Ahmed v Al-Hussain Pty Ltd t/as The Cheesecake Shop

RARES J: 1 On 18 April 2019, I found that the applicant, being Jameel Ahmed, succeeded in establishing that his employer, Al-Hussain Pty Ltd t/as The Cheesecake Shop at Tuggerah (the first respondent), contravened on multiple occasions, first, s 323(1) of the Fair Work Act 2009 (Cth) by failing to pay Mr Ahmed, in full, his wages and superannuation (the underpayment contravention) and, secondly, s 325(1) of the Act in unreasonably requiring Mr Ahmed to make cashback payments to the employer or another person related to it, being Zahid Hussain (the second respondent) and or Saqib Khayyam Azam Bhatti (the third respondent) (the cashback contravention): Ahmed v Al-Hussain Pty Ltd t/as The Cheesecake Shop (No 2) [2019] FCA 670 (the principal reasons). I have used the same defined expressions in these reasons as I did in the principal reasons. I also found that each of Mr Zahid and, after 8 June 2017, Mr Bhatti were involved, within the meaning of s 550(1) and (2) of the Act, in the employer's contraventions of ss 323(1) and 325(1). 2 Consequently, I found that I would give judgment for Mr Ahmed against: the employer and Mr Zahid jointly and severally for the full amounts of the underpaid wages of $15,909 for the period 20 December 2014 to 15 September 2015 (the first period), $9,512.92 for the period 16 September 2015 to 7 June 2017 (the second period), and $1,685 for the period 8 June 2017 to 26 November 2017 (the third period), together with the tax payable on the respective underpaid wage amounts, cashback payments that I fixed at $45,000 for the second period and $5,000 for the third period, and the total amount of his unpaid superannuation of $12,991.98; and the employer and Mr Bhatti jointly and severally for the underpaid wages of $1,685 plus tax, cashback payments of $5,000, and unpaid superannuation instalments for the quarters ended 30 June 2017 of $1,278.99, 30 September 2017 of $2,075.96, and 31 December 2017 of $722.07, that all occurred in the third period. 3 I ordered the parties on 18 April 2019 to provide agreed orders to give effect to the principal reasons that I delivered orally and, in default of agreement, each party file and serve draft orders on or before 17 May 2019. Mr Ahmed provided his proposed draft orders on 16 May 2019 and the employer and Mr Bhatti provided their proposed draft orders the next day. I also ordered the parties to file submissions as to penalty, which Mr Ahmed did on 9 May 2019 and the employer and Mr Bhatti did on 17 May 2019. Mr Ahmed also filed reply submissions on 21 May 2019.

Pre-judgment interest on the underpaid wages (including tax), the cashback payments and unpaid superannuation 4 The parties agreed on the amounts below as Mr Ahmed's underpaid wages that now include what he will have to pay in tax. In most instances, I calculated pre-judgment interest, based on the pre-judgment interest rate, to today's date from a day approximately in the middle of the relevant period or the time within it when the last underpayment or cashback payment occurred (the mid-point day). For example, in relation to the first period, I calculated pre-judgment interest from 4 May 2015, as the mid-point day. However, it is not practical to arrive at a mathematically precise sum because the underpayments (like the cashback payments) occurred over a substantial period of time on an irregular basis both as to dates and amounts. In those circumstances, I have approximated the interest calculations, added those to the underpaid wages (including tax) and cashback amounts but rounded the result down to produce what I consider to be appropriate judgment amounts, inclusive of pre-judgment interest, as set out in the tables below. 5 As I found in the principal reasons, the employer owed Mr Ahmed $12,991.98 for unpaid superannuation, together with pre-judgment interest calculated to today. The latest day on which the employer could pay Mr Ahmed's superannuation under the 2014 and 2017 contracts was the last day of the quarter in which the liability to pay the relevant superannuation arose, if the employer were to avoid liability to a charge for a superannuation guarantee shortfall under s 5 of the Superannuation Guarantee Charge Act 1992 (Cth), as calculated under Pt 3 of the Superannuation Guarantee (Administration) Act 1992 (Cth). The charge is imposed as an incentive to employers to pay promptly and in full their employees' superannuation entitlements under industry awards or contracts of employment. The payment of superannuation must be made within the quarter in which the liability arises in order to avoid the amount being considered as forming part of a superannuation guarantee shortfall under s 19(1) of the Superannuation Guarantee (Administration) Act (see Roy Morgan Research Pty Ltd v Commissioner of Taxation (2011) 244 CLR 97 at 101 [3] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ, 114 [53]-[54] and 115 [57] per Heydon J). In the table below, I have calculated the pre-judgment interest on the unpaid superannuation of $12,991.98 from the last day of the quarter which together totals $14,830.29. First period Unpaid wages including tax $19,591.33 Interest (from 4 May 2015) $4,523.18 Cashback payments - Unpaid superannuation (to quarter ended 30 September 2015) $2,035.50 Interest (from end of each quarter) $442.10 Total for the first period $26,477.60

Second period Unpaid wages including tax $11,714.80 Interest (from 27 July 2016) $1,830.88 Cashback payments $45,000 Interest (from 27 July 2016) $7,040.03 Unpaid superannuation (to quarter ended 31 March 2017) $6,879.46 Interest (from end of each quarter) $1,039.88 Total for the second period $73,419.34

Third period Unpaid wages including tax $2,071.01 Interest (from 24 November 2017) $170.08 Cashback payments $5,000 Interest (from 29 July 2017) $499.52 Unpaid superannuation (to quarter ended 31 December 2017) $4,077.02 Interest (from end of each quarter) $376.33 Total for the third period $12,103.35

The parties' submissions on pecuniary penalties 6 Mr Ahmed submits that, under s 546(1) of the Act, the employer, Mr Zahid and Mr Bhatti are each liable to pecuniary penalties totalling $740,000, $99,600 and $72,500 respectively. Mr Ahmed claimed that such "significant penalties" were justified on the basis of, first, the respondents' lack of contrition, secondly, the effect of the wilful exploitation of a vulnerable employee over an extended period of time, thirdly, the strong need for general and specific deterrence, fourthly, the deliberateness of the contraventions in that the employer, Mr Zahid and Mr Bhatti gave no explanation for the contraventions and, fifthly, the nature and extent of the loss or damage that Mr Ahmed sustained. 7 Mr Ahmed also claimed damages for what he had spent on pursing his and his family's visa application and, for the first time, damages for the loss of his visa in April 2018. He claimed these as damages because he had stopped making cashback payments, his stress caused by the respondents' continuous threats to cancel the employer's sponsorship of his visa, and the suffering and disturbance to him and his family (see also the principal reasons at [9]-[10]). 8 Mr Ahmed also sought, among other unpleaded claims, to hold the franchisor (which is not a party to the proceeding) responsible for the conduct of its franchisee, namely the employer, including, somehow, for the contraventions and orders that it pay the judgment sums. As the employer and Mr Bhatti submitted, the franchisor is not a party to the proceeding and those orders cannot be made in this proceeding. 9 The employer and Mr Bhatti argued that the majority of the contraventions occurred while Mr Zahid was the owner and operator of the employer and, thus, he, as opposed to the employer, ought to be penalised more significantly than the employer whose liability should be reduced or eliminated. They argued that Mr Zahid controlled the employer and that it had no independent decision-making power. 10 Mr Bhatti contended that his liability for pecuniary penalties should be similarly reduced because he was a recent migrant and had taken over the employer's business with little or no knowledge of Australian workplace laws. He claimed that he had relied on Mr Zahid to continue managing the business whilst he "learned the ropes". 11 Further, the employer and Mr Bhatti submitted that they had limited financial capacity. Today, Mr Bhatti tendered a statutory declaration outlining what he said was his financial circumstances. Mr Ahmed noted that he was not in a position to cross-examine on this new evidence. However, I admitted into evidence the statutory declaration, together with a document headed "TCS Tuggerah Resale Analysis" (I infer that "TCS" is an abbreviation of the Cheesecake Shop). That analysis appeared to reveal that the employer owed the franchisor $34,180.89 as a result of the termination, in July 2018, of the employer's holding of the franchise. Mr Bhatti confirmed, in his statutory declaration, as he had in his evidence at the trial, that he works as an Uber driver. He set out his financial circumstances which were precarious. He appeared to earn less from his driving than his ordinary living expenses. He also noted that he is the only person in his family working, and has to support his wife and son, and that they also care for his wife's daughter, who is Mr Bhatti's stepdaughter, for 12 nights per month. 12 The employer and Mr Bhatti argued that the contraventions fell within the low range of seriousness and, because the employer no longer had any employees, there was no need for specific deterrence. They contended that Mr Bhatti had lost the franchise business of the employer, and that Mr Bhatti had not made the cashback payment arrangement with Mr Ahmed. 13 As the employer and Mr Bhatti argued, for the purposes of determining the appropriate pecuniary penalty, the multiple contraventions of each of ss 323(1) and 325(1) must be taken to constitute a single contravention of each provision by force of s 557 of the Act. They submitted that, taking into account the above factors, the appropriate range of penalties that should be imposed on them is the "lower end of the range at 15% to 20% of the maximum".

Consideration - new claims 14 Mr Ahmed's evidence about the arrangements in which he made the visa payments was vague. I am not satisfied that the further amended statement of claim pleaded sufficiently any contract or other basis that would have been sufficient for me to find that Mr Ahmed could recover, in this proceeding, anything more than the amount he advanced to Mr Zahid and the employer to enable them to pay, or to reimburse them temporarily for the payment of, his visa. According to an invoice of Auswide Visas dated 11 May 2015, the sponsorship fee payable to the Department (see Migration Regulations 1994 (Cth) reg 5.38) was $420. Mr Ahmed said that he repaid Mr Zahid or the employer $5,000 as the sum that the employer had paid previously for a "business sponsorship approval for foreign staff hire". But, there was no evidence of any invoice or other document as to that "approval" having a value or of how, or when, Mr Ahmed paid the $5,000. 15 While I accept that Mr Ahmed incurred expenses in pursuing his visa applications, the evidence before me is insufficient to enable me to make any findings on any of this unarticulated cause of action. I think the proper course is to not decide anything about it, especially since Mr Ahmed has not pleaded any loss from, or caused by, the withdrawal of the employer's sponsorship. He may be able to bring any such claims in other proceedings if he so wishes.

Consideration - pecuniary penalties 16 Each of ss 323(1) and 325(1) is a civil remedy provision that attracts a maximum penalty of 60 penalty units for Mr Zahid and Mr Bhatti and 300 penalty units for the employer, where the contravention is not a serious contravention (ss 539(2) and 546(2)). Mr Ahmed did not make a claim that the contraventions were serious contraventions in the pleadings prepared by his lawyers and he did not submit that the contraventions were serious contraventions within the meaning of s 557A of the Act. That provision only commenced operation on 15 September 2017 and would have applied pecuniary penalties of up to 600 penalty units for Mr Zahid and Mr Bhatti, and up to 3,000 penalty units for the employer. 17 Under s 4AA(1) of the Crimes Act 1914 (Cth), the amount of a penalty unit was $170 for the period between 28 December 2012 and 30 June 2015, $180 for the period between 1 July 2015 and 30 June 2017, and $210 from 1 July 2017. 18 Section 557(1) of the Fair Work Act provides: 557 Course of conduct (1) For the purposes of this Part, 2 or more contraventions of a 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. 19 In Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 249 FCR 458 at 479 [90], Dowsett and Rares JJ said that: The primary purpose of imposing a civil penalty is to deter the contravener and others from repeating conduct of the kind complained of. As French CJ, Kiefel, Bell, Nettle and Gordon JJ explained in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [54]-[55]: … a criminal prosecution is aimed at securing, and may result in, a criminal conviction. By contrast, a civil penalty proceeding is precisely calculated to avoid the notion of criminality as such. No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd [(1991) ATPR 41-076 at 52,152], is primarily if not wholly protective in promoting the public interest in compliance: Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act. (footnotes omitted; emphasis added) 20 There is no evidence that any of the respondents previously has contravened the Act or any other legislation. It appears that the employer no longer carries on business. However, the employer has not provided any evidence of its financial position, assets or liabilities, other than the resale analysis that suggested it owed the franchisor over $34,000 following the termination of the franchise agreement. 21 As the employer and Mr Bhatti recognised in their written submissions on penalty, neither of them has shown any contrition. Mr Zahid has not appeared, but he has been aware of the proceeding and owns a half share of the employer. 22 In the principal reasons, I explained why I found that each of Mr Zahid and Mr Bhatti was involved and knowingly concerned in each contravention. 23 The employer employed Mr Ahmed under the 2014 and 2017 contracts. It failed to pay, in full, Mr Ahmed's wages and his superannuation and demanded that he make the cashback payments, each in contravention of ss 323(1) and 325(1) of the Act. Each of the underpayment and cashback contraventions of ss 323(1) and 325(1) arose out of a course of conduct by it and so each constituted only one contravention of each section under s 557(1) of the Act. The same applied to Mr Zahid and Mr Bhatti who each committed one contravention of each section. 24 The cashback contravention commenced with Mr Ahmed making a payment of $2,000 on 26 November 2015 and continued with many more payments until around 28 September 2017, although all of the respondents made demands on Mr Ahmed to pay $11,000 and more in the period immediately before his employment ceased on 26 November 2017. The course of conduct constituting the underpayment contravention commenced soon after 20 December 2014 but continued throughout Mr Ahmed's employment until 26 November 2017. That conduct occurred persistently (but with less financial detriment after the first period, because of the cashback contravention) over a course of nearly three years. 25 The employer's contraventions of ss 323(1) and 325(1) were deliberate and occurred in circumstances where Mr Zahid and Mr Bhatti, as its controlling mind or minds at the respective time of each occurrence, knew that the conduct was in breach of the 2014 and 2017 contracts. 26 The quantum of Mr Ahmed's wages and superannuation that the employer failed to pay in full in the first period was significant, amounting to nearly half his salary and superannuation entitlements. 27 All of the underpayment and cashback contraventions exploited Mr Ahmed's vulnerability by reason of his immigration status. Mr Zahid and Mr Bhatti made demands, coupled with the threat that the employer would no longer sponsor Mr Ahmed's visa if he did not comply with the demands and make the cashback payments. That threat materialised after Mr Ahmed stopped making cashback payments in around late September 2017. That is because the employer terminated his employment on 26 November 2017 and soon, thereafter, informed the Department on 7 December 2017. As I found in the principal reasons, the Department gave notice to Mr Ahmed on 20 April 2018 of its intention to cancel Mr Ahmed's visa. All of the contraventions were, therefore, at the higher end of the range of seriousness. 28 Indeed, each of the contraventions had all of the elements of a serious contravention within the meaning of s 557A. That is because each respondent, first, knowingly contravened each of ss 323(1) and 325(1) when, respectively, they failed to pay, or cause to be paid, in full Mr Ahmed's wages and superannuation and unreasonably required him to make each cashback payment and, secondly, engaged in that conduct as part of a systematic pattern of conduct relating to Mr Ahmed. However, because Mr Ahmed did not plead that the contraventions were serious contraventions under s 557A, I cannot find that they attract the higher penalties that the section imposed. In those circumstances, each of the contraventions falls at the higher end of the range of seriousness for the purposes of informing what are the appropriate pecuniary penalties, assessed under s 539(2), for the respondents' various contraventions of the Act other than under s 557A. 29 I reject the employer's argument that because Mr Zahid controlled it, it had no independent decision-making ability. Mr Zahid was the managing director of the employer until 8 June 2017. He controlled the employer and his acts were its acts: Hamilton v Whitehead (1988) 166 CLR 121 at 127-130 per Mason CJ, Wilson and Toohey JJ. The employer was the principal and Mr Zahid was knowingly concerned, and involved, in the employer's contraventions both before and after 8 June 2017: Hamilton 166 CLR at 127 (see the principal reasons at [73]-[78]). It is not wrong or oppressive to make the employer and the individual or individuals who is or are its controlling mind or minds, liable for what he caused the company to do, which amounted to a contravention of the Act, as Mason CJ, Wilson and Toohey JJ held (166 CLR at 128). 30 Each respondent's conduct in engaging in the contraventions (as I found in the principal reasons) was disgraceful and constituted a ruthless and deliberate exploitation of a vulnerable employee. In the first period of 9 months, the employer and Mr Zahid knew that they were paying Mr Ahmed half, and sometimes less than half, his wages. This was a flagrant contravention of s 323(1) of the worst possible kind. 31 In the second period, the quantum of underpayments reduced, but their net effect was increased by Mr Zahid's unreasonable demands for the cashback payments. Mr Ahmed was underpaid (after tax) $9,512.92 and made cashback payments of $45,000. Those sums totalled over $54,500, when Mr Ahmed's after tax salary over the 21 months should have been about $76,000. It is little wonder that Mr Ahmed had to work a second job to make ends meet with the assistance of his wife's income. 32 In the third period, for which Mr Bhatti has responsibility, Mr Ahmed was underpaid only his last 2 weeks' salary ($1,685) but made cashback payments of $5,000, effectively reducing his salary by $6,685 for the last 5.5 months of his employment. 33 Mr Bhatti's culpability is of a lesser order than Mr Zahid's. However, Mr Bhatti was well aware, from the time he commenced his involvement in June 2017, that Mr Ahmed was not being paid on time or at all at that stage, as I found in the principal reasons at [29]-[37]. Mr Bhatti had to arrange in late July and early August 2017 for Mr Ahmed to be paid over $2,900 to ensure that his group certificate for the previous financial year could issue in an amount that matched his salary under the 2014 contract. Mr Bhatti must have known that Mr Ahmed had not been paid wages for 4 or 5 weeks as at 27 June 2017. However, subsequently, during the third period, Mr Bhatti appears to have caused the employer to pay Mr Ahmed's wages regularly (except for the final fortnight) although the employer made no superannuation payments in the third period. Mr Bhatti, however, demanded and received cashback payments totalling $5,000 and made a demand that Mr Ahmed pay $11,000 that led to his termination when he refused to pay. 34 There is a need in this proceeding for both specific and general deterrence. I find that the employer's and Mr Bhatti's contraventions are close to the most serious possible for a contravention not amounting what would now be a serious contravention within the meaning of s 557A. 35 In Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 at [392]-[397], Katzmann J considered the effect of a change in the value of a penalty unit that straddled the period of a course of conduct for the purposes of determining the maximum penalty for a contravention under the Act based on that course of conduct. Her Honour followed what Jessup J had decided in Murrihy v Betezy.com.au Pty Ltd (No 2) (2013) 221 FCR 118 at 125 [22] and 127 [28], namely that the increased penalty did not apply retrospectively to a contravention that was complete in the period before which the new penalty came into force. However, Katzmann J held, following the reasoning of Gleeson CJ and Lee J in R v White (Court of Criminal Appeal of the Supreme Court of New South Wales, unreported 25 July 1991), that it would not be inappropriate for a sentencing judge to determine that the level of penalty had increased over the period of a conspiracy and to put that consideration into effect in any sentencing: Gleeson CJ, with whom Allen and James JJ agreed, applied that reasoning in R v Annecchini (Court of Criminal Appeal of the Supreme Court of New South Wales, unreported 24 April 1996, BC9601668 at pp.4-5). 36 Here, the penalty had increased twice over the course of the contravening conduct, from $170 per penalty unit until 30 June 2015, to $180 per penalty unit until 30 June 2017, and to $210 from 1 July 2017. The maximum penalty in force for the greater part of the course of conduct was $10,800 for the individuals and $54,000 for the employer. I have taken into consideration that most of the contravening conduct in the first period occurred when slightly lower maxima applied and that almost all of the contravening conduct in the third period occurred when the highest maxima applied: Annecchini (Court of Criminal Appeal of the Supreme Court of New South Wales, unreported 24 April 1996, BC9601668 at pp4-5).

Conclusion 37 I have had regard to all of the circumstances and the totality of the penalties for each respondent that I consider appropriate in concluding that the following pecuniary penalties should be imposed. The contravening conduct of both the employer and Mr Zahid over the whole of the three periods was ruthless, exploitative and very serious. That conduct requires the strongest denunciation and a very high penalty for each contravention to deter others from engaging in it in the future. As well, the penalties must specifically deter the employer and Mr Zahid from contravening again, as well as penalise them for their disgraceful mistreatment of Mr Ahmed. In particular, given the circumstances, the mere fact that this is the first occasion that either of the employer or Mr Zahid has been the subject of civil penalty proceedings cannot detract from the objective seriousness of a long course of conduct in which each engaged that has had significant financial and personal impact on its victim, Mr Ahmed. 38 In my opinion, the employer should pay a pecuniary penalty of $50,000 for each contravention, or a total of $100,000. Mr Zahid should pay a pecuniary penalty for each contravention of $10,000 or a total of $20,000. 39 Because Mr Bhatti's contravening conduct occurred over only the third period and involved significantly less money, but a higher maximum penalty of $12,600 for almost all the time, I have come to the conclusion that, having regard to all of his circumstances including his financial position, he should pay a pecuniary penalty of $3,000 for each contravention, or a total of $6,000. 40 I will direct the Registrar to forward the papers to the Fair Work Ombudsman. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.