WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT

CITATION : 2016 WAIRC 00919

DELIVERED : thursday, 8 December 2016

FILE NO. : M 21 OF 2016

CLAIMANT

AND

TOTAL BUSINESS TECHNOLOGY PTY LTD

FIRST RESPONDENT

LUKE ANDERSON

CatchWords : INDUSTRIAL LAW – Application for imposition of pecuniary penalties – contravention of civil penalty provisions on accrued annual leave and amounts payable in relation to performance of work - accessorial liability of directors – penalties imposed – costs and unreasonable act of unsuccessful respondent.

Legislation : Fair Work Act 2009.

Case(s) referred to
in reasons  : Sponza v Coal Face Resources Pty Ltd [2015] FCCA 1140

Result :  The second respondent pay the claimant, within 28 days of the date of this order, a pecuniary penalty in the amount of $17,280.

The third respondent pay the claimant, within 28 days of the date of this order, a pecuniary penalty in the amount of $12,960.

The second respondent pay the claimant’s costs, fixed in the sum of $3,862.40.

Representation:

Claimant : Mr Graham McCorry (agent) for the claimant

First Respondent : No appearance

Second Respondent : No appearance

Third Respondent : In person

REASONS FOR DECISION

Introduction

1          Mr Daryl Spaull (Mr Spaull) was employed by Total Business Technology Pty Ltd (the Company) from 24 March 2003 until 29 December 2015. He commenced claims against the Company (the Company Claim) and two directors of the Company, Mr Luke Anderson (Mr Anderson) and Mr Alan Green (Mr Green) (the Directors Claim) pursuant to the Fair Work Act 2009 (Cth) (FWA).

2          The Company Claim concerns allegations by Mr Spaull of unpaid:

• accrued annual leave of 313.2601 hours ($14,156.92);
• long service leave of 480 hours ($30,293.04) and
• commission payments of $13,913.

3          As a result of the Company being placed in administration on 28 September 2016, the Company Claim, by order made on 26 October 2016, was stayed until further order of the court.

4          The Directors Claim concerns allegations that the directors were involved in contraventions, by the Company, of civil penalty provisions of the FWA that required the payment of accrued annual leave and the payment of commissions. Mr Spaull seeks orders against the two directors for the payment of pecuniary penalties arising from their accessorial involvement in the Company’s contraventions (see s 550 and s 546 of the FWA). The maximum penalty for each civil penalty provision is $10,800. Two civil penalty provisions are alleged to have been contravened. Mr Spaull submits that each of Mr Anderson and Mr Green should be ordered to pay a pecuniary penalty of 80% of the maximum penalty, that is, that the court should make orders that Mr Anderson pay to Mr Spaull a pecuniary penalty fixed in the sum of $17,280 and that Mr Green pay to Mr Spaull a pecuniary penalty fixed in the sum of $17,280.

5          The Directors Claim proceeded to trial on 27 October 2016. Mr Spaull and Mr Green adduced evidence. Although, Mr Anderson did not attend the trial, it was necessary for Mr Spaull to satisfy me by evidence as to the appropriateness of making a discretionary order in the form of a civil penalty against him: Sponza v Coal Face Resources Pty Ltd [2015] FCCA 1140 at [8]- [9]. I have had regard to the whole of the evidence adduced at the trial in considering the case against each of Mr Anderson and Mr Green. The effect of the FWA is that Mr Spaull will succeed in the Directors Claim if I am satisfied of each of the following:

1. that the Company contravened a civil penalty provision. I must be satisfied that there was a failure by the Company to pay annual leave and this failure was a contravention of a civil penalty provision of the FWA and, further, there was a failure of the Company to make commission payments and this failure was a contravention of a civil penalty provision of the FWA;
2. that Mr Anderson and Mr Green were involved in the Company’s contraventions. I must be satisfied that Mr Anderson and Mr Green were each involved in the Company’s contravention of a civil penalty provision of the FWA such that, as a result of s 550 of the FWA, each ‘is taken to have contravened’ those provisions; and
3. that there should be an order that Mr Anderson and Mr Green pay a pecuniary penalty. The court should exercise the discretion conferred by s 546 of the FWA to order the payment of pecuniary penalties by Mr Anderson and Mr Green.

Jurisdiction, Practice and Procedure

6          In Schedule I of this decision, I have set out the law relevant to the jurisdiction, practice and procedure of this court in determining the Directors Claim. It is not in dispute and I am satisfied that:

• the Company, a corporation to which paragraph 51(xx) of the Constitution applies, is a national system employer; and
• Mr Spaull, an individual who was employed by the Company, is a national system employee.

7          On this application by Mr Spaull under s 539 of the FWA, Mr Anderson and Mr Green are persons amenable to the jurisdiction of the Court to make orders for the payment of a pecuniary penalty if the court is satisfied that there has been a contravention of a civil penalty provision (see s 546 of the FWA).

Did the Company Contravene a Civil Penalty Provision?

Annual leave

8          I am satisfied that:

1. when the employment of Mr Spaull ended on 29 December 2015, as a result of s 90(2) of the FWA, there was a statutory obligation upon the Company to pay him the amount that would have been payable to him had he then taken any annual leave which had accrued to that date (the Accrued Annual Leave obligation).
2. the amount that would have been payable to Mr Spaull had he taken that period of leave is the sum of $14,156.92. This finding is supported by an admission in the response to the claim filed by each director in which the number of annual leave hours claimed by Mr Spaull is conceded to be accurate. It is also supported by the evidence of Mr Green that his own investigations conducted in January 2016 revealed the Company Claim to be indefensible.
3. the Company has failed to discharge the Accrued Annual Leave obligation, that is, Mr Spaull has not been paid the amount of $14,156.92.
4. the failure to discharge the Accrued Annual Leave obligation is a contravention, by the Company, of a civil penalty provision of the FWA. The Accrued Annual Leave obligation is one of the ‘National Employment Standards’ identified in the FWA (see s 61 of the FWA). The National Employment Standards are ‘civil penalty provisions’ of the FWA (see s 44 and s 539 of the FWA).

Commission payments

9          I am satisfied that:

1. as a result of s 323 of the FWA, there was a statutory obligation upon the Company to pay to Mr Spaull, on a monthly basis, any amounts payable to him in relation to the performance of his work. This obligation extended to any incentive based payments payable to Mr Spaull by the Company.
2. as a result of the terms of his contract of employment (evidenced by the terms of a letter from the Company dated 9 September 2015 and admitted into evidence as annexure A2 to exhibit 1), the Company had an obligation to pay to Mr Spaull, on a monthly basis, incentive based payments (called ‘commission payments’ by the parties) calculated in accordance with the terms of his contract of employment (the Incentive Based Payments obligation).
3. The Company failed to discharge the Incentive Based Payments obligation when it failed to make the following payments:
   1. the September commission payment of $8,307, due on Thursday 9 October 2015, was not paid until 8 January 2016;
   2. the October commission payment of $2,718, due on Thursday 13 November 2015, has never been paid.
   3. the November commission payment of $4,729, due on Thursday 11 December 2015, has never been paid.
   4. the December commission payment, due on the second Thursday in January 2016, has never been paid. I infer that the December commission payment was $6,466 being the total claimed with respect to commission ($13,913) for October, November and December 2015 per the statement of claim of 11 March 2016 reduced by the October ($2,718) and November ($4,729) commission claims.

The findings above with respect to the September, October and November commission payments are supported by the terms of a letter from the Company dated 29 December 2015, signed by Mr Anderson and admitted into evidence as annexure E to exhibit 1. The findings with respect to the December commission payment are supported by the evidence of Mr Spaull as well as the evidence of Mr Green noted above regarding the results of his investigation in January 2016.

4. The failure to discharge the Incentive Based Payments obligation is a contravention, by the Company, of a civil penalty provision of the FWA (see s 323 and s 539 of the FWA).

Were Mr Anderson and Mr Green Involved in the Company’s Contraventions?

10       In Schedule II of this decision, I have set out the law relevant to s 550 of the FWA. Section 550 of the FWA provides, in effect, that Mr Anderson and Mr Green will not be liable to a pecuniary penalty unless each was involved in the contravention, by the Company, of the civil penalty provision (identified above) by doing one of the things set out in (a)-(d) of the section. It is necessary to examine the evidence with respect to the state of mind and the conduct of each of Mr Anderson and Mr Green in order to determine whether I am satisfied that, with knowledge of the essential matters which go to make up the contraventions by the Company identified above, each of them intentionally participated in those contraventions.

11       I am satisfied that:

1. Mr Anderson, Mr McKenzie and Mr Green were directors of the Company during 2015 and, except for Mr Green who resigned with effect from 15 February 2016, remained directors of the Company after Mr Spaull ceased his employment on 29 December 2015.
2. in the period June 2015 to December 2015, Mr Anderson, Mr McKenzie and Mr Spaull were working from the Company’s premises in Bunbury. During this period, Mr Anderson and Mr McKenzie were actively involved in the daily management of the business of the Company with Mr Anderson’s role including being the immediate supervisor of Mr Spaull. Commencing in June 2015, Mr Green reduced his involvement in the management of the Company to: one to two days per month spent in the Company’s premises in Bunbury; one day per month spent in Perth attending to a meeting with other directors and a meeting with the Company’s accountants; and responding to ad hoc requests from Company’s employees for advice.

These findings are supported by the evidence of Mr Spaull, particularly annexures B2, C1, C2 and C3 of exhibit 1 and the evidence of Mr Green.

12       I am satisfied that in September 2015, Mr McKenzie and Mr Green conducted negotiations with Mr Spaull which resulted in a change to the terms of his employment by the Company. The resulting terms being those set out in a document admitted into evidence as annexure A2 to exhibit 1 (a letter from the Company dated 9 September 2015 with provision to be signed by Mr McKenzie and Mr Spaull). This finding is supported by the evidence of Mr Spaull, including the email dated 9 September 2015 (of 3:08pm) from Mr McKenzie to Mr Spaull with a copy sent to Mr Anderson and admitted into evidence as annexure A1 to exhibit 1.

13       I am not satisfied that, in September 2015, Mr Green became aware of the terms as set out in the letter which is annexure A2. I accept that Mr Spaull was told by Mr McKenzie that the letter was subject to the approval of all the Directors and that, if correct, this would include Mr Green. However, this conflicts with the direct evidence of Mr Green that he was not aware of the negotiations or the letter and that it was not something brought to his attention at that time. On this issue, I consider the direct evidence of Mr Green to be more reliable than the hearsay evidence of Mr McKenzie.

14       I am satisfied that on 15 December 2015, frustrated with the Company’s failure to make the September, October and November commission payments and the apparent intransigence of his immediate manager, Mr Anderson, to ensure that the Company corrected this failure, Mr Spaull telephoned Mr Green to discuss the issue. Mr Green does not recall the conversation. However, when I contrast the bare denial of Mr Green with the detail of the evidence of Mr Spaull on what was said as well as the consistent conduct of Mr Spaull referring to the conversation in an email to Mr Anderson written on 15 December 2015 at 4:08 pm (annexure D of exhibit 1), I am satisfied that the conversation occurred and that the content was in accord with the evidence of Mr Spaull. The significance of the conversation was that it contained an express acknowledgment by Mr Green that:

• Mr Green knew that the Company had failed to pay commission payments due to Mr Spaull (‘it is just your commissions that have not been paid’); and
• Mr Green had the ability to ensure that the Company’s failure was corrected (‘I will ring you back before 1.00 pm and let you know when the commissions will be paid’).

15       I am satisfied that Mr Green failed to contact Mr Spaull by 1:00 pm on 15 December 2015 as promised and that this failure prompted Mr Spaull to decide to resign with effect from 29 December 2015. The decision was communicated by email from Mr Spaull to Mr Anderson at 4:08 pm on the same day (‘after no progress with my pay not getting paid again (sic) and again Alan telling me that he would ring me by 1:00 today and I received nothing I have no other choice’).

16       I am satisfied that on an unknown date between 15 - 29 December 2015, Mr Green became aware of the fact of the resignation of Mr Spaull on 15 December 2015 and that the reason for his resignation was the non-payment of commissions in October, November and December 2015. I accept Mr Green’s evidence that his involvement with the Company’s affairs during this period did not ordinarily include him being informed of matters affecting individual employees of the Company or being involved in decisions affecting individual employees. However, in cross-examination, Mr Green agreed that shortly after 15 December 2015 he became aware that Mr Spaull had resigned. In light of my findings of the content of the telephone conversation between Mr Spaull and Mr Green on the 15 December 2015, I am satisfied Mr Green also became aware that the reason for Mr Spaull resigning was Mr Green’s failure to resolve Mr Spaull’s complaint of non-payment of commissions.

17       I am satisfied that on an unknown date between 15 - 29 December 2015, Mr Anderson gave an instruction to administrative staff of the Company to the effect that Mr Spaull was not to be paid any amounts in discharge of the Accrued Annual Leave obligation and the Incentive Based Payments obligation. This finding is an inference drawn from me being satisfied of three facts. First, I accept the evidence of Mr Green that the usual practice of the Company was to pay employee entitlements at the end of employment ‘upon a director’s authorisation’ and that Mr Spaull was not paid his entitlements because Mr Anderson or Mr McKenzie (or both) withheld that authorisation. Secondly, Mr Anderson was the immediate supervisor of Mr Spaull during the period June 2015-December 2015. Thirdly, Mr Anderson signed the letter from the Company dated 29 December 2015 (admitted into evidence as annexure E to exhibit 1) in which the non-payment of September, October and November commission payments is explicitly acknowledged.

18       I am satisfied that, as was the evidence of Mr Green:

1. Mr Green became aware in January 2016 of the failure of the Company to make payments to Mr Spaull with respect to his entitlements regarding annual leave and commission payments; and
2. Mr Green did not attempt to persuade Mr Anderson or Mr McKenzie to give the necessary director’s authorisation to make payments to Mr Spaull; and
3. Mr Green did not himself initiate a director’s authorisation for a payment.

19       In light of my findings, I am satisfied that Mr Anderson intentionally participated in each and every instance of the contravention by the Company of the Accrued Annual Leave obligation and each and every instance of the contravention of the Incentive Based Payments obligation. Mr Anderson knew of each obligation. Mr Anderson knew of each contravention. In expressly omitting to give his authorisation for the Company to make the necessary payments. He engaged in conduct that implicated him in each contravention. There was a practical causal connection between him and each contravention.

20       In light of my findings I am satisfied that, as at 15 December 2015, Mr Green intentionally participated in the contravention by the Company of the Incentive Based Payments obligation with respect to the non-payment of the September, October and November commissions. As a result of the telephone conversation on that day with Mr Spaull, Mr Green knew of each obligation and Mr Green knew of the Company’s contravention. Mr Green had the ability to ensure that the Company’s failure was corrected. By his wilful omission to authorise the payments to Mr Spaull, Mr Green was knowingly concerned in the contravention. There was a practical causal connection between him and those contraventions from 15 December 2015. The submission by Mr Green (in closing submissions) that his only role was to recommend to other directors that a payment be made is inconsistent with my findings on what was said by Mr Green to Mr Spaull in their telephone conversation on 15 December 2015.

21       I am also satisfied that, commencing in mid-January 2016, Mr Green intentionally participated in the contravention by the Company of the Incentive Based Payments obligation with respect to the non-payment of the October, November and December commissions and he intentionally participated in the contravention by the Company of the Accrued Annual Leave obligation. Mr Green gave evidence of his knowledge, from his investigations, of each obligation and of the Company’s contravention. I repeat my findings that by his wilful omission to authorise the payments to Mr Spaull, Mr Green was knowingly concerned in those contraventions. There was a practical causal connection between him and those contraventions from the middle of January 2016 which continued until he ceased to be a director in February 2016.

Should There Be an Order That Mr Anderson and Mr Green Pay a Pecuniary Penalty?

22       In Schedule III of this decision I have set out the law relevant to s 546 of the FWA. Mr Spaull submits that each of Mr Anderson and Mr Green should be ordered to pay a pecuniary penalty of 80% of the maximum penalty of $10,800 for each contravention of two civil remedy provisions, s 44 (annual leave) and s 323 (commission payments) of the FWA, that is, that the court should order that each of Mr Anderson and Mr Green pay to Mr Spaull a pecuniary penalty fixed in the sum of $17,280.

23       I now consider the ‘(non-exhaustive) range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does, the amount of the penalty’.

The Nature and Extent of the Conduct Which Led to the Breaches

24       Mr Spaull had been an employee of the Company for over 12 years. Annual leave is a fundamental employment obligation. Mr Anderson’s relevant conduct commenced with his involvement in the non-payment of the September commission (in October 2015) by the Company and continued with his involvement in the non-payment of the annual leave (in December 2015) by the Company until the Company went into liquidation on 28 September 2016. Given his role as the manager of Mr Spaull and one of the two directors with day to day involvement in decisions concerning the Company’s operations and a role in authorising payments to employees, the role of Mr Anderson in each contravention could be characterised as ‘instrumental’.

25       Mr Green’s relevant conduct commenced with his involvement in the non-payment of the September, October and November commissions (on 15 December 2015) by the Company and continued with his involvement in the non-payment of the annual leave (in mid-January 2016) by the Company until he ceased as a director in February 2016. Given his role as one of three directors, albeit less active than the other two, and his authority regarding payments to employees, I would characterise his role in each contravention as ‘significant’.

The Circumstances in Which That Conduct Took Place

26       It is an aggravating feature of the contraventions and of the involvement of each of Mr Anderson and Mr Green that no satisfactory explanation was ever proffered to Mr Spaull for the non-payment of commissions. Mr Anderson had that opportunity as each became due and Mr Green had that opportunity commencing on 15 December 2015. It is an aggravating feature of the contraventions and of the involvement of each of Mr Anderson and Mr Green that neither ever informed Mr Spaull of a risk of non-payment of his accrued annual leave. Mr Anderson had the opportunity to inform Mr Spaull of that risk after 15 December 2015 and Mr Green had that opportunity from mid-January 2016. Mr Green suggested that the Company was in a precarious financial position as a consequence of a relocation of premises in 2013. The financial position of the Company may have diverted the attention of Mr Anderson and Mr Green. However, the situation of Mr Spaull must have been equally diverting to each of them when faced with his personal plea as to his situation. Those pleas were ignored.

The Nature and Extent of Any Loss or Damage Sustained as a Result of the Breaches

27       In the context of his remuneration (base wage of $80,000 per annum) the contraventions concerned not insignificant amounts with respect to annual leave ($14,156.92) and commission payments (non-payment of $13,913 and the late September payment of $8,307). A letter from the Company’s liquidators dated 6 October 2016 introduced into evidence reveals a significant deficiency in the assets available to satisfy the creditors of the Company including employees in the position of Mr Spaull. It would be wrong to fix a penalty for the purpose of compensating Mr Spaull for the loss of his entitlements. However, the extent of the loss by Mr Spaull is relevant in setting a penalty for the purpose of punishment and deterrence.

Whether There Had Been Similar Previous Conduct by the Respondent

28       There is no evidence of similar previous conduct of Mr Anderson or Mr Green.

Whether the Breaches Were Properly Distinct or Arose Out of the One Course of Conduct

29       The effect of s 557 of the FWA is that the Mr Anderson’s conduct concerning the contraventions of the Annual Leave obligation constitutes a single contravention of that obligation and his course of conduct with respect to the contraventions of the Incentive Based Payment obligation constitute a second (single) contravention of that obligation. Similarly, Mr Green’s conduct concerning the contraventions of the Annual Leave obligation constitutes a single contravention of that obligation and his course of conduct with respect to the contraventions of the Incentive Based Payment obligation constitute a second (single) contravention of that obligation.

The Size of the Business Enterprise Involved

30       There was evidence that the Company had operated for a number of years and, at least during 2015, employed 15-16 persons. There was evidence by Mr Green of a loss of $200,000 in the year ended June 2015. However, Mr Green also gave evidence of monthly meetings between all three directors and the accountants of the Company and there was no suggestion that the capacity of the Company to pay its debts as they fell due was ever raised as an issue for discussion. In short, I am satisfied that at all relevant times, to the knowledge of Mr Anderson and Mr Green, the Company had the financial capacity to meet its obligations to Mr Spaull.

Whether or Not the Breaches Were Deliberate

31       Given my findings on the state of mind of each director, it is apparent that each breach done by Mr Anderson and Mr Green was deliberate.

Whether Senior Management Was Involved in the Breaches

32       Mr Anderson was, in effect, an active and very senior manager of the Company. Mr Green was less active than Mr Anderson. However, he was equally senior in the administration of the Company until he resigned as director in February 2016.

Whether the Party Committing the Breach Had Exhibited Contrition

33       Neither Mr Anderson nor Mr Green has exhibited contrition.

Whether the Party Committing the Breach Had Taken Corrective Action

34       Neither Mr Anderson nor Mr Green has taken corrective action.

Whether the Party Committing the Breach Had Cooperated with the Enforcement Authorities

35       The occasion for co-operation does not appear to have arisen in this case.

The Need to Ensure Compliance with Minimum Standards by Provision of an Effective Means Enforcement of Employee Entitlements

36       This case illustrates the difficulties faced by an employee of a corporate entity seeking to enforce minimum standards with respect to entitlements. It is over one year since non-payment of the October 2015 commission payment and approaching one year since non-payment of the accrued annual leave. The Company went into liquidation on the eve of a hearing date. Mr Spaull has assumed the burden of proving accessorial liability of Mr Anderson and Mr Green. He has discharged that burden.

The Need for Specific and General Deterrence

37       Specific deterrence looms large as a relevant factor with respect to Mr Anderson. The liquidator refers to assets of the Company being transferred via a business sale agreement in September 2016 to a company operating in the same industry. Mr Spaull adduced evidence that satisfies me that:

1. Mr Anderson is intimately involved in the operation of that new business which is trading under the name ‘Totality Business Solutions’ which is deceptively similar to the Company’s trading name of ‘Total Business Technology’.
2. the ‘new’ business is attempting to leverage off the goodwill of the business formerly operated by the Company;
3. some of the promotional material of the ‘new’ business is misleading insofar as it suggests no connection with the failed business of the Company.

38       Specific deterrence does not loom as a relevant factor with respect to Mr Green; there is no evidence of any relevant ongoing activities as an employer or a director of the Company.

39       General deterrence is relevant in this case insofar as directors in a similar position of Mr Anderson and Mr Green must appreciate their obligations (and the consequences of a failure) with respect to matters within their authority.

40       Weighing the above factors and the submissions of the parties, I consider:

1. there should be an order that Mr Anderson pay a penalty of $8,640 with respect to the contravention of the Accrued Annual Leave obligation (that is, 80% of the maximum) and a penalty of $8,640 with respect to the contravention of the Incentive Based Payment obligation (that is, 80% of the maximum). The total penalty is $17,280. The penalty reflects my view of the aggravating features of the contravention identified above as well as the need to emphasise specific deterrence in the circumstances of this case.
2. there should be an order that Mr Green pay a penalty of $6,480 with respect to the contravention of the Accrued Annual Leave obligation (that is, 60% of the maximum) and a penalty of $6,480 with respect to the contravention of the Incentive Based Payment obligation (that is, 60% of the maximum). The total penalty is $12,960. The penalty reflects my view of the aggravating features of the contravention identified above as well as the disparate levels of involvement of Mr Anderson and Mr Green in each contravention.

Costs

41       In Schedule IV I have set out the law relevant to s 570 of the FWA. Unless I am satisfied, in accordance with s 570(2)(b) of the FWA, that the unreasonable act or omission of Mr Anderson or Mr Green caused Mr Spaull to incur costs, there will be no order as to costs.

42       The response filed by Mr Anderson and Mr Green on 8 April 2016:

1. admitted that the number of hours of accrued annual leave of Mr Spaull at the end of his employment was as alleged by him (that is, 315 hours). The only issues to be resolved in the Directors Claim with respect to annual leave was whether or not Mr Anderson and Mr Green were involved in a civil penalty contravention and, if so, the quantum, if any, of any penalty. Mr Anderson and Mr Green failed on each issue. I am satisfied that Mr Anderson did not have an arguable factual case with respect to each of these issues and nor did he have an arguable legal case with respect the issues. The evidence of his deep involvement in the management of the Company was overwhelming. He did not attend and participate in the hearing. Mr Anderson should pay Mr Spaull’s costs of this aspect of the claim. The position is different in relation to Mr Green. The evidence of his factual involvement in the management of the Company was not overwhelming and there was scope for legal argument about whether that level of involvement resulted in accessorial liability under s 550 of the FWA. It was not unreasonable for Mr Green to put the arguments that he put on this issue; and
2. did not admit the quantum of the commission payments claimed by Mr Spaull and raised a jurisdictional issue that was incomprehensible. The issue to be resolved in the Directors Claim was: whether the Company had an obligation to make commission payments; the quantum of the obligation; whether or not Mr Anderson and Mr Green were involved in a civil penalty contravention and, if so, the quantum, if any, of any penalty. Mr Anderson and Mr Green failed on each issue. I am satisfied that there was no arguable basis available to Mr Anderson or Mr Green for a factual response to the issues of whether the Company had an obligation to make commission payments and the quantum of the obligation. It is significant that, on 15 December 2015, Mr Spaull telephoned Mr Green to complain about the failure to pay commission payments. It is also significant that, on 29 December 2015, Mr Anderson signed a letter acknowledging that the Company owed commission payments for September, October and November 2015. Again, I am satisfied that Mr Anderson did not have an arguable legal case with respect his involvement in this contravention. Mr Anderson should pay Mr Spaull’s costs of this aspect of the claim. Again, I am satisfied that the position is different in relation to Mr Green. There was scope for legal argument about whether his level of involvement resulted in accessorial liability under s 550 of the FWA. It was not unreasonable for Mr Green to put the arguments that he put on this issue.

43       It follows that there should be an order that Mr Anderson pay the costs of Mr Spaull with respect to the whole claim. His agent calculates those costs to be $4,537.50 based on 25 hours at an hourly rate of $181.50 (including GST) plus disbursements of $232.40. The hourly rate is reasonable. The schedule of hours reveals that some of the time claimed is referable only to the Company Claim (for example, discussion with liquidator) and some of the time falls in the category of ‘indemnity’ costs (for example, discuss claim with client). I am satisfied as to 20 hours ($3,630) and the disbursements. The result will be an order that Mr Anderson pay the costs of Mr Spaull fixed in the sum of $3,862.40.

M. FLYNN

INDUSTRIAL MAGISTRATE

Schedule I: Jurisdiction, Practice and Procedure of the Industrial Magistrates Court (WA) under the Fair Work Act 2009 (Cth)

Jurisdiction

[1]   An employee, an employee organization or an inspector may apply to an eligible state or territory court for orders regarding a contravention of the civil penalty provisions identified in s 539(2) of the FWA. The Industrial Magistrates Court (WA) (IMC), being a court constituted by an industrial magistrate, is ‘an eligible State or Territory court’: FWA, s 12 (see definitions of ‘eligible State or Territory court’ and ‘Magistrates Court’); Industrial Relations Act 1979 (WA), ss 81, 81B.

[2]   The application to the IMC must be made within six years after the day on which the contravention of the civil penalty provision occurred: FWA, s 544.

[3]   The civil penalty provisions identified in s 539 of the FWA include:

• The National Employment Standards set out in Part 2-2 of the FWA: FWA, s 539; s 44(1).  Those standards include obligations of employers to employees with respect to annual leave as set out ss 86 - 94 of the FWA.
• Other terms and conditions of employment as set out in Part 2 - 9 of the FWA, s 539; s 323, s 325, s 328. Those terms and conditions include obligations of employers to employees with respect to the method and frequency of amounts payable in relation to the performance of work including payments of incentive based payments and bonuses: FWA, s 323(1).
• An ‘employer’ has the statutory obligations noted above if the employer is a ‘national system employer’ and that term, relevantly, is defined to include ‘a corporation to which paragraph 51(xx) of the Constitution applies’: FWA, s 14, s 12. The obligation is to an ‘employee’ who is a ‘national system employee’ and that term, relevantly, is defined to include ‘an individual so far as he or she is employed by a national system employer’: FWA, s 13.

[4]   Where the IMC is satisfied that there has been a contravention of a civil penalty provision, the court may make orders for:

• An employer to pay to an employee an amount that the employer was required to pay under the FWA: FWA, s 545(3). 
• A person to pay a pecuniary penalty: FWA, s 546.

In contrast to the powers of the Federal Court and the Federal Circuit Court, an eligible state or territory court has no power to order payment by an entity other than the employer of amounts that the employer was required to pay under the FWA. For example, the IMC has no power to order that the director of an employer company make payments of amounts payable under the FWA: Mildren and Anor v Gabbusch [2014] SAIRC 15.

Burden and standard of proof

[5]   In an application under the FWA, the claimant carries the burden of proving the claim. The standard of proof required to discharge the burden is proof ‘on the balance of probabilities’. In Miller v Minister of Pensions [1947] 2 All ER 372, 374, Lord Denning explained the standard in the following terms:

It must carry a reasonable degree of probability but not so high as is required in a criminal case. If the evidence is such that the tribunal can say 'we think it more probable than not' the burden is discharged, but if the probabilities are equal it is not.

[6]   In the context of an allegation of the breach of a civil penalty provision of the FWA it is also relevant to recall the observation of Dixon J said in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336:

 The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences [362].

[7]   Where in this decision I state that 'I am satisfied' of a fact or matter I am saying that 'I am satisfied on the balance of probabilities' of that fact or matter. Where I state that 'I am not satisfied' of a fact or matter I am saying that 'I am not satisfied on the balance of probabilities' of that fact or matter.

Practice and Procedure of the Industrial Magistrates Court

[8]   The Industrial Relations Act 1979 (WA) (IRA) provides that, except as prescribed by or under the Act, the powers, practice and procedure of the IMC is to be the same as if the proceedings were a case under the Magistrates Court (Civil Proceedings) Act 2004 (WA): IRA, s 81CA Relevantly, regulations prescribed under the IRA provide for an exception: a court hearing a trial is not bound by the rules of evidence and may inform itself on any matter and in any manner as it thinks fit: Regulation 35(4).

[9]   In Sammut v AVM Holdings Pty Ltd [No2] [2012] WASC 27, Commissioner Sleight examined a similarly worded provision regulating the conduct of proceedings in the State Administrative Tribunal and made the following observations (omitting citations):

40 … The tribunal is not bound by the rules of evidence and may inform itself in such a manner as it thinks appropriate. This does not mean that the rules of evidence are to be ignored. The more flexible procedure provided for does not justify decisions made without a basis in evidence having probative force. The drawing of an inference without evidence is an error of law. Similarly, such error is shown when the tribunal bases its conclusion on its own view of a matter which requires evidence.

42 … After all, they represent the attempt made, through many generations, to evolve a method of enquiry best calculated to prevent error and elicit truth. No tribunal can, without grave danger of injustice, set them on one side and resort to methods of enquiry which necessarily advantage one party and necessarily disadvantage the opposing party. In other words, although rules of evidence, as such, do not bind, every attempt must be made to administer 'substantial justice'.

43 … The tribunal can obtain information in any way it thinks best, always giving a fair opportunity to any party interested to meet that information; it is not obliged to obtain such independent opinion, for instance, upon oath, and whether the cross-examination shall take place upon that opinion is entirely a question for the discretion of the Tribunal; it is not bound by any rules of evidence and is authorised to act according to substantial justice and the merits of the case.

44 … An essential ingredient of procedural fairness is the opportunity of presenting one's case.

45 … the right to cross-examination is viewed as an important feature of procedural fairness.

47 … Procedural fairness requires fairness in the particular circumstances of the case. While a right to cross-examination is not necessarily to be recognised in every case as an incident of the obligation to accord procedural fairness, the right to challenge by cross-examination a deponent whose evidence is adverse, in important respects, to the case a party wishes to present, is.

Schedule II Accessorial liability under the Fair Work Act 2009 (Cth)

[1]      Section 550 of the FWA provides:

Involvement in contravention treated in same way as actual contravention

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

(2)     A person is involved in a contravention of a civil remedy provision if, and only if, the person:

(a)     has aided, abetted, counselled or procured the contravention; or

(b)     has induced the contravention, whether by threats or promises or otherwise; or

(c)     has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

(d)     has conspired with others to effect the contravention.

[2]      Decisions on this (or a comparable) provision have established the following principles:

1. Section 550 is in the same or similar form as the accessorial provision of other legislation, including s 75B of the Trade Practices Act 1974 (Cth) (now see the definition of ‘involved’ in the Australian Consumer Law Decisions on those provisions provide guidance to interpreting s 550 of the FWA not least because Parliament is assumed to have appreciated the effect those decisions when enacting s550 of the FWA.
   See Australian Building & Construction Commissioner v Abbott (No 4) [2011] FCA 950 at [188] (Gilmour J); Devonshire v Magellan Powertronics Pty Ltd (2013) 275 FLR 273; 231 IR 198; [2013] FMCA 207.
2. In order to establish whether any individual respondent was involved in a contravention, it is necessary to examine the state of mind of each respondent separately in relation to each alleged contravention.
   See Construction, Forestry, Mining and Energy Union v Director of the Fair Work Building Industry Inspectorate (as successor to the Australian Building and Construction Commissioner) [2012] FCAFC 178 at [38].
3. The respondent must intentionally participate in the contravention and to form the requisite intent the respondent must have knowledge of the essential matters which go to make up the contravention, whether or not the respondent knows that those matters amount to a contravention.
   See Construction, Forestry, Mining and Energy Union v Director of the Fair Work Building Industry Inspectorate (as successor to the Australian Building and Construction Commissioner) [2012] FCAFC 178 at [38].
4. What constitutes ‘the essential matters of the contravention’ will depend upon the facts and circumstances of each case.
   See the cases reviewed by White J in Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [182] ff including Potter v Fair Work Ombudsman [2014] FCA 187 and Fair Work Ombudsman v Al Hilfi [2012] FCA 1166.
5. Cameron FM in Guirguis v Ten Twelve Pty Ltd & Anor [2012] FMCA 307 at [150] - [151] (omitting citations):

Section 550(2)(a) of the FWA provides for accessorial liability on the basis that a person has “aided, abetted, counselled or procured” a contravention. That paragraph is identical to s.75B(1)(a) of the Competition and Consumer Act and it can be inferred that they have the same meaning… it was said that “aided, abetted, counselled or procured” … have the same meaning as in the common law where they designate participation in a crime as a principal in the second degree or as an accessory before the fact. “Aiding” and “abetting” refer to a person who is present at the time of the commission of an offence and “counselling” and “procuring” refer to a person who, although not present at the commission of the offence, is an accessory before the fact.

A person counsels a contravention by another if he or she urges its commission, advises its commission or asks that it be committed and procures a contravention if he or she causes it to be committed, persuades the principal to commit it or brings about its commission; there must also be a causal connection between that action and the conduct impugned:’

6. ‘To be knowingly concerned in a contravention, the respondent must have engaged in some act or conduct which “implicates or involves him or her” in the contravention so that there be a “practical connection between” the person and the contravention’: White J in Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [178].
7. ‘For a person to be liable as an accessory to a contravention on the basis that they are wilfully blind to a certain fact, it still must be shown, albeit by inference, that the person had actual knowledge of such fact. If the term “wilful blindness” is used merely as a shorthand expression to indicate circumstances which warrant the drawing of the necessary inference, then it is acceptable. But it is unacceptable if it is used as a basis for imputing knowledge where actual knowledge is not proved.’
   Cowdroy J in Potter v Fair Work Ombudsman [2014] FCA 187 at [82].

Schedule III Pecuniary Penalty Orders under the Fair Work Act 2009 (Cth)

[1] Section 546(1), (2) of the FWA relevantly provides:

2. The pecuniary penalty must not be more than:
   1. 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
   2. 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).

[2] The rate of a penalty unit is set by s 4AA of the Crimes Act 1914 (Cth): FWA, s 12. The relevant rate is that applicable at the date of the contravening conduct:

[3] The purpose served by penalties was examined by Barker J in Australian Building and Construction Commissioner v Construction, Forestry, Mining & Energy Union (No 2) (2010) 199 IR 373 at [6] (approved by the Full Court in McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29):

The purpose to be served by the imposition of penalties is at least threefold: (1) punishment, which must be proportionate to the offence and in accordance with prevailing standards; (2) deterrence, both personal (assessing the risk of re-offending) and general (a deterrent to others who might be likely to offend); and (3) rehabilitation.

[4] In Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [14], Tracey J adopted the following ‘non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty’ which had been set out by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7:

• The nature and extent of the conduct which led to the breaches.
• The circumstances in which that conduct took place.
• The nature and extent of any loss or damage sustained as a result of the breaches.
• Whether there had been similar previous conduct by the respondent.
• Whether the breaches were properly distinct or arose out of the one course of conduct.
• The size of the business enterprise involved.
• Whether or not the breaches were deliberate.
• Whether senior management was involved in the breaches.
• Whether the party committing the breach had exhibited contrition.
• Whether the party committing the breach had taken corrective action.
• Whether the party committing the breach had cooperated with the enforcement authorities.
• The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and
• The need for specific and general deterrence.

[5] The list is not ‘a rigid catalogue of matters for attention. At the end of the day the task of the court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations.’ (Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [91]).

[6] The fixing of a pecuniary penalty for multiple contraventions done by one person is subject to:

• Section 557 of the FWA which provides, in effect, that two or more contraventions of the same civil remedy provision by the same person are taken to constitute a single contravention if the contraventions arose out of a course of conduct by the person.
• The application of the totality principle. The totality of the penalty must be re-assessed in light of the totality of the offending behaviour. If the resulting penalty is disproportionately harsh, it may be necessary to reduce the penalty for individual contraventions. Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; 246 ALR 35; [2008] FCAFC 8; [47] – [52].

[7] Section 546(3) of the FWA also provides:

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.

[8]  In Milardovic v Vemco Services Pty Ltd (Administrators Appointed) (No 2) [2016] FCA 244 at [40] - [44], Mortimer J summarised the law (omitting citations and quotations) on this provision in light of Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4:

The power conveyed by s 546(3) is ordinarily to be exercised by awarding any penalty to the successful applicant. The initiating party is normally the proper recipient of the penalty as part of a system of recognising particular interests in certain classes of persons in upholding the integrity of awards and agreements the subject of penal proceedings. Where a public official vindicates the law by suing for and obtaining a penalty, it is appropriate that the penalty be paid to the Consolidated Revenue Fund. Otherwise, the general rule remains appropriate, that the penalty is to be paid to the party initiating the proceeding, with the “Gibbs exception” (Gibbs v The Mayor, Councillors and Citizens of City of Altona [1992] FCA 553) that the penalty may be ordered to be paid to the organisation on whose behalf the initiating party has acted.”

Schedule IV: Costs (of successful Claimant) under the Fair Work Act 2009 (Cth)

[1] Section 570 of the FWA relevantly provides:

Costs only if proceedings instituted vexatiously etc.

(1)     A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.

Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.

(2)     The party may be ordered to pay the costs only if:

(a)     the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or

(b)     the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs; or

(c)     the court is satisfied of both of the following:

1. the party unreasonably refused to participate in a matter before the FWC;
2. the matter arose from the same facts as the proceedings.

[2]   In Ryan v Primesafe [2015] FCA 8, Mortimer J states (omitting citations) at [64] - [65]:

“The discretion conferred by the confined terms of s 570(2) should be exercised cautiously, and the case for its exercise should be clear. The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them.”

(My emphasis)

[3]   In Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd (No 2) [2015] FCA 1509, Gilmour J states (omitting citations):

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

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

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

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

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

[13]   Even if the Court is satisfied of a s 570(2) precondition, it retains a discretion not to order costs.

[4]   In Rentuza v Westside Auto Wholesale [2009] FMCA 1022, Lucev FM states (omitting citations):

[27]     Whether a party has engaged in an unreasonable act or omission depends upon an objective analysis of the particular circumstances of the case.

[28]     The exercise of the discretion in s.570(2)(b) is not necessarily engaged because:

(a)      a party does not conduct litigation efficiently;

(b)      a concession is made late;

(c)      a party may have acted in a different or timelier fashion;

(d)     a party has adopted a genuine but misguided approach.