 48(4)).A reference in the Act to a modern award covering an employee is a reference to the award covering the employee in relation to particular employment (s 48(5)).

342    These provisions have not changed since the Act commenced in 2009.

343    Thus, the resolution of the key question — which, if any, award applies — turns on the proper construction of the coverage clauses in the Health Award and the Hair and Beauty Award as they were cast at the time of the Massage Therapists’ employment with FTM.

344    The principles of construction are well-established.

345    First, although an award is not a statute, generally speaking the principles of statutory interpretation apply.

346    An award is an instrument given the force of law. In effect, however, the FW Act, like its predecessors, “enacts by the prescribed constitutional method the provisions contained in the award”: Ex parte McLean (1930) 43 CLR 472 at 479 (Isaacs CJ and Starke J). As French J explained in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union [2006] FCA 813; 153 IR 426 at [52], as an instrument made by an authority (here, the Fair Work Commission), absent the contrary intention, the Acts Interpretation Act 1901 (Cth) applies to it as if it were an Act and as if each provision of the award were a section of the Act; expressions used in the award have the same meaning as the Act; and the award is to be read and construed subject to the Act and so as not to exceed the Commission’s power (see Interpretation Act, s 46). It follows, as French J went on to explain in Wanneroo at [53]:

The construction of an award, like that of a statute, begins with a consideration of the ordinary meaning of its words. As with the task of statutory construction regard must be paid to the context and purpose of the provision or expression being construed. Context may appear from the text of the instrument taken as a whole, its arrangement and the place in it of the provision under construction. It is not confined to the words of the relevant Act or instrument surrounding the expression to be construed. It may extend to ‘… the entire document of which it is a part or to other documents with which there is an association’. It may also include ‘… ideas that gave rise to an expression in a document from which it has been taken’ – Short v FW Hercus Pty Ltd (1993) 40 FCR 511 at 518 (Burchett J); Australian Municipal, Clerical and Services Union v Treasurer of the Commonwealth of Australia (1998) 80 IR 345 (Marshall J).

347    Second, the principles expounded by Madgwick J in Kucks v CSR Ltd (1996) 166 IR 182 at 184 apply:

It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.

The Health Award

348    At all material times the coverage clause (cl 4) relevantly provided that:

4.1    This industry and occupational award covers:

(a)    employers throughout Australia in the health industry and their employees in the classifications listed in clauses 14 – Minimum weekly wages for Support Services employees and 15 – Minimum weekly wages for Health Professional employees to the exclusion of any other modern award;

(b)    employers engaging a health professional employee falling within the classification listed in clause 15.

4.2    This award does not cover an employee excluded from award coverage by the [FW] Act.

…

4.8    Where an employer is covered by more than one award, an employee of that employer is covered by the award classification which is most appropriate to the work performed by the employee and to the environment in which the employee normally performs the work.

349    No respondent alleged that any of the Massage Therapists was excluded from award coverage by the FW Act.

350    The effect of cl 4.1 is that the Health Award covers both employers throughout Australia in the health industry and their employees in the classifications of Support Service employees and Health Professional employees and also employers not in the health industry but who engage Health Professional employees. It follows that if FTM falls into either para (a) or para (b) of cl 4.1 it was covered by the Health Award to the exclusion of any other modern award.

351    The first question, then, is whether FTM was an employer in the health industry.

Was FTM an employer in the health industry?

352    The “health industry” is defined in cl 3.1 to mean “employers whose business and/or activity is in the delivery of health care, medical services or dental services”.

353    Plainly FTM was not an employer whose business or activity was in the delivery of medical or dental services. The Health Award could only have covered it if its business or relevant activity was “in the delivery of health care”.

354    “Health care” is not defined in the Health Award so it is reasonable to infer that the expression was intended to bear its ordinary meaning. The Macquarie Dictionary (8th ed, Pan Macmillan Australia, 2020) defines “health care” as “medical and other services provided for the maintenance of health, prevention of disease, etc.” and “health” as including, relevantly:

1.    soundness of body; freedom from disease or ailment.

2.    the general condition of the body or mind with reference to soundness and vigour …

355    As the Ombudsman submitted, the evidence shows that FTM’s business was in the “health industry” because it was involved in the business of delivering health care.

356    FTM held a “medical malpractice insurance” policy.

357    The services FTM offered were described on its website as “therapeutic massage”. It promoted its business as a provider of therapeutic and remedial massages for which private health insurance rebates may be available. It provided a suite of massage services intended to relax the client or be remedial in nature and alleviate ailments. FTM’s “Operations Manual Therapist” describes the various forms of massage. Each of the descriptions extols the role of massage in healing the body and enhancing wellbeing. Remedial massage, for example, is described in this way:

Remedial Massage is a deep massage done by skilled hands to create the conditions for the body’s return to optimal health after injury. It is used to treat strains, sprains, broken bones, bruising, and any injury where the skin is intact. Deep tissue massage removes blockages, damaged cells; scar tissue and adhesions left after injury, speeds up recovery and encourages more complete healing. Remedial Massage is also used for conditions created by lifestyle for example Repetitive Strain Injury and Back Pain.

The techniques used are designed to increase the flow of blood and lymph around the body, particularly in the injured areas. This enables the body to heal.

358    The Operations Manual lists at length the health benefits of all forms of massage offered by FTM, including increasing blood circulation, improving the lymphatic system and metabolism, decreasing soreness and discomfort in muscles, and promoting relaxation. Mr Elvin also gave some oral evidence to similar effect. Aromatherapy was one of the massage services FTM offered. In cross-examination Mr Elvin agreed that one of the “goals” of aromatherapy was “to improve or to relax the individual” and that relaxation provides health benefits. In the Operations Manual, the “main benefit of aromatherapy” is said to be that “essential oils oxygenate the blood stream and stimulate the immune system … which leads to enhanced health and wellness”. Mr Elvin gave evidence that he wrote the Operations Manual and trained the Massage Therapists using it.

359    Massage is sometimes referred to as “traditional medicine”. Mr Elvin referred to it as “complementary to medicine”. He tendered a document entitled “Complementary Health Industry Reference Committee 2019 Industry Skills Forecast” (Ex 2R22), which described “massage and remedial massage therapy” in the following way:

Massage therapists perform therapeutic massage and administer body treatments for health, fitness and remedial purposes. Therapeutic massage is the manipulation of muscle and connective tissue, generally by hand, to promote bodily function, assist in the relevant tissue recovery and enhance wellbeing.

360    Reflexology, another service provided by FTM and included in the position description in the contracts for all the Massage Therapists, was also described:

Reflexology is a specialised tactile therapy whereby the application of pressure and soothing techniques to reflex points of the body can improve nerve and blood supply, relax the body and mind, and help restore balance and wellbeing.

361    Since I have found that FTM was covered by the Health Award because it was an employer in the health industry, the next question is in what classification the Massage Therapists were employed.

In what classification were the Massage Therapists employed?

362    Clause 14 relates to minimum weekly wages for “Support Services employees”. Clause 15 relates to minimum weekly wages for Health Professional employees and includes Health Professional employee–levels 1 to 4. The lowest pay point (pay point 1) for the lowest level of Health Professional employee (level 1) is “UG 2 qualification”. The second lowest is “three year degree entry”. “UG 2” is an abbreviation for “undergraduate 2” and is defined in cl 3.1 of the award to mean “an employee with a diploma or equivalent”.

363    Clause 13 provides that all employees covered by the award must be classified according to the structure and definitions set out in Schedule B – Classification Definitions.

364    The classifications of Support Services employees were defined in Schedule B.1 to the award. Clause B.1.1 deals with the SSE Level 1 classification, which is the entry level. It reads:

Entry level:

An employee with less than three months work experience in the industry and who performs basic duties.

An employee at this level:

•    works within established routines, methods and procedures;

•    has minimal responsibility, accountability or discretion;

•    works under direct or routine supervision, either individually or in a team; and

•    is not required to have previous experience or training.

Indicative roles at this level are:

365    Clause B.1.2 deals with the SSE Level 2 classification upon which the Ombudsman relied. At all relevant times it provided:

An employee at this level:

•    is capable of prioritising work within established routines, methods and procedures;

•    is responsible for work performed with a limited level of accountability or discretion;

•    works under limited supervision; either individually or in a team;

•    possesses sound communication skills; and

•    requires specific on-the-job training and/or relevant skills training or experience.

In addition to level 1, other indicative roles at this level are:

366    The Ombudsman submitted that SSE Level 2 was the correct classification for the Massage Therapists based on the fact that they had had at least three months previous work experience in the massage industry and had completed massage training courses in the Philippines; performed certain massages and used techniques defined in the Operations Manual; operated within established routines with limited discretion or autonomy; had sound communications skills, and received further on the job training.

367    There are problems with the Ombudsman’s argument.

368    First, it takes cl B.1.2 out of context. On a plain reading of the Award, Support Services employees provide support to Health Professionals. If an employee is a Health Professional they cannot be a Support Services employee even if they are required to perform some duties which might fall within that description. Second, the Ombudsman’s argument accorded little weight to the “indicative roles”. She pointed to “personal care worker grade 1” but I do not consider that the role of a massage therapist equates to, or resembles that of, a personal care worker.

369    In my opinion the Massage Therapists were Health Professionals.

370    The term “health professional” is not defined in the Health Award. But Schedule C contains a list of “common health professionals”. It relevantly includes the following:

Aromatherapist

…

Masseur, Remedial

…

Reflexologist

…

371    The list does not include medical practitioners or nurses for that matter. Rather, it is a list of what might properly be described as allied health professionals. Among the other professionals listed are various types of therapists, including acupuncturists, homoeopathists, musculoskeletal therapists, myotherapists, naturopathists, occupational therapists, and physiotherapists.

372    By definition, a therapist is a person who provides therapy. “Therapy” derives from the Greek therapeia meaning healing. The first listed meaning of therapy in the Macquarie Dictionary is “the treatment of disease, disorder, defect, etc., as by some remedial or curative process”.

373    The history of the making of the Award indicates that the intention was to include all health professionals other than medical practitioners and nurses. In a statement issued by the Australian Industrial Relations Commission during the award modernisation process, the Full Bench of the Commission explained:

The exposure draft of the Health Professionals and Support Services Industry and Occupational Award 2010 is a generic exposure draft to cover professional and technical classifications together with clerical and administrative classifications. We have sought, in the salary structure and level of salaries, to accommodate all health professionals (except doctors and nurses) employed in both the health industry and industry generally …

See Award Modernisation – Statement – Full Bench [2009] AIRCFB 50 at [78].

374    The use of the word “common” in Schedule C indicates that the list is not intended to be exhaustive. The Full Bench of the Fair Work Commission has confirmed that it is not exhaustive but indicative: 4 yearly review of modern awards – Health Professionals and Support Services Award 2010 [2019] FWCFB 8538 at [26]. The reasons were given at [27]:

a)    The roles of some health professionals are adjusting as technology, research and consumer demand are changing.

b)    The titles of some health professionals are changing as professional bodies prefer one title over another.

c)    It is not desirable for some health professionals to be covered by the HPSS Award and others to be award free simply because of a change in name or adjustment in role.

d)    It is inconsistent with the modern awards objective that “The FWC must ensure that modern awards, taken together with the NES, provide a fair and relevant minimum safety net of terms and conditions” to confine the coverage of the HPSS Award to a limited number of specific titles of health professionals.

e)    It is consistent with the modern awards objective and s.143 (2) of the Fair Work Act 2009 (FW Act) that clause 4 Coverage of the HPSS Award, in conjunction with Schedule B2 Health Professional employees – definitions, governs the coverage of the HPSS Award, supplemented, rather than confined by Schedule C.

375    The evidence establishes that the Massage Therapists were health professionals within the meaning of the Health Award because they performed aromatherapy, remedial massage, reflexology, and, as the Ombudsman submitted, aspects of myotherapy. The fact that they also performed other forms of massage is immaterial.

376    The job description provided to the Department of Immigration and Citizenship corresponds to the position description in each of the Therapists’ contract of employment. It was in the following terms:

This position required them to performing [sic] Thai foot reflexology, Thai head, shoulders and back, Traditional Thai, Aromatherapy, Deep tissue, Sports, Remedial and Swedish massages to customers as well as the duties listed below.

•    Massage the soft tissues of the body, such as muscles, tendons and ligaments, to assist healing, utilising a range of massage techniques to enhance sports performance and prevent injury.

•    Administering treatments to promote relaxation, improve circulation and relieve muscle tension.

•    Assessing and treating specific soft tissue dysfunction and providing rehabilitation advice

•    Employing other techniques, such as essential oils, to assist recovery

•    Assessing client’s physical condition and case history and advising on stretching exercises and relaxation techniques

•    Performs therapeutic massage and administers body treatments for relaxation, health, fitness and remedial purposes. Keep accurate and up-to date records regards a client’s condition before and after massage therapy session in cases of a client being treated for a specific condition

•    Obtain and keep an overview or profile of the client’s state of being and health history and discuss any problem areas that may contraindicate massage,

•    Acknowledge their professional limitations and refer the client to an appropriate health professional when necessary, in cases where massage may be or is contraindicated

•    Perform only those services for which they are qualified and which represent their training and education

•    Following different types of sanitary procedures in order to keep the room and the facility clean

377    This description bears all the hallmarks of the work of a health professional.

378    The representation that the job required them to perform remedial massages is inconsistent with Mr Elvin’s statement to the Court (at T697) that he knew that the massage therapists were not remedial masseurs.

379    Schedule B.2 of the Health Award describes the various levels of health professional employees.

380    Clause B.2.1 describes the position of HP Level 1, upon which the Ombudsman relied, thus:

Positions at level 1 are regarded as entry level health professionals and for initial years of experience.

This is the entry level for new graduates who meet the requirement to practise as a health professional (where appropriate in accordance with their professional association’s rules and be eligible for membership of their professional association) or such qualification as deemed acceptable by the employer. It is also the level for the early stages of the career of a health professional.

(Emphasis added.)

381    The evidence does not suggest that any of the higher level positions are applicable.

382    As I mentioned earlier, in cross-examination Mr Elvin testified that he directed the Massage Therapists to undergo training at the NKYR Academy in the Philippines; that he paid for the training; and that he recognised and accepted the qualifications obtained after they had completed the training. While only Ms Amacio, Mr Benting, Ms Ortega, and Ms Bantilan gave evidence that they held qualifications from the NKYR Academy, Mr Elvin testified that he understood that all of them had undertaken the course.

383    It will be recalled that HP Level 1 employees at pay point 1 are classified as employees with a diploma or equivalent (cl 15.2). FTM informed the Department of Immigration and Citizenship that all its massage therapists had at least three years’ industry experience which was equivalent to a diploma. In cross-examination, Mr Elvin denied that he had made such a representation despite earlier conceding that he had. And he also denied that three years’ experience was equivalent to a diploma. But the documentary evidence speaks for itself. In its letter to the Department of 1 February 2013, FTM referred to the ANZSCO classifications and relied on the statement by ANZSCO that “at least three years relevant experience may substitute for the formal qualification of a AQF Associate Degree, Advanced Diploma or Diploma (ANZSCO Skill Level 2)”. Plainly, FTM represented to the Department that the experience of the Therapists in the Philippines was equivalent to a diploma.

384    For these reasons, I find that the Massage Therapists held qualifications which were deemed acceptable by FTM and, in any event, was the appropriate level for the Massage Therapists who were in the early stages of their careers as health professionals.

385    The ANZSCO classification for “massage therapist” accords with the description of an HP Level 1 employee in the Health Award. ANZSCO defines massage therapist a person who “performs therapeutic massage and administers body treatments for health, fitness and remedial purposes”. The tasks include “massaging the soft tissues of the body, such as muscles, tendons and ligaments, to assist healing” and “administering treatments to promote relaxation, improve circulation and relieve muscle tension”. The indicative skill level is AQF associate degree, advanced diploma, diploma, or alternatively at least three years of relevant experience. This is consistent with the skill level of HP Level 1 employee. ANZSCO also lists several “specialisations” for massage therapists, including remedial masseur, shiatsu therapist and sports medicine masseur. These are consistent with the relevant “common health professionals” in Schedule C of the Health Award and inconsistent with the skill level and indicative roles of a SSE Level 2 employee.

386    While ANZSCO has a separate classification for “health professionals”, it is apparent that this classification is different from the “health professionals” covered by the Health Award. ANZSCO defines health professionals as people who “develop health care programs and policies, conduct tests and diagnose and treat physical and physiological disorders…”. Health professionals are described as having a bachelor degree or higher, and occupying roles such as medical practitioners, midwives and nurses. As will be recalled, the Health Award is not intended to cover these occupations.

387    It follows that at all relevant times the applicable classification for the employment of the Massage Therapists was HP Level 1.

388    There is an apparent conflict or at least tension between the stipulation in cl 4.1(a) that the Health Award covers “employers … and their employees in the [relevant] classifications … to the exclusion of any other modern award” and the terms of cl 4.8 (“Where an employer is covered by more than one award, an employee of that employer is covered by the award classification which is most appropriate to the work performed by the employee and to the environment in which the employee normally performs the work”). The apparent conflict or tension should be resolved in the way the plurality (McHugh, Gummow, Kirby and Hayne JJ) indicated in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [70]:

A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court “to determine which is the leading provision and which the subordinate provision, and which must give way to the other”. Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.

389    The apparent conflict or tension in the present case should be resolved by recognising that, in the case of employers in the health industry and their employees in the relevant classifications, the Health Award applies to the exclusion of any other modern award. Clause 4.8 is concerned with employers outside the health industry but who employ health professionals. Lest I am wrong, however, I will consider whether FTM was covered by the Health and Beauty Award and, if so, which classification of that award is most appropriate to the work performed by the Massage Therapists and to the environment in which they normally performed their work.

The Hair and Beauty Award

390    The coverage clause in the Hair and Beauty Award, also cl 4, relevantly provides:

4.1    This award covers employers throughout Australia in the hair and beauty industry and their employees in the classifications listed in clause 17-Minimum weekly wages to the exclusion of any other modern award. The award does not cover employees who perform hair and beauty work in the general retailing, theatrical, amusement and entertainment industries.

4.2    The award does not cover an employee excluded from award coverage by the Act.

…

4.7    Where an employer is covered by more than one award, an employee of that employer is covered by the award classification which is most appropriate to the work performed by the employee and to the environment in which the employee normally performs the work.

391    As the Ombudsman submitted, this coverage clause has three elements:

(1)    The employers must be in the hair and beauty industry;

(2)    The employees must be in the classifications listed in cl 17; and

(3)    The employees must not perform hair and beauty work in the general retailing, theatrical, amusement and entertainment industries.

392    “Hair and beauty industry” is defined in cl 3.1 to mean:

(a)    performing and/or carrying out of shaving, haircutting, hairdressing, hair trimming, facial waxing, hair curling or waving, beard trimming, face or head massaging, shampooing, wig-making, hair working, hair dyeing, manicuring, eye-brow waxing or lash tinting, or any process or treatment of the hair, head or face carried on, using or engaged in a hairdressing salon, and includes the sharpening or setting of razors in a hairdressing salon; and/or

(b)    performing and/or carrying out manicures, pedicures, nail enhancement and nail artistry techniques, waxing, eyebrow arching, lash brow tinting, make-up, analysis of skin, development of treatment plans, facial treatments including massage and other specialised treatments such as lymphatic drainage, high frequency body treatments, including full body massage and other specialised treatments using machinery and other cosmetic applications and techniques, body hair removal, including (but not limited to) waxing chemical methods, electrolysis and laser hair removal, aromatherapy and the application of aromatic plant oils for beauty treatments, using various types of electrical equipment for both body and facial treatments

(Emphasis added.)

393    The Ombudsman submitted that:

In the alternative to the [Ombudsman’s] claim is that the massages performed by the Massage Therapists were remedial in nature and therefore covered by the health professionals stream, it would be open to the Court to conclude that the substantial character of the work was repetitive and did not require diagnosis skills or a detailed understanding of anatomy. [Mr Elvin] gave evidence at the hearing that all of the massages with the exception of Thai Foot Reflexology and Thai Foot, Head, Back and Shoulder massages are “full body massages” which worked on the entirety of the body and the Massage Therapists were trained to perform all of these massages. He also agreed that massage puts frequent pressure and stretches parts of the body. [FTM] also offered aromatherapy.

[Mr Elvin’s] implied assertion that [FTM] did not fall within the hair and beauty industry because the Massage Therapists do not use machinery and other cosmetic applications and techniques must be rejected. It is clear when read in context, the phrase is ‘high frequency body treatments’, including fully body massage’ as one example and other specialised treatments using machinery and other cosmetic applications and techniques as a second example. The word ‘and’ clearly is to be read disjunctively such that to be included in the definition of ‘hair and beauty industry’, the work need only involve full body massage or other specialised treatments. The final phrase ‘using various types of electrical equipment for both body and facial treatments’ does not mean that all techniques listed must use electrical equipment just that such equipment may be used. That the Complementary Health Industry Reference Committee 2019 Industry Skills Forecast does not mention the Hair and Beauty Award is explicable because it was a report (that was produced after the Massage Therapists no longer worked for [FTM]) which focussed on the Health industry, not because the Hair and Beauty Award does not apply to some Massage Therapists.

394    The Ombudsman proceeded to outline the history of the making of the Hair and Beauty Award to which, for reasons that will shortly become apparent, it is unnecessary to refer.

395    Having regard to the broad definition of “hair and beauty industry” in the Hair and Beauty Award and the history of the Award summarised in the Ombudsman’s closing submissions, one might well conclude that FTM was in the “hair and beauty industry”. Contrary to the Ombudsman’s argument, however, the Massage Therapists were not employed in any of the classifications in cl 17.

396    Clause 17 contains only a list of levels and pay rates for each level. It must be read with the classifications in Schedule B. Those classifications are:

B.1    Hair and Beauty Employee Level 1 means a receptionist or salon assistant.

B.2    Hair and Beauty Employee Level 2 means:

(a)    a make-up artist who holds a Certificate II in make-up services (or equivalent);

(b)    a nail technician who holds a Certificate II in Nail Technology (or equivalent); or

(c)    an unqualified beautician or cosmetologist.

B.3    Hair and Beauty Employee Level 3 means:

(a)    a beautician who holds a Certificate III in Beauty Services (or equivalent); or

(b)    a hairdresser who holds a Certificate III in Hairdressing (or equivalent).

B.4    Hair and Beauty Employee Level 4 means a Beauty Therapist who holds a Certificate IV in Beauty Therapy (or equivalent).

B.5    Hair and Beauty Employee Level 5 means:

(a)    a hairdresser who holds a Certificate IV (or equivalent); or

(b)    a trichologist who is a hairdresser and holds a Certificate IV in Trichology (or equivalent).

B.6    Hair and Beauty Employee Level 6 means a beauty therapist who holds a Diploma in Beauty Therapy (or equivalent).

(Original emphasis.)

397    The Ombudsman submitted that the Massage Therapists are properly classified as Level 2 employees under the Hair and Beauty Award because they did not hold any of the qualifications required for the higher levels and, to the extent that they performed massages which were not directed to delivering health benefits, “it follows that they were provided for relaxation purposes”. But the submission ignores the reference to “beautician or cosmetologist”. At best, it impermissibly strains the meaning of those words. A beautician is a person skilled in cosmetic treatment and beauty aids (Macquarie Dictionary, p 129). “Cosmetologist” has not found its way into the Macquarie Dictionary but “cosmetology” is defined as “the art and techniques relating to cosmetics” (at p 353). “Unqualified” in both trades the Massage Therapists certainly were but they were not hired to, nor did they engage in, either the work of a beautician or cosmetologist.

398    It follows that even if the Hair and Beauty Award also covered FTM, the Massage Therapists were nonetheless covered by the HP Level 1 classification, it being the award classification which was most appropriate to the work they performed and to the environment in which they normally performed it.

THE LIABILITY OF FTM: SOME GENERAL MATTERS

399    At all relevant times s 793 provided that:

Liability of bodies corporate

Conduct of a body corporate

(1)    Any conduct engaged in on behalf of a body corporate:

(a)    by an officer, employee or agent (an official) of the body within the scope of his or her actual or apparent authority; or

(b)    by any other person at the direction or with the consent or agreement (whether express or implied) of an official of the body, if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the official;

is taken, for the purposes of this Act and the procedural rules, to have been engaged in also by the body.

State of mind of a body corporate

(2)    If, for the purposes of this Act or the procedural rules, it is necessary to establish the state of mind of a body corporate in relation to particular conduct, it is enough to show:

(a)    that the conduct was engaged in by a person referred to in paragraph (1)(a) or (b); and

(b)    that the person had that state of mind.

Meaning of state of mind

(3)    The state of mind of a person includes:

(a)    the knowledge, intention, opinion, belief or purpose of the person; and

(b)    the person’s reasons for the intention, opinion, belief or purpose.

…

(5)    In this section, employee has its ordinary meaning.

400    The effect of s 793 is that the conduct and state of mind of an official, employee or agent is attributed to the body corporate: Director of the Fair Work Building Industry Inspectorate v Robinson (2016) 241 FCR 338 at [48]–[50] (Charlesworth J).

401    This means that if either or both of Mr Elvin or Mr Puerto engaged in the conduct with which the contraventions are concerned and the conduct was within the scope of their actual or apparent authority, FTM also engaged in that conduct and their state of mind is taken to be the state of mind of FTM.

THE UNDERPAYMENT CLAIMS

General

402    Mr Elvin submitted that FTM did not calculate any employee entitlements on the basis of either award. He asserted that, although the contracts FTM entered into with the Massage Therapists recorded that the Health Award “was to be read with” the contract, the inclusion of the award was “an error”. In cross-examination Mr Elvin repeatedly described the contracts as “sham” and claimed that they had been varied with the knowledge of the Massage Therapists. He submitted that the calculation of the employee entitlements was based on “what was in effect an unwritten individual flexibility agreement” to which both parties adhered over many years. No such allegation was made in FTM’s amended defence. FTM merely admitted without qualification the Ombudsman’s claim, which (save for the words underlined below which were added in the last version) appeared in para 10 of its statement of claim and all subsequent iterations, that each of the Massage Therapists entered into a contract of employment with FTM, which was signed by Mr Elvin on its behalf, and included the following terms:

(a)    full-time employment in the position of ‘Massage Therapist’ upon arrival in Australia;

(b)    employment duration of four years;

(c)    the performance of work was to take place at the Belconnen Shop;

(d)    a gross annual salary of AU$52,000 and gross fortnightly wages of AU$2,080; and

(e)    entitlements to penalty rates, overtime rates and annual leave loading.

PARTICULARS

A.    Each of the Contracts was signed by the Second Respondent on behalf of the First Respondent.

B.    The respective Contracts for Ms Amacio and Ms Isugan were signed by the Third Respondent in the capacity of a witness.

C.    On behalf of the First Respondent, the Third Respondent gave the Contract to each of the Employees.

D.    The entitlements to penalties, annual leave loading and overtime rates prescribed in the Contracts were in accordance with the Health Professionals and Support Services Award 2010.

E.    Each of the Contracts included the words “if applicable, this letter should be read in conjunction with the Health Professionals and Support Services Award 2010.”

403    In his amended defence Mr Elvin did not plead that any of the Massage Therapists was employed under a contract that differed in any respect from that which each of them had signed. Nor did he make any submission to that effect in his opening submissions — other than to submit that the form of the contract was “incorrect” — or suggest to any of the Massage Therapists in cross-examination that they had agreed to any variation of the contract. In these circumstances, it was not open to Mr Elvin to allege or, for that matter, give evidence that they had agreed to one.

404    Moreover, when FTM was served with a notice to produce, amongst other things, documents and records relating to the terms of engagement of the Massage Therapists, including employment agreements or contracts, a copy of which was emailed to Mr Elvin personally, it produced the contracts upon which the Ombudsman relied and did not suggest that those contracts had been varied at any time. Mr Elvin telephoned FWI Hurrell, the day the documents were produced but the file note of the conversation, which was annexed to Mr Thomas’s affidavit (LRT-17), indicates that he did not tell her that the contracts he was producing were other than genuine or did not accurately reflect the terms upon which the Therapists were engaged and which governed their employment.

405    In any case, an oral individual flexibility agreement cannot displace the terms of an award.

406    In conformity with s 45 of the FW Act and like any modern award, both the Health Award and the Health and Beauty Award only entitle an employer and an employee to enter into an individual flexibility agreement for the purpose of meeting “the genuine individual needs” of each of them and on certain conditions (cl 7). Those conditions are that:

(a)    the agreement is made without coercion or duress (cl 7.2);

(b)    the terms that were varied only relate to arrangements for when work is performed; overtime rates; penalty rates; allowances; and/or leave loading (cl 7.3(a));

(c)    in the result, the employee is left better off overall than the employee would have been if no individual flexibility agreement had been agreed to (cl 7.3(b)); and

(d)    the agreement between the employer and the individual employee:

(i)    is in writing, names the parties to the agreement and is signed by the employer and the individual employee;

(ii)    states each term of the award that the employer and the individual employee have agreed to vary;

(iii)    details how the application of each term has been varied by agreement;

(iv)    details how the agreement results in the individual employee being better off overall in relation to the individual employee’s terms and conditions of employment; and

(v)    states the date the agreement begins to operate (cl 7.4).

407    Further, the employer is obliged to give the individual employee a copy of the agreement and keep the agreement as a time and wages record (Health Award, cl 7.5; Hair and Beauty Award, cl 7.6).

408    An employer seeking to enter into such an agreement must provide a written proposal to the employee and, where the employee’s understanding of written English is limited, the employer must take measures, including translating the proposal into “an appropriate language”, to ensure that the employee understands the proposal (cl 7.7).

409    Most, if not all, these conditions were not satisfied. Certainly, as Mr Elvin admitted, no written agreement was ever prepared, let alone entered into. And there is no evidence that a written proposal for such an agreement in conformity with cl 7.7 was ever presented to the Massage Therapists.

410    For all these reasons I find that the only contracts into which FTM entered with the Massage Therapists were the written contracts tendered in evidence and presented to the relevant authorities. I also find, based on Mr Elvin’s own evidence, that he never had any intention of complying with many of the terms of the contract and that he made an economic decision not to comply with the award (see T730/21).

Contraventions of the award (FW Act, s 45)

Introduction

411    It will be recalled that s 45 of the FW Act provides that a person must not contravene a term of a modern award.

Minimum wages

412    As I have already observed, the minimum weekly wage for an HP Level 1 employee is set out in cl 15.2 of the Health Award. The relevant starting pay point is pay point 1, which is specified to be $719.70 per week. This rate is subject to two adjustments. One is that, pursuant to cl 15.1(a), the applicable rate increases annually by one pay point on the anniversary of the employee’s commencement date until the employee reaches pay point 6. The second applies only to the period from 24 June 2012 until 6 July 2014 (the transitional period) when the transitional provisions, contained in Sch A to the Health Award, applied.

413    During the transitional period, there was no pre-modern award that provided adequate coverage. Clause A.2.3 of the Health Award provides that from the first full pay period on or after 1 July 2010 until the first full pay period on or after 1 July 2014, the employer must pay no less than the minimum wage in the relevant transitional minimum wage instrument. Clause 3.1 defines “transitional minimum wage instrument” as having the same meaning as in the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth). Subitem 5(3)(b) of Sch 9 of that Act relevantly defines “transitional minimum wage instrument” as including the rate of the standard federal minimum wage immediately before the repeal of the Workplace Relations Act 1996 (Cth) (WR Act), which occurred on 1 July 2009. Consequently, the relevant transitional minimum wage instrument is the Australian Pay and Classification Scale derived from the Australian Fair Pay Commission Wage Setting Decision No 2/2009. The federal minimum wage under this instrument was $14.31 per hour.

414    Clause A.2.5 allows the employer to phase in the minimum wage rates specified under the Award in instalments over several years. The employer is required to pay an employee no less than the minimum wage for the relevant Award classification “minus the specified proportion of the transitional amount”. The transitional amount is the difference between the minimum wage under the Award and the standard federal minimum wage. The proportions of the transitional amount that must be paid start at 80% on 1 July 2010 and decrease yearly by 20% until 1 July 2014. Thus, cl A.2.5 provides:

From the following dates the employer must pay no less than the minimum wage for the classification in this award minus the specified proportion of the transitional amount:

415    The same process applies for the payment of loadings and penalty rates, but not overtime.

416    In the present case the transitional amount applies during the period between 24 June 2012, when the first group started work for FTM, and 6 July 2014, being the beginning of the first full pay period after 1 July 2014 (cl A.2.7). As Mr Wong deposed in para 7 of his fourth affidavit, the minimum hourly wage for an HP Level 1 employee at pay point 1 is $18.94 ($719.70 divided by 38, representing the ordinary hours of work). For pay point 2, the minimum hourly rate is $19.67 ($747.60 divided by 38). Pursuant to cl A.2.5, the transitional amount payable is then reduced each year in 20% increments until the end of the 2013 financial year.

Public holiday rates

417    Clause 32.2 of the Health Award provides that any employee required to work on a public holiday will be paid double time and a half for all time worked. During the transitional period, as the federal minimum wage instrument did not include a provision for public holiday penalty rates, cl A.7.3 of the Award provided that the relevant loading or penalty be phased in at 20% annual increments from 1 July 2010. Clause 15.1(a) also applied to annually increase the pay point rate, and therefore the public holiday rate, until the Therapist reached pay point 6.

Monday to Saturday overtime rates

418    Clause 23 of the Health Award provided:

Ordinary hours of work

23.1     The ordinary hours of work for a full-time employee will be an average of 38 hours per week in a fortnight or four week period.

23.2     Not more than 10 ordinary hours of work (exclusive of meal breaks) are to be worked in any one day.

419    Clause 24 provided:

Span of hours

…

24.1     Unless otherwise stated, the ordinary hours of work for a day worker will be worked between 6.00 am and 6.00 pm Monday to Friday.

420    For relevant purposes, overtime rates were prescribed by cl 28.1(a)–(c) of the Health Award as follows:

(a)    An employee who works outside their ordinary hours on any day will be paid at the rate of:

(i)    time and a half for the first two hours; and

(ii)    double time thereafter.

(b)    All overtime worked on a Sunday will be paid at the rate of double time.

(c)    These extra rates will be in substitution for and not cumulative upon the shift loading prescribed in clause 29 – Shiftwork.

421    These provisions apply for the duration of the employment of all the Massage Therapists. The transitional provisions of the Award do not apply to overtime rates because they do not fall within the definition of “loading or penalty” in cl A.4.

422    Thus, the Therapists’ entitlement to overtime rates is to be calculated on the basis of: (a) hours worked in excess of 38 hours per week in accordance with cl 28.1 and cl 23.1; (b) hours worked in excess of 10 ordinary hours (exclusive of meal breaks) on any one day in accordance with cl 28.1(a) and cl 23.2; or (c) hours worked outside the span of hours in cl 24.1 for work performed Monday to Friday, with all work on a Saturday treated as overtime. In addition, the progressive pay point increases specified in cl 15.1(a) apply. This is the approach the Ombudsman took.

Sunday overtime rates

423    It will be recalled that cl 28.1(b) of the Health Award provides that all overtime worked on a Sunday will be paid at the rate of double time. Again, the transitional provisions of the Award do not apply to Sunday overtime rates. The Ombudsman calculated Sunday overtime in accordance with cl 28.1(b).

Were the Therapists paid below the award rates?

424    In its further amended defence FTM admitted the Ombudsman’s allegations as to:

(1)    the total number of ordinary hours the Massage Therapists worked for FTM;

(2)    the total number of hours the Massage Therapists worked on public holidays;

(3)    the total number of overtime hours the Massage Therapists worked between Monday and Saturday;

(4)    the total number of overtime hours the Massage Therapists worked on Sundays; and

(5)    the amounts the Massage Therapists were paid for the above hours.

425    Based on the admissions made in FTM’s further amended defence, it is evident that the Massage Therapists were underpaid, regardless of which of the two awards applied and the classification which applied to their employment. They were not paid the minimum hourly rates having regard to the hours they worked. They were not paid public holiday penalty rates when they worked public holidays. They were not paid Monday to Saturday overtime rates when they worked overtime over the period Monday to Saturday. Nor were they paid Sunday overtime rates when they worked overtime on Sundays.

426    I find that FTM breached the Health Award in all these respects and therefore contravened s 45 of the Act.

To what extent were the Therapists underpaid?

427    All that remains is for the extent of the underpayments to be determined. As I foreshadowed at the hearing, in the first instance the parties should endeavour to agree on them in the light of my findings. I will make orders setting out a process by which this is to take place and what is to happen in the event that they cannot reach agreement. If the calculations in Mr Wong’s fourth and final affidavit are correct, then the Massage Therapists were underpaid a total of $1,189,598.99 for the above contraventions, before certain deductions discussed below.

428    The assumptions Mr Wong made were disclosed in his first affidavit. I consider them to be fair and reasonable. Most favoured the respondents. Those assumptions included the following matters:

(1)    the Massage Therapists worked on all days on which one or more client appointments were recorded in FTM’s business management software system, Kitomba;

(2)    for the period from 8 July 2013 to 14 July 2013 in respect of which no appointment records were provided, the Massage Therapists worked 38 ordinary hours in the week;

(3)    subject to (4)–(7) below, on each day worked from 24 June 2012 to 7 July 2013 and from 15 July 2013 to 15 September 2013 the Massage Therapists started work at 9.45 am, finished work at 10 pm, and had two 30 minute unpaid meal breaks. From 16 September 2013 to 11 February 2016 the Therapists finished work at 10.30 pm;

(4)    where a day in the Kitomba appointment records was entirely shaded in grey with no written explanation and no recorded appointments, it was treated as a non-working day;

(5)    where a day in the Kitomba appointment records included a block of time shaded in grey with no written explanation, the block of time was treated as time not worked;

(6)    where a day in the Kitomba appointment records included a recorded appointment within a larger block of time that was shaded in grey with no written explanation, only the duration of the appointment within the larger block of time was treated as time worked; and

(7)    where a day in the Kitomba appointment records included more than one appointment within a larger block of time that was shaded in grey with no written explanation, only the period within the larger block from the start time of the first appointment to the finish time of the last appointment was treated as time worked.

429    Mr Wong explained in that affidavit that, except for a one-off payment to each Massage Therapist of approximately $6,500 on 29 June 2015, which was not reflected in any of their bank statements, he relied on the pay slips and pay records of FTM as indicating the wages actually paid.

430    Further, Mr Wong deducted from the entitlements allegedly owed an amount commensurate with the amount the Massage Therapists would have been paid under the Health Award in respect of the period of notice they were required to, but did not, give when they quit FTM or abandoned their employment and because of the provision by FTM of board and lodging during their employment. The first deduction was made because of cl 11.2 of the Health Award, the second because of cl 18.5(a).

431    Clause 11.1 of the Health Award provides that notice of termination is provided for in the NES. The minimum period of notice is set out in s 117 of the FW Act. For employees with a period of continued service of more than three but less than five years, the employer is required to give at least three weeks’ notice or payment in lieu.

432    Clause 11.2 deals with notice of termination by an employee. It provides:

The notice of termination required to be given by an employee is the same as that required of an employer except that there is no requirement on the employee to give additional notice based on the age of the employee concerned. If an employee fails to give the required notice the employer may withhold from any monies due to the employee on termination under this award of the NES, an amount not exceeding the amount the employee would have been paid under this award in respect of the period of notice required by this clause less any period of notice actually given by the employee.

433    Clause 18.5(a) provides that, where the employer provides board and lodging, the wage rates prescribed in the award will be reduced, in the case of employees receiving full adult rates of pay, by $21.19 per week.

434    The Ombudsman also deducted from the calculation of the underpayments the amounts paid to the Massage Therapists by Deloitte during the voluntary administration.

435    All of these deductions were appropriate.

436    On the other hand, I have difficulty understanding Mr Wong’s base rate calculations.

437    In her second further amended statement of claim at para 43HP, the Ombudsman pleaded that the following minimum hourly rates applied to the Therapists at the HP Level 1 classification:

438    This table is based on the table to para 4 of Mr Wong’s fourth affidavit, except that his table begins (correctly) on 24 June 2012, when the first group started work for FTM. The figure for pay point 2 in the penultimate row appears to be an error, since the figure given by Mr Wong is $20.60.

439    No reference was made to any of these figures in the Ombudsman’s submissions and regrettably I am unable to discern how Mr Wong determined them. Applying the methodology he purported to use, I come up with different figures.

440    In para 7 of his fourth affidavit Mr Wong stated:

To obtain the pay rates in the table above that applied from 24 June 2012 to 6 July 2014, I:

(a)    used the “transitional amount” referred to in Schedule A to the Health Award, being the difference between the minimum wage that was included in the Health Award for a HP Level 1 employee as at 1 July 2010 of $18.94 and the minimum hourly wage of $14.31 contained in the [Transitional Standard Federal Minimum Wage];

(b)    applied clause 15.2 of, and clause A.2.5 of Schedule A to, the Health Award to determine the applicable minimum wages for the Massage Therapists;

(c)    applied clause 32.2 of, and clause A.7.3 of Schedule A to, the Health Award to determine the applicable public holiday rates for the Massage Therapists; and

(d)    applied clauses 28.1(a) and 28.1(b) of the Award to determine the applicable overtime rates for the Massage Therapists, without reference to Schedule A which does not address overtime entitlements.

441    Using the same methodology, however, I calculate the HP Level 1 rate in the first period, for example, which is from 24 June 2012 until 30 June 2012, as $16.16, not $16.95. Similarly, by my reckoning, the HP Level 1 rate at pay point 1 in the second period, from 1 July 2012 to 30 June 2013, is $17.09 rather than $18.16. Those sums are derived in the following way.

442    For the first period, the transitional amount is 60% of $4.63 ($18.94, being the hourly pay point 1 rate for HP Level 1 minus $14.31, being the federal minimum wage), which equals $2.78. That amount must be subtracted from $18.94, which amounts to $16.16. During this period, then, FTM was obliged to pay the Massage Therapists an hourly rate for ordinary hours of no less than $18.94 minus $2.78, which is $16.16. For a 38 hour week that becomes $614.08.

443    The transitional amount for the second period (from 1 July 2012 to 30 June 2013) is 40% of $4.63, which equals $1.85. Until 24 June 2013, when pay point 2 rates became applicable for the first group, FTM was obliged to pay the Massage Therapists an hourly rate for ordinary hours of no less than $18.94 minus $1.85 or $17.09.

444    Similar issues are apparent in relation to the remaining pleaded rates during the transitional period. Yet even following this period the pleaded rates appear inconsistent with the Award. For instance, the hourly rate payable to the Therapists at pay point 4 in the fourth period (7 July 2014 to 5 July 2015) is $21.25. This is the weekly rate specified in cl 15.2 of $807.60 divided by 38. The rate the Ombudsman pleaded was $23.11.

445    If there are errors in the calculation of the figures for the minimum wages, those errors will infect the calculations for public holiday and overtime rates. It is, of course, entirely possible that I overlooked something.

446    In the circumstances, the Ombudsman should file and serve further submissions explaining with precision the steps taken by Mr Wong to reach the hourly figures he gave for all pay points in all columns in the table to para 4 and, if necessary, a further affidavit from Mr Wong.

Contraventions of the NES (FW Act, s 44)

Failure to pay annual leave entitlements on termination

447    At all material times s 90(2) of the FW Act provided that:

If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.

448    The Ombudsman calculated the Massage Therapists’ entitlement to annual leave on termination on the basis of the following matters, as recorded in Mr Wong’s first affidavit: