Basi v Namitha Nakul Pty Ltd

WIGNEY J: 1 Namitha Nakul Pty Limited operates Indian restaurants named "Adithya Kerala" in Wollongong and Nowra on the South Coast of New South Wales. The director and controller of Namitha Nakul is Mr Vaisakh Mohanan Usha. Ms Priyadevi Sunil Kumar is a cook at the Adithya Kerala Restaurant in Wollongong and is also said to have had some responsibility for the management of that restaurant. 2 Between July 2016 and September 2018, the applicant in this matter, Mr Midhun Basi, was employed by Namitha Nakul to work as a cook in the Adithya Kerala Restaurant in Wollongong and Nowra. As an employer in the restaurant industry, Namitha Nakul and its employees were covered by the Restaurant Industry Award 2010. 3 On 8 April 2019, Mr Basi commenced proceedings against, relevantly, Namitha Nakul, Mr Usha and Ms Kumar, alleging that Namitha Nakul had committed serious contraventions of the Fair Work Act 2009 (Cth) and that Mr Usha and Ms Kumar were involved in those contraventions. Mr Basi's main allegations were that he had been underpaid and overworked having regard to the terms of the Award. Mr Basi sought the imposition of pecuniary penalties against each of Namitha Nakul, Mr Usha and Ms Kumar for the contraventions and an order that each of the respondents pay compensation in respect of his underpaid wages, superannuation and interest. On the same day as he filed his originating application, Mr Basi also filed an interlocutory application seeking freezing orders against each of Namitha Nakul, Mr Usha and Ms Kumar pursuant to r 7.32 of the Federal Court Rules 2011 (Cth). That application was heard and determined ex parte by Robertson J on 9 April 2019. His Honour made freezing orders which had effect up to 5.00 pm on 1 May 2019. 4 In this application, Mr Basi sought an extension of the freezing orders until further order of the Court. Namitha Nakul, Mr Usha and Ms Kumar opposed the extension of the orders. They did not dispute that Mr Basi had an arguable case against them for the purposes of r 7.35(1)(b) of the Rules. They argued, however, that Mr Basi had not demonstrated that there was a danger that any prospective judgment in this matter would be wholly or partly unsatisfied because they might either abscond or dispose of or remove their assets from Australia. They also contended that the balance of convenience weighed against the continuation of the freezing orders. They argued in that regard that the orders lacked utility because they had few assets and that the making of the orders on 9 April 2019 had resulted in unfavourable and damaging media reports and publicity.

Relevant rules and principles 5 Rule 7.32 of the Rules provides as follows: (1) The Court may make an order (a freezing order), with or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the Court's process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied. (2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets. 6 Rule 7.35 of the Rules sets out the circumstances in which the power in Rule 7.32 may be enlivened. It relevantly provides as follows: (1) This rule applies if: (a) judgment has been given in favour of an applicant by: (i) the Court; or (ii) for a judgment to which subrule (2) applies - another court; or (b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in: (i) the Court; or (ii) for a cause of action to which subrule (3) applies - another court. (2) This subrule applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the Court. (3) This subrule applies to a cause of action if: (a) there is a sufficient prospect that the other court will give judgment in favour of the applicant; and (b) there is a sufficient prospect that the judgment will be registered in or enforced by the Court. (4) The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur: (a) the judgment debtor, prospective judgment debtor or another person absconds; (b) the assets of the judgment debtor, prospective judgment debtor or another person are: (i) removed from Australia or from a place inside or outside Australia; or (ii) disposed of, dealt with or diminished in value. (5) The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that: (a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because: (i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or (ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or (b) a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment. (6) Nothing in this rule affects the power of the Court to make a freezing order or ancillary order if the Court considers it is in the interests of justice to do so. 7 The purpose of a freezing order is to prevent an abuse or a frustration of the Court's process by depriving an applicant of the fruits of any judgment obtained in the action: Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 625. It is "no light matter" to freeze a party's assets and there is, accordingly, a need for the Court to exercise caution: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 324F. A freezing order is a "drastic remedy" which should not be lightly granted: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [51] citing Frigo v Culhari (unreported, NSW Court of Appeal 17 July 1998 at 10-11). 8 An applicant has a good arguable case if they have "a reasonably arguable case on legal as well as factual matters": Cardile at [68]; Insolvency Guardian Melbourne Pty Ltd v Carlei (2016) 111 ACSR 236; [2016] FCA 72 at [18]. It has also been said that a "good arguable case" is one "which is more than barely capable of serious argument, and yet not necessarily one the judge considers would have better than a fifty per cent chance of success": Curtis v NID Pty Ltd [2010] FCA 1072 at [6] citing Ninemia Maritime Corp v Trave Schiffahrtsgesselschaft mbH & Co KG (The Niedersachsen) [1983] Com LR 234 at 235 (affirmed on appeal: [1983] 1 WLR 1412); Deputy Commissioner of Taxation v Greenfield Electrical Services Pty Ltd (2016) 103 ATR 327; [2016] FCA 653 at [7]. 9 Where a freezing order is sought on the basis of a danger of the dissipation of assets, it is not necessary for the Court to be satisfied that the risk of dissipation is more probable than not. Nor is it necessary for the applicant to adduce evidence of an intention on the part of the respondent to dissipate assets: Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194; [2010] FCA 1014 at [8]-[10]; Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) (2012) 90 ATR 711; [2012] FCA 1064 at [23]. The making of a freezing order involves a discretionary exercise of power. The Court retains a discretion to refuse relief even if the requirements in r 7.35 of the Rules are satisfied: Patterson at 321-322.

Is there a good arguable case? 10 Namitha Nakul and Mr Usha and Ms Kumar conceded, or at least did not dispute, that Mr Basi had a good arguable case. It is accordingly unnecessary to set out the nature of the claim in any real detail. Nor is it necessary to refer to the evidence adduced by Mr Basi to demonstrate that he had a good arguable case. It is, however, necessary to say something about the claim because Mr Basi's submission that there is a danger of dissipation of assets rests, to a certain extent, on the very nature of the claim he has made. 11 Mr Basi alleged that, throughout his employment with Namitha Nakul, the company repeatedly and systematically contravened the Award and, therefore, contravened s 45 of the Fair Work Act. The contraventions of the Award included: (a) failing to display the Award contrary to cl 5 of the Award; (b) failing to arrange the ordinary hours of work of Mr Basi so they were an average of 38 hours per week over a period of no more than four weeks contrary to cl 31.1 of the Award; (c) failing to arrange Mr Basi's ordinary hours to meet the condition that a maximum of 11.5 hours be worked on any one day contrary to cl 31.2(a) of the Award; (d) rostering Mr Basi to work for more than 10 hours per day on more than three consecutive days without a break of at least 48 hours contrary to cl 31.2(b) of the Award; (e) requiring Mr Basi to work more than eight days of more than 10 hours in a four week period contrary to cl 31.2(c) of the Award; (f) failing to give Mr Basi a minimum of eight full days off per four week period contrary to cl 31.2(e) of the Award; (g) requiring Mr Basi to work for five or more hours in a day without affording him an unpaid meal break of no less than 30 minutes no earlier than one hour after starting work and no later than six hours after starting work, contrary to cl 32.1 of the Award; (h) failing to give Mr Basi two 20 minute paid breaks when he worked in excess of 10 hours in a day contrary to cl 32.6 of the Award; (i) failing, when Mr Basi had not been afforded a meal break, to pay him at 150% of the employee's ordinary base rate of pay from the end of six hours until either a meal break was given or the shift ended contrary to cl 32.4 of the Award; (j) failing to pay Mr Basi at the overtime rate set out in cl 33.2 in respect of work done outside of the spread of hours or rostered hours contrary to cl 33.1 of the Award; (k) failing to pay superannuation contributions sufficient to avoid the employer being required to pay the superannuation guarantee charge under superannuation legislation with respect to Mr Basi contrary to cl 30.2(a) of the Award; (l) failing to pay Mr Basi additional leave loading of 17.5 per cent of the payment provided for in the National Employment Standards contrary to cl 35.2(b) of the Award; and (m) failing to pay Mr Basi 225 per cent of the minimum wage for the relevant classification when working ordinary hours on public holidays contrary to cl 34.1 of the Award. 12 Mr Basi also alleged that Namitha Nakul contravened the following provisions of the Fair Work Act: (a) s 90(2) of the Fair Work Act by failing to pay Mr Basi for his untaken paid annual leave at the end of his employment in contravention of s 44 of the Fair Work Act; (b) s 325 of the Fair Work Act by Mr Usha demanding from Mr Basi that he pay Namitha Nakul's taxation liability in respect of Mr Basi and make payments back to the company from his wages; (c) s 343 of the Fair Work Act by reason of Mr Usha threatening to take action against Mr Basi with intent to coerce and not to exercise his workplace rights; (d) s 345 of the Fair Work Act by reason of Mr Usha knowingly making a false or misleading representation to Mr Basi about the effect of the exercise of workplace rights by him; and (e) s 535 of the Fair Work Act for failure to keep records of overtime hours pursuant to reg 3.34 of the Fair Work Regulations 2009 (Cth). 13 Mr Basi alleged that Mr Usha and Ms Kumar were knowingly concerned in and therefore involved in Namitha Nakul's contraventions. He also alleged that the contraventions are "serious contraventions" as defined in s 557A of the Fair Work Act because they were knowing contraventions and were part of a systematic pattern of conduct. One of the more serious allegations levelled against Namitha Nakul, Mr Usha and Ms Kumar was that Mr Basi was substantially underpaid throughout his employment. It is alleged that Mr Basi was underpaid by just over $100,000 for the 2016/2017 financial year and just under $115,000 for the 2017/2018 financial year. 14 One significant aspect of the allegation concerning the underpayment of Mr Basi was that Mr Basi claims that he was required by Mr Usha to make regular cash payments to Namitha Nakul or Mr Usha when or before he received his wages. That allegation was detailed in the following terms in paragraph 11 of the affidavit sworn by Mr Basi's solicitor and filed in support of Mr Basi's interlocutory application: I am informed by Mr Basi and verily believe that during his employment, the amounts he was paid were significantly less than the amounts payable under the Restaurant Industry Award 2010 (the Award), which is the Award applicable to his employment, in respect of the work performed by him. Further, he was required by the second respondent to make significant and regular cash payments back to the company and/or second respondent. The payments required of Mr Basi by the second respondent were in the amount of $511 from nett fortnightly wages of $1711. That is, the company would pay the applicant $1711 per fortnight and require that he pay $511 back. During the course of the applicant's employment, that demand changed, such that the applicant was required to pay the $511 to the company before receiving any payment of wages. I am also informed by Mr Basi and verily believe that the second respondent demanded that Mr Basi pay amounts owed by the company to the Australian Taxation Office for its PAYG tax liability in respect of Mr Basi's employment. The Statement of Claim alleges that those demands contravened s.343 and s.344 of the FW Act. The Statement of Claim also alleges that Ms Priyadevi Sunil Kumar was involved in the first respondent's contraventions of s.344, as the applicant made the payments to the second respondent in her presence.

Is there a danger that the prospective judgment will be wholly or partly unsatisfied? 15 Mr Basi pointed to four events or circumstances which he submitted demonstrated that there was a danger that any judgment he might obtain in this matter would or might be wholly or partly unsatisfied if the freezing orders are not extended. 16 First, Mr Usha was originally an Indian citizen. While he is now an Australian citizen, he is nonetheless entitled to return to and live and work in India indefinitely. He also has continuing family and business connections in India. Ms Kumar is also a citizen of India. In those circumstances, Mr Basi contended, in effect, that there was a danger that Mr Usha and Ms Kumar may return to India to avoid having to pay any penalty or compensation arising from a judgment in this matter. 17 Mr Usha and Ms Kumar did not dispute that they would be able to return to India though they pointed out that they had not done so. They also submitted that there was no evidence that they intended to do so. 18 Second, Mr Basi pointed out that if his claim is successful, the penalties and compensation payable by Namitha Nakul, Mr Usha and Ms Kumar were likely to be substantial. It was conceded on behalf of Namitha Nakul that some of the alleged contraventions would be admitted. It was submitted, however, that there were significant mitigating circumstances. Nonetheless, Namitha Nakul, Mr Usha and Ms Kumar did not dispute that their potential liabilities were likely to be substantial if Mr Basi's claim was successful. In Mr Basi's submission the size of the potential judgment further increased the risk that Mr Usha and Ms Kumar might return to India or take steps to dissipate their assets. 19 Third, Mr Basi relied on the fact that his case was that the contraventions by Namitha Nakul, Mr Usha and Ms Kumar were deliberate and systematic. He also said that the conduct of Mr Usha in requiring him to make cash payments from his wages demonstrated an element or degree of dishonesty on the part of Mr Usha. The available inference was that this was done so as to conceal the underpayment of Mr Basi's wages and to create a misleading impression that the correct wages were paid. In Mr Basi's submission, the fact that Mr Usha was capable of employing such dishonest means indicated that there is a substantial risk that Mr Usha and Ms Kumar, as Mr Usha's associate, would take similarly dishonest steps to avoid having to meet any judgment which may be awarded against them. It should also be noted in this context that there was evidence that Mr Usha and Ms Kumar had sought to procure a fellow employee of Mr Basi to sign a false statement about Mr Basi's hours of work. This also suggested that Mr Usha and Ms Kumar were people who were likely to seek to take dishonest steps to avoid having to meet any judgment. 20 Namitha Nakul, Mr Usha and Ms Kumar did not adduce any evidence which was capable of rebutting the evidence relating to either the requirement that Mr Basi make cash payments or the attempt to procure a false statement from another employee. In relation to the first of those matters, they relied on the fact that Namitha Nakul retained a solicitor as soon as the South Coast Labour Council raised claims on Mr Basi's behalf in August 2018. That solicitor engaged in lengthy and detailed correspondence with the Council about Mr Basi's claims over a number of months. The correspondence was annexed to the affidavit which was filed on behalf of Mr Basi in support of the interlocutory application. The correspondence suggested that Namitha Nakul and Mr Usha disputed, amongst other things, the allegation that Mr Basi was required to pay back some of his wages. It was asserted on their behalf that Mr Basi had borrowed money and that the payments that he was required to make were repayments of that loan. It would appear, however, that the Council requested documentary evidence of the supposed loan. That evidence was not forthcoming. 21 Mr Basi submitted that the fact that Namitha Nakul's former solicitor had, no doubt on instructions, disputed that the requirement that Mr Basi make cash payments had anything to do with the underpayment of his wages was beside the point. The fact remains that the affidavits filed by Mr Usha and Ms Kumar did not address the cashback claim. Nor did they address the allegation that they had attempted to get another employee to sign a false statement about Mr Basi's hours of work. 22 The fourth circumstance relied on by Mr Basi was that there was evidence that some steps had been taken to sell the assets of Namitha Nakul. It would appear that the restaurant in Nowra has been advertised for sale for $35,000. It would also appear that a "for lease" sign had appeared in the window of the restaurant in Wollongong. The evidence adduced on behalf of Namitha Nakul, Mr Usha and Ms Kumar did not address the evidence relating to the apparent attempt to sell the Nowra business or attempt to explain the "for lease" sign in the Wollongong restaurant. That evidence is capable of supporting the submission that some attempts have been made to dispose of the assets of the relevant business. 23 The evidence relating to the danger or risk of Mr Usha and Ms Kumar absconding or dissipating their assets and the assets of Namitha Nakul is by no means strong or overwhelming. I am nonetheless satisfied, in all the circumstances, that there is a danger that any judgment obtained by Mr Basi will be wholly or partly unsatisfied if the freezing orders are not extended. I accept that each of the four events or circumstances relied on by Mr Basi support the existence of such a danger, particularly when those circumstances are considered cumulatively. No compelling arguments have been advanced by Namitha Nakul, Mr Usha or Ms Kumar to the contrary.

Balance of convenience 24 The main arguments advanced by Namitha Nakul in opposition to the extension of the freezing orders concerned issues that were said to go to the balance of convenience. Those issues related to the supposed impecuniosity of Namitha Nakul, Mr Usha and Ms Kumar and to certain adverse media reporting that followed the making of the initial freezing orders on 9 April 2019. 25 As for impecuniosity, the orders made on 9 April 2019 required Namitha Nakul, Mr Usha and Ms Kumar to file and serve affidavits disclosing their assets. They complied with those orders, though as events transpired, Mr Basi's legal advisers did not receive the affidavits until the day of the hearing. In any event, the affidavits revealed that the only significant asset held by Mr Usha and Ms Kumar was a property they jointly owned in Calderwood, New South Wales. The acquisition of that property was settled in July 2018. A bank valuation at the time of settlement was said to have valued the property at $320,000. The property is subject to a mortgage to the ANZ Bank. The outstanding balance of the loan secured by the mortgage was said to be just over $280,000. There was, however, no evidence of the current value of the property. Nor was there any documentary evidence in relation to the current balance of the mortgage or the valuation of the property. 26 The evidence relating to the assets held by Namitha Nakul was limited to a very basic set of financial statements as at 30 June 2018. Those financial statements reveal that the company's assets as at 30 June 2018 were essentially limited to plant and equipment with a book value of just over $11,000 and just over $2,000 cash held in a bank account. The book value of the plant and equipment was based on the cost of the equipment less accumulated depreciation. Mr Usha did not affirm the accuracy of the financial statements in his affidavit or provide any update of any of the figures. 27 The submission advanced on behalf of Namitha Nakul, which was effectively adopted by Mr Usha and Ms Kumar, was that the freezing orders had no utility because of the limited assets held by them. 28 No authority was cited or relied on in support of the submission that the limited utility of freezing orders arising from the impecuniosity of those subject to the orders provided a proper discretionary basis for refusing to make or extend the freezing orders. I accept that in some circumstances that might provide a proper discretionary basis to refuse to make or extend freezing orders. I do not, however, consider it to be a persuasive reason for not extending the freezing orders in this case. While the assets of Namitha Nakul, Mr Usha and Ms Kumar may be fairly limited, the freezing orders nonetheless will have some utility. That is because they will prevent any untoward dissipation of those limited assets which those parties do have. 29 As for the adverse publicity, I am unable to see how the fact that the making of the initial freezing orders was accompanied by some unfavourable media reporting provides any compelling or persuasive discretionary reason for refusing to extend the freezing orders. 30 It was asserted that the unfavourable publicity had adversely affected Namitha Nakul's business. That assertion was unsupported by any evidence. In any event, while damage to the business may be an unfortunate by-product of the action taken by Mr Basi, I do not consider that to be a compelling reason to refuse to extend the freezing orders. 31 It was submitted on behalf of Namitha Nakul that the media articles indicated that the freezing orders were sought for some collateral or even improper purpose. It was somewhat unclear what that collateral purpose was said to be, though the suggestion seemed to be that the orders were sought to publicise the Council's intent to stamp out the underpayment of wages. Namitha Nakul also criticised an officer of the Council and Mr Basi for making certain statements to the media. I have read the media articles. They provide no basis whatsoever for the claim that the proceedings were commenced for a collateral or improper purpose. While some of the statements attributed to the Council officer and Mr Basi's solicitor could perhaps be said to be colourful and forceful, they are not deserving of any relevant criticism. I am unable to see how or why the media reporting could be said to provide any discretionary reason to refuse to extend the orders.

Undertakings as to damages 32 When the freezing orders were first made, Mr Basi was not required to give any undertaking as to damages. That was essentially because it was accepted that Mr Basi was impecunious. Namitha Nakul submitted on this application that the Court should revisit the question of the undertaking as to damages. It appeared to be accepted by Namitha Nakul that Mr Basi was impecunious and that that provided a proper discretionary basis not to require an undertaking as to damages from him. It was, however, submitted that there may be a third party who was standing behind Mr Basi and funding his litigation. The suggestion appeared to be that Mr Basi's backer should be required to provide an undertaking as to damages. 33 There are, at least, three problems with that submission. 34 The first, and most fundamental, problem is that there is no evidence whatsoever that a third party was funding Mr Basi's claim. There is no doubt that Mr Basi is being assisted by the Council. There is, however, no evidence that the Council is paying Mr Basi's legal fees. 35 The second difficulty is that, even if the Council was paying Mr Basi's fees, that provides no reason to require the Council to provide an undertaking as to damages. No authority was relied on in support of that proposition. 36 The third difficulty is that Namitha Nakul, in effect, conceded that the freezing orders would cause it no difficulties. That was tantamount to a concession that there was no real or appreciable risk that it would suffer any loss or damage arising from the freezing orders.

Form of the orders 37 Namitha Nakul took no issue with the form of the orders that were made on 9 April 2019. They would appear to follow the fairly standard form that is set out in the relevant rules or practice note of the Court. 38 In all the circumstances, I propose to extend the orders that were made by Robertson J on 9 April 2019 until further order of the Court. 39 I make the following orders: (1) The orders set out in Annexure A to the orders made by Robertson J on 9 April 2019 be extended until further order. (2) The respondents file and serve their defences on or before 15 May 2019. (3) The applicant file and serve any reply to the defences on or before 29 May 2019. (4) The matter be stood over for a further case management hearing before the docket judge on 5 June 2019. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.

SCHEDULE OF PARTIES NSD 523 of 2019 Respondents Fourth Respondent: SUJITH AYYAPPADAS