Elvin v Fair Work Ombudsman

[2024] FCA 1072

Federal Court of Australia|2024-09-16|Before: Katzmann J, Collier J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2024-09-16

Before

Katzmann J, Collier J

Source

Original judgment source is linked above.

Judgment (5 paragraphs)

[1]

Pursuant to section 500(2) of the Corporations Act 2001 (Cth), the First Respondent be granted leave, nunc pro tunc, to commence and proceed against the Second Respondent in liquidation in respect of her Amended Notice of Cross-appeal filed on 19 July 2024.
Such leave to be granted on the basis that the First Respondent will not seek to enforce any orders for compensation or pecuniary penalties made by the Court against the Second Respondent without first obtaining the leave of the Federal Court. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

[2]

COLLIER J: 1 By interlocutory application filed on 10 August 2024, the Fair Work Ombudsman seeks the following orders: 1. Pursuant to section 500(2) of the Corporations Act 2001 (Cth), the First Respondent be granted leave, nunc pro tunc, to commence and proceed against the Second Respondent in liquidation in respect of her Amended Notice of Cross-appeal filed on 19 July 2024. 2. Such leave to be granted on the basis that the First Respondent will not seek to enforce any orders for compensation or pecuniary penalties made by the Court against the Second Respondent without first obtaining the leave of the Federal Court. 2 The grant of leave to the Fair Work Ombudsman to proceed against Foot and Thai Massage Pty Ltd (in liquidation) (the company) is opposed by Mr Colin Elvin, who was a director of the company until 2016, and who is an appellant in related proceedings to which the Fair Work Ombudsman is the first respondent.

[3]

BACKGROUND 3 In a related judgment published at the same time as these reasons, I set out background which also applies to the present interlocutory application. That background is as follows: 1 On 10 May 2024 Katzmann J gave final judgment in Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 8) [2024] FCA 483. The respondents were found to have contravened the Fair Work Act 2009 (Cth) in multiple respects referable to, inter alia, minimum rates of pay for employees and record keeping. Mr Elvin was the second respondent in that case, being the director of the first respondent Foot & Thai Massage Pty Ltd ACN 147 134 272, a company now in liquidation. Her Honour appointed a referee to calculate the extent of underpayment of employees' entitlements and adopted the referee's report (to which Mr Elvin unsuccessfully objected). Her Honour made orders including the payment of compensation, interest and pecuniary penalties by the company and Mr Elvin. 2 By Amended Notice of Appeal filed on 6 July 2024 Mr Elvin has appealed the judgment of Katzmann J given on 14 October 2021 (Liability Decision) and the final judgment given on 10 May 2024 (Penalty Decision). 3 Further, by Amended Notice of Cross-Appeal filed on 19 July 2024 the Fair Work Ombudsman appealed part of the Liability Decision and Penalty Decision, materially referable to the finding of Katzmann J that the Hair and Beauty Award did not cover and apply to relevant employees of the company. 4 In Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) [2019] FCA 1601 Katzmann J granted the Fair Work Ombudsman leave to proceed against the company pursuant to s 500(2) of the Corporations Act 2001 (Cth) (Corporations Act). 5 In Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 8) [2024] FCA 483 Katzmann J made orders including that the company pay compensation and pecuniary penalties. 6 The present interlocutory application by the Fair Work Ombudsman seeks leave to commence proceedings referable to the cross-appeal against the company.

[4]

SUBMISSIONS OF THE PARTIES 7 The interlocutory application is supported by an affidavit of Ms Claire Toner, a Senior Lawyer employed by the Office of the Fair Work Ombudsman. Materially in that affidavit Ms Toner deposed: The Fair Work Ombudsman had communicated with Mr Elvin (who opposed the interlocutory application) and the third respondent to the appeal, Mr Puerto, who was a former supervisor at the company (who consented to the interlocutory application). As at the date of swearing the affidavit, the Fair Work Ombudsman had not received any response from the liquidators for the company regarding their position in respect of the interlocutory application. 8 In written submissions, the Fair Work Ombudsman stated, in summary: The overarching consideration is the interests of justice. Other relevant factors include the impact of the proceeding on the company's creditors and the efficient administration of the liquidation, any public interest associated with the appeal and, having regard to s 37M of the Federal Court of Australia Act 1976 (Cth), the efficient use of the judicial and administrative resources available for the purposes of the Court and the efficient disposal of the Court's overall caseload. The primary proceedings were brought by the Commonwealth in its capacity as a regulator. The primary Judge found that Mr Elvin, the company, and Mr Puerto had engaged in contraventions of the Fair Work Act 2009 (Cth) (Fair Work Act) concerning the exploitation of seven massage therapists who were recruited from the Philippines to work for the company including underpayments, unreasonable hours, cashbacks, coercion and racial discrimination. By their very nature, the proceedings raise concerning contraventions of the Fair Work Act and therefore issues of general public importance. The function of the Fair Work Ombudsman is to ensure compliance with, and to enforce, the Fair Work Act. The Fair Work Ombudsman was acting in the discharge of her functions in commencing the primary proceedings against Mr Elvin, the company and Mr Puerto. Where leave to commence proceedings against a company in liquidation is sought by a regulator, additional considerations arise, such as general deterrence and other public policy considerations. It would be incongruent for the Fair Work Ombudsman not to proceed against the company in the cross appeal, noting that the company was the employer of the relevant massage therapists, and was liable as a primary wrongdoer. The company is a proper party to the cross appeal proceedings because it may be affected by the relief sought: r 36.31 of the Federal Court Rules 2011 (Cth). In the event that the Fair Work Ombudsman's cross appeal is successful, the orders made by Katzmann J against the company in the primary proceedings may need to be amended. A company's financial circumstances are not a bar to a grant of leave. The fact that the company is in liquidation and may not be able to pay any penalties imposed is irrelevant and not a proper consideration in the granting of leave. A significant proportion of the compensation claimed by the Fair Work Ombudsman relates to underpayment of wages and entitlements due to the relevant employees. Such payments would be given priority over the majority of other unsecured creditors in the insolvency of the company under s 556(1) of the Corporations Act. It is desirable for all contentious issues between the parties in the appeal and cross appeal to be determined by the Full Court. Mr Elvin, who opposes the grant of leave, is not a creditor of the company. 9 Mr Elvin filed an affidavit on 27 August 2024 in which he deposed, in summary: In seeking leave to proceed against the company, the Fair Work Ombudsman relied on hearsay evidence that was never proven and should not have been admissible, namely evidence of three employees who were not claimants in the primary proceeding. As at 11 April 2016, Mr Elvin had retired as the director of the company and sold his one share in the company to Mr Viet Ngo. The Fair Work Ombudsman ignored the voluntary administration and the Deed of Company Arrangement that had been approved by the creditors of the company, and proceeded against the company on 22 June 2018. Mr Ngo placed the company into liquidation on 13 August 2019 in order to escape the litigation commenced by the Fair Work Ombudsman. The Fair Work Ombudsman nonetheless relentlessly pursued the case. If leave had not been granted, the Fair Work Ombudsman would have been required to submit to the liquidation process prescribed by the Corporations Act including filing a proof of debt or to apply to the Court for orders as to their status and standing (if any) to participate in the liquidation. Plainly, Mr Elvin is the target of the Fair Work Ombudsman's litigation. The current interlocutory application effectively revives the alternative claim in relation to the Hair and Beauty Award that was not pursued in the liability hearing. The effect of the cross appeal filed by the Fair Work Ombudsman is to amend the pleadings a fourth time, after the case had closed. There would be no interests of justice served by the granting of the application.

[5]

CONSIDERATION 10 As Katzmann J pointed out in Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) [2019] FCA 1601 at [14], s 500(2) of the Corporations Act does not mandate any particular considerations - rather the discretion to grant leave is at large. As her Honour continued in that case: 14. …Black J recently summarised the position taken in the authorities in In the matter of DSHE Holdings Limited (recs and mgrs apptd) (in liq) [2018] NSWSC 82 at [18]: [T]he purpose of this section is to prevent a company's assets being dissipated by unnecessary litigation, and an applicant for leave will be required to show why it should not be left to prove its debt in the winding up: Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314; (1983) 7 ACLR 669; (1983) 1 ACLC 742; HFPS Pty Ltd (Trustee) v Tamaya Resources Ltd (in liq) (No 1) [2016] FCA 442 at [18]. The claimant must establish that the claim has a solid foundation and gives rise to a serious question to be tried; factors relevant to the exercise of the court's discretion may include the degree of complexity of legal and factual issues and the prospect that a proof of debt will be rejected; and the power to grant leave is discretionary and other factors may be relevant to its exercise... 11 I also note and adopt the following observation of her Honour in that case: 15. Where leave is sought by a regulator, however, additional considerations arise, such as general deterrence and other public policy considerations: Australian Competition and Consumer Commission v Artorios Ink Co Pty Ltd [2013] FCA 753 (Mortimer J) at [10]-[11]. The Ombudsman has important statutory responsibilities which include enforcing the FW Act through proceedings of this kind: FW Act, s 682. Orders that can be made in such a proceeding include the imposition of civil penalties, the principal purpose of which is deterrence, both specific and general. 12 The submissions of the Fair Work Ombudsman accurately summarise these legal principles. 13 In my view: The public interest is served by the Fair Work Ombudsman undertaking her functions in accordance with the Fair Work Act. The basis on which the Amended Notice of Cross Appeal seeks orders is conditional on the Full Court finding that Katzmann J erred in respect of the award to which the relevant employees were subject. As matters presently stand, such a finding by the Full Court remains open. It is entirely desirable for all contentious issues between the parties to be determined by the Full Court. Mr Elvin's arguments in opposing the grant of leave are, in my view, of little merit or utility in considering this interlocutory application. Indeed, as the Fair Work Ombudsman correctly submitted, and as Mr Elvin himself observed, Mr Elvin has not been a director or a shareholder of the company for many years. Further, it does not appear that he is a creditor of the company. No impact on the interests of Mr Elvin has been demonstrated by an order in the terms sought by the Fair Work Ombudsman. Whether or not the "litigation target" of the Fair Work Ombudsman is Mr Elvin, as he contended, the fact is that the company was the employer of the relevant employees who were - as found by Katzmann J - the subject of underpayment. I agree with the submission of the Fair Work Ombudsman that the company is a proper party to the cross appeal, given that it could be affected by the outcome of that cross appeal. The liquidators of the company do not oppose the interlocutory application. The fact that the liquidators of the company have not responded to the interlocutory application is, ultimately, of little consequence in the circumstances of this interlocutory application. That the company entered liquidation, thus rendering nugatory the approval of the voluntary administration procedures approved by its creditors, is irrelevant to the present interlocutory application. 14 In my view it is appropriate that leave be granted to the Fair Work Ombudsman to commence proceedings against the company pursuant to s 500(2) of the Corporations Act referable to the Amended Notice of Cross Appeal. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Collier.