Fair Work Ombudsman v Devine Marine Group Pty Ltd

REASONS FOR JUDGMENT 1 On 12 December 2014, I delivered judgment in which I found that the second respondent, Capt Devine, had been involved as an accessory in contraventions by the first respondent, Devine Marine Group Pty Ltd (DMG), of s 45 of the Fair Work Act 2009 (Cth) (the FW Act): Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365. Those contraventions arose from the failure by DMG to pay two employees (Mr James and Mr Kouka) the minimum hourly rate required by cl 24.1(a) of the Manufacturing and Associated Industries and Occupations Award 2010 (the Award) and the penalty rates for Saturday and Sunday work required by cll 40.7 and 40.8 of the Award 2 The applicant (the FWO) did not seek orders against DMG as it is now in liquidation and I found that its claims against the third respondent, Capt Boucaut-Jones, were not established. This meant that orders were to be made only against Capt Devine in respect of his accessorial liability. Captain Boucaut-Jones foreshadowed an application for costs. I required the FWO to bring in minutes of the orders to give effect to my conclusions and adjourned the matter for submissions with respect to those minutes, the issue of penalty and costs. 3 Unfortunately, submissions could not be made on Capt Boucaut-Jones' costs application at the adjourned hearing because he had only recently obtained legal representation. A second hearing was held to permit him to make those submissions. 4 These are my reasons on the remaining issues, namely, the penalty to be imposed on Capt Devine and the claim of Capt Boucaut-Jones for costs. They are to be read in conjunction with the reasons contained in the primary judgment.

The relevant maximum penalties 10 The maximum number of penalty units for a contravention of s 45 of the FW Act is 60 (s 539(2)). As at the date of the contraventions in 2011, a penalty unit was $110: FW Act, s 12; Crimes Act 1914 (Cth), s 4AA. Accordingly, the maximum penalty for each contravention is $6,600. 11 Strictly speaking, cl 24.1(a) of the Award was breached in respect of each day worked by Mr James and Mr Kouka or, at least, in respect of each Award pay period, and cll 40.7 and 40.8 were breached in respect of each Saturday and Sunday which the men worked. Despite these multiple contraventions of each of cll 24.1(a), 40.7 and 40.8 of the Award in relation to Mr James and Mr Kouka, s 557 of the FW Act has the effect of deeming there to be only a single contravention of each provision. Section 557 provides (relevantly): Course of conduct (1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if: (a) the contraventions are committed by the same person; and (b) the contraventions arose out of a course of conduct by the person. (2) The civil remedy provisions are the following: … (b) section 45 (which deals with contraventions of modern awards); … 12 The proper application of s 557 was considered by the Full Court in Rocky Holdings Pty Ltd v Fair Work Ombudsman [2014] FCAFC 62; (2014) 221 FCR 153. The Court held that the term "two or more contraventions of a single penalty provision" in subs (1) is a reference to the contraventions which occur when a term of a modern award or, as the case may be, a provision of a national employment standard, is contravened, and that that is so even when the contraventions relate to two or more persons. This means that, in the circumstances referred to in subparas (a) and (b) of s 557(1), the multiple contraventions by DMG of cl 24.1(a) of the Award in relation to Mr James and Mr Kouka are to be taken to constitute a single contravention of that clause. Likewise, in the same circumstances, the multiple contraventions of cl 40.7 in relation to both Mr James and Mr Kouka are to be taken to constitute a single contravention of that provision, and the multiple contraventions of cl 40.8 in relation to both Mr James and Mr Kouka are to be taken to constitute a single contravention of that provision. 13 The FWO accepted, quite properly, that each of the contraventions of cll 24.1(a), 40.7 and 40.8 of the Award had been committed by the same person and that they arose out of a course of conduct of DMG, in which Capt Devine was involved. That means that a penalty is to be imposed on Capt Devine in respect of three contraventions only and, in turn, that the maximum of the aggregate penalties which may be imposed on him is $19,800.00.

Penalty principles 14 The matters relevant to the imposition of penalty in circumstances like the present are well established, and it is not necessary to refer to the authorities in any detail. Prominent among the matters to be considered are the nature, circumstance and significance of the contraventions, the effect on the employees of the contraventions, the involvement or otherwise of senior management in the contraventions, any previous like conduct by the respondent, the extent to which the respondent has taken corrective action or has exhibited contrition, and the need for general and specific deterrence: Stuart-Mahoney v CFMEU [2008] FCA 1426, (2008) 177 IR 61 at [40]; Temple v Powell [2008] FCA 714, (2008) 169 FCR 169 at [56]-[78]; Cahill v CFMEU (No 4) [2009] FCA 1040, (2009) 189 IR 304 at [9]-[10]. 15 The Court is to determine an appropriate penalty in each case by a process of instinctive synthesis after taking into account all relevant factors: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8, (2008) 165 FCR 560 at [27], [55]; Markarian v The Queen [2005] HCA 25, (2005) 228 CLR 357 at [37]-[39]. The need for deterrence, both personal and general, is usually a prominent consideration in the determination of penalty.

Consideration of penalty 16 It can be said that each contravention was a form of underpayment so that to that extent they have a commonality. 17 However, I accept the submission of the FWO that the minimum hourly rates and weekend penalty rates are separate parts of the safety net established by the FW Act and the Award. A guaranteed minimum rate of pay for all hours of work is central to the Australian workplace relations system. It is the base entitlement of employees. 18 Weekend penalty rates compensate employees for the disadvantages of working on weekends. The Full Bench of the Fair Work Commission has recently affirmed the appropriateness of penalty rates for weekend work. In Modern Awards Review 2012-Penalty Rates [2013] FWCFB 1635 at [218] the Full Bench held that the continuation of penalty rates for weekend work was appropriate as "there are disabilities associated with work at unsociable times". The higher rate for Sunday work reflects the greater disadvantages in working on Sundays. Thus, in Restaurant and Catering Association Victoria [2014] FWCFB 1996, the Full Bench referred to the "contemporary general assessment of the disabilities associated with working on Sundays as compared to other days of the week" as supporting the continuation of penalty rates for Sunday work. Although that conclusion was expressed in relation to an industry quite different from that in which DMG operated, it is reasonable to suppose that the same considerations underpin the prescription in the Award for all work performed on Sundays. 19 Thus, as the FWO submitted, cll 24.1(a), 40.7 and 40.8 serve separate and distinct purposes. This understanding should underpin the assessment of the culpability of Capt Devine for the contraventions. 20 It is evident that DMG, at the instigation of Capt Devine, engaged in a deliberate strategy by which to obtain labour at less cost. I repeat in this respect part of my finding at [195] in the principal reasons: … DMG, controlled by Capt Devine, had arranged to bring the Fijians, and in particular Mr James and Mr Kouka, to Australia as apparent participants in a training program when, in reality, it intended that they should carry out productive work. The evident purpose of the strategy was to avoid DMG having to pay the rates which would otherwise be applicable to the performance of that work by local employees. 21 The FWO also referred to the evidence of Capt Devine that DMG could not afford to engage workers as employees and, instead, preferred to engage them as contractors "because of WorkCover, Fair Work and over regulation of this country … in the Marine Industry in particular." 22 I proceed on the basis that DMG, by Capt Devine, was aware that Mr James and Mr Kouka were employees to whom the Award applied but sought to disguise their employment as participation in a training program as a means of saving costs. Captain Devine's participation was accordingly deliberate. He sought to achieve DMG's purpose by arranging for the men to be provided with "certificates of training" from the Adelaide Nautical College, by providing letters to support the visa applications of the men which referred to "training courses" and, on occasion, by instructing Mr James and Mr Kouka to describe themselves as trainees if anyone asked about their status. 23 The conduct comprising the course of contraventions occurred throughout the three month period of the men's employment. It cannot be regarded as conduct of an isolated kind. 24 The FWO submitted that the conduct of DMG and Capt Devine was aggravated because it involved an exploitation of the vulnerability of Mr James and Mr Kouka. It was said that they were induced to come to Australia by the prospect of enhancing their chances of obtaining employment with DMG in Fiji if it established operations there. Their remuneration here, although less than that required by the Award, was higher than that which they would receive if employed in Fiji. Accordingly, Mr James and Mr Kouka had an economic incentive to work in the manner directed by DMG. The FWO referred in addition to an occasion on which Capt Devine told Mr Kouka that, if he did not work harder, he would terminate the arrangement and inform the Department of Immigration and Citizenship that he had done so, with the effect that Mr Kouka's visa would then be cancelled. 25 The FWO submitted that DMG and Capt Devine had, by reason of these circumstances, exploited the circumstance that Mr James and Mr Kouka were foreign nationals whose first language is not English and who had little or no knowledge of Australian workplace laws. I agree that there was a form of exploitation in a general sense, that is, of an employer taking the benefit of an employee's ignorance of his or her lawful entitlements and of the employee's willingness to accept the proffered remuneration because doing so was more advantageous to the employee than the alternative. 26 However, I do not accept that exploitation of this kind should be regarded as an aggravating factor. It seems to be similar to the kinds of exploitation which the workplace laws are intended to prevent and which is present in the case of many contraventions of the present kind. It is necessary to exercise care before treating a commonplace circumstance, or a usual incident of a contravention, as an aggravating circumstance. The impact on affected workers may in some circumstances be an aggravating factor but that will usually be when that impact is greater by reason of a particular vulnerability of an employee or some other particular circumstance, so that the conduct of the contravening employer can be seen to be more egregious: Hanssen Pty Ltd v Jones [2009] FCA 192; (2009) 179 IR 87 at [61]. 27 That is not this case. Further, it is apparent that Mr James and Mr Kouka regarded the arrangements under which they worked for DMG as quite advantageous and, considered from the perspective of what was available to them in Fiji, that was objectively so. 28 Deterrence, both personal and general, is particularly important in this case. It is appropriate that the penalties be sufficient to indicate to employers generally that workplace obligations cannot be avoided simply by disguising an employment relationship as something else. 29 The FWO drew attention to the absence of any expression of contrition or remorse by Capt Devine, let alone recognition of the wrongfulness of his conduct as found by the Court. The penalty to be imposed cannot be mitigated on this account. However, it is appropriate to take into account that Capt Devine was unrepresented at the penalty hearing, as he was at the trial, and may not have been alert to the significance of an expression of contrition. I also take into account Capt Devine's apparent conviction that he was, in effect, doing the Fijians a favour, and there is a sense in which that was so. 30 It is not possible to determine the extent to which DMG, and in turn Capt Devine, benefited from the contraventions. This makes it difficult to fix penalties at a level which would make it apparent that it is not to the economic advantage of an employer to contravene an award. 31 Captain Devine has no record of previous contraventions of industrial instruments. He provided a number of written character and proficiency references. They indicate that he and DMG have had a good reputation in the marine salvage industry. I take these into account in Capt Devine's favour but indicate that the weight which can be given to them is reduced by the fact that none of them indicate awareness of the findings in the principal judgment. Indeed, many of the references were written well before the events giving rise to this litigation. 32 It is not possible to give Capt Devine credit for his cooperation with the FWO's investigation. He declined to be interviewed by the FWO. Although on my findings, DMG was not in contravention of the obligation to produce records to the FWO, it is pertinent that DMG, which was controlled by Capt Devine, did not produce any records voluntarily. 33 As well as DMG now being in liquidation, Capt Devine is now bankrupt. He said that he has lost everything and has little by way of assets, so much so that he had to rely on funds from his children in order to travel to Adelaide for the penalty hearing. Although I do not have Capt Devine's date of birth, it is apparent that he is nearing retirement age. Given his bankruptcy, it may be difficult for him to re-establish himself in the marine salvage industry. I accept that, by reason of his impecuniosity, Capt Devine is likely to have difficulty in paying the penalties which the Court will impose. That impecuniosity bears in particular on the penalties necessary to achieve a deterrent effect in this case. 34 The FWO submitted that the Court should impose separate penalties for each of the three separate contraventions. I will proceed on that basis. 35 In doing so, it is appropriate to have regard to the totality principle, namely, ensuring that the overall penalty imposed is proportionate to Capt Devine's culpability and avoiding the imposition of penalties having a crushing effect. Those considerations make it inappropriate to impose in respect of each contravention the penalty which would be imposed if it was the only contravention before the Court. I will give effect to this by imposing lower penalties in respect of each contravention than would otherwise be the case, and by imposing lower penalties in the case of the second and third than in the case of the first. 36 Balancing out these considerations, I impose a penalty in respect of the contravention of cl 24.1(a) of the Award of $4,000 and penalties of $2,000 in respect of each of the contraventions of cll 40.7 and 40.8 of the Award. The total of the penalties is therefore $8,000. 37 I accept the submission of the FWO that it is appropriate to order that the penalties be paid to Mr James and Mr Kouka. I will direct that $4,000 be paid to each.

[2012] FMCA 835

[2012] FMCA 464

[2012] FMCA 1210

[2005] HCA 25

[2014] FWCFB 1996

(2008) 165 FCR 560

(2008) 180 IR 350

(2009) 189 IR 304

(2009) 179 IR 87

(2005) 228 CLR 357

(1978) 140 CLR 470

(2012) 203 FCR 1

(2014) 221 FCR 153

(2008) 177 IR 61

(2008) 169 FCR 169

(1984) 158 CLR 661

(2006) 156 FCR 275

(1992) 43 IR 257

(1989) 21 FCR 467

(2013) 218 FCR 94

[2013] FCAFC 23

[2014] FCAFC 166

[2013] FCA 1135

[2014] FCA 187

[2012] FCAFC 37

[2008] FCA 714

[2014] FCA 351

[2008] FCAFC 8

[2009] FCA 274

[2009] FCA 1040

[2012] FCA 1166

[2009] FCA 192

[2013] FCAFC 22

[1978] HCA 51

[2013] FCA 1139