Resolution
39 Commencing with the statutory text, whilst section 557C is only concerned with casting the burden of disproving allegations made upon the employer, it does not follow that it has no effect in a proceeding against a responsible franchisor for secondary liability incurred by operation of s 588B. It is not correct to compartmentalise and confine s 557C in its operation only to allegations made in a proceeding against the employer. To do so is to ignore that the first element of liability of the responsible franchisor is derivative on establishing a contravention by a franchisee. It matters not that an order has been sought or made against the franchisee: s 588B(6). These provisions focus attention on the fact of contravention by the employer who is a franchisee and where establishing liability, when employment records have not been made and maintained, is facilitated by the reverse onus.
40 The statutory text does not require different modes of proof for the same contravention. An employer has either contravened a relevant civil remedy provision or not. Where contravention is established, the first necessary element to attach secondary liability to the responsible franchisor is satisfied. There is no textual requirement to prove the same contravention once in the primary liability proceeding and again in the secondary liability proceeding. Justice Katzmann, albeit when considering the general accessory liability provision at s 550, observed in DTF World Square at [267]:
It is common ground that s 557C has no role to play here. Contrary to the submission advanced on behalf of Ms Handoko and Ms Parmenas, however, it does not follow that in order to prove her case against them the Ombudsman must "positively prove" each element of the relevant contravention and their knowledge of each element without the benefit of the reverse onus. The submission must be rejected. The sole question here is the involvement of Ms Handoko and Ms Parmenas in the Employers' contraventions, not whether the contraventions occurred. That question has already been decided.
41 In my view that reasoning applies a fortiori to the liability of the responsible franchisor. There is no requirement to discharge the burden of proof twice in proceedings against a responsible franchisor where s 557C applies.
42 If the responsible franchisor was prevented from adducing evidence to discharge the burden of the employer that may have been a strong basis to conclude differently. Why is explained by Dixon CJ and Webb J in Commissioner of Police v Tanos (1958) 98 CLR 383; [1958] HCA 6, a case which concerned ex parte declarations about disorderly houses. At 395 their Honour's referenced the:
…deep-rooted principle of the law that before anyone can be punished or prejudiced in his person or property by any judicial or quasi-judicial proceeding he must be afforded an adequate opportunity of being heard.
43 And continued at 396 that the rule may be displaced by:
…a sufficient indication of an intention of the legislature to the contrary. Such an intention is not to be assumed nor is it to be spelled out from indirect references, uncertain inferences or equivocal considerations. The intention must satisfactorily appear from express words of plain intendment.
44 The provisions do not manifest an intention to prevent the responsible franchisor from assuming the burden of the employer. Section 557C is concerned only with the burden of proof of the employer. It says nothing about how that burden may be discharged or, in a proceeding against the responsible franchisor, by whom. The responsible franchisor has all the rights of a party to the proceeding. The conferral of jurisdiction on this Court by s 562 in relation to any matter under the FW Act, does not limit the general powers at ss 21, 22 or 23 of the Federal Court of Australia Act 1976 (Cth) (FCA Act): s 564. There is a similar provision that applies to the jurisdiction of the Federal Circuit and Family Court of Australia (Division 2) at s 568. Section 23 of the FCA Act is a general conferral of power to make all orders "the Court thinks appropriate", which is a broad power to make orders which are just and efficient in the administration of justice: Ilumba Pty Ltd v Malouf [2019] FCA 2095 at [15], Derrington J.
45 In multi-party proceedings it is elementary that respondents with the same or similar interests may each contest the applicant's claim. A close analogy for present purposes is the third-party procedure, in this Court by a cross-claim commenced by a respondent against a cross-respondent by invoking the procedure at r 15.01 of the Rules. The liability of a third-party (cross-respondent) is derivative. A party to a cross-claim may apply for an order permitting a cross-respondent to defend the claim of the applicant, or any other cross-claim, either alone or with another party: r 15.13. It is common for orders to be made in cross-claims to the effect that a cross-respondent has the right to cross-examine the applicant's witnesses, to call evidence and to make submissions for the purpose of defending the primary claim. The whole point of the procedure is to bind the third-party to the outcome of the principal claim and to ensure that the third-party has full participation rights: Barclays Bank v Tom [1923] 1 KB 221 at 223-224, Scrutton LJ.
46 The third-party is entitled to "full procedural fairness" in defence of the primary claim: Insurance Exchange v Dooley (2000) 50 NSWLR 222; [2000] NSWCA 159 at [16], Handley JA.
47 Procedural fairness underlies these fundamental principles, which in my view are equally applicable in a proceeding against a responsible franchisor, whether or not the employer is joined as a party or actively participates. So understood, s 557C speaks only to the burden of the employer which is no reason to conclude that it is inapplicable in a proceeding against the responsible franchisor when the first element of derivative liability is the same contravention. Further, there is no textual support for concluding that the burden imposed by s 557C is only capable of being discharged by the employer in determining the derivative liability of the responsible franchisor. Very clear words would be required to prejudice the responsible franchisor in that way. Parliament, in the expression of intent, did not choose that pathway.
48 Dealing next with the statutory context and history, s 557C was not proposed when the Amendment Bill was drafted and read for a second time. Part 2 of the Amendment Bill as drafted proposed the insertion of ss 558A, 558B and 558C. The Explanatory Memorandum in the Outline focused on the purpose of the new provisions as:
The Bill will introduce new provisions to hold franchisors and holding companies responsible for contraventions of the Fair Work Act, if they knew or could reasonably have been expected to have known the contraventions would occur in their business networks and failed to take reasonable steps to manage the risk.
49 Clause [55] simply noted that contravention by a franchisee entity was a trigger mechanism for application of the new provisions. The evolution of s 557C may be traced to debate in the Senate on 4 September 2017, when it was proposed by Senator Cameron from the opposition as an amendment to the Amendment Bill and drafted as a form of compromise with Senator Xenophon. The focus of the debate as recorded in Hansard (pages 6090-6097) was the importance of the employer's obligation to provide payslips to an employee detailing the hours worked and corresponding rates of pay. Senator Cameron described s 557C as:
[A]nother protection for vulnerable workers, by having a reverse onus of proof. In actually bringing a case against a powerful employer - an employer who has all the facts, an employer who may have been exploiting the worker - the worker may have some difficulties if they don't have a pay slip. So, the employer has an obligation under law to provide the pay slip, and you can't have noncompliance with legal obligations making it harder for a vulnerable worker, a worker in an exposed position, to actually make a claim for their rights under the law and their rights to get paid for what they've worked.
50 The Senate debate did not so much concern in the justification for the reverse onus but its dis-application if the employer provided a reasonable excuse. The government initially opposed the entire provision, but that position altered with the introduction of the reasonable excuse amendment, which Senator Cash described as going "part of the way to addressing the concerns" of the government (6094). After further debate, Senator Cash acknowledged that the amendments had majority support of the Senate, and for that reason no division was called for, and the amendment was agreed to (6097).
51 The legislative history does not reveal an intent to confine the reverse onus only to proceedings against an employer. Parliament simply did not address the interplay between the reverse onus and first requirement to establish the derivative liability of the responsible franchisor. It may be inferred that by requiring a contravention by the employer as the first element of the derivative liability of a responsible franchisor, it was assumed that the proof mechanism would apply.
52 The construction of the Ombudsman is supported by other considerations. It avoids the possibility of inconsistent findings on the same factual question. It harmoniously connects the provisions which have as their core purpose the protection of vulnerable workers from exploitation where the employer fails in the obligation to keep employment records, which makes proof of underpayment and other types of exploitation difficult: Ghimire at [11]-[14].
53 The contrary reasoning in McKenzie Matterson at [132] was with respect wrong.
54 For these reasons, I conclude that that it is open to the Ombudsman in this proceeding to plead the relevant contraventions required pursuant to s 557C and thus engage the reverse onus of disproving those allegations against BDH. In turn, BDH can assume the burden of disproving those allegations even though it is not the employer. The separate question is answered accordingly. I adjourn the proceeding to a date to be fixed for further case management.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McElwaine.