Fair Work Ombudsman v Aica International Pty Ltd [2025] FedCFamC2G 976

Note: The form of the order is subject to the entry in the Court's records.

Note: This copy of the Court's Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).

1. These proceedings were commenced by the Fair Work Ombudsman ("the applicant") on 25 June 2024 against AICA International Pty Ltd ("the first respondent"), being a corporate entity, and Mr. S Mathews ("the second respondent") as the corporate mind of the first respondent that was involved in an alleged contravention of s 716(5) of the Fair Work Act 2009 (Cth) ("the Act"). The applicant's statement of claim identified circumstances upon which the Court will expand, relating to the issue of a notice under section 716 of the Act to the first respondent, in respect of outstanding entitlements to a particular employee. The second respondent was identified as a person who was also involved in the alleged contravention by failing to comply with a notice served under section 716, and relief which was sought under s 545 of the Act for the payment of monies outstanding to the employee, as well as declarations in respect of the contravention and the seeking of a penalty under s 546 of the Act.
2. The matter came back before the Court, relevantly, on 3 December 2024, in circumstances where the second respondent appeared, and there had been default in compliance with the orders of the Court. As a result of that default, orders were made, by reason of which the facts pleaded in the statement of claim were taken to have been admitted, and a declaration was made in respect of the contravention by the first respondent under s 716 of the Act for failing to comply with the compliance notice issued on 2 May 2023, and a declaration as to the second respondent being involved within the meaning of s 550 regarding the first respondent's contravention of s 716 of the Act, and accordingly, being taken to have contravened the provision himself.
3. Orders were also made under s 545 of the Act that required the payment of $2654.68, as well as taking steps to pay the required additional superannuation to the employee's nominated superannuation fund and providing evidence to the applicant of the compliance with those orders, as well as an order for interest in respect of the amount outstanding. On 3 December 2024, the Court also made orders fixing the matter today for a penalty hearing, which provided an opportunity to the parties to put on evidence and submissions. An affidavit was filed by the applicant by Ms Courtney Hope Priestland (Ms Priestland") on 4 April 2025, which was treated as read, as well as an affidavit by Mr Ian Christopher Bennett ("Mr Bennett"), affirmed on 4 April 2024, which was also received into evidence.
4. The Court had marked as an exhibit the evidence of confirmation of service of the digital notification and invitation to attend the hearing today, as well as marking as an exhibit, the communication serving submissions prepared by the applicant on the first and second respondents. The court also received evidence of a search identifying that the second respondent became bankrupt on 19 August 2024.

1. The relevant principles in relation to a penalty hearing under s 547 of the Act are helpfully summarised by the High Court decision of Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13 in which the High Court identified the following:

[9]: The Commissioner's contentions should be accepted and the appeal allowed. Under the civil penalty regime provided by the Act, the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act. In that context, the penalties fixed by the primary judge were appropriate because they were no more than might be considered to be reasonably necessary to deter further contraventions of a like kind by Mr Pattinson, the CFMMEU or others. They represented a reasonable assessment of what was necessary to make the continuation of the CFMMEU's non‑compliance with the law, amply demonstrated by the history of its contraventions, too expensive to maintain.

[10]: The Full Court's critical error was that it was distracted by a concern, drawn from the criminal law, that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a "notion of proportionality", in the sense in which the Full Court used that term, in a civil penalty regime. Further, and relatedly, their Honours were misled by the view that the Act required that the maximum penalty be reserved for only the most serious examples of the offending comprehended by s 349(1), and that this principle could prevent the court from imposing the maximum penalty even though a penalty in that amount might reasonably be considered to be necessary to deter future contraventions of a like kind. Nothing in the text, context or purpose of s 546 requires that the maximum penalty be reserved for the most serious examples of misconduct within s 349(1). What is required is that there be "some reasonable relationship between the theoretical maximum and the final penalty imposed"[9]. That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others[10].

[14]:In The Commonwealth v Director, Fair Work Building Industry Inspectorate ("the Agreed Penalties Case")[13], French CJ, Kiefel, Bell, Nettle and Gordon JJ said that civil penalty provisions of the kind enacted in s 546 have a "statutory function of securing compliance with provisions of the [statutory] regime". Although it is accepted in the authorities that the courts may adapt principles which govern criminal sentencing to civil penalty regimes, "basic differences"[14] between criminal prosecutions and civil penalty proceedings mean there are limits to the transplantation of principles from the former context to the latter. Indeed, the Act is emphatic in drawing a distinction between its civil penalty regime and criminal proceedings. For example: a contravention of a civil remedy provision is not an offence[15]; the rules of evidence and procedure for civil matters are applicable to proceedings relating to a contravention of a civil remedy provision[16]; and a court must not make a pecuniary penalty order for a contravention of a civil remedy provision against a person who has already been convicted of an offence for substantially the same conduct[17]

[15]:Most importantly, it has long been recognised that, unlike criminal sentences, civil penalties are imposed primarily, if not solely, for the purpose of deterrence. The plurality in the Agreed Penalties Case said:

"[W]hereas criminal penalties import notions of retribution[19] and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, 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.'"

[16]:In a similar vein, in Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner[21], the Full Court of the Federal Court cited the decision of French J in Trade Practices Commission v CSR Ltd[22] and the reasons of the plurality in the Agreed Penalties Case as establishing that deterrence is the "principal and indeed only object" of the imposition of a civil penalty: "[r]etribution, denunciation and rehabilitation have no part to play".

[18]: In CSR[25], French J listed several factors which informed the assessment under the Trade Practices Act 1974 (Cth) of a penalty of appropriate deterrent value: "The assessment of a penalty of appropriate deterrent value will have regard to a number of factors which have been canvassed in the cases. These include the following:

1. The nature and extent of the contravening conduct.

2. The amount of loss or damage caused.

3. The circumstances in which the conduct took place.

4. The size of the contravening company.

5. The degree of power it has, as evidenced by its market share and ease of entry into the market.

6. The deliberateness of the contravention and the period over which it extended.

7. Whether the contravention arose out of the conduct of senior management or at a lower level.

8. Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.

9. Whether the company has shown a disposition to co‑operate with the authorities responsible for the enforcement of the Act in relation to the contravention."

[19]: It may readily be seen that this list of factors includes matters pertaining both to the character of the contravening conduct (such as factors 1 to 3) and to the character of the contravenor (such as factors 4, 5, 8 and 9). It is important, however, not to regard the list of possible relevant considerations[26] as a "rigid catalogue of matters for attention"[27] as if it were a legal checklist. The court's task remains to determine what is an "appropriate" penalty in the circumstances of the particular case.

1. The relevant principles were further helpfully addressed by the learned Bromwich J in Fair Work Ombudsman v Commonwealth Bank of Australia [2024] FCA 81 at [36] - [42].
2. Whilst it is clear from the decision of the High Court that the purpose of the single penalty provision is the promotion of the public interest in compliance with the provisions of the Act, by deterrence of further contraventions of the Act, it is useful to identify the framework behind that statutory provision. S 3 of the Act identifies the objects of the Act, relevantly identifying in three of those provisions ensuring enforcement, and in another provision identifying effective compliance mechanisms. Those aspects of the objects of the Act inform the purpose of s 547, as does chapter 5, in relation to which under part 5.2 there is established the Office of the Fair Work Ombudsman, and in particular division 2 under the guide to part 5.2, identified in s 679 the role of the applicant in promoting and monitoring compliance with the Act.
3. Division 3 of Part 5.2 of the Act also identifies in the guidelines that the office of a Fair Work inspector and the role of its inspectors, in exercising their compliance powers, is for the purpose of ensuring that the Act is complied with.
4. S 716 of the Act is a core provision of the applicant's compliance powers, to ensure compliance with the Act. The role of that compliance notice is of considerable importance as a mechanism to ensure the applicant's role in the enforcement of compliance with the Act is able to be effectively implemented. S 716 of the Act requires particular compliance for the issue of a valid notice, and indeed under s 717 of the Act, there is a review procedure available in relation to the compliance notice, which further reinforces its importance as a provision in ensuring compliance with Act.
5. The provision encourages compliance by the terms of s 716(4B), which provides that a person who complies with the notice in relation to a contravention of a civil remedy provision is not taken to have admitted to contravening the provision or to have been found to have contravened the provision. That is a powerful incentive for employers to comply with the obligations imposed by a s 716 notice. Most importantly, s 716(5) of the Act provides that a person must not fail to comply with a notice given under this section. There is a qualification in respect of that confirmation in ss (6), that ss (5) does not apply if the person has a reasonable excuse.
6. Contravention of s 716 falls within the civil penalty provisions found in s 539 of the Act. In addition to the enforcement powers under s 545, the Act creates the pecuniary penalty orders that are available under s 546, which relevantly provides as follows:

(1) The Federal Court, the Federal Circuit and Family Court of Australia (Division 2) or an eligible State or Territory court may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.

1. From the evidence admitted in the present case, the court finds that Ms Priestland, as an inspector appointed under s 700 of the Act, engaged in an investigation in relation to alleged underpayment to an individual, who was a former employee of the first respondent on 17 November 2022. Ms Priestland identified that it had become apparent that the second respondent was the key and main management personnel within the first respondent. It was identified that the second respondent was the sole director and shareholder of the first respondent.
2. As a result of the investigations that occurred on 27 April 2023 by Ms Priestland as a Fair Work inspector, she formed the belief that the particular employee had been employed on a full-time basis from 26 February 2018 to 12 July 2022. The inspector identified having a belief that the Professional Employees Award 2020 applied to that employment relationship. The inspector identified that the duties performed by the employee were consistent with a level 3 professional classification under that award. The inspector identified that the employee was entitled to be paid the applicable minimum rate for a level 3 professional under that award.
3. The inspector identified having a belief that the first respondent had failed to employ the employee at the applicable minimum rate for the hours of work the employee performed from 7 February 2022 to 20 February 2022, contrary to clause 14.1 of the award. It was in those circumstances, on 2 May 2023, that the Fair Work inspector issued a compliance notice to the first respondent in relation to the work hours identified in the course of the investigation pursuant to s 716(2) of the Act.
4. The notice, the court finds, complied with the requirements of s 716(2) and subsection (3) of the Act. The notice requires the first respondent to rectify the work hours identified under payment and provide the inspector and the applicant with notice of the steps taken to rectify the issues. The notice also identified the potential for the imposition of pecuniary penalties.
5. In response to the compliance notice, the inspector received a communication from the second respondent that he did not consider the investigation and issuing of the compliance notice to be fair, as the respondent sustained substantial level of financial losses and that the second respondent was ready to face any trial where he can seek justice and compensation for the losses. On 23 May 2023, steps were taken by the applicant's notice assessments team to try and assist the respondent's compliance with the notice. On 23 May 2023, the applicant was informed by the second respondent that he and the business were not in a position to comply with the compliance notice. The first respondent did not, in fact, comply with the compliance notice by completing the specified actions, nor was any step taken under s 717 of the Act in relation to the notice.
6. The second respondent did not deny the underpayment alleged by the first respondent in communications with the applicant, but asserted it was attributable to other employees engaged with the first respondent not properly fulfilling their duties while the second respondent was otherwise occupied, including being overseas and that the respondents had experienced financial hardship and regulatory challenges impacting their operations. Further communication was sent after the failure to comply with the notice by the inspector to the respondents on 9 June 2023, also drawing attention to the risks arising from non-compliance, including the commencement of legal proceedings and the potential for the seeking of pecuniary penalties.
7. On 14 June 2024, a further communication was sent to the respondents, providing an opportunity to rectify the underpayment as to the value of $2,654.68 and to complete the specified actions, or provide a reasonable excuse for the non-compliance, and foreshadowing commencement of litigation. Those facts are uncontested, and the position remains today that there has been a continuing failure to comply with the requirements of the notice. That failure, relevantly, is one in which resulted in this Court making orders under section 545 of the Act for compliance with the requirement of payment by the respondents to the applicant for the purpose of reimbursing the employee and making the relevant superannuation contributions. Those orders made on 3 December 2024 have not been complied with by the first respondent.
8. The Court also received into evidence the affidavit of Mr Bennett that has been referred to and which identified steps that have been taken to try and obtain engagement in these proceedings by the respondents. It is of relevance, especially in light of the Court's order against the first respondent, that the second respondent ceased to be a director of that corporate entity on 19 August 2024 as a result of his bankruptcy. The bankruptcy of the second respondent is however not something that prevents the ongoing obligation of the second respondent to meet any civil penalty order, made by this court.
9. It is apparent that the second respondent was knowingly involved in the contraventions of the first respondent, as reflected in the declarations that were made by this Court on 3 December 2024. The affidavit, which included communications from Mr Bennett and communications sent to the respondents, makes it apparent that there was another entity in which it appears the second respondent was the corporate mind and in relation to which there was issued a compliance notice on 2 May 2023. It appears that there is no compliance with that notice by the second respondent or the second respondent's company. These are matters relevant to the considerations that the Court must take into account in determining the appropriate penalty.

1. Turning to the nature and extent of the contravening conduct, from the history I just identified it is apparent that the Fair Work inspector issued a valid notice under s 716 of the Act in respect of outstanding entitlements concerning a particular employee requiring steps to be taken by the first respondent, and that those steps were not taken. Whilst the amount outstanding was not substantial, it was, no doubt, of considerable significance for the employee. The steps that were required were not just payment of the outstanding under payment but also attending to the payment of superannuation entitlements in respect to the same and providing documentation to the Fair Work inspector, and thereby the applicant, of compliance with the requirements of the Act.
2. Whilst it was a singular contravention of the Act under section 716, on its face it was a serious and deliberate failure to comply with the Act in circumstances where no evidence has been put on as to the actual financial circumstances of the first respondent, which remains listed with ASIC, or indeed the circumstances of the second respondent. The court takes into account that the second respondent has, since the contravention, been placed in bankruptcy. That does not, however, identify the whole of his financial circumstances and why he was unable to pay or ensure compliance with the requirements of the notice. The court finds that the contravention by the respondents was deliberate.
3. Whilst the court understands there were assertions of an inability to pay, the respondents however did not engage in these proceedings to prove such facts and the Court does not accept that the evidence establishes that the first respondent was unable to pay the amounts, or that the reason raised as to why the first respondent did not keep the records and produce the records sought by the Fair Work inspector, or why the second respondent did not take the necessary steps to ensure compliance were credible and persuasive.

1. In relation to the amount of loss or damage caused by the contravention, the underpayment for the employee, for a limited period, was significant and important. Indeed, at one level, the small amount outstanding to the employee would have been of considerable significance to that individual, and the loss is not one which has been recouped. To date, no payment has been made, as it was required under the notice, and no step was taken by the respondents to comply with the orders of this Court requiring payment of that amount and the interest thereon. The loss to the particular employee is one aspect of significance. The failure to keep the records and produce records to the Fair Work inspector identifying the underpayment and the rectification of the same is entirely unsatisfactory.

THE CIRCUMSTANCES IN WHICH THE CONDUCT TOOK PLACE

1. In relation to the circumstances in which the conduct took place, the Court has already identified that it is not in a position to find that the respondents could not comply with the notice as no evidence has been put on by the respondents to demonstrate the truth of the assertions of an inability to pay such a small amount or the inability to take steps to attend to the calculation of the superannuation requirements identified in the notice, and to produce the documentation that was required. The assertions of other financial losses and inability to pay by the respondents have not been established, and the court finds that the conduct by the respondents was deliberate and does not accept that there was an inability to attend to the requirements of the notice.

1. In relation to the size of the contravening company, the court is alive to the fact that the first respondent could be characterised as a small business, and the court takes into account that the objects of the Act acknowledging the special circumstances of small and medium-sized businesses. Those special circumstances do not mean that there is an excuse for non-compliance with requirements of the Act by reason of being a small business.
2. Compliance with the provisions of the Act is of central importance for every employer, small or big. A small business entity does not become subject to some lesser standard in respect of the requirements of the Act concerning payment of employees in relation to their entitlements and the keeping of proper records. The Court will return to this aspect in relation to small business and the circumstances of the second respondent shortly.
3. This is not an entity where there is any relevance of market share or ease of entry into the market.

1. For the reasons the court has already identified, the Court has found the contravention in the present case to be deliberate in respect of the contravention and, on the face of the material before this Court, there has been a continuing failure to comply with the orders of this Court that required payment to be made, which means the period of the non-compliance with the notice extends to date.

1. In relation to senior management, the Court finds that the second respondent was the senior management and corporate mind of the first respondent and was knowingly involved in the contravention and that the conduct, the Court finds, was deliberate.

1. In relation to the corporate culture, the only conclusion the Court can draw is that the culture of that corporate entity was not one conducive to compliance with the Act or the keeping of records as required by the Act, or the meeting of obligations in respect of the entitlements of employees as required by the Act. It is the case that no corrective measures have been taken by the respondents in respect of the contravention. The Court accepts that in the circumstances it appears that the corporate entity is not continuing to trade, albeit it is apparent that it remains on the register.

1. In relation to the issue of co-operation by the respondents, there was attendance at the hearing at which this court made orders identifying the declarations and orders for payment, but that was hardly a reflection of any contrition by the respondents. The respondents have not engaged with the applicant in a meaningful way to identify records to assist the applicant and ensure that the steps of compliance had been taken or to demonstrate from identified records the inability to do so. Neither respondent, the Court finds, has cooperated with the applicant in respect of the compliance notice. The proceedings were brought to enforce the same, or indeed with the orders of this Court.

1. The Court takes into account that the maximum penalty that could be imposed for the contravention in the present case against the first respondent is $41,250, being a corporate entity. The court takes into account that the maximum penalty the court could impose on the second respondent, being an individual, is $8240.
2. The Court turns to the issue of general deterrence. The role of the s 716 notice, as the Court has identified, is central to the powers of enforcement and compliance by the applicant. The s716 notice is a core provision that facilitates compliance with the Act, and a contravention of the same is a matter of considerable significance. Ensuring compliance with a s 716 notice for the purpose of general deterrence is also of considerable importance.
3. Notwithstanding the amount of the underpayment in the present case, general deterrence of the failure to comply with the 716 notice, by the first respondent in the present case, warrants a penalty of striking the reasonable balance between oppressive severity and the need for general deterrence by employers of a failure to comply with the Act. In all the circumstances of this case, the Court finds that the appropriate penalty in respect of the first respondent is 80 per cent of the maximum penalty for the contravention of s 716(5) of the Act, amounting to $33,000.
4. The Court has taken into account, in that regard, the need for specific deterrence in relation to the first respondent still exists, given that the first respondent is still an entity on the ASIC register, albeit the Court finds that it is not trading. In terms of a need for specific deterrence, the deliberateness of the conduct is a matter the court has taken into account in fixing that maximum penalty for the first respondent.
5. Turning to the second respondent, there is again an important consideration to ensure compliance by those in the role of management or the corporate mind with obligations of the Act, and in particular, a central provision of the kind reflected in s 716. The requirements of general deterrence for those involved in a contravention of s 716 are substantial. The corporate mind or management who fail to comply with s 716 of the Act undermines the effectiveness of this central provision of enforcing the Act.
6. The Court has also taken into account, having found that the conduct is deliberate by the second respondent, that there is a real need for specific deterrence in relation to the second respondent. The second respondent's continued failure to engage with these proceedings and/or to attend to the meeting of the obligations imposed by Court orders reflect a significant need for specific deterrence. The other corporate entity to which the Court has referred to regarding an apparent failure to comply with a 716 notice in which it appears the second respondent was a corporate identity, is a further fact the Court has taken into account in relation to the need for specific deterrence. The Court finds that the appropriate balance in relation to the second respondent warrants a penalty in the present case reflecting 80 per cent of the maximum penalty, being an amount of $6600.
7. Before the Court leaves the issue determined in these proceedings of penalty, the Court wants to identify an obvious and real need for further reform in this area of compliance with the s 716 notice. This is not the first case where this Court has been faced with a small corporate entity in respect of which there is a director who is knowingly involved in a contravention that simply does not engage with these proceedings. The only conclusion that can be drawn from the continuing failure to engage by some who are knowingly involved in the contraventions is that the penalty is inadequate to ensure and encourage compliance with and engagement with the s 716 notice and proceedings that are brought by the applicant. The amount of penalty for an individual and, indeed, the corporate entity should, the Court recommends, be substantially increased.
8. The Court wants to make a further observation in relation to the urgent need for law reform in relation to the Act, given the potential for individuals to use a corporate veil as an employer and then fail to comply with the obligations of the Act is not an isolated incident. Under the Corporations Act 2001 (Cth) ("the Corporations Act"), there are important powers that facilitate disqualification of individuals from managing corporate entities in certain circumstances. Whilst it is true that the bankruptcy that has occurred in the present case has given rise to a disqualification under s 206B of the Corporations Act, that does not prevent the second respondent from re-engaging potentially as a corporate mind of corporate entities after the discharge of his bankruptcy.
9. Under the Corporations Act, there is a provision, s 206C, which ensures the Court has the power of disqualification where there is a contravention of a civil penalty provision. It has been almost 10 years since it was recommended that this Court have conferred on a jurisdiction under the Corporations Act. The conferral of that jurisdiction is needed, given that this Court regularly exercises compatible jurisdiction in bankruptcy. But more importantly for the Act, a provision similar to s 206C is required to ensure that the applicant may seek not just the consequence of penalties, but the removal of an individual from being involved in the management of a corporate entity of the same type of the power found in s 206C of the Corporations Act. The need for such reform is urgent.
10. It is for these reasons the Court makes the above orders.

I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Ex-Tempore Reasons for Judgment of Judge Street delivered on 12 June 2025.