FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 8) [2024] FCA 483

ORDERS

THE COURT DECLARES THAT:

1.    During various periods from 24 June 2012 until 16 June 2016 inclusive, the first respondent contravened:

(a)    s 45 of the Fair Work Act 2009 (Cth) (FW Act) by failing to pay each of Irene Amacio (Ms Amacio), Crisanta Bantilan (Ms Bantilan), Ruben Benting (Mr Benting), Delo Be Isugan (Ms Isugan), Janice Castaneda (Ms Castaneda), Mayet Ortega (Ms Ortega), and Cyrene Sarto (Ms Sarto) (collectively, the Massage Therapists) the minimum hourly rates of pay, as Health Professional Level 1 employees (HP Level 1), in accordance with cl 15.2 of, and cl A.2.5 of Schedule A to, the Health Professionals and Support Services Award 2010 (Health Award);

(b)    s 45 of the FW Act by failing to pay each of the Massage Therapists public holiday rates, as HP Level 1 employees, in accordance with cl 32.2 of, and cl A.7.3 of Schedule A to, the Health Award;

(c)    s 45 of the FW Act by failing to pay each of the Massage Therapists overtime rates for overtime work performed between Monday and Saturday as HP Level 1 employees, in accordance with cl 28.1(a) of the Health Award;

(d)    s 45 of the FW Act by failing to pay each of the Massage Therapists overtime rates for overtime work performed on Sundays, as HP Level 1 employees, in accordance with cl 28.1(b) of the Health Award;

(e)    s 44(1) of the FW Act by requesting or requiring each of the Massage Therapists to work more than 38 hours a week when it was unreasonable to do so, in contravention of s 62(1) of the FW Act;

(f)    s 44(1) of the FW Act by failing to pay each of the Massage Therapists their respective accrued untaken annual leave entitlements on termination, in accordance with s 90(2) of the FW Act;

(g)    s 44(1) of the FW Act by failing to give the Fair Work Information Statement to each of the Massage Therapists as it was obliged to do under s 125(1) of the FW Act;

(h)    s 323(1) of the FW Act by failing to pay each of the Massage Therapists in full in that it made deductions from their wages when it was not authorised to do so;

(i)    s 325(1) of the FW Act by unreasonably directing each of Ms Amacio, Ms Bantilan, Ms Isugan, Ms Castaneda, Ms Ortega and Ms Sarto to refund part of their wages to the first respondent;

(j)    s 535(1) of the FW Act by failing to make and keep employee records in relation to each of the Massage Therapists, as prescribed by:

(i)    reg 3.34 of the Fair Work Regulations 2009 (Cth) (FW Regulations) in that it did not record the number of overtime hours worked by the Massage Therapists or the start and finish times of overtime hours they worked;

(ii)    reg 3.36(1) of the FW Regulations in that it did not record the periods of annual leave taken by the Massage Therapists and the balance of their entitlements to annual leave from time to time; and

(iii)    reg 3.40 of the FW Regulations in that its records did not document the manner in which the employment of the Massage Therapists was terminated;

(k)    s 536(1) of the FW Act by failing to give pay slips to each of the Massage Therapists within one working day of payment for work performed by them in that, except for three or four pay slips it provided in 2015, it did not give them any pay slips after about 31 March 2014;

(l)    s 536(2) of the FW Act by failing to ensure that the pay slips it provided to each of the Massage Therapists included the information prescribed by reg 3.46(2) of the FW Regulations;

(m)    reg 3.44(1) of the FW Regulations by making and keeping employee records in relation to each of Ms Amacio, Ms Bantilan, Ms Isugan, Ms Castaneda, Ms Ortega and Ms Sarto, knowing that those records were false or misleading in that they did not refer to the amounts they were directed to refund from their wages;

(n)    reg 3.44(6) of the FW Regulations by making use of entries in the employee records of each of Ms Amacio, Ms Bantilan, Ms Isugan, Ms Castaneda, Ms Ortega and Ms Sarto in that it provided those records to the applicant knowing that they were false or misleading;

(o)    s 340(1)(b) of the FW Act by taking adverse action against each of the Massage Therapists by making threats to send them back to the Philippines in order to prevent them from exercising their workplace rights to make complaints in relation to their employment to the immigration authorities or the applicant;

(p)    s 343(1)(a) of the FW Act by threatening to send each of the Massage Therapists back to the Philippines and to have their families in the Philippines killed with intent to coerce them not to exercise their workplace rights to complain about their working conditions to the immigration authorities or the applicant; and

(q)    s 351(1) of the FW Act by taking adverse action against each of the Massage Therapists because of their race and national extraction in that it:

(i)    failed to pay them minimum hourly rates;

(ii)    required them to make fortnightly cash repayments from their earnings;

(iii)    failed to pay them public holiday rates;

(iv)    failed to pay them Monday to Saturday overtime rates;

(v)    failed to pay them Sunday overtime rates;

(vi)    failed to pay their annual leave entitlements on termination;

(vii)    failed to pay them in full by reason of unauthorised deductions;

(viii)    requested or required them to work unreasonable additional hours; and

(ix)    made threats to send them back to the Philippines or have their families killed if they complained about their working conditions and instructed them not to discuss with, or complain about, those conditions to, anyone.

2.    The second respondent was knowingly concerned and therefore involved in each of the contraventions by the first respondent set out at paras 1(a) to 1(j) and 1(m) to 1(q) above.

3.    The third respondent was knowingly concerned and therefore involved in the contraventions by the first respondent set out at paras 1(e), 1(g) to 1(i), 1(k) and 1(o) to 1(q) above.

4.    After credit is given for the amounts paid by Deloitte Touche Tohmatsu on or about 19 July 2017, the first respondent underpaid the Massage Therapists by the following amounts (the underpayments):

(a)    Ms Amacio by $159,799.21;

(b)    Ms Bantilan by $152,200.47;

(c)    Mr Benting by $140,307.06;

(d)    Ms Isugan by $149,331.13;

(e)    Ms Castaneda by $120,055.56;

(f)    Ms Ortega by $123,783.29; and

(g)    Ms Sarto by $125,615.99.

THE COURT ORDERS THAT:

1.    Pursuant to s 545 of the FW Act, within 28 days the first and second respondents pay the applicant the following amounts as compensation for the contraventions:

(a)    $971,092.27, being the total of the above underpayments;

(b)    $30,000 for the non-economic loss suffered by Ms Amacio, Ms Bantilan, Mr Benting and Ms Isugan; and

(c)    $25,000 for the non-economic loss suffered by Ms Castaneda, Ms Ortega and Ms Sarto.

2.    The first and second respondents pay interest from 16 February 2016 on:

(a)    the underpayments at the rates prescribed by Practice Note GPN–INT; and

(b)    90% of the sums payable for non-economic loss.

3.    Within 28 days of receipt of any of the amounts mentioned in orders 1 and 2, the applicant pay the amounts to the Massage Therapists or, in the event that the applicant cannot locate one or more of the Massage Therapists or for any reason payment cannot be made to one or more of them, pay any such amount to the Commonwealth of Australia.

4.    Pursuant to s 546 of the FW Act, within 28 days:

(a)    the first respondent pay pecuniary penalties for the contraventions the subject of declaration 1 in the sum of $778,100;

(b)    the second respondent pay pecuniary penalties for the contraventions the subject of declaration 2 in the total sum of $150,140;

(c)    the third respondent pay pecuniary penalties for the contraventions the subject of declaration 3 in the total sum of $38,650.

5.    Pursuant to s 546(3)(a) of the FW Act the penalties be paid to the Commonwealth.

6.    In the event that some or all of the compensation (including interest) is not paid to the Massage Therapists in accordance with the orders for payment, the applicant may remit to the Massage Therapists, in her discretion, all the penalties or a portion of them.

7.    The applicant not seek to enforce against the first respondent the orders for compensation or pecuniary penalties without first obtaining the leave of the Court.

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

REASONS FOR JUDGMENT

KATZMANN J:

INTRODUCTION

1    This proceeding is concerned with multiple contraventions of the Fair Work Act 2009 (Cth) (FW Act) and Fair Work Regulations 2009 (Cth) (FW Regulations) over a period of almost four years affecting seven employees of the first respondent, Foot & Thai Massage Pty Ltd (FTM). All questions relating to liability were heard separately. Judgment on liability was published on 14 October 2021: Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 4) [2021] FCA 1242 (liability judgment or LJ). Because of issues relating to the calculation of the underpayments of the employees’ entitlements, I appointed a referee to determine the extent of the entitlements. The second respondent, Colin Elvin, objected to the adoption of the referee’s report but I dismissed his objections and adopted the report: Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 6) [2023] FCA 1116 (Foot & Thai (No 6)). This judgment is concerned with the question of relief and should be read with the liability judgment.

2    In addition to declarations to reflect my findings, the Fair Work Ombudsman seeks orders for the payment of compensation to the affected employees and pecuniary penalties for breaches of the civil remedy provisions of the FW Act.

3    There was a considerable delay between the publication of the liability judgment and the hearing on relief occasioned by the inability of the parties to agree on the value of the underpayments of wages and other entitlements to reflect the findings in the liability judgment, the consequential referral to a referee of the determination of the amount of underpayments, delay in the receipt of the referee’s report, and the lengthy period of time afforded the parties to make submissions on the adoption of the report and then on the questions relating to relief.

4    FTM was the owner and operator of a therapeutic massage business in Canberra, which traded under the name “foot&thai”. The seven employees covered by the liability judgment were recruited from the Philippines and employed by FTM as massage therapists. Four of them (Irene Amacio, Crisanta Bantilan, Ruben Benting and Delo Be Isugan) were employed from 24 June 2012 (the first group). Ms Isugan was employed until 26 October 2015, Mr Benting until 8 February 2016, Ms Amacio until 10 February 2016, and Ms Bantilan until 11 February 2016. The remaining three (Janice Castaneda (formerly Mapute), Mayet Ortega and Cyrene Sarto) started on 15 April 2013 (the second group). Ms Sarto finished on 12 January 2016, Ms Ortega and Ms Castaneda the following day. From now on, I will refer to them, as I did in the liability judgment, as the Massage Therapists.

5    At all relevant times Mr Elvin was the sole director of FTM and its only executive officer. He hired the Massage Therapists, set their wages and conditions, and managed the business of FTM. The third respondent, Jun Millard Puerto, was an employee of FTM, who was responsible for supervising the Massage Therapists. Mr Puerto elected not to file any evidence, cross-examine any witness, or make any submissions despite being present in court for the duration of the hearing. I found that Mr Elvin was knowingly concerned and therefore involved in the vast majority of the contraventions by FTM and that Mr Puerto was knowingly concerned and therefore involved in many of them.

THE EVIDENCE

6    The Ombudsman relied on two affidavits affirmed by Luke Russell Thomas on 8 June 2023 (affidavit in chief) and 31 August 2023 (reply affidavit). Mr Thomas is a Fair Work Inspector and currently an Assistant Director of Enforcement Team 3 within the Office of the Fair Work Ombudsman. He was involved in the Ombudsman’s investigation which culminated in the initiation of this proceeding, had the primary carriage of the investigation at certain times, and at other times supervised the investigation. I will refer to this evidence as and where it is relevant.

7    Mr Elvin filed an affidavit affirmed on 10 August 2023. Most of the affidavit is irrelevant and/or inadmissible for other reasons. In substance it consisted of submissions and complaints about the liability judgment and the referee’s report. It also repeated Mr Elvin’s attacks on the credibility of the Ombudsman’s witnesses, which I found wholly unpersuasive, and criticised the Ombudsman’s conduct in the prosecution of the case.

8    In only one respect does it contain potentially relevant information. That information consists of Mr Elvin’s statements that he is unemployed, has “no money”, was left with a $200,000 debt to his bank following the sale of the FTM business, and is indebted to his parents “for a substantial amount of money”. I accept that such matters could be relevant to the question of penalty in that, if I were satisfied of their truth, I might take them into account in determining the amount necessary to deter him from committing further contraventions. But no evidence was adduced to support these bald statements and having regard to the adverse opinion I formed of Mr Elvin’s credit, (see LJ [206]–[217]), I cannot give them any weight.

9    Annexed to Mr Elvin’s affidavit were applications for personal protection orders filed in the Magistrates Court of the Australian Capital Territory exactly a week after the publication of the liability judgment and an excerpt from a transcript of the consequential proceedings in August 2022 of Mr Elvin’s evidence and the magistrate’s decision declining to make the orders. He stated that he was providing this material “to demonstrate that there is a real likelihood the Federal Court has been misled”.

THE RESPONDENTS’ POSITION

Mr Elvin’s submissions

10    Mr Elvin’s submissions ran to 23 pages. Like his evidence, they were largely irrelevant. They consisted of complaints about the calculations of the underpayments, grievances he bears about the Ombudsman’s decision not to seek any relief in relation to one matter about which Mr Benting gave evidence and the Ombudsman’s claim of legal professional privilege over certain documents. All these matters were dealt with in the liability judgment, Foot & Thai (No 6) or, in the case of the last matter, were resolved against him by Raper J in Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 5) [2023] FCA 1098.

11    Mr Elvin also complained about the findings I made in the liability judgment and of bad faith on the part of the Ombudsman. He attached to his submissions a copy of a notice to admit facts and the authenticity of certain documents together with correspondence referred to in the notice. He claimed that he had repeatedly raised concerns with the Ombudsman which were never satisfactorily dealt with.

12    None of this material bears on the issues falling for determination at this point and none of it establishes impropriety by the Ombudsman. As I explained to Mr Elvin at the hearing, the remaining questions are to be decided on the facts as found. I reject his invitation to the Court to revisit the findings and dismiss the proceeding in its entirety. Nothing he said and nothing contained in the material annexed to his affidavit would justify such an extraordinary step.

13    Nevertheless, I propose to address a number of Mr Elvin’s submissions.

14    First, Mr Elvin submitted that the Ombudsman did not disclose to the Court or the respondents for two and a half years that no claim was being made in relation to “Mr Benting’s alleged cashbacks”. That claim is false. Moreover, Mr Elvin knew it to be false. As I noted in the liability judgment at [532], in every iteration of her pleading the Ombudsman did not include an allegation that FTM had required Mr Benting to pay back money from his wages, limiting her claim to the six female Massage Therapists, despite the evidence given by Mr Benting which was to the same effect. He filed a defence to the Ombudsman’s pleading and must be taken to have read it. Even if it escaped his attention at the time, he certainly knew by the time of the closing argument that the Ombudsman’s “cashback” claims did not cover Mr Benting when I sought clarification from counsel about it and, at the latest, when I published the liability judgment. I made the same point in response to a similar complaint in Foot & Thai (No 6) at [56].

15    Second, Mr Elvin submitted that in their calculations neither Ronnie Wong of the Ombudsman’s Office nor the referee took into account the voluntary administration of FTM. That, too, is false. At footnotes 1 and 3 to her submissions to the referee, the Ombudsman accepted that the payments to the Massage Therapists by the administrators during the voluntary administration had to be taken into account, and in the calculations she submitted to the referee she reduced the total underpayments by those amounts. In determining the “total amounts outstanding”, the referee deducted the “amounts paid” from the gross value of the entitlements. The referee made it clear that those deductions reflected the amounts paid to the Massage Therapists by the administrators (at [49] and [53]).

16    Third, Mr Elvin took issue with the statement I made at LJ [787] that “[a]t all relevant times it was he who controlled what the company did”. He submitted that he had no control of FTM after 15 December 2015 when administrators were appointed. Rather, he contended, the administrators were in fact and law in control of what the company did from 15 December 2015 to 11 April 2016. I accept that what I said at LJ [787] was an overstatement in that the administrators were in control of the company in that period. A more accurate statement would have been that Mr Elvin was in complete control of the company for all but 16 weeks of the four-year contravention period. It is not true, however, that Mr Elvin had no control over the company during that 16-week period. On 4 January 2016 Mr Elvin entered into an agreement with the company and the administrators, called an “operating licence”, under which he would “operate and manage” the FTM business on certain terms. The licence was in place on and from 4 January 2016 until 4 April 2016.

17    Clause 2.6 of the licence agreement required, amongst other things, that Mr Elvin, as the licensee, “at [his] own cost and risk and without limitation, conduct and manage the Business:

(i)    in the ordinary course;

(ii)    in a professional, diligent, businesslike and efficient manner to high standard expected of a business operator and manager of business such as the Business;

(iii)    by employing its own employees;

…”

“Business” was defined in cl 1.1 to mean “the massage services and other businesses operated by [FTM] but exclud[ing] all cash in hand, cash at bank; debtors, goodwill and work in progress”.

18    Fourth, Mr Elvin submitted that the deed of company arrangement (DOCA) prevented the Court from ordering penalties. This submission impugns my finding to the contrary (at LJ [937]-[948]).

19    The only relevant submission Mr Elvin made was that the Ombudsman’s proposed penalties were excessive. It was an unhelpful submission in that it was based on a misrepresentation about the extent of the contraventions covered by the Ombudsman’s claim. Mr Elvin contended that the Ombudsman’s proposed orders “appear essentially to cover threatening to send the massage therapists back to the Philippines and making them pay cash backs that according to the [Ombudsman] totalled $91,200.00 for which the [Ombudsman] seeks to have FTM repay that amount and impose on FTM penalties amounting to $958,500.00”. That is simply a fallacy.

20    Mr Elvin did not engage with the Ombudsman’s submissions on compensation or penalties except in two respects. One was to challenge the Ombudsman’s characterisation of the Massage Therapists as “vulnerable” employees. I address that matter later in these reasons. The other was to respond to certain entries in the Ombudsman’s table of proposed penalties which included an allegation that Mr Benting was required to make fortnightly cash repayments from his earnings as part of the description of the s 351 contraventions as they affected him. These entries contained an obvious error, no doubt occasioned by the use of the cut and paste word-processing function and a lapse in proof-reading. The Ombudsman acknowledged the error and corrected it in an amended table.

21    For completion, I note Mr Elvin’s contention in correspondence with the Ombudsman annexed to his submissions that I made a finding (at LJ [339(3)(a)) that Mr Benting was required to pay back $800 a fortnight from his wages in the period from 26 August 2012 to 2 June 2013. That contention is false. The reference is to my summary of the issues. It should not have been made. It is abundantly clear from my reasons that I did not make that finding (see esp. LJ [532] and [564]).

Mr Puerto

22    Since Mr Puerto did not file any evidence or submissions and offered no explanation for his silence, I infer that there was nothing he could say that would assist his case.

DECLARATORY RELIEF

23    I found that FTM contravened the FW Act in the following respects:

(1)    by failing to pay the Massage Therapists minimum hourly rates, public holiday penalty rates, Monday to Saturday overtime rates, and Sunday overtime rates prescribed by the Health Professionals and Support Services Award 2010 (Health Award) (contraventions of s 45);

(2)    by requiring the Massage Therapists to work unreasonable hours over and above 38 hours a week, contrary to s 62(1) (contraventions of s 44);

(3)    by not paying each of the Massage Therapists the amounts that would have been payable to them with respect to the periods of untaken annual leave they had at the end of their employment, contrary to s 90(2) (contraventions of s 44);

(4)    by failing to give each of the Massage Therapists the Fair Work Information Statement as required by s 125 (contraventions of s 44);

(5)    by unreasonably requiring Ms Amacio, Ms Bantilan, Ms Isugan, Ms Castaneda, Ms Ortega, and Ms Sarto to spend $800 per fortnight of their wages on its business by directing them to refund that amount during the so-called cashback periods, contrary to s 325(1) (contraventions of s 44);

(6)    by deducting amounts from the wages of the Massage Therapists described in the records as “staff loans” when the deductions were not authorised by any of the exceptions in s 324(1), contrary to s 323(1) (contraventions of s 44);

(7)    by failing to make and keep records of:

(a)    the number of overtime hours worked by each of the Massage Therapists or the start and finish times of their overtime hours as prescribed by reg 3.34 of the FW Regulations;

(b)    the periods of annual leave they took and the balance of their entitlements to annual leave from time to time as prescribed by reg 3.36(1); and

(c)    setting out the nature of the termination of their employment as prescribed by reg 3.40 (all contraventions of s 535(1));

(8)    by making and keeping pay records that, to its knowledge, were false or misleading as to the net amounts paid to Ms Amacio, Ms Bantilan, Ms Isugan, Ms Castaneda, Ms Ortega and Ms Sarto because they did not record or reflect the amounts they were required to return in cash from their salaries during the so-called cashback periods (contraventions of reg 3.44(1));

(9)    by producing to FWI Hurrell on 16 June 2016, in response to a notice to produce issued by the Ombudsman, records which to its knowledge were false as they did not record the cashback amounts (a contravention of reg 3.44(6));

(10)    by not giving the Massage Therapists pay slips after about 31 March 2014 (contraventions of s 536(1));

(11)    by failing to record the details prescribed by reg 3.46(2) in the pay slips which it did give the Massage Therapists (contraventions of s 536(2));

(12)    by taking adverse action against the Massage Therapists and by threatening to send the Massage Therapists back to the Philippines if they broke any of FTM’s “rules”, complained about their working conditions or reported FTM to “immigration”, and to have their families killed if they did (contraventions of s 340(1) and 343(1)); and

(13)    by injuring them in their employment in various respects for reasons which included their race and national extraction (contraventions of s 351(1)).

24    I found that Mr Elvin was knowingly concerned and therefore involved in all but the pay slip contraventions and Mr Puerto in the contraventions of s 44 with respect to the requirement to work unreasonable hours and the failure to provide Fair Work Information Statements: ss 323(1); 325(1); 340(1); 343(1); s 351(1) (to a limited extent only); and s 536(1). The effect of those findings is that Mr Elvin and Mr Puerto are taken to have contravened those provisions.

25    The Ombudsman seeks declarations to reflect those findings and there is no good reason why I should not make them. The Court has jurisdiction to make binding declarations as of right under s 21 of the Federal Court of Australia Act 1976 (Cth) and nothing in the FW Act limits the exercise of that power. The conditions which must generally be satisfied before the discretion will be exercised (see Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437–8 per Gibbs J) are satisfied here. Moreover, it is appropriate to mark the Court’s disapproval of the respondents’ conduct in this way: Fair Work Ombudsman v South Jin Pty Ltd (No 2) [2016] FCA 832 at [7] (White J). I will therefore grant the Ombudsman declaratory relief.

COMPENSATION

The power

26    Section 545(1) of the FW Act provides that the Court may make any order it considers appropriate if it is satisfied that a person has contravened a civil remedy provision including an order for compensation for loss suffered because of a contravention.

27    The power conferred by s 545(1) is a broad one, “constrained only by limitations that are strictly required by the language and purpose of the section”: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [103] (Keane, Nettle and Gordon JJ, Gageler J agreeing at [51]).

28    There is no doubt that the power is wide enough to capture both economic and non-economic loss. Nor is there any doubt that the Court may order both the principal and the accessories to pay compensation: see, for example, Veeraragoo v Goldbreak Holdings Pty Ltd (No 2) [2018] FCA 1448 at [42]–[52] (Colvin J) and the cases cited there and Fair Work Ombudsman v IE Enterprises Pty Ltd [2020] FCA 848 at [24] (Anderson J).

29    The Ombudsman submitted that “[i]t would frustrate the legislative intent … not to make orders compensating the Massage Therapists for the significant loss[es] they have suffered as a result of the underpayment of their entitlements”.

The claim

30    The Ombudsman seeks an order that FTM and Mr Elvin “jointly and severally” pay her the total amount of the underpayments (less the amounts paid by the administrators) for payment out to the Massage Therapists as compensation and, if they cannot be located, to the Commonwealth. The claim is based on the findings in the liability judgment and the conclusions of the referee whose report I adopted in Foot & Thai (No 6).

31    The total amount of the underpayments, after taking into account the amounts paid to the Massage Therapists by the administrators of FTM, is $971,092.27, made up as follows:

(1)    Ms Amacio: $159,799.21;

(2)    Ms Bantilan: $152,200.47;

(3)    Mr Benting: $140,307.06;

(4)    Ms Isugan: $149,331.13;

(5)    Ms Castaneda: $120,055.56;

(6)    Ms Ortega: $123,783.29; and

(7)    Ms Sarto: $125,615.99.

32    Obviously enough, having regard to the terms of s 545(2)(b), the Ombudsman must prove that the loss has been incurred “because of the contravention[s]”. As in any civil proceeding, the standard of proof is the balance of probabilities. In the present case the causal connection is readily established, as the amounts in the penultimate paragraph were calculated by comparing what each of the Massage Therapists was entitled to receive under the relevant provisions of the Health Award with the amounts they did receive.

33    In addition, the Ombudsman seeks compensation for non-economic loss caused by the contraventions of s 340(1) (adverse action for exercising workplace rights), s 343 (coercion) and s 351 (discrimination based on race and national extraction). Once again, notwithstanding the involvement of all the respondents in the contraventions giving rise to these claims, the orders are only sought against FTM and Mr Elvin.

Compensation for the underpayments

34    In the liability judgment I found that FTM contravened s 45 of the FW Act by failing to pay the Massage Therapists minimum hourly rates, public holiday penalty rates, Monday to Saturday overtime rates and Sunday overtime rates in breach of various clauses of the Health Award. I also found that FTM contravened s 325(1) of the Act by unreasonably requiring six of the Massage Therapists to spend $800 per fortnight of their wages on its business by directing each of them to refund that amount during periods in which the fortunes of the business were suffering (the so-called cashback periods). And I found that FTM contravened s 323(1) of the Act by deducting certain amounts from the wages of the Massage Therapists, described in the company’s records as “staff loans” when the deductions were not permitted by any of the authorised exceptions in s 324(1). Collectively, these were the underpayments claims.

35    In its defence FTM pleaded that it could not be subjected to “any order for underpayment” because it was a party to a deed of company arrangement, which extinguished any claims by, or debts to, the relevant employees who were also parties to the DOCA and paid in accordance with its terms. I did not uphold that defence (at LJ [886]–[925]).

36    Nevertheless, I was concerned that there might be public interest considerations which could conceivably militate against the making of an order for compensation in relation to the underpayments. For this reason, I caused a request to be made of the President of the NSW Bar Association for the appointment of amicus curiae to make submissions on the question. Mr Assaf SC and Mr Rose of counsel (the amici) kindly accepted the appointment. They filed an outline of submissions and appeared to support their arguments. I am most grateful to them for their assistance.

The submissions of amici curiae

37    The amici accepted that I was correct to hold, for the reasons I gave in the liability judgment, that the DOCA only bound creditors in respect of claims arising on or before 15 December 2015 (at LJ [868]), being the date of the appointment of the administrators, and that the Ombudsman was not a creditor at that time (at LJ [925]). But the amici submitted that I was incorrect to find that the DOCA did not extinguish any claims or debts of the Massage Therapists. They contended that s 545 of the FW Act was “not intended to provide a mechanism for the shortfall from any DOCA”. In particular, they argued that it was not the intention of Parliament that s 545B be deployed “to effectively seek to resurrect claims — including employee claims — which have effectively … been compromised by the DOCA”. In summary, the amici submitted that the following “public interest and discretionary considerations” militate against the making of the proposed compensation orders.

38    First, notwithstanding the scope of the question and their express disavowal of any contention that the liability judgment should be corrected, the amici submitted that contrary to the conclusion reached at [928] of the liability judgment the effect of the prescribed provisions, set out in Schedule 8A to the Corporations Regulations 2001 (Cth) (which are taken to have been included in the DOCA by virtue of s 444A(5) of the Corporations Act 2001 (Cth)), is that the underlying debts and claims of the employees that existed against FTM as at the day the administration began have been satisfied in full and completely discharged, such that they have consequently been extinguished. The amici correctly observed (and the Ombudsman acknowledged) that my attention had not previously been drawn to the prescribed provisions.

39    Second, the compensation orders sought by the Ombudsman are (or are arguably) contrary to the policy and purpose of Pt 5.3A of the Corporations Act. That is because, by seeking those orders, the Ombudsman effectively seeks to resurrect the Historical Employee Claims as defined in the DOCA when those claims were captured, fully satisfied and completely discharged by the DOCA; the Massage Therapists engaged with the deed administration process by submitting formal proofs of debt, having those claims adjudicated upon, and receiving dividends of distribution in respect of those claims.

40    Third, assuming the Court were to find that the proposed compensation orders are not contrary to the policy and purpose of Pt 5.3A, in the proper exercise of its discretion the Court would have to be satisfied of the quantum of proposed compensation orders in light of the tension between the contemporaneous statutory records of the administrators of the DOCA and the Ombudsman’s evidence on quantum.

41    Fourth, no sufficient evidence appears to have been adduced to establish the utility of the proposed orders.

42    In oral argument, however, the amici accepted that the Court could make an order for compensation in the event of fraud or misleading or deceptive conduct. They pointed to s 445D(1) of the Corporations Act, which gives the Court the power to make an order terminating a deed of company arrangement in certain circumstances, and s 445G, which allows the Court to declare a deed, or a provision of it, void.

43    The circumstances covered by s 445D(1) include where the Court is satisfied that:

(a)    information about the company’s business, property, affairs or financial circumstances that:

(i)    was false or misleading; and

(ii)    can reasonably be expected to have been material to creditors of the company in deciding whether to vote in favour of the resolution that the company execute the deed;

was given to the administrator of the company or to such creditors;

…

(f)    the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be:

(i)    oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; … or

(g)    the deed should be terminated for some other reason.

44    With respect to the circumstances in s 445D(1), a “material factor” is something which was relevant to, and did affect or might have affected, the outcome of the vote: Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWC 1235; 226 ALR 510 at [165] (Campbell J). The test of materiality under both ss 445D and 445G is an objective one; it does not matter whether anyone was actually misled: Bidald at [147]; [166]. See also Commissioner of Taxation v Comcorp Australia Ltd and Others (1996) 70 FCR 356 at 385 (Carr J, Lockhart J agreeing at 358). Whether the information is false or misleading is to be judged on the basis of information available at the time of the hearing: Bidald at [147].

45    The amici submitted that, while no application was made to the Court for such an order, if any of the circumstances in which such an order could be obtained could be established, then that would be relevant to the exercise of the Court’s discretion to order compensation for claims otherwise caught by cll 5 and 6 of Schedule 8A to the Corporations Regulations. In particular, they acknowledged that their submissions were “predicated on the basis that the requirements of Pt 5.3A were complied with, including, implicitly, the requirements to not mislead creditors – to not mislead the administrator, by way of example”. Put another way, they said that the benefits that accrue to a company under Pt 5.3A are “predicated on an assumption that … there has been honest and fair dealing”. They accepted that the provision by the company of false or misleading information either to the creditors or the administrators would be “a relevant discretionary factor” to take into account in determining whether to make a compensation order under s 545 of the FW Act.

Consideration

46    The third submission can be disposed of straight away. I am satisfied of the quantum of the proposed compensation orders for the reasons I gave in the liability judgment and Foot & Thai (No 6).

47    I will now address the other submissions. Before doing so, however, I would make the following preliminary observations.

48    As I said in the liability judgment at [866], s 444D(1) of the Corporations Act provides that a deed of company arrangement binds all creditors of the company, “so far as concerns claims [against it] arising on or before the day specified in the deed under paragraph 444A(4)(i)”. The “day specified in the deed under s 444A(4)(i)” is “the day (not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the deed”. The administration of the company begins when an administrator is appointed (s 435C). In the present case that was 15 December 2015. As the amici recognised, any underpayments after that date are not covered by the DOCA and there is no impediment to the making of an order under s 545 for compensation for those underpayments.

49    That means that, even if the amici are correct, not all the underpayments would be extinguished by the DOCA. Some $33,565.07 of the total sum related to debts incurred after 15 December 2015. A list of those underpayments is annexed to these reasons and marked “Annexure B”.

50    Further, as I said in the liability judgment at [952], regardless of whether the DOCA operates in the way the respondents contended a deed of company arrangement only binds creditors in relation to claims against the subject company; it does not bind third parties: Lehman Brothers Holdings Inc. v City of Swan (2010) 240 CLR 509 at [52]–[55]. In other words, contrary to Mr Elvin’s submissions, it does not and cannot prevent the Court from making orders that he pay compensation.

51    Moreover, contrary to Mr Elvin’s submissions, the DOCA has no effect on the Court’s power to make declarations with respect to the underpayments or its power to impose pecuniary penalties on the respondents.

The policy and purpose of Pt 5.3A of the Corporations Act

52    I accept the submissions of the amici as to the policy and purpose of Pt 5.3A of the Corporations Act.

53    The policy and purpose of Pt 5.3A are apparent from s 435A. It provides that:

The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a)    maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b)    if it is not possible for the company or its business to continue in existence—results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.

54    I also accept that a construction of the provisions of Pt 5.3A that will best achieve the object of the Part is to be preferred to any other interpretation: Acts Interpretation Act 1901 (Cth), s 15AA.

55    The mechanism by which these objects are to be achieved is through a deed of company arrangement: Commonwealth of Australia v Rocklea Spinning Mills Pty Ltd (2005) 145 FCR 220 at [26] (Finkelstein J). In Rocklea Spinning Mills at [30] Finkelstein J observed that where the object of the deed is to preserve the company’s business, the legislation does not assume that the creditors will be paid in full. Rather, Pt 5.3A assumes that it might often be necessary to extinguish certain claims “by compositional bar”. His Honour also observed that in the circumstances Pt 5.3A makes no assumption that the creditors will be treated equally or that they will be given the same priority as in a winding up. As he explained, that is because “the equal treatment of creditors or the maintenance of priorities when there is not enough money for everyone can easily thwart the attempt to revive an ailing company”.

56    It is implicit in the statutory scheme in Pt 5.3A, as the amici put it, that a “key policy objective” is to give an insolvent company a “fresh start”: see, for example, Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd (2015) 297 FLR 1; WASCA 95; 106 ACSR 79 at [218] (Newnes and Murphy JJA).

57    The Ombudsman did not quarrel with this. Rather, she submitted that, like most statutory provisions, Pt 5.3A does not have “a singular purpose”. She contended that it seeks to balance competing considerations which are reflected in the detail of the legislative scheme. She argued that one of those considerations is the “high public policy” underlying s 556 of the Corporations Act of protecting employees in the aftermath of an insolvency (see, for example, Re Killarnee Civil & Concrete Contractors Pty Ltd (in Liq); Jones (Liquidator) v Matrix Partners Pty Ltd (2018) 260 FCR 310 at [112] (Allsop CJ), which is “carried through” in s 444DA. She claimed the same public policy considerations are embodied in those sections of the FW Act providing for a guaranteed enforceable safety net. She contended that these provisions are “complementary” and “do not conflict” with Pt 5.3A of the Corporations Act.

58    Whether or not the Ombudsman is right, the objects of Pt 5.3A can only be relevant to the interpretation of the provisions of that Part of the Corporations Act. They have no, or at least no direct, bearing on the interpretation of provisions in the FW Act.

The prescribed provisions

59    Section 444A(5) of the Corporations Act provides that “the instrument [setting out the terms of a deed of company arrangement] is taken to include the prescribed provisions, except so far as it provides otherwise”. The amici submitted the DOCA did not provide otherwise. The Ombudsman contended that it did.

60    Regulation 5.3A.06 provides that for s 444A(5), the prescribed provisions are those set out in Sch 8A.

61    Schedule 8A relevantly provides:

5    Discharge of debts

The creditors must accept their entitlements under this deed in full satisfaction and complete discharge of all debts or claims which they have or claim to have against the company as at the day when the administration began and each of them will, if called upon to do so, execute and deliver to the company such forms of release of any such claim is the administrator requires.

6    Claims extinguished

If the administrator has paid to the creditors their full entitlements under this deed, all debts or claims, present or future, actual or contingent, due or which may become due by the company as a result of anything done or omitted by or on behalf of the company before the day when the administration began and each claim against the company as a result of anything done or omitted by or on behalf of the company before the day when the administration began is extinguished.

62    Once an obligation such as a debt is satisfied or discharged, it is necessarily extinguished: Federal Commissioner of Taxation v Orica Ltd (1998) 194 CLR 500 at [114] (Gummow J).

63    I reject the Ombudsman’s contention that the reference in cl 6 to the creditors’ “full entitlements under [the] deed” is a reference to “full amounts owing to them” by the company, irrespective of whether those amounts exceed the amounts in the proofs of debt they submitted. The reason she proffered — that s 553(1) of the Corporations Act provides that all debts payable by, and all claims against, the company are admissible to proof against the company if the circumstances giving rise to them occurred before the relevant date — is no reason at all.

64    Recital C to the DOCA states that the deed “binds all of the Creditors of the Company pursuant to s 444D of the Act …”. Section 444D provides that a deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed …”. While the Ombudsman was not a creditor, each of the Massage Therapists was.

65    Having regard to the terms of s 444A(5), I accept that I was wrong to conclude (at LJ [928]) that the DOCA did not purport to extinguish claims or debts without considering the effect of the prescribed provisions. Provided that “the creditor concerned is bound by the deed”, it is clear from the combined effect of s 444H, s 444A(5), reg 5.3A and Sch 8A that the DOCA will have extinguished them unless it provides otherwise.

66    The first question, then, is whether the DOCA provided otherwise.

Did the DOCA provide otherwise?

67    The DOCA does not contain a provision to the effect of either cl 5 or cl 6 of Sch 8A. But as Rees J observed in a similar situation, the absence of a provision in a deed of company arrangement is not providing otherwise; it is not providing at all: In the matter of Oneoz Pty Ltd (subject to Deed of Company Arrangement) [2019] NSWSC 1247 at [18].

68    Clause 17.1 of the DOCA, however, relevantly provides that, “for the purposes only of administering this Deed” (my emphasis), the prescribed provisions are taken to be included in it “where they are not expressly referred to, pursuant to section 444A of the Act, including but not limited to” certain powers which, as the amici submitted, are identical to those contained in cl 2 of Sch 8A.

69    The amici submitted that the clause was “not a paragon of drafting clarity” and conceded that it was arguable that the purpose of the words in the chapeau to the clause (italicised in the preceding paragraph of these reasons, hereafter referred to as the italicised words) was to limit the incorporation of the prescribed provisions to those provisions relating to the powers of the administrator. Nevertheless, for the following reasons they argued that this construction should be rejected.

70    First, while it is necessary to focus on the terms of the DOCA to determine its proper construction, the DOCA must be construed contextually and that context includes first and foremost the legislative context, as a deed of company arrangement is an instrument which “derives its operative force from statute”: City of Swan v Lehman Brothers Australia Limited (2009) 179 FCR 243 at [7] (Stone J) (Rares J agreeing at [125]). See also Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited [2022] FCA 1243; 165 ACSR 550 at [25] (Lee J). Consequently, “it is to be interpreted as a statute”, rather than a contract.

71    Second, whether a particular provision is within the scope of a deed of company arrangement made under Pt 5.3A is a matter of statutory construction: City of Swan at [9] (Stone J) (Rares J agreeing at [125]). That means that the object and purpose of Pt 5.3A must be taken into account: Ibid.

72    Third, to read the italicised words in such a way as to limit the incorporation of the prescribed provisions only to those provisions relating to the powers of the administrator would not be contrary to the object and purpose of Pt 5.3A.

73    The Ombudsman submitted that the words “except so far as [the deed] provides otherwise” directs attention to whether there is a provision about a particular subject-matter which differs in terms from those contained in the prescribed provisions. She submitted that this can be achieved either expressly, by providing that a prescribed provision is excluded or omitted, or implicitly, by the DOCA making provision on a relevant subject-matter in terms which are different from, or inconsistent with, the prescribed provision.

74    The Ombudsman also argued that, properly construed, cl 17 of the DOCA only incorporates those clauses in the prescribed provisions which confer powers on the deed administrator and cll 5 and 6 do not confer any powers on the administrator. Further, she contended that the DOCA “expressly and exhaustively” addresses the topic of the administration of employee claims in cll 10–12. These clauses are set out at LJ [872]–[878].

75    I accept these submissions. While the words in the DOCA must be read in their statutory context, the construction urged by the amici would have the Court ignore altogether the italicised words in the chapeau. Yet if the DOCA is to be construed like a statute, as the amici argued, the principles in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 apply. And that means that the Court “must strive to give meaning to every word of the provision”, since it is “a known rule in the interpretation of [s]tatutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent”: Project Blue Sky at [71] (McHugh, Gummow, Kirby and Hayne JJ).

76    I do not accept the amici’s submission that to read the italised words in cl 17.1 of the DOCA, so as to limit the incorporation of the prescribed provisions only to those provisions relating to the powers of the administrator, would be contrary to the object and purpose of Pt 5.3A. While regard may be had to an objects clause to resolve uncertainty or ambiguity, an objects clause does not control clear statutory language: Minister for Urban Affairs and Planning v Rosemount Estates Pty Ltd (1996) 91 LGERA 31 at 78 (Cole JA); Lynn v New South Wales (2016) 91 NSWLR 636 at [54] (Beazley P, Gleeson JA agreeing at [147]). There is nothing uncertain or ambiguous about the meaning of s 444A(5). Section 444A(5) clearly enables the parties to a deed of company arrangement to choose whether to incorporate the prescribed provisions. The italicised words are words of limitation. Their evident purpose was to incorporate the prescribed provisions only for the purposes of administering the DOCA and thus to the extent to which they relate to those purposes.

Are the proposed compensation orders contrary to the policy and purpose of Pt 5.3A?

77    The amici submitted that the proposed compensation orders are “arguably contrary to the policy and purpose of Part 5.3A” and that, in applying for those orders, “the Ombudsman effectively seeks to resurrect the Historical Employee claims as defined in the DOCA”, when:

(a)    the claims were “captured and fully satisfied and completely discharged by the DOCA”;

(b)    “the relevant statutory framework … has been properly engaged and invoked”; and

(c)    Parliament could not have intended by the enactment of s 545 of the FW Act “to provide a mechanism permitting the Court to effectively undermine the objectives of Part 5.3A by subjecting a company, having the benefit of a deed of company arrangement, [to] new debts in the form of compensation orders – the quantum of which is directly referable to, and ascertainable by, the claims of employees whose debts have been captured by any relevant deed of company arrangement”.

78    The amici accepted that the Ombudsman did not bring the proceedings on behalf of the Massage Therapists but pursuant to her statutory power to enforce the legislation (LJ [889]). Nevertheless, they argued that “in substance” the orders for compensation she sought against FTM undermine the proper operation of Pt 5.3A.

79    In relation to the first matter, the amici submitted first, that the claims of the Massage Therapists that existed as at 15 December 2015 were captured by the DOCA and were “[s]atisfied, discharged and subsequently extinguished by virtue of the operation of [cl] 5 of the Prescribed Provisions”; second and alternatively, they were extinguished by virtue of the operation of cl 6 of the prescribed provisions; third, they were barred by virtue of the operation of cl 12 of the DOCA; and fourth, they were statute-barred by operation of s 544 of the FW Act.

80    As I am persuaded that the DOCA excludes cll 5 and 6 of the prescribed provisions, I do not accept the first two propositions.

81    In relation to the third, I held at LJ [928] that cl 12 operates as a covenant on the part of the creditors not to sue FTM to enforce their claims or recover their debts. I accept that that is a relevant consideration in determining whether to make the compensation orders and I will take it into account.

82    I reject the fourth proposition.

83    Section 544 of the FW Act relevantly provides that a person may apply for an order in relation to a contravention of a civil remedy provision or a safety net contractual entitlement only if the application is made within six years after the day on which the contravention occurred. Section 545(5) provides that a court must not make an order under this section in relation to an underpayment that relates to a period that is more than six years before the commencement of the proceedings concerned.

84    These proceedings were commenced on 22 June 2018. No contravention occurred more than six years before that date. The contravention period began on 24 June 2012, within six years of the filing of the originating application.

85    With respect to the second matter, as the amici submitted, the Massage Therapists did engage with the deed administration process. They each submitted formal proofs of debt and were present at the meeting of creditors held on 18 March 2016 when the creditors resolved to execute the DOCA. All were paid “dividends” pursuant to the DOCA. Consequently, it may be inferred that the administrators adjudicated the value of their entitlements. Contrary to the amici’s submission, however, s 554A(3) did not give them a right to appeal the administrators’ adjudication. That right is only given to persons aggrieved by an evaluation of debts or claims of uncertain value. As the Ombudsman submitted, the value of the underpayments was not uncertain.

86    Further, while they accepted the money paid to them by the administrators, there is no evidence that any of the Massage Therapists executed a form of release as contemplated by cl 5 of Sch 8A of the Corporations Regulations.

87    In addition, the Ombudsman contended that, despite cl 10.2 of the DOCA, the Massage Therapists only received 8.9% of their “annual leave entitlement claims”, by which I gather she meant their annual leave entitlements. For this reason, she contended that any putative bar in cl 10.2 to proceedings to recover their annual leave entitlements is ineffective. I agree.

88    The figure of 8.9% comes from the End of Administration Return, which is a statutory report, filed by the deed administrators on 17 October 2017. It is part of exhibit LRT–C to FWI Thomas’s reply affidavit. There, the administrators recorded the following payments:

89    It was common ground that the second item related to annual leave. The reason for the shortfall in the annual leave payments is not apparent.

90    Clause 10.2 of the DOCA provides:

The Company will honour annual leave Claims of every Current Employee, and to that extent Current Employees will not be able to prove for annual leave entitlements under this Deed and will be barred from instituting or continuing any legal action, or other proceedings, or from otherwise maintaining an entitlement to a Claim to recover those annual leave entitlements as against the Deed Fund.

91    “Claims” is defined in cl 1.1 of the DOCA (unless the contrary intention appears) as:

all and any existing, or contingent claims, including Historical Employee Claims, and or causes of action, debts, or liability of whatever nature which exist as at the Appointment Date.

92    “Historical Employee Claims” is defined in the same clause, again subject to an apparent contrary intention, as:

all current or contingent claims by current or former employees of the Company arising out of or in connection with the employees’ employment relationship with the Company, including, but not limited to, outstanding employee entitlements, superannuation claims, unpaid overtime and unfair dismissal claims.

93    The effect of cl 10.2, read with the definition of Claims in cl 1.1, is that FTM undertook to pay all current employees, including the Massage Therapists, the full extent of their annual leave entitlements and only then would the Massage Therapists be precluded from recovering anything more in annual leave entitlements.

94    Payments were made under the DOCA by the administrators to each of the Massage Therapists on or about 19 July 2017. Those amounts are set out at LJ [879]. They represent a very small fraction of the amounts they claimed, let alone the amounts they were owed. The amounts paid with respect to annual leave, for example, in contrast to the amounts I found they were owed were: $1,016.63 to Ms Amacio (instead of $10,121.03); $1,051.93 to Ms Bantilan (instead of $8,826.63); $1,051.93 to Mr Benting (instead of $8,494.25); $988.18 to Ms Isugan (instead of $9,180.94); $971.71 to Ms Castaneda (instead of $6,153.36); $971.92 Ms Ortega (instead of $3,403.77); and $971.92 to Ms Sarto (instead of $5,377.50).

95    The contrast between the amounts paid in wages by the administrators and the amounts they were actually owed is even starker: for example, the administrators paid Ms Amacio $22,870.73 in wages when the actual amount she was underpaid in minimum wages, public holidays and overtime penalty rates was $149,678.18. In other words, she recovered less than 15% of what she was owed.

96    I now turn to the third matter.

97    The Court’s powers under s 545 of the FW Act are extremely broad. Insofar as they are relevant, they provide (omitting headings and notes):

(1)    The Federal Court … may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.

(2)    Without limiting subsection (1), orders the Federal Court … may make include the following:

(a)    an order granting an injunction, or interim injunction, to prevent, stop or remedy the effects of a contravention;

(b)    an order awarding compensation for loss that a person has suffered because of the contravention;

(c)    an order for reinstatement of a person.

…

(4)    A court may make an order under this section:

(a)    on its own initiative, during proceedings before the court; or

(b)    on application.

…

98    It is reasonable to infer that the power in s 545 is unconfined except to the extent of any limitations imposed, expressly or impliedly, by the subject matter, scope, and purpose of the FW Act: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 40 (Mason J, Gibbs CJ agreeing at 30, Brennan J at 56, Deane J at 70 and Dawson J at 71).

99    The amici submitted that, by enacting the FW Act, Parliament must be taken to have been aware of Chapter 5 of the Corporations Act and not to have intended in any way to have modified its impact on employees of corporations, citing the familiar passage in the judgment of Gaudron J in Saraswati v The Queen (1991) 172 CLR 1 at 17:

It is a basic rule of construction that, in the absence of express words, an earlier statutory provision is not repealed, altered or derogated from by a later provision unless an intention to that effect is necessarily to be implied. There must be very strong grounds to support that implication, for there is a general presumption that the legislature intended that both provisions should operate and that, to the extent that they would otherwise overlap, one should be read as subject to the other …

100    The amici also submitted that, in enacting s 545 of the FW Act, Parliament assumed the relevant employer was not subject to any form of external administration because other sections of the Act (ss 119(1), 226(2), 226A(1) and 226(3)) expressly deal with circumstances where an employer is insolvent or bankrupt. Further, they referred to the enactment of the Fair Entitlements Guarantee Act 2012 (Cth) (FEG Act), which they said was “part of the statutory framework” implemented by Parliament “in respect of unpaid wages and entitlements for employees of insolvent companies”.

101    I will deal with the second submission first.

102    I do not accept this submission. At the time FTM was under administration, ss 226(2), 226A(1) and 226(3) had not been enacted. At that time s 226 had no subsections. Sections 226(2), 226(3) and 226A(1) were not introduced until 2022. And s 119(1) does not support the submission. It provides, relevantly, that an employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated because of the insolvency or bankruptcy of the employer. If anything, it supports the Ombudsman’s position.

103    The FEG Act establishes a scheme for the provision of limited financial assistance for certain types of “employee entitlements” on the insolvency of an employee’s employer. But it is a scheme of “last resort”, in that no requirement to make an advance arises unless there is no other available source of funds: Secretary, Attorney-General’s Department v Warren (2022) 292 FCR 498 at [8] (Rares, Thawley and Anderson JJ). Moreover, entitlements under that scheme were not accessible to the Massage Therapists because they were migrants on subclass 457 visas and the scheme did not extend to them: FEG Act, s 10(1)(g).

104    Nevertheless, I accept the amici’s submission that Parliament should be taken to have been aware of Chapter 5 of the Corporations Act and did not intend to modify its impact on employees of corporations.

105    While Saraswati was concerned with provisions of the same Act, the authorities her Honour went on to cite, in passages to which I was not taken, were not.

106    One of those authorities was Seward v The “Vera Cruz” (1889) 10 App Cas 59 at 68 in which the Earl of Selborne LC stated:

Now if anything be certain it is this, that where there are general words in a later Act capable of reasonable and sensible application without extending them to subjects specially dealt with by earlier legislation, you are not to hold that earlier and special legislation indirectly repealed, altered, or derogated from merely by force of such general words, without any indication of a particular intention to do so.

107    Another was Bank Officials’ Association (South Australian Branch) v the Savings Bank of South Australia (1923) 32 CLR 276 in which Seward was relied upon. In that case the High Court held that the Industrial Code 1920 (SA), which empowered the Industrial Court of South Australia to fix wages and conditions of employment, was a general enactment and did not repeal provisions in the Savings Bank Act 1875 (SA) which enabled the trustees of the bank with the approval of the Governor to lawfully fix a maximum salary for a given position.

108    These cases are applications of the maxim generalia specialibus non derogant, that is, a general provision does not derogate from a special one. As explained in Bennion on Statutory Interpretation (6th edition, LexisNexis, 2013), §88 p 281:

Where the literal meaning of a general enactment covers a situation for which specific provision is made by another enactment contained in an earlier Act, it is presumed that the situation was intended to continue to be dealt with by the specific provision rather than the later general one. Accordingly the earlier specific provision is not treated as impliedly repealed.

109    In the present context, s 545 of the FW Act is a general provision which applies to any person who the Court finds has contravened or proposes to contravene a civil remedy provision of that Act. In contrast, the provisions in Pt 5.3A of the Corporations Act are specific provisions dealing with companies that enter into deeds of company arrangement. Accordingly, the latter will not be impliedly repealed by the former.

110    It does not necessarily follow, however, that in an appropriate case the Court is precluded from making an order under s 545 of the FW Act against a company which has entered into a deed of company arrangement requiring it to pay compensation to the Ombudsman for underpaying employees who were creditors bound by the deed and therefore unable to sue the company themselves. After all, Pt 5.3A of the Corporations Act includes ss 445D and 445G, which give the Court the power to terminate a deed of company arrangement or declare the deed or a provision of it void. In other words, the object of Pt 5.3A, as described in s 435A, is not to be achieved at all costs. The legislature contemplated that there are circumstances in which a court ought or might not give effect to it.

Is it appropriate to order that FTM pay compensation in the circumstances of this case?

111    In exercising its discretion to order compensation under s 545 of the FW Act, the Ombudsman submitted that the Court should have regard to the following considerations:

(1)    the fact that FTM created and kept false or misleading employee records and did not have adequate records, which meant that the deed administrator proceeded to determine employee entitlements based on incomplete, limited, or incorrect information;

(2)    more likely than not the Massage Therapists did not know the full extent of their legal rights and entitlements including the amount of the underpayments and therefore lacked the capacity to lodge a proof of debt or commence legal proceedings in a proper and timely manner for adjudication by the deed administrator;

(3)    the deed administrator did not “extensively investigate and properly determine” their legal entitlements;

(4)    the DOCA only provided for a short period in which to lodge proofs of debt and for the deed administrator to adjudicate claims when it took the Ombudsman a much longer period to investigate those entitlements; and

(5)    Mr Elvin may be held liable for compensation as an accessory to FTM’s contraventions and is not bound by the DOCA.

112    As to the first matter, it is highly likely that the administrators were misled. While there is no evidence to explain the reasons for the administrators’ calculations, as the amici submitted the Court may infer that they analysed and relied on the books and records of the company. Mr Elvin did not suggest otherwise. Indeed, he informed the Court that he provided everything to the administrators. Quite apart from the deficiencies in the books and records disclosed in the present proceedings, the liquidator reported to creditors in 2019 that the books and records of the company were inadequate and did not meet the requirements of s 286 of the Corporations Act with respect to the keeping of financial records. In the same report the liquidator identified possible breaches of other sections of the Act, including duties of directors and officers to exercise care and diligence (s 180) and to act in good faith (s 181).

113    Having regard to the state of the company’s records, the administrators were not in a position to assess the true value of the Massage Therapists’ entitlements. Among other things, the leave and pay records relating to the Massage Therapists for the duration of the contravention period, which were produced to the Ombudsman in response to a notice to produce and admitted into evidence in the liability hearing, purported to identify the gross and net wages paid to them and deductions (other than for income tax) made from the gross wages (LJ [576]–[577]). Yet, contrary to the requirements of the FW Regulations, FTM did not produce any record of the number of overtime hours they worked or the start and finish times of those hours, the periods of annual leave they took and the balance of their annual leave entitlements, or the nature of the termination of their employment (LJ [578]–[580]). Further, the pay records were false or misleading as to the net amounts the Massage Therapists received during the periods covered by the contraventions of s 325(1) of the FW Act because they did not record the moneys they were required to repay in cash (LJ [581]).

114    It can reasonably be expected that false or misleading information in FTM’s records given to the creditors and/or the administrators would have been material to the creditors in deciding whether to vote in favour of execution of the DOCA.

115    As to the second matter, I have no doubt that the Massage Therapists were unaware of the full extent of their entitlements as of 15 December 2015 or, for that matter, at any time before the Ombudsman’s investigation concluded in 2018. That is apparent when their proofs of debt, which were exhibited to FWI Thomas’s reply affidavit, are compared with the actual shortfall in their entitlements. Ms Amacio only claimed that she had “unpaid overtime” debts totalling $70,000. Ms Bantilan said she was only owed annual leave in the amount of $10,199. Each of Mr Benting, Ms Castaneda, Ms Ortega, and Ms Sarto claimed to be owed unpaid wages and leave entitlements of “at least $40,000” together with an unspecified amount of unpaid superannuation contributions. Yet, the actual amounts they were underpaid, as recorded by the referee were as follows: Ms Amacio – $159,799.21; Mr Benting – $140,307.06; Ms Bantilan – $152,200.47; Ms Castaneda – $120,055.56; Ms Ortega – $123,783.29 and Ms Sarto – $125,615.99.

116    Other documents exhibited to FWI Thomas’s reply affidavit, however, show that Ms Isugan received assistance from Legal Aid ACT in order to complete her proof of debt. Her claim was more detailed and extensive, although still less than the full extent of her entitlements. In a letter to the administrators written by her lawyer, dated 14 January 2016, she claimed to be entitled to in excess of $100,000 including $3,262.50 representing three weeks’ pay in lieu of notice as a result of her summary dismissal from FTM’s employment; unpaid overtime totalling $88,619.44; unpaid annual leave entitlements totalling $11,434.93; and unpaid superannuation entitlements of $2,153.95. The same day she lodged a formal proof of debt in the amount of $118,520 to which she attached the letter from her Legal Aid lawyer. On 16 February 2016 Ms Isugan submitted a second formal proof of debt, also accompanied by a letter from her lawyer, this time for unpaid wages and an amount of $13,200 referable to the amounts of money she said she was required to return in cash to FTM. Then, on an unknown date, Ms Isugan lodged yet a third formal proof of debt, this time for outstanding annual leave payments in the sum of $9,071. In the result, her formal proof of debt claims totalled $140,791.

117    Ms Isugan’s unpaid entitlements were higher, however, than the amounts claimed, although not by much – at $149,331.13.

118    Mr Elvin intimated that all the Massage Therapists were represented by the law firm, Ashurst, but there was no evidence to support that claim.

119    The minutes of the meeting held on 26 February 2016 disclose that four of the eight employees in attendance, seven of whom were the Massage Therapists, were “represented by” a lawyer, Claire Bradbury (who I gather is or was a solicitor with Ashurst) and, although they then voted against the motion to execute the DOCA, at the subsequent meeting on 18 March 2016, when they were also present as was Ms Bradbury, the motion was carried unanimously.

120    Even so, no matter how skilled and informed the lawyers may have been they did not have the powers given by Parliament to the Ombudsman to investigate the extent of the underpayments and they would not have had access to all the relevant documents.

121    As for the third matter, I do not know the extent to which the deed administrator investigated the underpayments. The only evidence on the subject appears in the remuneration report dated 21 January 2016, annexed to FWI Thomas’s affidavit filed on 25 November 2020 but that affidavit was never read. The amounts paid to the Massage Therapists, however, were substantially less than their claims and considerably less than the amounts to which they were entitled.

122    As to the fourth matter, it is true that the Ombudsman took a long time to investigate the extent of the underpayments and that she was likely to be much better informed than the deed administrators. At the time the dividends were paid to the Massage Therapists, the Ombudsman’s investigation was still in progress. Mr Elvin complained that the Ombudsman could have taken action before or during the DOCA. But the first complaint to the Ombudsman was not lodged until the day the administrators were appointed; the Ombudsman’s investigation did not start until 28 April 2016; the deed was wholly effectuated by 17 October 2017; and the Ombudsman’s investigation did not conclude until the third week of May 2018.

123    As to the fifth matter, Mr Elvin was bound by the DOCA. However, as I have said already, the DOCA does not preclude the Court from ordering him to pay compensation. Even so, the fact that an order can be made against Mr Elvin is not a factor that weighs in favour of exercising the discretion to make an order against FTM.

124    It seems to me that the fact that the Massage Therapists are not covered by the FEG Act is a factor weighing in favour of the making of a compensation order against FTM.

125    The final matter that needs to be addressed is the question of utility.

126    The evidence does not indicate that FTM will be able to pay compensation at least to the extent of the underpayments.

127    The Ombudsman acknowledged that the utility (quaere futility) of making compensation orders and the inability of FTM to comply with them “may have some limited relevance” but is not determinative. She claimed that “this may be inferred” from the fact that the Court granted leave to proceed against the company in liquidation. I accept that the inability of FTM to comply with an order that it pay compensation is not determinative but the fact that leave was granted to proceed against FTM after it went into liquidation had little to do with the capacity of the company to comply with an order for compensation: Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liq) [2019] FCA 1601.

128    The Ombudsman submitted that refraining to make a compensation order in such circumstances might “directly undermine the protective purposes of the FW Act” as it “may encourage employers to engage in a deliberate and systematic pattern of conduct of underpayment” and avoid liability by claiming that, as at the date of the liability hearing, the employer did not have the means to rectify the underpayments. She submitted that, even if an employer is unable to pay the amounts ordered in compensation at the time the order is made, they may be able to do so in the future. In any event, she argued, the making of a compensation order would allow her to use the enforcement processes of the Court “to interrogate more deeply and extensively the financial position of the alleged impecunious respondent, whose financial circumstances may be opaque or misrepresented at trial …”.

129    The Ombudsman noted that in the statutory report provided to creditors in November 2019 the liquidator had identified some potentially material or significant voidable related party transactions and some uncommercial transactions that may be void as against a liquidator which required investigation. The Ombudsman also pointed to the fact that the company was still in liquidation and the most recent administration return recorded that investigations were ongoing.

130    I accept these submissions. I am not satisfied that it would be futile to order FTM to pay compensation.

Conclusion

131    Taking all relevant matters into account, and notwithstanding the terms of cll 11 and 12 of the DOCA, I am persuaded that it is appropriate to order FTM to pay compensation.

132    Even if I am wrong to conclude that the DOCA is not an insuperable barrier to the making of a compensation order referable to debts and claims covered by it, it cannot operate as a barrier to the Court making an order for compensation for FTM’s underpayments after 15 December 2015, which total $33,565.07.

Compensation for non-economic loss

133    Although a broader claim was made in the originating application, the claim to compensation for non-economic loss as advanced in final submissions is confined to “the emotional harm and distress and the loss of enjoyment of life” allegedly caused by the various threats made to the Massage Therapists throughout their employment.

134    I addressed these matters at [607]–[673] of the liability judgment. It was apparent from the evidence that all the Massage Therapists had been threatened by Mr Elvin and that they remained, years later, in fear of him. Their distress was palpable. At [204] of the liability judgment I observed that:

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.

135    At [663] I said:

None of the Therapists were discredited in cross-examination. I do not accept that any of them gave false evidence because they had been reprimanded by him. Their failure to make complaints until after they left FTM’s employ, a matter raised in cross-examination, is readily explicable by their fear of the reprisals Mr Elvin might take if they did. Ms Isugan said as much. As I mentioned earlier, their demeanour under cross-examination was consistent with their evidence. It was obvious that they were terrified of what Mr Elvin might do. Mr Elvin revealed in cross-examination his willingness to deceive. Furthermore, Mr Elvin’s demeanour under cross-examination graphically demonstrated how angry he could become when vexed or stressed.

136    Although there was no expert evidence that any of the Massage Therapists had a mental illness or disorder as a result of any of the contravening conduct, that is not a bar to the recovery of compensation of this nature. It is not to the point that at common law damages for breach of contract for wrongful dismissal do not include compensation for injured feelings (Addis v Gramophone Co. Ltd [1909] AC 488 (HL)).

137    In Fair Work Ombudsman v Maritime Union of Australia (No 2) [2015] FCA 814; 252 IR 101 Siopis J awarded compensation of $20,000 to each of four employees and $40,000 to a fifth for contraventions of s 346(c) of the FW Act arising out of the publication of posters at their workplace labelling them as “scabs”. In that case, as in the present case, there was no evidence of a recognised psychiatric or psychological disorder. Nevertheless, on appeal the Full Court (Bromberg J dissenting) held that “the awards of compensation did not exceed what was permissible in the proper exercise of the primary judge’s discretion”: Maritime Union of Australia v Fair Work Ombudsman (2016) 247 FCR 154 at [34].

138    In James Cook University v Ridd (2020) 278 FCR 566 the Full Court (Griffiths, Rangiah and SC Derrington JJ) held that there was no error in an award of $90,000 for “general damages” on the basis that the University’s actions had caused Prof Ridd “stress, anxiety and humiliation” but no psychiatric injury or any lasting or significant medical condition that could be attributed to the University’s actions. In their joint judgment Griffiths and SC Derrington JJ discussed the breadth of s 545 and held that it “should not be read down so as to prevent an award for general damages, unconnected to personal injury, to include an amount representing ‘hurt and humiliation’ suffered by reason of the contravention”, affirming the correctness of statements to similar effect by single judges of this Court in other cases (at [155]). Their Honours observed that that there were no obvious policy considerations militating against the inclusion in a compensation order under s 545(2) a component for “shock, distress, hurt or humiliation” (at [157]). Moreover, they remarked that “the express exclusion of such a component in relation to a claim for unfair dismissal in s 392(4) suggests a contrary conclusion”.

139    I accept the Ombudsman’s submission that, in the present case, she has established that each of the Massage Therapists suffered “significant emotional harm and distress as a result of living in fear of [Mr Elvin] becoming angry and sending them back to the Philippines or of killing their families back in the Philippines [which they endured] for a sustained period of approximately 3 to 4 years”. I had the strong impression from watching and hearing them in the witness box that their suffering was ongoing. The Ombudsman argued that, in view of the gravity of the conduct, the period over which it occurred and the level of distress and anxiety it evidently caused, an order “in the range of $30,000” for each Massage Therapist was appropriate. If anything, the Ombudsman’s claim may be understated.

140    While some of the Massage Therapists were more emotionally labile than others in the witness box, I do not think that is a reliable basis to conclude that the extent of their distress was appreciably greater. Nevertheless, I do think that the Massage Therapists in the first group should receive more than those in the second. That is because the period of their distress is longer. I will award $30,000 to the Massage Therapists in the first group and $25,000 to those in the second.

Should Mr Elvin be ordered to pay compensation?

141    Having regard to his position in FTM and the extent of his involvement in the contraventions, I am satisfied that it is appropriate to order that Mr Elvin pay compensation. It is also relevant that FTM is in liquidation and there is every prospect that the full amount of the compensation awarded may not be recoverable from the company: compare Veeraragoo at [50]. As was the case with the general manager of the employing company in Veeraragoo, Mr Elvin’s “behaviour was the instigating cause [of the contravening conduct] and all of the contravening conduct that provides the basis for the compensatory orders sought occurred at his direction or, at least, with his full knowledge of all relevant events and with his support”: Veeraragoo at [51].

INTEREST

142    Interest on the underpayments should be paid at the rates prescribed by Practice Note GPN-INT.

143    Pre-judgment interest on the non-economic loss should not be awarded at the same rate for the reasons I gave in Gill v Ethicon Sàrl (No 5) [2019] FCA 1905 at [5131]; see also Taylor v August and Pemberton Pty Ltd [2023] FCA 1313 at [558]. Rather, it should be awarded at 2% per annum. As most of the harm is likely to have occurred during the period the Massage Therapists were employed with FTM and for the duration of this proceeding, interest should be awarded on 90% of the $30,000.

144    For ease of calculation, interest should run from 11 February 2016.

PENALTIES

145    The relevant provisions appear in Part 4-1 of both the FW Act and the FW Regulations.

The power

146    The power to make pecuniary penalty orders is contained in s 546. It relevantly provides:

(1)    The Federal Court … may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.

…

Determining amount of pecuniary penalty

(2)    The pecuniary penalty must not be more than:

(a)    if the person is an individual—the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2); or

(b)     if the person is a body corporate—5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2).

Payment of penalty

(3)    The court may order that the pecuniary penalty, or a part of the penalty, be paid to:

(a)    the Commonwealth; or

(b)    a particular organisation; or

(c)    a particular person.

Recovery of penalty

(4)    The pecuniary penalty may be recovered as a debt due to the person to whom the penalty is payable.

No limitation on orders

(5)    To avoid doubt, a court may make a pecuniary penalty order in addition to one or more orders under section 545.

147    Pecuniary penalties for contraventions of the civil remedy provisions of the FW Act are fixed under s 546(2) of the Act by reference to the table to s 539(2). Where the order is to be made against an individual, the pecuniary penalty must not be more than the maximum number of penalty units referred to in the relevant item in column 4 of the table and, where the order is to be made against a corporation, it must not be more than five times the maximum: FW Act, s 546(2). For all relevant purposes, with two exceptions, those figures are 60 units for an individual and 300 units for a body corporate. The first exception relates to the contraventions of ss 535(1)–(2) and 536(1)–(2) of the Act, where they are 30 units for an individual and 150 units for a body corporate. The second relates to the contraventions of reg 3.44(2) and (6). In the case of those contraventions, the maximum penalties are 20 units for an individual and 100 for a body corporate: see FW Regulations, reg 4.01A.

148    “Penalty unit” has the meaning given by s 4AA(1) of the Crimes Act 1914 (Cth): FW Act, s 12. Up until 28 December 2012, “penalty unit” was defined in s 4AA(1) as the amount of $110. On that date, an amendment to s 4AA, introduced by the Crimes Legislation Amendment (Serious Drugs, Identity Crime and Other Measures) Act 2012 (Cth), came into force. The effect of the amendment was to increase penalties under Commonwealth laws by increasing the size of a penalty unit.

149    In the present case, the contraventions occurred during the period from 24 June 2012 to 16 June 2016 inclusive. At the beginning of that period the value of a penalty unit was $110, from 28 December 2012 it increased to $170 and on 31 July 2015 it rose to $180. Most of the contraventions occurred in the period between 24 June 2012 and 11 February 2016 inclusive. In circumstances such as these, the higher penalty applies for the entire contravention period but it is appropriate for the Court to have regard to the fact that a lower penalty unit value applied for part of the period: Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 at [394]–[401] (Katzmann J); Fair Work Ombudsman v Phua & Foo Pty Ltd [2018] FCA 137 at [31] (Siopis J); Registered Organisations Commissioner v Australian Nursing and Midwifery Federation (No 2) [2018] FCA 2004 at [123]–[126] (Barker J); Ahmed v Al-Hussain Pty Ltd t/as The Cheesecake Shop (No 3) [2019] FCA 848 at [35]–[36] (Rares J); and Fair Work Ombudsman v Australian Workers’ Union [2020] FCA 60 at [47]–[48] (Snaden J).

150    Section 557 of the FW Act requires that multiple contraventions of certain civil remedy provisions be taken to constitute a single contravention in certain circumstances. It relevantly provides:

(1)    For the purposes of this Part, 2 or more contraventions of civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:

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

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

(2)    The civil remedy provisions are the following:

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

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

…

(g)    subsection 323(1) (which deals with methods and frequency of payment);

…

(i)    Subsection 325(1) (which deals with unreasonable requirements to spend amounts);

…

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

(o)    subsections 536(1) and (2) (which deal with employer obligations in relation to payslips);

…

(s)    any other civil remedy provisions prescribed by the regulations.

151    Regulation 4.03A provides that for the purpose of s 557(2)(s) of the Act each civil remedy provision mentioned in items 4 to 19 of the table to reg 4.01A(2) is prescribed. Among those civil remedy provisions is reg 3.44(1) and (6) (at items 14 and 19 respectively).

152    The effect of these provisions is that multiple contraventions of the same provision of the National Employment Standards (NES) and multiple contraventions of the same clause of a modern award are deemed to constitute a single contravention by a contravener where they arose out of a course of conduct in which the contravener participated. See Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153 (North, Flick and Jagot JJ).

153    Notably, for present purposes, contraventions of the adverse action provisions of the FW Act, which include ss 340, 343 and 351, are not captured by s 557.

154    However, where there is an interrelationship between the legal and factual elements of two or more contraventions committed by the same person, it may be appropriate to group those contraventions to avoid penalising the contravener for what is essentially the same contravening conduct: see Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1; 194 IR 461 at [41] (Middleton and Gordon JJ). This principle, commonly referred to as the “course of conduct” or “one transaction” principle, has “some overlap” with another principle applied both to the criminal law and the law of civil penalties, namely, the “totality principle”: Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243 at [234] – [236] (Allsop CJ, Middleton and Robertson JJ). The so-called totality principle is applied at the end of the assessment process to ensure that the aggregate penalty “is not unjust or out of proportion to the circumstances of the case”: Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [42] (Stone and Buchanan JJ).

155    Section 556 of the FW Act provides protection against double jeopardy. It provides:

Civil double jeopardy

If a person is ordered to pay a pecuniary penalty under a civil remedy provision in relation to particular conduct, the person is not liable to be ordered to pay a pecuniary penalty under some other provision of a law of the Commonwealth in relation to that conduct.

Note:    A court may make other orders, such as an order for compensation, in relation to particular conduct even if the court has made a pecuniary penalty order in relation to that conduct (see subsection 546(5)).

The principles

156    The most recent authoritative statement of the governing principles for the fixing of a pecuniary penalty in a proceeding of this kind is to be found in the High Court’s judgment in Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450. Unless otherwise indicated, the paragraph references below are to paragraphs in the judgment of the plurality in Pattinson.

157    First, the Court’s task is to determine the appropriate penalty in the circumstances of the case before it (at [19]). An appropriate penalty is one which strikes a reasonable balance between oppressive severity and the need for deterrence (at [41]).

158    Second, that determination is to be informed by the purpose of the civil penalty regime provided by the FW Act, which is primarily, if not exclusively, the promotion of the public interest in compliance with the legislative requirements by the deterrence of further contraventions (at [9]).

159    Third, the reasonableness of the relationship between the theoretical maximum and the final penalty imposed may be established having regard to the circumstances of the conduct involved in the contravention and the circumstances of the contravener (at [55]). That is because the circumstances of the contravening conduct or the circumstances of the contravener or both may bear upon the extent of the need for deterrence.

160    Fourth, a civil penalty must be fixed with a view to ensuring that it is not regarded by the contravener or others as an acceptable cost of doing business (at [17]). In other words, the amount of the penalty must be sufficient to serve the objects of both specific and general deterrence. As to the latter, regardless of whether specific deterrence is called for, it is important to send a message that contraventions of the Act are serious matters and are unacceptable: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The Queensland Infrastructure Case) (2017) 254 FCR 68 at [98] (Dowsett, Greenwood and Wigney JJ).

161    Fifth, in every case a number of factors will inform the assessment of “a penalty of appropriate deterrent value” (at [18]). These factors, drawn from the judgment of French J in Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076 at 52,152-3 and routinely applied to contraventions of workplace legislation, like the FW Act, include: the nature and extent of the contravening conduct; the circumstances in which the conduct took place; the amount of loss or damage it caused; the size of the contravening company; whether the conduct was deliberate or inadvertent; whether the contravention arose from the conduct of senior management or at a lower level; whether the company has a corporate culture conducive to compliance, as evidenced by educational programs, disciplinary and other corrective measures in response to an acknowledged contravention. The extent of any contrition on the part of the contravener is also relevant because one might infer that a person who is genuinely remorseful is less likely to reoffend, so to speak, such that there may be little or no need for specific deterrence.

162    Several of these factors are interrelated. An evaluation of the nature and extent of the contravening conduct, for example, will involve an examination of the gravity of the contravening conduct and that will be informed, amongst other things, by the loss and damage it has caused and the extent of any previous contraventions. Similarly, the existence of a corporate culture conducive to compliance may suggest that contraventions are more likely to be inadvertent than deliberate.

The claim

163    The Ombudsman’s claim is summarised in the amended table to which I referred above at [20] and which is annexed to these reasons.

The application of the course of conduct principles

164    The contraventions committed by the respondents are identified in Annexure A to these reasons and in the declarations. As the Ombudsman submitted, subject to ss 556 and 557 and the one transaction principle, each of them attracts a penalty.

165    Having regard to s 557, the Ombudsman accepted that the following contraventions of the Health Award are to be treated as a single contravention of s 45. They are the contraventions of:

(1)    cl 15.2 (failing to pay each of the Massage Therapists their minimum hourly rates in accordance with Sch A cl A.2.5 of the Award);

(2)    cl 32.2 (failing to pay each of the Massage Therapists public holiday rates in accordance with Sch A cl A.7.3);

(3)    cl 28.1(a) (failing to pay each of the Massage Therapists overtime rates for overtime work performed between Monday and Saturday);

(4)    cl 28.1(b) (failing to pay each of the Massage Therapists overtime rates for overtime work performed on Sundays).

166    Consequently, there are four contraventions of s 45.

167    The Ombudsman also accepted that the multiple contraventions of the NES by requiring each of the Massage Therapists to work unreasonable hours should be treated as a single contravention of s 44.

168    As for the other contraventions of s 44, the Ombudsman submitted that the contraventions concerning the failure to pay accrued untaken annual leave on termination did not satisfy the terms of s 577 because, with the exception of Ms Castaneda and Ms Ortega whose employment was terminated on the same day, the other Massage Therapists were terminated on different days and in different pay periods. It is unnecessary for me to decide whether this submission is correct, for the Ombudsman accepted that there was “a sufficient factual and legal overlap” between these contraventions to warrant them being treated as a single contravention. The Ombudsman took the same approach to the contraventions concerning the failure to give the Massage Therapists the Fair Work Information Statement, contrary to s 125.

169    With respect to the contraventions of s 323 (the failure to pay employees in full on at least a monthly basis due to making unlawful deductions from their pay in relation to purported “staff loans”), the Ombudsman accepted that s 557(1) applies to treat all the occasions applying to an individual therapist as one contravention and, although the deductions were for different amounts in different pay periods, there was a sufficient factual and legal overlap for them to be considered a single contravention under the one transaction principle.

170    With respect to the contraventions of s 325 (unreasonable requirement to spend part of their pay by returning $800 a fortnight to their employer — the cashback requirement), the Ombudsman submitted, and I accept, that the contraventions with respect to employees in the first group (Ms Amacio, Ms Bantilan and Ms Isugan) over the period between 26 August 2012 and 2 June 2013, these contraventions were part of a course of conduct and should therefore be treated as a single contravention in accordance with s 557 and that the contraventions with respect to employees in the second group (Ms Castaneda, Ms Ortega and Ms Sarto) over the period between 21 April 2013 and 5 January 2014 were part of a second course of conduct which should be treated as a single contravention. In other words, the effect of s 557 on the numerous contraventions of s 325 is that there are only two contraventions of s 325.

171    I now turn to the contraventions of s 535 relating to record keeping.

172    These contraventions fall into three different categories. They involve, in turn, contraventions of reg 3.34 (failing to make and keep employee overtime records); contraventions of reg 3.36(1) (failing to make and keep employee records); and contraventions of reg 3.40 (failing to make and keep termination of employment records). As the Ombudsman submitted, a contravention of each of these regulations is a contravention of s 535 and FTM’s failure to make and keep records in relation to each of the Massage Therapists throughout the periods of employment arose out of the same course of conduct, namely, the absence of the practice or procedure to create each of these three types of records. Consequently, there are three “distinct and separate” contraventions of s 535, one for each of the three regulations.

173    The next category concerns the contraventions of s 536 (the pay slip contraventions).

174    The Ombudsman accepted that the contraventions of s 536(1) (failing to provide pay slips after about 31 March 2014 save for three or four pay slips provided in 2015) arose out of the same course of conduct and should therefore be treated as a single contravention.

175    The Ombudsman also accepted that the multiple contraventions of s 536(2) (failing to provide pay slips which recorded the name/number of the fund or account into which each of the deductions was paid, as required by reg 3.46(2)) arose out of the same course of conduct that amounts to a single contravention of s 536(2).

176    The following two categories relate to the contraventions of reg 3.44.

177    The first category concerns the contraventions of reg 3.44(1) (failing to record the fortnightly cashback payments). The second concerns the contraventions of reg 3.44(6) (making use of entries in employee records knowing they were false or misleading). These relate to the production of documents to the Ombudsman in response to the notice to produce issued on 16 June 2016 which did not record the fortnightly cashback payments.

178    The Ombudsman accepted that the same approach should be taken to these contraventions as to the contraventions of s 325(1) such that:

(a)    the multiple contraventions of reg 3.44(1) with respect to the records relating to Ms Amacio, Ms Bantilan and Ms Isugan should be treated as one contravention and those with respect to the records of Ms Castaneda, Ms Ortega and Ms Sarto should be treated as another; and

(b)    the production of numerous documents to the Ombudsman in response to the notice to produce (all on the one day) should be treated as a single contravention.

179    The Ombudsman observed that s 557(1) does not apply to s 340(1)(b) or s 343(1)(a) but conceded that “there is a sufficient degree of factual and legal overlap for the contraventions to be grouped into seven contraventions of each provision, one for each Massage Therapist under the one transaction principle.

The impact of s 556 of the FW Act

180    The Ombudsman also accepted that s 556 applies because the contraventions of s 340(1)(b) are “wholly subsumed by the conduct and contextual facts for the contraventions of s 343(1)(a)”. As she said, both contraventions concern the threats made to prevent the exercise of workplace rights. She observed that there is no substantive difference between the two to warrant choosing one over the other as “the lead contraventions”. She has selected contraventions of s 340(1)(b) as the lead contraventions. Consequently, she does not seek the imposition of penalties for the contraventions of s 343(1)(a).

181    The final category of contraventions to be considered at this point relates to the contraventions of s 351(1). As the acts of discrimination, the subject of these contraventions, are also elements of other contraventions, the Ombudsman correctly submitted that it is necessary to consider whether s 556 applies to prevent the Court from imposing penalties for contraventions of s 351(1) if the “particular conduct” has been penalised under another provision of the Act. The Ombudsman submitted that it does not because the gravamen of the contravening conduct in s 351 is different.

182    It will be recalled that s 556 of the FW Act provides that “[i]f a person is ordered to pay a pecuniary penalty under a civil remedy provision in relation to particular conduct, the person is not liable to be ordered to pay a pecuniary penalty under some other provision of a law of the Commonwealth in relation to that conduct” (emphasis added). It is not in doubt that the section applies to different civil remedy provisions of the FW Act.

183    The contraventions of s 351 involve the taking of certain action for a particular reason, in the present case because of the race and national extraction of the employees. “Action” is defined in s 7 to include an omission. As the Ombudsman put it in submissions, the contraventions comprise conduct giving rise to other contraventions and a mental element, namely, the reason the action was taken.

184    Section 556 was considered by the Full Court (Bromberg, Wheelahan and Snaden JJ) in Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (2019) 272 FCR 290 (Hassett).

185    The relevant provisions in the Hassett matter were ss 499 and 500.

186    Section 499 relevantly provided that “[a] permit holder must not exercise a State or Territory OHS right unless he or she complies with any reasonable request by the occupier of the premises to comply with an occupational health and safety requirement that applies to the premises”. Section 500 relevantly provided that a “[a] permit holder exercising, or seeking to exercise, rights in accordance with this Part must not intentionally hinder or obstruct any person, or otherwise act in an improper manner”.

187    The issues in Hassett were whether the primary judge erred in holding that s 556 did not apply where the conduct constituting contraventions of s 499 was a component of the conduct encompassing their contraventions of s 500 and in failing to hold that, if the Court imposed a penalty for the s 499 contraventions, the conduct constituting the contraventions was unable to be considered in imposing a penalty for the s 500 contraventions. The Full Court resolved each issue in the appellant’s favour (at [10]).

188    The conduct establishing the contraventions of s 499 was Mr Hassett climbing on a crane while it was in operation. The conduct establishing the contraventions of s 500 included that conduct but also included Mr Hassett’s refusal of the occupier’s request to get off the crane and his use of insulting language and his abusive behaviour. In other words, the contraventions of s 499 were entirely subsumed by the contraventions of s 500.

189    In resolving the first issue in the appellants’ favour the Full Court held (at [16]):

Hassett’s refusal to get off the crane was relevantly the “particular conduct” for s 556 purposes. That particular conduct was part of and was subsumed by, the whole of the conduct the subject of the contravention of s 500. Where that particular conduct was the subject of penalty in relation to a contravention of s 500, s 556 precluded that particular conduct being the subject of a penalty in relation to the contravention of s 499 of the [Fair Work Act].

190    In resolving the second issue in the appellants’ favour the Full Court held at [26] that the “particular conduct” to which s 556 refers consists of the acts or omissions that constitute the contraventions, that is to say, what the contravener did (or did not do).

191    In so concluding, the Full Court approved the construction given to the section by Jessup J in Australian Building and Construction Commissioner v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (The Australian Paper Case) (No 2) [2017] FCA 367 at [39]. In that case, Jessup J rejected a submission by the regulator that s 556 operates only where the constituent elements of each contravention are the same (at [38]–[40]). Rather, his Honour said that “the better view is that the reference to ‘particular conduct’ in s 556 is to what the person actually did, with all of its attributes and in its whole context” (at [40]). Even though in that case there were “adjectival elements the presence of which were necessary ingredients of the provisions respectively”, which “differed as between the two [provisions])”, his Honour held that s 556 precluded the imposition of penalties for contraventions of both provisions.

192    In the present case the conduct constituting the adverse action for the purposes of s 351 included the very same conduct constituting the four s 45 contraventions, two of the three contraventions of s 44, the contraventions of s 323, and the contraventions of ss 340 and 343.

193    Yet the Ombudsman submitted that “the critical defining attribute” of the s 351 contraventions was the mental element, that is the fact that the adverse action was taken because of the race or national extraction of the Massage Therapists. She said that the section is directed to proscribing discrimination because of certain attributes. She claimed that Hassett was distinguishable because neither s 499 nor 500 has a mental element as an essential ingredient. She continued:

In this case, the additional element in the First and Second Respondents’ contraventions of s 351(1) of the FW Act is that there is conduct which supports that the adverse action was taken because of the Massage Therapists’ race or national extraction. In this case, the additional element in the First and Second Respondents’ contraventions of s 351(1) of the FW Act is that there is conduct which supports that the adverse action was taken because of the Massage Therapists’ race or national extraction …

At LJ [698], in determining the relevant circumstances which supported the FWO’s hypothesis that the relevant actions were taken because of the Massage Therapists’ race and national extraction, the Court relied on additional contextual facts. In particular, the Court found that, at all relevant times, the Second Respondent recruited only Filipinos directly from the Philippines to work as massage therapists for the First Respondent on subclass 457 visas: see LJ [64]-[70] for the first group and [74]-[79] for the second group. The conduct includes the Second Respondent going to the Philippines, meeting with the Massage Therapists alone and together in a group and offering them employment to work in Australia

At LJ [727], the Court records that the Second Respondent admitted that, by deciding to employ people on subclass 457 visas from the Philippines, the First Respondent was “only employing people from one racial group”. On this basis, the Court held that the First Respondent took the other actions because: (a) the Second Respondent believed the Massage Therapists would be prepared to put up with below award rates and conditions that contravened the NES because, to his knowledge, the rates the First Respondent paid were far higher than the rates they were paid in the Philippines and the hours they were required to work were substantially less; and (b) that they were unlikely to complain because they were Filipinos with families in the Philippines, to whom the Massage Therapists were devoted and who relied on their financial support.

The Court therefore relied upon this additional evidence as to the recruitment of the Massage Therapists and their preparedness to tolerate oppressive terms and condition to support the inference that the First and Second Respondent were actuated by the proscribed reasons of race and national extraction. These additional facts formed a necessary part of the contraventions to establish the hypothesis supporting the First and Second Respondents’ state of mind. None of these additional facts were relevant to establishing any of the other contraventions. Thus, the relevant attributes of the conduct must include the vulnerable characteristics and circumstances of the Massage Therapists, which includes their race and national extraction, the contextual conduct which lead to them being targeted and the reasons why the First and Second Respondents took such actions.

By contrast, the “particular conduct” constituting the other contraventions set out above has a manifestly different character to the conduct comprising the contravention[s] of s 351(1) of the FW Act. Put differently, there are additional aggravating features consisting of both the relevant attributes of the Massage Therapists, the context which led to the contraventions (i.e. their targeted recruitment from the Philippines) and an additional mental element as set out above that justifies additional penalties being imposed. As there are discrete aspects of the conduct with a qualitative difference for the contravention[s] of s 351(1) of the FW Act from the other contraventions, the FWO submits that s 556 of the FW Act does not apply to prevent the imposition of penalties for seven contraventions of s 351 of the FW Act.

194    Although at first blush I was attracted to the Ombudsman’s argument, it does not withstand scrutiny. It flies in the face of the Full Court’s reasoning in Hassett. The reason the adverse action was taken is not an act or omission constituting the contraventions. Whatever is meant by the words “particular conduct” in s 556, they do not mean a state of mind. As the Full Court (Bromberg, Moshinsky and Bromwich JJ) said in Construction, Forestry, Maritime, Mining and Energy Union and Others v Fair Work Ombudsman (The Botany Cranes Case) (2023) 297 FCR 438 at [109], referring to the use of the word “conduct” in s 83(2) of the Building and Construction Industry (Improving Productivity) Act 2016 (Cth) (BCIIP Act) and s 91 of the same Act which is identical in terms to s 556 of the FW Act:

Turning to the meaning of the word “conduct” in ss 83(2) and 91, in our opinion, the primary judge erred in concluding (at [60]-[61]) that the references in these provisions to “the same conduct” or “particular conduct” mean all of the physical and mental elements that go to making a person liable for a contravention of two laws at once. The word “conduct”, in ordinary English, refers to what a person does or does not do. It does not encompass the mental element that accompanies a particular act or omission. That this is the sense that “conduct” is used in the Act is supported by the definition of “conduct” in s 5 of the Act. That section defines “conduct” as including an omission, which is inconsistent with the notion of a state of mind. It is further supported by the distinction drawn by ss 94 and 95 of the Act between conduct and states of mind. Parker, at the passages relied on by the Commissioner, does not stand for a contrary proposition.

195    The FW Act also draws a distinction between conduct and states of mind in s 793, which is identical in terms to s 94 of the BCIIP Act.

196    The matters upon which the Ombudsman relied do not engage the with the language or purpose of s 556. The fact that in concluding that the respondents had not rebutted the statutory presumption that the adverse action was taken for a reason that included the race or national extraction of the Massage Therapists is not to the point. The argument is based on a misinterpretation of the reasoning in The Australian Paper Case. Contrary to the Ombudsman’s submission, the passages upon which she relied in the judgments of the Full Court in Parker v Australian Building and Construction Commission (2019) 270 FCR 39 and Construction, Forestry, Mining and Energy Union (The BKH Contractors Appeal) (2020) 274 FCR 19 do not support her position.

197    It follows that, if penalties are imposed for the particular acts or omissions upon which the contraventions of s 351 are based, s 556 prevents the Court from imposing additional penalties for those contraventions.

198    I now turn to consider the relevant factors with a view to determining the appropriate penalties to deter the respondents and others from engaging in the contravening conduct.

The nature, gravity and extent of the contravening conduct and the circumstances in which it took place

199    The contravening conduct occurred over a four-year period, from June 2012 until June 2016. Since FTM was registered on 1 November 2010, this period represents over 70% of the time the company had been in existence.

200    It included contraventions of the Health Award by failing to pay the Massage Therapists minimum hourly rates, public holiday rates and overtime rates; requiring them to work unreasonable hours; contraventions of the NES by making unlawful deductions from their pay thereby failing to pay them in full; failing to pay accrued annual leave on termination; failing to give them the Fair Work Information Statement; and requiring them to return in cash a significant portion of their wages. It also included contraventions threatening them with severe reprisals if they reported their working conditions to anyone, particularly the authorities; failing to make and keep overtime, leave and employment records contrary to the FW Regulations; failing to give them pay slips and pay slips which recorded the requisite details of the fund or account into which deductions were paid; making and keeping false records; and making use of those records knowing that they were false or misleading.

201    Further, the contravening conduct included threats to send the Massage Therapists back to the Philippines (thereby terminating their employment) and to have their families killed if they reported their working conditions to the authorities or anyone else; and discriminating against them because of their race or national extraction.

202    It goes without saying that the contravening conduct in this case was extremely serious. As the Ombudsman submitted, it involved the systematic exploitation of two groups of migrant workers over a period of four years. The workers in question were all on temporary (subclass 457) visas sponsored by FTM. As temporary visa holders they were in a precarious position as their continuing residence in this country for the duration of the sponsorship depended on their continuing employment (LJ [240]). For this reason alone, the Ombudsman’s characterisation of them as vulnerable is apt. The failure by FTM to give the Massage Therapists the Fair Work Information Statement put them at an even greater disadvantage in that it inhibited their ability to understand and protect their entitlements. As I observed in the liability judgment at [505], giving the Fair Work Information Statement to new employees is a means of ensuring that they are aware from the commencement of their employment of their rights and entitlements. It provides a useful checklist of important information about pay and conditions to which they might reasonably have recourse throughout their employment including advice on the roles of the Ombudsman and the Fair Work Commission and information on how to contact them.

203    The evidence was that FTM recruited only Filipino massage therapists (to replace Thai students who formerly held those positions) and did so directly from the Philippines. I held (at LJ [743] that FTM employed them because Mr Elvin (and therefore FTM) believed that they would be prepared to put up with below award rates and conditions because he knew they were paid even less in the Philippines and they were unlikely to complain because their families, to whom they were devoted, lived in the Philippines and were dependent on their financial support.

204    The overwhelming majority of the contravening conduct was deliberate and intentional, rather than inadvertent or careless.

205    The Massage Therapists were enticed to come to Australia to work for FTM on false promises. The terms of their contracts bore little relationship to their actual terms of employment. Mr Elvin conceded in cross-examination that the contracts falsely represented that they would not have to work more than an average of 38 hours a week (see LJ [144]). They also falsely represented that the Massage Therapists would be paid penalty rates and annual leave loadings in accordance with the Health Award (LJ [402]). He described the contracts as “bodgie” and “sham” (LJ [144], [402]). As he effectively admitted, his purpose was to deceive the Department of Immigration into believing that FTM intended to comply with the conditions for sponsorship of employees on subclass 457 visas (see LJ [144]). He also admitted that, by providing copies of the signed employment contracts containing the false promises, he deceived the Philippine Overseas Employment Administration, an agency he understood was responsible for ensuring that the terms and conditions of overseas employment contracts were not unfairly exploitative of Filipino workers (LJ [147]). Based on Mr Elvin’s own evidence, I found that he never had any intention of complying with many of the terms of their contracts and that he made an economic decision not to comply with the Health Award (at LJ [410]).

206    As a standard business sponsor of the Massage Therapists’ subclass 457 visas, FTM held obligations under the Migration Regulations 1994 (Cth). They included a requirement to provide visa holders with no less favourable terms and conditions of employment than the sponsor provides, or would provide, to an Australian citizen or permanent resident (reg 2.79(2)).

207    Compliance with sponsorship obligations, including reg 2.79, may be monitored by immigration inspectors or Fair Work Inspectors who have investigative powers under the Migration Act 1958 (Cth): see ss 140UA and 140V. Reg 2.78 provided that a person is taken not to have cooperated with an inspector if that person hinders or obstructs an inspector while the inspector is exercising powers, where the person conceals or attempts to conceal, from an inspector the location of a person, document or thing, or where the person prevents or attempts to prevent another person from assisting an inspector.

208    In certain circumstances, the Minister had the power to cancel FTM’s approval as a sponsor of visa holders or bar it from sponsoring prospective visa holders if it failed to satisfy sponsorship obligations: see Migration Act, ss 140L, 140M; Migration Regulations, Div 2.20.

209    In my reasons for finding that FTM threatened the Massage Therapists as alleged, I remarked at LJ [668]:

On [Mr Elvin’s] own account, FTM had provided the Department with false and misleading information about the conditions of employment of the Massage Therapists. Mr Elvin had every reason to be worried about the possibility that the Therapists might report him to the Department or some other Commonwealth authority like the Ombudsman. The consequences for him would be dire. Even if he or the company were not prosecuted, if the truth were revealed his business model would be destroyed and in all likelihood the business itself would fail.

The loss or damage caused by the contravening conduct

210    Each of the Massage Therapists was underpaid a total of between approximately $120,000 and $159,000: a significant sum of money for any employee. Close to a million dollars in total remains unpaid. They also suffered non-economic loss as discussed above.

The size of the contravening company

211    FTM is a small company. Evidence exhibited to Mr Thomas’s reply affidavit shows that it operated at a loss in 2017, 2018 and 2019. It remains in liquidation. In the most recent report from the liquidators in evidence, which covers the period from 13 August 2021 to 12 August 2022, its liabilities are said to amount to over $2.2 million; the liquidator’s estimate of the total value of the company’s assets realisations is $220,052.60 (consisting entirely of gross realisations to date, with future realisations estimated at $0); and its total receipts together with cash in the bank amounts to $276,005.40.

212    The size of a contravening company and its capacity to pay a civil penalty can be relevant to the penalty that is necessary to deter the company from engaging in contravening conduct in the future, that is to say, it can be relevant to the question of specific deterrence: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254; 215 ALR 281; (2005) ATPR¶42-051 at [9] (Merkel J). In considering the size of a civil penalty, however, capacity to pay is of less relevance than the objective of general deterrence: Ibid; Jordan v Mornington Inn Pty Ltd [2007] FCA 1384; 60 AILR ¶100–744; 166 IR 33 at [99] (Heerey J) approved in Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [69] (Stone and Buchanan JJ). The deterrent objective is not defeated by the fact that a company is in liquidation and unable to pay penalties: Secretary, Department of Health and Ageing v Prime Nature Prize Pty Ltd (in liq) [2010] FCA 597 at [22] (Stone J). As Merkel J explained in Leahy at [9]:

[A] contravening company’s capacity to pay a penalty is of less relevance to the objective of general deterrence because that objective is not concerned with whether the penalties imposed have been paid. Rather, it involves a penalty being fixed that will deter others from engaging in similar contravening conduct in the future. Thus, general deterrence will depend more on the expected quantum of the penalty for the offending conduct, rather than on a past offender’s capacity to pay a previous penalty. … [A] penalty that is no greater than is necessary to achieve the object of general deterrence, will not be oppressive.

213    The same principles apply to natural persons. Thus, the possibility that an order for the payment of penalties will push a company into insolvency or a natural person into bankruptcy “must not prevent the Court from doing its duty”; otherwise, “the important object of general deterrence will be undermined”: Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247; (2006) ATPR ¶42–091 at [11] (Heerey, Finkelstein and Allsop JJ).

The involvement of senior management

214    Mr Elvin, at the relevant time FTM’s sole director and the managing director of its business, was involved in all but one of the contraventions. He was the person who decided to underpay the Massage Therapists, the person who required them to work unreasonable hours, and the person who threatened them and took other adverse action against them.

215    Mr Puerto was his second in command. He was involved in a number of the contraventions.

216    It was their conduct that gave rise to the contraventions.

Whether the company has a corporate culture conducive to compliance

217    It is readily apparent from the liability judgment that FTM had no such culture. The contravening conduct began one year and seven months after it was first registered. I was informed that none of the respondents has previously been found to have contravened the FW Act. In the absence of corporate culture conducive to compliance, however this is likely to have been the result of good luck, rather than good management.

The extent of any contrition

218    None of the respondents exhibited any contrition.

Conclusions

219    It is obvious that substantial penalties are called for. As the Ombudsman submitted, the imposition of penalties in the higher range is necessary to deter the respondents and others from engaging in conduct of this kind.

220    The future of FTM – and hence the necessity for specific deterrence – is unclear. But general deterrence is unquestionably necessary.

221    Recently, in Fair Work Ombudsman v DTF World Square Pty Ltd (in liq) (No 4) [2024] FCA 341 at [37], I observed that it is a notorious fact that foreign workers are particularly susceptible to exploitation. In May 2023 the Grattan Institute, in a document annexed to Mr Thomas’s affidavit in chief, noted that exploitation of foreign workers is widespread in this country: Coates B, Wiltshire T, and Reysenbach T (2023), Short-changed: How to stop the exploitation of migrant workers in Australia, Grattan Institute. The authors reported that between five and 16 percent of employed recently arrived migrants (between 27,000 and 82,000 workers) are paid below the national minimum wage. They observed:

Recent migrants are at higher risk of exploitation because they tend to be younger, have less experience, and work in industries where exploitation is common. And migrants have additional vulnerabilities because of visa rules, their weaker bargaining power, cultural and social norms, and information barriers. Recent migrants are 40 per cent more likely to be underpaid than long-term residents with the same skills and experience and who work in the same job.

222    The authors noted that exploitation of migrant workers typically includes, among other things, underpayment of wages, unpaid superannuation, unpaid penalty rates, unpaid leave, and “cash back arrangements” whereby employers demand payments in cash after they have paid employees — all features of the contravening conduct in the present case. They commented that the exploitation of foreign workers not only hurts them but also weakens the bargaining power of Australian workers, harms businesses which try to do the right thing, undermines confidence in our migration program, and damages our global reputation.

223    In cross-examination during the liability hearing Mr Elvin tried to justify his and the company’s conduct by claiming that the company was never doing well and “things [had] always been tight” (LJ [145]). He referred to earlier times when he employed Thai students who were prepared to work for even less than the Massage Therapists. As I mentioned earlier, he said he made an economic decision not to comply with the Award.

224    The Full Court said in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 at [151] (Jagot, Yates and Bromwich JJ):

If it costs more to obey the law than to breach it, a failure to sanction contraventions adequately de facto punishes all who do the right thing. It is therefore important that those who do comply see that those who do not are dealt with appropriately. This is, in a sense, the other side of deterrence, being a dimension of the general deterrence equation. This is not to give licence to impose a disproportionate or oppressive penalty, which cannot be done, but rather to recognise that proportionality of penalty is measured in the wider context of the demands of effective deterrence and encouraging the corresponding virtue of voluntary compliance.

225    In my opinion there is also a need for specific deterrence in the case of the two accessories, and Mr Elvin in particular, as there is no evidence to indicate that either man has learned anything from the Ombudsman’s investigation or the proceedings. Mr Puerto filed no evidence at all. While Mr Elvin claims to be impecunious, his evidence was silent as to his income and assets and his intentions.

226    ASIC records annexed to FWI Thomas’s affidavit in chief show that Mr Elvin is the sole director and shareholder of a company called Universal Stronghold Pty Ltd, registered on 3 August 2020. It is difficult to know what to make of this in the absence of cross-examination of Mr Elvin or any other evidence. But it does not exclude the possibility that Mr Elvin intends to remain in business with the opportunity to exploit other workers.

227    Land titles searches annexed to FWI Thomas’s affidavit in reply disclose that Mr Elvin sold three properties during the course of the proceedings. The evidence is that Mr Elvin sold one (37 Krichauff Street Page) for $710,000 on 17 March 2020 with settlement taking place on 3 April 2020. Another (44B Edwards Street Higgins, in which the Massage Therapists had formerly been housed) sold for $780,000 on 30 November 2021 with settlement taking place on 18 January 2022. The third (44A Edwards Street Higgins) was sold for $675,000 on 16 July 2021 with settlement on 27 August 2021. In the absence of evidence as to what Mr Elvin did with the proceeds of the sales or full disclosure of his financial position, I cannot conclude that a small penalty would be a sufficient deterrent for him.

228    As to quantum, I have given careful consideration to the submissions and am satisfied that the percentages of the maximum the Ombudsman proposes are appropriate in order to serve the legislative purpose. I bear in mind the remarks of French CJ, Kiefel, Bell, Nettle and Gordon JJ in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [60] that, although the regulator in a civil penalty proceeding is not a disinterested party, “it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance”.

229    For contraventions spanning periods during which the penalty unit increases, the Ombudsman’s figures are calculated as percentages of a maximum derived by multiplying the highest penalty unit value. In the case of the contraventions of s 45 (the breaches of the award), for example, where the figures were based on a penalty unit value of $180, only 15% of the contravening conduct occurred in the period during which the penalty unit had that value. For 85% of the period the value was lower. The same applies to the contraventions of ss 340(1)(b) and 351(1). The lion’s share of the contravening conduct (around 70%) occurred at a time when the penalty unit was valued at $170 and around 14% during the period when the penalty unit was valued at $110. In the case of the contraventions of s 323(1), by way of another example, 57% occurred during the period when the penalty unit was valued at $110, whereas the Ombudsman’s calculations were based on a penalty unit value of $170 for the entire period.

230    I consider that there should be some adjustment to the Ombudsman’s figures to take into account these circumstances and circumstances of this kind which affect other calculations. While the Ombudsman claimed to have done so, with the exception of the amount sought for the contravention of s 536(2), it is not apparent to me that the figures she proposed reflect that.

231    As I mentioned earlier, the Ombudsman did not seek orders for the imposition of penalties for the contraventions of s 343(1)(a) because of the factual overlap with the contraventions of s 340(1)(b) and I have determined that she is not entitled to recover penalties for the contraventions of s 351(1) because imposing penalties for those contraventions would amount to double jeopardy contrary to s 556.

FTM

232    With the exception of the contraventions of s 325(1) of the FW Act, where it is $51,000, ss 535(1) and 536(1), where it is $27,000 and s 546(2), where it is $25,500, the maximum penalty for each of the contraventions of the Act is $54,000 and $18,000 for each of the breaches of the Regulations. The aggregate amount sought is $1,140,450, representing 77% of the maximum.

233    The Ombudsman’s proposed figures are informed by the deterrent purpose of civil penalties and take into account the importance of the particular provisions; the gravity of particular contraventions; the amount of the underpayments; the extent to which the sums have already been reduced as a result of the operation of s 557 and the one transaction principle; and in the case of the contravention relating to the failure to pay public holiday rates, the number of public holidays.

234    For the contraventions of the Health Award, the Ombudsman proposed penalties ranging from 75% of the maximum for the failure to pay public holiday rates to 85% of the maximum for the failure to pay overtime rates. For the contraventions of the NES, she proposed penalties ranging from 50% of the maximum for making unauthorised deductions from wages contrary to s 323(1) to 60% of the maximum for failing to pay accrued untaken annual leave entitlements on termination contrary to s 90(2); and for failing to give the Fair Work Information Statement contrary to s 125(1) to 85% of the maximum for the cashback contraventions contrary to s 325(1). For the contraventions of the general protection provisions (ss 340 and 351), she proposed penalties of 85% of the maximum.

235    Subject to the question of totality, I consider that the following penalties are appropriate:

(1)    with respect to the contraventions of s 45 of the FW Act:

(a)    by failing to pay minimum hourly rates as prescribed by Sch A cl A.2.5 to the Health Award, $40,800;

(b)    by failing to pay public holiday rates as prescribed by Sch A cl A.7.3 to the Health Award, $38,250;

(c)    by failing to pay overtime rates for overtime work performed between Monday and Saturday contrary to cl 28.1(a) of the Health Award, $43,350;

(d)    by failing to pay overtime rates for overtime work performed on a Sunday contrary to cl 28.1(b) of the Health Award, $43,350;

(2)    with respect to the contraventions of s 44 of the FW Act:

(a)    by requiring each of the Massage Therapists to work unreasonable additional hours contrary to s 62(1) of the Act, $43,350;

(b)    by failing to pay accrued untaken annual leave entitlements on termination contrary to s 90(2) of the Act, $32,400;

(c)    by failing to give the Fair Work Information Statement to each of the Massage Therapists contrary to s 125(1) of the Act, $30,600;

(3)    with respect to the contravention of s 323(1) of the FW Act by not paying each of the Massage Therapists in full, $21,000;

(4)    with respect to the contraventions of s 325(1) of the FW Act:

(a)    by unreasonably requiring each of Ms Amacio, Ms Bantilan, and Ms Isugan to repay FTM $800 per fortnight from their wages during the period from 26 August 2012 to 2 June 2013, $40,000; and

(b)    by unreasonably requiring each of Ms Castaneda, Ms Ortega, and Ms Sarto to repay FTM $800 per fortnight from their wages during the period 21 April 2013 to 5 January 2014, $43,350;