Fair Work Ombudsman v Blue Sky Kids Land Pty Ltd

KATZMANN J: 1 This is a dispute about certain amendments to a defence following the filing of a second further amended statement of claim. It relates to those amendments in which the respondents concerned (Guo Dong Gu and Fei Rong Yang) seek to deny allegations previously admitted. The applicant, the Fair Work Ombudsman, contends that leave is required to withdraw the admissions. While she does not consent to the filing of a second further amended defence in which the admissions have become denials, ultimately she did not oppose the grant of leave. Mr Gu and Ms Yang argue that leave is not required but that, if it is, it should be granted.

Background 2 The proceeding was instituted on 6 September 2019. The first two respondents (the corporate respondents) are related companies. The third and fourth respondents (Mr Gu and Ms Yang) are directors of them both. The Ombudsman alleges that the first respondent, Blue Sky Kids Land Pty Ltd, and, in the alternative, the second, Q Fay Trading Company Pty Ltd, contravened the Fair Work Act 2009 (Cth) and the Fair Work Regulations 2009 (Cth) in numerous respects. 3 All respondents filed defences. Mr Gu and Ms Yang, who were then represented by Ren Zhou Lawyers (who were also the lawyers for the first and second respondents) raised the penalty privilege. The corporate respondents filed an amended defence on 10 February 2020. The Ombudsman filed an interlocutory application to strike out parts of their amended defence which was listed for hearing on 24 March 2020, but on 13 March 2020 the corporate respondents went into voluntary liquidation. Nevertheless, on 21 April 2020, the Ombudsman filed an amended statement of claim. On 25 May 2020 I granted the Ombudsman leave to proceed against the corporate respondents. On 4 December 2020 the Ombudsman filed an amended originating application and further amended statement of claim. 4 The Ombudsman's evidence was given over four days in October 2021. At that point Mr Gu and Ms Yang had no legal representation. After the hearing I made orders for the filing of any amended defences and evidence. On 24 December 2021 Mr Gu and Ms Yang filed an amended defence. By this time, they had appointed new lawyers, Yingke Law Firm and the amended defence was signed by Jingyi Li, as "lawyer for the 3rd and 4th respondents". Thereafter the progress of the proceeding stalled as the Ombudsman sought further and better particulars of the amended defences, repeated consent applications were made for extensions of the timetable, and the Ombudsman applied to file a second further amended statement of claim (SFASOC) and a further amended originating application. 5 On 15 March 2023, the Ombudsman was granted leave, by consent, to file the SFASOC and the further amended originating application in the form served by the Ombudsman on 11 January 2023. When this order was made, Mr Gu and Ms Yang were ordered (also by consent) to serve any proposed further amended defence by 31 March 2023, and the Ombudsman was ordered to notify Mr Gu and Ms Yang of any objections to the proposed amendments and the basis for each objection. Mr Gu and Ms Yang were granted leave to file any further amended defence by 12 April 2023, but only to the extent that it included the amendments to which the Ombudsman took no objection. In the event that Mr Gu and Ms Yang sought leave to file a further amended defence with amendments that had been objected to, the parties were ordered to confer with respect to a timetable for the hearing of any such application. 6 On 12 April 2023, while I was overseas on leave (from which I would not return until the end of May) Mr Gu and Ms Yang filed a further amended defence. Notwithstanding the order to the contrary, that further amended defence included paragraphs to which the Ombudsman had objected. Two days later the Ombudsman notified the Court that she objected to a number of paragraphs and to the fact that the further amended defence filed by Mr Gu and Ms Yang included the amendments to which she had taken objection. As such, the further amended defence was not filed in compliance with the orders made on 15 March 2023 and was removed from the court file by consent pursuant to orders made by the duty judge (Perry J) on 17 April 2023. The same day Mr Gu and Ms Yang filed a further amended defence that omitted the controversial amendments. 7 On 27 April 2023, Mr Gu and Ms Yang indicated that they intended to seek leave to file a second further amended defence (albeit entitled "Further Amended Defence"), incorporating the amendments to which the Ombudsman had objected. Later that day the duty judge (Wigney J) made orders, by consent, fixing a timetable for the filing of submissions and any evidence on the question of leave. His Honour also ordered that, unless any of the parties notified the Court by 24 May 2023 that a hearing was required, the question of whether leave should be granted to Mr Gu and Ms Yang be determined on the papers. 8 The parties filed submissions but no evidence. No request was made for an oral hearing.

The relevant amendments 9 The amendments in question are to paras 6(g)(iii), 41(a) and (b), 43, 44, 187, 194, and 226 of the further amended defence. In para 6 the Ombudsman describes Mr Gu. Paragraphs 41, 43 and 44 relate to some of the alleged record-keeping contraventions. Paragraphs 187 and 194 concern allegations about the respondents' dealings with the Ombudsman. Paragraph 226 relates to additional allegations of knowledge, wilful blindness or recklessness on the part of Mr Gu concerning aspects of the corporate respondents' record-keeping and non-compliance with notices to produce issued by the Ombudsman. 10 In para 6(g)(iii) the Ombudsman pleaded: The Third Respondent, Mr Guo Dong Gu (Mr Gu), is and was at all material times: … (g) a person who: … (iii) knew of BSKL and Q FAY's respective operations, including: A. the duties of employees; and B. the operating hours of the Business. 11 No amendment was made to this paragraph in the Ombudsman's SFASOC. 12 In the amended defence para 6(g)(iii) was admitted. Now it is denied. 13 Save for para 226, the other paragraphs in question do not make allegations against either Mr Gu or Ms Yang. Nevertheless, in their amended defence they admitted them. Now they resile from their admissions. 14 In para 41 of the SFASOC the Ombudsman pleaded (the amendments are underlined) that with respect to four employees during various periods, their employer "did not make and keep, or keep in a readily accessible form, records of the kind specified in paragraphs 39(b) above". The paragraph was also expanded to include additional records. It is unnecessary to refer to the particulars. 15 In para 43 the Ombudsman pleaded: The Employer did not make and keep records of the kind specified in paragraph 39(f) above in respect of Xibing Cen and Tzu Fong Yu. Particulars A. The FWO refers to and relies on the matters pleaded in paragraphs 18 to 29 above. B. No records of the kind specified in paragraph 39(f) above in respect of Xibing Cen were provided in response to the Second BSKL NTP, Fifth BSKL NTP or First Q FAY NTP. C. No records of the kind specified in paragraph 39(f) above in respect of Tzu Fong Yu were provided in response to the Second BSKL NTP, Fourth BSKL NTP or First Q FAY NTP. 16 Mr Gu and Ms Yang formerly admitted this paragraph. Now they wish to deny it. 17 In para 44 the Ombudsman pleaded: By reason of the matters pleaded in paragraphs 38 to 43 above, excluding the Xing Yang Payroll Register Documents 2, the Tzu Fong Yu Payroll Register Document, the Xing Yang Timesheets and the Tzu Fong Yu Timesheets, BSKL contravened section 535(1) of the FW Act, by failing to comply with regulations 3.33(1)(a), 3.33(1)(b), 3.33(2), 3.33(3)(c), 3.33(3)(d), 3.34 and 3.37(b) to (e) of the FW Regulations. 18 In their amended defence Mr Gu and Ms Yang pleaded: As to paragraph 44: a. the paragraph is admitted insofar as paragraphs 38 to 43 are admitted; b. the paragraph is otherwise denied. 19 Although the scope of the allegation has been narrowed in the manner indicated by the amendment, Mr Gu and Ms Yang now wish to deny it in toto. 20 Paragraph 187 has never been amended. It reads: By reason of the matters pleaded in paragraphs 49 to 51 above, 52 to 54 above, 55 to 56 above, 57 to 58 above, 61 and 64 above, and 63 and 66 above, each of the Xing Yang Employment Details Form 1, the Xing Yang Employment Details Form 2, the Xing Yang Payroll Register Document, the Xibing Cen Payroll Register Document 1, the Xibing Cen Payroll Register Document 2, the Xibing Cen Timesheets 2, the North Rocks Timesheets and the Jin Zhang Timesheets was false or misleading. 21 Similarly, para 194 has never been amended. It reads: By reason of the matters pleaded in paragraphs 59 to 60 above, 62 and 65 above, each of the Jin Zhang Payroll Register Document 1 and the Baulkham Hills Timesheets was false or misleading. 22 In their amended defence Mr Gu and Ms Yang pleaded: Paragraph 187 is admitted to the extent that paragraphs 49 to 66 are admitted, but is otherwise denied. … Paragraph 194 is admitted to the extent that paragraphs 59 to 65 are admitted, but is otherwise denied. 23 Now they wish to wholly deny both these paragraphs. 24 Paragraph 226 was the subject of an amendment in the SFASOC. The amendments are underlined below. Paragraph 226 now reads: By reason of the matters pleaded in paragraphs 6, 67 and 223 above, Mr Gu: (a) was a person who gave instructions for each of the Xing Yang Employment Details Form 1, the Xing Yang Employment Details Form 2, the Xing Yang Payroll Register Document, the Xibing Cen Payroll Register Document 1, the Xibing Cen Payroll Register Document 2, the Xibing Cen Timesheets 2, the North Rocks Timesheets and the Jin Zhang Timesheets to be produced or provided by BSKL to FWI Liljeqvist; or in the alternative knew that BSKL had produced them to FWI Liljeqvist; and (b) knew, was wilfully blind to, or was reckless as to whether, each of the Xing Yang Employment Details Form 1, the Xing Yang Employment Details Form 2, the Xing Yang Payroll Register Document, the Xibing Cen Payroll Register Document 1, the Xibing Cen Payroll Register Document 2, the Xibing Cen Timesheets 2, the North Rocks Timesheets and the Jin Zhang Timesheets was false or misleading. Particulars The FWO refers to and repeats particulars A to C at paragraph 67 above. (c) was a person who gave instructions for each of the Jin Zhang Payroll Register Document 1 and the Baulkham Hills Timesheets to be produced or provided by Q FAY to FWI Liljeqvist; or in the alternative knew that Q FAY had produced them to FWI Liljeqvist; (d) knew, was wilfully blind to, or was reckless as to whether, each of the Jin Zhang Payroll Register Document 1 and the Baulkham Hills Timesheets was false or misleading; (e) knew, or was wilfully blind to, whether each of the Xing Yang Timesheets, the Xibing Cen Timesheets 3, the Jin Zhang Timesheets 2, the Tzu Fong Yu Timesheets, the Xing Yang Payroll Register Documents 2, the Tzu Fong Yu Payroll Register Document, Xibing Cen PAYG Documents and Jin Zhang PAYG Documents were kept in a [form] that was readily accessible to a FWI; and (f) knew, or was wilfully blind to, whether: (i) BSKL failed to produce documents in compliance with the First BSKL NTP, Second BSKL NTP, Third BSKL NTP, Fourth BSKL NTP and Fifth BSKL NTP; and (ii) Q FAY failed to produce documents in compliance with the First Q FAY NTP and Second QFAY NTP. Particulars The FWO refers to and repeats particulars A to C at paragraph 67 above. 25 In their amended defence Mr Gu and Ms Yang pleaded: As to paragraph 226: a. paragraphs 226(a) and (c) are admitted; and b. paragraphs 226(b) and (d) are admitted to the extent that the allegations concerning the pleaded documents are otherwise admitted in this defence, and is otherwise denied. 26 Now they wish to withdraw the admissions with respect to paras 226(b) and (d) so that para 226 of the second further amended defence would read: As to paragraphs 226: a. paragraphs 226(a) and (c) are admitted; and b. the paragraph is otherwise denied.

Is leave required? 27 Although Mr Gu and Ms Yang applied for leave, they maintain that no such application was necessary. They rely on r 16.55 of the Federal Court Rules 2011 (Cth). They submit it grants the respondents an unfettered right to file an amended pleading, following an amendment to the statement of claim, without the Ombudsman's consent and, by inference, without obtaining the leave of the Court. 28 The Ombudsman submits that this interpretation of the rule is contrary to authority and the proper construction of the Rules. 29 For the reasons that follow, I am satisfied that leave is required. 30 Rule 16.51 is entitled "Amendment without needing the leave of the Court". It gives a party the right to amend a pleading once at any time before the pleadings close without the leave of the Court but it expressly provides that a party may not amend a pleading if the pleading has previously been amended in accordance with the leave of the Court unless each other party consents to the amendment. 31 Rule 16.12 provides that, as between an applicant and a respondent, the pleadings close at the end of the latest of the times fixed by the Rules for filing a defence, reply or other pleading between those parties, even if a request or order for particulars has not been complied with. Rule 16.33 requires an applicant to file any reply within 14 days of being served with the defence. 32 The Ombudsman filed a reply but well outside the time fixed by r 16.33 and only after it obtained a court order. It follows that pleadings closed in this case on 26 November 2019, when the last of the original defences was filed. 33 Rule 16.53(1) stipulates that, unless r 16.51 applies, a party must apply for the leave of the Court to amend a pleading. 34 Although the orders made on 15 March 2023 did not expressly grant the respondents leave to file any amended defences, that was the effect of the order made that day requiring them to file any amended defences to the SFASOC. 35 Rule 16.55 provides: Consequential amendment of defence (1) The respondent may amend the defence if: (a) an applicant amends the statement of claim; and (b) the respondent has filed a defence before being served with a copy of the amended statement of claim. (2) The amended defence must identify the statement of claim to which it relates. (3) The right to amend the defence under subrule (1) is in addition to the right to amend a pleading under rule 16.51. (4) The respondent must file an amended defence within 28 days after the respondent is served with a copy of the amended statement of claim. 36 Mr Gu and Ms Yang contend that the preconditions for the operation of this rule were satisfied because the SFASOC was filed on 16 March 2023 and they filed their further amended defence within the prescribed 28-day period. 37 As the Ombudsman submitted, this contention is based on a misunderstanding of the operation of r 16.55. 38 In Adeang v The Australian Broadcasting Corporation (No 2) [2016] FCA 1599 at [13]-[17] Rares J held that this rule should be construed so as to permit a defence to be amended in a manner that is responsive to an amendment in a claim and not otherwise, following Yarrabee Chicken Company Pty Ltd v Steggles Ltd [2010] FCA 394 at [122] per Jagot J. In the submissions made on their behalf, Mr Guo and Ms Yang did not refer to these authorities although they are directly on point, let alone contend that they should not be followed and there is no good reason to depart from them. As the Ombudsman submitted, the purpose of the rule is evident from its title. Consequently, unless the proposed amendments are responsive to an amendment made by the Ombudsman, they cannot be made under either r 16.51 or 16.55. 39 In any case, r 26.11, which apparently escaped the attention of the lawyers acting for Mr Gu and Ms Yang, provides a complete answer to their contention that leave was not required to make the amendments to which the Ombudsman objected. It reads: Withdrawal of defence etc (1) A party may, at any time, withdraw a plea raised in the party's pleading by filing a notice of withdrawal, in accordance with Form 47. (2) However, a party must not withdraw an admission or any other plea that benefits another party, in a defence or subsequent pleading unless: (a) the other party consents; or (b) the Court gives leave. (3) The notice of withdrawal must: (a) state the extent of the withdrawal; and (b) if the withdrawal is by consent - be signed by each consenting party. 40 No notice of withdrawal was filed. The Ombudsman did not consent. And leave was not sought before the further amended defence was filed.

Should leave be granted? 41 A convenient summary of the principles governing the grant of leave to withdraw an admission appears in Juno Pharmaceuticals Pty Ltd v Millennium Pharmaceuticals, Inc [2019] FCA 526 at [38]. There, Besanko J said: The overriding consideration in determining whether to grant leave to withdraw an admission is the interests of justice. In determining where the balance lies, a number of matters which overlap and interact are relevant. They are the circumstances in which the admission came to be made, the strength of the case now advanced that the admission is or may well be incorrect, whether the applicant [being the party seeking to withdraw the admission] has done all he or she could do to establish that the admission is incorrect, whether the applicant has acted in a transparent and straightforward fashion, any delay in making the application to withdraw the admission, the significance of the admission to the respective cases of the parties, prejudice to the applicant if the admission is not withdrawn and to the respondent if it is, general prejudice to the applicant and the respondent and finally, case management principles as discussed in AON Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 and embodied in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). I refer to, but do not find it necessary to discuss the following authorities: Jeans v Commonwealth Bank of Australia Ltd [2003] FCAFC 309; (2003) 204 ALR 327 at [32]; Centrestate Exports Pty Ltd v Amarantos Shipping Co Ltd [2005] SASC 158 at [32]; Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2 at [122]-[124]; (2016) 332 ALR 199; Ansell Healthcare Products LLC v Reckitt Benckiser (Australia) Pty Ltd (No 2) [2016] FCA 765 at [49]-[64], especially at [61]. 42 No explanation for the proposed amendments was proffered, save in submissions, even though numerous requests for one had apparently been made beforehand. In their submissions, Mr Gu and Ms Yang state, in effect, that their proposed amendments are in truth consequential amendments because of amendments made to other paragraphs of the statement of claim which bear upon the paragraphs of the SFASOC to which the controversial paragraphs of the defence respond. Having considered those submissions, the Ombudsman consented to the withdrawal of the relevant admissions and does not oppose the grant of leave. 43 In these circumstances, I propose to grant leave to Mr Gu and Ms Yang to file their further amended defence in the form annexed to their submissions of 8 May 2023. I expect it will also be necessary for an amended statement of agreed facts and issues to be prepared and filed. I will reserve the question of costs. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Katzmann.

SCHEDULE OF PARTIES NSD 1444 of 2019 Respondents Fourth Respondent: FEI RONG YANG